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<SEC-DOCUMENT>0000891092-00-000311.txt : 20000417
<SEC-HEADER>0000891092-00-000311.hdr.sgml : 20000417
ACCESSION NUMBER:		0000891092-00-000311
CONFORMED SUBMISSION TYPE:	N-14 8C
PUBLIC DOCUMENT COUNT:		4
FILED AS OF DATE:		20000414

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIHOLDINGS INSURED FUND II INC
		CENTRAL INDEX KEY:			0001071899
		STANDARD INDUSTRIAL CLASSIFICATION:	 []
		IRS NUMBER:				223636347
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-14 8C
		SEC ACT:		
		SEC FILE NUMBER:	333-34836
		FILM NUMBER:		602191

	BUSINESS ADDRESS:	
		STREET 1:		C/O MERRILL LYNCH ASSET MANAGEMENT
		STREET 2:		800 SCUDDERS MILL RD
		CITY:			PLAINSBORO
		STATE:			NJ
		ZIP:			08536
		BUSINESS PHONE:		6092823087

	MAIL ADDRESS:	
		STREET 1:		C/O MERRILL LYNCH ASSET MANAGEMENT
		STREET 2:		PO BOX 9011, INFO SYSTEMS SECT 2-B
		CITY:			PRINCETON
		STATE:			NJ
		ZIP:			08543-9011
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-14 8C
<SEQUENCE>1
<DESCRIPTION>FORM N-14
<TEXT>

<HTML>
<head>
<TITLE> N-14 8C</TITLE>
</head>
<body>
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<p><table width=600><tr><td  align=center><font size=2><B>As filed with the
Securities and Exchange Commission on April 14, 2000</B></font></td></tr></TABLE>

<table width=600><tr><td align=right><font size=2><B>Securities Act File No.
_________<BR> Investment Company Act File No. 811-09191</B></font></td></tr></TABLE>

<TABLE WIDTH=600><TR><TD>
<HR ALIGN=LEFT WIDTH=100% SIZE=4 noshade>
<HR ALIGN=LEFT WIDTH=100% SIZE=1 noshade>
</TR></TABLE>

<table width=600><tr><td  align=center><font size=4><B>SECURITIES AND
EXCHANGE COMMISSION</B></font><BR><font size=2><B>Washington, D.C. 20549</B></font></td></tr></TABLE>

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

<table width=600><tr><td  align=center><font size=4><B>FORM N-14</B></font><BR><font size=3><B>REGISTRATION
STATEMENT<BR> UNDER<BR> THE SECURITIES ACT OF 1933</B></font></td></tr></TABLE>

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

<table width=600>
  <tr>
    <td width="11" valign="top"><font size="2">|<u>&nbsp;&nbsp;&nbsp;</u>|<br>
      |<u>&nbsp;&nbsp;&nbsp;</u>| </font></td>
    <td width="577" align="center"><FONT SIZE="2"><b>Pre-Effective Amendment No.
      &nbsp;&nbsp;&nbsp;<BR>
      Post-Effective Amendment No.&nbsp;&nbsp;&nbsp;<BR>
      (Check appropriate box or boxes)&nbsp;&nbsp;&nbsp;</b></FONT></td>
  </tr>
</TABLE>

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

<table width=600><tr><td  align=center><FONT SIZE="5"><B>MuniHoldings Insured
Fund II, Inc.</B></FONT><BR><font size=1><B>(Exact Name of
Registrant as Specified in Charter)</B></font></td></tr></TABLE>

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

<table width=600><tr><td  align=center><font size=2><B>(609) 282-2800</b></font><B><BR><font size=1> (Area
Code and Telephone Number)</font></B></td></tr></TABLE>

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

<table width=600><tr><td  align=center><font size=2><B>800 Scudders Mill
Road<BR> Plainsboro, New Jersey 08536</b></font><B><BR><font size=1> (Address of Principal Executive Offices:<BR>
Number, Street, City, State, Zip Code)</font></B></td></tr></TABLE>

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

<table width=600><tr><td  align=center><font size=2><B>Terry K. Glenn<BR>
MuniHoldings Insured Fund II, Inc.<BR> 800 Scudders Mill Road, Plainsboro, New
Jersey 08536<BR> Mailing Address:<BR> P.O. Box 9011, Princeton, New Jersey 08543-9011</b></font><B><BR>
<font size=1>(Name and Address of Agent for Service)</font></B></td></tr></TABLE>

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

<table width=600><tr><td  align=center><FONT SIZE="2"><B><I>Copies to:</I></B></FONT></td></tr></TABLE>


<table width=600>
  <tr valign=TOP>
    <td width=50% align=CENTER><font size=2><b>Frank P. Bruno, Esq.</b><br>
      <b>BROWN &amp; WOOD LLP</b><br>
      <b>One World Trade Center</b><br>
      <b>New York, New York 10048-0557</b>
      </font></td>
    <td width=50% align=CENTER><font size=2><b>Michael J. Hennewinkel, Esq.</b><br>
      <b>FUND ASSET MANAGEMENT</b><br>
      <b>800 Scudders Mill Road</b><br>
      <b>Plainsboro, New Jersey 08543-9011</b></font></td>
  </tr>
</TABLE>

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

<table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate
Date of Proposed Public Offering:</B> As soon as practicable after the Registration
Statement becomes effective under the Securities Act of 1933.</FONT></td></tr></TABLE><p></p>

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

<p><table width=600><tr><td  align=center><font size=2><B>Calculation of
Registration Fee Under the Securities Act of 1933</B></font></td></tr></TABLE>




<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="10" align="left">
      <hr noshade size="2">
    </TH>
  </TR>
  <TR VALIGN="BOTTOM">

    <TH COLSPAN="2" align="left"><font size="1">Title Of Securities Being Registered</font></TH>
    <TH COLSPAN="2"><font size="1">Amount being<br>
      Registered (1)
      </font></TH>
    <TH COLSPAN="2"><font size="1">Proposed<br>
      Maximum<br>
      Offering
      Price<br>
      Per Unit (1)
      </font></TH>
    <TH COLSPAN="2"><font size="1">Proposed<br>
      Maximum<br>
      Aggregate<br>
      Offering<br>
      Price (1)
       </font></TH>
    <TH COLSPAN="2"><font size="1">Amount of<br>
      Registration<br>
      Fee (3)</font></TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD WIDTH="100%" ALIGN="LEFT" colspan="10">
      <hr noshade size="1">
    </TD>
  </TR>

  <TR VALIGN="BOTTOM">

    <TD WIDTH="45%" ALIGN="LEFT"><FONT SIZE="-1">Common Stock ($.10 par value)</FONT></TD>
    <TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE="-1">12,383,275</FONT></TD>
    <TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE="-1">$12.68&nbsp;&nbsp;</FONT></TD>
    <TD WIDTH="5%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE="-1">$157,019,929</FONT></TD>
    <TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE="-1">$41,453</FONT></TD>
    <TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <tr valign="BOTTOM">

    <td align="LEFT"><font size="-1">Auction Market Preferred Stock, Series C</font></td>
    <td align="LEFT"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT"><font size="-1">3,980</font></td>
    <td align="LEFT"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT"><font size="-1">$25,000</font></td>
    <td align="LEFT"><font size="-1">(2)</font></td>
    <td align="RIGHT"><font size="-1">$&nbsp;&nbsp;99,500,000</font></td>
    <td align="LEFT"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT"><font size="-1">$26,268</font></td>
    <td align="LEFT"><font size="-1">&nbsp;</font></td>
  </tr>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" colspan="10">
      <hr noshade size="2">
    </TD>
  </TR>
</TABLE>


<table width=600><tr><td width=3% valign=top><font size="1">(1)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Estimated
solely for the purpose of calculating the filing fee.</font></td></tr></TABLE>

<table width=600><tr><td width=3% valign=top><font size="1">(2)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Represents
the liquidation preference of a share of preferred stock after the
reorganization. </font></td></tr></TABLE>

<table width=600><tr><td width=3% valign=top><font size="1">(3)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Paid
by wire transfer to the designated lockbox of the Securities and Exchange
Commission in Pittsburgh, Pennsylvania.</font></td></tr></TABLE>

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

<table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.</B></FONT></td></tr></TABLE>
<TABLE WIDTH=600><TR><TD>
<HR ALIGN=LEFT WIDTH=100% SIZE=1 noshade>
<HR ALIGN=LEFT WIDTH=100% SIZE=4 noshade>
</TR></TABLE>

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












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

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

<p><table width=600><tr><td  align=center><font size=2><B>NOTICE OF SPECIAL
MEETING OF STOCKHOLDERS</B></font></td></tr></TABLE><p></p>

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

<p><table width=600><tr><td  align=center><font size=2><B>To Be Held on June
27, 2000</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>T<font size="1">O THE</font> S<font size="1">TOCKHOLDERS
      OF</font> <BR>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M<font size="1">UNI</font>H<font size="1">OLDINGS</font>
      I<font size="1">NSURED</font> F<font size="1">UND</font> II, I<font size="1">NC</font>.
      <BR>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M<font size="1">UNI</font>H<font size="1">OLDINGS</font>
      I<font size="1">NSURED</font> F<font size="1">UND</font> III, I<font size="1">NC</font>.<BR>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M<font size="1">UNI</font>H<font size="1">OLDINGS</font>
      I<font size="1">NSURED</font> F<font size="1">UND</font> IV, I<font size="1">NC</font>.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTICE IS
HEREBY GIVEN that the special meetings of stockholders (the
&#147;Meetings&#148;) of MuniHoldings Insured Fund II, Inc. (&#147;Insured
II&#148;), MuniHoldings Insured Fund III, Inc. (&#147;Insured III&#148;) and
MuniHoldings Insured Fund IV, Inc. (&#147;Insured IV&#148;) will be held at the
offices of Merrill Lynch Asset Management, L.P., 800 Scudders Mill Road,
Plainsboro, New Jersey on Tuesday, June 27, 2000 at 9:00 a.m. Eastern time
(Insured II), 9:20 a.m. Eastern time (Insured III) and 9:40 a.m. Eastern time
(Insured IV) for the following purposes:</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) To
approve or disapprove an Agreement and Plan of Reorganization (the &#147;Agreement
and Plan&#148;) contemplating (i) the acquisition of substantially all of the assets
and the assumption of substantially all of the liabilities of Insured III by
Insured II, in exchange solely for an equal aggregate value of newly-issued
shares of Insured II Common Stock and shares of a newly-created series of
Auction Market Preferred Stock (&#147;AMPS&#148;) of Insured II to be designated Series C
(&#147;Insured II Series C AMPS&#148;), (ii) the acquisition of substantially all of the
assets and the assumption of substantially all of the liabilities of Insured IV
by Insured II, in exchange solely for an equal aggregate value of newly-issued
shares of Insured II Common Stock and Insured II Series C AMPS, (iii) the
distribution by Insured III of such Insured II Common Stock to the holders of
Common Stock of Insured III and such Insured II Series C AMPS to the holders of
Series A AMPS of Insured III and (iv) the distribution by Insured IV of such
Insured II Common Stock to the holders of Common Stock of Insured IV and such
Insured II Series C AMPS to the holders of Series A AMPS of Insured IV. A vote
in favor of this proposal also will constitute a vote in favor of the
liquidation and dissolution of each of Insured III and Insured IV and the
termination of their respective registrations under the Investment Company Act
of 1940, as amended; and</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) To transact such other
      business as properly may come before the Meetings or any adjournment thereof.
      </font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Boards of Directors of Insured II, Insured III and Insured IV have fixed the
close of business on May 2, 2000 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Meetings or any
adjournment thereof.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
complete list of the stockholders of Insured II, Insured III and Insured IV
entitled to vote at the Meetings will be available and open to the examination
of any stockholder of Insured II, Insured III or Insured IV, respectively, for
any purpose germane to the Meetings during ordinary business hours from and
after June 13, 2000, at the offices of Insured II, 800 Scudders Mill Road,
Plainsboro, New Jersey.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are cordially invited
      to attend the Meeting. <B>Stockholders who do not expect to attend the Meeting
      in person are requested to complete, date and sign the enclosed form of
      proxy and return it promptly in the envelope provided for that purpose.</B>
      <b>If you have been provided with the opportunity on your proxy card or
      voting instruction form to provide vo ting instructions via telephone or
      the Internet, please take advantage of these prompt and efficient voting
      options.</b> The enclosed proxy is being solicited on behalf of the Board
      of Directors of Insured II, Insured III or Insured IV, as applicable.</FONT></td>
  </tr></TABLE><p></p>

<p>
<table width=600>
  <tr>
    <td align=right width="297">&nbsp;</td>
    <td align=left width="291"><font size=2>By Order of the Board of Directors,</font></td>
  </tr>
</TABLE>
<p></p>

<p>
<table width=600>
  <tr>
    <td align=right width="298">&nbsp;</td>
    <td align=left width="290"><font size=2>B<font size="1">RADLEY</font> J. L<font size="1">UCIDO</font><br>
      <i>Secretary</i><br>
      MuniHoldings Insured Fund II, Inc. and<br>
      MuniHoldings Insured Fund III, Inc.</font></td>
  </tr>
</TABLE>
<p></p>

<p>
<table width=600>
  <tr>
    <td align=right width="297">&nbsp;</td>
    <td align=left width="291"><font size=2>W<font size="1">ILLIAM</font> E. Z<font size="1">ITELLI</font><br>
      <i>Secretary</i><br>
      MuniHoldings Insured Fund IV, Inc.</font></td>
  </tr>
</TABLE>
<p></p>

<p><table width=600><tr><td><font size=2>Plainsboro, New Jersey <BR>Dated: May
__, 2000</font></td></tr></TABLE><p></p>


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












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<p><table width=600><tr><td><font size=2>The information in this prospectus is
not complete and may be changed. We may not use this prospectus to sell
securities until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any State
where the offer or sale is not permitted.</font></td></tr></TABLE><p></p>



<p><table width=600><tr><td  align=center><font size=2><B>SUBJECT TO
COMPLETION <BR> PRELIMINARY PROXY STATEMENT AND PROSPECTUS DATED APRIL 14, 2000</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr><td  align=center><font size=2><B>PROXY STATEMENT AND
PROSPECTUS <BR>MUNIHOLDINGS INSURED FUND II, INC. <BR>MUNIHOLDINGS INSURED FUND III,
INC. <BR>MUNIHOLDINGS INSURED FUND IV, INC. <BR>P.O. BOX 9011 <BR>PRINCETON, NEW JERSEY
08543-9011 <BR>(609) 282-2800</B></font></td></tr></TABLE><p></p>

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

<p><table width=600><tr><td  align=center><font size=2><B>SPECIAL MEETING OF
STOCKHOLDERS</B></font></td></tr></TABLE><p></p>

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


<p><table width=600><tr><td  align=center><font size=2><B>June 27, 2000</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Joint Proxy Statement
      and Prospectus is furnished to you as a stockholder of one or more of the
      funds listed above. A Special Meeting of the stockholders of each of these
      funds will be held on June 27, 2000 (each, a &#147;Meeting&#148; and collectively,
      the &#147;Meetings&#148;) to consider the items that are listed below and
      discussed in greater detail elsewhere in this Proxy Statement and Prospectus.
      The Board of Directors of each of the funds is requesting its stockholders
      to submit a proxy to be used at the Meetings to vote the shares held by
      the stockholder submitting the proxy.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
proposals to be considered at the Meetings are:</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. To
approve or disapprove an Agreement and Plan of Reorganization among the funds;
and</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. To
transact such other business as may properly come before the Meetings or any
adjournment thereof.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Agreement
and Plan of Reorganization that you are being asked to consider involves a
transaction that will be referred to in this Proxy Statement and Prospectus as
the Reorganization. The Reorganization involves the combination of three funds
into one. The three funds are:</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td>
<font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniHoldings
Insured Fund II, Inc. (&#147;Insured II&#148;), which will be the surviving fund<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniHoldings Insured
Fund III, Inc. (&#147;Insured III&#148;)<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniHoldings Insured Fund
IV, Inc. (&#147;Insured IV&#148;)</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
III and Insured IV are sometimes referred to herein collectively as the
&#147;Acquired Funds&#148; and individually as an &#147;Acquired Fund,&#148; as
the context requires. Insured II, Insured III and Insured IV are sometimes
referred to herein collectively as the &#147;Funds&#148; and individually as a
&#147;Fund,&#148; as the context requires. The fund resulting from the
Reorganization is sometimes referred to herein as the &#147;Combined Fund.&#148;</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the Reorganization, Insured
      II will acquire substantially all of the assets and assume substantially
      all of the liabilities of each Acquired Fund solely in exchange for shares
      of Insured II&#146;s Common Stock, par value $.10 per share, and shares
      of a newly-created series of Insured II&#146;s Auction Market Preferred
      Stock (&#147;AMPS&#148;), with a par value of $.10 per share and a liquidation
      preference of $25,000 per share, to be designated Series C (&#147;Insured
      II Series C AMPS&#148;). The Acquired Funds will distribute the Insured
      II Common Stock and Insured II Series C AMPS received in the Reorganization
      to their respective stockholders and will then liquidate and dissolve and
      terminate their registrations under the Investment Company Act of 1940,
      as amended (the &#147;Investment Company Act&#148;). Insured II will continue
      to operate as a registered closed-end investment company with the investment
      objective and policies described in this Proxy Statement and Prospectus.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td align=right><font size=1><i>(continued on next page)</i></font></td></tr></TABLE><p></p>

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

<p><table width=600><tr><td  align=center><font size=2><B>The Securities and
Exchange Commission has not approved or disapproved these securities or passed<BR>
upon the adequacy of this Proxy Statement and Prospectus. Any representation<BR> to
the contrary is a criminal offense.</B></font></td></tr></TABLE></p>

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

<p><table width=600><tr><td  align=center><font size=2><B>The date of this
Proxy Statement and Prospectus is May __, 2000.</B></font></td></tr></TABLE><p></p>

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












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<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the Reorganization, Insured
      II will issue shares of its Common Stock and AMPS to each Acquired Fund
      based on the value of the assets transferred to Insured II by that Acquired
      Fund. These shares will then be distributed by each Acquired Fund to its
      stockholders based on the value of the shares held by each stockholder just
      prior to the Reorganization. A holder of Common Stock of an Acquired Fund
      will receive Insured II Common Stock and a holder of AMPS of an Acquired
      Fund will receive Insured II Series C AMPS. All references to the Common
      Stock of an Acquired Fund will include shares of Common Stock of an Acquired
      Fund representing Dividend Reinvestment Plan shares held in the book deposit
      accounts of holders of Common Stock of an Acquired Fund.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Proxy Statement and Prospectus serves as a prospectus of Insured II in
connection with the issuance of Insured II Common Stock and Insured II Series C
AMPS in the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Proxy
Statement and Prospectus sets forth information about Insured II, Insured III
and Insured IV that stockholders of the Funds should know before considering the
Reorganization and should be retained for future reference. Each Fund has
authorized the solicitation of proxies in connection with the Reorganization
solely on the basis of this Proxy Statement and Prospectus and the accompanying
documents.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
address of the principal executive offices of Insured II, Insured III and
Insured IV is 800 Scudders Mill Road, Plainsboro, New Jersey 08536, and the
telephone number is (609) 282-2800.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Common Stock of Insured II and Insured III is listed on the New York Stock
Exchange (the &#147;NYSE&#148;) under the symbols &#147;MUE&#148; and
&#147;MSR,&#148; respectively. The Common Stock of Insured IV is listed on the
American Stock Exchange (the &#147;AMEX&#148;) under the symbol &#147;MOU.&#148;
After the Reorganization, shares of Insured II Common Stock will continue to be
listed on the NYSE under the symbol &#147;MUE.&#148; Reports, proxy materials
and other information concerning Insured II and Insured III may be inspected at
the offices of the NYSE, 20 Broad Street, New York, New York 10005. Reports,
proxy materials and other information concerning Insured IV may be inspected at
the offices of the AMEX, 980 Washington Boulevard, Gaithersburg, Maryland 20878.</font></td></tr></TABLE><p></p>

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









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









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

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="2"></TH>
    <TH COLSPAN="2"></TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD WIDTH="88%" ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD WIDTH="10%" ALIGN="center" colspan="2"><FONT SIZE="-1"></FONT><FONT SIZE="-1">&nbsp;&nbsp;Page&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1"><a href="#5a">INTRODUCTION</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">5</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="2%">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="5%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1"><a href="#5b">ITEM 1. THE REORGANIZATION</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">5</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="2%">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="5%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;<a href="#5c">SUMMARY</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">5</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="2%">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="5%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;<a href="#15a">&nbsp;RISK
      FACTORS AND SPECIAL CONSIDERATIONS</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">15</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#15b">Interest
      Rate and Credit Risk</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">15</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#15c">Non-Diversification</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">15</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#15d">Rating
      Categories</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">15</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#15e">Private
      Activity Bonds</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">15</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#15f">Portfolio
      Insurance</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">15</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#15g">&nbsp;Leverage</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">15</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#16a">Portfolio
      Management</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">16</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#16b">Indexed
      and Inverse Floating Rate Securities</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">16</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#17a">&nbsp;Options
      and Futures Transactions</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">17</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#17b">Antitakeover
      Provisions</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">17</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#17c">Ratings
      Considerations</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">17</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="2%">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="5%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;<a href="#18a">COMPARISON
      OF THE FUNDS</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">18</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#18b">Financial
      Highlights</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">18</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#22">Investment
      Objective and Policies</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">22</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#23">Portfolio
      Insurance</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">23</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#24">Description
      of Municipal Bonds</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">24</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#25">Special
      Considerations Relating to Municipal Bonds</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
      Investment Policies</FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">25</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#26">Information
      Regarding Options and Futures Transactions</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">26</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#29">Investment
      Restrictions</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">29</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#30">Rating
      Agency Guidelines</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">30</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#31">&nbsp;Portfolio
      Composition</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">31</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#32">&nbsp;Portfolio
      Transactions</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">32</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#33a">Portfolio
      Turnover</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">33</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#33b">Net
      Asset Value</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">33</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#34">&nbsp;Capital
      Stock</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">34</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#36">Management
      of the Funds</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">36</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#37a">Code
      of Ethics</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">37</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#37b">Voting
      Rights</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">37</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#38a">Stockholder
      Inquiries</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">38</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#38b">Dividends
      and Distributions</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">38</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#39">Automatic
      Dividend Reinvestment Plan</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">39</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#41a">Mutual
      Fund Investment Option</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">41</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#41b">Liquidation
      Rights of Holders and AMPS</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">41</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#41c">Tax
      Rules Applicable to the Funds and Their Stockholders</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">41</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#45a">Tax
      Treatment of Options and Futures Transactions</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">45</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><font size="-1">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
    <TD ALIGN="LEFT" width="2%">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="5%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;<a href="#45b">AGREEMENT
      AND PLAN&nbsp;OF REORGANIZATION</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">45</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#45c">General</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">45</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#46">Procedure</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">46</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#47">Terms
      of the Agreement and Plan</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">47</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#48">&nbsp;Potential
      Benefits to Common Stockholders of the Funds as a Result of the Reorganization</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">48</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#50">Surrender
      and Exchange of Stock Certificates</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">50</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#51">Tax
      Consequences of the Reorganization</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">51</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="88%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#52">Capitalization</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%"><FONT SIZE="-1">52</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
</TABLE>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">3
</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;













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









<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="2"></TH>
    <TH COLSPAN="2"></TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD WIDTH="87%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="2%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="6%" ALIGN="RIGHT">&nbsp;</TD>
    <TD WIDTH="5%" ALIGN="LEFT">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD WIDTH="87%" ALIGN="LEFT"><FONT SIZE="-1"><a href="#53a">INFORMATION CONCERNING
      THE SPECIAL MEETINGS</a></FONT></TD>
    <TD WIDTH="2%" ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE="-1">53</FONT></TD>
    <TD WIDTH="5%" ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1">&nbsp;&nbsp;<a href="#53b">&nbsp;Date,
      Time and Place of Meetings</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">53</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;<a href="#53c">Solicitation,
      Revocation and Use of Proxies</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">53</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1">&nbsp;&nbsp;<a href="#53d">&nbsp;Record
      Date and Outstanding Shares</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">53</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1">&nbsp;&nbsp;<a href="#53e">&nbsp;Security
      Ownership of Certain Beneficial Owners and Management</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">53</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1">&nbsp;&nbsp;<a href="#53f">&nbsp;Voting
      Rights and Required Vote</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">53</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;<a href="#54a">Appraisal
      Rights</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">54</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="2%">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="6%">&nbsp;</TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#54b">ADDITIONAL INFORMATION</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">54</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#55a">CUSTODIAN</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">55</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#55b">TRANSFER AGENT,
      DIVIDEND DISBURSING AGENT AND REGISTRAR</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">55</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#56a">LEGAL PROCEEDINGS</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">56</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#56b">LEGAL OPINIONS</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">56</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#56c">EXPERTS</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">56</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#56d">STOCKHOLDER PROPOSALS</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">56</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#f1">INDEX TO FINANCIAL
      STATEMENTS</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">F-1</FONT></TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#i1">APPENDIX I &nbsp;&nbsp;&nbsp;&nbsp;INFORMATION
      PERTAINING TO EACH FUND</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">I-1</FONT></TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#ii1">APPENDIX II &nbsp;&nbsp;AGREEMENT
      AND PLAN OF REORGANIZATION</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">II-1</FONT></TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#ii1">APPENDIX III &nbsp;RATINGS
      OF MUNICIPAL BONDS</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">III-1</FONT></TD>
    <TD ALIGN="LEFT" width="5%">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="87%"><FONT SIZE="-1"><a href="#iv1">APPENDIX IV &nbsp;PORTFOLIO
      INSURANCE</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="6%"><FONT SIZE="-1">IV-1</FONT></TD>
  </TR>
</TABLE>


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













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<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="5a"></a>INTRODUCTION</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Proxy Statement and Prospectus
      is furnished to you in connection with the solicitation of proxies on behalf
      of the Boards of Directors of Insured II, Insured III and Insured IV for
      use at the Meetings to be held at the offices of Merrill Lynch Asset Management,
      L.P. (&#147;MLAM&#148;), 800 Scudders Mill Road, Plainsboro, New Jersey
      on June 27, 2000, at the time specified for each Fund in Appendix I to this
      Proxy Statement and Prospectus. The mailing address for each Fund is P.O.
      Box 9011, Princeton, New Jersey 08543-9011. The approximate mailing date
      of this Proxy Statement and Prospectus is May __, 2000.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
person giving a proxy may revoke it at any time prior to its exercise by
executing a superseding proxy, by giving written notice of the revocation to the
Secretary of Insured II, Insured III or Insured IV, as applicable, at the
address indicated above or by voting in person at the appropriate Meeting. All
properly executed proxies received prior to the Meetings will be voted at the
Meetings in accordance with the instructions marked thereon or otherwise as
provided therein. Unless instructions to the contrary are marked, proxies will
be voted &#147;FOR&#148; the proposal to approve the Agreement and Plan of
Reorganization among Insured II, Insured III and Insured IV (the &#147;Agreement
and Plan&#148;).</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to Item 1, assuming
      the required quorums are present at the Meetings, approval of the Agreement
      and Plan will require the affirmative vote of stockholders representing
      (i) a majority of the outstanding shares of Insured II Common Stock and
      Insured II AMPS, Series A and Series B, voting together as a single class,
      and a majority of the outstanding shares of Insured II AMPS, Series A and
      Series B, voting together as a separate class, (ii) a majority of the outstanding
      shares of Insured III Common Stock and Insured III AMPS, Series A, voting
      together as a single class, and a majority of the outstanding shares of
      Insured III AMPS, Series A, voting separately as a class, and (iii) a majority
      of the outstanding shares of Insured IV Common Stock and Insured IV AMPS,
      Series A, voting together as a single class, and a majority of the outstanding
      shares of Insured IV AMPS, Series A, voting separately as a class. Because
      of the requirement that the Agreement and Plan be approved by stockholders
      of all three Funds, the Reorganization will not take place if stockholders
      of any one Fund do not approve the Agreement and Plan.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors of each
      Fund has fixed the close of business on May 2, 2000 as the record date (the
      &#147;Record Date&#148;) for the determination of stockholders entitled
      to notice of, and to vote at, the Meetings or any adjournment thereof. Stockholders
      on the Record Date will be entitled to one vote for each share held, with
      no shares having cumulative voting rights. At the Record Date, each Fund
      had outstanding the number of shares of Common Stock and AMPS set forth
      in Appendix I to this Proxy Statement and Prospectus. To the knowledge of
      the management of each Fund, no person owned beneficially more than 5% of
      the respective outstanding shares of either class of capital stock of any
      Fund as of the Record Date.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Boards of Directors of the Funds know of no business other than that discussed
in Item 1 above that will be presented for consideration at the Meetings. If any
other matter is properly presented, it is the intention of the persons named in
the enclosed proxy to vote in accordance with their best judgment.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="#5b"></a>ITEM 1. THE REORGANIZATION</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="#5c"></a>SUMMARY</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The
following is a summary of certain information contained elsewhere in this Proxy
Statement and Prospectus and is qualified in its entirety by reference to the
more complete information contained in this Proxy Statement and Prospectus and
in the Agreement and Plan attached hereto as Exhibit II.</I></FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>In this
Proxy Statement and Prospectus, the term &#147;Reorganization&#148; refers
collectively to (i) the acquisition of substantially all of the assets and the
assumption of substantially all of the liabilities of Insured III and Insured IV
by Insured II (ii) the subsequent distribution of Insured II Common Stock to the
holders of Insured III Common Stock and Insured IV Common Stock and of Insured
II Series C AMPS to the holders of Insured III Series A AMPS and Insured IV
Series A AMPS; and (iii) the subsequent deregistration and dissolution of each
of Insured III and Insured IV as described below.</I></FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
meetings of the Boards of Directors of each Fund, the Board of Directors of
each Fund unanimously approved the Reorganization. Subject to obtaining the
necessary approvals from the stockholders of each Fund, the Board of Directors
of each Acquired Fund also deemed advisable the deregistration of each Acquired
Fund</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>under the Investment Company Act and
its dissolution under the laws of the State of Maryland. The Reorganization
requires approval of the stockholders of each of the three Funds. The
Reorganization will not take place if the stockholders of any one Fund do not
approve the Agreement and the Plan.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
seeks to provide stockholders with current income exempt from Federal income
tax. Each Fund seeks to achieve its investment objective by investing primarily
in a portfolio of long-term, investment grade municipal obligations, the
interest on which, in the opinion of bond counsel to the issuer, is exempt from
Federal income tax (&#147;Municipal Bonds&#148;). Under normal circumstances, at
least 80% of each Fund&#146;s total assets will be invested in municipal
obligations with remaining maturities of one year or more that are covered by
insurance guaranteeing the timely payment of principal at maturity and interest.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
is a non-diversified, leveraged, closed-end management investment company
registered under the Investment Company Act. If the stockholders of the Funds
approve the Reorganization, (i) Insured II Common Stock and Insured II Series C
AMPS will be issued to Insured III in exchange for the assets of Insured III;
(ii) Insured II Common Stock and Insured II Series C AMPS will be issued to
Insured IV in exchange for the assets of Insured IV; and (iii) Insured III and
Insured IV will distribute these shares to their respective stockholders as
provided in the Agreement and Plan. After the Reorganization, each Acquired Fund
will terminate its registration under the Investment Company Act and its
incorporation under Maryland law.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
upon their evaluation of all relevant information, the Board of Directors of
each Fund has determined that the Reorganization will potentially benefit the
holders of Common Stock of that Fund. Specifically, after the Reorganization,
stockholders of each Acquired Fund will remain invested in a closed-end fund
with an investment objective and policies substantially similar to the Acquired
Fund&#146;s investment objective and policies and that uses substantially the
same management personnel. In addition, it is anticipated that the holders of
Common Stock of each Fund will be subject to a reduced overall operating expense
ratio based on the anticipated pro forma combined total operating expenses and
the total combined assets of the Combined Fund after the Reorganization. The
Boards of Directors also considered the relative tax positions of the
Funds&#146; portfolios. It is not anticipated that the Reorganization will
directly benefit the holders of shares of AMPS of any Fund; however, the
Reorganization will not adversely affect the holders of shares of any series of
AMPS of any Fund and the expenses of the Reorganization will not be borne by the
holders of shares of AMPS of any Fund.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If all of
the requisite approvals are obtained, it is anticipated that the Reorganization
will occur as soon as practicable after such approval, provided that the Funds
have obtained prior to that time a favorable private letter ruling from the
Internal Revenue Service (the &#147;IRS&#148;) concerning the tax consequences
of the Reorganization as set forth in the Agreement and Plan or an opinion of
counsel to the same effect. Under the Agreement and Plan, however, the Board of
Directors of any Fund may cause the Reorganization to be postponed or abandoned
in certain circumstances should such Board determine that it is in the best
interests of the stockholders of that Fund to do so. The Agreement and Plan may
be terminated, and the Reorganization abandoned, whether before or after
approval by the Funds&#146; stockholders, at any time prior to the Exchange Date
(as defined below), (i) by mutual consent of the Boards of Directors of all of
the Funds or (ii) by the Board of Directors of any Fund if any condition to that
Fund&#146;s obligations has not been fulfilled or waived by such Fund&#146;s
Board of Directors.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr align="center"><td><font size=2><b>Fee Table
for Common Stockholders of Insured II,<BR>
Insured III, Insured IV and the Combined Fund*<BR>
as of March 31, 2000 (Unaudited)(a)</b></font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table illustrates, based on average net assets attributable to common
stock, the expenses to be incurred by each Fund individually and the estimated
pro forma expenses to be incurred by the Combined Fund after the Reorganization:</font></td></tr></TABLE><p></p>




<font size="1"> </font>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="2">&nbsp;</TH>
    <TH COLSPAN="6"><font size="1">Actual</font>
      <hr noshade size="1" width="95%">
    </TH>
    <TH COLSPAN="2">
      <hr size="1" noshade width="85%">
    </TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="2"></TH>
    <TH COLSPAN="2"><font size="1">Insured<br>
      II </font>
      <hr noshade size="1" width="85%">
    </TH>
    <TH COLSPAN="2"><font size="1">Insured<br>
      III </font>
      <hr noshade size="1" width="85%">
    </TH>
    <TH COLSPAN="2"><font size="1">Insured<br>
      IV </font>
      <hr noshade size="1" width="85%">
    </TH>
    <TH COLSPAN="2"><font size="1">Combined<br>
      Fund* </font>
      <hr noshade size="1" width="85%">
    </TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">Common Stockholder Transaction Expenses:</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="center" colspan="2">&nbsp;</TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;Maximum Sales Load (as a percentage</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;of the offering price)
      imposed on</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;purchases of Common
      Stock</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">(b)</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">(b)</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">(b)</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">(c)</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;Dividend Reinvestment and</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;Cash Purchase Plan
      Fees</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">Annual Expenses (as a percentage of</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;net assets attributable to Common
      Stock</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;at March 31, 2000(d):</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;Investment Advisory Fees(e)</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">0.85%</FONT></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">0.85%</FONT></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">0.85%</FONT></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">0.85%</FONT></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;Interest Payments on Borrowed
      Funds</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;&nbsp;Other Expenses</FONT></TD>
    <TD ALIGN="LEFT"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">0.39%</FONT></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">0.47%</FONT></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">0.57%</FONT></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><FONT SIZE="-1">0.32%</FONT></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"> </TD>
    <TD ALIGN="LEFT"> </TD>
    <TD ALIGN="RIGHT">
      <hr noshade size="1" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT"> </TD>
    <TD ALIGN="RIGHT">
      <hr noshade size="1" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT"> </TD>
    <TD ALIGN="RIGHT">
      <hr noshade size="1" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT"> </TD>
    <TD ALIGN="RIGHT">
      <hr noshade size="1" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT"> </TD>
  </TR>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="-1">Total Annual Expenses(f)</font></td>
    <td align="LEFT"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT"><font size="-1">1.24%</font></td>
    <td align="LEFT">&nbsp;</td>
    <td align="RIGHT"><font size="-1">1.32%</font></td>
    <td align="LEFT">&nbsp;</td>
    <td align="RIGHT"><font size="-1">1.42%</font></td>
    <td align="LEFT">&nbsp;</td>
    <td align="RIGHT"><font size="-1">1.17%</font></td>
    <td align="LEFT"> </td>
  </tr>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"> </TD>
    <TD ALIGN="LEFT"> </TD>
    <TD ALIGN="RIGHT">
      <hr noshade size="3" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT"> </TD>
    <TD ALIGN="RIGHT">
      <hr noshade size="3" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT"> </TD>
    <TD ALIGN="RIGHT">
      <hr noshade size="3" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT"> </TD>
    <TD ALIGN="RIGHT">
      <hr noshade size="3" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT"> </TD>
  </TR>
</TABLE>



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

<table width=600><tr><td width=3% align=right valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">The
expenses for the Combined Fund represent the estimated annualized expenses as
of March 31, 2000 assuming Insured II had acquired the assets and assumed the
liabilities of Insured III and Insured IV as of that date.
</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">(a)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">No
information is presented with respect to AMPS because no Fund&#146;s operating
expenses are, and the expenses of the Reorganization will not be, borne by the
holders of AMPS of any Fund. Generally, AMPS are sold at a fixed liquidation
preference of $25,000 per share and investment return is set at an auction.
</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">(b)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Shares
of Common Stock purchased in the secondary market may be subject to brokerage
commissions or other charges. </font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">(c)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">No
sales load will be charged on the issuance of shares in the Reorganization.
Shares of Common Stock are not available for purchase from the Funds but may be
purchased through a broker-dealer subject to individually negotiated commission
rates. </font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">(d)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">The
pro forma annual operating expenses for the Combined Fund are projections for a
12-month period. </font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">(e)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Based
on average net assets of each Fund and the Combined Fund (excluding assets
attributable to AMPS). If assets attributable to AMPS are included, the
Investment Advisory Fee for each Fund and the Combined Fund would be 0.55%.
</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">(f)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Based
on average net assets (excluding assets attributable to AMPS) of Insured II,
Insured III, Insured IV and the Combined Fund and excludes FAM&#146;s voluntary
waiver of a portion of the advisory fee and reimbursement of certain other
expenses with respect to Insured II, Insured III and Insured IV. Including such
fee waivers and expense reimbursements, the Total Annual Expenses for Insured
II, Insured III, Insured IV and the Combined Fund (excluding assets
attributable to AMPS) would have been 1.08%, 0.99%, 1.11%, and 1.00%,
respectively. If assets attributable to AMPS are included, the Total Annual
Expenses for Insured II, Insured III, Insured IV (excluding the advisory fee
waivers and expense reimbursements) and the Combined Fund (excluding any
advisory fee waivers and expense reimbursements) would be 0.70%, 0.75 %, 0.88%
and 0.68%, respectively. If assets attributable to AMPS and the above described
advisory fee waivers and expense reimbursements are included, the Total Annual
Expenses for Insured II, Insured III, Insured IV and the Combined Fund would
have been 0.61%, 0.56% , 0.69% and 0.58%, respectively.
</font></td></tr></TABLE>

<p><table width=600><tr><td><font size=2><B>Example:
</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2><B>Cumulative Expenses Paid on Shares
of Common Stock for the Periods Indicated: </B></font></td></tr></TABLE><p></p>


<font size="1"> </font>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="600">
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="2"></TH>
    <TH COLSPAN="2"></TH>
    <TH width="40"></TH>
    <TH COLSPAN="3"></TH>
    <TH COLSPAN="2"></TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" WIDTH="269">&nbsp;</TD>
    <TD ALIGN="LEFT" WIDTH="36">&nbsp;</TD>
    <TD ALIGN="center" WIDTH="36"><font size="1"><b>1 Year</b> </font>
      <hr noshade size="1">
    </TD>
    <TD ALIGN="center" WIDTH="38">&nbsp;</TD>
    <TD ALIGN="center" WIDTH="40"><font size="1"><b>3 Years</b> </font>
      <hr noshade size="1">
    </TD>
    <TD ALIGN="center" WIDTH="30">&nbsp;</TD>
    <TD ALIGN="center" WIDTH="39"><font size="1"><b>5 Years</b> </font>
      <hr noshade size="1">
    </TD>
    <TD ALIGN="center" WIDTH="36">&nbsp;</TD>
    <TD ALIGN="center" WIDTH="40"><font size="1"><b>10 Years</b> </font>
      <hr noshade size="1">
    </TD>
    <TD ALIGN="left" WIDTH="34">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" WIDTH="269"><font size="2">An investor would pay the following
      expenses on<br>
      &nbsp;&nbsp;&nbsp; a $1,000 investment assuming (1) the operating<br>
      &nbsp;&nbsp;&nbsp; expense ratio for each Fund set forth above and<br>
      &nbsp;&nbsp;&nbsp; (2) a 5% annual return throughout the period: </font></TD>
    <TD ALIGN="LEFT" WIDTH="36">&nbsp;</TD>
    <TD ALIGN="RIGHT" WIDTH="36">&nbsp;</TD>
    <TD ALIGN="LEFT" WIDTH="38">&nbsp;</TD>
    <TD ALIGN="RIGHT" WIDTH="40">&nbsp;</TD>
    <TD ALIGN="RIGHT" WIDTH="30">&nbsp;</TD>
    <TD ALIGN="RIGHT" WIDTH="39">&nbsp;</TD>
    <TD ALIGN="LEFT" WIDTH="36">&nbsp;</TD>
    <TD ALIGN="RIGHT" WIDTH="40">&nbsp;</TD>
    <TD ALIGN="left" WIDTH="34">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" WIDTH="269"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
      II</font></TD>
    <TD ALIGN="LEFT" WIDTH="36">&nbsp;</TD>
    <TD ALIGN="center" WIDTH="36"><font size="2">$13</font></TD>
    <TD ALIGN="LEFT" WIDTH="38">&nbsp;</TD>
    <TD ALIGN="center" WIDTH="40"><font size="2">$39</font></TD>
    <TD ALIGN="RIGHT" WIDTH="30">&nbsp;</TD>
    <TD ALIGN="center" WIDTH="39"><font size="2">$68</font></TD>
    <TD ALIGN="LEFT" WIDTH="36">&nbsp;</TD>
    <TD ALIGN="center" WIDTH="40"><font size="2">$150</font></TD>
    <TD ALIGN="left" WIDTH="34">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="269"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
      III</font></TD>
    <TD ALIGN="LEFT" width="36">&nbsp;</TD>
    <TD ALIGN="center" width="36"><font size="2">$13</font></TD>
    <TD ALIGN="LEFT" width="38">&nbsp;</TD>
    <TD ALIGN="center" width="40"><font size="2">$42</font></TD>
    <TD ALIGN="RIGHT" width="30">&nbsp;</TD>
    <TD ALIGN="center" width="39"><font size="2">$72</font></TD>
    <TD ALIGN="LEFT" width="36">&nbsp;</TD>
    <TD ALIGN="center" width="40"><font size="2">$159</font></TD>
    <TD ALIGN="left" width="34">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="269"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
      IV</font></TD>
    <TD ALIGN="LEFT" width="36">&nbsp;</TD>
    <TD ALIGN="center" width="36"><font size="2">$14</font></TD>
    <TD ALIGN="LEFT" width="38">&nbsp;</TD>
    <TD ALIGN="center" width="40"><font size="2">$45</font></TD>
    <TD ALIGN="RIGHT" width="30">&nbsp;</TD>
    <TD ALIGN="center" width="39"><font size="2">$78</font></TD>
    <TD ALIGN="LEFT" width="36">&nbsp;</TD>
    <TD ALIGN="center" width="40"><font size="2">$170</font></TD>
    <TD ALIGN="left" width="34">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="269"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Combined
      Fund*</font></TD>
    <TD ALIGN="LEFT" width="36">&nbsp;</TD>
    <TD ALIGN="center" width="36"><font size="2">$12</font></TD>
    <TD ALIGN="LEFT" width="38">&nbsp;</TD>
    <TD ALIGN="center" width="40"><font size="2">$37</font></TD>
    <TD ALIGN="RIGHT" width="30">&nbsp;</TD>
    <TD ALIGN="center" width="39"><font size="2">$64</font></TD>
    <TD ALIGN="LEFT" width="36"><font size="2">&nbsp;</font></TD>
    <TD ALIGN="center" width="40"><font size="2">$142</font></TD>
    <TD ALIGN="left" width="34">&nbsp;</TD>
  </TR>
  <TR>
    <TD COLSPAN="10">&nbsp; </TD>
  </TR>
</TABLE>

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

<table width=600><tr><td width=3% valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Assumes
that the Reorganization had taken place on March 31, 2000.</font></td></tr></TABLE>

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










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<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing Fee Table is intended to assist investors in understanding the costs
and expenses that a common stockholder of each Fund will bear directly or
indirectly as compared to the costs and expenses that would be borne by such
investors taking into account the Reorganization. <B>The example set forth above
assumes that shares of common stock were purchased in the initial offerings and
the reinvestment of all dividends and distributions and uses a 5% annual rate
of return as mandated by Securities and Exchange Commission (the &#147;SEC&#148;)
regulations. The example should not be considered a representation of past or
future expenses or annual rates of return. Actual expenses or annual rates of
return may be more or less than those assumed for purposes of the example.</B> See
&#147;Comparison of the Funds&#148; and &#147;The Reorganization &#151; Potential Benefits to
Common Stockholders of the Funds as a Result of the Reorganization.&#148;</FONT></td></tr></TABLE><p></p>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
Insured II
</B></FONT></TD>
    <TD width=60% valign=top><font size=2> Insured II was incorporated under the
      laws of the State of Maryland on December 28, 1998 and commenced operations
      on February 26, 1999. Insured II is a non-diversified, leveraged, closed-end
      management investment company whose investment objective is to provide stockholders
      with current income exempt from Federal income tax. Insured II seeks to
      achieve its investment objective by investing primarily in a portfolio of
      long term, investment grade Municipal Bonds. Under normal circumstances,
      at least 80% of Insured II&#146;s assets will be invested in municipal obligations
      with remaining maturities of one year or more that are covered by insurance
      guaranteeing the timely payment of principal and interest when due. Insured
      II intends to invest primarily in long-term Municipal Bonds with a maturity
      of more than ten years. The weighted average maturity of Insured II&#146;s
      portfolio was 21.72 years as of March 31, 2000. The average maturity of
      Insured II&#146;s portfolio securities, and therefore Insured II&#146;s
      portfolio as a whole, will vary based upon the assessment of Fund Asset
      Management, L.P. (&#147;FAM&#148;), Insured II&#146;s investment adviser,
      of economic and market conditions. See &#147;Comparison of the Funds &#151;
      Investment Objectives and Policies.&#148;</font></TD>
  </TR></TABLE><p></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
</B></FONT></TD><TD width=60% valign=top><font size=2>Insured II has outstanding Common
Stock and two series of AMPS, designated Series A and Series B, which AMPS
shall be referred to herein collectively as &#147;Insured II AMPS.&#148; As of March 31,
2000, Insured II had net assets (including assets attributable to Insured II
AMPS) of $243,164,208.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
Insured III
</B></FONT></TD><TD width=60% valign=top><font size=2> Insured III was
incorporated under the laws of the State of Maryland on April 5, 1999 and
commenced operations on May 28, 1999. Insured III is a non-diversified,
leveraged, closed-end management investment company whose investment objective
is to provide stockholders with current income exempt from Federal income tax.
Insured III seeks to achieve its investment objective by investing primarily in
a portfolio of long term, investment grade Municipal Bonds. Under normal
circumstances, at least 80% of Insured III&#146;s assets will be invested in
municipal obligations with remaining maturities of one year or more that are
covered by insurance guaranteeing the timely payment of principal and interest
when due. Insured III intends to invest primarily in long-term Municipal Bonds
with a maturity </font></TD></TR></TABLE></P>

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













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









<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
</B></FONT></TD>
    <TD width=60% valign=top><font size=2>of more than ten years. The weighted
      average maturity of Insured III&#146;s portfolio was 25.89 years as of March
      31, 2000. The average maturity of Insured III&#146;s portfolio securities,
      and therefore Insured III&#146;s portfolio as a whole, will vary based upon
      FAM&#146;s assessment of economic and market conditions. See &#147;Comparison
      of the Funds &#151; Investment Objectives and Policies.&#148;</font></TD>
  </TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><font size=2>Insured III has outstanding
Common Stock and one series of AMPS, designated Series A, which AMPS shall be
referred to herein as &#147;Insured III AMPS.&#148; As of March 31, 2000,
Insured III had net assets (including assets attributable to Insured III AMPS)
of $156,768,267.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
Insured IV
</B></FONT></TD>
    <TD width=60% valign=top><font size=2> Insured IV was incorporated under the
      laws of the State of Maryland on August 16, 1999 and commenced operations
      on September 24, 1999. Insured IV is a non-diversified, leveraged, closed-end
      management investment company whose investment objective is to provide stockholders
      with current income exempt from Federal income tax. Insured IV seeks to
      achieve its investment objective by investing primarily in a portfolio of
      long term, investment grade Municipal Bonds. Under normal circumstances,
      at least 80% of Insured IV&#146;s assets will be invested in municipal obligations
      with remaining maturities of one year or more that are covered by insurance
      guaranteeing the timely payment of principal and interest when due. Insured
      IV intends to invest primarily in long-term Municipal Bonds with a maturity
      of more than ten years. The weighted average maturity of Insured IV&#146;s
      portfolio was 24.29 years as of March 31, 2000. The average maturity of
      Insured IV&#146;s portfolio securities, and therefore Insured IV&#146;s
      portfolio as a whole, will vary based upon FAM&#146;s assessment of economic
      and market conditions. See &#147;Comparison of the Funds &#151; Investment
      Objectives and Policies.&#148;</font></TD>
  </TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
</B></FONT></TD><TD width=60% valign=top><font size=2>Insured IV has outstanding Common
Stock and one series of AMPS, designated Series A, which AMPS shall be referred
to herein as &#147;Insured IV AMPS.&#148; As of March 31, 2000, Insured IV had
net assets (including assets attributable to Insured IV AMPS) of $83,800,500.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
Comparison of the Funds
</B></FONT></TD><TD width=60% valign=top><FONT SIZE="2"><I>Investment
Objectives and Policies.</I> The Funds have substantially similar investment
objectives and policies. All three Funds seek to provide stockholders
(including holders of AMPS) with current income exempt from Federal income tax
and seek to invest primarily in a portfolio of long-term investment grade
Municipal Bonds. Under normal circumstances, at least 80% of each Fund&#146;s
assets will be invested in municipal obligations with remaining maturities of
one year or more that are covered by insurance guaranteeing the timely payment
of principal at maturity and interest. Each Fund intends to invest
substantially all (at least 80%) of its assets in Municipal Bonds except during
interim periods pending investment of the net proceeds of any public offering
of a Fund&#146;s securities and during</FONT></TD></TR></TABLE></P>

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













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









<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
</B></FONT></TD><TD width=60% valign=top><font size=2>temporary defensive periods. See
&#147;Comparison of the Funds &#151; Investment Objectives and Policies&#148; on
page 22 of this Proxy Statement and Prospectus.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
</B></FONT></TD>
    <TD width=60% valign=top><FONT SIZE="2"><I>Capital Stock.</I> Each Fund has
      outstanding both Common Stock and AMPS. The Common Stock of Insured II and
      Insured III is traded on the NYSE. The Common Stock of Insured IV is traded
      on the AMEX. As of March 31, 2000, (i) the net asset value per share of
      Insured II Common Stock was $12.54 and the market price per share was $10.5625;
      (ii) the net asset value per share of Insured III Common Stock was $13.06
      and the market price per share was $11.375; and (iii) the net asset value
      per share of Insured IV Common Stock was $15.15 and the market price per
      share was $12.75. The AMPS of each Fund have a liquidation preference of
      $25,000 per share and are sold principally at auction. See &#147;Comparison
      of the Funds &#151; Capital Stock&#148; on page 34 of this Proxy Statement
      and Prospectus.</FONT></TD>
  </TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
</B></FONT></TD>
    <TD width=60% valign=top><font size=2>Auctions generally have been held and
      will be held every seven days for each series of AMPS of each Fund unless
      the applicable Fund elects, subject to certain limitations, to have a special
      dividend period. In connection with the Reorganization, a holder of AMPS
      of an Acquired Fund may receive Insured II Series C AMPS with a dividend
      payment date and an auction date that fall on a day of the week that is
      different from the schedule of the AMPS of the Acquired Fund that he or
      she holds. See &#147;Comparison of the Funds &#151; Capital Stock&#148;
      on page 34 of this Proxy Statement and Prospectus. The following table provides
      information about the dividend rates for each series of AMPS of each Fund
      as of a recent auction date.</font></TD>
  </TR></TABLE></P>
<font size="1"> </font>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
  <TR VALIGN="BOTTOM">
    <TH align="left" width="240">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TH>
    <TH width="123" align="center"><font size="1">Auction Date </font></TH>
    <TH width="13">&nbsp;</TH>
    <TH width="102" align="center"><font size="1">Fund </font></TH>
    <TH width="1">&nbsp;</TH>
    <TH width="54" align="center"><font size="1">Series </font></TH>
    <TH width="1">&nbsp;</TH>
    <TH colspan="2" align="center"><font size="1">Dividend Rate </font></TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="left" width="240">&nbsp;</TD>
    <TD ALIGN="center" width="123">
      <hr size="1" noshade width="60%">
    </TD>
    <TD ALIGN="LEFT" width="13">&nbsp;</TD>
    <TD ALIGN="center" width="102">
      <hr size="1" noshade width="35%">
    </TD>
    <TD ALIGN="LEFT" width="1">&nbsp;</TD>
    <TD ALIGN="center" width="54">
      <hr width="30" size="1" noshade>
    </TD>
    <TD ALIGN="LEFT" width="1">&nbsp;</TD>
    <TD ALIGN="RIGHT" colspan="2">
      <hr size="1" noshade width="100%">
    </TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="left" width="240">&nbsp;</TD>
    <TD ALIGN="center" width="123"><font size="2">April 6, 2000</font></TD>
    <TD ALIGN="LEFT" width="13">&nbsp;</TD>
    <TD ALIGN="center" width="102"><font size="2">Insured II</font></TD>
    <TD ALIGN="LEFT" width="1">&nbsp;</TD>
    <TD ALIGN="center" width="54"><font size="2">A</font></TD>
    <TD ALIGN="LEFT" width="1">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="40"><font size="2">3.95</font></TD>
    <td align="LEFT" width="26"><font size="2">%</font></td>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="left" width="240">&nbsp;</TD>
    <TD ALIGN="center" width="123"><font size="2">April 5, 2000</font></TD>
    <TD ALIGN="LEFT" width="13">&nbsp;</TD>
    <TD ALIGN="center" width="102"><font size="2">Insured II</font></TD>
    <TD ALIGN="LEFT" width="1">&nbsp;</TD>
    <TD ALIGN="center" width="54"><font size="2">B</font></TD>
    <TD ALIGN="LEFT" width="1">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="40"><font size="2">3.80</font></TD>
    <td align="LEFT" width="26"><font size="2">%</font></td>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="left" width="240">&nbsp;</TD>
    <TD ALIGN="center" width="123"><font size="2">April 4, 2000</font></TD>
    <TD ALIGN="LEFT" width="13">&nbsp;</TD>
    <TD ALIGN="center" width="102"><font size="2">Insured III</font></TD>
    <TD ALIGN="LEFT" width="1">&nbsp;</TD>
    <TD ALIGN="center" width="54"><font size="2">A</font></TD>
    <TD ALIGN="LEFT" width="1">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="40"><font size="2">3.85</font></TD>
    <td align="LEFT" width="26"><font size="2">%</font></td>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="left" width="240">&nbsp;</TD>
    <TD ALIGN="center" width="123"><font size="2">April 5, 2000</font></TD>
    <TD ALIGN="LEFT" width="13">&nbsp;</TD>
    <TD ALIGN="center" width="102"><font size="2">Insured IV</font></TD>
    <TD ALIGN="LEFT" width="1">&nbsp;</TD>
    <TD ALIGN="center" width="54"><font size="2">A</font></TD>
    <TD ALIGN="LEFT" width="1">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="40"><font size="2">3.50</font></TD>
    <td align="LEFT" width="26"><font size="2">%</font></td>
  </TR>
</TABLE>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
</B></FONT></TD><TD width=60% valign=top><FONT SIZE="2"><I>Advisory Fees.</I> The investment
adviser for each Fund is FAM. The principal business address of FAM is 800
Scudders Mill Road, Plainsboro, New Jersey 08536. FAM was organized as an
investment adviser in 1977 and offers investment advisory services to more than
50 registered investment companies. The Asset Management Group of Merrill Lynch
&amp; Co., Inc. (&#147;ML &amp; Co.&#148;) (which includes FAM) acts as investment
adviser for over 100 registered investment companies and also offers portfolio
management and portfolio analysis services to individuals and institutional
accounts.</FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
</B></FONT></TD><TD width=60% valign=top><font size=2>FAM is responsible for the
management of each Fund&#146;s investment portfolio and for providing
administrative services to each Fund. The portfolio of Insured II is managed by
Robert A. DiMella. The portfolio of Insured III is managed by William R. Bock
and Mr. DiMella. The portfolio of Insured IV is managed by Fred K.</font></TD></TR></TABLE></P>

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











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









<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><font size=2>Steube and Mr. DiMella. After
the Reorganization, the portfolio of the Combined Fund will be managed by Mr.
DiMella.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD>
    <TD width=60% valign=top><font size=2>Pursuant to separate investment advisory
      agreements between FAM and each Fund, each Fund pays FAM a monthly fee at
      the annual rate of 0.55% of such Fund&#146;s average weekly net assets,
      including assets acquired from the sale of AMPS. Since the commencement
      of operations of each Fund, FAM has waived a portion of its advisory fee
      and reimbursed certain other expenses with respect to each Fund. After the
      Reorganization, the Combined Fund would pay FAM a monthly fee at the annual
      rate of 0.55% of its average weekly net assets, including assets acquired
      from the sale of AMPS. It is not anticipated that FAM will waive its advisory
      fee or reimburse certain expenses with respect to Insured II, Insured III,
      Insured IV on an ongoing basis or with respect to the Combined Fund after
      the Reorganization. See &#147;Comparison of the Funds &#151; Management
      of the Funds.&#148;</font></TD>
  </TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
</B></FONT></TD>
    <TD width=60% valign=top><FONT SIZE="2"><I>Other Significant Fees.</I> State
      Street Bank and Trust Company (&#147;State Street&#148;) is the custodian,
      transfer agent, dividend disbursing agent and registrar for the Common Stock
      of Insured II. The Bank of New York (&#147;BONY&#148;) is the custodian,
      transfer agent, dividend disbursing agent and registrar for the Common Stock
      of Insured III and Insured IV. BONY is the transfer agent, dividend disbursing
      agent, registrar and auction agent for each Fund&#146;s AMPS. State Street
      and BONY receive fees for these services. The principal business addresses
      for State Street and BONY in the above-described capacities are as follows:
      State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
      02110 (for its transfer agency services) and One Heritage Drive, P2N, North
      Quincy, Massachusetts 02171 (for its custodial services); and The Bank of
      New York, 90 Washington Street, New York, New York 10286 (for its custodial
      services) and 101 Barclay Street, New York, New York 10286 (for its transfer
      agency and auction agency services). See &#147;Comparison of the Funds &#151;
      Management of the Funds.&#148;</FONT></TD>
  </TR></TABLE></P>


<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><FONT SIZE="2"><I>Overall Expense Ratio.</I> As stated
above, since the commencement of operations of each Fund, FAM has voluntarily
waived a portion of its advisory fee and reimbursed certain other expenses with
respect to each Fund. It is not anticipated that FAM will waive its advisory
fee or reimburse certain expenses with respect to Insured II, Insured III and
Insured IV on an ongoing basis. The table below sets forth the total annualized
operating expense ratio for Insured II, Insured III, Insured IV and the
Combined Fund (excluding any advisory fee waivers and expense reimbursements)
based on their respective net assets (excluding assets attributable to AMPS) as
of March 31, 2000.</FONT></TD></TR></TABLE></P>

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








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







<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="3"></TH>
    <TH COLSPAN="2"></TH>
    <TH COLSPAN="2"></TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="242">&nbsp;</TD>
    <TD ALIGN="LEFT" width="98">&nbsp;</TD>
    <TD ALIGN="LEFT" width="24">&nbsp;</TD>
    <TD ALIGN="center" width="105"><b><font size="1">Net Assets<br>
      (Excluding Assets<br>
      Attributable to<br>
      AMPS) as of<br>
      March 31, 2000 </font></b>
      <hr noshade size="1">
      <b><font size="1"> </font></b></TD>
    <TD ALIGN="LEFT" width="44">&nbsp;</TD>
    <TD ALIGN="center" colspan="2"><b><font size="1">Total Annualized<br>
      Operating<br>
      Expense Ratio* </font></b>
      <hr noshade size="1">
      </TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="242">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD ALIGN="LEFT" width="98"><b><FONT SIZE="-1">Insured II</FONT></b></TD>
    <TD ALIGN="LEFT" width="24"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="center" width="105"><FONT SIZE="-1">$138,164,208</FONT></TD>
    <TD ALIGN="LEFT" width="44"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="49"><FONT SIZE="-1">1.24</FONT></TD>
    <TD ALIGN="LEFT" width="38"><FONT SIZE="-1">%</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="242">&nbsp;</TD>
    <TD ALIGN="LEFT" width="98"><b><FONT SIZE="-1">Insured III</FONT></b></TD>
    <TD ALIGN="LEFT" width="24"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="center" width="105"><FONT SIZE="-1">$&nbsp;&nbsp;88,918,267</FONT></TD>
    <TD ALIGN="LEFT" width="44"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="49"><FONT SIZE="-1">1.32</FONT></TD>
    <TD ALIGN="LEFT" width="38"><FONT SIZE="-1">%</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="242">&nbsp;</TD>
    <TD ALIGN="LEFT" width="98"><b><FONT SIZE="-1">Insured IV</FONT></b></TD>
    <TD ALIGN="LEFT" width="24"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="center" width="105"><FONT SIZE="-1">$&nbsp;&nbsp;52,150,500</FONT></TD>
    <TD ALIGN="LEFT" width="44"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="49"><FONT SIZE="-1">1.42</FONT></TD>
    <TD ALIGN="LEFT" width="38"><FONT SIZE="-1">%</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="242">&nbsp;</TD>
    <TD ALIGN="LEFT" width="98"><b><FONT SIZE="-1">Combined Fund</FONT></b></TD>
    <TD ALIGN="LEFT" width="24"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="center" width="105"><FONT SIZE="-1">$279,232,975</FONT></TD>
    <TD ALIGN="LEFT" width="44"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="49"><FONT SIZE="-1">1.17</FONT></TD>
    <TD ALIGN="LEFT" width="38"><FONT SIZE="-1">%</FONT></TD>
  </TR>
</TABLE>

<table width=600>
  <tr>
    <td width="234">&nbsp;</td>
    <td width="354">
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</TABLE>

<table width=600>
  <tr>
    <td width=40% valign=top>&nbsp;</td>
    <td width=3% valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=55%><font size="1">Including fee waivers and expense reimbursements,
      the total annualized operating expense ratios for Insured II, Insured III,
      Insured IV and the Combined Fund would have been 1.08%, 0.99%, 1.11% and
      1.00%, respectively.</font></td>
  </tr>
</TABLE>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><font size=2>The table below sets forth
the total annualized operating expense ratio for Insured II, Insured III,
Insured IV and the Combined Fund (excluding any advisory fee waivers and
expense reimbursements) based on their respective net assets (including assets
attributable to AMPS) as of March 31, 2000.</font></TD></TR></TABLE>
<p>
<table cellpadding="0" cellspacing="0" border="0" width="600">
  <tr valign="BOTTOM">
    <th colspan="3"></th>
    <th colspan="2"></th>
    <th colspan="2"></th>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="240">&nbsp;</td>
    <td align="LEFT" width="103">&nbsp;</td>
    <td align="LEFT" width="21">&nbsp;</td>
    <td align="center" width="105"><b><font size="1">Net Assets<br>
      (Including Assets<br>
      Attributable to<br>
      AMPS) as of<br>
      March 31, 2000 </font></b>
      <hr noshade size="1">
      <b><font size="1"> </font></b></td>
    <td align="LEFT" width="44">&nbsp;</td>
    <td align="center" colspan="2"><b><font size="1">Total Annualized<br>
      Operating<br>
      Expense Ratio* </font></b>
      <hr noshade size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="240">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align="LEFT" width="103"><b><font size="-1">Insured II</font></b></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="center" width="105"><font size="-1">$243,164,208</font></td>
    <td align="LEFT" width="44"><font size="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td align="RIGHT" width="49"><font size="2">0.70</font></td>
    <td align="LEFT" width="38"><font size="-1">%</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="240">&nbsp;</td>
    <td align="LEFT" width="103"><b><font size="-1">Insured III</font></b></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="center" width="105"><font size="-1">$156,768,267</font></td>
    <td align="LEFT" width="44"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="49"><font size="2">0.75</font></td>
    <td align="LEFT" width="38"><font size="-1">%</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="240">&nbsp;</td>
    <td align="LEFT" width="103"><b><font size="-1">Insured IV</font></b></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="center" width="105"><font size="-1">$&nbsp;83,800,500</font></td>
    <td align="LEFT" width="44"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="49"><font size="2">0.88</font></td>
    <td align="LEFT" width="38"><font size="-1">%</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="240">&nbsp;</td>
    <td align="LEFT" width="103"><b><font size="-1">Combined Fund</font></b></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="center" width="105"><font size="-1">$483,732,975</font></td>
    <td align="LEFT" width="44"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="49"><font size="2">1.17</font></td>
    <td align="LEFT" width="38"><font size="-1">%</font></td>
  </tr>
</TABLE>
<table width=600>
  <tr>
    <td width="234">&nbsp;</td>
    <td width="354">
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</TABLE>
<table width=600>
  <tr>
    <td width=40% valign=top>&nbsp;</td>
    <td width=3% valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=55%><font size="1">Including fee waivers and expense reimbursements,
      the total annualized operating expense ratios for Insured II, Insured III,
      Insured IV and the Combined Fund would have been 0.61%, 0.56%, 0.69% and
      0.58%, respectively.</font></td>
  </tr>
</TABLE>
<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><FONT SIZE="2"><I>Purchases and Sales of Common Stock
and AMPS.</I> Purchase and sale procedures for the Common Stock of each Fund are
substantially similar. Investors typically purchase and sell shares of Common
Stock of the Funds through a registered broker-dealer on the NYSE (for Insured
II and Insured III) or the AMEX (for Insured IV), thereby incurring a brokerage
commission set by the broker-dealer. Alternatively, investors may purchase or
sell shares of Common Stock of a Fund through privately negotiated transactions
with existing stockholders.</FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><font size=2>Purchase and sale procedures for
the AMPS of each Fund also are substantially similar. Such AMPS generally are
purchased and sold at separate auctions conducted on a regular basis by BONY,
as the auction agent for each Fund&#146;s AMPS (in such capacity, the &#147;Auction
Agent&#148;). Unless otherwise permitted by the Funds, only existing and
potential holders of AMPS may participate in auctions through their
broker-dealers. Broker-dealers submit the orders of their respective customers
who are existing and potential holders of AMPS to the Auction Agent. On or
prior to each auction date for the AMPS (the business day next preceding the
first day of each dividend period), each holder may submit orders to buy, sell
or hold AMPS to its broker-dealer. Outside of these auctions, shares of AMPS
may be purchased or sold through broker-dealers for the AMPS in a secondary
trading market maintained by the broker-dealers. </font></TD></TR></TABLE></P>

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













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








<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><font size=2>However, no assurance can be given
that a secondary market will continue to exist, or if it does exist, that it
will provide holders with a liquid trading market for the AMPS of any of the
Funds. </font></TD></TR></TABLE></P>


<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><FONT SIZE="2"><I>Ratings of AMPS.</I> The AMPS of each
Fund have been assigned a rating of AAA from Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;)
and &#147;aaa&#148; from Moody&#146;s Investors Service, Inc. (&#147;Moody&#146;s&#148;).
See &#147;Comparison of the Funds &#151; Rating Agency Guidelines.&#148;</FONT></TD></TR></TABLE></P>


<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><FONT SIZE="2"><I>Portfolio Insurance.</I> Each Fund has
a substantially similar policy with respect to obtaining insurance for
portfolio securities. Under normal circumstances, at least 80% of each Fund&#146;s
assets will be invested in municipal obligations either (i) insured under an
insurance policy purchased by a Fund or (ii) insured under an insurance policy
obtained by the issuer thereof or another party. See &#147;Comparison of the
Funds &#151; Investment Objectives and Policies &#151; Portfolio Insurance.&#148;</FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><FONT SIZE="2"><I>Ratings of Municipal Bonds.</I> Each
Fund will invest only in Municipal Bonds that at the time of purchase are
considered investment grade. See Appendix III &#147;Ratings of Municipal Bonds.&#148;</FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD>
    <TD width=60% valign=top><font size=2><i>Portfolio Transactions</i>. The portfolio
      transactions in which the Funds may engage are substantially similar, as
      are the procedures for such transactions. See &#147;Comparison of the Funds
      &#151; Portfolio Transactions.&#148;</font></TD>
  </TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><FONT SIZE="2"><I>Dividends and Distributions.</I> The
methods of dividend payment and distributions are substantially similar for all
of the Funds, both with respect to the Common Stock of each Fund and the AMPS
of each Fund. See &#147;Comparison of the Funds &#151; Dividends and Distributions.&#148;</FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><FONT SIZE="2"><I>Net Asset Value.</I> The net
asset value per share of Common Stock of each Fund is determined as of the
close of business on the NYSE (generally, 4:00 p.m., Eastern time) on the last
business day of each week. For purposes of determining the net asset value of a
share of Common Stock of each Fund, the value of the securities held by the
Fund plus any cash or other assets (including interest accrued but not yet
received) minus all liabilities (including accrued expenses) and the aggregate
liquidation value of the outstanding shares of AMPS of the Fund is divided by
the total number of shares of Common Stock of the Fund outstanding at such
time. Expenses, including fees payable to FAM, are accrued daily. See &#147;Comparison
of the Funds &#151; Net Asset Value.&#148;</FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD><TD width=60% valign=top><FONT SIZE="2"><I>Voting Rights.</I> The corresponding
voting rights of the holders of shares of each Fund&#146;s Common Stock are
substantially similar. Likewise, the corresponding voting rights of the holders
of shares of each Fund&#146;s AMPS are substantially similar. See &#147;Comparison
of the Funds &#151; Capital Stock.&#148;</FONT></TD></TR></TABLE></P>

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








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<P><table width=600><TR><TD width=40% valign=top><font size=2><B>

</B></FONT></TD>
    <TD width=60% valign=top><font size=2><i>Stockholder Services</i>. An automatic
      dividend reinvestment plan is available to holders of shares of the Common
      Stock of each Fund. The plans are substantially similar for each Fund. See
      &#147;Comparison of the Funds &#151; Automatic Dividend Reinvestment Plan.&#148;
      Other stockholder services, including the provision of annual and semi-annual
      reports, are the same for each Fund.</font></TD>
  </TR></TABLE></P>

<p><table width=600><tr><td  align=center><font size=2><B>Outstanding
Securities of Insured II, Insured III and Insured IV as of March 31, 2000</B></font></td></tr></TABLE></p>
<table cellpadding="0" cellspacing="0" border="0" width="600">
  <tr valign="bottom" align="center">
    <th colspan="2" align="left">
      <p><font size="1">Title of Class<br>
        </font></p>
      <hr size="1" width="20%" align="left">
    </th>
    <th colspan="2"> <font size="1">Amount <br>
      Authorized </font>
      <hr size="1" noshade width="60%">
    </th>
    <th colspan="2"> <font size="1">Amount<br>
      held by <br>
      Fund for<br>
      Its Own<br>
      Account </font>
      <hr size="1" noshade width="50%">
    </th>
    <th colspan="2"> <font size="1">Amount<br>
      Outstanding <br>
      Exclusive of<br>
      Amount Shown<br>
      in Previous<br>
      Column </font>
      <hr size="1" noshade width="50%">
    </th>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1"><b>Insured II</b></font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td align="RIGHT" width="62"><font size="-1"></font></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td align="LEFT" width="73"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="32">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align="RIGHT" width="98"><font size="-1"></font></td>
    <td align="LEFT" width="29"><font size="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1">Common Stock</font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="62"><font size="-1">199,995,800</font></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="right" width="73"><font size="-1">-0-</font></td>
    <td align="LEFT" width="32"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="98"><font size="-1">11,015,719</font></td>
    <td align="LEFT" width="29"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1">AMPS</font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1">&nbsp;&nbsp;&nbsp;&nbsp;Series
      A</font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="62"><font size="-1">2,100</font></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="right" width="73"><font size="-1">-0-</font></td>
    <td align="LEFT" width="32"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="98"><font size="-1">2,100</font></td>
    <td align="LEFT" width="29"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1">&nbsp;&nbsp;&nbsp;&nbsp;Series
      B</font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="62"><font size="-1">2,100</font></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="right" width="73"><font size="-1">-0-</font></td>
    <td align="LEFT" width="32"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="98"><font size="-1">2,100</font></td>
    <td align="LEFT" width="29"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1"><b>Insured III</b></font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1">Common Stock</font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="62"><font size="-1">199,997,286</font></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="right" width="73"><font size="-1">-0-</font></td>
    <td align="LEFT" width="32"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="98"><font size="-1">6,806,667</font></td>
    <td align="LEFT" width="29"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1">AMPS</font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1">&nbsp;&nbsp;&nbsp;&nbsp;Series
      A</font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="62"><font size="-1">2,714</font></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="right" width="73"><font size="-1">-0-</font></td>
    <td align="LEFT" width="32"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="98"><font size="-1">2,714</font></td>
    <td align="LEFT" width="29"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1"><b>Insured IV</b></font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1">Common Stock</font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="62"><font size="-1">199,998,734</font></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="right" width="73"><font size="-1">-0-</font></td>
    <td align="LEFT" width="32"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="98"><font size="-1">3,441,482</font></td>
    <td align="LEFT" width="29"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1">AMPS</font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="128"><font size="-1">&nbsp;&nbsp;&nbsp;&nbsp;Series
      A</font></td>
    <td align="LEFT" width="157"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="62"><font size="-1">1,266</font></td>
    <td align="LEFT" width="21"><font size="-1">&nbsp;</font></td>
    <td align="right" width="73"><font size="-1">-0-</font></td>
    <td align="LEFT" width="32"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="98"><font size="-1">1,266</font></td>
    <td align="LEFT" width="29"><font size="-1">&nbsp;</font></td>
  </tr>
</TABLE>
<P><table width=600><TR><TD width=40% valign=top><font size=2><B>
Tax Considerations
</B></FONT></TD>
    <TD width=60% valign=top><font size=2> The Funds have jointly requested a
      private letter ruling from the IRS with respect to the Reorganization to
      the effect that, among other things, no Fund will recognize gain or loss
      on the transaction and the stockholders of each Acquired Fund will not recognize
      gain or loss on the exchange of their shares of Common Stock or AMPS for
      Insured II Common Stock (except to the extent that a holder of Common Stock
      in an Acquired Fund receives cash representing an interest in less than
      a full share of Insured II Common Stock in the Reorganization) or Insured
      II Series C AMPS, as applicable. The consummation of the Reorganization
      is subject to the receipt of such ruling or of an opinion of counsel to
      the same effect. The Reorganization will not affect the status of Insured
      II as a regulated investment company (&#147;RIC&#148;) under the Internal
      Revenue Code of 1986, as amended (the &#147;Code&#148;). Each Acquired Fund
      will liquidate pursuant to the Reorganization. See &#147;Agreement and Plan
      &#151; Tax Consequences of the Reorganization.&#148;</font></TD>
  </TR></TABLE></P>

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













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<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="15a"></a>RISK FACTORS AND SPECIAL
      CONSIDERATIONS</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
investment risks associated with an investment in Insured II are substantially
similar to the investment risks associated with an investment in Insured III and
Insured IV. These investment risks will also apply to an investment in the
Combined Fund after the Reorganization. It is expected that the Reorganization
itself will not adversely affect the rights of holders of shares of Common Stock
or of any series of AMPS of any Fund or create additional risks.</font></td></tr></TABLE><p></p>

<A NAME="A002"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="15b"></a>Interest Rate and Credit Risk</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
invests in municipal bonds that are subject to interest rate and credit risk.
Interest rate risk is the risk that prices of municipal bonds generally increase
when interest rates decline and decrease when interest rates increase. Prices of
longer-term securities generally change more in response to interest rate
changes than prices of shorter-term securities. Credit risk is the risk that the
issuer will be unable to pay the interest or principal when due. The degree of
credit risk depends on both the financial condition of the issuer and the terms
of the obligation.</font></td></tr></TABLE><p></p>

<A NAME="A003"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="15c"></a>Non-Diversification</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
is registered as a &#147;non-diversified&#148; investment company. This means
that each Fund may invest a greater percentage of its assets in a single issuer
than a diversified investment company. Since a Fund may invest a relatively high
percentage of its assets in a limited number of issuers, the Fund may be more
exposed to the effects of any single economic, political or regulatory
occurrence than a more widely-diversified fund. Even as a non-diversified fund,
each Fund must still meet the diversification requirements applicable to RICs
under the Code.</font></td></tr></TABLE><p></p>

<A NAME="A004"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="15d"></a>Rating Categories</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds
intend to invest in municipal bonds that are rated investment grade by S&amp;P,
Moody&#146;s or Fitch IBCA, Inc. (&#147;Fitch&#148;) or are considered by FAM to
be of comparable quality. Obligations rated in the lowest investment grade
category may have certain speculative characteristics.</font></td></tr></TABLE><p></p>

<A NAME="A005"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="15e"></a>Private Activity Bonds</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
may invest all or a portion of its assets in certain tax-exempt securities
classified as &#147;private activity bonds.&#148; These bonds may subject
certain investors in a Fund to a Federal alternative minimum tax.</font></td></tr></TABLE><p></p>

<A NAME="A006"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="15f"></a>Portfolio Insurance</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
is subject to certain investment restrictions imposed by guidelines of the
insurance companies that issue portfolio insurance. The Funds do not expect
these guidelines to prevent FAM from managing the Funds&#146; portfolios in
accordance with the Funds&#146; investment objective and policies.</font></td></tr></TABLE><p></p>

<A NAME="A007"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="15g"></a>Leverage</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Use of
leverage, through the issuance of AMPS, involves certain risks to holders of
Common Stock of each Fund. For example, each Fund&#146;s issuance of AMPS may
result in higher volatility of the net asset value of its Common Stock and
potentially more volatility in the market value of its Common Stock. In
addition, changes in the short-term and medium-term dividend rates on, and the
amount of taxable income allocable to, the AMPS will affect the yield to
holders of Common Stock. Under certain circumstances when a Fund is required to
allocate taxable income to holders of AMPS, that Fund may be required to make
an additional distribution to such holders in an amount approximately equal to
the tax liability resulting from that allocation (an &#147;Additional
Distribution&#148;). Leverage will allow holders of each Fund&#146;s Common
Stock to realize a higher current rate of return than if the Fund were not
leveraged as long as the Fund, while accounting for its costs and operating
expenses, is able to realize a higher net return on its investment portfolio
than the then-current dividend rate (and any Additional Distribution) paid on
the AMPS. Similarly, since a pro rata portion of each Fund&#146;s net realized
capital gains is generally payable to holders of the Fund&#146;s Common Stock,
the use of leverage will increase the amount of such gains distributed to
holders of the Fund&#146;s Common Stock. However, short-term, medium-term and
long-term interest rates change from time to time as do their relationships to
each other (<I>i.e.</I>, the slope of the yield curve) depending upon such factors as
supply and demand forces, monetary and tax policies and investor expectations.</FONT></td></tr></TABLE></p>

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













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<p><table width=600><tr><td><FONT SIZE="2">Changes in any or all of such factors
could cause the relationship between short-term, medium-term and long-term
rates to change (<I>i.e.</I>, to flatten or to invert the slope of the yield curve) so
that short-term and medium-term rates may substantially increase relative to
the long-term obligations in which each Fund may be invested. To the extent
that the current dividend rate (and any Additional Distribution) on the AMPS
approaches the net return on a Fund&#146;s investment portfolio, the benefit of
leverage to holders of Common Stock will be decreased. If the current dividend
rate (and any Additional Distribution) on the AMPS were to exceed the net
return on a Fund&#146;s portfolio, holders of Common Stock would receive a
lower rate of return than if the Fund were not leveraged. Similarly, since both
the costs of issuing AMPS and any decline in the value of a Fund&#146;s
investments (including investments purchased with the proceeds from any AMPS
offering) will be borne entirely by holders of that Fund&#146;s Common Stock,
the effect of leverage in a declining market would result in a greater decrease
in net asset value to holders of Common Stock than if that Fund were not
leveraged. If a Fund is liquidated, holders of that Fund&#146;s AMPS will be
entitled to receive liquidating distributions before any distribution is made
to holders of Common Stock of that Fund.</FONT></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In an
extreme case, a decline in net asset value could affect each Fund&#146;s ability
to pay dividends on its Common Stock. Failure to make such dividend payments
could adversely affect a Fund&#146;s qualification as a RIC under the Federal
tax laws. See &#147;Comparison of the Funds &#151; Tax Rules Applicable to the
Funds and Their Stockholders.&#148; However, each Fund intends to take all
measures necessary to make Common Stock dividend payments. If a Fund&#146;s
current investment income is ever not sufficient to meet dividend payments on
either the Common Stock or the AMPS, a Fund may have to liquidate certain of its
investments. In addition, each Fund has the authority to redeem its AMPS for any
reason and may redeem all or part of its AMPS under the following circumstances:</font></td></tr></TABLE><p></p>

<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>if
a Fund anticipates that its leveraged capital structure will result in a lower
rate of return for any significant amount of time to holders of the Common
Stock than a Fund can obtain if the Common Stock were not leveraged,</font></td></tr></TABLE>

<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>if
the asset coverage for the AMPS declines below 200%, either as a result of a
decline in the value of a Fund&#146;s portfolio investments or as a result of
the repurchase of Common Stock in tender offers, or otherwise, or</font></td></tr></TABLE>

<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2> in
order to maintain the asset coverage established by Moody&#146;s and S&amp;P in
rating the AMPS.</font></td></tr></TABLE>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Redemption
of the AMPS or insufficient investment income to make dividend payments, may
reduce the net asset value of the Common Stock and require a Fund to liquidate a
portion of its investments at a time when it may be disadvantageous to do so.</font></td></tr></TABLE>
<p></p>

<p><table width=600><tr>
    <td><font size=2><B><a name="16a"></a>Portfolio Management </B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
portfolio management strategies of the Funds are the same. In the event of an
increase in short-term or medium-term rates or other change in market conditions
to the point where a Fund&#146;s leverage could adversely affect holders of
Common Stock as noted above, or in anticipation of such changes, each Fund may
attempt to shorten the average maturity of its investment portfolio, which would
tend to offset the negative impact of leverage on holders of its Common Stock.
Each Fund also may attempt to reduce the degree to which it is leveraged by
redeeming AMPS pursuant to the provisions of the applicable Articles
Supplementary that establish the rights and preferences of each series of AMPS
or otherwise purchasing shares of AMPS. Purchases and sales or redemptions of
AMPS, whether on the open market or in negotiated transactions, are subject to
limitations under the Investment Company Act. In determining whether or not it
is in the best interest of a Fund and its stockholders to redeem or repurchase
outstanding preferred stock, its Board of Directors will take into account a
variety of factors, including market conditions, the ratio of preferred stock to
common stock, and the expenses associated with such redemptions or repurchase.
If market conditions subsequently change, each Fund may sell previously unissued
shares of AMPS or shares of AMPS that the Fund previously issued but later
repurchased or redeemed.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2><B><a name="16b"></a>Indexed and Inverse Floating Rate Securities</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Fund may invest in securities whose potential returns are directly related to
changes in an underlying index or interest rate, known as indexed securities.
The return on indexed securities will rise when the underlying index or
interest rate rises and fall when the index or interest rate falls. Each Fund
may also invest in securities </font></td></tr></TABLE></p>

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













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<p><table width=600><tr><td><font size=2>whose return is inversely related to
changes in an interest rate (inverse floaters). In general, income on inverse
floaters will decrease when short term interest rates increase and increase
when short term interest rates decrease. Investments in inverse floaters may
subject a Fund to the risks of reduced or eliminated interest payments and
losses of principal. In addition, certain indexed securities and inverse
floaters may increase or decrease in value at a greater rate than the
underlying interest rate, which effectively leverages a Fund&#146;s investment.
As a result, the market value of such securities will generally be more
volatile than that of fixed rate, tax exempt securities. Both indexed
securities and inverse floaters are derivative securities and can be considered
speculative.</font></td></tr></TABLE></p>

<p><table width=600><tr>
    <td><font size=2><B><a name="17a"></a>Options and Futures Transactions.</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
may seek to hedge its portfolio against changes in interest rates by using
options and financial futures contracts. A Fund&#146;s hedging transactions are
designed to reduce volatility, but come at some cost. For example, a Fund may
try to limit its risk of loss from a decline in price of a portfolio security by
purchasing a put option. However, that Fund must pay for the put option, and the
price of the security may not in fact drop. In large part, the success of a
Fund&#146;s hedging activities depends on its ability to forecast movements in
securities prices and interest rates. Each Fund does not, however, intend to
enter into options and futures transactions for speculative purposes. Each Fund
is not required to hedge its portfolio and may choose not to do so. Each Fund
cannot guarantee that any hedging strategies it uses will work.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2><B><a name="17b"></a>Antitakeover Provisions</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Articles of Incorporation
      of each Fund (in each case, a &#147;Charter&#148;) include provisions that
      could limit the ability of other entities or persons to acquire control
      of that Fund or to change the composition of its Board of Directors. Such
      provisions could limit the ability of stockholders to sell their shares
      at a premium over prevailing market prices by discouraging a third party
      from seeking to obtain control of a Fund.</font></td>
  </tr></TABLE><p></p>

<A NAME="A008"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="17c"></a>Ratings Considerations</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
has received ratings of AAA from S&amp;P and &#147;aaa&#148; from Moody&#146;s
with respect to its AMPS. In order to maintain these ratings, each Fund is
required to maintain portfolio holdings that satisfy specific guidelines
established by such rating agencies. These guidelines may impose asset coverage
requirements that are more stringent than those imposed by the Investment
Company Act.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
described by Moody&#146;s and S&amp;P, a preferred stock rating is an assessment
of the capacity and willingness of an issuer to pay preferred stock obligations.
The ratings of 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
address the likelihood that a holder of shares of AMPS will be able to sell such
shares in an auction. The ratings are based on current information furnished to
Moody&#146;s and S&amp;P by the Funds and FAM 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 of the
Funds has not been rated by any nationally recognized statistical rating
organization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board
of Directors of each Fund, without stockholder approval, may amend, alter or
repeal certain definitions or restrictions that have been adopted by a Fund
pursuant to the rating agency guidelines, in the event a Fund receives
confirmation from the rating agencies that any such amendment, alteration or
repeal would not impair the ratings then assigned to shares of AMPS.</font></td></tr></TABLE><p></p>

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




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



<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><b> <a name="18a"></a>COMPARISON OF THE FUNDS</b></font></td>
  </tr>
</TABLE>
<p><table width=600><tr>
    <td><font size=2><B><a name="18b"></a>Financial Highlights</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
II</i></font></td></tr></TABLE></p>

<p><table width=600><tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial information
      in the table below for the period February 26, 1999 (commencement of operations)
      to September 30, 1999 has been audited in conjunction with the annual audit
      of the financial statements of Insured II by __________<FONT SIZE="1"></FONT>,
      independent auditors. The financial information for the six month period
      ended March 31, 2000 is unaudited and has been provided by FAM. The following
      per share data and ratios have been derived from information provided in
      the financial statements of Insured II.</FONT></td>
  </tr></TABLE><p></p>


<table cellpadding="0" cellspacing="0" border="0" width="600">
  <tr valign="BOTTOM">
    <th colspan="2"></th>
    <th colspan="2"></th>
    <th colspan="2"></th>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT">&nbsp;</td>
    <td align="LEFT">&nbsp;&nbsp;&nbsp;</td>
    <td align="center">
      <p><b><font size="1">For the Period <br>
        October 1, 1999 <br>
        To March 31, 2000 <br>
        (Unaudited) </font></b></p>
    </td>
    <td align="LEFT"><b>&nbsp;&nbsp;</b></td>
    <td align="center" colspan="2"><b><font size="1">For the Period<br>
      February 26, 1999&#134; To<br>
      September 30, 1999</font></b></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2"><b>&nbsp;Increase (Decrease) in Net Asset
      Value:<br>
      &nbsp;Per Share Operating Performance: </b></font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Net asset value, beginning of period</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.00</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Investment income--net</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">.68</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Realized and unrealized loss on investments&#151;
      net</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">(2.24</font></td>
    <td align="LEFT"><font size="2">)</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Total from investment operations</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">(1.56</font></td>
    <td align="LEFT"><font size="2">)</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Less dividends to Common Stock shareholders:<br>
      &nbsp;&nbsp;&nbsp;Investment income &#151; net</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">(.43</font></td>
    <td align="LEFT"><font size="2">)</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Total dividends and distributions to
      Common Stock shareholders</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">(.43</font></td>
    <td align="LEFT"><font size="2">)</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Capital charge resulting from issuance
      of Common Stock</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">(.03</font></td>
    <td align="LEFT"><font size="2">)</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Effect of Preferred Stock activity:&#134;&#134;<br>
      &nbsp;&nbsp;&nbsp;Dividends to Preferred Stock shareholders:<br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment income &#151; net</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">(.17</font></td>
    <td align="LEFT"><font size="2">)</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Capital charge resulting from issuance
      of Preferred Stock</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">(.09</font></td>
    <td align="LEFT"><font size="2">)</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Total effect of Preferred Stock activity</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">(.26</font></td>
    <td align="LEFT"><font size="2">)</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Net asset value, end of period</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.72</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Market price per share, end of period</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.00</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2"><b>&nbsp;Total Investment Return:**</b></font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Based on market price per share</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">(17.36</font></td>
    <td align="LEFT"><font size="2">%)#</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Based on net asset value per share</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">(12.40</font></td>
    <td align="LEFT"><font size="2">%)#</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2"><b>&nbsp;Ratios Based on Average Net Assets
      of Common Stock:</b></font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Total expenses, net of reimbursement***</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">.62</font></td>
    <td align="LEFT"><font size="2">%*</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Total expenses***</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">1.22</font></td>
    <td align="LEFT"><font size="2">%*</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Total investment income &#151; net***</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">8.27</font></td>
    <td align="LEFT"><font size="2">%*</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Amount of dividends to Preferred Stock
      shareholders</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">2.04</font></td>
    <td align="LEFT"><font size="2">%*</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Investment income &#151; net, to Common
      Stock shareholders</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">6.23</font></td>
    <td align="LEFT"><font size="2">%*</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2"><b>&nbsp;Ratios Based on Total Average Net
      Assets:&#134;&#134;&#134;***</b></font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Total expenses, net of reimbursement</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">.38</font></td>
    <td align="LEFT"><font size="2">%*</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Total expenses</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">.75</font></td>
    <td align="LEFT"><font size="2"> %* </font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Total investment income &#151; net</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">5.07</font></td>
    <td align="LEFT"><font size="2"> %* </font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2"><b>&nbsp;Ratios Based on Average Net Assets
      of Preferred Stock:</b></font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Dividends to Preferred Stock shareholders</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">3.24</font></td>
    <td align="LEFT"><font size="2">%* </font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2"><b>&nbsp;Supplemental Data:</b></font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Net assets, net of Preferred Stock,
      end of period (in thousands)</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;139,929</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Preferred Stock outstanding, end of
      period (in thousands)</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;105,000</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Portfolio turnover</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">159.29</font></td>
    <td align="LEFT"><font size="2">% </font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2"><b>&nbsp;Leverage:</b></font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Asset coverage per $1,000</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,333</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2"><b>&nbsp;Dividends Per Share on Preferred
      Stock Outstanding:</b></font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Series A &#151; Investment income &#151;
      net</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;443</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Series B &#151; Investment income &#151;
      net</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;432</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
</TABLE>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

<table width=600><tr><td width=3% align=right valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Annualized.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">**
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Total
investment returns based on market value, which can be significantly greater or
lesser than the net asset value, may result in substantially different returns.
Total investment returns exclude the effects of sales charges.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">***
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Do
not reflect the effect of dividends to Preferred Stock shareholders.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">&#134;</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1"> Commencement
of operations.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">&#134;&#134;</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1"> Insured
II&#146;s Preferred Stock was issued on March 18, 1999.
</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">&#134;&#134;&#134;</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1"> Includes
Common and Preferred Stock average net assets.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">#
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Aggregate
total investment return.</font></td></tr></TABLE>

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













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









<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
III</i></font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
financial information in the table below is unaudited and has been provided by
FAM. The following per share data and ratios have been derived from information
provided in the financial statements of Insured III.</font></td></tr></TABLE><p></p>


<table cellpadding="0" cellspacing="0" border="0" width="600">
  <tr valign="BOTTOM">
    <th width="73%"><font size="-1"></font></th>
    <th width="4%">&nbsp;</th>
    <th width="17%"><font size="-1"><b><font size="1">For the Period<br>
      May 28, 1999&#134; to<br>
      March 31, 2000<br>
      (Unaudited)</font></b> </font></th>
    <th width="6%">&nbsp;</th>
  </tr>
  <tr valign="BOTTOM">
    <td width="100%" align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td width="73%" align="LEFT"><font size="-1">&nbsp;<b>Increase (Decrease)
      in Net Asset Value:</b></font></td>
    <td width="4%" align="LEFT"><font size="-1">&nbsp;</font></td>
    <td width="17%" align="LEFT"><font size="-1">&nbsp;</font></td>
    <td width="6%" align="LEFT"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;<b>Per Share Operating
      Performance:</b></font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Net asset value, beginning
      of period</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Investment income &#151;
      net</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Realized and unrealized
      loss on investments &#151; net</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Total from investment operations</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Less dividends to Common
      Stock shareholders from Investment income &#151; net</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Capital charge resulting
      from issuance of Common Stock</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">Effect of Preferred Stock shareholders:&#134;&#134;</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;&nbsp;&nbsp;Dividends to
      Preferred Stock shareholders:</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment
      income &#151; net</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;&nbsp;&nbsp;Capital charge
      resulting from issuance of Preferred Stock</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Total effect of Preferred
      Stock activity</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Net asset value, end of
      period</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Market price per share,
      end of period</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;<b>Total Investment Return:</b>**</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;&nbsp;Based on market price
      per share</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Based on net asset value
      per share </font></td>
    <td align="LEFT" width="4%">&nbsp;</td>
    <td align="LEFT" width="17%">&nbsp;</td>
    <td align="LEFT" width="6%">&nbsp;</td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1"><b>Ratios Based on Average Net
      Assets of Common Stock:</b></font></td>
    <td align="LEFT" width="4%">&nbsp;</td>
    <td align="LEFT" width="17%">&nbsp;</td>
    <td align="LEFT" width="6%">&nbsp;</td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Total expenses, net of
      reimbursement***</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Total expenses***</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Total investment income
      &#151; net***</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Amount of dividends to
      Preferred Stock shareholders</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">Investment income &#151; net,
      to Common Stock shareholders</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1"><b>Ratios Based on Total Average
      Net Assets:</b>&#134;&#134;&#134;***</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Total expenses, net of
      reimbursement</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Total expenses</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Total investment income
      &#151; net</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;<b>Ratios Based on Average
      Net Assets of Preferred Stock:</b></font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Dividends to Preferred
      Stock shareholders</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;<b>Supplemental Data:</b></font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Net assets, net of Preferred
      Stock, end of period (in thousands)</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Preferred Stock outstanding,
      end of period (in thousands)</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Portfolio turnover</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;<b>Leverage:</b></font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Asset coverage per $1,000</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;<b>Dividends Per Share
      on Preferred Stock Outstanding:</b></font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="73%"><font size="-1">&nbsp;Investment income &#151;
      net</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="17%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="6%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>

</TABLE>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</TABLE>
<table width=600><tr><td width=3% align=right valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Annualized.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">**
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Total
investment returns based on market value, which can be significantly greater or
lesser than the net asset value, may result in substantially different returns.
Total investment returns exclude the effects of sales charges.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">***
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Do
not reflect the effect of dividends to Preferred Stock shareholders.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">&#134;</font></td><td width=2%><font size="1"></font></td>
    <td width=95%><font size="1"> Commencement of operations&#134;.</font></td>
  </tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">&#134;&#134;</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1"> Insured
III&#146;s Preferred Stock was issued on June 17, 1999.
</font></td></tr></TABLE>


<table width=600><tr><td width=3% align=right valign=top><font size="1">&#134;&#134;&#134;</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1"> Includes
Common and Preferred Stock average net assets.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">#
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Aggregate
total investment return.</font></td></tr></TABLE>

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













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








<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
IV</i></font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
financial information in the table below is unaudited and has been provided by
FAM. The following per share data and ratios have been derived from information
provided in the financial statements of Insured IV.</font></td></tr></TABLE><p></p>


<table cellpadding="0" cellspacing="0" border="0" width="600">
  <tr valign="BOTTOM">
    <th width="81%">&nbsp;</th>
    <th width="2%">&nbsp;</th>
    <th width="14%">
      <p><b><font size="1">For the Period<br>
        September 24, 1999&#134;<br>
        </font><font size="1">To March 31, 2000<br>
        (Unaudited) </font></b> </p>
    </th>
    <th width="3%">&nbsp;</th>
  </tr>
  <tr valign="BOTTOM">
    <th colspan="4">&nbsp; </th>
  </tr>
  <tr valign="BOTTOM">
    <td width="100%" align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td width="81%" align="LEFT"><font size="-1">&nbsp;<b>Increase (Decrease)
      In Net Asset Value:</b></font></td>
    <td width="2%" align="LEFT"><font size="-1">&nbsp;</font></td>
    <td width="14%" align="LEFT"><font size="-1">&nbsp;</font></td>
    <td width="3%" align="LEFT"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;<b>Per Share Operating
      Performance:</b></font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="100%" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4"><font size="-1">&nbsp;Net asset value, beginning
      of period</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Investment income &#151;
      net</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Realized and unrealized
      loss on investments &#151; net</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">Total from investment operations</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">Capital charge resulting from
      issuance of Common Stock</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">Effect of Preferred Stock activity:&#134;&#134;</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">Dividends and distributions to
      Preferred Stock shareholders:</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">Investment income &#151; net</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;&nbsp;&nbsp;Capital charge
      resulting from issuance of Preferred Stock</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Total effect of Preferred
      Stock activity</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Net asset value, end of
      period</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Market price per share,
      end of period</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;<b>Total Investment Return:</b>**</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Based on market price per
      share</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Based on net asset value
      per share</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;<b>Ratios Based on Average
      Net Assets of Common Stock:</b></font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Total expenses, net of
      reimbursement***</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Total expenses***</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Total investment income
      &#151; net***</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Amount of dividends to
      Preferred Stock shareholders</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Investment income &#151;
      net, to Common Stock shareholders</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" height="16" width="81%"><font size="-1">&nbsp;<b>Ratios Based
      on Total Average Net Assets:</b>&#134;&#134;&#134;*</font></td>
    <td align="LEFT" height="16" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" height="16" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" height="16" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4"><font size="-1">&nbsp;Total expenses, net of
      reimbursement</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Total expenses</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4"><font size="-1">&nbsp;Total investment income
      &#151; net</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;<b>Ratios Based on Average
      Net Assets of Preferred Stock:</b></font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4"><font size="-1">&nbsp;Dividends to Preferred
      Stock shareholders</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;<b>Supplemental Data:</b></font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Net assets, net of Preferred
      Stock, end of period (in thousands)</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Preferred Stock outstanding,
      end of period (in thousands)</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Portfolio turnover</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;<b>Dividends Per Share
      On Preferred Stock Outstanding:</b></font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Investment income &#151;
      net</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;<b>Leverage:</b></font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Asset coverage per $1,000</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;<b>Dividends Per Share
      on Preferred Stock Outstanding:</b></font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Investment income &#151;
      net</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
</TABLE>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

<table width=600><tr><td width=3% align=right valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Annualized.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">**
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Total
investment returns based on market value, which can be significantly greater or
lesser than the net asset value, may result in substantially different returns.
Total investment returns exclude the effects of sales charges.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">***
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Do
not reflect the effect of dividends to Preferred Stock shareholders.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">&#134;</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1"> Commencement
of operations.</font></td></tr></TABLE>

<table width=600><tr>
            <td width=3% align=right valign=top><font size="1">&#134;&#134;</font></td>
            <td width=2%><font size="1"></font></td>

    <td width=95%><font size="1"> Insured IV&#146;s Preferred Stock was issued
      on October 18, 1999.</font></td>
          </tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">#
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Aggregate
total investment return.</font></td></tr></TABLE>

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













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









<p><table width=600><tr><td  align=center><font size=2><B>Per Share Data for
Common Stock* (Unaudited)<BR> Traded on the New York Stock Exchange (Insured II and
Insured III) and <BR>American Stock Exchange (Insured IV)</B></font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
II</i></font></td></tr></TABLE>
<br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="bottom" width="142">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="bottom" width="42">&nbsp;</td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="bottom" width="39">&nbsp;</td>
    <td valign="TOP" width="16">&nbsp;</td>
    <td valign="bottom" width="41">&nbsp;</td>
    <td valign="TOP" width="27">&nbsp;</td>
    <td valign="bottom" width="33">&nbsp;</td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="bottom" align="right" width="35">&nbsp;</td>
    <td valign="bottom" width="16">&nbsp;</td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="bottom" align="right" width="42">&nbsp;</td>
    <td valign="bottom" width="87">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="142">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="bottom" colspan="3" align="center"><b><font size=1>Market Price**</font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="16">&nbsp;</td>
    <td valign="bottom" colspan="3" align="center"><b><font size=1>Net Asset Value</font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="bottom" align="center" colspan="4"> <b><font size="1">(Discount)<br>
      Premium to Net <br>
      Asset Value </font></b>
      <hr noshade size="1">
    </td>
    <td valign="bottom" width="87">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" align="center" width="142"><font size=1><b>Quarter/Period
      Ended* </b> </font>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="bottom" align="center" width="42"><b><font size=1>High </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="bottom" align="center" width="39"><b><font size=1>Low </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="16">&nbsp;</td>
    <td valign="bottom" align="center" width="41"><b><font size=1>High </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="27">&nbsp;</td>
    <td valign="bottom" align="center" width="33"><b><font size=1>Low </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="bottom" align="center" colspan="2"><b><font size=1>High </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="bottom" align="center" width="42"><b><font size=1>Low </font></b>
      <hr noshade size="1">
    </td>
    <td valign="bottom" width="87">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="142" height="23"> <font size="2">March 31, 1999&#134;</font></td>
    <td valign="TOP" width="24" height="23"><font size="2"></font></td>
    <td valign="bottom" width="42" height="23"> <font size="2"> $15.50</font></td>
    <td valign="TOP" width="18" height="23"><font size="2"></font></td>
    <td valign="bottom" width="39" height="23"> <font size="2"> $14.875</font></td>
    <td valign="TOP" width="16" height="23"><font size="2"></font></td>
    <td valign="bottom" width="41" height="23"> <font size="2">$15.08</font></td>
    <td valign="TOP" width="27" height="23"><font size="2"></font></td>
    <td valign="bottom" width="33" height="23"> <font size="2"> $14.83</font></td>
    <td valign="TOP" width="18" height="23"><font size="2"></font></td>
    <td valign="bottom" align="right" width="35" height="23"> <font size="2">1.67</font></td>
    <td valign="bottom" width="16" height="23"> <font size="2"> %</font></td>
    <td valign="TOP" width="18" height="23"><font size="2"></font></td>
    <td valign="bottom" align="right" width="42" height="23"> <font size="2">(0.50</font></td>
    <td valign="bottom" width="87" height="23"> <font size="2"> )%</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="142"> <font size="2">June 30, 1999</font></td>
    <td valign="TOP" width="24"><font size="2"></font></td>
    <td valign="bottom" width="42"> <font size="2">$15.25&nbsp;&nbsp;</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" width="39"> <font size="2">$12.875&nbsp;</font></td>
    <td valign="TOP" width="16"><font size="2"></font></td>
    <td valign="bottom" width="41"> <font size="2">$15.08</font></td>
    <td valign="TOP" width="27"><font size="2"></font></td>
    <td valign="bottom" width="33"> <font size="2">$13.74</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" align="right" width="35"> <font size="2">0.89</font></td>
    <td valign="bottom" width="16"> <font size="2"> )%</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" align="right" width="42"> <font size="2">(7.55</font></td>
    <td valign="bottom" width="87"> <font size="2"> )%</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="142"> <font size="2">September 30, 1999</font></td>
    <td valign="TOP" width="24"><font size="2"></font></td>
    <td valign="bottom" width="42"> <font size="2">$13.50&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" width="39"> <font size="2">$11.1875</font></td>
    <td valign="TOP" width="16"><font size="2"></font></td>
    <td valign="bottom" width="41"> <font size="2">$13.95</font></td>
    <td valign="TOP" width="27"><font size="2"></font></td>
    <td valign="bottom" width="33"> <font size="2">$12.67</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" align="right" width="35"> <font size="2">(2.31</font></td>
    <td valign="bottom" width="16"> <font size="2"> )%</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" align="right" width="42"> <font size="2">(10.71</font></td>
    <td valign="bottom" width="87"> <font size="2"> )%</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="142"><font size="2">December 31, 1999</font></td>
    <td valign="TOP" width="24"><font size="2"></font></td>
    <td valign="bottom" width="42"><font size="2">$12.50&nbsp;</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" width="39"><font size="2">$10.1875</font></td>
    <td valign="TOP" width="16"><font size="2"></font></td>
    <td valign="bottom" width="41"><font size="2">$12.60</font></td>
    <td valign="TOP" width="27"><font size="2"></font></td>
    <td valign="bottom" width="33"><font size="2">$11.68</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" align="right" width="35"><font size="2">3.48</font></td>
    <td valign="bottom" width="16"><font size="-1">%</font><font size="2"></font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" align="right" width="42"><font size="-1">(11.93</font><font size="2"></font></td>
    <td valign="bottom" width="87"><font size="-1">)%</font><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="bottom" width="142"><font size="2">March 31, 2000</font></td>
    <td valign="TOP" width="24"><font size="2"></font></td>
    <td valign="bottom" width="42"><font size="2">$10.9375</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" width="39"><font size="2">$&nbsp;&nbsp;9.9375</font></td>
    <td valign="TOP" width="16"><font size="2"></font></td>
    <td valign="bottom" width="41"><font size="2">$12.54</font></td>
    <td valign="TOP" width="27"><font size="2"></font></td>
    <td valign="bottom" width="33"><font size="2">$11.44</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" align="right" width="35"><font size="2">(5.65</font></td>
    <td valign="bottom" width="16"><font size="2">)%</font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="bottom" align="right" width="42"><font size="-1">(17.50</font><font size="2"></font></td>
    <td valign="bottom" width="87"><font size="-1">)%</font><font size="2"></font></td>
  </tr>
</TABLE>
<br>

<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
III</i></font></td></tr></TABLE></p>


<TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="bottom" WIDTH="130">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="48">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="21">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="50">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="40">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="22">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="43">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="36">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="20">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="43">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="74">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="130">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" colspan="3" align="center"><b><font size=1>Market Price** </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="bottom" colspan="3" align="center"><b><font size=1>Net Asset Value </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" colspan="4"><b><font size=1>(Discount)<br>
      Premium to Net <br>
      Asset Value </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="center" WIDTH="74">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="center" WIDTH="130"><b><font size="1">Quarter/Period
      Ended* </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="48"><b><font size="1">High </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="21">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="50"><b><font size="1">Low </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="40"><b><font size="1">High </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="22">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="43"><b><font size="1">Low </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" colspan="2"><b><font size="1">High </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="center" WIDTH="20"><b></b></TD>
    <TD VALIGN="bottom" align="center" WIDTH="43"><b><font size="1">Low </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="center" WIDTH="74">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="130"> <FONT SIZE=2> July 31, 1999&#134;&#134;</FONT></TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="48"> <FONT SIZE=2> $15.563</FONT></TD>
    <TD VALIGN="TOP" WIDTH="21">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="50"> <FONT SIZE=2> $13.1875</FONT></TD>
    <TD VALIGN="TOP" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="40"> <FONT SIZE=2> $14.93</FONT></TD>
    <TD VALIGN="TOP" WIDTH="22">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="43"> <FONT SIZE=2> $14.40</FONT></TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="36"> <FONT SIZE=2> 2.46</FONT></TD>
    <TD VALIGN="bottom" WIDTH="18"> <FONT SIZE=2> %</FONT></TD>
    <TD VALIGN="bottom" align="right" WIDTH="20">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="43"> <FONT SIZE=2> (8.42</FONT></TD>
    <TD VALIGN="bottom" WIDTH="74"> <FONT SIZE=2> )%</FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="130"> <FONT SIZE=2> October 31, 1999</FONT></TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="48"> <FONT SIZE=2> $13.50</FONT></TD>
    <TD VALIGN="TOP" WIDTH="21">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="50"> <FONT SIZE=2> $11.25</FONT></TD>
    <TD VALIGN="TOP" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="40"> <FONT SIZE=2> $14.36</FONT></TD>
    <TD VALIGN="TOP" WIDTH="22">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="43"> <FONT SIZE=2> $12.10</FONT></TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="36"> <FONT SIZE=2> 2.21</FONT></TD>
    <TD VALIGN="bottom" WIDTH="18"> <FONT SIZE=2> %</FONT></TD>
    <TD VALIGN="bottom" align="right" WIDTH="20">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="43"> <FONT SIZE=2> (9.28</FONT></TD>
    <TD VALIGN="bottom" WIDTH="74"> <FONT SIZE=2> )%</FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="130"> <FONT SIZE=2> January 31, 2000</FONT></TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="48"> <FONT SIZE=2> $12.9375</FONT></TD>
    <TD VALIGN="TOP" WIDTH="21">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="50"> <FONT SIZE=2> $10.6875</FONT></TD>
    <TD VALIGN="TOP" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="40"> <FONT SIZE=2> $13.13</FONT></TD>
    <TD VALIGN="TOP" WIDTH="22">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="43"> <FONT SIZE=2> $11.81</FONT></TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="36"> <FONT SIZE=2> (0.63</FONT></TD>
    <TD VALIGN="bottom" WIDTH="18"> <FONT SIZE=2> )%</FONT></TD>
    <TD VALIGN="bottom" align="right" WIDTH="20">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="43"> <FONT SIZE=2> (10.85</FONT></TD>
    <TD VALIGN="bottom" WIDTH="74"> <FONT SIZE=2> )%</FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="130"> <FONT SIZE=2> March 31, 2000#</FONT></TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="48"> <FONT SIZE=2> $11.625</FONT></TD>
    <TD VALIGN="TOP" WIDTH="21">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="50"> <FONT SIZE=2> $10.75</FONT></TD>
    <TD VALIGN="TOP" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="40"> <FONT SIZE=2> $13.06</FONT></TD>
    <TD VALIGN="TOP" WIDTH="22">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="43"> <FONT SIZE=2> $11.82</FONT></TD>
    <TD VALIGN="TOP" WIDTH="19">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="36"> <FONT SIZE=2> (3.88</FONT></TD>
    <TD VALIGN="bottom" WIDTH="18"> <FONT SIZE=2> )%</FONT></TD>
    <TD VALIGN="bottom" align="right" WIDTH="20">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="43"> <FONT SIZE=2> (14.69</FONT></TD>
    <TD VALIGN="bottom" WIDTH="74"> <FONT SIZE=2> )%</FONT></TD>
  </TR>
</TABLE>

<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
IV </i></font></td></tr></TABLE></p>


<TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="bottom" WIDTH="142">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="24">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="42">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="39">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="16">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="41">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="27">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="33">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="35">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="16">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="42">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="87">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="142">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="24">&nbsp;</TD>
    <TD VALIGN="bottom" colspan="3" align="center"><b><font size=1>Market Price**</font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="16">&nbsp;</TD>
    <TD VALIGN="bottom" colspan="3" align="center"><b><font size=1>Net Asset Value</font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" colspan="4"> <b><font size="1">(Discount)<br>
        Premium to Net <br>
        Asset Value </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" WIDTH="87">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="center" WIDTH="142"><font size=1><b>Quarter/Period
      Ended* </b> </font>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="24">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="42"><b><font size=1>High </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="39"><b><font size=1>Low </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="16">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="41"><b><font size=1>High </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="27">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="33"><b><font size=1>Low </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" colspan="2"><b><font size=1>High </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="42"><b><font size=1>Low </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" WIDTH="87">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="142" height="23"> <FONT SIZE=2> November 30, 1999&#134;&#134;&#134;</FONT></TD>
    <TD VALIGN="TOP" WIDTH="24" height="23">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="42" height="23"> <FONT SIZE=2> $15.25</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18" height="23">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="39" height="23"> <FONT SIZE=2> $12.375</FONT></TD>
    <TD VALIGN="TOP" WIDTH="16" height="23">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="41" height="23"> <FONT SIZE=2> $15.10</FONT></TD>
    <TD VALIGN="TOP" WIDTH="27" height="23">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="33" height="23"> <FONT SIZE=2> $14.28</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18" height="23">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="35" height="23"> <FONT SIZE=2> 4.90</FONT></TD>
    <TD VALIGN="bottom" WIDTH="16" height="23"> <FONT SIZE=2> %</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18" height="23">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="42" height="23"> <FONT SIZE=2> (16.50</FONT></TD>
    <TD VALIGN="bottom" WIDTH="87" height="23"> <FONT SIZE=2> )%</FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="142"> <FONT SIZE=2> February 29, 2000</FONT></TD>
    <TD VALIGN="TOP" WIDTH="24">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="42"> <FONT SIZE=2> $13.25</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="39"> <FONT SIZE=2> $11.875</FONT></TD>
    <TD VALIGN="TOP" WIDTH="16">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="41"> <FONT SIZE=2> $14.83</FONT></TD>
    <TD VALIGN="TOP" WIDTH="27">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="33"> <FONT SIZE=2> $14.14</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="35"> <FONT SIZE=2> (7.41</FONT></TD>
    <TD VALIGN="bottom" WIDTH="16"> <FONT SIZE=2> )%</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="42"> <FONT SIZE=2> (17.34</FONT></TD>
    <TD VALIGN="bottom" WIDTH="87"> <FONT SIZE=2> )%</FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="142"> <FONT SIZE=2> March 31, 2000##</FONT></TD>
    <TD VALIGN="TOP" WIDTH="24">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="42"> <FONT SIZE=2> $12.875</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="39"> <FONT SIZE=2> $12.1875</FONT></TD>
    <TD VALIGN="TOP" WIDTH="16">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="41"> <FONT SIZE=2> $15.15</FONT></TD>
    <TD VALIGN="TOP" WIDTH="27">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="33"> <FONT SIZE=2> $14.59</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="35"> <FONT SIZE=2> (12.97</FONT></TD>
    <TD VALIGN="bottom" WIDTH="16"> <FONT SIZE=2> )%</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="42"> <FONT SIZE=2> (17.33</FONT></TD>
    <TD VALIGN="bottom" WIDTH="87"> <FONT SIZE=2> )%</FONT></TD>
  </TR>
</TABLE>


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

<table width=600><tr><td width=3% align=right valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Calculations
are based upon shares of Common Stock outstanding at the end of each
quarter/period. </font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">**
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">As
reported in the consolidated transaction operating system.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">&#134;</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">For
the period February 26, 1999 to March 31, 1999. </font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">&#134;&#134;</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1"> For
the period May 28, 1999 to July 31, 1999.</font></td></tr></TABLE>

<table width=600><tr>
    <td width=3% align=right valign=top><font size="1">&#134;&#134;&#134;</font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1"> For the period September 24, 1999 to November
      30, 1999. </font></td>
  </tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">#
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">For
the period February 1, 2000 to March 31, 2000.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">##
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">For
the period March 1, 2000 to March 31, 2000.</font></td></tr></TABLE>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since Insured II&#146;s commencement
      of operations on February 26, 1999, share prices for its common stock have
      fluctuated between a maximum premium of approximately 3.48% and a maximum
      discount of approximately (17.50%). Since Insured III&#146;s commencement
      of operations on May 28, 1999, share prices for its common stock have fluctuated
      between a maximum premium of approximately 2.46% and a maximum discount
      of approximately (14.69%). Since Insured IV&#146;s commencement of operations
      on September 24, 1999, share prices for its common stock have fluctuated
      between a maximum premium of approximately 4.90% and a maximum discount
      of approximately (17.34%). Although there is no reason to believe that this
      pattern should be affected by the Reorganization, it is not possible to
      predict whether shares of the Combined Fund will trade at a premium or discount
      to net asset value following the Reorganization, or what the magnitude of
      any such premium or discount might be.</font></td>
  </tr></TABLE><p></p>

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











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<p><table width=600><tr>
    <td><font size=2><B><a name="22"></a>Investment Objective and Policies</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
structure, organization and investment policies of the Funds are substantially
similar. Each Fund seeks as a fundamental investment objective current income
exempt from Federal income tax. The investment objective of each Fund is a
fundamental policy that may not be changed without a vote of a majority of a
Fund&#146;s outstanding voting securities.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund seeks to achieve
      its investment objective by investing primarily in Municipal Bonds. Each
      Fund intends to invest substantially all (at least 80%) of its assets in
      Municipal Bonds except during interim periods pending investment of the
      net proceeds of public offerings of a Fund&#146;s securities and during
      temporary defensive periods. Under normal circumstances, at least 80% of
      each Fund&#146;s assets will be invested in municipal obligations with remaining
      maturities of one year or more that are covered by insurance guaranteeing
      the timely payment of principal and interest when due.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ordinarily,
none of the Funds intend to realize significant interest income that is subject
to Federal income tax. Each Fund may invest all or a portion of its assets in
certain tax-exempt securities classified as &#147;private activity bonds&#148;
(in general, bonds that benefit non-governmental entities) that may subject
certain investors in a Fund to a Federal alternative minimum tax. Each Fund also
may invest in securities not issued by or on behalf of a state or territory or
by an agency or instrumentality thereof, if a Fund nevertheless believes such
securities pay interest or distributions that are exempt from Federal income
taxation (&#147;Non-Municipal Tax-Exempt Securities&#148;). Non-Municipal
Tax-Exempt Securities may include securities issued by other investment
companies that invest in Municipal Bonds, to the extent such investments are
permitted by the Investment Company Act. Other Non-Municipal Tax-Exempt
Securities could include trust certificates or other instruments evidencing
interests in one or more long-term Municipal Bonds. Certain Non-Municipal
Tax-Exempt Securities may be characterized as derivative instruments.
Non-Municipal Tax-Exempt Securities are considered &#147;Municipal Bonds&#148;
for purposes of each Fund&#146;s investment objective and policies.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
investment grade Municipal Bonds in which each Fund will primarily invest are
those Municipal Bonds that are rated at the date of purchase in the four highest
rating categories of S&amp;P, Moody&#146;s or Fitch IBCA, Inc.
(&#147;Fitch&#148;) or, if unrated, are considered to be of comparable quality
by FAM. In the case of long-term debt, the investment grade rating categories
are AAA through BBB for S&amp;P, Aaa through Baa for Moody&#146;s and AAA
through BBB for Fitch. In the case of short-term notes, the investment grade
rating categories are SP-l+ through SP-3 for S&amp;P, MIG-1 through MIG-3 for
Moody&#146;s and F-1+ through F-3 for Fitch. In the case of tax-exempt
commercial paper, the investment grade rating categories are A-1+ through A-3
for S&amp;P, Prime-1 through Prime-3 for Moody&#146;s and F-l+ through F-3 for
Fitch. Securities rated in the lowest investment grade rating category (BBB,
SP-3 and A-3 for S&amp;P; Baa, MIG-3 and Prime-3 for Moody&#146;s; and BBB and
F-3 for Fitch), may be considered to 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, FAM will take into account the
portfolio insurance as well as the nature of any letters of credit or similar
credit enhancement to which particular Municipal Bonds are entitled and the
creditworthiness of the insurance company or financial institution that provided
such insurance or credit enhancement. Consequently, if Municipal Bonds are
covered by insurance policies issued by insurers whose claims-paying ability is
rated AAA by S&amp;P or Fitch or Aaa by Moody&#146;s, FAM may consider such
municipal obligations to be equivalent to AAA- or Aaa- rated securities, as the
case may be, even though such Municipal Bonds would generally be assigned a
lower rating if the rating were based primarily upon the credit characteristics
of the issuers without regard to the insurance feature. The insured Municipal
Bonds must also comply with the standards applied by the insurance carriers in
determining eligibility for portfolio insurance. See Appendix III to this Proxy
Statement and Prospectus for a description of S&amp;P&#146;s, Moody&#146;s and
Fitch&#146;s ratings of Municipal Bonds. See also Appendix IV &#151;
&#147;Portfolio Insurance.&#148;</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund&#146;s
investments may also include variable rate demand obligations (&#147;VRDOs&#148;)
and VRDOs in the form of participation interests (&#147;Participating VRDOs&#148;)
in variable rate tax-exempt obligations held by a financial institution,
typically a commercial bank. The VRDOs in which each Fund may invest are
tax-exempt obligations, in the opinion of counsel to the issuer, that contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand on the part of the holder thereof to receive payment of the
unpaid principal balance plus accrued interest on a notice period not to exceed
seven days. Participating VRDOs provide a Fund with a specified undivided
interest (up to 100%) in the underlying obligation and the right to demand
payment of the unpaid principal balance plus accrued interest on the
Participating VRDOs from the financial </font></td></tr></TABLE></p>

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













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









<p><table width=600><tr><td><font size=2>institution on a specified number of
days&#146; notice, not to exceed seven days. There is, however, the possibility
that because of default or insolvency, the demand feature of VRDOs or
Participating VRDOs may not be honored. Each Fund has been advised by its
counsel that a Fund should be entitled to treat the income received on
Participating VRDOs as interest from tax-exempt obligations.</font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
average maturity of a Fund&#146;s portfolio securities will vary based upon
FAM&#146;s assessment of economic and market conditions. The net asset value of
the shares of common stock of closed-end investment companies, such as the
Funds, which invest primarily in fixed-income securities, changes as the general
levels of interest rates fluctuate. When interest rates decline, the value of a
fixed-income portfolio generally can be expected to rise. Conversely, when
interest rates rise, the value of a fixed-income portfolio generally can be
expected to decline. Prices of longer-term securities generally fluctuate more
in response to interest rate changes than do short-term or medium-term
securities. These changes in net asset value are likely to be greater in the
case of a fund having a leveraged capital structure, such as that used by the
Funds.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
intends to invest primarily in long-term Municipal Bonds with maturities of more
than ten years. Also, each Fund may invest in intermediate-term Municipal Bonds
with maturities of between three years and ten years. Each Fund may invest in
short-term, tax-exempt securities, short-term U.S. Government securities,
repurchase agreements or cash. Investments in such short-term securities or cash
will not exceed 20% of a Fund&#146;s total assets except during interim periods
pending investment of the net proceeds of public offerings of that Fund&#146;s
securities or in anticipation of the repurchase or redemption of that
Fund&#146;s securities and temporary periods when, in the opinion of FAM,
prevailing market or economic conditions warrant.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
is classified as non-diversified within the meaning of the Investment Company
Act, which means that each Fund is not limited by the Investment Company Act in
the proportion of its assets that it may invest in securities of a single
issuer. However, each Fund&#146;s investments in a single issuer will be limited
so as to qualify the Fund for the special tax treatment afforded RICs under the
Federal tax laws. See &#147;Comparison of the Fund &#151; Tax Rules Applicable
to the Funds and Their Stockholders.&#148; Requirements for qualification as a
RIC include, among others, limiting its investments so that, at the close of
each quarter of the taxable year, (i) not more than 25% of the market value of
the Fund&#146;s total assets will be invested in the securities (other than U.S.
Government securities) of a single issuer, and (ii) with respect to 50% of the
market value of its total assets, not more than 5% of the market value of its
total assets will be invested in the securities (other than U.S. Government
securities) of a single issuer. A fund that elects to be classified as
&#147;diversified&#148; under the Investment Company Act must satisfy, among
other requirements, the foregoing 5% requirement with respect to 75% of its
total assets. To the extent that a Fund assumes large positions in the
securities of a small number of issuers, that Fund&#146;s yield may fluctuate to
a greater extent than that of a diversified investment company as a result of
changes in the financial condition or in the market&#146;s assessment of the
issuers.</font></td></tr></TABLE><p></p>

<A NAME="A010"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="23"></a>Portfolio Insurance</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under normal circumstances,
      at least 80% of each Fund&#146;s assets will be invested in Municipal Bonds
      either (i) insured under an insurance policy purchased by a Fund or (ii)
      insured under an insurance policy obtained by the issuer thereof or any
      other party. Each Fund will seek to limit its investments to municipal obligations
      insured under insurance policies issued by insurance carriers that have
      total admitted assets (unaudited) of at least $75,000,000 and capital and
      surplus (unaudited) of at least $50,000,000 and insurance claims-paying
      ability ratings of AAA from S&amp;P or Fitch or Aaa from Moody&#146;s. No
      assurance can be given that insurance from insurance carriers meeting these
      criteria will be available. See Appendix IV to this Proxy Statement and
      Prospectus for a brief description of the insurance claims-paying ability
      ratings of S&amp;P, Moody&#146;s and Fitch. Currently, it is anticipated
      that a majority of the insured Municipal Bonds in each Fund&#146;s portfolio
      will be insured by the following insurance companies that satisfy the foregoing
      criteria: Ambac Assurance Corporation, Financial Guaranty Insurance Company,
      Financial Security Assurance and MBIA Insurance Corporation. Each Fund also
      may purchase Municipal Bonds covered by insurance issued by any other insurance
      company that satisfies the foregoing criteria. A majority of the insured
      Municipal Bonds held by the Funds will be insured under policies obtained
      by parties other than the Funds.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Fund may purchase, but has no obligation to purchase, separate insurance
policies (the &#147;Policies&#148;) from insurance companies meeting the
criteria set forth above that guarantee the payment of principal and interest
on specified eligible Municipal Bonds purchased by the Fund. A Municipal Bond
will be eligible for coverage if it meets certain requirements of the insurance
company set forth in a Policy. In the event interest or principal on
</font></td></tr></TABLE></p>

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













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<p><table width=600><tr><td><font size=2>an insured Municipal Bond is not paid
when due, the insurer will be obligated under its Policy to make such payment
not later than 30 days after it has been notified by, and provided with
documentation from, a Fund that such nonpayment has occurred.</font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Policies will be effective only with respect to insured Municipal Bonds
beneficially owned by a Fund. In the event of a sale of any Municipal Bonds held
by a Fund, the issuer of the relevant Policy will be liable only for those
payments of interest and principal that are then due and owing. The Policies
will not guarantee the market value of the insured Municipal Bonds or the value
of the shares of a Fund.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
insurer will not have the right to withdraw coverage on securities insured by
their Policies and held by a Fund so long as such securities remain in that
Fund&#146;s portfolio. In addition, the insurer may not cancel its Policies for
any reason except failure to receive premiums when due. The Board of Directors
of each Fund will reserve the right to terminate any of the Policies if it
determines that the benefits to the Fund of having its portfolio insured under
such policy are not justified by the expense involved.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
premiums for the Policies are paid by each Fund and the yield on its portfolio
is reduced thereby. FAM estimates that the cost of the annual premiums for the
Policies currently ranges from approximately 0.02 of 1% to 0.15 of 1% of the
principal amount of the Municipal Bonds covered by such Policies. This estimate
is based on the expected composition of each Fund&#146;s portfolio of Municipal
Bonds. In instances in which the Funds purchase Municipal Bonds insured under
policies obtained by parties other than the Funds, the Funds do not pay the
premiums for such policies; rather, the cost of such policies may be reflected
in the purchase price of the Municipal Bonds.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is the
intention of FAM to retain any insured securities that are in default or in
significant risk of default and to place a value on the insurance, which
ordinarily will be the difference between the market value of the defaulted
security and the market value of similar securities that are not in default. In
certain circumstances, however, FAM may determine that an alternate value for
the insurance, such as the difference between the market value of the defaulted
security and its par value, is more appropriate. FAM will be unable to manage
the portfolio to the extent it holds defaulted securities, which may limit its
ability in certain circumstances to purchase other Municipal Bonds. See
&#147;Net Asset Value&#148; below for a more complete description of each
Fund&#146;s method of valuing defaulted securities and securities that have a
significant risk of default.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
assurance can be given that insurance with the terms and issued by insurance
carriers meeting the criteria described above will continue to be available to
each Fund. In the event the Board of Directors of a Fund determines that such
insurance is unavailable or that the cost of such insurance outweighs the
benefits to a Fund, that Fund may modify the criteria for insurance carriers or
the terms of the insurance, or may discontinue its policy of maintaining
insurance for all or any of the Municipal Bonds held in that Fund&#146;s
portfolio. Although FAM periodically reviews the financial condition of each
insurer, no assurance can be given that the insurers will be able to honor their
obligations under all circumstances.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio
insurance reduces financial or credit risk (<i>i.e.</i>, the possibility that the
owners of insured Municipal Bonds will not receive timely scheduled payments of
principal or interest). However, insured Municipal Bonds remain subject to
market risk (<i>i.e.</i>, fluctuations in market value as a result of changes in
prevailing interest rates and other market conditions).</font></td></tr></TABLE><p></p>

<A NAME="A011"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="24"></a>Description of Municipal Bonds</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal
Bonds include debt obligations issued to obtain funds for various public
purposes, including construction of a wide range of public facilities, refunding
of outstanding obligations and obtaining funds for general operating expenses
and loans to other public institutions and facilities. In addition, certain
types of private activity bonds (&#147;PABs&#148;) are issued by or on behalf of
public authorities to finance various privately operated facilities, including
airports, public ports, mass commuting facilities, multifamily housing projects,
as well as facilities for water supply, gas, electricity, sewage or solid waste
disposal. For purposes of this Proxy Statement and Prospectus, such obligations
are Municipal Bonds if the interest paid thereon is exempt from Federal income
tax even though such bonds may be PABs as discussed below. Also, for purposes of
this Proxy Statement and Prospectus, Non-Municipal Tax-Exempt Securities as
discussed above will be considered Municipal Bonds.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The two
principal classifications of Municipal Bonds are &#147;general obligation&#148; bonds
and &#147;revenue&#148; bonds, which latter category includes PABs and, for
bonds issued on or before August 15, 1986, industrial development bonds or
&#147;IDBs.&#148; General obligation bonds are secured by the issuer&#146;s
pledge of faith, credit and taxing power </font></td></tr></TABLE></p>

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













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









<p><table width=600><tr><td><font size=2>for the repayment of principal and the
payment of interest. Revenue or special obligation bonds are payable only from
the revenues derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise tax or other specific revenue
source such as from the user of the facility being financed. PABs are in most
cases revenue bonds and do not generally constitute the pledge of the credit or
taxing power of the issuer of such bonds. The payment of principal and the
interest when due on revenue bonds depends solely on the ability of the user of
the facility financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment. Municipal Bonds may also include &#147;moral obligation&#148; bonds,
which are normally issued by special purpose public authorities. If an issuer
of moral obligation bonds is unable to meet its obligations, the repayment of
such bonds becomes a moral commitment but not a legal obligation of the state
or municipality in question.</font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
may purchase Municipal Bonds classified as PABs. Interest received on certain
PABs is treated as an item of &#147;tax preference&#148; for purposes of the
Federal alternative minimum tax and may impact the overall tax liability of
investors in a Fund. There is no limitation on the percentage of each
Fund&#146;s assets that may be invested in Municipal Bonds the interest on which
is treated as an item of &#147;tax preference&#148; for purposes of the Federal
alternative minimum tax. See &#147;Comparison of the Funds &#151; Tax Rules
Applicable to the Funds and Their Stockholders.&#148;</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also
included within the general category of Municipal Bonds are certificates of
participation (&#147;COPs&#148;) executed and delivered for the benefit of
government authorities or entities to finance the acquisition or construction of
equipment, land and/or facilities. COPs represent participation interests in a
lease, an installment purchase contract or a conditional sales contract
(hereinafter collectively referred to as &#147;lease obligations&#148;) relating
to such equipment, land or facilities. Although lease obligations do not
constitute general obligations of the issuer for which the issuer&#146;s
unlimited tax power is pledged, a lease obligation frequently is backed by the
issuer&#146;s covenant to budget for, appropriate and make the payments due
under the lease obligation. However, certain lease obligations contain
&#147;non-appropriation&#148; clauses, which provide that the issuer has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
&#147;non-appropriation&#148; lease obligations are secured by the lease
property, disposition of such property in the event of foreclosure might prove
to be difficult and the proceeds thereof may not be sufficient to pay principal
and interest when due on such obligations.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal
tax legislation has limited and may continue to limit the types and volume of
such 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 each Fund.</font></td></tr></TABLE><p></p>

<A NAME="A012"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="25"></a>Other Investment Policies</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
has adopted certain other policies as set forth below:</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Borrowings.</I> Each Fund
      is authorized to borrow money in amounts of up to 5% of the value of its
      total assets at the time of such borrowings; provided, however, that each
      Fund is authorized to borrow moneys in amounts of up to 33<font size="1"><sup>1</sup>/3</font>%
      of the value of its total assets at the time of such borrowings to finance
      the repurchase of its own common stock pursuant to tender offers or otherwise
      to redeem or repurchase shares of preferred stock or for temporary, extraordinary
      or emergency purposes. Borrowings by each Fund (commonly known, as with
      the issuance of preferred stock, as &#147;leveraging&#148;) create an opportunity
      for greater total return since each Fund will not be required to sell portfolio
      securities to repurchase or redeem shares but, at the same time, increase
      exposure to capital risk. In addition, borrowed funds are subject to interest
      costs that may offset or exceed the return earned on the borrowed funds.</FONT></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>When-Issued
Securities and Delayed Delivery Transactions.</I> Each Fund may purchase or sell
Municipal Bonds on a delayed delivery basis or on a when-issued basis at fixed
purchase or sale terms. These transactions arise when securities are purchased
or sold by a Fund with payment and delivery taking place in the future. The
purchase will be recorded on the date a Fund enters into the commitment, and the
value of the obligation will thereafter be reflected in the calculation of that
Fund&#146;s net asset value. The value of the obligation on the delivery day may
be more or less than its purchase price. A separate account of a Fund will be
established with its custodian, consisting of cash, cash equivalents or liquid
securities having a market value at all times at least equal to the amount of
the commitment.</FONT></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Indexed
and Inverse Floating Obligations.</I> Each Fund may invest in Municipal Bonds that
yield a return based on a particular index of value or interest rates. For
example, each Fund may invest in Municipal Bonds that pay interest based on an
index of Municipal Bond interest rates. The principal amount payable upon
maturity of certain Municipal Bonds also may be based on the value of an index.
To the extent a Fund invests in these types of Municipal Bonds, that Fund&#146;s
return on such Municipal Bonds will be subject to risk with respect to the value
of the particular index. Also, each Fund may invest in so-called &#147;inverse
floating obligations&#148; or &#147;residual interest bonds&#148; on which the
interest rates typically vary inversely with a short-term floating rate (which
may be reset periodically by a Dutch auction, a remarketing agent, or by
reference to a short-term tax-exempt interest rate index). Each Fund may
purchase synthetically-created inverse floating rate bonds evidenced by
custodial or trust receipts. Generally, income on inverse floating rate bonds
will decrease when short-term interest rates increase, and will increase when
short-term interest rates decrease. Such securities have the effect of providing
a degree of investment leverage, since they may increase or decrease in value in
response to changes, as an illustration, in market interest rates at a rate that
is a multiple (typically two) of the rate at which fixed-rate, long-term,
tax-exempt securities increase or decrease in response to such changes. As a
result, the market values of such securities generally will be more volatile
than the market values of fixed-rate tax-exempt securities. To seek to limit the
volatility of these securities, each Fund may purchase inverse floating
obligations with shorter-term maturities or limitations on the extent to which
the interest rate may vary. FAM believes that indexed and inverse floating
obligations represent a flexible portfolio management instrument for each Fund
that allows FAM to vary the degree of investment leverage relatively efficiently
under different market conditions.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Call
Rights.</I> Each Fund may purchase a Municipal Bond issuer&#146;s right to call all
or a portion of such Municipal Bond for mandatory tender for purchase (a
&#147;Call Right&#148;). A holder of a Call Right may exercise such right to
require a mandatory tender for the purchase of related Municipal Bonds, subject
to certain conditions. A Call Right that is not exercised prior to the maturity
of the related Municipal Bond will expire without value. The economic effect of
holding both the Call Right and the related Municipal Bond is identical to
holding a Municipal Bond as a non-callable security.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Repurchase
Agreements.</I> Each Fund may invest in Municipal Bonds and U.S. Government
securities pursuant to repurchase agreements. Repurchase agreements may be
entered into only with a member bank of the Federal Reserve System or a primary
dealer in U.S. Government securities or an affiliate thereof. Under such
agreements, the seller agrees, upon entering into the contract, to repurchase
the security at a mutually agreed-upon time and price, thereby determining the
yield during the term of the agreement. A Fund may not invest in repurchase
agreements maturing in more than seven days if such investments, together with
all other illiquid investments, would exceed 15% of that Fund&#146;s net assets.
In the event of default by the seller under a repurchase agreement, a Fund may
suffer time delays and incur costs or possible losses in connection with the
disposition of the underlying securities. In general, for Federal income tax
purposes, repurchase agreements are treated as collateralized loans secured by
the securities &#147;sold.&#148; Therefore, amounts earned under such agreements
will not be considered tax-exempt interest.</FONT></td></tr></TABLE><p></p>

<A NAME="A013"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="26"></a>Information Regarding Options and Futures
      Transactions</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
may hedge all or a portion of its portfolio investments against fluctuations in
interest rates through the use of options and certain financial futures
contracts and options thereon. While each Fund&#146;s use of hedging strategies
is intended to reduce the volatility of the net asset value of the Common Stock,
the net asset value of the Common Stock will fluctuate. No assurance can be
given that a Fund&#146;s hedging transactions will be effective. In addition,
because of the leveraged nature of the Common Stock, hedging transactions will
result in a larger impact on the net asset value of the Common Stock than would
be the case if the Common Stock were not leveraged. Furthermore, a Fund may only
engage in hedging activities from time to time and may not necessarily be
engaging in hedging activities when movements in interest rates occur. No Fund
has an obligation to enter into hedging transactions and each may choose not to
do so.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;Gains from transactions in options
      and futures contracts distributed to stockholders will be taxable as ordinary
      income or, in certain circumstances, as long-term capital gains to stockholders.
      See &#147;Comparison of the Funds &#151; Tax Rules Applicable to the Funds
      and Their Stockholders &#151; Tax Treatment of Options and Futures Transactions.&#148;
      In addition, in order to obtain ratings of the AMPS from one or more nationally
      recognized statistical rating organizations, a Fund may be required to limit
      its use of hedging techniques in accordance with the specified guidelines
      of such rating organizations. See &#147;Rating Agency Guidelines&#148; below.</font></td>
  </tr></TABLE><p></p>

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











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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a description of the options and futures transactions in which each
Fund may engage, limitations on the Fund&#146;s use of such transactions and
risks associated with these transactions. The investment policies with respect
to the hedging transactions of a Fund are not fundamental policies and may be
modified by the Board of Directors of that Fund without the approval of that
Fund&#146;s stockholders.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Writing
Covered Call Options.</I> Each Fund is authorized to write (<I>i.e.</I>, sell) covered call
options with respect to Municipal Bonds it owns, thereby giving the holder of
the option the right to buy the underlying security covered by the option from a
Fund at the stated exercise price until the option expires. Each Fund writes
only covered call options, which means that so long as a Fund is obligated as
the writer of a call option, it will own the underlying securities subject to
the option. None of the Funds may write covered call options on underlying
securities in an amount exceeding 15% of the market value of its total assets.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
receives a premium from writing a call option, which increases a Fund&#146;s
return on the underlying security in the event the option expires unexercised or
is closed out at a profit. By writing a call, a Fund limits its opportunity to
profit from an increase in the market value of the underlying security above the
exercise price of the option for as long as that Fund&#146;s obligation as a
writer continues. Covered call options serve as a partial hedge against a
decline in the price of the underlying security. Each Fund may engage in closing
transactions in order to terminate outstanding options that it has written.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Purchase
of Options.</I> Each Fund may purchase put options in connection with its hedging
activities. By buying a put, a Fund has a right to sell the underlying security
at the exercise price, thus limiting its risk of loss through a decline in the
market value of the security until the put expires. The amount of any
appreciation in the value of the underlying security will be partially offset by
the amount of the premium paid for the put option and any related transaction
costs. Prior to its expiration, a put option may be sold in a closing sale
transaction; profit or loss from the sale will depend on whether the amount
received is more or less than the premium paid for the put option plus the
related transaction costs. A closing sale transaction cancels out a Fund&#146;s
position as the purchaser of an option by means of an offsetting sale of an
identical option prior to the expiration of the option it has purchased. In
certain circumstances, a Fund may purchase call options on securities held in
its portfolio on which it has written call options, or on securities which it
intends to purchase. A Fund will not purchase options on securities if, as a
result of such purchase, the aggregate cost of all outstanding options on
securities held by that Fund would exceed 5% of the market value of that
Fund&#146;s total assets.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Financial
Futures Contracts and Options.</I> Each Fund is authorized to purchase and sell
certain financial futures contracts and options thereon solely for the purposes
of hedging its investments in Municipal Bonds against declines in value and
hedging against increases in the cost of securities it intends to purchase. A
financial futures contract obligates the seller of a contract to deliver and the
purchaser of a contract to take delivery of the type of financial instrument
covered by the contract or, in the case of index-based financial futures
contracts, to make and accept a cash settlement, at a specific future time for a
specified price. A sale of financial futures contracts may provide a hedge
against a decline in the value of portfolio securities because such depreciation
may be offset, in whole or in part, by an increase in the value of the position
in the financial futures contracts or options. A purchase of financial futures
contracts may provide a hedge against an increase in the cost of securities
intended to be purchased, because such appreciation may be offset, in whole or
in part, by an increase in the value of the position in the financial futures
contracts.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purchase or sale of a financial futures contract differs from the purchase or
sale of a security in that no price or premium is paid or received. Instead, an
amount of cash or securities acceptable to the broker equal to approximately 5%
of the contract amount must be deposited with the broker. This amount is known
as initial margin. Subsequent payments to and from the broker, called variation
margin, are made on a daily basis as the price of the financial futures contract
fluctuates making the long and short positions in the financial futures contract
more or less valuable.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
may purchase and sell financial futures contracts based on The Bond Buyer
Municipal Bond Index, a price-weighted measure of the market value of 40 large
tax-exempt issues, and purchase and sell put and call options on such financial
futures contracts for the purpose of hedging Municipal Bonds that a Fund holds
or anticipates purchasing against adverse changes in interest rates. Each Fund
also may purchase and sell financial futures contracts on U.S. Government
securities and purchase and sell put and call options on such financial futures
contracts for such hedging purposes. With respect to U.S. Government securities,
currently there are financial futures contracts based on long-term U.S. Treasury
bonds, U.S. Treasury notes, GNMA Certificates and three-month U.S. Treasury
bills.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to policies adopted by its Board of Directors, each Fund also may engage in
transactions in other financial futures contracts, such as financial futures
contracts on other municipal bond indices that may become available, if FAM
should determine that there is normally sufficient correlation between the
prices of such financial futures contracts and the Municipal Bonds in which a
Fund invests to make such hedging appropriate.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Over-The-Counter
Options.</I> Each Fund may engage in options and futures transactions on exchanges
and in the over-the-counter markets (&#147;OTC options&#148;). In general,
exchange-traded contracts are third-party contracts (<I>i.e.</I>, performance of the
parties&#146; obligations is guaranteed by an exchange or clearing corporation)
with standardized strike prices and expiration dates. OTC option transactions
are two-party contracts with price and terms negotiated by the buyer and seller.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restrictions
on OTC Options.</I> Each Fund will engage in transactions in OTC options only with
banks or dealers that have capital of at least $50 million or whose obligations
are guaranteed by an entity having capital of at least $50 million. Certain OTC
options and assets used to cover OTC options written by the Funds are considered
to be illiquid. The illiquidity of such options or assets may prevent a
successful sale of such options or assets, result in a delay of sale, or reduce
the amount of proceeds that otherwise might be realized.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Risk
Factors in Financial Futures Contracts and Options Thereon.</I> Use of futures
transactions involves the risk of imperfect correlation in movements in the
price of financial futures contracts and movements in the price of the security
that is the subject of the hedge. If the price of the financial futures contract
moves more or less than the price of the security that is the subject of the
hedge, a Fund will experience a gain or loss that will not be completely offset
by movements in the price of such security. There is a risk of imperfect
correlation where the securities underlying financial futures contracts have
different maturities, ratings, geographic compositions or other characteristics
different from those of the security being hedged. In addition, the correlation
may be affected by additions to or deletions from the index that serves as a
basis for a financial futures contract. Finally, in the case of financial
futures contracts on U.S. Government securities and options on such financial
futures contracts, the anticipated correlation of price movements between the
U.S. Government securities underlying the futures or options and Municipal Bonds
may be adversely affected by economic, political, legislative or other
developments which have a disparate impact on the respective markets for such
securities.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
regulations of the Commodity Futures Trading Commission, the futures trading
activities described herein will not result in a Fund being deemed a
&#147;commodity pool,&#148; as defined under such regulations, provided that
such Fund adheres to certain restrictions. In particular, a Fund may purchase
and sell financial futures contracts and options thereon (i) for bona fide
hedging purposes, without regard to the percentage of that Fund&#146;s assets
committed to margin and option premiums, and (ii) for non-hedging purposes, if,
immediately thereafter the sum of the amount of initial margin deposits on that
Fund&#146;s existing futures positions and option premiums entered into for
non-hedging purposes do not exceed 5% of the market value of the liquidation
value of that Fund&#146;s portfolio, after taking into account unrealized
profits and unrealized losses on any such transactions. Margin deposits may
consist of cash or securities acceptable to the broker and the relevant contract
market.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When a
Fund purchases a financial futures contract, or writes a put option or purchases
a call option thereon, it will maintain an amount of cash, cash equivalents
(<I>e.g.</I>, commercial paper and daily tender adjustable notes) or liquid securities
in a segregated account with that Fund&#146;s custodian, so that the amount so
segregated plus the amount of initial and variation margin held in the account
of its broker equals the market value of the financial futures contract, thereby
ensuring that the use of such financial futures contract is unleveraged.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
certain risks are involved in options and futures transactions, FAM believes
that, because the Funds will engage in options and futures transactions only for
hedging purposes, the options and futures portfolio strategies of the Funds will
not subject them to the risks associated with speculation in options and futures
transactions.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
volume of trading in the exchange markets with respect to Municipal Bond options
may be limited, and it is impossible to predict the amount of trading interest
that may exist in such options. In addition, no assurance can be given that
viable exchange markets will continue to be available.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Fund intends to enter into options and futures transactions, on an exchange or
in the over-the-counter market, only if there appears to be a liquid secondary
market for such options or futures. No assurance can be given, however, that a
liquid secondary market will exist at any specific time. Thus, it may not be
possible to close an option or futures transaction. The inability to close
options and futures positions also could have an adverse impact on a Fund&#146;s
ability to hedge effectively its portfolio. There is also the risk of loss by a
Fund of</font></td></tr></TABLE></p>

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













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<p><table width=600><tr><td><font size=2>margin deposits or collateral in the
event of bankruptcy of a broker with which that Fund has an open position in an
option or financial futures contract.</font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
liquidity of a secondary market in a financial futures contract may be adversely
affected by &#147;daily price fluctuation limits&#148; established by commodity
exchanges that limit the amount of fluctuation in a financial futures contract
price during a single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions. Prices have in the past
reached or exceeded the daily limit on a number of consecutive trading days.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If it is
not possible to close a financial futures position entered into by a Fund, that
Fund would continue to be required to make daily cash payments of variation
margin in the event of adverse price movements. In such a situation, if a Fund
has insufficient cash, it may have to sell portfolio securities to meet daily
variation margin requirements at a time when it may be disadvantageous to do so.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
successful use of these transactions also depends on the ability of FAM to
forecast correctly the direction and extent of interest rate movements within a
given time frame. To the extent these rates remain stable during the period in
which a financial futures contract is held by a Fund or move in a direction
opposite to that anticipated, that Fund may realize a loss on the hedging
transaction that is not fully or partially offset by an increase in the value of
portfolio securities. As a result, a Fund&#146;s total return for such period
may be less than if it had not engaged in the hedging transaction. Furthermore,
a Fund will only engage in hedging transactions from time to time and may not
necessarily be engaging in hedging transactions when movements in interest rates
occur.</font></td></tr></TABLE><p></p>

<A NAME="A014"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="29"></a>Investment Restrictions</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds
have identical investment restrictions. The following are fundamental investment
restrictions of each Fund and may not be changed without the approval of the
holders of a majority of the outstanding shares of Common Stock and the
outstanding shares of AMPS and any other preferred stock, voting together as a
single class, and a majority of the outstanding shares of AMPS and any other
preferred stock, voting separately as a class. (For this purpose and under the
Investment Company Act, for the Common Stock and AMPS voting together as a
single class &#147;majority&#148; means the lesser of (i) 67% of the shares of
each class of capital stock represented at a meeting at which more than 50% of
the outstanding shares of each class of capital stock are represented or (ii)
more than 50% of the outstanding shares of each class of capital stock, but for
the AMPS voting separately as a single class, &#147;majority&#148; means more
than 50% of the outstanding AMPS.) No Fund may:</font></td></tr></TABLE><p></p>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
Make investments for the purpose of exercising control or management.</font></td></tr></TABLE></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
Purchase or sell real estate, commodities or commodity contracts; provided,
that the Fund may invest in securities secured by real estate or interests
therein or issued by companies that invest in real estate or interests therein,
and the Fund may purchase and sell financial futures contracts and options
thereon.</font></td></tr></TABLE></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.
Issue senior securities or borrow money except as permitted by Section 18 of
the Investment Company Act.</font></td></tr></TABLE></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.
Underwrite securities of other issuers except insofar as the Fund may be deemed
an underwriter under the Securities Act of 1933 (the &#147;Securities Act&#148;)
in selling portfolio securities.</font></td></tr></TABLE></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.
Make loans to other persons, except that the Fund may purchase Municipal Bonds
and other debt securities and enter into repurchase agreements in accordance
with its investment objective, policies and limitations.</font></td></tr></TABLE></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.
Invest more than 25% of its total assets (taken at market value at the time of
each investment) in securities of issuers in a single industry; provided, that
for purposes of this restriction, states, municipalities and their political
subdivisions are not considered to be part of any industry.</font></td></tr></TABLE></P>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of restriction (6), the exception for states, municipalities and their
political subdivisions applies only to tax-exempt securities issued by such
entities.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
investment restrictions adopted by each Fund, which may be changed by the Board
of Directors without stockholder approval, provide that no Fund may:</font></td></tr></TABLE><p></p>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.
Purchase securities of other investment companies, except to the extent that
such purchases are permitted by applicable law. Applicable law currently
prohibits the Fund from purchasing the securities of other investment companies
except if immediately thereafter not more than (i) 3% of the total outstanding
</font></td></tr></TABLE></P>

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













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<p><table width=600><tr><td width=30>&nbsp;</td><td width=570><font size=2>voting
stock of such company is owned by the Fund, (ii) 5% of the Fund&#146;s total
assets, taken at market value, would be invested in any one such company, (iii)
10% of the Fund&#146;s total assets, taken at market value, would be invested
in such securities, and (iv) the Fund, together with other investment companies
having the same investment adviser and companies controlled by such companies,
owns not more than 10% of the total outstanding stock of any one closed-end
investment company.</font></td></tr></TABLE></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.
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 (3)
above or except as may be necessary in connection with transactions in
financial futures contracts and options thereon.</font></td></tr></TABLE></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.
Purchase any securities on margin, except that the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities (the deposit or payment by the Fund of initial or
variation margin in connection with financial futures contracts and options
thereon is not considered the purchase of a security on margin).</font></td></tr></TABLE></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.
Make short sales of securities or maintain a short position or invest in put,
call, straddle or spread options, except that the Fund may write, purchase and
sell options and futures on Municipal Bonds, U.S. Government obligations and
related indices or otherwise in connection with bona fide hedging activities
and may purchase and sell Call Rights to require mandatory tender for the
purchase of related Municipal Bonds.</font></td></tr></TABLE></P>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a
percentage restriction on the investment or use of assets set forth above is
adhered to at the time a transaction is effected, later changes in percentages
resulting from changing values will not be considered a violation.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For so
long as shares of AMPS are rated by Moody&#146;s, no Fund will change these
additional investment restrictions unless it receives written confirmation from
Moody&#146;s that engaging in such transactions would not impair the rating then
assigned to the shares of AMPS by Moody&#146;s.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FAM and
Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated (&#147;Merrill
Lynch&#148;) are owned and controlled by Merrill Lynch &amp; Co., Inc. (&#147;ML
&amp; Co.&#148;). Because of the affiliation of Merrill Lynch with FAM, each
Fund is prohibited from engaging in certain transactions involving Merrill Lynch
except pursuant to an exemptive order or otherwise in compliance with the
provisions of the Investment Company Act and the rules and regulations
thereunder. Included among such restricted transactions will be purchases from
or sales to Merrill Lynch of securities in transactions in which it acts as
principal. An exemptive order has been obtained that permits the Funds to effect
principal transactions with Merrill Lynch in high quality, short-term,
tax-exempt securities subject to conditions set forth in such order. The Funds
may consider in the future requesting an order permitting other principal
transactions with Merrill Lynch, but no assurance can be given that such
application will be made and, if made, that such order would be granted.</font></td></tr></TABLE><p></p>

<A NAME="A015"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="30"></a>Rating Agency Guidelines</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
intends that, so long as shares of its AMPS are outstanding, the composition of
its portfolio will reflect guidelines established by Moody&#146;s and S&amp;P in
connection with a Fund&#146;s receipt of a rating for such shares on or prior to
their date of original issue of at least &#147;aaa&#148; from Moody&#146;s and
AAA from S&amp;P. Moody&#146;s and S&amp;P, which are nationally recognized
statistical rating organizations, issue ratings for various securities
reflecting the perceived creditworthiness of such securities. The guidelines for
rating AMPS have been developed by Moody&#146;s and S&amp;P in connection with
issuances of asset-backed and similar securities, including debt obligations and
variable rate preferred stock, generally on a case-by-case basis through
discussions with the issuers of these securities. The guidelines are designed to
ensure that assets underlying outstanding debt or preferred stock will be
sufficiently varied and of sufficient quality and amount to justify
investment-grade ratings. The guidelines do not have the force of law but have
been adopted by each Fund in order to satisfy current requirements necessary for
Moody&#146;s and S&amp;P to issue the above-described ratings for shares of
AMPS, which ratings generally are relied upon by institutional investors in
purchasing such securities. The guidelines provide a set of tests for portfolio
composition and asset coverage that supplement (and in some cases are more
restrictive than) the applicable requirements under the Investment Company Act.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Fund may, but is not required to, adopt any modifications to these guidelines
that hereafter may be established by Moody&#146;s or S&amp;P. Failure to adopt
any such modifications, however, may result in a change in the ratings
described above or a withdrawal of the ratings altogether. In addition, any
rating agency providing a rating </font></td></tr></TABLE></p>

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













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









<p><table width=600><tr><td><font size=2>for the shares of AMPS, at any time,
may change or withdraw any such rating. As set forth in the Articles
Supplementary of each Fund, the Board of Directors, without stockholder
approval, may modify certain definitions or restrictions that have been adopted
by a Fund pursuant to the rating agency guidelines, provided the Board of
Directors has obtained written confirmation from Moody&#146;s and S&amp;P that
any such change would not impair the ratings then assigned by Moody&#146;s and S&amp;P
to the AMPS. See &#147;The Reorganization &#151; Risk Factors and Special
Considerations &#151; Ratings Considerations.&#148;</font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For so
long as any shares of a Fund&#146;s AMPS are rated by Moody&#146;s or S&amp;P,
as the case may be, a Fund&#146;s use of options and financial futures contracts
and options thereon will be subject to certain limitations mandated by the
rating agencies.</font></td></tr></TABLE><p></p>

<A NAME="A016"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="31"></a>Portfolio Composition</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are differences in concentration
      among the types of securities held in the portfolio of each Fund. For Insured
      II, as of March 31, 2000, approximately 64.8% and 35.2% of its portfolio
      was invested in revenue bonds and general obligation bonds, respectively;
      for Insured III, approximately 86.1% and 13.9% of its portfolio was invested
      in revenue bonds and general obligation bonds, respectively; and for Insured
      IV, approximately 70% and 30% of its portfolio was invested in revenue bonds
      and general obligation bonds, respectively.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
the investment portfolios of the Funds must satisfy the same standards with
respect to credit quality, the actual securities owned by each Fund are
different. As a result there are certain differences in the composition of the
three investment portfolios. The tables below set forth ratings information as
of March 31, 2000 for the Municipal Bonds held by each Fund.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
II</i></font></td></tr></TABLE></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March 31, 2000, approximately
      94.5% and 5.5% of the market value of Insured II&#146;s portfolio was invested
      in long-term municipal obligations and short-term municipal obligations,
      respectively. The following table sets forth certain information with respect
      to the composition of Insured II&#146;s long-term municipal obligation investment
      portfolio as of March 31, 2000.</font></td>
  </tr></TABLE><p></p>

<TABLE 0 CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="24">&nbsp;</TD>
    <td valign="bottom" align="center" width="88"><b><font size=1>S&amp;P </font></b>
      <hr noshade size="1">
    </td>
    <TD VALIGN="TOP" width="13">&nbsp;</TD>
    <td valign="bottom" align="center" width="90"><b><font size=1>Moody&#146;s
      </font></b>
      <hr noshade size="1">
    </td>
    <TD VALIGN="TOP" width="24">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" width="109"><b><font size=1>Number of Issues
      </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" width="29">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" width="106"><b><font size="1">Value (in
      <br>
      Thousands) </font></b>
      <hr noshade size="1">
      <b> </b></TD>
    <TD VALIGN="TOP" width="28">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" width="86"><b><font size=1>Percent</font></b>
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="24">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <td valign="TOP" align="center" width="88">
      <p><font size="2">AAA</font>
    </td>
    <TD VALIGN="TOP" width="13">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <td valign="TOP" align="center" width="90">
      <p><font size="2">Aaa</font>
    </td>
    <TD VALIGN="TOP" width="24">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD VALIGN="TOP" width="109">
      <div align="center"><font size="2">34</font></div>
    </TD>
    <TD VALIGN="TOP" width="29">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD VALIGN="TOP" width="106">
      <div align="center"><font size="2">$203,585</font></div>
    </TD>
    <TD VALIGN="TOP" width="28">
      <div align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div>
    </TD>
    <TD VALIGN="TOP" width="86">
      <div align="center"><font size="2">&nbsp;&nbsp;85.4%</font></div>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="24">&nbsp;</TD>
    <td valign="TOP" align="center" width="88">
      <p><font size="2">&nbsp;AA&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <TD VALIGN="TOP" width="13">&nbsp;</TD>
    <td valign="TOP" align="center" width="90">
      <p><font size="2">Aa&nbsp;&nbsp;</font>
    </td>
    <TD VALIGN="TOP" width="24">&nbsp;</TD>
    <TD VALIGN="TOP" width="109">
      <div align="center"><font size="2">&nbsp;3</font></div>
    </TD>
    <TD VALIGN="TOP" width="29">&nbsp;</TD>
    <TD VALIGN="TOP" width="106">
      <div align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;11,302</font></div>
    </TD>
    <TD VALIGN="TOP" width="28">
      <div align="center"></div>
    </TD>
    <TD VALIGN="TOP" width="86">
      <div align="center"><font size="2">4.7</font></div>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="24">&nbsp;</TD>
    <td valign="TOP" align="center" width="88">
      <p><font size="2">&nbsp;BBB&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" align="center" width="90">
      <p><font size="2">Baa&nbsp;</font>
    </td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="109">
      <div align="center"><font size="2">&nbsp;6</font></div>
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;23,531</font></div>
    </td>
    <td valign="TOP" width="28">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="86">
      <div align="center"><font size="2">9.9</font></div>
    </td>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="24">&nbsp;</TD>
    <td valign="TOP" align="center" width="88">&nbsp;</td>
    <TD VALIGN="TOP" width="13">&nbsp;</TD>
    <td valign="TOP" align="center" width="90">&nbsp;</td>
    <TD VALIGN="TOP" width="24">&nbsp;</TD>
    <td valign="TOP" width="109" align="center"><font size="2">43&nbsp;</font></td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106" align="center"><font size="2">&nbsp;238,418</font></td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td valign="TOP" width="86" align="center"><font size="2">100.0&nbsp;&nbsp;&nbsp;</font></td>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="24">&nbsp;</TD>
    <td valign="TOP" align="center" width="88">&nbsp;</td>
    <TD VALIGN="TOP" width="13">&nbsp;</TD>
    <td valign="TOP" align="center" width="90">&nbsp;</td>
    <TD VALIGN="TOP" width="24">&nbsp;</TD>
    <TD VALIGN="TOP" width="109" align="center">&nbsp;</TD>
    <TD VALIGN="TOP" width="29">&nbsp;</TD>
    <TD VALIGN="TOP" width="106" align="center">&nbsp;</TD>
    <TD VALIGN="TOP" width="28">&nbsp;</TD>
    <TD VALIGN="TOP" width="86" align="center">&nbsp;</TD>
  </TR>
</TABLE>


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

<table width=600><tr><td width=3% valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Ratings: Using the higher of S&amp;P&#146;s or
      Moody&#146;s rating on Insured II&#146;s municipal obligations. S&amp;P&#146;s
      rating categories may be modified further by a plus (+) or minus (-) in
      AA, A and BBB ratings. Moody&#146;s rating categories may be modified further
      by a 1, 2 or 3 in Aa, A and Baa ratings. See Appendix IV &#151; &#147;Ratings
      of Municipal Bonds.&#148;</font></td>
  </tr></TABLE>

<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
III</i></font></td></tr></TABLE></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March 31, 2000, approximately
      95.8% and 4.2% of the market value of Insured III&#146;s portfolio was invested
      in long-term municipal obligations and short-term municipal obligations,
      respectively. The following table sets forth certain information with respect
      to the composition of Insured III&#146;s long-term municipal obligation
      investment portfolio as of March 31, 2000.</font></td>
  </tr></TABLE><p></p>

<table 0 cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="1">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="bottom" align="center" width="88"><b><font size=1>S&amp;P </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="bottom" align="center" width="90"><b><font size=1>Moody&#146;s
      </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="bottom" align="center" width="109"><b><font size=1>Number of Issues
      </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="bottom" align="center" width="106"><b><font size="1">Value (in
      <br>
      Thousands) </font></b>
      <hr noshade size="1">
      <b> </b></td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td valign="bottom" align="center" width="86"><b><font size=1>Percent</font></b>
      <hr noshade size="1">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="1">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" align="center" width="88">
      <p><font size="2">AAA</font>
    </td>
    <td valign="TOP" width="13">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" align="center" width="90">
      <p><font size="2">Aaa</font>
    </td>
    <td valign="TOP" width="24">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" width="109">
      <div align="center"><font size="2">29</font></div>
    </td>
    <td valign="TOP" width="29">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">$132,762</font></div>
    </td>
    <td valign="TOP" width="28">
      <div align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div>
    </td>
    <td valign="TOP" width="86">
      <div align="center"><font size="2">&nbsp;&nbsp;86.3%</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="1">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" align="center" width="88">
      <p><font size="2">&nbsp;AA&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" align="center" width="90">
      <p><font size="2">Aa&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="109">
      <div align="center"><font size="2">&nbsp;4</font></div>
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;13,972</font></div>
    </td>
    <td valign="TOP" width="28">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="86">
      <div align="center"><font size="2">9.1</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="1">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" align="center" width="88">
      <p><font size="2">&nbsp;A&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" align="center" width="90">
      <p><font size="2">A&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="109">
      <div align="center"><font size="2">&nbsp;&nbsp;1</font></div>
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,987</font></div>
    </td>
    <td valign="TOP" width="28">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="86">
      <div align="center"><font size="2">2.6</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="1">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" align="center" width="88">
      <p><font size="2">&nbsp;BBB&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" align="center" width="90">
      <p><font size="2">Baa&nbsp;</font>
    </td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="109">
      <div align="center"><font size="2">&nbsp;&nbsp;1</font></div>
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,068</font></div>
    </td>
    <td valign="TOP" width="28">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="86">
      <div align="center"><font size="2">2.0</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="1">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" align="center" width="88">&nbsp;</td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" align="center" width="90">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="109" align="center"><font size="2">35 </font></td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106" align="center"><font size="2">&nbsp;&nbsp;153,789</font></td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td valign="TOP" width="86" align="center"><font size="2">100.0&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
</TABLE>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Ratings: Using the higher of S&amp;P&#146;s or
      Moody&#146;s rating on Insured III&#146;s municipal obligations. S&amp;P&#146;s
      rating categories may be modified further by a plus (+) or minus (-) in
      AA, A and BBB ratings. Moody&#146;s rating categories may be modified further
      by a 1, 2 or 3 in Aa, A and Baa ratings. See Appendix IV &#151; &#147;Ratings
      of Municipal Bonds.&#148;</font></td>
  </tr>
</TABLE>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
31</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;













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








<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
IV</i></font></td></tr></TABLE></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March 31, 2000, approximately
      100% of the market value of Insured IV&#146;s portfolio was invested in
      long-term municipal obligations. As of March 31, 2000, Insured IV did not
      have any investments in any short-term municipal obligations. The following
      table sets forth certain information with respect to the composition of
      Insured IV&#146;s long-term municipal obligation investment portfolio as
      of March 31, 2000.</font></td>
  </tr></TABLE><p></p>

<TABLE 0 CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="bottom" align="center" width="88"><b><font size=1>S&amp;P </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="bottom" align="center" width="90"><b><font size=1>Moody&#146;s
      </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="bottom" align="center" width="109"><b><font size=1>Number of Issues
      </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="bottom" align="center" width="106"><b><font size="1">Value (in
      <br>
      Thousands) </font></b>
      <hr noshade size="1">
      <b> </b></td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td valign="bottom" align="center" width="86"><b><font size=1>Percent</font></b>
      <hr noshade size="1">
    </td>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <td valign="TOP" width="24">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" align="center" width="88">
      <p><font size="2">AAA</font>
    </td>
    <td valign="TOP" width="13">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" align="center" width="90">
      <p><font size="2">Aaa</font>
    </td>
    <td valign="TOP" width="24">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" width="109">
      <div align="center"><font size="2">33</font></div>
    </td>
    <td valign="TOP" width="29">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">$74,086</font></div>
    </td>
    <td valign="TOP" width="28">
      <div align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div>
    </td>
    <td valign="TOP" width="86">
      <div align="center"><font size="2">&nbsp;90.5%</font></div>
    </td>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" align="center" width="88">
      <p><font size="2">&nbsp;AA&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" align="center" width="90">
      <p><font size="2">Aa&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="109">
      <div align="center"><font size="2">&nbsp;&nbsp;3</font></div>
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">&nbsp;&nbsp;&nbsp;7,754</font></div>
    </td>
    <td valign="TOP" width="28">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="86">
      <div align="center"><font size="2">9.5</font></div>
    </td>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" align="center" width="88">&nbsp;</td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" align="center" width="90">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="109" align="center"><font size="2">36</font></td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106" align="center"><font size="2">&nbsp;&nbsp;81,840</font></td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td valign="TOP" width="86" align="center"><font size="2">100.0&nbsp;&nbsp;&nbsp;
      </font></td>
  </TR>
</TABLE>

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

<table width=600><tr><td width=3% valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Ratings: Using the higher of S&amp;P&#146;s or
      Moody&#146;s rating on the Insured IV&#146;s municipal obligations. S&amp;P&#146;s
      rating categories may be modified further by a plus (+) or minus (-) in
      AA, A and BBB ratings. Moody&#146;s rating categories may be modified further
      by a 1, 2 or 3 in Aa, A and Baa ratings. See Appendix IV &#151; &#147;Ratings
      of Municipal Bonds.&#148;</font></td>
  </tr></TABLE>

<A NAME="A017"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="32"></a>Portfolio Transactions</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
procedures for engaging in portfolio transactions are the same for each Fund.
Subject to policies established by the Board of Directors of each Fund, FAM is
primarily responsible for the execution of each Fund&#146;s portfolio
transactions. In executing such transactions, FAM seeks to obtain the best
results for each Fund, taking into account such factors as price (including the
applicable brokerage commission or dealer spread), size of order, difficulty of
execution and operational facilities of the firm involved and the firm&#146;s
risk in positioning a block of securities. While FAM generally seeks reasonably
competitive commission rates, the Funds do not necessarily pay the lowest
commission or spread available.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of
the Funds has any obligation to deal with any broker or dealer in the execution
of transactions in portfolio securities. Subject to obtaining the best price and
execution, securities firms that provide supplemental investment research to
FAM, including Merrill Lynch, may receive orders for transactions by a Fund.
Information so received will be in addition to, and not in lieu of, the services
required to be performed by FAM under its investment advisory agreements with
the Funds, and the expenses of FAM will not necessarily be reduced as a result
of the receipt of such supplemental information.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
invests in securities that are primarily traded in the over-the-counter markets,
and each Fund normally deals directly with the dealers who make markets in the
securities involved, except in those circumstances where better prices and
execution are available elsewhere. Under the Investment Company Act, except as
permitted by exemptive order, persons affiliated with a Fund are prohibited from
dealing with the Fund as principals in the purchase and sale of securities.
Since transactions in the over-the-counter markets usually involve transactions
with dealers acting as principals for their own account, the Funds do not deal
with affiliated persons, including Merrill Lynch and its affiliates, in
connection with such transactions, except that, pursuant to an exemptive order
obtained by FAM, a Fund may engage in principal transactions with Merrill Lynch
in high quality, short-term, tax-exempt securities. An affiliated person of a
Fund may serve as its broker in over-the-counter transactions conducted on an
agency basis.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
also may purchase tax-exempt debt instruments in individually negotiated
transactions with the issuers of such securities. Because an active trading
market may not exist for such securities, the prices that a Fund may pay for
these securities or receive on their resale may be lower than that for similar
securities with a more liquid market.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board
of Directors of each Fund has considered the possibility of recapturing for the
benefit of the Funds brokerage commissions, dealer spreads and other expenses of
possible portfolio transactions, such as underwriting commissions, by conducting
portfolio transactions through affiliated entities, including Merrill Lynch. For
example, brokerage commissions received by Merrill Lynch could be offset against
the investment advisory fees paid by the Fund to FAM. After considering all
factors deemed relevant, the Directors of each Fund made a determination not to
seek such recapture. The Directors will reconsider this matter from time to
time.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Periodic
auctions are conducted for the AMPS of each Fund by the Auction Agent for the
Funds. The auctions require the participation of one or more broker-dealers,
each of whom enters into an agreement with the Auction Agent. After each
auction, the Auction Agent pays a service charge, from funds provided by the
issuing Fund, to each broker-dealer at the annual rate of .25%, calculated on
the basis of the purchase price of shares of the relevant AMPS placed by such
broker-dealer at such auction.</font></td></tr></TABLE><p></p>

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











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<A NAME="A018"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="33a"></a>Portfolio Turnover</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, none of the Funds
      purchases securities for short-term trading profits. However, any Fund may
      dispose of securities without regard to the time that they have been held
      when such action, for defensive or other reasons, appears advisable to FAM.
      (The portfolio turnover rate is calculated by dividing the lesser of purchases
      or sales of portfolio securities for the particular fiscal year by the monthly
      average of the value of the portfolio securities owned by a Fund during
      the particular fiscal year. For purposes of determining this rate, all securities
      whose maturities at the time of acquisition are one year or less are excluded.)
      A high portfolio turnover rate results in greater transaction costs, which
      are borne directly by a Fund, and also has certain tax consequences for
      stockholders. The portfolio turnover rate for each Fund for the periods
      indicated is set forth below:</font></td>
  </tr></TABLE><p></p>


<TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="bottom" align="center" WIDTH="126"><b><font size="1">Insured II </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="50">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="155"><b><font size="1">Period February
      26, 1999&#134;<br>
      to September 30, 1999 </font></b>
      <hr noshade size="1">
      <b><font size="1"> </font></b></TD>
    <TD VALIGN="TOP" WIDTH="51">&nbsp;</TD>
    <td valign="bottom" align="center" width="165"><b><font size="1">Period October
      1, 1999<br>
      to March 31, 2000<br>
      (Unaudited) </font></b>
      <hr noshade size="1">
      <b><font size="1"> </font></b></td>
    <TD VALIGN="bottom" align="center" WIDTH="51">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="126">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="50">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="155"><b><font size=2>159.29%</font></b></TD>
    <TD VALIGN="TOP" WIDTH="51">&nbsp;

    </TD>
    <TD VALIGN="TOP" WIDTH="165">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="51">&nbsp;</TD>
  </TR>
</TABLE>

<br>
<br>
&nbsp;
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="bottom" align="center" width="126"><b><font size="1">Insured III
      </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="50">&nbsp;</td>
    <td valign="bottom" align="center" width="155"> <b><font size="1"> </font></b></td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="bottom" align="center" width="165"><b><font size="1">Period May
      28, 1999&#134;<br>
      to March 31, 2000<br>
      Unaudited) </font> </b>
      <hr noshade size="1">
    </td>
    <td valign="bottom" align="center" width="51">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="126">&nbsp;</td>
    <td valign="TOP" width="50">&nbsp;</td>
    <td valign="bottom" align="center" width="155"><b></b></td>
    <td valign="TOP" width="51">&nbsp; </td>
    <td valign="TOP" width="165">&nbsp;</td>
    <td valign="TOP" width="51">&nbsp;</td>
  </tr>
</TABLE>
<br>
<br>
<br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="bottom" align="center" width="126"><b><font size="1">Insured IV
      </font></b>
      <hr noshade size="1">
    </td>
    <td valign="TOP" width="50">&nbsp;</td>
    <td valign="bottom" align="center" width="155"> <b><font size="1"> </font></b></td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="bottom" align="center" width="165"><b><font size="1">Period September
      24, 1999&#134;<br>
      to March 31, 2000<br>
      (Unaudited) </font> </b>
      <hr noshade size="1">
    </td>
    <td valign="bottom" align="center" width="51">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="126">&nbsp;</td>
    <td valign="TOP" width="50">&nbsp;</td>
    <td valign="bottom" align="center" width="155"><b></b></td>
    <td valign="TOP" width="51">&nbsp; </td>
    <td valign="TOP" width="165">&nbsp;</td>
    <td valign="TOP" width="51">&nbsp;</td>
  </tr>
</TABLE>


<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>
<table width=600><tr><td width=3% valign=top><font size="1">&#134;</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1"> Commencement
of operations</font></td></tr></TABLE>

<A NAME="A021"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="33b"></a>Net Asset Value</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net
asset value per share of Common Stock of each Fund is determined as of the close
of business on the NYSE (generally, 4:00 p.m., Eastern time) on the last
business day in each week. For purposes of determining the net asset value of a
share of Common Stock of each Fund, the value of the securities held by a Fund
plus any cash or other assets (including interest accrued but not yet received)
minus all liabilities (including accrued expenses) and the aggregate liquidation
value of the outstanding shares of AMPS is divided by the total number of shares
of Common Stock outstanding at such time. Expenses, including the fees payable
to FAM, are accrued daily.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Municipal Bonds in which each Fund invests are traded primarily in the
over-the-counter markets. In determining net asset value, each Fund uses the
valuations of portfolio securities furnished by a pricing service approved by
its Board of Directors. The pricing service typically values portfolio
securities at the bid price or the yield equivalent when quotations are readily
available. Municipal Bonds for which quotations are not readily available are
valued at fair market value on a consistent basis as determined by the pricing
service using a matrix system to determine valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of each Fund
under the general supervision of the Board of Directors of that Fund. The Board
of Directors of each Fund has determined in good faith that the use of a pricing
service is a fair method of determining the valuation of portfolio securities.
Positions in futures contracts are valued at closing prices for such contracts
established by the exchange on which they are traded, or if market quotations
are not readily available, are valued at fair value on a consistent basis using
methods determined in good faith by the Board of Directors of each Fund.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
determines and makes available for publication weekly the net asset value of its
Common Stock. Currently, the net asset values of shares of publicly traded
closed-end investment companies investing in debt securities are published in
<I>Barron&#146;s</I>, the Monday edition of <I>The Wall Street Journal</I>, and the Monday and
Saturday editions of <I>The New York Times</I>.</FONT></td></tr></TABLE><p></p>

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













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<A NAME="A022"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="34"></a>Capital Stock</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund has outstanding both
      Common Stock and AMPS. The Common Stock of Insured II and Insured III is
      traded on the NYSE. The Common Stock of Insured IV is traded on the AMEX.
      The shares of Insured II Common Stock commenced trading on the NYSE on March
      8, 1999. As of March 31, 2000, the net asset value per share of Insured
      II Common Stock was $12.54 and the market price per share was $10.5625.
      The shares of Insured III Common Stock commenced trading on the NYSE on
      June 7, 1999. As of March 31, 2000, the net asset value per share of Insured
      III Common Stock was $13.06 and the market price per share was $11.375.
      The shares of Insured IV Common Stock commenced trading on the AMEX in October,
      1999. As of March 31, 2000, the net asset value per share of Insured IV
      Common Stock was $15.15 and the market price per share was $12.75.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
is authorized to issue 200,000,000 shares of capital stock, all of which shares
initially were classified as Common Stock. The Board of Directors of each Fund
is authorized to classify or reclassify any unissued shares of capital stock by
setting or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption. In connection with each Fund&#146;s offering of shares
of AMPS, Insured II reclassified 4,200 shares of unissued capital stock as AMPS,
Insured III reclassified 2,714 shares of unissued capital stock as AMPS and
Insured IV reclassified 1,266 shares of unissued capital stock as AMPS.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
Stock</i></font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of each Fund&#146;s Common Stock are entitled to share equally in dividends
declared by a Fund&#146;s Board of Directors payable to holders of the Common
Stock and in the net assets of a Fund available for distribution to holders of
the Common Stock after payment of the preferential amounts payable to holders of
any outstanding preferred stock. See &#147;Voting Rights&#148; and
&#147;Liquidation Rights of Holders of AMPS&#148; below. Holders of a
Fund&#146;s Common Stock do not have preemptive or conversion rights and shares
of a Fund&#146;s Common Stock are not redeemable. The outstanding shares of
Common Stock of each Fund are fully paid and nonassessable.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So long
as any shares of a Fund&#146;s AMPS or any other preferred stock are
outstanding, holders of that Fund&#146;s Common Stock will not be entitled to
receive any dividends of or other distributions from that Fund unless all
accumulated dividends on outstanding shares of that Fund&#146;s AMPS and any
other preferred stock have been paid, and unless asset coverage (as defined in
the Investment Company Act) with respect to such AMPS and any other preferred
stock would be at least 200% after giving effect to such distributions.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred
Stock</i></font></td></tr></TABLE></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The AMPS of each Fund have
      a similar structure. The AMPS of a Fund are shares of preferred stock of
      that Fund that entitle their holders to receive dividends when, as and if
      declared by the Board of Directors, out of funds legally available therefor,
      at a rate per annum that may vary for the successive dividend periods. The
      AMPS of each Fund have a liquidation preference of $25,000 per share; the
      AMPS of the Funds are not traded on any stock exchange or over-the-counter.
      Each Fund&#146;s AMPS can be purchased at an auction.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Auctions
generally have been held and will be held every seven days for the AMPS of each
Fund, unless the applicable Fund elects, subject to certain limitations, to
declare a special dividend period. The following table provides information
about the dividend rates for each series of AMPS of each Fund as of a recent
auction date.</font></td></tr></TABLE><p></p>

<TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=600 border="0">
  <TR>
    <TD VALIGN="TOP" WIDTH="85" align="center">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="85" align="center"><font size=1><b>Auction Date </b></font>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="83">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="79" align="center"><font size=1><b>Fund </b></font>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="75">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="66" align="center"><font size=1><b>Series </b></font>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="45">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="2" align="center"><font size=1><b>Dividend Rate
      </b></font>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="106">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="85">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="85">
      <P><font size="2">April 6, 2000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="83">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="79" align="center">
      <P><font size="2">Insured II</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="75">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="66" align="center">
      <P><font size="2">A</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="45">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="37">
      <P><font size="2">3.95</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="22">
      <P><font size="2">%</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="106">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="85">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="85">
      <P><font size="2">April 5, 2000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="83">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="79" align="center">
      <P><font size="2">Insured II</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="75">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="66" align="center">
      <P><font size="2">B</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="45">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="37">
      <P><font size="2">3.80</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="22">
      <P><font size="2">%</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="106">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="85">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="85">
      <P><font size="2">April 4, 2000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="83">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="79" align="center">
      <P><font size="2">Insured III</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="75">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="66" align="center">
      <P><font size="2">A</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="45">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="37">
      <P><font size="2">3.85</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="22">
      <P><font size="2">%</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="106">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="85">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="85">
      <P><font size="2">April 5, 2000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="83">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="79" align="center">
      <P><font size="2">Insured IV</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="75">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="66" align="center">
      <P><font size="2">A</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="45">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="37">
      <P><font size="2">3.50</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="22">
      <P><font size="2">%</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="106">&nbsp;</TD>
  </TR>
</TABLE>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the
Investment Company Act, each Fund is permitted to have outstanding more than one
series of preferred stock as long as no single series has priority over another
series as to the distribution of assets of the Fund or the payment of dividends.
Holders of a Fund&#146;s preferred stock do not have preemptive rights to
purchase any shares of AMPS or any other preferred stock that might be issued.
The net asset value per share of a Fund&#146;s AMPS equals its liquidation
preference plus accumulated dividends per share.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
redemption provisions pertaining to the AMPS of each Fund are substantially
similar. It is anticipated that shares of AMPS of each Fund will generally be
redeemable at the option of the Fund at a price equal to their liquidation
preference of $25,000 plus accumulated but unpaid dividends (whether or not
earned or declared) to the date of redemption plus, under certain circumstances,
a redemption premium. Shares of AMPS will also be subject to mandatory
redemption at a price equal to their liquidation preference plus accumulated but
unpaid dividends to the date of redemption upon the occurrence of certain
specified events, such as the failure of the Fund to maintain the asset coverage
for the AMPS specified by Moody&#146;s and S&amp;P in connection with their
issuance of ratings on the AMPS.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
Provisions of the Charter</i></font></td></tr></TABLE></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund&#146;s Charter includes
      provisions that could have the effect of limiting the ability of other entities
      or persons to acquire control of a Fund or to change the composition of
      its Board of Directors and could have the effect of depriving stockholders
      of an opportunity to sell their shares at a premium over prevailing market
      prices by discouraging a third party from seeking to obtain control of the
      Fund. A Director may be removed from office with or without cause by vote
      of the holders of at least 66<font size=1><sup>2</sup>/3</font>% of the
      votes entitled to be voted on the matter. A Director elected by all of the
      holders of capital stock may be removed only by action of such holders,
      and a Director elected by the holders of AMPS and any other preferred stock
      may be removed only by action of the holders of AMPS and any other preferred
      stock.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Charter of each Fund requires the favorable vote of the holders of
at least 66 K% of all of a Fund&#146;s shares of capital stock, then entitled to
be voted, voting as a single class, to approve, adopt or authorize the
following:</font></td></tr></TABLE><p></p>

<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>a
merger or consolidation or statutory share exchange of the Fund with any other
corporation or entity,</font></td></tr></TABLE>

<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>a
sale of all or substantially all of the Fund&#146;s assets (other than in the
regular course of the Fund&#146;s investment activities), or</font></td></tr></TABLE>

<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>a
liquidation or dissolution of the Fund,</font></td></tr></TABLE>

<p><table width=600><tr><td><font size=2>unless such action has been approved,
adopted or authorized by the affirmative vote of at least two-thirds of the
total number of Directors fixed in accordance with the by-laws, in which case
the affirmative vote of a majority of all of the votes entitled to be cast by
stockholders of the Fund, voting as a single class, is required. Such approval,
adoption or authorization of the foregoing also would require the favorable
vote of at least a majority of the Fund&#146;s shares of preferred stock then
entitled to be voted thereon, including the AMPS, voting as a separate class.</font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, conversion of a Fund to an open-end investment company would require
an amendment to that Fund&#146;s Charter. The amendment would have to be
declared advisable by the Board of Directors prior to its submission to
stockholders. Such an amendment would require the affirmative vote of the
holders of at least 66<font size=1><sup>2</sup>/3</font>% of a Fund&#146;s outstanding shares of capital stock
(including the AMPS and any other preferred stock) entitled to be voted on the
matter, voting as a single class (or a majority of such shares if the amendment
was previously approved, adopted or authorized by at least two-thirds of the
total number of Directors fixed in accordance with the by-laws), and the
affirmative vote of at least a majority of outstanding shares of preferred stock
of that Fund (including the AMPS), voting as a separate class. Such a vote also
would satisfy a separate requirement in the Investment Company Act that the
change be approved by the stockholders. Stockholders of an open-end investment
company may require the company to redeem their shares of common stock at any
time (except in certain circumstances as authorized by or under the Investment
Company Act) at their net asset value, less such redemption charge, if any, as
might be in effect at the time of a redemption. All redemptions will be made in
cash. If the Fund is converted to an open-end investment company, it could be
required to liquidate portfolio securities to meet requests for redemption and
the Common Stock no longer would be listed on a stock exchange. Conversion to an
open-end investment company would also require redemption of all outstanding
shares of preferred stock (including the AMPS) and would require changes in
certain of a Fund&#146;s investment policies and restrictions, such as those
relating to the issuance of senior securities, the borrowing of money and the
purchase of illiquid securities.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board
of Directors of each Fund has determined that the 66<font size=1><sup>2</sup>/3</font>% voting requirements
described above, which are greater than the minimum requirements under Maryland
law or the Investment Company Act, are in the best interests of stockholders
generally. Reference should be made to the Charter of each Fund on file with the
SEC for the full text of these provisions.</font></td></tr></TABLE><p></p>

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













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<A NAME="A024"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="36"></a>Management of the Funds</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Directors
and Officers.</I> The Board of Directors of Insured II and Insured III currently
consists of the same seven persons, five of whom are not &#147;interested
persons,&#148; as defined in the Investment Company Act, of Insured II and
Insured III. The Board of Directors of Insured IV currently consists of seven
persons, five of whom are not &#147;interested persons,&#148; as defined in the
Investment Company Act, of Insured IV. Terry K. Glenn serves as a Director and
President of each Fund, and Arthur Zeikel serves as a Director of each Fund. The
Directors of each Fund are responsible for the overall supervision of the
operations of the Fund and perform the various duties imposed on the directors
of investment companies by the Investment Company Act and under applicable
Maryland law. The Funds have the same slate of officers with a few exceptions.
For further information regarding the Directors and officers of each Fund,
Appendix I &#151; &#147;Information Pertaining to Each Fund.&#148;</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The portfolio of Insured II
      is managed by Robert A. DiMella. The portfolio of Insured III is managed
      by William R. Bock and Mr. DiMella. The portfolio of Insured IV is managed
      by Fred K. Steube and Mr. DiMella. After the Reorganization, the portfolio
      of the Combined Fund will be managed by Mr. DiMella. The portfolio managers
      are primarily responsible for the management of the applicable Fund&#146;s
      portfolio. Biographical information about Messrs. DiMella, Bock and Steube
      is contained in Appendix I to this Proxy Statement and Prospectus.</font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Management
and Advisory Arrangements</I>. FAM, which is owned and controlled by ML &amp; Co.,
serves as the investment adviser for each Fund pursuant to separate investment
advisory agreements that, except for their termination dates, are identical. FAM
provides each Fund with the same investment advisory and management services.
The Asset Management Group of ML &amp; Co. (which includes FAM) acts as the
investment adviser to more than 100 registered investment companies and offers
services to individuals and institutional accounts. As of April 2000, the Asset
Management Group of ML&amp; Co. had a total of approximately $___ billion in
investment company and other portfolio assets under management (approximately
$___ billion of which were invested in municipal securities). This amount
includes assets managed for certain affiliates of FAM. FAM is a limited
partnership, the partners of which are ML &amp; Co. and Princeton Services, Inc.
FAM was organized as an investment adviser in 1977 and offers investment
advisory services to more than 50 registered investment companies. The principal
business address of FAM is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Fund&#146;s investment advisory agreement with FAM provides that, subject to the
supervision of the Board of Directors of the Fund, FAM is responsible for the
actual management of the Fund&#146;s portfolio. The responsibility for making
decisions to buy, sell or hold a particular security for each Fund rests with
FAM, subject to review by the Board of Directors of that Fund.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FAM
provides the portfolio management for each Fund. Such portfolio management
considers analyses from various sources (including brokerage firms with which
each Fund does business), makes the necessary investment decisions, and places
orders for transactions accordingly. FAM also is responsible for the performance
of certain administrative and management services for each Fund.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the
services provided by FAM under each Fund&#146;s investment advisory agreement,
each Fund pays a monthly fee at an annual rate of 0.55% of its average weekly
net assets (<i>i.e.</i>, the average weekly value of the total assets of a Fund,
including assets acquired from the sale of preferred stock, minus the sum of
accrued liabilities of the Fund and accumulated dividends on its shares of
preferred stock). For purposes of this calculation, average weekly net assets
are determined at the end of each month on the basis of the average net assets
of the Fund for each week during the month. The assets for each weekly period
are determined by averaging the net assets at the last business day of a week
with the net assets at the last business day of the prior week. After the
Reorganization, the Combined Fund would pay FAM a monthly fee at the annual rate
of 0.55% of its average weekly net assets as described above. Since the
commencement of operations of each Fund, FAM has waived a portion of its
advisory fee and reimbursed certain other expenses with respect to each Fund.
The above described fee waivers and expense reimbursements are voluntary and may
be reduced or discontinued by FAM at any time without notice to stockholders.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund&#146;s investment
      advisory agreement obligates FAM to provide investment advisory services
      and to pay all compensation of and furnish office space for officers and
      employees of a Fund connected with investment and economic research, trading
      and investment management of a Fund, as well as the compensation of all
      Directors of a Fund who are affiliated persons of FAM or any of its affiliates.
      Each Fund pays all other expenses incurred in the operation of the Fund,
      including, among other things, expenses for legal and auditing services,</font></td>
  </tr></TABLE></p>

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













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<p><table width=600><tr>
    <td><font size=2> taxes, costs of printing proxies, listing fees, stock certificates
      and stockholder reports, charges of the custodian and the transfer agent,
      dividend disbursing agent and registrar, fees and expenses with respect
      to the issuance of AMPS, SEC fees, fees and expenses of unaffiliated Directors,
      accounting and pricing costs, insurance, interest, brokerage costs, litigation
      and other extraordinary or non-recurring expenses, mailing and other expenses
      properly payable by the Fund. FAM provides accounting services to each Fund,
      and each Fund reimburses FAM for its respective costs in connection with
      such services.</font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
earlier terminated as described below, the investment advisory agreement between
each Fund and FAM will continue from year to year if approved annually (a) by
the Board of Directors of a Fund or by a majority of the outstanding shares of a
Fund&#146;s Common Stock and AMPS, voting together as a single class, and (b) by
a majority of the Directors of a Fund who are not parties to such contract or
&#147;interested persons,&#148; as defined in the Investment Company Act, of any
such party. The contract is not assignable and it may be terminated without
penalty on 60 days&#146; written notice at the option of either party thereto or
by the vote of the stockholders of the Fund.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities
held by a Fund may also be held by, or be appropriate investments for, other
funds or investment advisory clients for which FAM or its affiliates act as an
adviser. Because of different objectives or other factors, a particular security
may be bought for an advisory client when other clients are selling the same
security. If purchases or sales of securities by FAM for a Fund or other funds
for which it acts as investment adviser or for advisory clients arise for
consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the respective funds and clients in a manner
deemed equitable to all. Transactions effected by FAM (or its affiliates) on
behalf of more than one of its clients during the same period may increase the
demand for securities being purchased or the supply of securities being sold,
causing an adverse effect on price.</font></td></tr></TABLE><p></p>

<A NAME="A025"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="37a"></a>Code of Ethics</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors of each
      Fund has approved a Code of Ethics under Rule 17j-l of the Investment Company
      Act that covers each Fund and FAM (collectively, the &#147;Codes&#148;).
      The Codes significantly restrict the personal investing activities of all
      employees of FAM and, as described below, impose additional, more onerous,
      restrictions on Fund investment personnel.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Codes require that all
      employees of FAM preclear any personal securities investments (with limited
      exceptions, such as mutual funds, high-quality short-term securities and
      direct obligations of the U.S. government). The preclearance requirement
      and associated procedures are designed to identify any substantive prohibition
      or limitation applicable to the proposed investment. The substantive restrictions
      applicable to all employees of FAM include a ban on acquiring any securities
      in a &#147;hot&#148; initial public offering and a prohibition from profiting
      on short-term trading in securities. In addition, no employee may purchase
      or sell any security that, at the time is being purchased or sold (as the
      case may be), or to the knowledge of the employee is being considered for
      purchase or sale, by any fund advised by FAM. Furthermore, the Codes provide
      for trading &#147;blackout periods,&#148; which prohibit trading by investment
      personnel of each Fund within seven calendar days before or after trading
      by a Fund in the same or equivalent security.</font></td>
  </tr></TABLE><p></p>

<A NAME="A026"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="37b"></a>Voting Rights</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting
rights are identical for the holders of shares of each Fund&#146;s Common Stock.
Holders of each Fund&#146;s Common Stock are entitled to one vote for each share
held and will vote with the holders of any outstanding shares of the Fund&#146;s
AMPS or other preferred stock on each matter submitted to a vote of holders of
Common Stock, except as set forth below.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting
rights of the holders of each Fund&#146;s AMPS are identical. Except as
otherwise indicated below, and except as otherwise required by applicable law,
holders of shares of a Fund&#146;s AMPS will be entitled to one vote per share
on each matter submitted to a vote of a Fund&#146;s stockholders and will vote
together with the holders of shares of a Fund&#146;s Common Stock as a single
class.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
shares of each Fund&#146;s Common Stock, AMPS and any other preferred stock do
not have cumulative voting rights, which means that the holders of more than 50%
of the shares of a Fund&#146;s Common Stock, AMPS and any other preferred stock
voting for the election of Directors can elect all of the Directors standing for
election by such holders, and, in such event, the holders of the remaining
shares of a Fund&#146;s Common Stock, AMPS and any other preferred stock will
not be able to elect any of such Directors.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the election of a Fund&#146;s Directors, holders of shares of a
Fund&#146;s AMPS, voting separately as a class, shall be entitled at all times
to elect two of that Fund&#146;s Directors, and the remaining Directors will be
elected by holders of shares of that Fund&#146;s Common Stock and shares of that
Fund&#146;s AMPS and any other preferred stock, voting together as a single
class. In addition, if at any time dividends on outstanding shares of a
Fund&#146;s AMPS shall be unpaid in an amount equal to at least two full
years&#146; dividends thereon or if at any time holders of any shares of a
Fund&#146;s preferred stock are entitled, together with the holders of shares of
that Fund&#146;s AMPS, to elect a majority of the Directors of that Fund under
the Investment Company Act, then the number of Directors constituting the Board
of Directors automatically shall be increased by the smallest number that, when
added to the two Directors elected exclusively by the holders of shares of AMPS
and any other preferred stock as described above, would constitute a majority of
the Board of Directors as so increased by such smallest number, and at a special
meeting of stockholders which will be called and held as soon as practicable,
and at all subsequent meetings at which Directors are to be elected, the holders
of shares of that Fund&#146;s AMPS and any other preferred stock, voting
separately as a class, will be entitled to elect the smallest number of
additional Directors that, together with the two Directors which such holders in
any event will be entitled to elect, constitutes a majority of the total number
of Directors of the Fund as so increased. The terms of office of the persons who
are Directors at the time of that election will continue. If a Fund thereafter
shall pay, or declare and set apart for payment in full, all dividends payable
on all outstanding shares of AMPS and any other preferred stock for all past
dividend periods, the additional voting rights of the holders of shares of AMPS
and any other preferred stock as described above shall cease, and the terms of
office of all of the additional Directors elected by the holders of shares of
AMPS and any other preferred stock (but not of the Directors with respect to
whose election the holders of shares of Common Stock were entitled to vote or
the two Directors the holders of shares of AMPS and any other preferred stock
have the right to elect in any event) will terminate automatically.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
affirmative vote of the holders of a majority of the outstanding shares of a
Fund&#146;s AMPS, voting as a separate class, will be required to (i) authorize,
create or issue any class or series of stock ranking prior to any series of
preferred stock with respect to payment of dividends or the distribution of
assets on liquidation, (ii) amend, alter or repeal the provisions of the
Charter, whether by merger, consolidation or otherwise, so as to adversely
affect any of the contract rights expressly set forth in the Charter of holders
of preferred stock, (iii) approve any plan of reorganization adversely affecting
such AMPS or (iv) take any action to change a Fund&#146;s investment policies
requiring a vote of stockholders under Section 13(a) of the Investment Company
Act.</font></td></tr></TABLE><p></p>

<A NAME="A027"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="38a"></a>Stockholder Inquiries</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholder
inquiries with respect to any Fund may be addressed to such Fund by telephone at
(609) 282-2800 or at the address set forth on the cover page of this Proxy
Statement and Prospectus.</font></td></tr></TABLE><p></p>

<A NAME="A028"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="38b"></a>Dividends and Distributions</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Funds&#146; current policies with respect to dividends and distributions
relating to shares of their Common Stock are identical. Each Fund intends to
distribute all or a portion of its net investment income monthly to holders of a
Fund&#146;s Common Stock. Monthly distributions to holders of a Fund&#146;s
Common Stock normally consist of all or a portion of its net investment income
remaining after the payment of dividends (and any Additional Distribution) on
the Fund&#146;s AMPS. A Fund may at times pay out less than the entire amount of
net investment income earned in any particular period and may at times pay out
such accumulated undistributed income in addition to net investment income
earned in other periods in order to permit it to maintain a more stable level of
dividends to holders of Common Stock. As a result, the dividend paid by a Fund
to holders of its Common Stock for any particular period may be more or less
than the amount of net investment income earned by that Fund during such period.
For Federal tax purposes, a Fund is required to distribute substantially all of
its net investment income for each year. All net realized long-term or
short-term capital gains, if any, are distributed pro rata at least annually to
holders of shares of a Fund&#146;s Common Stock and AMPS. While any shares of a
Fund&#146;s AMPS are outstanding, that Fund may not declare any cash dividend or
other distribution on its Common Stock, unless at the time of such declaration
(1) all accumulated dividends on its AMPS, including any Additional
Distribution, have been paid, and (2) the net asset value of its portfolio
(determined after deducting the amount of such dividend or other distribution)
is at least 200% of the liquidation value of the outstanding shares of AMPS. If
a Fund&#146;s ability to make distributions on its Common Stock is limited, such
limitation could under certain circumstances impair the ability of the Fund to
maintain its qualification for taxation as a regulated investment company, which
would have adverse tax consequences for holders of Common Stock. See
&#147;Comparison of the Funds &#151; Tax Rules Applicable to the Funds and Their
Stockholders.&#148;</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Similarly,
the Funds&#146; current policies with respect to dividends and distributions on
shares of their AMPS are identical. The holders of shares of a Fund&#146;s AMPS
are entitled to receive, when, as and if declared by the Fund&#146;s Board of
Directors, out of funds legally available therefor, cumulative cash dividends on
their shares. Dividends on a Fund&#146;s shares of AMPS so declared and payable
shall be paid (i) in preference to and in priority over any dividends so
declared and payable on that Fund&#146;s Common Stock, and (ii) to the extent
permitted under the Code and to the extent available, out of net tax-exempt
income earned on the Fund&#146;s investments. Dividends for each Fund&#146;s
AMPS are paid through The Depository Trust Company (&#147;DTC&#148;) (or a
successor securities depository) on each dividend payment date. DTC&#146;s
normal procedures now provide for it to distribute dividends in same-day funds
to agent members, who in turn are expected to distribute such dividends to the
person for whom they are acting as agent in accordance with the instructions of
such person. Prior to each dividend payment date, the relevant Fund is required
to deposit with the Auction Agent sufficient funds for the payment of such
declared dividends. None of the Funds intends to establish any reserves for the
payment of dividends, and no interest will be payable in respect of any dividend
payment or payment on the shares of a Fund&#146;s AMPS which may be in arrears.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
paid by each Fund, to the extent paid from tax-exempt income earned on Municipal
Bonds, are exempt from Federal income tax, subject to the possible application
of a Federal alternative minimum tax. However, each Fund is required to allocate
net capital gains and other income subject to regular Federal income tax, if
any, proportionately between shares of its Common Stock and shares of its AMPS
in accordance with the current position of the IRS described herein. See
&#147;Tax Rules Applicable to the Funds and Their Stockholders&#148; below. Each
Fund notifies the Auction Agent of the amount of any net capital gains or other
taxable income to be included in any dividend on shares of AMPS prior to the
auction establishing the applicable rate for such dividend. The Auction Agent in
turn notifies each broker-dealer whenever it receives any such notice from a
Fund, and each broker-dealer then notifies its customers who are holders of the
Fund&#146;s AMPS. Each Fund also may include such income in a dividend on shares
of its AMPS without giving advance notice thereof if it increases the dividend
by an additional amount to offset the tax effect thereof. The amount of taxable
income allocable to shares of a Fund&#146;s AMPS will depend upon the amount of
such income realized by the Fund and other factors, but generally is not
expected to be significant.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
information concerning the manner in which dividends and distributions to
holders of each Fund&#146;s Common Stock may be reinvested automatically in
shares of a Fund&#146;s Common Stock, see &#147;Automatic Dividend Reinvestment
Plan&#148; below. Dividends and distributions will be subject to the tax
treatment discussed below, whether they are reinvested in shares of a Fund or
received in cash.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a Fund
retroactively allocates any net capital gains or other income subject to regular
Federal income tax to shares of its AMPS without having given advance notice
thereof as described above, which only may happen when such allocation is made
as a result of the redemption of all or a portion of the outstanding shares of
its AMPS or the liquidation of the Fund, such Fund will make certain payments to
holders of shares of its AMPS to which such allocation was made to offset
substantially the tax effect thereof. In no other instances will a Fund be
required to make payments to holders of shares of its AMPS to offset the tax
effect of any reallocation of net capital gains or other taxable income.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2><B><a name="39"></a>Automatic Dividend Reinvestment Plan</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to each Fund&#146;s Automatic Dividend Reinvestment Plan (each, a
&#147;Plan&#148;), unless a holder of a Fund&#146;s Common Stock is ineligible
or otherwise elects, all dividend and capital gains distributions are
automatically reinvested by either State Street, as agent for Insured II
stockholders in administering the Plan, or BONY, as agent for stockholders of
Insured III and Insured IV in administering the Plan (each, a &#147;Plan
Agent&#148;), in additional shares of the applicable Fund&#146;s Common Stock.
State Street will be the Plan Agent for the Combined Fund after the
Reorganization. Stockholders whose shares are held in the name of a broker or
nominee should contact such broker or nominee to confirm that they are eligible
to participate in a Fund&#146;s dividend reinvestment plan. Holders of a
Fund&#146;s Common Stock who are ineligible or elect not to participate in a
Plan receive all distributions in cash paid by check mailed directly to the
stockholder of record (or, if the shares are held in street or other nominee
name, then to such nominee) by BONY or State Street, as applicable, as dividend
paying agent. Such stockholders may elect not to participate in a Plan and to
receive all distributions of dividends and capital gains in cash by sending
written instructions to BONY or State Street, as applicable, as dividend paying
agent, at the addresses set forth below. Participation in each Plan is
completely voluntary and may be terminated or resumed at any time without
penalty by written notice if received by the applicable Plan Agent not less than
ten days prior to any dividend record date; otherwise, such termination or
resumption will be effective with respect to any subsequently declared dividend
or capital gains distribution.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whenever
a Fund declares an ordinary income dividend or a capital gain dividend
(collectively referred to as &#147;dividends&#148;) payable either in shares or
in cash, non-participants in a Plan receive cash, and participants in the Plan
receive the equivalent in shares of the Fund&#146;s Common Stock. The shares are
acquired by the applicable Plan Agent for the participant&#146;s account,
depending upon the circumstances described below, either (i) through receipt of
additional unissued but authorized shares of a Fund&#146;s Common Stock from
that Fund (&#147;newly-issued shares&#148;) or (ii) by purchase of outstanding
shares of a Fund&#146;s Common Stock on the open market (&#147;open-market
purchases&#148;), on the NYSE (Insured II and Insured III), AMEX (Insured IV) or
elsewhere. If on the payment date for the dividend, the net asset value per
share of a Fund&#146;s Common Stock is equal to or less than the market price
per share of that Fund&#146;s Common Stock plus estimated brokerage commissions
(such condition being referred to herein as &#147;market premium&#148;), the
applicable Plan Agent invests the dividend amount in newly-issued shares on
behalf of the participant. The number of newly-issued shares of a Fund&#146;s
Common Stock to be credited to the participant&#146;s account is determined by
dividing the dollar amount of the dividend by the net asset value per share on
the date the shares are issued, provided that the maximum discount from the
then-current market price per share on the date of issuance may not exceed 5%.
If on the dividend payment date, the net asset value per share is greater than
the market value (such condition being referred to herein as &#147;market
discount&#148;), the applicable Plan Agent invests the dividend amount in shares
acquired on behalf of the participant in open-market purchases.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the
event of a market discount on the dividend payment date, the applicable Plan
Agent has until the last business day before the next date on which the shares
trade on an &#147;ex-dividend&#148; basis or in no event more than 30 days after
the dividend payment date (the &#147;last purchase date&#148;) to invest the
dividend amount in shares acquired in open-market purchases. Each Fund intends
to pay monthly income dividends. Therefore, the period during which open-market
purchases can be made exists only from the payment date on the dividend through
the date before the next &#147;ex-dividend&#148; date, which typically is
approximately ten days. If, before the applicable Plan Agent has completed its
open-market purchases, the market price of a share of a Fund&#146;s Common Stock
exceeds the net asset value per share, the average per share purchase price paid
by the applicable Plan Agent may exceed the net asset value of that Fund&#146;s
shares, resulting in the acquisition of fewer shares than if the dividend had
been paid in newly-issued shares on the dividend payment date. Because of the
foregoing difficulty with respect to open-market purchases, each Plan provides
that if the applicable Plan Agent is unable to invest the full dividend amount
in open-market purchases during the purchase period or if the market discount
shifts to a market premium during the purchase period, the applicable Plan Agent
ceases making open-market purchases and invests the uninvested portion of the
dividend amount in newly-issued shares at the close of business on the last
purchase date.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
applicable Plan Agent maintains all stockholders&#146; accounts in a Plan and
furnishes written confirmation of all transactions in the account, including
information needed by stockholders for tax records. Shares in the account of
each Plan participant are held by the applicable Plan Agent in non-certificated
form in the name of the participant, and each stockholder&#146;s proxy includes
those shares purchased or received pursuant to a Plan. The applicable Plan Agent
will forward all proxy solicitation materials to participants and vote proxies
for shares held pursuant to a Plan in accordance with the instructions of the
participants.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the
case of stockholders such as banks, brokers or nominees which hold shares for
others who are the beneficial owners, the applicable Plan Agent will administer
a Plan on the basis of the number of shares certified from time to time by the
record stockholders as representing the total amount registered in the record
stockholder&#146;s name and held for the account of beneficial owners who are to
participate in that Plan.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are
no brokerage charges with respect to shares issued directly by any Fund as a
result of dividends or capital gains distributions payable either in shares or
in cash. However, each participant pays a pro rata share of brokerage
commissions incurred with respect to the applicable Plan Agent&#146;s
open-market purchases in connection with the reinvestment of dividends.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
automatic reinvestment of dividends and distributions does not relieve
participants of any Federal, state or local income tax that may be payable (or
required to be withheld) on such dividends. See &#147;Comparison of the Funds
&#151; Tax Rules Applicable to the Funds and Their Stockholders.&#148;</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders
participating in a Plan may receive benefits not available to stockholders not
participating in that Plan. If the market price (plus commissions) of a Fund&#146;s
shares of Common Stock is higher than the net asset value of such shares,
participants in a Plan receive shares of the Fund&#146;s Common Stock at less
than they otherwise could purchase them and have shares with a cash value
greater than the value of any cash distribution they would have received on
their shares. If the market price plus commissions is lower than the net asset
value of such </font></td></tr></TABLE></p>

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













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<p><table width=600><tr><td><font size=2>shares, participants receive
distributions of shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions of shares
at prices below the net asset value. Also, since the Funds normally do not
redeem their shares, the price on resale may be more or less than the net asset
value. See &#147;Comparison of the Funds &#151; Tax Rules Applicable to the
Funds and Their Stockholders&#148; for a discussion of the tax consequences of
each Plan.</font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
reserves the right to amend or terminate its Plan. There is no direct service
charge to participants in a Plan; however, each Fund reserves the right to amend
its Plan to include a service charge payable by the participants.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the Reorganization, a
      holder of shares of an Acquired Fund who has elected to receive dividends
      in cash will continue to receive dividends in cash; all other holders will
      have their dividends automatically reinvested in shares of the Combined
      Fund. However, if a stockholder owns shares in an Acquired Fund and in Insured
      II, after the Reorganization, the stockholder&#146;s election with respect
      to the dividends of Insured II will control unless the stockholder specifically
      elects a different option at that time. The principal business address for
      BONY in its capacity as Plan Agent for each Acquired Fund is 101 Barclay
      Street, New York, New York 10286. Following the Reorganization, all correspondence
      should be directed to the Plan Agent for Insured II as follows: State Street
      Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110.</font></td>
  </tr></TABLE><p></p>

<A NAME="A029"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="41a"></a>Mutual Fund Investment Option</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A holder
of Common Stock of any Fund, who purchased his or her shares through Merrill
Lynch in a Fund&#146;s initial public offering, has the right to reinvest the
net proceeds from a sale of such shares in Class D shares of certain Merrill
Lynch-sponsored open-end funds without the imposition of an initial sales
charge, if certain conditions are satisfied. A holder of Common Stock of an
Acquired Fund who qualifies for this option will have the same option with
respect to the shares of Insured II Common Stock received in the Reorganization.</font></td></tr></TABLE><p></p>

<A NAME="A030"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="41b"></a>Liquidation Rights of Holders of AMPS</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon any
liquidation, dissolution or winding up of any Fund, whether voluntary or
involuntary, the holders of shares of that Fund&#146;s AMPS will be entitled to
receive, out of the assets of the Fund available for distribution to
stockholders, before any distribution or payment is made upon any shares of that
Fund&#146;s Common Stock or any other capital stock of the Fund ranking junior
in right of payment upon liquidation to AMPS, $25,000 per share together with
the amount of any dividends accumulated but unpaid (whether or not earned or
declared) thereon to the date of distribution, and after such payment the
holders of AMPS will be entitled to no other payments except for any additional
dividends. If such assets of a Fund shall be insufficient to make the full
liquidation payment on the AMPS and liquidation payments on any other
outstanding class or series of preferred stock of the Fund ranking on a parity
with the AMPS as to payment upon liquidation, then such assets will be
distributed among the holders of shares of AMPS and the holders of shares of
such other class or series ratably in proportion to the respective preferential
amounts to which they are entitled. After payment of the full amount of
liquidation distribution to which they are entitled, the holders of shares of a
Fund&#146;s AMPS will not be entitled to any further participation in any
distribution of assets by that Fund except for any additional dividends. A
consolidation, merger or share exchange of a Fund with or into any other entity
or entities or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all or any part of the assets of that Fund
shall not be deemed or construed to be a liquidation, dissolution or winding up
of that Fund for this purpose.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2><B><a name="41c"></a>Tax Rules Applicable to the Funds and
      Their Stockholders</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tax
consequences of investing in shares of Common Stock or AMPS of each Fund are
identical. The Funds have elected and qualified for the special tax treatment
afforded RICs under the Code. As a result, in any taxable year in which they
distribute an amount equal to at least 90% of taxable net income and 90% of
tax-exempt net income (see below), the Funds (but not their stockholders) are
not subject to Federal income tax to the extent that they distribute their net
investment income and net realized capital gains. In all taxable years through
the taxable year of the Reorganization, each Fund has distributed substantially
all of its income. Insured II intends to continue to distribute substantially
all of its income following the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Fund is qualified to pay &#147;exempt-interest dividends&#148; as defined in
Section 852(b)(5) of the Code. Under such section, if, at the close of each
quarter of its taxable year, at least 50% of the value of a Fund&#146;s total
assets consists of obligations exempt from Federal income tax (&#147;tax-exempt
obligations&#148;) under Section 103(a) </font></td></tr></TABLE></p>

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









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<p><table width=600><tr><td><font size=2>of the Code (relating generally to
obligations of a state or local governmental unit), that Fund is qualified to
pay exempt-interest dividends to its stockholders. Exempt-interest dividends
are dividends or any part thereof paid by a Fund which are attributable to
interest on tax-exempt obligations and designated by a Fund as exempt-interest
dividends in a written notice mailed to stockholders within 60 days after the
close of its taxable year. To the extent that the dividends distributed to a
Fund&#146;s stockholders are derived from interest income exempt from Federal
income tax under Code Section 103(a) and are properly designated as
exempt-interest dividends, they are excludable from a stockholder&#146;s gross
income for Federal income tax purposes. Exempt-interest dividends are included,
however, in determining the portion, if any, of a person&#146;s social security
benefits and railroad retirement benefits subject to Federal income taxes. A
tax adviser should be consulted with respect to whether exempt-interest
dividends retain the exclusion under Code Section 103(a) if a stockholder would
be treated as a &#147;substantial user&#148; or &#147;related person&#148; under
Code Section 147(a) with respect to property financed with the proceeds from an
issue of IDBs or PABs, if any, held by a Fund.</font></td></tr></TABLE></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The IRS, in a revenue ruling,
      held that certain AMPS would be treated as stock for Federal income tax
      purposes. The terms of the currently outstanding AMPS of each Fund, as well
      as the Insured II Series C AMPS to be issued by Insured II, are substantially
      similar, but not identical, to the AMPS discussed in the revenue ruling.
      In the opinion of Brown &amp; Wood <font size="1">LLP</font>, counsel to
      all three Funds, the shares of each Fund&#146;s currently outstanding AMPS,
      as well as the Insured II Series C AMPS to be issued by Insured II, constitute
      stock, and distributions with respect to shares of such AMPS (other than
      distributions in redemption of shares of AMPS subject to Section 302(b)
      of the Code) will constitute dividends to the extent of current and accumulated
      earnings and profits as calculated for Federal income tax purposes. Nevertheless,
      the IRS could take a contrary position, asserting, for example, that the
      shares of AMPS constitute debt. If this position were upheld, the discussion
      of the treatment of distributions below would not apply to holders of shares
      of AMPS. Instead, distributions by each Fund to holders of shares of its
      AMPS would constitute interest, whether or not they exceeded the earnings
      and profits of the Fund, would be included in full in the income of the
      recipient and taxed as ordinary income. Counsel believes that such a position,
      if asserted by the IRS, would be unlikely to prevail.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the
extent that a Fund&#146;s distributions are derived from interest on its taxable
investments or from an excess of net short-term capital gains over net long-term
capital losses (&#147;ordinary income dividends&#148;), such distributions are
considered taxable ordinary income for Federal income tax purposes.
Distributions, if any, from an excess of net long-term capital gains over net
short-term capital losses derived from the sale of securities or from certain
transactions in futures or options (&#147;capital gain dividends&#148;) are
taxable as long-term capital gains for Federal income tax purposes, regardless
of the length of time the stockholder has owned Fund shares. Certain categories
of capital gains are taxable at different rates for Federal income tax purposes.
Generally not later than 60 days after the close of its taxable year, a Fund
provides its stockholders with a written notice designating the amounts of any
exempt-interest dividends and capital gain dividends, as well as any amount of
capital gain dividends in the different categories of capital gain referred to
above. Distributions by a Fund, whether from exempt-interest income, ordinary
income or capital gains, are not eligible for the dividends received deduction
for corporations under the Code.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A loss
realized on a sale or exchange of shares of a Fund is disallowed if other Fund
shares are acquired (whether under the Automatic Dividend Reinvestment Plan or
otherwise) within a 61-day period beginning 30 days before and ending 30 days
after the date that the shares are disposed of. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All or a
portion of a Fund&#146;s gain from the sale or redemption of tax-exempt
obligations purchased at a market discount will be treated as ordinary income
rather than capital gain. This rule may increase the amount of ordinary income
dividends received by stockholders. Any loss upon the sale or exchange of Fund
shares held for six months or less is treated as long-term capital loss to the
extent of exempt-interest dividends received by the stockholder. In addition,
such loss is disallowed to the extent of any capital gain dividends received by
the stockholder. Distributions in excess of a Fund&#146;s earnings and profits
first will reduce the adjusted tax basis of a holder&#146;s shares and, after
such adjusted tax basis is reduced to zero, will constitute capital gains to
such holder (assuming the shares are held as a capital asset). If a Fund pays a
dividend in January which was declared in the previous October, November or
December to stockholders of record on a specified date in one of such months,
then such dividend is treated for tax purposes as paid by the Fund and received
by its stockholders on December 31 of the year in which such dividend was
declared.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The IRS
has taken the position in a revenue ruling that if a RIC has two or more classes
of shares it may designate distributions made to each class in any year as
consisting of no more than such class&#146; proportionate share of particular
types of income, including exempt-interest dividends and capital gain dividends.
A class&#146;s proportionate share of a particular type of income is determined
according to the percentage of total dividends paid by the RIC during such year
that was paid to such class. Consequently, when Common Stock and one or more
series of AMPS are outstanding, each Fund intends to designate distributions
made to the classes as consisting of particular types of income in accordance
with each class&#146;s proportionate share of such income. After the
Reorganization, Insured II will, likewise, so designate distributions with
respect to its Common Stock and its AMPS, Series A, B and C. Each Fund may
notify the Auction Agent of the amount of any net capital gains and other
taxable income to be included in any dividend on shares of its AMPS prior to the
auction establishing the applicable rate for such dividend. Except for the
portion of any dividend that a Fund informs the Auction Agent will be treated as
capital gains or other taxable income, the dividends paid on the shares of AMPS
constitute exempt-interest dividends. Alternatively, each Fund may include such
income in a dividend on shares of its AMPS without giving advance notice thereof
if it increases the dividend by an additional amount to offset the tax effect
thereof. The amount of net capital gains and ordinary income allocable to shares
of a Fund&#146;s AMPS (the &#147;taxable distribution&#148;) depends upon the
amount of such gains and income realized by that Fund and the total dividends
paid on shares of its Common Stock and shares of its AMPS during a taxable year,
but the taxable distribution generally is not significant.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the opinion of Brown &amp;
      Wood <font size="1">LLP</font>, counsel to all three Funds, under current
      law the manner in which each Fund allocates, and Insured II will allocate,
      items of tax-exempt income, net capital gains, and other taxable income,
      if any, among shares of Common Stock and outstanding AMPS (including, for
      Insured II, its Series A AMPS, Series B AMPS and, after the Reorganization,
      the newly issued Series C AMPS) will be respected for Federal income tax
      purposes. However, the tax treatment of additional dividends may affect
      a Fund&#146;s calculation of each class&#146; allocable share of capital
      gains and other taxable income. In addition, there is currently no direct
      guidance from the IRS or other sources specifically addressing whether a
      Fund&#146;s method for allocating tax-exempt income, net capital gains and
      other taxable income among shares of Common Stock and the outstanding series
      of AMPS will be respected for Federal income tax purposes, and it is possible
      that the IRS could disagree with counsel&#146;s opinion and attempt to reallocate
      a Fund&#146;s net capital gains or other taxable income. In the event of
      a reallocation, some of the dividends identified by a Fund as exempt-interest
      dividends to holders of shares of its AMPS could be recharacterized as additional
      capital gains or other taxable income. In the event of such recharacterization,
      a Fund is not required to make payments to the affected stockholders to
      offset the tax effect of such reallocation. In addition, a reallocation
      could cause a Fund to be liable for income tax and excise tax on all reallocated
      taxable income. Brown &amp; Wood <font size="1">LLP</font> has advised each
      Fund that, in its opinion, if the IRS were to challenge in court its allocations
      of income and gain, the IRS would be unlikely to prevail. The opinion of
      Brown &amp; Wood <font size=1>LLP</font>, however, represents only its best
      legal judgment and is not binding on the IRS or the courts.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Code
requires a RIC to pay a nondeductible 4% excise tax to the extent it does not
distribute during each calendar year 98% of its ordinary income, determined on a
calendar year basis, and 98% of its capital gains, determined in general, on an
October 31 year-end, plus certain undistributed amounts from previous years. The
required distributions, however, are based only on the taxable income of a RIC.
The excise tax, therefore, generally does not apply to the tax-exempt income of
RICs, such as the Funds, that pay exempt-interest dividends.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Code
subjects interest received on certain otherwise tax-exempt securities to a
Federal alternative minimum tax. The alternative minimum tax applies to interest
received on &#147;activity bonds&#148; issued after August 7, 1986. As set forth
above, &#147;private activity bonds&#148; are bonds which, although tax-exempt,
are used for purposes other than those generally performed by governmental units
and which benefit non-governmental entities (e.g., bonds used for industrial
development or housing purposes). Income received on such bonds is classified as
an item of &#147;tax preference&#148; which could subject investors in such
bonds, including stockholders of the Funds, to an increased Federal alternative
minimum tax. Each Fund purchases such &#147;private activity bonds&#148; and
reports to stockholders within 60 days after calendar year-end the portion of
its dividends declared during the year which constitutes an item of tax
preference for alternative minimum tax purposes. The Code further provides that
corporations are subject to a Federal alternative minimum tax based, in part, on
certain differences between taxable income as adjusted for other tax preferences
and the corporation&#146;s &#147;adjusted current earnings&#148; which more
closely reflect a corporation&#146;s economic income. Because an exempt-interest
dividend paid by a Fund is included in adjusted current earnings, a corporate
stockholder may be required to pay a Federal alternative minimum tax on
exempt-interest dividends paid by such Fund.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds
may invest in instruments the return on which includes nontraditional features
such as indexed principal or interest payments (&#147;nontraditional
instruments&#148;). These instruments may be subject to special tax rules under
which a Fund may be required to accrue and distribute income before amounts due
under the obligations are paid. In addition, it is possible that all or a
portion of the interest payments on such nontraditional instruments could be
recharacterized as taxable ordinary income.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If at any
time when shares of AMPS are outstanding a Fund does not meet the asset coverage
requirements of the Investment Company Act, that Fund will be required to
suspend distributions to holders of its Common Stock until the asset coverage is
restored. See &#147;Dividends and Distributions.&#148; This may prevent a Fund
from distributing at least 90% of its net investment income and may, therefore,
jeopardize that Fund&#146;s qualification for taxation as a RIC. If a Fund were
to fail to qualify as a RIC, some or all of the distributions paid by that Fund
would be fully taxable to stockholders for Federal income tax purposes. Upon any
failure to meet the asset coverage requirements of the Investment Company Act, a
Fund, in its sole discretion, may redeem shares of AMPS in order to maintain or
restore the requisite asset coverage and avoid the adverse consequences to that
Fund and its stockholders of failing to qualify as a RIC. No assurance can be
given, however, that any such action would achieve such objectives.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As noted
above, a Fund must distribute annually at least 90% of its net taxable and
tax-exempt interest income. A distribution will only be counted for this purpose
if it qualifies for the dividends paid deduction under the Code. Some types of
preferred stock that the Funds have issued and that Insured II contemplates
issuing may raise a question as to whether distributions on such preferred stock
are &#147;preferential&#148; under the Code and, therefore, not eligible for the
dividends paid deduction. Counsel has advised the Funds that the outstanding
preferred stock and the preferred stock to be issued by Insured II will not
result in the payment of a preferential dividend. If a Fund ultimately relies
solely on a legal opinion when it issues such preferred stock, no assurance can
be given that the IRS would agree that dividends on the preferred stock are not
preferential. If the IRS successfully disallowed the dividends paid deduction
for dividends on the preferred stock, the Funds could be disqualified as RICs.
In this case, dividends paid by the Funds on the Common Stock and the AMPS would
not be exempt from Federal income taxes. Additionally, the Funds would be
subject to a Federal alternative minimum tax.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
certain circumstances when a Fund is required to allocate taxable income to the
AMPS, it will pay Additional Distributions to holders of shares of AMPS. The
Federal income tax consequences of Additional Distributions under existing law
are uncertain. The Funds treat and Insured II intends to continue to treat a
holder as receiving a dividend distribution in the amount of any Additional
Distribution only as and when such Additional Distribution is paid. An
Additional Distribution generally is designated by a Fund as an exempt-interest
dividend except as otherwise required by applicable law. However, the IRS may
assert that all or part of an Additional Distribution is a taxable dividend
either in the taxable year for which the allocation of taxable income is made or
in the taxable year in which the Additional Distribution is paid.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The value
of shares acquired pursuant to a Fund&#146;s dividend reinvestment plan is
generally excluded from gross income to the extent that the cash amount
reinvested would be excluded from gross income. If, when a Fund&#146;s shares
are trading at a premium over net asset value, that Fund issues shares pursuant
to the dividend reinvestment plan that have a greater fair market value than the
amount of cash reinvested, it is possible that all or a portion of such discount
(which may not exceed 5% of the fair market value of such Fund&#146;s shares)
could be viewed as a taxable distribution. If the discount is viewed as a
taxable distribution, it is also possible that the taxable character of this
discount would be allocable to all of the stockholders, including stockholders
who do not participate in a Fund&#146;s dividend reinvestment plan. Thus,
stockholders who do not participate in the dividend reinvestment plan, as well
as dividend reinvestment plan participants, might be required to report as
ordinary income a portion of their distributions equal to the allocable share of
the discount.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
certain provisions of the Code, some stockholders may be subject to a 31%
withholding tax on certain ordinary income dividends and on capital gain
dividends and redemption payments (&#147;backup withholding&#148;). Generally,
stockholders subject to backup withholding will be those for whom no taxpayer
identification number is on file with a Fund or who, to that Fund&#146;s
knowledge, have furnished an incorrect number. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such stockholder is not otherwise subject to backup withholding.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ordinary
income dividends paid to stockholders who are nonresident aliens or foreign
entities are subject to a 30% United States withholding tax under existing
provisions of the Code applicable to foreign individuals and entities unless a
reduced rate of withholding or a withholding exemption is provided under
applicable treaty law. Nonresident stockholders are urged to consult their own
tax advisers concerning the applicability of the United States withholding tax.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Code
provides that every stockholder required to file a tax return must include for
information purposes on such return the amount of exempt-interest dividends
received from all sources (including the Funds) during the taxable year.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2><B><a name="45a"></a>Tax Treatment of Options and Futures
      Transactions.</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund
may purchase or sell municipal bond index financial futures contracts and
interest rate financial futures contracts on U.S. Government securities. Each
Fund may also purchase and write call and put options on such financial futures
contracts. In general, unless an election is available to a Fund or an exception
applies, such options and financial futures contracts that are &#147;Section
1256 contracts&#148; will be &#147;marked to market&#148; for Federal income tax
purposes at the end of each taxable year (<i>i.e.</i>, each such option or financial
futures contract will be treated as sold for its fair market value on the last
day of the taxable year), and any gain or loss attributable to Section 1256
contracts will be 60% long-term and 40% short-term capital gain or loss.
Application of these rules to Section 1256 contracts held by a Fund may alter
the timing and character of distributions to stockholders. The mark-to-market
rules outlined above, however, will not apply to certain transactions entered
into by a Fund solely to reduce the risk of changes in price or interest rates
with respect to its investments.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Code
Section 1092, which applies to certain &#147;straddles,&#148; may affect the
taxation of a Fund&#146;s sales of securities and transactions in financial
futures contracts and related options. Under Section 1092, a Fund may be
required to postpone recognition for tax purposes of losses incurred in certain
sales of securities and certain closing transactions in financial futures
contracts or the related options.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing is a general and abbreviated summary of the applicable provisions of
the Code and Treasury Regulations presently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and the
Treasury Regulations promulgated thereunder. The Code and the Treasury
Regulations, are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders
are urged to consult their tax advisers regarding specific questions as to
Federal, foreign, state or local tax consequences of an investment in a Fund.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="45b"></a>AGREEMENT AND PLAN OF
      REORGANIZATION</B></font></td>
  </tr></TABLE></p>

<A NAME="A031"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="45c"></a>General</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the
Agreement and Plan (attached hereto as Appendix II), (i) Insured II will acquire
substantially all of the assets, and will assume substantially all of the
liabilities, of Insured III, in exchange solely for shares of an equal aggregate
value of Insured II Common Stock and Insured II Series C AMPS to be issued by
Insured II and (ii) Insured II will acquire substantially all of the assets, and
will assume substantially all of the liabilities, of Insured IV, in exchange
solely for shares of an equal aggregate value of Insured II Common Stock and
Insured II Series C AMPS to be issued by Insured II. The number of shares of
Insured II Common Stock issued to each Acquired Fund will have an aggregate net
asset value equal to the aggregate net asset value of the shares of Common Stock
of that Acquired Fund (except that cash will be paid in lieu of any fractional
shares), and the number of shares of Insured II Series C AMPS issued to each
Acquired Fund, will have an aggregate liquidation preference and value equal to
the aggregate liquidation preference and value of each such Fund&#146;s AMPS.
Upon receipt by the Acquired Funds of such shares, the Acquired Funds will (i)
distribute the shares of Insured II Common Stock to the holders of Insured III
Common Stock and Insured IV Common Stock, as applicable, in exchange for their
shares of Common Stock in the Acquired Funds and (ii) distribute the shares of
Insured II Series C AMPS to the holders of Insured III AMPS and Insured IV AMPS,
as applicable, in exchange for their shares of AMPS in the Acquired Funds.
Insured II will file Articles Supplementary establishing the powers, rights and
preferences of the Insured II Series C AMPS with the State Department of
Assessments and Taxation of Maryland (the &#147;Maryland Department&#148;) prior
to the closing of the Reorganization. As soon as practicable after the date that
the Reorganization takes place (the &#147;Exchange Date&#148;), each Acquired
Fund will file Articles of Dissolution with the Maryland Department to effect
the formal dissolution of such Fund, and will dissolve.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Acquired Fund will distribute the shares of Insured II Common Stock and the
shares of Insured II Series C AMPS received by it pro rata to its holders of
record of Common Stock and AMPS, as applicable, in exchange for such
stockholders&#146; shares in the Acquired Funds. Such distribution will be
accomplished by opening new accounts on the books of Insured II in the names of
the common and preferred stockholders of each Acquired Fund and transferring to
those stockholder accounts the Insured II Common Stock or Insured II Series C
AMPS previously credited on those books to the accounts of the Acquired Funds.
Each newly-opened account on the books of Insured II for the previous holders of
Common Stock of the Acquired Funds would represent the respective pro rata
number of shares of Insured II Common Stock (rounded down, in the case of
fractional shares, to the next largest number of whole shares) due such holder
of Common Stock. No fractional shares of Insured II Common Stock will be issued.
In lieu thereof, Insured II&#146;s transfer agent, State Street Bank and Trust
Company, will aggregate all fractional shares of Insured II Common Stock and
sell the resulting whole shares on the NYSE for the account of all holders of
fractional interests, and each such holder will be entitled to the pro rata
share of the proceeds from such sale upon surrender of the Common Stock
certificates of the applicable Acquired Fund. Similarly, each newly-opened
account on the books of Insured II for the previous holders of AMPS of an
Acquired Fund would represent the respective pro rata number of shares of
Insured II Series C AMPS due such holder of AMPS. See &#147;Surrender and
Exchange of Stock Certificates&#148; below for a description of the procedures
to be followed by the stockholders of the Acquired Funds to obtain their Insured
II Common Stock (and cash in lieu of fractional shares, if any). Because AMPS
are held in &#147;street name&#148; by The Depository Trust Company, all
transfers are accomplished by book entry.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly,
as a result of the Reorganization, every holder of Common Stock of an Acquired
Fund would own shares of Insured II Common Stock that (except for cash payments
received in lieu of fractional shares) would have an aggregate net asset value
immediately after the Exchange Date equal to the aggregate net asset value of
that stockholder&#146;s Common Stock immediately prior to the Exchange Date.
Since the Insured II Common Stock would be issued at net asset value and the
shares of Common Stock of the Acquired Funds would be valued at net asset value
for the purposes of the exchange, the holders of Common Stock of each Fund will
not be diluted as a result of the Reorganization. Similarly, since the Insured
II Series C AMPS would be issued at a liquidation preference and value per share
equal to the liquidation preference and value per share of the AMPS of the
Acquired Funds, holders of AMPS of each Fund will not be diluted as result of
the Reorganization. However, as a result of the Reorganization, a stockholder of
any Fund likely will hold a reduced percentage of ownership in the Combined Fund
than he or she held in Insured II, Insured III or Insured IV.</font></td></tr></TABLE><p></p>

<A NAME="A032"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="#46"></a>Procedure</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At a
meeting of the Board of Directors of each Fund, the Board of Directors of each
Fund, including all of the Directors who are not &#147;interested persons,&#148;
as defined in the Investment Company Act, of the applicable Fund, unanimously
approved the Agreement and Plan and the submission of such Agreement and Plan to
the stockholders of each Fund for approval.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also, the
Board of Directors of Insured II approved the filing of Articles Supplementary
establishing the powers, rights and preferences of the Insured II Series C AMPS
in order that they may be distributed to holders of AMPS of each Acquired Fund
as part of the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a
result of such Board approvals, the Funds have jointly filed this proxy
statement with the SEC soliciting a vote of the stockholders of each Fund to
approve the Reorganization. The costs of such solicitation are to be paid by
Insured II after the Reorganization so as to be borne equally and exclusively on
a per share basis by the holders of Common Stock of each Fund. Special meetings
of stockholders of each Fund will be held on June 27, 2000. If the stockholders
of all three Funds approve the Reorganization, the Reorganization will take
place as soon as practicable after such approval, provided that the Funds have
obtained prior to that time a favorable private letter ruling from the IRS
concerning the tax consequences of the Reorganization as set forth in the
Agreement and Plan or an opinion of counsel to the same effect.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The
Boards of Directors of Insured II, Insured III and Insured IV recommend that the
stockholders of the respective Funds approve the Agreement and Plan.</B></FONT></td></tr></TABLE><p></p>

<A NAME="A033"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="47"></a>Terms of the Agreement and Plan</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a summary of the significant terms of the Agreement and Plan of
Reorganization. This summary is qualified in its entirety by reference to the
Agreement and Plan of Reorganization, attached hereto as Appendix II.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Valuation
of Assets and Liabilities.</I> The respective assets of each Fund will be valued on
the business day prior to the Exchange Date (the &#147;Valuation Date&#148;).
The valuation procedures are the same for all three Funds: net asset value per
share of the Common Stock of each Fund will be determined as of the close of
business on the NYSE (generally, 4:00 p.m., Eastern time) on the Valuation Date.
For the purpose of determining the net asset value of a share of Common Stock of
each Fund, the value of the securities held by the issuing Fund plus any cash or
other assets (including interest accrued but not yet received) minus all
liabilities (including accrued expenses) and the aggregate liquidation value of
the outstanding shares of AMPS of the issuing Fund is divided by the total
number of shares of Common Stock of the issuing Fund outstanding at such time.
Daily expenses, including the fees payable to FAM, will accrue on the Valuation
Date.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Municipal Bonds in which each Fund invests are traded primarily in the
over-the-counter markets. In determining net asset value on the Valuation Date,
each Fund will use the valuations of portfolio securities furnished by a pricing
service approved by the Boards of Directors of the Funds. The pricing service
typically values portfolio securities at the bid price or the yield equivalent
when quotations are readily available. Municipal Bonds for which quotations are
not readily available will be valued at fair market value on a consistent basis
as determined by the pricing service using a matrix system to determine
valuations. The Boards of Directors of the Funds have determined in good faith
that the use of a pricing service is a fair method of determining the valuation
of portfolio securities. Positions in financial futures contracts will be valued
on the Valuation Date at closing prices for such contracts established by the
exchange on which they are traded, or if market quotations are not readily
available, will be valued at fair value on a consistent basis using methods
determined in good faith by each Board of Directors.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Distribution
of Insured II Common Stock and Insured II Series C AMPS</I>. On the Exchange Date,
Insured II will issue to each Acquired Fund a number of shares of Insured II
Common Stock the aggregate net asset value of which will equal the respective
aggregate net asset value of shares of Common Stock of the Acquired Fund on the
Valuation Date. Each holder of Common Stock of an Acquired Fund will receive the
number of shares of Insured II Common Stock corresponding to his or her
proportionate interest in the respective aggregate net asset value of the Common
Stock of the Acquired Fund, as applicable.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On the
Exchange Date, Insured II also will issue (i) to Insured III a number of shares
of Insured II Series C AMPS, the aggregate liquidation preference and value of
which will equal the aggregate liquidation preference and value of Insured III
AMPS on the Valuation Date and (ii) to Insured IV a number of shares of Insured
II Series C AMPS, the aggregate liquidation preference and value of which will
equal the aggregate liquidation preference and value of Insured IV AMPS on the
Valuation Date. Each holder of AMPS of an Acquired Fund will receive the number
of shares of Insured II Series C AMPS corresponding to his or her proportionate
interest in the aggregate liquidation preference and value of the AMPS of the
Acquired Fund. No sales charge or fee of any kind will be charged to
stockholders of the Acquired Funds in connection with their receipt of Insured
II Common Stock or Insured II Series C AMPS in the Reorganization. Holders of
Insured IV AMPS will find that the auction date and dividend payment date for
the Insured II Series C AMPS received in the Reorganization fall on different
days of the week than the auction date and dividend payment date of the AMPS
currently held. Any such change in the auction date and dividend payment date
will not adversely affect the value of a holder&#146;s AMPS. It is anticipated
that the auction for Insured II Series C AMPS will be held on Tuesday; the
Insured III AMPS are also auctioned on Tuesday, but the Insured IV AMPS are
auctioned on Wednesday. The auction procedures for all of the AMPS are
substantially similar. As a result of the Reorganization, the last dividend
period for the AMPS of each Acquired Fund prior to the Exchange Date may be
shorter than the dividend period for such AMPS determined as set forth in the
applicable Articles Supplementary.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Expenses.</I>
Insured II shall pay, subsequent to the Exchange Date, all expenses incurred in
connection with the Reorganization, including, but not limited to, all costs
related to the preparation and distribution of materials distributed to each
Fund&#146;s Board of Directors, expenses incurred in connection with the
preparation of the Agreement and Plan, a registration statement on Form N-14 and
a private letter ruling request submitted to the IRS, SEC and state securities
commission filing fees and legal and audit fees in connection with the
Reorganization, costs of printing and distributing this Proxy Statement and
Prospectus, legal fees incurred preparing each Fund&#146;s board materials,
attending each Fund&#146;s board meetings and preparing the minutes for such
board meetings, accounting fees associated with each Fund&#146;s financial
statements, stock exchange fees, rating agency fees, portfolio transfer taxes
(if any) and any similar expenses incurred in connection with the
Reorganization. In this regard, expenses of the Reorganization will be deducted
from the assets of the Combined Fund so as to be borne equally and exclusively
on a per share basis by the holders of Common Stock of each Fund. No Fund shall
pay any expenses of its respective stockholders arising out of or in connection
with the Reorganization.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Required
Approvals.</I> Under the Articles of Incorporation of each Fund (including Articles
Supplementary establishing the powers, rights and preferences of each series of
AMPS of each Fund), relevant Maryland law and the rules of the NYSE and AMEX,
stockholder approval of the Agreement and Plan requires the affirmative vote of
stockholders representing more than 50% of the outstanding shares of Common
Stock and AMPS of a Fund, voting together as a single class, and more than 50%
of the outstanding shares of AMPS, voting separately as a single class. Because
of the requirement that the Agreement and Plan be approved by the stockholders
of all three Funds, the Reorganization will not take place if the stockholders
of any one Fund do not approve the Agreement and Plan.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Deregistration
and Dissolution.</I> Following the transfer of the assets and liabilities of the
Acquired Funds and the distribution of shares of Insured II Common Stock and
Insured II Series C AMPS to stockholders of the Acquired Funds, in accordance
with the foregoing, each Acquired Fund will terminate its registration under the
Investment Company Act and its incorporation under Maryland law and will
withdraw its authority to do business in any state where it is required to do
so.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Amendments
and Conditions.</I> The Agreement and Plan may be amended at any time prior to the
Exchange Date with respect to any of the terms therein. The obligations of each
Fund pursuant to the Agreement and Plan are subject to various conditions,
including a registration statement on Form N-14 being declared effective by the
SEC, approval by the stockholders of each Fund as described above, a favorable
IRS ruling or an opinion of counsel being received with respect to tax matters,
an opinion of counsel as to securities matters being received and the continuing
accuracy of various representations and warranties of the Funds being confirmed
by the respective parties.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Postponement,
Termination.</I> Under the Agreement and Plan, the Board of Directors of any Fund
may cause the Reorganization to be postponed or abandoned under certain
circumstances should such Board determine that it is in the best interests of
the stockholders of its respective Fund to do so. The Agreement and Plan may be
terminated, and the Reorganization abandoned at any time (whether before or
after adoption thereof by the stockholders of any Fund) prior to the Exchange
Date, or the Exchange Date may be postponed: (i) by mutual consent of the Boards
of Directors of the three Funds and (ii) by the Board of Directors of any Fund
if any condition to that Fund&#146;s obligations set forth in the Agreement and
Plan has not been fulfilled or waived by such Board.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2><B><a name="48"></a>Potential Benefits to Common Stockholders
      of the Funds as a Result of the Reorganization</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
approving the Reorganization, the Board of Directors of each Fund identified
certain benefits that are likely to result from the Reorganization, including
lower aggregate operating expenses per share of Common Stock, greater
efficiency and flexibility in portfolio management and a more liquid trading
market for the shares of Common Stock of the Combined Fund. With respect to
each Acquired Fund, following the Reorganization their respective stockholders
will remain invested in a closed-end fund that has investment objectives and
policies substantially similar to those of the Acquired Fund. The Boards also
considered the possible risks and costs of combining the Funds, and examined
the relative credit strength, maturity characteristics, mix of type and
purpose, and yield of the Funds&#146; portfolios of Municipal Bonds and the
costs involved in a transaction such as the Reorganization. The Boards noted
the many similarities between the Funds, including their substantially similar
investment objectives and investment policies, their use of substantially the
same management personnel and </font></td></tr></TABLE></p>

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













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<p><table width=600><tr><td><font size=2>their similar portfolios of Municipal
Bonds. The Boards also considered the relative tax positions of the portfolios
of the Funds. As of February 29, 2000, each Fund had net realized capital
losses and net unrealized capital losses, with Insured II and Insured III
having significant net realized and unrealized capital losses. As a result of
the Reorganization and subject to certain limitations, the stockholders of each
Fund may benefit from the ability of the Combined Fund to use the net realized
capital losses of the other Fund to offset future net realized capital gains of
the Combined Fund, if any. Based on these factors, the Boards concluded that
the Reorganization will potentially benefit the stockholders of each Fund in
that it (i) presents no significant risks that would outweigh the benefits
discussed above and (ii) involves minimal costs (including relatively minor
legal, accounting and administrative costs).</font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Combined Fund that would result from the Reorganization would have a larger
asset base than any of the Funds has currently. Based on data presented by FAM,
the Board of Directors of each Fund believes that administrative expenses for
the Combined Fund would be less than the aggregate expenses for the individual
Funds, resulting in a lower expense ratio for common stockholders of the
Combined Fund and higher earnings per common share. In particular, certain fixed
costs, such as costs of printing stockholder reports and proxy statements, legal
expenses, audit fees, mailing costs and other expenses will be spread across a
larger asset base, thereby lowering the expense ratio for the Combined Fund.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As stated above, since the
      commencement of operations of each Fund, FAM has voluntarily waived a portion
      of its advisory fee and reimbursed certain other expenses with respect to
      each Fund. It is not anticipated that FAM will waive its advisory fee or
      reimburse certain expenses with respect to Insured II, Insured III and Insured
      IV on an ongoing basis or with respect to the Combined Fund after the Reorganization.
      The table below sets forth the total annualized operating expense ratio
      for Insured II, Insured III, Insured IV and the Combined Fund (excluding
      any advisory fee waivers and expense reimbursements) based on their respective
      net assets (excluding assets attributable to AMPS) as of March 31, 2000.</font></td>
  </tr></TABLE><p></p>


<TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="121">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="34">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="148"><b><font size="1">Net Assets<br>
      (Excluding Assets<br>
      Attributable to<br>
      AMPS) as of<br>
      March 31, 2000 </font></b>
      <hr noshade size="1">
      <b><font size="1"> </font></b></TD>
    <TD VALIGN="TOP" WIDTH="31">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" colspan="2"><b><font size="1">Total Annualized
      Operating<br>
      Expense Ratio* </font></b>
      <hr noshade size="1">
      <b><font size="1"> </font></b></TD>
    <TD VALIGN="TOP" WIDTH="88">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="121"> <b><FONT SIZE=2> Insured II </FONT></b></TD>
    <TD VALIGN="TOP" WIDTH="34">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="148"> <FONT SIZE=2> $138,164,208
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="31">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="77"> <FONT SIZE=2> 1.24 </FONT></TD>
    <TD VALIGN="bottom" WIDTH="61"> <FONT SIZE=2> % </FONT></TD>
    <TD VALIGN="TOP" WIDTH="88">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="121"> <b><FONT SIZE=2> Insured III </FONT></b></TD>
    <TD VALIGN="TOP" WIDTH="34">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="148"> <FONT SIZE=2> $&nbsp;&nbsp;88,918,267
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="31">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="77"> <FONT SIZE=2> 1.32 </FONT></TD>
    <TD VALIGN="bottom" WIDTH="61"> <FONT SIZE=2> % </FONT></TD>
    <TD VALIGN="TOP" WIDTH="88">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="121"> <b><FONT SIZE=2> Insured IV </FONT></b></TD>
    <TD VALIGN="TOP" WIDTH="34">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="148"> <FONT SIZE=2> $&nbsp;&nbsp;52,150,500
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="31">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="77"> <FONT SIZE=2> 1.42 </FONT></TD>
    <TD VALIGN="bottom" WIDTH="61"> <FONT SIZE=2> % </FONT></TD>
    <TD VALIGN="TOP" WIDTH="88">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="121"> <b><FONT SIZE=2> Combined Fund </FONT></b></TD>
    <TD VALIGN="TOP" WIDTH="34">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="148"> <FONT SIZE=2> $279,232,975
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="31">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="77"> <FONT SIZE=2> 1.17 </FONT></TD>
    <TD VALIGN="bottom" WIDTH="61"> <FONT SIZE=2> % </FONT></TD>
    <TD VALIGN="TOP" WIDTH="88">&nbsp;</TD>
  </TR>
</TABLE>


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

<table width=600><tr><td width=3% valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Including
fee waivers and expense reimbursements, the total annualized operating expense
ratios for Insured II, Insured III, Insured IV and the Combined Fund would have
been 1.08%, 0.99%, 1.11% and 1.00%, respectively.</font></td></tr></TABLE>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table
below sets forth the total annualized operating expense ratio for Insured II,
Insured III, Insured IV and the Combined Fund (excluding any advisory fee
waivers and expense reimbursements) based on their respective net assets
(including assets attributable to AMPS) as of March 31, 2000.</font></td></tr></TABLE><p></p>


<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="38">&nbsp;</td>
    <td valign="TOP" width="121">&nbsp;</td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td valign="bottom" align="center" width="152"><b><font size="1">Net Assets<br>
      (Including Assets<br>
      Attributable to<br>
      AMPS) as of<br>
      March 31, 2000 </font></b>
      <hr noshade size="1">
      <b><font size="1"> </font></b></td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td valign="bottom" align="center" colspan="2"><b><font size="1">Total Annualized
      Operating<br>
      Expense Ratio* </font></b>
      <hr noshade size="1">
      <b><font size="1"> </font></b></td>
    <td valign="TOP" width="88">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="38">&nbsp;</td>
    <td valign="bottom" width="121"> <b><font size=2> Insured II </font></b></td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td width="152" valign="bottom" align="center"> <font size=2> $243,164,208</font></td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td width="71" valign="bottom" align="right"> <font size=2> 0.70</font></td>
    <td valign="bottom" width="67"> <font size=2> % </font></td>
    <td valign="TOP" width="88">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="38">&nbsp;</td>
    <td valign="bottom" width="121"> <b><font size=2> Insured III </font></b></td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td width="152" valign="bottom" align="center"> <font size=2> $156,768,267</font></td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td width="71" valign="bottom" align="right"> <font size=2> 0.75</font></td>
    <td valign="bottom" width="67"> <font size=2> % </font></td>
    <td valign="TOP" width="88">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="38">&nbsp;</td>
    <td valign="bottom" width="121"> <b><font size=2> Insured IV </font></b></td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td width="152" valign="bottom" align="center"> <font size=2> $&nbsp; 83,800,500</font></td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td width="71" valign="bottom" align="right"> <font size=2> 0.88</font></td>
    <td valign="bottom" width="67"> <font size=2> % </font></td>
    <td valign="TOP" width="88">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="38">&nbsp;</td>
    <td valign="bottom" width="121"> <b><font size=2> Combined Fund </font></b></td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td width="152" valign="bottom" align="center"> <font size=2> $483,732,975</font></td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td width="71" valign="bottom" align="right"> <font size=2> 0.68</font></td>
    <td valign="bottom" width="67"> <font size=2> % </font></td>
    <td valign="TOP" width="88">&nbsp;</td>
  </tr>
</TABLE>


<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>
<table width=600><tr><td width=3% valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Including
fee waivers and expense reimbursements, the total annualized operating expense
ratios for Insured II, Insured III, Insured IV and the Combined Fund would have
been 0.61%, 0.56%, 0.69% and 0.58%, respectively.</font></td></tr></TABLE>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management
projections estimate that the Combined Fund will have net assets in excess of
$483 million (including assets attributable to AMPS) upon completion of the
Reorganization. A larger asset base should provide benefits in portfolio
management. After the Reorganization, the Combined Fund should be able to
purchase larger amounts of Municipal Bonds at more favorable prices than any
Fund separately and, with this greater purchasing power, request improvements in
the terms of the Municipal Bonds (<I>e.g.</I>, added indenture provisions covering call
protection, sinking funds and audits for the benefit of large holders) prior to
purchase.</FONT></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on
the foregoing, the Boards concluded that the Reorganization is in the best
interests of the stockholders of each Fund because the Reorganization presents
no significant risks or costs (including legal, accounting and administrative
costs) that would outweigh the benefits discussed above.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
approving the Reorganization, the Boards determined that the Reorganization is
in the best interests of each Fund and, with respect to net asset value and
liquidation preference, that the interests of existing stockholders of each Fund
would not be diluted as a result of the Reorganization. Although the
Reorganization is expected to result in a reduction in net asset value per share
of the Combined Fund after the Reorganization of approximately __________ as a
result of the estimated costs of the Reorganization, management of each Fund
advised its Board that it expects that such costs would be recovered within
approximately one year after the Exchange Date due to a decrease in the
operating expense ratio.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is not
anticipated that the Reorganization directly would benefit the holders of shares
of AMPS of any Fund; however, the Reorganization will not adversely affect the
holders of shares of AMPS of any of the Funds and the expenses of the
Reorganization will not be borne by the holders of shares of AMPS of any Fund.</font></td></tr></TABLE><p></p>

<A NAME="A034"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="50"></a>Surrender and Exchange of Stock Certificates</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the
Exchange Date, each holder of an outstanding certificate or certificates
formerly representing shares of Common Stock of an Acquired Fund will be
entitled to receive, upon surrender of his or her certificate or certificates, a
certificate or certificates representing the number of shares of Insured II
Common Stock distributable with respect to such holder&#146;s shares of Common
Stock of the Acquired Fund, together with cash in lieu of any fractional shares
of Common Stock. Promptly after the Exchange Date, the transfer agent for the
Insured II Common Stock will mail to each holder of certificates formerly
representing shares of Common Stock of an Acquired Fund a letter of transmittal
for use in surrendering his or her certificates for certificates representing
shares of Insured II Common Stock and cash in lieu of any fractional shares of
Common Stock.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares of
AMPS are held in &#147;street name&#148; by The Depository Trust Company, and
all transfers will be accomplished by book entry. Surrender of physical
certificates for AMPS is not required.</font></td></tr></TABLE><p></p>


<TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="219"><b><font size=1>If Prior To
      The Reorganization You Held: </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="65">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="220"><b><font size=1>After The Reorganization,
      You Will Hold: </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="56">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="219"> <font size="2">Insured II
      Common Stock</font> </TD>
    <TD VALIGN="TOP" WIDTH="65">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="220"> <font size="2">Insured II
      Common Stock</font> </TD>
    <TD VALIGN="TOP" WIDTH="56">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="219"> <font size="2">Insured II
      Series A AMPS</font> </TD>
    <TD VALIGN="TOP" WIDTH="65">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="220"> <font size="2">Insured II
      Series A AMPS</font> </TD>
    <TD VALIGN="TOP" WIDTH="56">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="219"> <font size="2">Insured II
      Series B AMPS</font> </TD>
    <TD VALIGN="TOP" WIDTH="65">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="220"> <font size="2">Insured II
      Series B AMPS</font> </TD>
    <TD VALIGN="TOP" WIDTH="56">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="219"> <font size="2">Insured III
      Common Stock</font> </TD>
    <TD VALIGN="TOP" WIDTH="65">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="220"> <font size="2">Insured II
      Common Stock</font> </TD>
    <TD VALIGN="TOP" WIDTH="56">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="219"> <font size="2">Insured III
      Series A AMPS</font> </TD>
    <TD VALIGN="TOP" WIDTH="65">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="220"> <font size="2">Insured II
      Series C AMPS</font> </TD>
    <TD VALIGN="TOP" WIDTH="56">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="219"> <font size="2">Insured IV
      Common Stock</font> </TD>
    <TD VALIGN="TOP" WIDTH="65">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="220"> <font size="2">Insured II
      Common Stock</font> </TD>
    <TD VALIGN="TOP" WIDTH="56">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="38">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="219"> <font size="2">Insured IV
      Series A AMPS</font> </TD>
    <TD VALIGN="TOP" WIDTH="65">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="220"> <font size="2">Insured II
      Series C AMPS</font> </TD>
    <TD VALIGN="TOP" WIDTH="56">&nbsp;</TD>
  </TR>
</TABLE>


<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Please do
not send in any stock certificates at this time. upon consummation of the
reorganization, common stockholders of the Acquired Funds will be furnished with
instructions for exchanging their stock certificates for Insured II stock
certificates and, if applicable, cash in lieu of fractional shares.</B></FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From and
after the Exchange Date, certificates formerly representing shares of Common
Stock of an Acquired Fund will be deemed for all purposes to evidence ownership
of the number of full shares of Insured II Common Stock distributable with
respect to the shares of the Acquired Fund held before the Reorganization as
described above and as shown in the table above, provided that, until such stock
certificates have been so surrendered, no dividends payable to the holders of
record of Common Stock of an Acquired Fund as of any date subsequent to the
Exchange Date will be paid to the holders of such outstanding stock
certificates. Dividends payable to holders of record of shares of Common Stock
of Insured II, as of any date after the Exchange Date and prior to the exchange
of certificates by any stockholder of an Acquired Fund, will be paid to such
stockholder, without interest, at the time such stockholder surrenders his or
her stock certificates for exchange.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From and
after the Exchange Date, there will be no transfers on the stock transfer books
of any Acquired Fund. If, after the Exchange Date, certificates representing
shares of Common Stock of an Acquired Fund are presented to Insured II, they
will be canceled and exchanged for certificates representing Common Stock of
Insured II, as applicable, and cash in lieu of fractional shares of Common
Stock, if any, distributable with respect to such Common Stock in the
Reorganization.</font></td></tr></TABLE><p></p>

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













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<A NAME="A035"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="51"></a>Tax Consequences of the Reorganization</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General.</I>
The Reorganization has been structured with the intention that it qualify for
Federal income tax purposes as a tax-free reorganization under Section
368(a)(1)(C) of the Code. Each Fund has elected and qualified for the special
tax treatment afforded RICs under the Code, and Insured II intends to continue
to so qualify after the Reorganization. The Funds have jointly requested a
private letter ruling from the IRS that for Federal income tax purposes: (i) the
exchange of assets by each Acquired Fund for Insured II Common Stock and Insured
II Series C AMPs, as described above, will constitute a reorganization within
the meaning of Section 368(a)(1)(C) of the Code, and each Acquired Fund and
Insured II will be deemed a &#147;party&#148; to a reorganization within the
meaning of Section 368(b) of the Code; (ii) in accordance with Section 361(a) of
the Code, no gain or loss will be recognized to the Acquired Funds as a result
of the Reorganization or on the distribution of Insured II Common Stock and
Insured II Series C AMPS to the respective stockholders of the Acquired Funds
under Section 361(c)(1) of the Code; (iii) under Section 1032 of the Code, no
gain or loss will be recognized to Insured II as a result of the Reorganization;
(iv) in accordance with Section 354(a)(1) of the Code, no gain or loss will be
recognized to the stockholders of the Acquired Funds on the receipt of Insured
II Common Stock and Insured II Series C AMPS in exchange for their corresponding
shares of Common Stock or AMPS of an Acquired Fund (except to the extent that
common stockholders receive cash representing an interest in fractional shares
of Insured II Common Stock in the Reorganization); (v) in accordance with
Section 362(b) of the Code, the tax basis of the assets of the Acquired Funds in
the hands of Insured II will be the same as the tax basis of such assets in the
hands of the Acquired Fund that transferred them immediately prior to the
consummation of the Reorganization; (vi) in accordance with Section 358 of the
Code, immediately after the Reorganization, the tax basis of the Insured II
Common Stock and Insured II Series C AMPS received by the stockholders of the
Acquired Funds in the Reorganization will be equal to the tax basis of the
Common Stock or AMPS of the Acquired Fund surrendered in exchange; (vii) in
accordance with Section 1223 of the Code, a stockholder&#146;s holding period
for the Insured II Common Stock, and Insured II Series C AMPS will be determined
by including the period for which such stockholder held the Common Stock or AMPS
of the Acquired Fund exchanged therefor, provided, that such shares were held as
a capital asset; (viii) in accordance with Section 1223 of the Code, Insured
II&#146;s holding period with respect to the assets of the Acquired Funds
transferred will include the period for which such assets were held by the
Acquired Fund; (ix) the payment of cash to common stockholders of an Acquired
Fund in lieu of fractional shares of Insured II Common Stock will be treated as
though the fractional shares were distributed as part of the Reorganization and
then redeemed, with the result that such stockholders will have short- or
long-term capital gain or loss to the extent that the cash distribution differs
from the stockholder&#146;s basis allocable to the Insured II fractional shares;
and (x) the taxable year of each Acquired Fund will end on the effective date of
the Reorganization and pursuant to Section 381(a) of the Code and regulations
thereunder, Insured II will succeed to and take into account certain tax
attributes of the Acquired Funds, such as earnings and profits, capital loss
carryovers and method of accounting.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As noted
in the discussion under &#147;Comparison of the Funds &#151; Tax Rules
Applicable to the Funds and Their Stockholders,&#148; a Fund must distribute
annually at least 90% of its net taxable and tax-exempt income. A distribution
will only be counted for this purpose if it qualifies for the dividends paid
deduction under the Code. In the opinion of Brown &amp; Wood <font size=1>LLP</font>, the issuance
of Insured II Series C AMPS pursuant to the Agreement and Plan Reorganization in
addition to the already existing Insured II Series A AMPS and Insured II Series
B AMPS will not cause distributions on any series of Insured II AMPS to be
treated as preferential dividends ineligible for the dividends paid deduction.
It is possible, however, that the IRS may assert that, because there are several
series of AMPS, distributions on such shares are preferential under the Code and
therefore not eligible for the dividends paid deduction. If the IRS successfully
disallowed the dividends paid deduction for dividends on the AMPS, Insured II
could lose the special tax treatment afforded RICs. In this case, dividends on
the shares of Insured II Common Stock and Insured II AMPS would not be exempt
from Federal income tax. Additionally, Insured II would be subject to a Federal
alternative minimum tax.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Section 381(a) of the Code, Insured II will succeed to and take into account
certain tax attributes of the Acquired Funds, including, but not limited to,
earnings and profits, any net operating loss carryovers, any capital loss
carryovers and method of accounting. The Code, however, contains special
limitations with regard to the use of net operating losses, capital losses and
other similar items in the context of certain reorganizations, including
tax-free reorganizations pursuant to Section 368(a)(1)(C) of the Code, which
could reduce the benefit of these attributes to Insured II.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders
should consult their tax advisers regarding the effect of the Reorganization in
light of their individual circumstances. As the foregoing relates only to
Federal income tax consequences, stockholders also should consult their tax
advisers as to the foreign, state and local tax consequences of the
Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Regulated
Investment Company Status.</I> The Funds have elected and qualified for taxation as
RICs under Sections 851-855 of the Code, and after the Reorganization Insured II
intends to continue to so qualify.</FONT></td></tr></TABLE><p></p>

<A NAME="A036"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="#52"></a>Capitalization</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth as of March 31, 2000 (i) the capitalization of
Insured II, (ii) the capitalization of Insured III, (iii) the capitalization of
Insured IV and (iv) the capitalization of the Combined Fund as adjusted to give
effect to the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td  align=center><font size=2><B>Pro Forma
Capitalization of Insured II, Insured III, Insured IV<BR> and Combined Fund as of
March 31, 2000</B></font></td></tr></TABLE></p>


<TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="TOP" WIDTH="165">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="74"><b><font size="1">Insured II
      </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="72"><b><font size="1">Insured III
      </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="68"><b><font size="1">Insured IV
      </font></b>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="52"><b><font size="1">Pro Forma<br>
      Adjustment </font></b>
      <hr noshade size="1">
      <b><font size="1"> </font></b></TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="73"><b><font size="1">Combined<br>
      Fund<br>
      as Adjusted(a) </font></b>
      <hr noshade size="1">
      <b><font size="1"> </font> </b></TD>
    <TD VALIGN="TOP" WIDTH="35">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="165"><font size="2">Net Assets:</font></TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="74">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="72">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="68">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="52">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="73">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">&nbsp;&nbsp;Net Assets Attributable to<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Common Stock</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="74">
      <P><font size="2">$138,164,208</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="72">
      <P><font size="2">$88,918,267</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="68">
      <P><font size="2">$52,150,500</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="52">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="73">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">&nbsp;&nbsp;Net Assets Attributable to<br>
        &nbsp;&nbsp;&nbsp; AMPS</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="74">
      <P><font size="2">$105,000,000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="72">
      <P><font size="2">$67,850,000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="68">
      <P><font size="2">$31,650,000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P><font size="2">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="73">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">Shares Outstanding:</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="74">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="72">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="68">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="52">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="73">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">&nbsp;&nbsp;Common Stock</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="74">
      <P><font size="2">11,015,719</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="72">
      <P><font size="2">6,806,667</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="68">
      <P><font size="2">3,441,482</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="52">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="73">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" WIDTH="35">
      <P><font size="2">(b)</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">&nbsp;&nbsp;AMPS</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="74">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="72">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="68">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="52">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="73">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Series A</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="74">
      <P><font size="2">2,100</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="72">
      <P><font size="2">2,714</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="68">
      <P><font size="2">1,266</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P><font size="2">(3,980</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14">
      <P><font size="1">)</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="73">
      <P><font size="2">2,100</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="35">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Series B</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="74">
      <P><font size="2">2,100</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="72">
      <P><font size="2">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="68">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P>&nbsp;
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="72" align="right">

      <p><font size="2">2,100</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="35">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Series C</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="74">
      <P><font size="2">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="72">
      <P><font size="2">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="68">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P><font size="2">3,980</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="73">
      <P><font size="2">3,980</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="35">
      <P><font size="2">(b)</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">Net Asset Value Per Share:</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="74">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="72">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="68">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="52">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="73">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">&nbsp;&nbsp;Common Stock</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="74">
      <P><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.54</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="72">
      <P><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.06</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="68">
      <P><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.15</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P><font size="2">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="73">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" WIDTH="35">
      <P><font size="2">(c)</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="2">&nbsp;&nbsp;&nbsp;AMPS</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="74">
      <P><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="72">
      <P><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="12">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="68">
      <P><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P><font size="2">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="73">
      <P><font size="2">$25,000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="35">&nbsp;</TD>
  </TR>
</TABLE>


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

<table width=600><tr><td width=3% valign=top><font size="1">(a)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">The
adjusted balances are presented as if the Reorganization had been consummated
on March 31, 2000 and are for informational purposes only. Assumes distribution
of undistributed net investment income and accrual of estimated Reorganization
expenses of approximately $335,400. No assurance can be given about how many
shares of Insured II Common Stock will be received by holders of Common Stock
of Insured III or Insured IV on the Exchange Date, and the foregoing should not
be relied upon to reflect the number of shares of Insured II Common Stock that
actually will be received on or after such date.</font></td></tr></TABLE>

<table width=600><tr><td width=3% valign=top><font size="1">(b)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Assumes
the issuance of _________ shares of Insured II Common Stock and one
newly-created series of AMPS consisting of 3,980 Series C shares, in exchange
for the net assets of each of Insured III and Insured IV. The estimated number
of shares issued was based on the net asset value of each Fund, net of
distributions, on March 31, 2000.</font></td></tr></TABLE>

<table width=600><tr><td width=3% valign=top><font size="1">(c)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Net
Asset Value Per Share of Common Stock net of Reorganization-related expenses
and distribution of undistributed net investment income of $_____ for Insured
II, $_____ for Insured III and $_____ for Insured IV.</font></td></tr></TABLE>

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













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<!-- MARKER LABEL="sheet: 55, page: 55" -->









<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="53a"></a>INFORMATION CONCERNING
      THE SPECIAL MEETINGS</B></font></td>
  </tr></TABLE></p>

<A NAME="A037"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="53b"></a>Date, Time and Place of Meetings</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Meetings will be held on
      June 27, 2000 at the offices of Merrill Lynch Asset Management, 800 Scudders
      Mill Road, Plainsboro, New Jersey at the times listed on Appendix I to this
      Proxy Statement and Prospectus.</font></td>
  </tr></TABLE><p></p>

<A NAME="A038"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="53c"></a>Solicitation, Revocation and Use of
      Proxies</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
stockholder executing and returning a proxy has the power to revoke it at any
time prior to its exercise by executing a superseding proxy, by giving written
notice of the revocation to the Secretary of the appropriate Fund or by voting
in person at the Meeting. Although mere attendance at a Meeting will not revoke
a proxy, a stockholder present at a Meeting may withdraw his or her proxy and
vote in person.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
shares represented by properly executed proxies, unless such proxies previously
have been revoked, will be voted at the Meetings in accordance with the
directions on the proxies; if no direction is indicated, the shares will be
voted &#147;FOR&#148; the proposal to approve the Agreement and Plan. It is not
anticipated that any other matters will be brought before the Meetings. If,
however, any other business properly is brought before the Meetings, proxies
will be voted in accordance with the judgment of the persons designated on such
proxies.</font></td></tr></TABLE><p></p>

<A NAME="A039"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="53d"></a>Record Date and Outstanding Shares</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only
holders of record of shares of Common Stock or AMPS of a Fund at the close of
business on the Record Date are entitled to vote at a Meeting or any adjournment
thereof. At the close of business on the Record Date, the Funds had the number
of shares outstanding listed in Appendix I to this Proxy Statement and
Prospectus.</font></td></tr></TABLE><p></p>

<A NAME="A040"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="53e"></a>Security Ownership of Certain Beneficial
      Owners and Management</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the
knowledge of the Funds, as of the date hereof, no person or entity owns
beneficially 5% or more of the shares of the Common Stock or AMPS of any Fund.</font></td></tr></TABLE><p></p>

<p>
<p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the Record
Date, the Directors and officers of Insured II as a group (12 persons) owned an
aggregate of less than 1% of the outstanding shares of Insured II Common Stock
and owned no Insured II AMPS.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the
Record Date, the Directors and officers of Insured III as a group (13 persons)
owned an aggregate of less than 1% of the outstanding shares of Insured III
Common Stock and owned no Insured III AMPS.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the Record Date, the
      Directors and officers of Insured IV as a group ([14] persons) owned an
      aggregate of less than 1% of the outstanding shares of Insured IV Common
      Stock and owned no Insured IV AMPS.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On the
Record Date, Mr. Glenn, a Director and an officer of each Fund, Mr. Zeikel, a
Director of each Fund, and the other Directors and officers of each Fund owned
an aggregate of less than 1% of the outstanding shares of Common Stock of ML
&amp; Co.</font></td></tr></TABLE><p></p>

<A NAME="A041"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="53f"></a>Voting Rights and Required Vote</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of this Proxy Statement and Prospectus, each share of Common Stock and
AMPS of each of the Funds is entitled to one vote. Approval of the Agreement and
Plan requires the approval of each Fund. With respect to each Fund, approval of
the Agreement and Plan requires the affirmative vote of stockholders
representing (i) a majority of the outstanding shares of a Fund&#146;s Common
Stock and AMPS, voting together as a single class, and (ii) a majority of the
outstanding shares of a Fund&#146;s AMPS, voting separately as a single class.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of any vote at
      a Meeting that requires the approval of the outstanding shares of a Fund&#146;s
      Common Stock and AMPS, voting together as a single class, a quorum consists
      of one-third of the shares entitled to vote at that Meeting. For purposes
      of any vote at a Meeting that requires the approval of the outstanding shares
      of a Fund&#146;s AMPS, voting separately as a single class, a quorum consists
      of one-third of the shares entitled to vote separately as a single class
      at that Meeting. If, by the time scheduled for each Meeting, a quorum of
      the applicable Fund&#146;s stockholders is not present, or if a quorum is
      present but sufficient votes to take action upon the Agreement and Plan
      are not received from the stockholders of the applicable Fund, the persons
      named as </font></td>
  </tr></TABLE></p>

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













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<!-- MARKER LABEL="sheet: 56, page: 56" -->









<p><table width=600><tr><td><font size=2>proxies may propose one or more
adjournments of a Meeting to permit further solicitation of proxies from
stockholders. Any such adjournment will require the affirmative vote of a
majority of the shares of the applicable Fund present in person or by proxy and
entitled to vote at the session of a Meeting to be adjourned. The persons named
as proxies will vote in favor of any such adjournment if they determine that
adjournment and additional solicitation are reasonable and in the interests of
the applicable Fund&#146;s stockholders.</font></td></tr></TABLE></p>

<A NAME="A042"></A>
<p><table width=600><tr>
    <td><font size=2><B><a name="54a"></a>Appraisal Rights</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Maryland law, stockholders of a company whose shares are traded publicly on a
national securities exchange, such as each Acquired Fund, are not entitled to
demand the fair value of their shares upon a transfer of assets; therefore, the
commmon stockholders of each Acquired Fund will be bound by the terms of the
Reorganization, if approved at the Meetings. However, any common stockholder of
an Acquired Fund may sell his or her shares of Common Stock at any time on the
NYSE (Insured II and Insured III) or AMEX (Insured IV). Conversely, since the
AMPS are not traded publicly on a national securities exchange, holders of AMPS
issued by an Acquired Fund will be entitled to appraisal rights upon the
consummation of the Reorganization. As stockholders of the corporation acquiring
the assets of the Acquired Funds, neither holders of Insured II Common Stock nor
holders of Insured II Series A AMPS or Insured II Series B AMPS are entitled to
appraisal rights under Mayland law.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Maryland law, a holder of AMPS of any Acquired Fund desiring to receive payment
of the fair value of his or her stock (an &#147;objecting stockholder&#148;) (i)
must file with the applicable Acquired Fund a written objection to the
Reorganization at or before the Meeting, (ii) must not vote in favor of the
Reorganization (although a vote against the Reorganization is not required), and
(iii) must make written demand on Insured II for payment of his or her stock,
stating the number and class of shares for which he or she demands payment,
within 20 days after the Maryland Department of Assessments and Taxation accepts
for filing the Articles of Transfer with respect to the Reorganization (Insured
II is required promptly to give written notice to all objecting stockholders of
the date that the Articles of Transfer are accepted for record). A vote against
the Reorganization will not be sufficient to satisfy the requirement of a
written demand described in clause (iii). An objecting stockholder who fails to
adhere to this procedure will be bound by the terms of the Reorganization. An
objecting stockholder ceases to have any rights of a stockholder except the
right to receive fair value for his or her shares and has no right to receive
any dividends or distribution payable to such holders on a record date after the
close of business on the date on which fair value is to be determined, which,
for these purposes, will be the date of the Meeting. A demand for payment of
fair market value may not be withdrawn, except upon the consent of Insured II.
Within 50 days after the Articles of Transfer have been accepted for filing, an
objecting stockholder who has not received payment for his or her shares may
petition a court located in Baltimore, Maryland for an appraisal to determine
the fair market value of his or her stock.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="54b"></a>ADDITIONAL INFORMATION</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
expenses of preparation, printing and mailing of the enclosed form of proxy, the
accompanying Notice and this Proxy Statement and Prospectus will be borne by
Insured II, the surviving fund after the Reorganization, so as to be borne
equally and exclusively on a per share basis by the holders of Common Stock of
each Fund. If the Reorganization is not approved, these expenses will be
allocated among the Funds according to the net asset value of the Common Stock
of each Fund on the Meeting date.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds
likewise will reimburse banks, brokers and others for their reasonable expenses
in forwarding proxy solicitation materials to the beneficial owners of shares of
each Fund and certain persons that the Funds may employ for their reasonable
expenses in assisting in the solicitation of proxies from such beneficial owners
of shares of capital stock of the Funds.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to obtain the necessary
      quorums at each Meeting, supplementary solicitation may be made by mail,
      telephone, telegraph or personal interview by officers of the Funds. Each
      Fund has retained [Shareholder Communications Corporation, 17 State Street,
      New York, New York 10004 to aid in the solicitation of proxies, at a cost
      to be borne by Insured II, Insured III and Insured IV of approximately $3,500,
      $3,500 and $2,500, respectively, plus out-of-pocket expenses of $____________,
      $____________ and $__________, respectively.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker-dealer firms, including
      Merrill Lynch, holding Fund shares in &#147;street name&#148; for the benefit
      of their customers and clients will request the instructions of such customers
      and clients on how to vote their shares on each proposal before the Meetings.
      With respect to shares of Common Stock of each Fund, broker-dealer firms,
      </font></td>
  </tr></TABLE></p>

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













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<p><table width=600><tr>
    <td><font size=2>including Merrill Lynch, will not be permitted to grant voting
      authority without instructions with respect to the approval of the Agreement
      and Plan. Shares of AMPS of a Fund held in &#147;street name,&#148; however,
      may be voted without instructions under certain conditions by broker-dealer
      firms with respect to Item 1 and counted for purposes of establishing a
      quorum of that Fund if no instructions are received one business day before
      the Meeting or, if adjourned, one business day before the day to which the
      Meeting is adjourned. With respect to each Fund, these conditions include,
      among others, that (i) at least 30% of that Fund&#146;s AMPS outstanding
      have voted on Item 1, (ii) less than 10% of that Fund&#146;s AMPS outstanding
      have voted against Item 1 and (iii) holders of that Fund&#146;s Common Stock
      have voted to approve Item 1. In such instances, the broker-dealer firm
      will vote that Fund&#146;s shares of AMPS on Item 1 in the same proportion
      as the votes cast by all holders of that Fund&#146;s AMPS who voted on Item
      1. The Funds will include shares held of record by broker-dealers as to
      which such authority has been granted in its tabulation of the total number
      of shares present for purposes of determining whether the necessary quorum
      of stockholders of each Fund exists. Proxies that are returned to a Fund
      but that are marked &#147;abstain&#148; or on which a broker-dealer has
      declined to vote on any proposal (&#147;broker non-votes&#148;) will be
      counted as present for the purposes of determining a quorum. Abstentions
      and broker non-votes will not be counted as votes cast. Abstentions and
      broker non-votes will have the same effect as a vote against the Reorganization.</font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Proxy Statement and Prospectus does not contain all of the information set forth
in the registration statement and the exhibits relating thereto that Insured II
has filed with the SEC under the Securities Act of 1933, as amended, and the
Investment Company Act, to which reference is hereby made.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds
are subject to the informational requirements of the Exchange Act and the
Investment Company Act and in accordance therewith are required to file reports,
proxy statements and other information with the SEC. Any such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the SEC:
Regional Office, at Seven World Trade Center, 13th Floor, New York, New York
10048; Pacific Regional Office, at 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, California 90036; and Midwest Regional Office, at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained from the public reference section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Funds, that file electronically with the SEC. Reports, proxy statements and
other information concerning Insured II and Insured III can also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. Reports, proxy statements and other information concerning Insured IV can
also be inspected at the offices of the American Stock Exchange, 980 Washington
Boulevard, Gaithersburg, Maryland 20878.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="55a"></a>CUSTODIAN</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State
Street acts as the custodian for cash and securities of Insured II. The
principal business address of State Street in such capacity is One Heritage
Drive, P2N, North Quincy, Massachusetts 02171. BONY acts as the custodian for
cash and securities of each Acquired Fund. The principal business address of
BONY in such capacity is 90 Washington Street, New York, New York 10286.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="55b"></a>TRANSFER AGENT, DIVIDEND
      DISBURSING AGENT AND REGISTRAR</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State
Street serves as the transfer agent, dividend disbursing agent and registrar
with respect to the Common Stock of Insured II, pursuant to a registrar,
transfer agency and service agreement with Insured II. The principal business
address of State Street in such capacity is 225 Franklin Street, Boston,
Massachusetts 02110.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BONY
serves as the transfer agent, dividend disbursing agent and registrar with
respect to the Common Stock of each Acquired Fund, pursuant to a separate
registrar, transfer agency and service agreement with each Acquired Fund. The
principal business address of BONY in such capacity is 101 Barclay Street, New
York, New York 10286.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BONY
serves as the transfer agent, dividend disbursing agent, registrar and auction
agent to Insured II, Insured III and Insured IV, in connection with their
respective AMPS, pursuant to separate registrar, transfer agency, dividend
disbursing agency and service agreements with each Fund. The principal business
address of BONY in such capacity is 101 Barclay Street, New York, New York
10286.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="56a"></a>LEGAL PROCEEDINGS</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are
no material legal proceedings to which any Fund is a party.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="56b"></a>LEGAL OPINIONS</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
legal matters in connection with the Reorganization will be passed upon for the
Funds by Brown &amp; Wood <font size=1>LLP</font>, New York, New York.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="56c"></a>EXPERTS</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_____________________, independent
      auditors, have audited the financial statements and financial highlights
      of Insured II as of September 30, 1999 as set forth in their report which
      appears in this Proxy Statement and Prospectus. The financial statements
      and financial highlights of Insured II are included in reliance on ________&#146;s
      report, given on their authority as experts in accounting and auditing.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;________ will serve as the
      independent auditors for the Combined Fund after the Reorganization. The
      principal business address of ________ is _______________________________________.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B><a name="56d"></a>STOCKHOLDER PROPOSALS</B></font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2000
Annual Meetings of Insured II, Insured II and Insured IV are expected to be held
in December 2000. If a stockholder of a Fund intends to present a proposal at
the 2000 Annual Meeting of Stockholders of that Fund, and desires to have the
proposal included in that Fund&#146;s proxy statement and form of proxy for that
meeting, the stockholder must deliver the proposal to the offices of Insured II,
Insured III and Insured IV by July 12, 2000.</font></td></tr></TABLE><p></p>

<p>
<table width=600>
  <tr>
    <td align=right width="377">&nbsp;</td>
    <td width="211"><font size=2>By Order of the Boards of Directors</font></td>
  </tr>
</TABLE>
</p>

<p>
<table width=600>
  <tr>
    <td align=right width="375">&nbsp;</td>
    <td align=left width="213"><font size="2">BRADLEY J. LUCIDO<b><br>
      </b><i>Secretary</i><b><br>
      </b>MuniHoldings Insured Fund II, Inc. and <br>
      MuniHoldings Insured Fund III, Inc.</font></td>
  </tr>
</TABLE>
</p>

<p>
<table width=600>
  <tr>
    <td align=right width="377">&nbsp;</td>
    <td align=left width="211"><font size="2">WILLIAM E. ZITELLI, JR.<br>
      <i>Secretary</i><br>
      MuniHoldings Insured Fund IV, Inc.</font></td>
  </tr>
</TABLE>
</p>

<p><table width=600><tr><td><font size=2>Plainsboro, New Jersey<BR> Dated: May __,
2000</font></td></tr></TABLE></p>


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














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<!-- MARKER LABEL="sheet: 59, page: 59" -->







<p><table width=600><tr>
    <td  align=center><FONT SIZE="2"><B><U><a name="f1"></a>INDEX TO FINANCIAL
      STATEMENTS</U></B></FONT></td>
  </tr></TABLE></p>

<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="TOP" WIDTH="532">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="26">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="42">
      <P align="center"><font size="2"><b><font size="1">Page<br>
        </font></b></font>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="532">
      <P><font size="2">Audited Financial Statements for MuniHoldings Insured
        Fund II, Inc. for the Period February 26, <br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1999 to September 30, 1999</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="42">
      <P align="center"><font size="2">F-2</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="532">
      <P><font size="2">Unaudited Financial Statements for MuniHoldings Insured
        Fund II, Inc. for the Period October 1, <br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1999 to March 31, 2000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="42">
      <P align="center"><font size="2">F-3</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="532">
      <P><font size="2">Unaudited Financial Statements for MuniHoldings Insured
        Fund III, Inc. for the Period May 28, <br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1999 to March 31, 2000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="42">
      <P align="center"><font size="2">F-4</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="532">
      <P><font size="2">Unaudited Financial Statements for MuniHoldings Insured
        Fund IV, Inc. for the <br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Period September 24, 1999 to March 31,
        2000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="42">
      <P align="center"><font size="2">F-5</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="532">
      <P><font size="2">Pro Forma Unaudited Financial Statements for the Combined
        Fund as of March 31, 2000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="42">
      <P align="center"><font size="2">F-6</font>
    </TD>
  </TR>
</TABLE>

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













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<!-- MARKER LABEL="sheet: 60, page: 60" -->







<p><table width=600><tr>
    <td  align=center><font size=2>Audited Financial Statements for <BR>
      MuniHoldings Insured Fund II, Inc. <BR>
      for the Period February 26, 1999 to September 30, 1999</font></td>
  </tr></TABLE></p>



<p><table width=600><tr>
    <td  align=center><font size=2>[To Be Filed By Amendment]</font></td>
  </tr></TABLE></p>


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













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<!-- MARKER LABEL="sheet: 61, page: 61" -->







<p>
<table width=600>
  <tr>
    <td  align=center><font size=2>Unaudited Financial Statements for <BR>
      MuniHoldings Insured Fund II, Inc. <BR>
      for the Period October 1, 1999 to March 31, 2000</font></td>
  </tr>
</TABLE>
<b></p> </b>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2>[To Be Filed By Amendment]</font></td>
  </tr>
</TABLE>
</p>


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













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<!-- MARKER LABEL="sheet: 62, page: 62" -->







<p><table width=600><tr>
    <td  align=center><font size=2>Unaudited Financial Statements for <BR>
      MuniHoldings Insured Fund III, Inc. <BR>
      for the Period May 28, 1999 to March 31, 2000</font></td>
  </tr></TABLE></p>


<p><table width=600><tr>
    <td  align=center><font size=2>[To Be Filed By Amendment]</font></td>
  </tr></TABLE></p>


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













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<!-- MARKER LABEL="sheet: 63, page: 63" -->







<p><table width=600><tr>
    <td  align=center><font size=2>Unaudited Financial Statements for <BR>
      MuniHoldings Insured Fund IV, Inc. <BR>
      for the Period September 24, 1999 to March 31, 2000</font></td>
  </tr></TABLE></p>


<p><table width=600><tr>
    <td  align=center><font size=2>[To Be Filed By Amendment]</font></td>
  </tr></TABLE></p>

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













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<!-- MARKER LABEL="sheet: 64, page: 64" -->








<p><table width=600><tr>
    <td  align=center height="46"><font size=2>Pro Forma Unaudited Financial Statements
      for <BR>
      the Combined Fund <BR>
      as of March 31, 2000</font></td>
  </tr></TABLE></p>


<p><table width=600><tr>
    <td  align=center><font size=2>[To Be Filed By Amendment]</font></td>
  </tr></TABLE></p>

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

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

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

<p><table width=600><tr><td><font size=2><B>General Information Pertaining to
Each Fund</B></font></td></tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td><font size="1"><b>Fund<br>
      </b></font>
      <hr size="1" noshade align="left" width="25">
      <font size="1"><b> </b></font></td>
    <td>&nbsp;</td>
    <td valign="bottom">
      <div align="center"><font size="1"><b>Defined Term<br>
        Used in Exhibit I</b> </font> </div>
      <hr size="1" noshade>
    </td>
    <td>
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="1"><b>Fiscal<br>
        Year End</b> </font> </div>
      <hr size="1" noshade>
    </td>
    <td>
      <div align="center"></div>
    </td>
    <td>
      <div align="center"><font size="2"><b><font size="1">State of</font></b></font><font size="1"><b><br>
        Incorporation</b></font><font size="1"><b> </b></font></div>
      <hr size="1" noshade align="center">
    </td>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td>
      <div align="center"><font size="1"><b>Meeting Time</b></font> </div>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p><font size="2">MuniHoldings Insured Fund II, Inc.</font>
    </td>
    <td valign="TOP">
      <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">Insured II</font>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">9/30</font>
    </td>
    <td valign="TOP">
      <div align="center"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">Maryland</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="center"><font size="2">9:00 a.m.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p><font size="2">MuniHoldings Insured Fund III, Inc.</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="center"><font size="2">Insured III</font>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">4/30</font>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">Maryland</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="center"><font size="2">9:20 a.m.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p><font size="2">MuniHoldings Insured Fund IV, Inc.</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="center"><font size="2">Insured IV</font>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">8/31</font>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">Maryland</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="center"><font size="2">9:40 a.m.</font>
    </td>
  </tr>
</TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="3" align="center">
      <div align="center">
        <div align="center"><font size="2"><b><font size="1">Shares of Capital
          Stock Outstanding<br>
          as of the Record Date</font></b></font></div>
        <hr size="1" noshade align="center" width="99%">
      </div>
      </td>
  </tr>
  <tr valign="bottom">
    <td><b><font size="1">Fund</font></b>
      <hr size="1" noshade align="left" width="25">
    </td>
    <td>&nbsp;</td>
    <td>
      <div align="center"><b><font size="1">Common Stock</font></b></div>
      <hr size="1" noshade align="center">
    </td>
    <td>&nbsp;</td>
    <td>
      <div align="center"><font size="1"><b>AMPS</b></font></div>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Insured II</font>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">4,200</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Insured III</font>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">2,714</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Insured IV</font>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <p align="center"><font size="2">1,266</font>
    </td>
  </tr>
</TABLE>
<br>
<table width=600><tr><td><font size=2><B>Information Pertaining to Directors
of Insured II and Insured III</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth in the table below
      is information regarding board of directors and audit committee meetings
      held and the aggregate fees and expenses paid by Insured II and Insured
      III to non-affiliated Directors during the period February 26, 1999 to September
      30, 1999 (Insured II) and during the period May 28, 1999 to April 30, 2000
      (Insured III).</font></td>
  </tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td>
      <div align="center"><b></b></div>
    </td>
    <td>
      <div align="center"><b></b></div>
    </td>
    <td colspan="5">
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b><font size="1">Board of Directors</font></b></div>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <div align="center"><b></b></div>
    </td>
    <td colspan="5">
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b><font size="1">Audit Committee</font></b></div>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <div align="center"><b></b></div>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="1"><b>Fund</b></font>
      <hr size="1" noshade align="left" width="25">
    </td>
    <td>
      <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td>
      <p align="center"><b><font size="1"># Meetings<br>
        Held* </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td>
      <p align="center"><b><font size="1">Annual<br>
        Fee ($) </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td>
      <p align="center"><b><font size="1">Per Meeting<br>
        Fee ($)*** </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td>
      <p align="center"><b><font size="1"># Meetings<br>
        Held* </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td>
      <p align="center"><b><font size="1">Annual<br>
        Fee ($) </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td>
      <p align="center"><b><font size="1">Per Meeting<br>
        Fee ($)*** </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Insured II</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <div align="center"><font size="2">3</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">1,500</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">250</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">3</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">1,500</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">250</font></div>
    </td>
    <td valign="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Insured III</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">1,500</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">250</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">1,500</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">250</font></div>
    </td>
    <td valign="TOP">&nbsp;</td>
  </tr>
</TABLE>
<p></p>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

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

<table width=600><tr><td width=3% align=right valign=top><font size="1">**
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">The
Chairman of the Audit Committee receives an annual fee of $1,000.</font></td></tr></TABLE>

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

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth in the table below
      is information regarding compensation paid by Insured II and Insured III
      to the non-affiliated Directors during the period February 26, 1999 to September
      30, 1999 (Insured II) and during the period May 28, 1999 to April 30, 2000
      (Insured III).</font></td>
  </tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td>
      <p align="left"><font size="1"><b>Fund </b></font>
      <hr size="1" noshade align="left" width="25">
    </td>
    <td>
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td>
      <p align="center"><font size="1"><b>Grills </b></font>
      <hr size="1" noshade align="center" width="50%">
    </td>
    <td>
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td>
      <p align="center"><font size="1"><b>Mintz</b></font>
      <hr size="1" noshade align="center" width="50%">
    </td>
    <td>
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td>
      <p align="center"><font size="1"><b>Salomon </b></font>
      <hr size="1" noshade align="center" width="50%">
    </td>
    <td>
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td>
      <div align="center"><font size="1"><b>Seiden</b></font></div>
      <hr size="1" noshade align="center" width="50%">
    </td>
    <td>
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td>
      <div align="center"><font size="1"><b>Swensrud</b></font></div>
      <hr size="1" noshade align="center" width="50%">
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Insured II</font>
    </td>
    <td valign="TOP" align="center">
      <p align="JUSTIFY"><font size="2"></font>
    </td>
    <td valign="TOP" align="center"><font size="2">$4,250</font></td>
    <td valign="TOP" align="center">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td valign="TOP" align="center"><font size="2">$4,250</font></td>
    <td valign="TOP" align="center">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td valign="TOP" align="center"><font size="2">$4,250</font></td>
    <td valign="TOP" align="center">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td valign="TOP" align="center"><font size="2">$4,250</font></td>
    <td valign="TOP" align="center">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td valign="TOP" align="center"><font size="2">$4,250</font></td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Insured III</font>
    </td>
    <td valign="TOP"></td>
    <td valign="TOP"></td>
    <td valign="TOP"></td>
    <td valign="TOP"></td>
    <td valign="TOP"></td>
    <td valign="TOP"></td>
    <td valign="TOP"></td>
    <td valign="TOP"></td>
    <td valign="TOP"></td>
    <td valign="TOP"></td>
  </tr>
</TABLE>
<p></p>

<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>
<table width=600><tr>
    <td width=3% align=left valign=middle><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td><td width=95%><font size="1">No
pension or retirement benefits are accrued as part of the expenses of Insured
II and Insured III.</font></td></tr></TABLE>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth in the table below is information regarding the aggregate compensation
paid by all registered investment companies advised by Fund Asset Management,
L.P. (&#147;FAM&#148;) and its affiliate, Merrill Lynch Asset Management, L.P. (&#147;MLAM&#148;)
(collectively, &#147;FAM/MLAM Advised Funds&#148;), including Insured II and
Insured III, to the non-affiliated Directors for the year ended December 31,
1999.</font></td></tr></TABLE><p></p>

<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="284">
      <p><font size="1"><b>Name of Insured II and Insured III Director </b></font>
      <hr size="1" noshade align="left" width="195">
    </td>
    <td width="115">&nbsp;</td>
    <td width="201">
      <p align="center"><font size="1"><b>Aggregate Compensation from FAM/MLAM<br>
        Advised Funds Paid to Directors($)(*) </b></font>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="284">
      <p><font size="2">Joe Grills</font>
    </td>
    <td valign="TOP" width="115">
      <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP" width="201">
      <div align="center"><font size="2">245,250</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="284">
      <p><font size="2">Walter Mintz</font>
    </td>
    <td valign="TOP" width="115">&nbsp;</td>
    <td valign="TOP" width="201">
      <div align="center"><font size="2">211,250</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="284">
      <p><font size="2">Robert S. Salomon, Jr. </font>
    </td>
    <td valign="TOP" width="115">&nbsp;</td>
    <td valign="TOP" width="201">
      <div align="center"><font size="2">211,250</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="284">
      <p><font size="2">Melvin R. Seiden</font>
    </td>
    <td valign="TOP" width="115">&nbsp;</td>
    <td valign="TOP" width="201">
      <div align="center"><font size="2">211,250</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="284">
      <p><font size="2">Stephen B. Swensrud</font>
    </td>
    <td valign="TOP" width="115">&nbsp;</td>
    <td valign="TOP" width="201">
      <div align="center"><font size="2">232,250</font></div>
    </td>
  </tr>
</TABLE>

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

<table width=600><tr><td width=3% valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">The Directors serve on the boards of FAM/MLAM-advised
      funds as follows: Mr. Grills (31 registered investment companies consisting
      of 47 portfolios); Mr. Mintz (21 registered investment companies consisting
      of 43 portfolios); Mr. Salomon (21 registered investment companies consisting
      of 43 portfolios); Mr. Seiden 21 registered investment companies consisting
      of 43 portfolios); and Mr. Swensrud (30 registered investment companies
      consisting of 67 portfolios).</font></td>
  </tr></TABLE>

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














<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 59, page: 59" -->







<p><table width=600><tr><td><font size=2><B>Information Pertaining to Directors
of Insured IV</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth in the table below
      is information regarding board of directors and audit committee meetings
      held and the aggregate fees and expenses paid by Insured IV to non-affiliated
      Directors during the period September 24, 1999 to April 30, 2000.</font></td>
  </tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td>
      <div align="center"><b></b></div>
    </td>
    <td>
      <div align="center"><b></b></div>
    </td>
    <td colspan="5">
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b><font size="1">Board of Directors</font></b></div>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <div align="center"><b></b></div>
    </td>
    <td colspan="5">
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b></b></div>
      <div align="center"><b><font size="1">Audit Committee</font></b></div>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <div align="center"><b></b></div>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="1"><b>Fund</b></font>
      <hr size="1" noshade align="left" width="30">
    </td>
    <td>
      <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td>
      <p align="center"><b><font size="1"># Meetings<br>
        Held* </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td>
      <p align="center"><b><font size="1">Annual<br>
        Fee ($) </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td>
      <p align="center"><b><font size="1">Per Meeting<br>
        Fee ($)*** </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td>
      <p align="center"><b><font size="1"># Meetings<br>
        Held* </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td>
      <p align="center"><b><font size="1">Annual<br>
        Fee ($) </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td>
      <p align="center"><b><font size="1">Per Meeting<br>
        Fee ($)*** </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Insured IV</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">2,000</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">200</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">800</font></div>
    </td>
    <td valign="TOP">
      <div align="center"></div>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">0</font></div>
    </td>
    <td valign="TOP">&nbsp;</td>
  </tr>
</TABLE>
<br>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>
<table width=600><tr><td width=3% align=right valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Includes
meetings held via teleconferencing equipment.</font></td></tr></TABLE>

<table width=600><tr><td width=3% align=right valign=top><font size="1">**
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">The
Chairman of the Audit Committee receives an annual fee of $1,000.</font></td></tr></TABLE>

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

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth in the table below
      is information regarding compensation paid by Insured IV to the non-affiliated
      Directors during the period September 24, 1999 to April 30, 2000.</font></td>
  </tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="135">
      <p align="left"><font size="1"><b>Fund </b></font>
      <hr size="1" noshade align="left" width="25">
    </td>
    <td valign="TOP" width="22">
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td valign="TOP" width="74">
      <p align="center"><font size="1"><b>Forbes </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td valign="TOP" width="18">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td valign="TOP" width="86">
      <p align="center"><font size="1"><b>Montgomery </b></font>
      <hr size="1" noshade align="center">
      <p align="center">&nbsp;
    </td>
    <td valign="TOP" width="14">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td valign="TOP" width="74">
      <p align="center"><font size="1"><b>Reilly </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td valign="TOP" width="15">
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td valign="TOP" width="72">
      <div align="center"><font size="1"><b>Ryan</b></font></div>
      <hr size="1" noshade align="center">
    </td>
    <td valign="TOP" width="11">
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td valign="TOP" width="79">
      <div align="center"><font size="1"><b>West</b></font></div>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="135">
      <p align="JUSTIFY"><font size="2">Insured IV</font>
    </td>
    <td valign="TOP" width="22">
      <p align="JUSTIFY"><font size="2"></font>
    </td>
    <td valign="TOP" width="74"></td>
    <td valign="TOP" width="18">
      <p align="JUSTIFY"><font size="2"></font>
    </td>
    <td valign="TOP" width="86"></td>
    <td valign="TOP" width="14">
      <p align="JUSTIFY"><font size="2"></font>
    </td>
    <td valign="TOP" width="74"></td>
    <td valign="TOP" width="15">
      <p align="JUSTIFY"><font size="2"></font>
    </td>
    <td valign="TOP" width="72"></td>
    <td valign="TOP" width="11">
      <p align="JUSTIFY"><font size="2"></font>
    </td>
    <td valign="TOP" width="79"></td>
  </tr>
</TABLE>
<p></p>

<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>
<table width=600><tr>
    <td width=3% align=left valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td><td width=95%><font size="1">No
pension or retirement benefits are accrued as part of the expenses of Insured
IV.</font></td></tr></TABLE>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth
in the table below is information regarding the aggregate compensation paid by
all FAM/MLAM Advised Funds, including Insured IV, to the non-affiliated
Directors for the year ended December 31, 1999.</font></td></tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="245">
      <p><font size="1"><b>Name of Insured IV Director</b></font>
      <hr size="1" noshade align="left" width="48%">
    </td>
    <td width="137">
      <p><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="218">
      <p align="center"><font size="1"><b>Aggregate Compensation from FAM/MLAM
        <br>
        Advised Funds Paid to Directors($)(*) </b></font>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="245">
      <p><font size="2">Ronald W. Forbes</font>
    </td>
    <td valign="TOP" width="137">&nbsp;</td>
    <td valign="TOP" width="218">
      <div align="center"><font size="2">213,900</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="245">
      <p><font size="2">Cynthia A. Montgomery</font>
    </td>
    <td valign="TOP" width="137">&nbsp;</td>
    <td valign="TOP" width="218">
      <div align="center"><font size="2">213,900</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="245">
      <p><font size="2">Charles C. Reilly</font>
    </td>
    <td valign="TOP" width="137">&nbsp;</td>
    <td valign="TOP" width="218">
      <div align="center"><font size="2">400,025</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="245">
      <p><font size="2">Kevin A. Ryan</font>
    </td>
    <td valign="TOP" width="137">&nbsp;</td>
    <td valign="TOP" width="218">
      <div align="center"><font size="2">213,900</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="245">
      <p><font size="2">Richard R. West</font>
    </td>
    <td valign="TOP" width="137">&nbsp;</td>
    <td valign="TOP" width="218">
      <div align="center"><font size="2">388,775</font></div>
    </td>
  </tr>
</TABLE>
<p></p>

<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>
<table width=600><tr>
    <td width=3% align=left valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">The Directors serve on the boards of FAM/MLAM-advised
      funds as follows: Mr. Forbes (36 registered investment companies consisting
      of 49 portfolios); Ms. Montgomery (36 registered investment companies consisting
      of 49 portfolios); Mr. Reilly (55 registered investment companies consisting
      of 69 portfolios); Mr. Ryan (36 registered investment companies consisting
      of 49 portfolios); and Mr. West (65 registered investment companies consisting
      of 72 portfolios).</font></td>
  </tr></TABLE>

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












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 60, page: 60" -->







<p><table width=600><tr><td><font size=2><B>Information Pertaining to Directors
of Insured II, Insured III and Insured IV</B></font></td></tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width="600">
  <tr valign="bottom">
    <td width="307">&nbsp;</td>
    <td width="43">&nbsp;</td>
    <td width="48">&nbsp;</td>
    <td width="12">&nbsp;</td>
    <td colspan="5">
      <div align="center"><b><font size="1">Director Since</font></b></div>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr valign="bottom">
  <tr>
    <td valign="TOP" width="307">
      <p align="JUSTIFY"><font size="1"><b>Name, Address and Biography </b></font>
      <hr size="1" noshade align="left" width="135">
    </td>
    <td valign="TOP" width="43">
      <p align="JUSTIFY"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td valign="TOP" width="48">
      <p align="center"><font size="1"><b>Age </b></font>
      <hr size="1" noshade align="center" width="50%">
    </td>
    <td valign="TOP" width="12">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td valign="TOP" width="55">
      <p align="center"><font size="1"><b>Insured II </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td valign="TOP" width="12">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td valign="TOP" width="54">
      <p align="center"><font size="1"><b>Insured III </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td valign="TOP" width="13">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="1"><b>Insured IV </b></font>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="307">
      <p align="JUSTIFY"><font size="2">Ronald W. Forbes <br>
        &nbsp;&nbsp;&nbsp; 1400 Washington Avenue, Albany, New York <br>
        &nbsp;&nbsp;&nbsp; 12222. Professor of Finance, School of Business, <br>
        &nbsp;&nbsp;&nbsp; State University of New York at Albany, since 1989;
        <br>
        &nbsp;&nbsp;&nbsp; Consultant, Urban Institute, Washington, D.C. <br>
        &nbsp;&nbsp;&nbsp; since 1995. </font>
    </td>
    <td valign="TOP" width="43">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="48">
      <p align="center"><font size="2">59</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="54">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="307">&nbsp;</td>
    <td valign="TOP" width="43">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="48">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="54">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="307">
      <p align="JUSTIFY"><font size="2">Terry K. Glenn <br>
        &nbsp;&nbsp;&nbsp; P.O. Box 9011, Princeton, New Jersey 08543-9011. <br>
        &nbsp;&nbsp;&nbsp; Executive Vice President of FAM and MLAM <br>
        &nbsp;&nbsp;&nbsp; (which terms as used herein include their corporate
        <br>
        &nbsp;&nbsp;&nbsp; predecessors) since 1983; Executive Vice President
        <br>
        &nbsp;&nbsp;&nbsp; and Director of Princeton Services, Inc. (&#147;Princeton
        <br>
        &nbsp;&nbsp;&nbsp; Services&#148;) since 1993; President of Princeton
        Funds <br>
        &nbsp;&nbsp;&nbsp; Distributor, Inc. (&#147;PFD&#148;) since 1986 and
        Director <br>
        &nbsp;&nbsp;&nbsp; thereof since 1991; President of Princeton <br>
        &nbsp;&nbsp;&nbsp; Administrators, L.P. (&#147;Princeton Administrators&#148;)
        <br>
        &nbsp;&nbsp;&nbsp; since 1988. </font>
    </td>
    <td valign="TOP" width="43">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="48">
      <p align="center"><font size="2">59</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="54">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="307">&nbsp;</td>
    <td valign="TOP" width="43">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="48">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="54">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="307">
      <p align="JUSTIFY"><font size="2">Joe Grills <br>
        &nbsp;&nbsp;&nbsp; P.O. Box 98, Rapidan, Virginia 22733. Member of <br>
        &nbsp;&nbsp;&nbsp; the Committee of Investment of Employee Benefit <br>
        &nbsp;&nbsp;&nbsp; Assets of the Financial Executives Institute <br>
        &nbsp;&nbsp;&nbsp; (&#147;CIEBA&#148;) since 1986; Member of CIEBA&#146;s <br>
        &nbsp;&nbsp;&nbsp; Executive Committee since 1988 and its Chairman <br>
        &nbsp;&nbsp;&nbsp; from 1991 to 1992; Assistant Treasurer of <br>
        &nbsp;&nbsp;&nbsp; International Business Machines Corporation <br>
        &nbsp;&nbsp;&nbsp; (&#147;IBM&#148;) and Chief Investment Officer of IBM
        <br>
        &nbsp;&nbsp;&nbsp; Retirement Funds from 1986 until 1993; Member <br>
        &nbsp;&nbsp;&nbsp; of the Investment Advisory Committees of the State
        <br>
        &nbsp;&nbsp;&nbsp; of New York Common Retirement Fund and the <br>
        &nbsp;&nbsp;&nbsp; Howard Hughes Medical Institute since 1997; <br>
        &nbsp;&nbsp;&nbsp; Director, Duke Management Company since 1992 <br>
        &nbsp;&nbsp;&nbsp; and Vice Chairman thereof since 1998; Director, <br>
        &nbsp;&nbsp;&nbsp; LaSalle Street Fund since 1995; Director, Hotchkis
        <br>
        &nbsp;&nbsp;&nbsp; and Wiley Mutual Funds since 1996; Director, <br>
        &nbsp;&nbsp;&nbsp; Kimco Realty Corporation since 1997; Member of <br>
        &nbsp;&nbsp;&nbsp; the Investment Advisory Committee of the Virginia <br>
        &nbsp;&nbsp;&nbsp; Retirement System since 1998; Director, Montpelier
        <br>
        &nbsp;&nbsp;&nbsp; Foundation since 1998. </font>
    </td>
    <td valign="TOP" width="43">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="48">
      <p align="center"><font size="2">64</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="54">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="307">&nbsp;</td>
    <td valign="TOP" width="43">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="48">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="54">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="307">
      <p align="JUSTIFY"><font size="2">Walter Mintz <br>
        &nbsp;&nbsp;&nbsp; 1114 Avenue of the Americas, New York, New York <br>
        &nbsp;&nbsp;&nbsp; 10036. Special Limited Partner of Cumberland <br>
        &nbsp;&nbsp;&nbsp; Associates (investment partnership) since 1982. </font>
    </td>
    <td valign="TOP" width="43">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="48">
      <p align="center"><font size="2">70</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="54">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="307">&nbsp;</td>
    <td valign="TOP" width="43">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="48">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="54">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="307">
      <p align="JUSTIFY"><font size="2">Cynthia A. Montgomery <br>
        &nbsp;&nbsp;&nbsp; Harvard Business School, Soldiers Field Road, <br>
        &nbsp;&nbsp;&nbsp; Boston, Massachusetts 02163. Professor, Harvard <br>
        &nbsp;&nbsp;&nbsp; Business School since 1989; Associate Professor, <br>
        &nbsp;&nbsp;&nbsp; J.L. Kellogg Graduate School of Management, <br>
        &nbsp;&nbsp;&nbsp; Northwestern University from 1985 to 1989; <br>
        &nbsp;&nbsp;&nbsp; Assistant Professor, Graduate School of Business <br>
        &nbsp;&nbsp;&nbsp; Administration, The University of Michigan from <br>
        &nbsp;&nbsp;&nbsp; 1979 to 1985; Director, UNUM Provident since <br>
        &nbsp;&nbsp;&nbsp; 1990 and Director of Newell Rubbermaid since 1995.
        </font>
    </td>
    <td valign="TOP" width="43">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="48">
      <p align="center"><font size="2">47</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="54">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
</TABLE>
<br>
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
I-3</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;








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<!-- MARKER LABEL="sheet: 61, page: 61" -->






<p>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="306">&nbsp;</td>
    <td width="46">&nbsp;</td>
    <td width="50">&nbsp;</td>
    <td width="15">&nbsp;</td>
    <td colspan="5">
      <div align="center"><b><font size="1">Director Since</font></b></div>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">
      <p align="JUSTIFY"><font size="1"><b>Name, Address and Biography </b></font>
      <hr size="1" noshade align="left" width="135">
    </td>
    <td valign="TOP" width="46">
      <p align="JUSTIFY"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td valign="TOP" width="50">
      <p align="center"><font size="1"><b>Age </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td valign="TOP" width="15">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td valign="TOP" width="50">
      <p align="center"><font size="1"><b>Insured II </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td valign="TOP" width="13">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td valign="TOP" width="52">
      <p align="center"><font size="1"><b>Insured III </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td valign="TOP" width="12">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="1"><b>Insured IV </b></font>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">
      <p align="JUSTIFY"><font size="2">Charles C. Reilly <br>
        &nbsp;&nbsp;&nbsp; 9 Hampton Harbor Road, Hampton Bays, New <br>
        &nbsp;&nbsp;&nbsp; York 11946. Self-employed financial consultant since
        <br>
        &nbsp;&nbsp;&nbsp; 1990; President and Chief Investment Officer of <br>
        &nbsp;&nbsp;&nbsp; Verus Capital, Inc. from 1979 to 1990; Senior Vice
        <br>
        &nbsp;&nbsp;&nbsp; President of Arnhold and S. Bleichroeder, Inc. from
        <br>
        &nbsp;&nbsp;&nbsp; 1973 to 1990; Adjunct Professor, Columbia <br>
        &nbsp;&nbsp;&nbsp; University Graduate School of Business from 1990 <br>
        &nbsp;&nbsp;&nbsp; to 1991; Adjunct Professor, Wharton School, The <br>
        &nbsp;&nbsp;&nbsp; University of Pennsylvania from 1989 to 1990; <br>
        &nbsp;&nbsp;&nbsp; Partner, Small Cities Cable Television from <br>
        &nbsp;&nbsp;&nbsp; 1986 to 1997. </font>
    </td>
    <td valign="TOP" width="46">&nbsp;</td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">68</font>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">&nbsp;</td>
    <td valign="TOP" width="46">&nbsp;</td>
    <td valign="TOP" width="50">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="50">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">
      <p align="JUSTIFY"><font size="2">Kevin A. Ryan <br>
        &nbsp;&nbsp;&nbsp; 127 Commonwealth Avenue, Chestnut Hill, <br>
        &nbsp;&nbsp;&nbsp; Massachusetts 02167. Founder and Director <br>
        &nbsp;&nbsp;&nbsp; Emeritus of The Boston University Center for the <br>
        &nbsp;&nbsp;&nbsp; Advancement of Ethics and Character and Director <br>
        &nbsp;&nbsp;&nbsp; thereof until 1999; Professor until 1999 and currently
        <br>
        &nbsp;&nbsp;&nbsp; Professor Emeritus of Education at Boston <br>
        &nbsp;&nbsp;&nbsp; University since 1982; formerly taught on the <br>
        &nbsp;&nbsp;&nbsp; faculties of The University of Chicago, Stanford <br>
        &nbsp;&nbsp;&nbsp; University and Ohio State University. </font>
    </td>
    <td valign="TOP" width="46">&nbsp;</td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">67</font>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">&nbsp;</td>
    <td valign="TOP" width="46">&nbsp;</td>
    <td valign="TOP" width="50">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="50">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">
      <p align="JUSTIFY"><font size="2">Robert S. Salomon, Jr. <br>
        &nbsp;&nbsp;&nbsp; 106 Dolphin Cove Quay, Stamford, Connecticut <br>
        &nbsp;&nbsp;&nbsp; 06902. Principal of STI Management (investment <br>
        &nbsp;&nbsp;&nbsp; adviser) since 1994; Chairman and CEO of Salomon <br>
        &nbsp;&nbsp;&nbsp; Brothers Asset Management from 1992 until 1995; <br>
        &nbsp;&nbsp;&nbsp; Monthly columnist with the<i> Forbes</i> Magazine since
        <br>
        &nbsp;&nbsp;&nbsp; 1992; Chairman of Salomon Brothers equity mutual <br>
        &nbsp;&nbsp;&nbsp; funds from 1992 until 1995; Director of Stock <br>
        &nbsp;&nbsp;&nbsp; Research and U.S. Equity Strategist at Salomon <br>
        &nbsp;&nbsp;&nbsp; Brothers Inc from 1975 until 1991; Trustee, The <br>
        &nbsp;&nbsp;&nbsp; Common Fund since 1980. </font>
    </td>
    <td valign="TOP" width="46">&nbsp;</td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">62</font>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">&nbsp;</td>
    <td valign="TOP" width="46">&nbsp;</td>
    <td valign="TOP" width="50">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="50">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">
      <p align="JUSTIFY"><font size="2">Melvin R. Seiden<br>
        &nbsp;&nbsp;&nbsp; 780 Third Avenue, Suite 2502, New York, New <br>
        &nbsp;&nbsp;&nbsp; York 10017. Director of Silbanc Properties, Ltd. (real
        <br>
        &nbsp;&nbsp;&nbsp; estate, investment and consulting) since 1987; <br>
        &nbsp;&nbsp;&nbsp; Chairman and President of Seiden &amp; de Cuevas, Inc.
        <br>
        &nbsp;&nbsp;&nbsp; private investment firm) from 1964 to 1987. </font>
    </td>
    <td valign="TOP" width="46">&nbsp;</td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">69</font>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">&nbsp;</td>
    <td valign="TOP" width="46">&nbsp;</td>
    <td valign="TOP" width="50">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="50">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">
      <p align="JUSTIFY"><font size="2">Stephen B. Swensrud <br>
        &nbsp;&nbsp;&nbsp; 24 Federal Street, Suite 400, Boston, Massachusetts
        <br>
        &nbsp;&nbsp;&nbsp; 02110. Chairman of Fernwood Advisors (investment <br>
        &nbsp;&nbsp;&nbsp; adviser) since 1996; Principal of Fernwood <br>
        &nbsp;&nbsp;&nbsp; Associates (financial consultant) since 1975; <br>
        &nbsp;&nbsp;&nbsp; Chairman, Department of Manufacturing, RPP <br>
        &nbsp;&nbsp;&nbsp; Corporation since 1999; Director, Department of <br>
        &nbsp;&nbsp;&nbsp; Telecommunications, International Mobile <br>
        &nbsp;&nbsp;&nbsp; Communications, Inc. since 1999. </font>
    </td>
    <td valign="TOP" width="46">&nbsp;</td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">66</font>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="56">
      <p align="center"><font size="2">N/A</font>
    </td>
  </tr>
</TABLE>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
I-4</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;








<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 62, page: 62" -->






<p>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="306">&nbsp;</td>
    <td width="45">&nbsp;</td>
    <td width="50">&nbsp;</td>
    <td width="15">&nbsp;</td>
    <td colspan="5">
      <div align="center"><b><font size="1">Director Since</font></b></div>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr valign="bottom">
    <td width="306">
      <p align="JUSTIFY"><font size="1"><b>Name, Address and Biography </b></font>
      <hr size="1" noshade align="left" width="135">
    </td>
    <td width="45">
      <p align="JUSTIFY"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="50">
      <p align="center"><font size="1"><b>Age </b></font>
      <hr size="1" noshade align="center" width="50%">
    </td>
    <td width="15">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="52">
      <p align="center"><font size="1"><b>Insured II </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td width="14">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="51">
      <p align="center"><font size="1"><b>Insured III </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td width="12">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="55">
      <p align="center"><font size="1"><b>Insured IV </b></font>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">
      <p align="JUSTIFY"><font size="2">Richard R. West <br>
        &nbsp;&nbsp;&nbsp; Box 604, Genoa, Nevada 89411. Professor of <br>
        &nbsp;&nbsp;&nbsp; Finance since 1984, Dean from 1984 to 1993, and <br>
        &nbsp;&nbsp;&nbsp; currently Dean Emeritus of New York University, <br>
        &nbsp;&nbsp;&nbsp; Leonard N. Stern School of Business <br>
        &nbsp;&nbsp;&nbsp; Administration; Director of Bowne &amp; Co., Inc. <br>
        &nbsp;&nbsp;&nbsp; (financial printers), Vornado Realty Trust, Inc. <br>
        &nbsp;&nbsp;&nbsp; (real estate holding company) and Alexander&#146;s Inc.
        <br>
        &nbsp;&nbsp;&nbsp; (real estate company). </font>
    </td>
    <td valign="TOP" width="45">&nbsp;</td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">61</font>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="51">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">&nbsp;</td>
    <td valign="TOP" width="45">&nbsp;</td>
    <td valign="TOP" width="50">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="51">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="306">
      <p align="JUSTIFY"><font size="2">Arthur Zeikel <br>
        &nbsp;&nbsp;&nbsp; 300 Woodland Avenue, Westfield, New Jersey <br>
        &nbsp;&nbsp;&nbsp; 07090. Chairman of FAM and MLAM from 1997 to <br>
        &nbsp;&nbsp;&nbsp; 1999; President of FAM and MLAM from 1977 to <br>
        &nbsp;&nbsp;&nbsp; 1997; Chairman of Princeton Services from 1997 <br>
        &nbsp;&nbsp;&nbsp; to 1999 and Director thereof since 1993; President
        <br>
        &nbsp;&nbsp;&nbsp; of Princeton Services from 1993 to 1997; Executive
        <br>
        &nbsp;&nbsp;&nbsp; Vice President of Merrill Lynch &amp; Co., Inc. (&#147;ML
        &amp; <br>
        &nbsp;&nbsp;&nbsp; Co.&#148;) from 1990 to 1999. </font>
    </td>
    <td valign="TOP" width="45">&nbsp;</td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">67</font>
    </td>
    <td valign="TOP" width="15">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="52">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="51">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
</TABLE>
<p>&nbsp;
<table width=600><tr><td><font size=2><B>Information Pertaining to Officers
of Insured II, Insured III and Insured IV</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth
in the table below is information about the officers of Insured II, Insured III
and Insured IV.</font></td></tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="209">&nbsp;</td>
    <td width="13">&nbsp;</td>
    <td width="55">&nbsp;</td>
    <td width="14">&nbsp;</td>
    <td width="57">&nbsp;</td>
    <td width="14">&nbsp;</td>
    <td colspan="5">
      <div align="center"><font size="2"><b><font size="1">Officer Since</font></b></font></div>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr valign="bottom">
    <td width="209">
      <p align="JUSTIFY">
      <b><font size="1">Name, Address and Biography</font>
      <hr size="1" noshade align="left" width="135">
      </b> </td>
    <td width="13">
      <p align="JUSTIFY"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td width="55">
      <p align="center"><b><font size="1">Age</font> </b>
      <hr size="1" noshade align="center" width="50%">
    </td>
    <td width="14">
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td width="57">
      <p align="center"><b><font size="1">Office</font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td width="14">
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td width="63">
      <p align="center"><b><font size="1">Insured II</font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td width="14">
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td width="72">
      <p align="center"><b><font size="1">Insured III</font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td width="16">
      <p align="center"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
        </b>
    </td>
    <td width="73">
      <p align="center"><b><font size="1">Insured IV</font> </b>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="209">
      <p align="JUSTIFY"><font size="2">Terry K. Glenn <br>
        &nbsp;&nbsp;&nbsp; Executive Vice President of MLAM <br>
        &nbsp;&nbsp;&nbsp; and FAM since 1983; Executive <br>
        &nbsp;&nbsp;&nbsp; Vice President and Director of <br>
        &nbsp;&nbsp;&nbsp; Princeton Services since 1993; <br>
        &nbsp;&nbsp;&nbsp; President of PFD since 1986 and <br>
        &nbsp;&nbsp;&nbsp; Director thereof since 1991; <br>
        &nbsp;&nbsp;&nbsp; President of Princeton <br>
        &nbsp;&nbsp;&nbsp; Administrators since 1988. </font>
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">59</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="57">
      <p align="left"><font size="2">President</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="63">
      <p align="center"><font size="2">1999*</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="72">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="16">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="209">&nbsp;</td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="57">
      <div align="left"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="63">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="72">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="16">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="209">
      <p align="JUSTIFY"><font size="2">Vincent R Giordano<br>
        &nbsp;&nbsp;&nbsp; Senior Vice President of <br>
        &nbsp;&nbsp;&nbsp; FAM and MLAM since 1984; <br>
        &nbsp;&nbsp;&nbsp; Portfolio Manager of FAM and <br>
        &nbsp;&nbsp;&nbsp; MLAM since 1977; Senior Vice <br>
        &nbsp;&nbsp;&nbsp; President of Princeton Services <br>
        &nbsp;&nbsp;&nbsp; since 1993. </font>
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">55</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="57">
      <p align="left"><font size="2">Senior <br>
        Vice President</font><font size="2"></font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="63">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="72">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="16">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="209">&nbsp;</td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2"> </font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="57">
      <div align="left"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="63">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="72">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="16">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="209">
      <p align="JUSTIFY"><font size="2">Kenneth A. Jacob <br>
        &nbsp;&nbsp;&nbsp; First Vice President of MLAM since <br>
        &nbsp;&nbsp;&nbsp; 1997; Vice President of MLAM <br>
        &nbsp;&nbsp;&nbsp;
        from 1984 to 1997; Vice President<br>
        &nbsp;&nbsp;&nbsp;
         of FAM since 1984. </font>
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">48</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="57">
      <div align="left"><font size="2">Vice</font> <font size="2"><br>
        President</font> </div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="63">
      <div align="center"><font size="2">1999</font></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="72">
      <div align="center"><font size="2">1999</font></div>
    </td>
    <td valign="TOP" width="16">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <div align="center"><font size="2">1999</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="209">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="57">
      <div align="left"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="63">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="72">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="16">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="209">
      <p align="JUSTIFY"><font size="2">Donald C. Burke<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Senior Vice President and Treasurer &nbsp;&nbsp;&nbsp;&nbsp;of
        MLAM and FAM since 1999; &nbsp;&nbsp;&nbsp;&nbsp;Senior Vice President
        and Treasurer &nbsp;&nbsp;&nbsp;&nbsp;of Princeton Services since 1999;
        &nbsp;&nbsp;&nbsp;&nbsp;Vice President of PFD since 1999; &nbsp;&nbsp;&nbsp;&nbsp;First
        Vice President of MLAM from &nbsp;&nbsp;&nbsp;&nbsp;1997 to 1999; Vice
        President of &nbsp;&nbsp;&nbsp;&nbsp;MLAM from 1990 to 1997; Director
        &nbsp;&nbsp;&nbsp;&nbsp;of Taxation of MLAM since 1990. </font>
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">39</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="57">
      <p align="left"><font size="2">Vice</font> <font size="2"><br>
        President and <br>
        Treasurer</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="63">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="72">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="16">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
</TABLE>
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
I-5</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;








<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 63, page: 63" -->






<p>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="208">&nbsp;</td>
    <td width="15">&nbsp;</td>
    <td width="55">&nbsp;</td>
    <td width="14">&nbsp;</td>
    <td width="58">&nbsp;</td>
    <td width="12">&nbsp;</td>
    <td width="238" colspan="5">
      <div align="center"><b><font size="1">Officer Since</font></b></div>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr valign="bottom">
    <td width="208">
      <p align="JUSTIFY"><font size="1"><b>Name, Address and Biography </b></font>
      <hr size="1" noshade align="left" width="135">
    </td>
    <td width="15">
      <p align="JUSTIFY"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="55">
      <p align="center"><font size="1"><b>Age </b></font>
      <hr size="1" noshade align="center" width="50%">
    </td>
    <td width="14">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="58">
      <p align="center"><font size="1"><b>Office </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td width="12">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="67">
      <p align="center"><font size="1"><b>Insured II </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td width="13">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="71">
      <p align="center"><font size="1"><b>Insured III </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td width="14">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="73">
      <p align="center"><font size="1"><b>Insured IV </b></font>
      <hr size="1" noshade align="center">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="208">
      <p align="JUSTIFY"><font size="2">Robert A. DiMella, CFA<br>
        &nbsp;&nbsp;&nbsp; Vice President of MLAM <br>
        &nbsp;&nbsp;&nbsp; since 1997; Assistant Vice <br>
        &nbsp;&nbsp;&nbsp; President of MLAM from 1995 to <br>
        &nbsp;&nbsp;&nbsp; 1997; Assistant Portfolio Manager <br>
        &nbsp;&nbsp;&nbsp; of MLAM from 1993 to 1995. </font>
    </td>
    <td valign="TOP" width="15">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">33</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="58">
      <p align="left"><font size="2">Vice</font> <font size="2"><br>
        President</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="67">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="71">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="208">&nbsp;</td>
    <td valign="TOP" width="15">&nbsp;</td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="58">
      <div align="left"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="67">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="71">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="208">
      <p align="JUSTIFY"><font size="2">William R. Bock <br>
        &nbsp;&nbsp;&nbsp; Vice President of MLAM <br>
        &nbsp;&nbsp;&nbsp; since 1989 </font>
    </td>
    <td valign="TOP" width="15">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">64</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="58">
      <p align="left"><font size="2">Vice</font> <font size="2"><br>
        President</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="67">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="71">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <p align="center"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="208">
      <p align="JUSTIFY"><font size="2">.</font>
    </td>
    <td valign="TOP" width="15">&nbsp;</td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="58">
      <div align="left"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="67">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="71">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="208">
      <p align="JUSTIFY"><font size="2">Fred K. Steube <br>
        &nbsp;&nbsp;&nbsp; Vice President of MLAM <br>
        &nbsp;&nbsp;&nbsp; since 1989. </font>
    </td>
    <td valign="TOP" width="15">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">49</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="58">
      <p align="left"><font size="2">Vice</font> <font size="2"><br>
        President</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="67">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="71">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="208">&nbsp;</td>
    <td valign="TOP" width="15">&nbsp;</td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="58">
      <div align="left"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="67">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="71">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="208">
      <p align="JUSTIFY"><font size="2">William E. Zitelli, Jr. <br>
        &nbsp;&nbsp;&nbsp; Attorney associated with MLAM <br>
        &nbsp;&nbsp;&nbsp; since 1998; Attorney associated <br>
        &nbsp;&nbsp;&nbsp; with Pepper Hamilton LLP from <br>
        &nbsp;&nbsp;&nbsp; 1997 to 1998; Attorney associated <br>
        &nbsp;&nbsp;&nbsp; with Reboul, MacMurray, Hewitt, <br>
        &nbsp;&nbsp;&nbsp; Maynard and Kristol from 1994 <br>
        &nbsp;&nbsp;&nbsp; to 1997. </font>
    </td>
    <td valign="TOP" width="15">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">31</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="58">
      <p align="left"><font size="2">Secretary</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="67">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="71">
      <p align="center"><font size="2">N/A</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <p align="center"><font size="2">1999</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="208">&nbsp;</td>
    <td valign="TOP" width="15">&nbsp;</td>
    <td valign="TOP" width="55">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="58">
      <div align="left"></div>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="67">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="71">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="208">
      <p align="JUSTIFY"><font size="2">Bradley J. Lucido <br>
        &nbsp;&nbsp;&nbsp; Vice President of MLAM since <br>
        &nbsp;&nbsp;&nbsp; 1999; attorney with MLAM since <br>
        &nbsp;&nbsp;&nbsp; 1995; attorney in private practice <br>
        &nbsp;&nbsp;&nbsp; from 1991 to 1995. </font>
    </td>
    <td valign="TOP" width="15">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">35</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="58">
      <p align="left"><font size="2">Secretary</font>
    </td>
    <td valign="TOP" width="12">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="67">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="13">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="71">
      <p align="center"><font size="2">1999</font>
    </td>
    <td valign="TOP" width="14">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="73">
      <p align="center"><font size="2">N/A</font>
    </td>
  </tr>
</TABLE>
<p>&nbsp;
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>
<table width=600><tr><td width=3% align=right valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Prior to being elected President of Insured II
      in 1999, Mr. Glenn served as Executive Vice President of the Fund. </font></td>
  </tr></TABLE>

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













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<!-- MARKER LABEL="sheet: 64, page: 64" -->







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

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

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS
AGREEMENT AND PLAN OF REORGANIZATION (this &#147;Agreement&#148;) is made as of
the _____ day of May, 2000, by and among MuniHoldings Insured Fund II, Inc., a
Maryland corporation (&#147;Insured II&#148;), MuniHoldings Insured Fund III,
Inc., a Maryland corporation (&#147;Insured III&#148;) and MuniHoldings Insured
Fund IV, Inc., a Maryland corporation (&#147;Insured IV&#148;) (Insured II,
Insured III and Insured IV are sometimes referred to herein collectively as the
&#147;Funds&#148; and individually as a &#147;Fund,&#148; as the context
requires; Insured III and Insured IV are sometimes referred to herein
collectively as the &#147;Acquired Funds&#148; and individually as an
&#147;Acquired Fund,&#148; as the context requires).</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><FONT SIZE="2"><U>PLAN OF REORGANIZATION</U></FONT></td>
  </tr></TABLE><p></p>

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

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) (1) the acquisition by
      Insured II of substantially all of the assets, and the assumption by Insured
      II of substantially all of the liabilities of Insured III in exchange solely
      for an equal aggregate value of newly issued shares of (A) common stock,
      with a par value of $0.10 per share of Insured II (&#147;Insured II Common
      Stock&#148;) and (B) auction market preferred stock of Insured II, 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) to be designated
      Series C (&#147;Insured II Series C AMPS&#148;), and (2) the subsequent
      distribution by Insured III to Insured III stockholders of (x) all of the
      Insured II Common Stock received by Insured III in exchange for such stockholders&#146;
      shares of common stock, with a par value of $0.10 per share, of Insured
      III, including shares of Common Stock of Insured III representing the Dividend
      Reinvestment Plan (&#147;DRIP&#148;) shares held in the book deposit accounts
      of the holders of Common Stock of Insured III (&#147;Insured III Common
      Stock&#148;) and (y) all of the Insured II Series C AMPS received by Insured
      III in exchange for such stockholders&#146; shares of auction market preferred
      stock of Insured III, 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) designated Series A (&#147;Insured III AMPS&#148;);</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) (1) the acquisition by
      Insured II of substantially all of the assets, and the assumption by Insured
      II of substantially all of the liabilities of Insured IV in exchange solely
      for an equal aggregate value of newly issued shares of (A) Insured II Common
      Stock and (B) Insured II Series C AMPS, and (2) the subsequent distribution
      by Insured IV to Insured IV stockholders of (x) all of the Insured II Common
      Stock received by Insured IV in exchange for such stockholders&#146; shares
      of common stock, with a par value of $0.10 per share, of Insured IV, including
      shares of Common Stock of Insured IV representing DRIP shares held in the
      book deposit accounts of holders of Common Stock of Insured IV (&#147;Insured
      IV Common Stock&#148;) and (y) all of the Insured II Series C AMPS received
      by Insured IV in exchange for such stockholders&#146; shares of auction
      market preferred stock of Insured IV, 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) designated Series A (&#147;Insured IV
      AMPS&#148;); all upon and subject to the terms hereinafter set forth (collectively,
      the &#147;Reorganization&#148;).</font></td>
  </tr></TABLE><p></p>

<p>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the
course of the Reorganization, Insured II Common Stock and Insured II Series C
AMPS will be distributed to the stockholders of the Acquired Funds as follows:</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) (1) each holder of Insured
      III Common Stock will be entitled to receive a number of shares of Insured
      II Common Stock equal to the aggregate net asset value of the Insured III
      Common Stock owned by such stockholder on the Exchange Date; and (2) each
      holder of Insured III AMPS will be entitled to receive a number of shares
      of Insured II Series C AMPS equal to the aggregate liquidation preference
      (and aggregate value) of the Insured III AMPS owned by such stockholder
      on the Exchange Date (as defined in Section 8(a) below); and</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) (1)
each holder of Insured IV Common Stock will be entitled to receive a number of
shares of Insured II Common Stock equal to the aggregate net asset value of the
Insured IV Common Stock owned by such stockholder on the Exchange Date; and (2)
each holder of Insured IV AMPS will be entitled to receive a number of shares of
Insured II Series C AMPS equal to the aggregate liquidation preference (and
aggregate value) of the Insured IV AMPS owned by such stockholder on the
Exchange Date.</font></td></tr></TABLE><p></p>

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













<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 65, page: 65" -->







<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is
intended that the Reorganization described in this Agreement shall be a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the &#147;Code&#148;), and any successor
provision.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to
the Exchange Date, each Acquired Fund shall declare a dividend or dividends
which, together with all such previous dividends, shall have the effect of
distributing to their respective stockholders all of their respective net
investment company taxable income to and including the Exchange Date, if any
(computed without regard to any deduction for dividends paid), and all of its
net capital gain, if any, realized to and including the Exchange Date. In this
regard and in connection with the Reorganization, the last dividend period for
the Insured III AMPS and Insured IV AMPS prior to the Exchange Date may be
shorter than the dividend period for such AMPS determined as set forth in the
applicable Articles Supplementary.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Articles
Supplementary to Insured II&#146;s Articles of Incorporation establishing the
powers, rights and preferences of the Insured II Series C AMPS will have been
filed with the State Department of Assessments and Taxation of Maryland (the
&#147;Maryland Department&#148;) prior to the Exchange Date.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
promptly as practicable after the consummation of the Reorganization, each
Acquired Fund shall be dissolved in accordance with the laws of the State of
Maryland and will terminate its registration under the Investment Company Act of
1940, as amended (the &#147;1940 Act&#148;).</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><FONT SIZE="2"><U>AGREEMENT</U></FONT></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order
to consummate the Reorganization and in consideration of the promises and the
covenants and agreements hereinafter set forth, and intending to be legally
bound, each Fund hereby agrees as follows:</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">1. <I>Representations and Warranties of
Insured II</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
II represents and warrants to, and agrees with, the Acquired Funds that:</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Insured II is a corporation duly organized, validly existing and in good
standing in conformity with the laws of the State of Maryland, and has the power
to own all of its assets and to carry out this Agreement. Insured II has all
necessary Federal, state and local authorizations to carry on its business as it
is now being conducted and to carry out this Agreement.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Insured II is duly registered under the 1940 Act as a non-diversified,
closed-end management investment company (File No. 811-09191), and such
registration has not been revoked or rescinded and is in full force and effect.
Insured II has elected and qualified for the special tax treatment afforded
regulated investment companies (&#147;RICs&#148;) under Sections 851-855 of the
Code at all times since its inception and intends to continue to so qualify
until consummation of the Reorganization and thereafter.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Each
Acquired Fund has been furnished with Insured II&#146;s Annual Report to
Stockholders for the fiscal year ended September 30, 1999, and the audited
financial statements appearing therein, having been examined by Ernst &amp;
Young <FONT SIZE="1">LLP</FONT>, independent public accountants, fairly present the financial position
of Insured II as of the respective dates indicated, in conformity with generally
accepted accounting principles applied on a consistent basis.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Each
Acquired Fund has been furnished with Insured II&#146;s Semi-Annual Report to
Stockholders for the period ended March 31, 2000, and the unaudited financial
statements appearing therein, fairly present the financial position of Insured
II as of the respective dates indicated, in conformity with generally accepted
accounting principles applied on a consistent basis.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) An
unaudited statement of assets, liabilities and capital of Insured II and an
unaudited schedule of investments of Insured II, each as of the Valuation Time
(as defined in Section 4(d) of this Agreement), will be furnished to each
Acquired Fund, at or prior to the Exchange Date for the purpose of determining
the number of shares of Insured II Common Stock and Insured II Series C AMPS to
be issued pursuant to Section 5 of this Agreement; each will fairly present the
financial position of Insured II as of the Valuation Time in conformity with
generally accepted accounting principles applied on a consistent basis.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)
Insured II has full power and authority to enter into and perform its
obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action of its Board of
Directors, and this Agreement constitutes a valid and binding contract
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors&#146; rights generally and court decisions with respect
thereto.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) There
are no material legal, administrative or other proceedings pending or, to the
knowledge of Insured II, threatened against it which assert liability on the
part of Insured II or which materially affect its financial condition or its
ability to consummate the Reorganization. Insured II is not charged with or, to
the best of its knowledge, threatened with any violation or investigation of any
possible violation of any provisions of any Federal, state or local law or
regulation or administrative ruling relating to any aspect of its business.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)
Insured II is not obligated under any provision of its Articles of
Incorporation, as amended, or its by-laws, as amended, or a party to any
contract or other commitment or obligation, and is not subject to any order or
decree which would be violated by its execution of or performance under this
Agreement, except insofar as the Funds have mutually agreed to amend such
contract or other commitment or obligation to cure any potential violation as a
condition precedent to the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) There
are no material contracts outstanding to which Insured II is a party that have
not been disclosed in the N-14 Registration Statement (as defined in subsection
(l) below) or will not otherwise be disclosed to the Acquired Funds prior to the
Valuation Time.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)
Insured II has no known liabilities of a material amount, contingent or
otherwise, other than those shown on its statements of assets, liabilities and
capital referred to above, those incurred in the ordinary course of its business
as an investment company since March 31, 2000; and those incurred in connection
with the Reorganization. As of the Valuation Time, Insured II will advise each
Acquired Fund in writing of all known liabilities, contingent or otherwise,
whether or not incurred in the ordinary course of business, existing or accrued
as of such time.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) No
consent, approval, authorization or order of any court or governmental authority
is required for the consummation by Insured II of the Reorganization, except
such as may be required under the Securities Act of 1933, as amended (the
&#147;1933 Act&#148;), the Securities Exchange Act of 1934, as amended (the
&#147;1934 Act&#148;) and the 1940 Act or state securities laws (which term as
used herein shall include the laws of the District of Columbia and Puerto Rico).</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) The
registration statement filed by Insured II on Form N-14 which includes the joint
proxy statement of the Funds with respect to the transactions contemplated
herein and the prospectus of Insured II relating to the Insured II Common Stock
and Insured II Series C AMPS to be issued pursuant to this Agreement (the
&#147;Joint Proxy Statement and Prospectus&#148;), and any supplement or
amendment thereto or to the documents therein (as amended or supplemented, the
&#147;N-14 Registration Statement&#148;), on its effective date, at the time of
the stockholders&#146; meetings referred to in Section 7(a) of this Agreement
and at the Exchange Date, insofar as it relates to Insured II (i) complied or
will comply in all material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) did
not or will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Joint Proxy Statement and Prospectus
included therein did not or will not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; <I>provided, however,</I> that the representations and warranties in this
subsection only shall apply to statements in or omissions from the N-14
Registration Statement made in reliance upon and in conformity with information
furnished by Insured II for use in the N-14 Registration Statement as provided
in Section 7(e) of this Agreement.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)
Insured II is authorized to issue 200,000,000 shares of capital stock, of which
2,100 shares have been designated as Series A AMPS, 2,100 shares have been
designated as Series B AMPS (the Series A AMPS of Insured II and the Series B
AMPS of Insured II being collectively referred to herein as the &#147;Insured II
AMPS&#148;) and 199,995,800 shares have been designated as common stock, par
value $.10 per share; each outstanding share of which is fully paid and
nonassessable and has full voting rights.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) The
shares of Insured II Common Stock and Insured II Series C AMPS to be issued to
the Acquired Funds pursuant to this Agreement will have been duly authorized
and, when issued and delivered pursuant to this Agreement, will be legally and
validly issued and will be fully paid and nonassessable and will have full
voting rights, and no stockholder of Insured II will have any preemptive right
of subscription or purchase in respect thereof.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) At or
prior to the Exchange Date, the Insured II Common Stock to be transferred to the
Acquired Funds for distribution to the stockholders of the Acquired Funds on the
Exchange Date will be duly qualified for offering to the public in all states of
the United States in which the sale of shares of the Funds presently are</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>qualified, and there will be a
sufficient number of such shares registered under the 1933 Act and, as may be
necessary, with each pertinent state securities commission to permit the
transfers contemplated by this Agreement to be consummated.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) At or
prior to the Exchange Date, the shares of Insured II Series C AMPS to be
transferred to Insured III and Insured IV on the Exchange Date will be duly
qualified for offering to the public in all states of the United States in which
the sale of AMPS of the Acquired Funds presently are qualified, and there are a
sufficient number of Insured II Series C AMPS registered under the 1933 Act and
with each pertinent state securities commission to permit the transfers
contemplated by this Agreement to be consummated.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) At or prior to the Exchange
      Date, Insured II will have obtained any and all regulatory, Director and
      stockholder approvals necessary to issue the Insured II Common Stock and
      Insured II Series C AMPS to Insured III and Insured IV.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">2. <I>Representations and Warranties of
Insured III</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
III represents and warrants to, and agrees with, Insured II and Insured IV that:</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Insured III is a corporation duly organized, validly existing and in good
standing in conformity with the laws of the State of Maryland, and has the power
to own all of its assets and to carry out this Agreement. Insured III has all
necessary Federal, state and local authorizations to carry on its business as it
is now being conducted and to carry out this Agreement.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Insured III is duly registered under the 1940 Act as a non-diversified,
closed-end management investment company (File No. 811-09285), and such
registration has not been revoked or rescinded and is in full force and effect.
Insured III has elected and qualified for the special tax treatment afforded
RICs under Sections 851-855 of the Code at all times since its inception, and
intends to continue to so qualify through its taxable year ending upon
liquidation.</font></td></tr></TABLE><p></p>

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

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
Insured III has full power and authority to enter into and perform its
obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action of its Board of
Directors and this Agreement constitutes a valid and binding contract
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors&#146; rights generally and court decisions with respect
thereto.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Each
of Insured II and Insured IV has been furnished with Insured III&#146;s
Semi-Annual Report to Stockholders for the period ended October 31, 1999, and
the unaudited financial statements appearing therein, fairly present the
financial position of Insured III as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) An
unaudited statement of assets, liabilities and capital of Insured III and an
unaudited schedule of investments of Insured III, each as of the Valuation Time,
will be furnished to each of Insured II and Insured IV at or prior to the
Exchange Date for the purpose of determining the number of shares of Insured II
Common Stock and Insured II Series C AMPS to be issued to Insured III pursuant
to Section 5 of this Agreement; each will fairly present the financial position
of Insured III as of the Valuation Time in conformity with generally accepted
accounting principles applied on a consistent basis.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) There
are no material legal, administrative or other proceedings pending or, to the
knowledge of Insured III, threatened against it which assert liability on the
part of Insured III or which materially affect its financial condition or its
ability to consummate the Reorganization. Insured III is not charged with or, to
the best of its knowledge, threatened with any violation or investigation of any
possible violation of any provisions of any Federal, state or local law or
regulation or administrative ruling relating to any aspect of its business.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) There
are no material contracts outstanding to which Insured III is a party that have
not been disclosed in the N-14 Registration Statement or will not otherwise be
disclosed to Insured II and Insured IV prior to the Valuation Time.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Insured III is not obligated under any provision of its Articles of
Incorporation, as amended, or its by-laws, as amended, or a party to any
contract or other commitment or obligation, and is not subject to any order or
decree which would be violated by its execution of or performance under this
Agreement, except insofar as the Funds have mutually agreed to amend such
contract or other commitment or obligation to cure any potential violation as a
condition precedent to the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)
Insured III has no known liabilities of a material amount, contingent or
otherwise, other than those shown on its statements of assets, liabilities and
capital referred to above, those incurred in the ordinary course of its business
as an investment company since October 31, 1999 and those incurred in connection
with the Reorganization. As of the Valuation Time, Insured III will advise
Insured II and Insured IV in writing of all known liabilities, contingent or
otherwise, whether or not incurred in the ordinary course of business, existing
or accrued as of such time.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)
Insured III has filed, or has obtained extensions to file, all Federal, state
and local tax returns which are required to be filed by it, and has paid or has
obtained extensions to pay, all Federal, state and local taxes shown on said
returns to be due and owing and all assessments received by it, up to and
including the taxable year in which the Exchange Date occurs. All tax
liabilities of Insured III have been adequately provided for on its books, and
no tax deficiency or liability of Insured III has been asserted and no question
with respect thereto has been raised by the Internal Revenue Service or by any
state or local tax authority for taxes in excess of those already paid, up to
and including the taxable year in which the Exchange Date occurs.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) At
both the Valuation Time and the Exchange Date, Insured III will have full right,
power and authority to sell, assign, transfer and deliver the Insured III
Investments. At the Exchange Date, subject only to the obligation to deliver the
Insured III Investments as contemplated by this Agreement, Insured III will have
good and marketable title to all of the Insured III Investments, and Insured II
will acquire all of the Insured III Investments free and clear of any
encumbrances, liens or security interests and without any restrictions upon the
transfer thereof (except those imposed by the Federal or state securities laws
and those imperfections of title or encumbrances as do not materially detract
from the value or use of the Insured III Investments or materially affect title
thereto).</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) No
consent, approval, authorization or order of any court or governmental authority
is required for the consummation by Insured III of the Reorganization, except
such as may be required under the 1933 Act, the 1934 Act, the 1940 Act or state
securities laws.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) The
N-14 Registration Statement, on its effective date, at the time of the
stockholders&#146; meetings referred to in Section 7(a) of this Agreement and on
the Exchange Date, insofar as it relates to Insured III (i) complied or will
comply in all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder, and (ii) did not
or will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Joint Proxy Statement and Prospectus included
therein did not or will not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; <I>provided,
however</I>, that the representations and warranties in this subsection shall apply
only to statements in or omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by Insured III for
use in the N-14 Registration Statement as provided in Section 7(e) of this
Agreement.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)
Insured III is authorized to issue 200,000,000 shares of capital stock, of which
2,714 shares have been designated as Series A AMPS, and 199,997,286 shares have
been designated as common stock, par value $.10 per share; each outstanding
share of which is fully paid and nonassessable and has full voting rights.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) All
of the issued and outstanding shares of Insured III Common Stock and Insured III
AMPS were offered for sale and sold in conformity with all applicable Federal
and state securities laws.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) The
books and records of Insured III made available to Insured II and Insured IV
and/or their counsel are substantially true and correct and contain no material
misstatements or omissions with respect to the operations of Insured III.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)
Insured III will not sell or otherwise dispose of any of the shares of Insured
II Common Stock or Insured II Series C AMPS to be received in the
Reorganization, except in distribution to the stockholders of Insured III, as
provided in Section 4 of this Agreement.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><FONT SIZE="2">3. <I>Representations and Warranties of
Insured IV</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured
IV represents and warrants to, and agrees with, Insured II and Insured III that:</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Insured IV is a corporation duly organized, validly existing and in good
standing in conformity with the laws of the State of Maryland, and has the power
to own all of its assets and to carry out this Agreement. Insured IV has all
necessary Federal, state and local authorizations to carry on its business as it
is now being conducted and to carry out this Agreement.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Insured IV is duly registered under the 1940 Act as a non-diversified,
closed-end management investment company (File No. 811-09557), and such
registration has not been revoked or rescinded and is in full force and effect.
Insured IV has elected and qualified for the special tax treatment afforded RICs
under Sections 851-855 of the Code at all times since its inception, and intends
to continue to so qualify through its taxable year ending upon liquidation.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) As
used in this Agreement, the term &#147;Insured IV Investments&#148; shall mean
(i) the investments of Insured IV shown on the schedule of its investments as of
the Valuation Time furnished to each of Insured II and Insured III; and (ii) all
other assets owned by Insured IV or liabilities incurred as of the Valuation
Time. The Insured IV Investments, together with the Insured III Investments, may
sometimes be referred to herein collectively as the &#147;Acquired Fund
Investments.&#148;</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
Insured IV has full power and authority to enter into and perform its
obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action of its Board of
Directors and this Agreement constitutes a valid and binding contract
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors&#146; rights generally and court decisions with respect
thereto.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Each
of Insured II and Insured III has been furnished with Insured IV&#146;s
Semi-Annual Report to Stockholders for the period ended February 29, 2000, and
the unaudited financial statements appearing therein, fairly present the
financial position of Insured IV as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) An
unaudited statement of assets, liabilities and capital of Insured IV and an
unaudited schedule of investments of Insured IV, each as of the Valuation Time,
will be furnished to each of Insured II and Insured III at or prior to the
Exchange Date for the purpose of determining the number of shares of Insured II
Common Stock and Insured II Series C AMPS to be issued to Insured IV pursuant to
Section 5 of this Agreement; each will fairly present the financial position of
Insured IV as of the Valuation Time in conformity with generally accepted
accounting principles applied on a consistent basis.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) There
are no material legal, administrative or other proceedings pending or, to the
knowledge of Insured IV, threatened against it which assert liability on the
part of Insured IV or which materially affect its financial condition or its
ability to consummate the Reorganization. Insured IV, is not charged with or, to
the best of its knowledge, threatened with any violation or investigation of any
possible violation of any provisions of any Federal, state or local law or
regulation or administrative ruling relating to any aspect of its business.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) There
are no material contracts outstanding to which Insured IV is a party that have
not been disclosed in the N-14 Registration Statement or will not otherwise be
disclosed to Insured II and Insured III prior to the Valuation Time.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Insured IV is not obligated under any provision of its Articles of
Incorporation, as amended, or its by-laws, as amended, or a party to any
contract or other commitment or obligation, and is not subject to any order or
decree which would be violated by its execution of or performance under this
Agreement, except insofar as the Funds have mutually agreed to amend such
contract or other commitment or obligation to cure any potential violation as a
condition precedent to the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)
Insured IV has no known liabilities of a material amount, contingent or
otherwise, other than those shown on its statements of assets, liabilities and
capital referred to above, those incurred in the ordinary course of its business
as an investment company since February 29, 2000 and those incurred in
connection with the Reorganization. As of the Valuation Time, Insured IV will
advise Insured II and Insured III in writing of all known liabilities,
contingent or otherwise, whether or not incurred in the ordinary course of
business, existing or accrued as of such time.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)
Insured IV has filed, or has obtained extensions to file, all Federal, state and
local tax returns which are required to be filed by it, and has paid or has
obtained extensions to pay, all Federal, state and local taxes shown on said
returns to be due and owing and all assessments received by it, up to and
including the taxable year in which the Exchange Date occurs. All tax
liabilities of Insured IV have been adequately provided for on its books, and no
tax deficiency or liability of Insured IV has been asserted and no question with
respect thereto has been raised by the Internal Revenue Service or by any state
or local tax authority for taxes in excess of those already paid, up to and
including the taxable year in which the Exchange Date occurs.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) At
both the Valuation Time and the Exchange Date, Insured IV will have full right,
power and authority to sell, assign, transfer and deliver the Insured IV
Investments. At the Exchange Date, subject only to the obligation to deliver the
Insured IV Investments as contemplated by this Agreement, Insured IV will have
good and marketable title to all of the Insured IV Investments, and Insured II
will acquire all of the Insured IV Investments free and clear of any
encumbrances, liens or security interests and without any restrictions upon the
transfer thereof (except those imposed by the Federal or state securities laws
and those imperfections of title or encumbrances as do not materially detract
from the value or use of the Insured IV Investments or materially affect title
thereto).</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) No
consent, approval, authorization or order of any court or governmental authority
is required for the consummation by Insured IV of the Reorganization, except
such as may be required under the 1933 Act, the 1934 Act, the 1940 Act or state
securities laws.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) The
N-14 Registration Statement, on its effective date, at the time of the
stockholders&#146; meetings referred to in Section 7(a) of this Agreement and on
the Exchange Date, insofar as it relates to Insured IV (i) complied or will
comply in all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder, and (ii) did not
or will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Joint Proxy Statement and Prospectus included
therein did not or will not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; <I>provided,
however</I>, that the representations and warranties in this subsection shall apply
only to statements in or omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by Insured IV for use
in the N-14 Registration Statement as provided in Section 7(e) of this
Agreement.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)
Insured IV is authorized to issue 200,000,000 shares of capital stock, of which
1,266 shares have been designated as Series A AMPS, and 199,998,734 shares have
been designated as common stock, par value $.10 per share; each outstanding
share of which is fully paid and nonassessable and has full voting rights.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) All
of the issued and outstanding shares of Insured IV Common Stock and Insured IV
AMPS were offered for sale and sold in conformity with all applicable Federal
and state securities laws.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) The
books and records of Insured IV made available to Insured II and Insured III
and/or their counsel are substantially true and correct and contain no material
misstatements or omissions with respect to the operations of Insured IV.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)
Insured IV will not sell or otherwise dispose of any of the shares of Insured II
Common Stock or Insured II Series C AMPS to be received in the Reorganization,
except in distribution to the stockholders of Insured IV, as provided in Section
4 of this Agreement.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">4. <I>The Reorganization</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Subject to receiving the requisite approvals of the stockholders of each Fund,
and to the other terms and conditions contained herein, (i) Insured III agrees
to convey, transfer and deliver to Insured II and Insured II agrees to acquire
from Insured III on the Exchange Date, all of the Insured III Investments
(including interest accrued as of the Valuation Time on debt instruments) and
assume substantially all of the liabilities of Insured III in exchange solely
for that number of shares of Insured II Common Stock and Insured II Series C
AMPS provided in Section 5 of this Agreement; and (ii) Insured IV agrees to
convey, transfer and deliver to Insured II and Insured II agrees to acquire from
Insured IV on the Exchange Date, all of the Insured IV Investments (including
interest accrued as of the Valuation Time on debt instruments) and assume
substantially all of the liabilities of Insured IV in exchange solely for that
number of shares of Insured II Common Stock and Insured II Series C AMPS
provided in Section 5 of this Agreement.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to this Agreement, as soon as practicable after the Exchange Date (i) Insured
III will distribute all shares of Insured II Common Stock and Insured II Series
C AMPS received by it to its stockholders in exchange for their shares of
Insured III Common Stock and Insured III AMPS; and (ii) Insured IV will
distribute all shares of Insured II Common Stock and Insured II Series C AMPS
received by it to its stockholders in exchange for their shares of Insured IV
Common Stock and Insured IV AMPS. Such distributions shall be accomplished by
the opening of stockholder accounts on the stock ledger records of Insured II in
the amounts due the stockholders of each Acquired Fund based on their respective
holdings in such Acquired Fund as of the Valuation Time.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Prior
to the Exchange Date, each Acquired Fund shall declare a dividend or dividends
which, together with all such previous dividends, shall have the effect of
distributing to their respective stockholders all of their respective net
investment company taxable income to and including the Exchange Date, if any
(computed without regard to any deduction for dividends paid), and all of their
net capital gain, if any, realized to and including the Exchange Date. In this
regard and in connection with the Reorganization, the last dividend period for
the Insured III AMPS and the Insured IV AMPS prior to the Exchange Date may be
shorter than the dividend period for such AMPS determined as set forth in the
applicable Articles Supplementary.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Each
Acquired Fund will pay or cause to be paid to Insured II any interest such
Acquired Fund receives on or after the Exchange Date with respect to any of the
Acquired Fund Investments transferred to Insured II hereunder.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The
Valuation Time shall be 4:00 p.m., Eastern time, on __________ __, 2000, or such
earlier or later day and time as may be mutually agreed upon in writing (the
&#147;Valuation Time&#148;).</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)
Recourse for liabilities assumed from each Acquired Fund by Insured II in the
Reorganization will be limited to the net assets of each such fund acquired by
Insured II. The known liabilities of the Acquired Funds, as of the Valuation
Time, shall be confirmed in writing to Insured II pursuant to Sections 2(j) and
3(j) of this Agreement.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The
Funds will jointly file Articles of Transfer with the Maryland Department and
any other such instrument as may be required by the State of Maryland to effect
the transfer of the Acquired Fund Investments.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) The
Acquired Funds will each be dissolved following the Exchange Date by filing
separate Articles of Dissolution with the Maryland Department.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)
Insured II will file with the Maryland Department Articles Supplementary to its
Articles of Incorporation establishing the powers, rights and preferences of the
Insured II Series C AMPS prior to the closing of the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) As
promptly as practicable after the liquidation of each Acquired Fund pursuant to
the Reorganization, each Acquired Fund shall terminate its respective
registration under the 1940 Act.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">5. <I>Issuance and Valuation of Insured
II Common Stock and Insured II Series C AMPS in the Reorganization</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Full
shares of Insured II Common Stock and Insured II Series C AMPS of an aggregate
net asset value or liquidation preference, as the case may be, equal (to the
nearest one ten thousandth of one cent) to the value of the assets of Insured
III acquired in the Reorganization determined as hereinafter provided, reduced
by the amount of liabilities of Insured III assumed by Insured II in the
Reorganization, shall be issued by Insured II to Insured III in exchange for
such assets of Insured III, plus cash in lieu of fractional shares. Insured II
will issue to Insured III (a) a number of shares of Insured II Common Stock, the
aggregate net asset value of which will equal the aggregate net asset value of
the shares of Insured III Common Stock, determined as set forth below, and (b) a
number of shares of Insured II Series C AMPS, the aggregate liquidation
preference and value of which will equal the aggregate liquidation preference
and value of the Insured III AMPS, determined as set forth below.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Full
shares of Insured II Common Stock and Insured II Series C AMPS of an aggregate
net asset value or liquidation preference, as the case may be, equal (to the
nearest one ten thousandth of one cent) to the value of the assets of Insured IV
acquired in the Reorganization determined as hereinafter provided, reduced by
the amount of liabilities of Insured IV assumed by Insured II in the
Reorganization, shall be issued by Insured II to Insured IV in exchange for such
assets of Insured IV, plus cash in lieu of fractional shares. Insured II will
issue to Insured IV (a) a number of shares of Insured II Common Stock, the
aggregate net asset value of which will equal the aggregate net asset value of
the shares of Insured IV Common Stock, determined as set forth below, and (b) a
number of shares of Insured II Series C AMPS, the aggregate liquidation
preference and value of which will equal the aggregate liquidation preference
and value of the Insured IV AMPS, determined as set forth below.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net asset value of each
      Fund and the liquidation preference and value of the AMPS of each Fund shall
      be determined as of the Valuation Time in accordance with the procedures
      described in (i) the final prospectus of Insured II, dated February 23,
      1999, relating to the Insured II Common Stock and (ii) the final prospectus
      of Insured II, dated March 15, 1999, relating to the Insured II AMPS, and
      no formula will be used to adjust the net asset value so determined of any
      Fund to take into account differences in realized and unrealized gains and
      losses. Values in all cases shall be determined as of the Valuation Time.
      The value of the Acquired Fund Investments to be transferred to Insured
      II shall be determined by Insured II pursuant to the procedures utilized
      by Insured II in valuing its own assets and determining its own liabilities
      for purposes of the Reorganization. Such valuation and determination shall
      be made by Insured II in cooperation with the Acquired Funds and shall be
      confirmed in writing by Insured II to the Acquired Funds. The net asset
      value per share of the Insured II Common Stock and the liquidation preference
      and value per share of the Insured II Series C AMPS shall be determined
      in accordance with such procedures and Insured II shall certify the computations
      involved. For purposes of determining the net asset value of a share of
      Common Stock of each Fund, the value of the securities held by the Fund
      plus any cash or other assets (including interest accrued but not yet received)
      minus all liabilities (including accrued expenses) and the aggregate liquidation
      value of the outstanding shares of AMPS of that Fund is divided by the total
      number of shares of Common Stock of that Fund outstanding at such time.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured II shall issue to Insured
      III separate certificates or share deposit receipts for the Insured II Common
      Stock and the Insured II Series C AMPS, each registered in the name of Insured
      III. Insured III then shall distribute the Insured II Common Stock and the
      Insured II Series C AMPS to the holders of Insured III Common Stock and
      Insured III AMPS by redelivering the certificates or share deposit receipts
      evidencing ownership of (i) the Insured II Common Stock to State Street
      Bank &amp; Trust Company, as the transfer agent and registrar for the Insured
      II Common Stock for distribution to the holders of Insured III Common Stock
      on the basis of such holder&#146;s proportionate interest in the aggregate
      net asset value of the Common Stock of Insured III and (ii) the Insured
      II Series C AMPS to The Bank of New York as the transfer agent and registrar
      for the Insured II Series C AMPS for distribution to the holders of Insured
      III AMPS on the basis of such holder&#146;s proportionate interest in the
      aggregate liquidation preference and value of the Insured III AMPS. With
      respect to any Insured III stockholder holding certificates evidencing ownership
      of either Insured III Common Stock or Insured III AMPS as of the Exchange
      Date, and subject to Insured II being informed thereof in writing by Insured
      III, Insured II will not permit such stockholder to receive new certificates
      evidencing ownership of the Insured II Common Stock or Insured II Series
      C AMPS, exchange Insured II Common Stock or Insured II Series C AMPS credited
      to such stockholder&#146;s account for shares of other investment companies
      managed by Fund Asset Management, L.P. (&#147;FAM&#148;) or any of its affiliates,
      or pledge or redeem such Insured II Common Stock or Insured II Series C
      AMPS, in any case, until notified by Insured III or its agent that such
      stockholder has surrendered his or her outstanding certificates evidencing
      ownership of Insured III Common Stock or, in the event of lost certificates,
      posted adequate bond. Insured III, at its own expense, will request its
      stockholders to surrender their outstanding certificates evidencing ownership
      of Insured III Common Stock, or post adequate bond therefor.</font></td>
  </tr></TABLE>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured II shall issue to Insured
      IV separate certificates or share deposit receipts for the Insured II Common
      Stock and the Insured II Series C AMPS, each registered in the name of Insured
      IV. Insured IV then shall distribute the Insured II Common Stock and the
      Insured II Series C AMPS to the holders of Insured IV Common Stock and Insured
      IV AMPS by redelivering the certificates or share deposit receipts evidencing
      ownership of (i) the Insured II Common Stock to State Street Bank &TrustCompany,
      as the transfer agent and registrar for the Insured II Common Stock for
      distribution to the holders of Insured IV Common Stock on the basis of such
      holder&#146;s proportionate interest in the aggregate net asset value of
      the Common Stock of Insured IV and (ii) the Insured II Series C AMPS to
      The Bank of New York as the transfer agent and registrar for the Insured
      II Series C AMPS for distribution to the holders of Insured IV AMPS on the
      basis of such holder&#146;s proportionate interest in the aggregate liquidation
      preference and value of the Insured IV AMPS. With respect to any Insured
      IV stockholder holding certificates evidencing ownership of either Insured
      IV Common Stock or Insured IV AMPS as of the Exchange Date, and subject
      to Insured II being informed thereof in writing by Insured IV, Insured II
      will not permit such stockholder to receive new certificates evidencing
      ownership of Insured II Common Stock or Insured II Series C AMPS, exchange
      Insured II Common Stock or Insured II Series C AMPS credited to such stockholder&#146;s
      account for shares of other investment companies managed by FAM or any of
      its affiliates, or pledge or redeem such Insured II Common Stock or Insured
      II Series C AMPS, in any case, until notified by Insured IV or its agent
      that such stockholder has surrendered his or her outstanding certificates
      evidencing ownership of Insured IV Common Stock or, in the event of lost
      certificates, posted adequate bond. Insured IV, at its own expense, will
      request its stockholders to surrender their outstanding certificates evidencing
      ownership of Insured IV Common Stock, or post adequate bond therefor.</font></td>
  </tr>
</TABLE>
<p></p>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-9</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;













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<p>
<p>
<p></p>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
payable to holders of record of shares of Insured II Common Stock and Insured II
Series C AMPS, as of any date after the Exchange Date and prior to the exchange
of certificates by any stockholder of an Acquired Fund shall be payable to such
stockholder without interest; however, such dividends shall not be paid unless
and until such stockholder surrenders the stock certificates representing shares
of common stock or AMPS of the Acquired Funds, as the case may be, for exchange.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
fractional shares of Insured II Common Stock will be issued to holders of
Insured III Common Stock or Insured IV Common Stock. In lieu thereof, Insured
II&#146;s transfer agent, State Street Bank &amp; Trust Company, will aggregate
all fractional shares of Insured II Common Stock and sell the resulting full
shares on the New York Stock Exchange at the current market price for shares of
Insured II Common Stock for the account of all holders of fractional interests,
and each such holder will receive such holder&#146;s <I>pro rata</I> share of the
proceeds of such sale upon surrender of such holder&#146;s certificates
representing Insured III Common Stock or Insured IV Common Stock.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">6. <I>Payment of Expenses</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) With
respect to expenses incurred in connection with the Reorganization, (i) each
Fund shall pay all expenses incurred that are attributable solely to such Fund
and the conduct of its business, and (ii) Insured II shall pay, subsequent to
the Exchange Date and pro rata according to each Fund&#146;s net assets on the
Exchange Date, all expenses incurred in connection with the Reorganization,
including, but not limited to, all costs related to the preparation and
distribution of the N-14 Registration Statement. Such fees and expenses shall
include the cost of preparing and filing a ruling request with the Internal
Revenue Service, legal and accounting fees, printing costs, filing fees, stock
exchange fees, rating agency fees, portfolio transfer taxes (if any) and any
similar expenses incurred in connection with the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If
for any reason the Reorganization is not consummated, no party shall be liable
to any other party for any damages resulting therefrom, including, without
limitation, consequential damages.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">7. <I>Covenants of the Funds</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Each
Fund agrees to hold a special meeting of its stockholders as soon as is
practicable after the effective date of the N-14 Registration Statement for the
purpose of considering the Reorganization as described in this Agreement.</font></td></tr></TABLE><p></p>

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

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Each
Acquired Fund agrees that following the consummation of the Reorganization, it
will dissolve in accordance with the laws of the State of Maryland and any other
applicable law, it will not make any distributions of any shares of Insured II
Common Stock and Insured II Series C AMPS, as applicable other than to its
respective stockholders and without first paying or adequately providing for the
payment of all of its respective liabilities not assumed by Insured II, if any,
and on and after the Exchange Date it shall not conduct any business except in
connection with its dissolution.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Each
Acquired Fund undertakes that if the Reorganization is consummated, it will file
an application pursuant to Section 8(f) of the 1940 Act for an order declaring
that such Acquired Fund has ceased to be a registered investment company.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)
Insured II will file the N-14 Registration Statement with the Securities and
Exchange Commission (the &#147;Commission&#148;) and will use its best efforts
to provide that the N-14 Registration Statement becomes effective as promptly as
practicable. Each Fund agrees to cooperate fully with the others, and each will
furnish to the others the information relating to itself to be set forth in the
N-14 Registration Statement as required by the 1933 Act, the 1934 Act, the 1940
Act, and the rules and regulations thereunder and the state securities laws.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)
Insured II has no plan or intention to sell or otherwise dispose of the Acquired
Fund Investments, except for dispositions made in the ordinary course of
business.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Each
Fund agrees that by the Exchange Date all of its Federal and other tax returns
and reports required to be filed on or before such date shall have been filed
and all taxes shown as due on said returns either </font></td></tr></TABLE><p></p>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-10</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;













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<p><table width=600><tr><td><font size=2>have been paid or adequate liability
reserves have been provided for the payment of such taxes. In connection with
this covenant, the Funds agree to cooperate with each other in filing any tax
return, amended return or claim for refund, determining a liability for taxes
or a right to a refund of taxes or participating in or conducting any audit or
other proceeding in respect of taxes. Insured II agrees to retain for a period
of ten (10) years following the Exchange Date all returns, schedules and work
papers and all material records or other documents relating to tax matters of
the Acquired Funds for each of such Fund&#146;s taxable period first ending
after the Exchange Date and for all prior taxable periods. Any information
obtained under this subsection shall be kept confidential except as otherwise
may be necessary in connection with the filing of returns or claims for refund
or in conducting an audit or other proceeding. After the Exchange Date, each
Acquired Fund shall prepare, or cause its agents to prepare, any Federal, state
or local tax returns, including any Forms 1099, required to be filed by such
fund with respect to its final taxable year ending with its complete
liquidation and for any prior periods or taxable years and further shall cause
such tax returns and Forms 1099 to be duly filed with the appropriate taxing
authorities. Notwithstanding the aforementioned provisions of this subsection,
any expenses incurred by the Acquired Funds (other than for payment of taxes)
in connection with the preparation and filing of said tax returns and Forms
1099 after the Exchange Date shall be borne by each such Fund to the extent
such expenses have been accrued by such Fund in the ordinary course without
regard to the Reorganization; any excess expenses shall be borne by FAM at the
time such tax returns and Forms 1099 are prepared.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Each
Fund agrees to mail to its respective stockholders of record entitled to vote at
the special meeting of its stockholders at which action is to be considered
regarding this Agreement, in sufficient time to comply with requirements as to
notice thereof, a combined proxy statement and prospectus which complies in all
material respects with the applicable provisions of Section 14(a) of the 1934
Act and Section 20(a) of the 1940 Act, and the rules and regulations,
respectively, thereunder.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Following the consummation of the Reorganization, Insured II will stay in
existence and continue its business as a non-diversified, closed-end management
investment company registered under the 1940 Act.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">8. <I>Exchange Date</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Delivery of the assets of the Acquired Funds to be transferred, together with
any other Acquired Fund Investments, and the shares of Insured II Common Stock
and Insured II Series C AMPS to be issued as provided in this Agreement, shall
be made at the offices of Brown &amp; Wood <FONT SIZE="1">LLP</FONT>, One World Trade Center, New
York, New York 10048, at 10:00 a.m. on the next full business day following the
Valuation Time, or at such other place, time and date agreed to by the Funds,
the date and time upon which such delivery is to take place being referred to
herein as the &#147;Exchange Date.&#148; To the extent that any Acquired Fund
Investments, for any reason, are not transferable on the Exchange Date, the
applicable Acquired Fund shall cause such Acquired Fund Investments to be
transferred to Insured II&#146;s account with State Street Bank &amp; Trust
Company at the earliest practicable date thereafter.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Each Acquired Fund will
      deliver to Insured II on the Exchange Date confirmations or other adequate
      evidence as to the tax basis of each of their respective Acquired Fund Investments
      delivered to Insured II hereunder, certified by Ernst &amp; Young <font size="1">LLP</font>
      (for Insured IV) and Deloitte &amp; Touche <font size="1">LLP</font> (for
      Insured III).</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) As
soon as practicable after the close of business on the Exchange Date, each
Acquired Fund shall deliver to Insured II a list of the names and addresses of
all of the stockholders of record of such Acquired Fund on the Exchange Date and
the number of shares of common stock and AMPS of such Acquired Fund owned by
each such stockholder, certified to the best of their knowledge and belief by
the applicable transfer agent for such Acquired Fund or by its President.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">9. <I>Conditions of the Acquired Funds</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
obligations of each Acquired Fund hereunder shall be subject to the following
conditions:</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) That this Agreement shall
      have been adopted, and the Reorganization shall have been approved, by the
      affirmative vote of two-thirds of the members of the Board of Directors
      of each Fund and by the affirmative vote of (i) the holders of (a) a majority
      of the Insured II Common Stock and Insured II AMPS, voting together as a
      single class, and (b) a majority of the Insured II AMPS, voting separately
      as a class, in each case issued and outstanding and entitled to vote thereon;
      (ii) the holders of (a) a majority of the Insured III Common Stock and Insured
      III AMPS, voting together as a single class, and (b) a majority of the Insured
      III AMPS, voting separately</font></td>
  </tr></TABLE><p></p>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-11</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;













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<p><table width=600><tr>
    <td><font size=2> as a class, in each case issued and outstanding and entitled
      to vote thereon; (iii) the holders of (a) a majority of the Insured IV Common
      Stock and Insured IV AMPS, voting together as a single class, and (b) a
      majority of the Insured IV AMPS, voting separately as a class, in each case
      issued and outstanding and entitled to vote thereon; and further that each
      Fund shall have delivered to each other Fund a copy of the resolution approving
      this Agreement adopted by such Fund&#146;s Board of Directors, and a certificate
      setting forth the vote of such Fund&#146;s stockholders obtained at the
      special meeting of its stockholders, each certified by the Secretary of
      the appropriate Fund.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) That
each Acquired Fund shall have received from Insured II and from each other
Acquired Fund a statement of assets, liabilities and capital, with values
determined as provided in Section 5 of this Agreement, together with a schedule
of such fund&#146;s investments, all as of the Valuation Time, certified on the
Fund&#146;s behalf by its President (or any Vice President) and its Treasurer,
and a certificate signed by the Fund&#146;s President (or any Vice President)
and its Treasurer, dated as of the Exchange Date, certifying that as of the
Valuation Time and as of the Exchange Date there has been no material adverse
change in the financial position of the Fund since the date of such Fund&#146;s
most recent Annual or Semi-Annual Report, as applicable, other than changes in
its portfolio securities since that date or changes in the market value of its
portfolio securities.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) That
Insured II shall have furnished to the Acquired Funds a certificate signed by
Insured II&#146;s President (or any Vice President) and its Treasurer, dated as
of the Exchange Date, certifying that, as of the Valuation Time and as of the
Exchange Date all representations and warranties of Insured II made in this
Agreement are true and correct in all material respects with the same effect as
if made at and as of such dates, and that Insured II has complied with all of
the agreements and satisfied all of the conditions on its part to be performed
or satisfied at or prior to each of such dates.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) That
there shall not be any material litigation pending with respect to the matters
contemplated by this Agreement.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) That the Acquired Funds
      shall have received an opinion or opinions of Brown &amp; Wood LLP, as counsel
      to the Funds, in form and substance satisfactory to the Acquired Funds and
      dated the Exchange Date, to the effect that (i) each Fund is a corporation
      duly organized, validly existing and in good standing in conformity with
      the laws of the State of Maryland; (ii) the shares of Insured II Common
      Stock and Insured II Series C AMPS to be issued pursuant to this Agreement
      are duly authorized and, upon delivery, will be validly issued and outstanding
      and fully paid and nonassessable by Insured II, and no stockholder of Insured
      II has any preemptive right to subscription or purchase in respect thereof
      (pursuant to the Articles of Incorporation or the by-laws of Insured II
      or the state law of Maryland, or to the best of such counsel&#146;s knowledge,
      otherwise); (iii) this Agreement has been duly authorized, executed and
      delivered by each of the Funds, and represents a valid and binding contract,
      enforceable in accordance with its terms, except as enforceability may be
      limited by bankruptcy, insolvency, reorganization or other similar laws
      pertaining to the enforcement of creditors&#146; rights generally and court
      decisions with respect thereto; <I>provided,</I> such counsel shall express
      no opinion with respect to the application of equitable principles in any
      proceeding, whether at law or in equity; (iv) the execution and delivery
      of this Agreement does not, and the consummation of the Reorganization will
      not, violate any material provisions of Maryland law or the Articles of
      Incorporation, as amended, the by-laws, as amended, or any agreement (known
      to such counsel) to which any Fund is a party or by which any Fund is bound,
      except insofar as the parties have agreed to amend such provision as a condition
      precedent to the Reorganization; (v) each Acquired Fund has the power to
      sell, assign, transfer and deliver the assets transferred by it hereunder
      and, upon consummation of the Reorganization in accordance with the terms
      of this Agreement, each Acquired Fund will have duly transferred such assets
      and liabilities in accordance with this Agreement; (vi) to the best of such
      counsel&#146;s knowledge, no consent, approval, authorization or order of
      any United States federal court, Maryland state court or governmental authority
      is required for the consummation by the Funds of the Reorganization, except
      such as have been obtained under the 1933 Act, the 1934 Act and the 1940
      Act and the published rules and regulations of the Commission thereunder
      and under Maryland law and such as may be required under state securities
      laws; (vii) the N-14 Registration Statement has become effective under the
      1933 Act, no stop order suspending the effectiveness of the N-14 Registration
      Statement has been issued and no proceedings for that purpose have been
      instituted or are pending or contemplated under the 1933 Act, and the N-14
      Registration Statement, and each amendment or supplement thereto, as of
      their respective effective dates, appear on their face to be appropriately
      responsive in all material respects to the requirements of the 1933 Act,
      the 1934 Act and the 1940 Act and the published rules and regulations of
      the Commission thereunder; (viii) the descriptions in the N-14 Registration
      Statement of statutes, legal and governmental proceedings and contracts
      and other documents are accurate and </FONT></td>
  </tr></TABLE><p></p>

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













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<p><table width=600><tr>
    <td><font size=2>fairly present the information required to be shown; (ix)
      the information in the Joint Proxy Statement and Prospectus under &#147;Comparison
      of the Funds &#151; Tax Rules Applicable to the Funds and their Stockholders&#148;
      and &#147;Agreement and Plan of Reorganization &#151; Tax Consequences of
      the Reorganization,&#148; to the extent that it constitutes matters of law,
      summaries of legal matters or legal conclusions, has been reviewed by such
      counsel and is correct in all material respects as of the date of the Joint
      Proxy Statement and Prospectus; (x) such counsel does not know of any statutes,
      legal or governmental proceedings or contracts or other documents related
      to the Reorganization of a character required to be described in the N-14
      Registration Statement which are not described therein or, if required to
      be filed, filed as required; (xi) no Fund, to the knowledge of such counsel,
      is required to qualify to do business as a foreign corporation in any jurisdiction
      except as may be required by state securities laws, and except where each
      has so qualified or the failure so to qualify would not have a material
      adverse effect on such Fund or its respective stockholders; (xii) such counsel
      does not have actual knowledge of any material suit, action or legal or
      administrative proceeding pending or threatened against any Fund, the unfavorable
      outcome of which would materially and adversely affect such Fund; (xiii)
      all corporate actions required to be taken by the Funds to authorize this
      Agreement and to effect the Reorganization have been duly authorized by
      all necessary corporate actions on the part of such Fund; and (xiv) such
      opinion is solely for the benefit of the Funds and their Directors and officers.
      Such opinion also shall state that (x) while such counsel cannot make any
      representation as to the accuracy or completeness of statements of fact
      in the N-14 Registration Statement or any amendment or supplement thereto,
      nothing has come to their attention that would lead them to believe that,
      on the respective effective dates of the N-14 Registration Statement and
      any amendment or supplement thereto, (1) the N-14 Registration Statement
      or any amendment or supplement thereto contained any untrue statement of
      a material fact or omitted to state any material fact required to be stated
      therein or necessary to make the statements therein not misleading; and
      (2) the prospectus included in the N-14 Registration Statement contained
      any untrue statement of a material fact or omitted to state any material
      fact necessary to make the statements therein, in the light of the circumstances
      under which they were made, not misleading; and (y) such counsel does not
      express any opinion or belief as to the financial statements or other financial
      or statistical data relating to any Fund contained or incorporated by reference
      in the N-14 Registration Statement. In giving the opinion set forth above,
      Brown &amp; Wood LLP may state that it is relying on certificates of officers
      of a Fund with regard to matters of fact and certain certificates and written
      statements of governmental officials with respect to the good standing of
      a Fund.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) That each Acquired Fund
      shall have received either (a) a private letter ruling from the Internal
      Revenue Service or (b) an opinion of Brown &amp; Wood LLP, to the effect
      that for Federal income tax purposes (i) the transfer by such Acquired Fund
      of substantially all of its assets to Insured II in exchange solely for
      shares of Insured II Common Stock and Insured II Series C AMPS as provided
      in this Agreement will constitute a reorganization within the meaning of
      Section 368(a)(1)(C) of the Code, and the respective Funds will each be
      deemed to be a &#147;party&#148; to a reorganization within the meaning
      of Section 368(b); (ii) in accordance with Section 361(a) of the Code, no
      gain or loss will be recognized to an Acquired Fund as a result of the asset
      transfer solely in exchange for shares of Insured II Common Stock and Insured
      II Series C AMPS or on the distribution of Insured II Common Stock and Insured
      II Series C AMPS to stockholders of the respective Acquired Fund under Section
      361(c)(1); (iii) under Section 1032 of the Code, no gain or loss will be
      recognized to Insured II on the receipt of assets of an Acquired Fund in
      exchange for its shares; (iv) in accordance with Section 354(a)(1) of the
      Code, no gain or loss will be recognized to the stockholders of an Acquired
      Fund on the receipt of shares of Insured II Common Stock and Insured II
      Series C AMPS in exchange for their shares of the Acquired Fund; (v) in
      accordance with Section 362(b) of the Code, the tax basis of an Acquired
      Fund&#146;s assets in the hands of Insured II will be the same as the tax
      basis of such assets in the hands of the Acquired Fund immediately prior
      to the consummation of the Reorganization; (vi) in accordance with Section
      358 of the Code, immediately after the Reorganization, the tax basis of
      the shares of Insured II Common Stock and Insured II Series C AMPS received
      by the stockholders of an Acquired Fund in the Reorganization will be equal
      to the tax basis of the shares of the Acquired Fund surrendered in exchange;
      (vii) in accordance with Section 1223 of the Code, a stockholder&#146;s
      holding period for the shares of Insured II will be determined by including
      the period for which such stockholder held the Acquired Fund shares exchanged
      therefor, <I>provided,</I> that such shares were held as a capital asset;
      (viii) in accordance with Section 1223 of the Code, Insured II&#146;s holding
      period with respect to an Acquired Fund&#146;s assets transferred will include
      the period for which such assets were held by the Acquired Fund; (ix) the
      payment of cash to common stockholders of an Acquired Fund in lieu of fractional
      shares of Insured II Common Stock will be treated as though the fractional
      shares were distributed as part of the Reorganization and then redeemed,</FONT>
      <font size=2>with the result that such stockholders will have short- or
      long-term capital gain or loss to the extent that the cash</font></td>
  </tr></TABLE><p></p>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-13</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;













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<!-- MARKER LABEL="sheet: 77, page: 77" -->







<p><table width=600><tr>
    <td><font size=2> distribution differs from the stockholder&#146;s basis allocable
      to the Insured II fractional shares; and (x) the taxable year of each Acquired
      Fund will end on the effective date of the Reorganization, and pursuant
      to Section 381(a) of the Code and regulations thereunder, Insured II will
      succeed to and take into account certain tax attributes of each Acquired
      Fund, such as earnings and profits, capital loss carryovers and method of
      accounting.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) That
all proceedings taken by each of the Funds and its counsel in connection with
the Reorganization and all documents incidental thereto shall be satisfactory in
form and substance to the others.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) That
the N-14 Registration Statement shall have become effective under the 1933 Act,
and no stop order suspending such effectiveness shall have been instituted or,
to the knowledge of Insured II, be contemplated by the Commission.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) That the Acquired Funds
      shall have received from Ernst &amp; Young LLP a letter dated within three
      days prior to the effective date of the N-14 Registration Statement and
      a similar letter dated within five days prior to the Exchange Date, in form
      and substance satisfactory to them, to the effect that (i) they are independent
      public accountants with respect to Insured II within the meaning of the
      1933 Act and the applicable published rules and regulations thereunder;
      (ii) in their opinion, the financial statements and supplementary information
      of Insured II included or incorporated by reference in the N-14 Registration
      Statement and reported on by them comply as to form in all material respects
      with the applicable accounting requirements of the 1933 Act and the published
      rules and regulations thereunder; (iii) on the basis of limited procedures
      agreed upon by the Funds and described in such letter (but not an examination
      in accordance with generally accepted auditing standards) consisting of
      a reading of any unaudited interim financial statements and unaudited supplementary
      information of Insured II included in the N-14 Registration Statement, and
      inquiries of certain officials of Insured II responsible for financial and
      accounting matters, nothing came to their attention that caused them to
      believe that (a) such unaudited financial statements and related unaudited
      supplementary information do not comply as to form in all material respects
      with the applicable accounting requirements of the 1933 Act and the published
      rules and regulations thereunder, (b) such unaudited financial statements
      are not fairly presented in conformity with generally accepted accounting
      principles, applied on a basis substantially consistent with that of the
      audited financial statements, or (c) such unaudited supplementary information
      is not fairly stated in all material respects in relation to the unaudited
      financial statements taken as a whole; and (iv) on the basis of limited
      procedures agreed upon by the Funds and described in such letter (but not
      an examination in accordance with generally accepted auditing standards),
      the information relating to Insured II appearing in the N-14 Registration
      Statement, which information is expressed in dollars (or percentages derived
      from such dollars) (with the exception of performance comparisons, if any),
      if any, has been obtained from the accounting records of Insured II or from
      schedules prepared by officials of Insured II having responsibility for
      financial and reporting matters and such information is in agreement with
      such records, schedules or computations made therefrom.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) That
the Commission shall not have issued an unfavorable advisory report under
Section 25(b) of the 1940 Act, nor instituted or threatened to institute any
proceeding seeking to enjoin consummation of the Reorganization under Section
25(c) of the 1940 Act, and no other legal, administrative or other proceeding
shall be instituted or threatened which would materially affect the financial
condition of Insured II or would prohibit the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) That
the Acquired Funds shall have received from the Commission such orders or
interpretations as Brown &amp; Wood <FONT SIZE="1">LLP</FONT>, as their counsel, deems reasonably
necessary or desirable under the 1933 Act and the 1940 Act in connection with
the Reorganization, <I>provided</I>, that such counsel shall have requested such orders
as promptly as practicable, and all such orders shall be in full force and
effect.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">10. <I>Insured II Conditions</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
obligations of Insured II hereunder shall be subject to the following
conditions:</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) That
this Agreement shall have been adopted, and the Reorganization shall have been
approved, by the Board of Directors and the stockholders of each of the Funds as
set forth in Section 9(a); and that each Acquired Fund shall have delivered to
Insured II a copy of the resolution approving this Agreement adopted by such
Acquired Fund&#146;s Board of Directors, and a certificate setting forth the
vote of the stockholders of such Acquired Fund obtained, each certified by its
Secretary.</font></td></tr></TABLE><p></p>

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













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<!-- MARKER LABEL="sheet: 78, page: 78" -->







<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) That
each Acquired Fund shall have furnished to Insured II a statement of its assets,
liabilities and capital, with values determined as provided in Section 5 of this
Agreement, together with a schedule of investments with their respective dates
of acquisition and tax costs, all as of the Valuation Time, certified on such
Fund&#146;s behalf by its President (or any Vice President) and its Treasurer,
and a certificate signed by such Fund&#146;s President (or any Vice President)
and its Treasurer, dated as of the Exchange Date, certifying that as of the
Valuation Time and as of the Exchange Date there has been no material adverse
change in the financial position of the Acquired Fund since the date of such
Fund&#146;s most recent Annual Report or Semi-Annual Report, as applicable,
other than changes in the Acquired Fund Investments since that date or changes
in the market value of the Acquired Fund Investments.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) That
each Acquired Fund shall have furnished to Insured II a certificate signed by
such Fund&#146;s President (or any Vice President) and its Treasurer, dated the
Exchange Date, certifying that as of the Valuation Time and as of the Exchange
Date all representations and warranties of the Acquired Fund made in this
Agreement are true and correct in all material respects with the same effect as
if made at and as of such dates and the Acquired Fund has complied with all of
the agreements and satisfied all of the conditions on its part to be performed
or satisfied at or prior to such dates.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) That each Acquired Fund
      shall have delivered to Insured II a letter from Deloitte &amp; Touche <font size="1">LLP</font>
      (for Insured III) or Ernst &amp; Young LLP (for Insured IV), dated the Exchange
      Date, stating that such firm has performed a limited review of the Federal,
      state and local income tax returns of the Acquired Fund for the period ended
      April 30, 1999 (for Insured III) and August 31, 1999 (for Insured IV) (which
      returns originally were prepared and filed by the Acquired Fund), and that
      based on such limited review, nothing came to their attention which caused
      them to believe that such returns did not properly reflect, in all material
      respects, the Federal, state and local income taxes of the Acquired Fund
      for the period covered thereby; and that for the period from May 1, 1999
      (for Insured III) and September 1, 1999 (for Insured IV), to and including
      the Exchange Date and for any taxable year of the Acquired Fund ending upon
      the liquidation of that Acquired Fund, such firm has performed a limited
      review to ascertain the amount of applicable Federal, state and local taxes,
      and has determined that either such amount has been paid or reserves have
      been established for payment of such taxes, this review to be based on unaudited
      financial data; and that based on such limited review, nothing has come
      to their attention which caused them to believe that the taxes paid or reserves
      set aside for payment of such taxes were not adequate in all material respects
      for the satisfaction of Federal, state and local taxes for the period from
      May 1, 1999 (for Insured III) and September 1, 1999 (for Insured IV), to
      and including the Exchange Date and for any taxable year of that Acquired
      Fund, ending upon the liquidation of such fund or that such fund would not
      qualify as a regulated investment company for Federal income tax purposes
      for the tax years in question.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) That
there shall not be any material litigation pending with respect to the matters
contemplated by this Agreement.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) That
Insured II shall have received an opinion of Brown &amp; Wood <FONT SIZE="1">LLP</FONT>, as counsel to
the Funds, in form and substance satisfactory to Insured II and dated the
Exchange Date, with respect to the matters specified in Section 9(e) of this
Agreement and such other matters as Insured II reasonably may deem necessary or
desirable.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) That
Insured II shall have received a private letter ruling from the Internal Revenue
Service or an opinion of Brown &amp; Wood <FONT SIZE="1">LLP</FONT> with respect to the matters
specified in Section 9(f) of this Agreement.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) That Insured II shall have
      received from Deloitte &amp; Touche <font size="1">LLP</font> (for Insured
      III) and Ernst &amp; Young <font size="1">LLP</font> (for Insured IV) a
      letter dated within three days prior to the effective date of the N-14 Registration
      Statement and a similar letter dated within five days prior to the Exchange
      Date, in form and substance satisfactory to Insured II, to the effect that
      (i) they are independent public accountants with respect to such fund within
      the meaning of the 1933 Act and the applicable published rules and regulations
      thereunder; (ii) in their opinion, the financial statements and supplementary
      information of such fund included or incorporated by reference in the N-14
      Registration Statement and reported on by them (if applicable) comply as
      to form in all material respects with the applicable accounting requirements
      of the 1933 Act and the published rules and regulations thereunder; (iii)
      on the basis of limited procedures agreed upon by the Funds and described
      in such letter (but not an examination in accordance with generally accepted
      auditing standards) consisting of a reading of any unaudited interim financial
      statements and unaudited supplementary information of the Acquired Fund
      included in the N-14 Registration Statement, and inquiries of certain officials
      of the Acquired Fund responsible for financial and accounting matters, nothing
      came to their attention that caused them to believe that (a) such unaudited
      financial statements and related unaudited supplementary information do
      not comply as to form in all material respects</font></td>
  </tr></TABLE><p></p>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-15</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;













<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 79, page: 79" -->







<p><table width=600><tr>
    <td><font size=2> with the applicable accounting requirements of the 1933
      Act and the published rules and regulations thereunder, (b) such unaudited
      financial statements are not fairly presented in conformity with generally
      accepted accounting principles, applied on a basis substantially consistent
      with that of the audited financial statements, or (c) such unaudited supplementary
      information is not fairly stated in all material respects in relation to
      the unaudited financial statements taken as a whole; and (iv) on the basis
      of limited procedures agreed upon by the Funds and described in such letter
      (but not an examination in accordance with generally accepted auditing standards),
      the information relating to the Acquired Fund appearing in the N-14 Registration
      Statement, which information is expressed in dollars (or percentages derived
      from such dollars) (with the exception of performance comparisons, if any),
      if any, has been obtained from the accounting records of the Acquired Fund
      or from schedules prepared by officials of the Acquired Fund having responsibility
      for financial and reporting matters and such information is in agreement
      with such records, schedules or computations made therefrom.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) That
the Acquired Fund Investments to be transferred to Insured II shall not include
any assets or liabilities which Insured II, by reason of charter limitations or
otherwise, may not properly acquire or assume.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) That
the N-14 Registration Statement shall have become effective under the 1933 Act
and no stop order suspending such effectiveness shall have been instituted or,
to the knowledge of any Acquired Fund, be contemplated by the Commission.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) That
the Commission shall not have issued an unfavorable advisory report under
Section 25(b) of the 1940 Act, nor instituted or threatened to institute any
proceeding seeking to enjoin consummation of the Reorganization under Section
25(c) of the 1940 Act, and no other legal, administrative or other proceeding
shall be instituted or threatened which would materially affect the financial
condition of any Acquired Fund or would prohibit the Reorganization.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) That
Insured II shall have received from the Commission such orders or
interpretations as Brown &amp; Wood <FONT SIZE="1">LLP</FONT>, as counsel to Insured II, deems
reasonably necessary or desirable under the 1933 Act and the 1940 Act in
connection with the Reorganization, <I>provided,</I> that such counsel shall have
requested such orders as promptly as practicable, and all such orders shall be
in full force and effect.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) That
all proceedings taken by each Acquired Fund and its respective counsel in
connection with the Reorganization and all documents incidental thereto shall be
satisfactory in form and substance to Insured II.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) That
prior to the Exchange Date, each Acquired Fund shall have declared a dividend or
dividends which, together with all such previous dividends, shall have the
effect of distributing to its stockholders all of its net investment company
taxable income for the period to and including the Exchange Date, if any
(computed without regard to any deduction for dividends paid), and all of its
net capital gain, if any, realized to and including the Exchange Date. In this
regard, the last dividend period for the Insured III AMPS and the Insured IV
AMPS may be shorter than the dividend period for such AMPS determined as set
forth in the applicable Articles Supplementary.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">11. <I>Termination, Postponement and
Waivers</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Notwithstanding anything contained in this Agreement to the contrary, this
Agreement may be terminated and the Reorganization abandoned at any time
(whether before or after adoption thereof by the stockholders of the Funds)
prior to the Exchange Date, or the Exchange Date may be postponed, (i) by mutual
consent of the Boards of Directors of the Funds, (ii) by the Board of Directors
of any Acquired Fund if any condition of such Acquired Fund&#146;s obligations
set forth in Section 9 of this Agreement has not been fulfilled or waived by
such Board; or (iii) by the Board of Directors of Insured II if any condition of
Insured II&#146;s obligations set forth in Section 10 of this Agreement has not
been fulfilled or waived by such Board.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If the transactions contemplated
      by this Agreement have not been consummated by February 28, 2001, this Agreement
      automatically shall terminate on that date, unless a later date is mutually
      agreed to by the Boards of Directors of the Funds.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In
the event of termination of this Agreement pursuant to the provisions hereof,
the same shall become void and have no further effect, and there shall not be
any liability on the part of any Fund or persons who are their directors,
trustees, officers, agents or stockholders in respect of this Agreement.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) At
any time prior to the Exchange Date, any of the terms or conditions of this
Agreement may be waived by the Board of Directors of any Fund (whichever is
entitled to the benefit thereof), if, in the judgment
</font></td></tr></TABLE><p></p>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-16</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;













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<p><table width=600><tr><td><font size=2>of such Board after consultation with
its counsel, such action or waiver will not have a material adverse effect on
the benefits intended under this Agreement to the stockholders of their
respective fund, on behalf of which such action is taken. In addition, the
Boards of Directors of the Funds have delegated to FAM the ability to make
non-material changes to the transaction if it deems it to be in the best
interests of the Funds to do so.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The
respective representations and warranties contained in Sections 1, 2 and 3 of
this Agreement shall expire with, and be terminated by, the consummation of the
Reorganization, and no Fund nor any of its officers, directors, trustees, agents
or stockholders shall have any liability with respect to such representations or
warranties after the Exchange Date. This provision shall not protect any
officer, director, trustee, agent or stockholder of any Fund against any
liability to the entity for which that officer, director, trustee, agent or
stockholder so acts or to its stockholders, to which that officer, director,
trustee, agent or stockholder otherwise would be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties in
the conduct of such office.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) If
any order or orders of the Commission with respect to this Agreement shall be
issued prior to the Exchange Date and shall impose any terms or conditions which
are determined by action of the Boards of Directors of the Funds to be
acceptable, such terms and conditions shall be binding as if a part of this
Agreement without further vote or approval of the stockholders of the Funds
unless such terms and conditions shall result in a change in the method of
computing the number of shares of Insured II Common Stock and Insured II Series
C AMPS to be issued to the Acquired Funds, as applicable, in which event, unless
such terms and conditions shall have been included in the proxy solicitation
materials furnished to the stockholders of the Funds prior to the meetings at
which the Reorganization shall have been approved, this Agreement shall not be
consummated and shall terminate unless the Funds promptly shall call a special
meeting of stockholders at which such conditions so imposed shall be submitted
for approval.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">12. <I>Indemnification</I>.</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Each
Acquired Fund hereby severally agrees to indemnify and hold Insured II harmless
from all loss, liability and expenses (including reasonable counsel fees and
expenses in connection with the contest of any claim) which Insured II may incur
or sustain by reason of the fact that (i) Insured II shall be required to pay
any corporate obligation of such Acquired Fund, whether consisting of tax
deficiencies or otherwise, based upon a claim or claims against such Acquired
Fund which were omitted or not fairly reflected in the financial statements to
be delivered to Insured II in connection with the Reorganization; (ii) any
representations or warranties made by such Acquired Fund in this Agreement
should prove to be false or erroneous in any material respect; (iii) any
covenant of such Acquired Fund has been breached in any material respect; or
(iv) any claim is made alleging that (a) the N-14 Registration Statement
included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein attributable to such Fund not misleading or (b) the Joint Proxy
Statement and Prospectus delivered to the stockholders of the Funds and forming
a part of the N-14 Registration Statement included any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements therein attributable to such Fund, in the light of the circumstances
under which they were made, not misleading, except with respect to (iv)(a) and
(b) herein insofar as such claim is based on written information furnished to
the Acquired Funds by Insured II.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Insured II hereby agrees to indemnify and hold each Acquired Fund harmless from
all loss, liability and expenses (including reasonable counsel fees and expenses
in connection with the contest of any claim) which such Acquired Fund may incur
or sustain by reason of the fact that (i) any representations or warranties made
by Insured II in this Agreement should prove false or erroneous in any material
respect, (ii) any covenant of Insured II has been breached in any material
respect, or (iii) any claim is made alleging that (a) the N-14 Registration
Statement included any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein, not misleading or (b) the Joint Proxy Statement and
Prospectus delivered to stockholders of the Funds and forming a part of the N-14
Registration Statement included any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except with respect to (iii)(a) and (b) herein insofar as such claim is based on
written information furnished to Insured II by the Acquired Fund seeking
indemnification.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In
the event that any claim is made against Insured II in respect of which
indemnity may be sought by Insured II from an Acquired Fund under Section 12(a)
of this Agreement, or in the event that any claim is made against an Acquired
Fund in respect of which indemnity may be sought by an Acquired Fund from
Insured II </font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>under Section 12(b) of this Agreement,
then the party seeking indemnification (the &#147;Indemnified Party&#148;),
with reasonable promptness and before payment of such claim, shall give written
notice of such claim to the other party (the &#147;Indemnifying Party&#148;).
If no objection as to the validity of the claim is made in writing to the
Indemnified Party by the Indemnifying Party within thirty (30) days after the
giving of notice hereunder, then the Indemnified Party may pay such claim and
shall be entitled to reimbursement therefor, pursuant to this Agreement. If,
prior to the termination of such thirty-day period, objection in writing as to
the validity of such claim is made to the Indemnified Party, the Indemnified
Party shall withhold payment thereof until the validity of such claim is
established (i) to the satisfaction of the Indemnifying Party, or (ii) by a
final determination of a court of competent jurisdiction, whereupon the
Indemnified Party may pay such claim and shall be entitled to reimbursement
thereof, pursuant to this Agreement, or (iii) with respect to any tax claims,
within seven (7) calendar days following the earlier of (A) an agreement
between Insured II and the Acquired Fund seeking indemnification that an
indemnity amount is payable, (B) an assessment of a tax by a taxing authority,
or (C) a &#147;determination&#148; as defined in Section 1313(a) of the Code.
For purposes of this Section 12, the term &#147;assessment&#148; shall have the
same meaning as used in Chapter 63 of the Code and Treasury Regulations
thereunder, or any comparable provision under the laws of the appropriate
taxing authority. In the event of any objection by the Indemnifying Party, the
Indemnifying Party promptly shall investigate the claim, and if it is not
satisfied with the validity thereof, the Indemnifying Party shall conduct the
defense against such claim. All costs and expenses incurred by the Indemnifying
Party in connection with such investigation and defense of such claim shall be
borne by it. These indemnification provisions are in addition to, and not in
limitation of, any other rights the parties may have under applicable law.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">13. <I>Other Matters.</I></FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Pursuant to Rule 145 under the 1933 Act, and in connection with the issuance of
any shares to any person who at the time of the Reorganization is, to its
knowledge, an affiliate of a party to the Reorganization pursuant to Rule
145(c), Insured II will cause to be affixed upon the certificate(s) issued to
such person (if any) a legend as follows:</font></td></tr></TABLE><p></p>

<p>
<table width=500>
  <tr>
    <td width="93">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td width="395"><FONT SIZE="2"><B>THESE SHARES ARE SUBJECT TO RESTRICTIONS
      ON TRANSFER UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE
      TRANSFERRED EXCEPT TO MUNIHOLDINGS INSURED FUND II, INC. (OR ITS STATUTORY
      SUCCESSOR), OR ITS PRINCIPAL UNDERWRITER UNLESS (I) A REGISTRATION STATEMENT
      WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933 OR (II)
      IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE FUND, SUCH REGISTRATION
      IS NOT REQUIRED.</B></FONT></td>
  </tr>
</TABLE>
<p></p>

<p><table width=600><tr><td><font size=2>and, further, that stop transfer
instructions will be issued to Insured II&#146;s transfer agent with respect to such
shares. Each Acquired Fund will provide Insured II on the Exchange Date with
the name of any stockholder of an Acquired Fund who is to the knowledge of such
Acquired Fund an affiliate of that Acquired Fund on such date.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) All
covenants, agreements, representations and warranties made under this Agreement
and any certificates delivered pursuant to this Agreement shall be deemed to
have been material and relied upon by each of the parties, notwithstanding any
investigation made by them or on their behalf.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Any
notice, report or demand required or permitted by any provision of this
Agreement shall be in writing and shall be made by hand delivery, prepaid
certified mail or overnight service, addressed to any Fund, at 800 Scudders Mill
Road, Plainsboro, New Jersey 08536, Attn: Terry K. Glenn, President.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) This
Agreement supersedes all previous correspondence and oral communications between
the parties regarding the Reorganization, constitutes the only understanding
with respect to the Reorganization, may not be changed except by a letter of
agreement signed by each party and shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said state.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)
Copies of the Articles of Incorporation, as amended, and Articles Supplementary
of each Fund are on file with the Maryland Department and notice is hereby given
that this instrument is executed on behalf of the Directors of each Fund.</font></td></tr></TABLE><p></p>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-18</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement may be executed in any number of counterparts, each of which, when
executed and delivered, shall be deemed to be an original but all such
counterparts together shall constitute but one instrument.</font></td></tr></TABLE><p></p>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP">
      <p><font size="2">MUNIHOLDINGS INSURED FUND II, INC.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&nbsp;</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP"><font size="2">&nbsp;&nbsp;By:_______________________________________</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Attest:</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">_____________________________________</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p><font size="2">MUNIHOLDINGS INSURED FUND III, INC.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&nbsp;&nbsp;</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP"><font size="2">&nbsp;By:_______________________________________</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Attest:</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">_____________________________________</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p><font size="2">MUNIHOLDINGS INSURED FUND IV, INC.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY">&nbsp;
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP"><font size="2">&nbsp;&nbsp;&nbsp;By:_______________________________________</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Attest:</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">_____________________________________</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
  </tr>
</TABLE>
<br>
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-19</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;














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

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

<p><table width=600><tr><td><font size=2><B>Description of Moody&#146;s Investors
Service, Inc.&#146;s (&#147;Moody&#146;s&#148;) Municipal Bond Ratings</B></font></td></tr></TABLE><p></p>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
Aaa
</FONT></TD><TD width=90% valign=top><font size=2>Bonds which are rated Aaa are
judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as &#147;gilt edge.&#148; Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
Aa
</FONT></TD><TD width=90% valign=top><font size=2>Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A
</FONT></TD><TD width=90% valign=top><font size=2>Bonds which are rated A
possess many favorable investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
Baa
</FONT></TD>
    <TD width=90% valign=top><font size=2>Bonds which are rated Baa are considered
      as medium grade obligations,<i> i.e</i>., they are neither highly protected
      nor poorly secured. Interest payments and principal security appear adequate
      for the present, but certain protective elements may be lacking or may be
      characteristically unreliable over any great length of time. Such bonds
      lack outstanding investment characteristics and in fact have speculative
      characteristics as well.</font></TD>
  </TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
Ba
</FONT></TD><TD width=90% valign=top><font size=2>Bonds which are rated Ba are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
B
</FONT></TD><TD width=90% valign=top><font size=2>Bonds which are rated B
generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
Caa
</FONT></TD><TD width=90% valign=top><font size=2>Bonds which are rated Caa are
of poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
Ca
</FONT></TD><TD width=90% valign=top><font size=2>Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
C
</FONT></TD><TD width=90% valign=top><font size=2>Bonds which are rated C are
the lowest rated class of bonds and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.</font></TD></TR></TABLE><p></P>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Note:</I>
Those bonds in the Aa, A, Baa, Ba and B groups which Moody&#146;s believes possess
the strongest investment attributes are designated by the symbols Aa1, A1,
Baa1, Ba1 and B1</FONT></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Short-Term
Notes:</I> The three ratings of Moody&#146;s for short-term notes are MIG-1/VMIG-1,
MIG-2/VMIG-2 and MIG-3/VMIG-3. MIG-1/VMIG-1 denotes &#147;best quality, enjoying
strong protection from established cash flows&#148;; MIG-2/VMIG-2 denotes
&#147;high quality&#148; with &#147;ample margins of protection&#148;;
MIG-3/VMIG-3 instruments are of &#147;favorable quality...but...lacking the
undeniable strength of the preceding grades&#148;.</FONT></td></tr></TABLE><p></p>

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














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

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moody&#146;s
Commercial Paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody&#146;s employs the following three designations, all judged
to be investment grade, to indicate the relative repayment capacity of rated
issuers:</font></td></tr></TABLE><p></p>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuers
rated Prime-1 (or supporting institutions) have a superior ability for
repayment of short-term promissory obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics: leading market
positions in well established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well established
access to a range of financial markets and assured sources of alternate
liquidity.</font></td></tr></TABLE><p></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuers
rated Prime-2 (or supporting institutions) have a strong ability for repayment
of short-term promissory obligations. This will normally be evidenced by many
of the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.</font></td></tr></TABLE><p></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuers
rated Prime-3 (or supporting institutions) have an acceptable ability for
repayment of short-term promissory obligations. The effects of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes to the level of debt
protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.</font></td></tr></TABLE><p></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuers
rated Not Prime do not fall within any of the Prime rating categories.</font></td></tr></TABLE><p></P>

<p><table width=600><tr>
    <td><font size=2><B>Description of Standard &amp; Poor&#146;s, a division
      of The McGraw-Hill Companies, Inc.&nbsp;(&#147;Standard &amp; <br>
      &nbsp;&nbsp;&nbsp;&nbsp;Poor&#146;s&#148;), Municipal Debt Ratings</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Standard &amp; Poor&#146;s municipal debt rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial obligation,
a specific class of financial obligations or a specific program. It takes into
consideration the creditworthiness of guarantors, insurers, or other forms of
credit enhancement on the obligation.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The debt
rating is not a recommendation to purchase, sell or hold a financial obligation,
inasmuch as it does not comment as to market price or suitability for a
particular investor.</font></td></tr></TABLE><p></p>

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

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

<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. Likelihood of
      payment &#151; capacity and willingness of the obligor as to the timely
      payment of interest and repayment of principal in accordance with the terms
      of the obligation;</font></td>
  </tr></TABLE><p></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;II.
Nature of and provisions of the obligation;</font></td></tr></TABLE><p></P>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;III.
Protection afforded to, and relative position of, the obligation in the event
of bankruptcy, reorganization or other arrangement under the laws of bankruptcy
and other laws affecting creditors&#146; rights.</font></td></tr></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
AAA
</FONT></TD><TD width=90% valign=top><font size=2>Debt rated &#147;AAA&#148; has the
highest rating assigned by Standard &amp; Poor&#146;s. Capacity to meet its financial
commitment on the obligation is extremely strong.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
AA
</FONT></TD><TD width=90% valign=top><font size=2>Debt rated &#147;AA&#148; differs from
the highest rated issues only in small degree. The Obligor&#146;s capacity to meet
its financial commitment on the obligation is very strong.</font></TD></TR></TABLE><p></P>

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













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<P><table width=600><TR><TD width=10% valign=top><font size=2>
A
</FONT></TD><TD width=90% valign=top><font size=2>Debt rated &#147;A&#148; is somewhat
more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher-rated categories. However, the
obligor&#146;s capacity to meet its financial commitment on the obligation is still
strong.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
BBB
</FONT></TD><TD width=90% valign=top><font size=2>Debt rated &#147;BBB&#148; exhibits
adequate protection parameters. However, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR>
    <TD width=10% valign=top><font size=2> BB <br>
      B <br>
      CCC <br>
      CC<br>
      C </FONT></TD>
    <TD width=90% valign=top><font size=2>Debt rated &#147;BB,&#148; &#147;B,&#148;
      &#147;CCC,&#148; &#147;CC&#148; and &#147;C&#148; are regarded as having
      significant speculative characteristics.&#147;BB&#148; indicates the least
      degree of speculation and &#147;C&#148; the highest degree of speculation.
      While such debt will likely have some quality and protective characteristics,
      these may be outweighed by large uncertainties or major exposures to adverse
      conditions.</font></TD>
  </TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
D
</FONT></TD><TD width=90% valign=top><font size=2>Debt rated &#147;D&#148; is in payment
default. The &#147;D&#148; rating category is used when payments on an obligation are not
made on the date due even if the applicable grace period has not expired,
unless Standard &amp; Poor&#146;s believes that such payments will be made during such
grace period. The &#147;D&#148; rating also will be used upon the filing of a bankruptcy
petition or the taking of similar action if payments on an obligation are
jeopardized.</font></TD></TR></TABLE><p></P>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Plus (+) or Minus (&#150; ): The
      ratings from &#147;AA&#148; to &#147;CCC&#148; may be modified by the addition
      of a plus or minus sign to show relative standing within the major rating
      categories.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2><B>Description of Standard &amp; Poor&#146;s
Commercial Paper Ratings</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Standard &amp; Poor&#146;s commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. Ratings are graded into several categories, ranging from
&#147;A-1&#147; for the highest-quality obligations to &#147;D&#148; for the
lowest. These categories are as follows:</font></td></tr></TABLE><p></p>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A-1
</FONT></TD><TD width=90% valign=top><font size=2>This designation indicates
that the degree of safety regarding timely payment is strong. Those issues
determined to possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A-2
</FONT></TD><TD width=90% valign=top><font size=2>Capacity for timely payment
on issues with this designation is satisfactory. However, the relative degree
of safety is not as high as for issues designated &#147;A-1.&#148;</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A-3
</FONT></TD><TD width=90% valign=top><font size=2>Issues carrying this
designation have an adequate capacity for timely payment. They are, however,
more vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designations.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
B
</FONT></TD><TD width=90% valign=top><font size=2>Issues rated &#147;B&#148; are regarded
as having only speculative capacity for timely payment.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
C
</FONT></TD><TD width=90% valign=top><font size=2>This rating is assigned to
short-term debt obligations with a doubtful capacity for payment.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
D
</FONT></TD><TD width=90% valign=top><font size=2>Debt rated &#147;D&#148; is in payment
default. The &#147;D&#148; rating category is used when interest payments or principal
payments are not made on the date due, even if the applicable grace period has
not expired unless Standard &amp; Poor&#146;s believes that such payments will be made
during such grace period.</font></TD></TR></TABLE><p></P>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
commercial paper rating is not a recommendation to purchase or sell a security.
The ratings are based on current information furnished to Standard &amp;
Poor&#146;s by the issuer or obtained by Standard &amp; Poor&#146;s from other
sources it considers reliable. The ratings may be changed, suspended, or
withdrawn as a result of changes in, or unavailability of, such information.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Standard &amp; Poor&#146;s note rating reflects the liquidity factors and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.</font></td></tr></TABLE><p></p>

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














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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;
Amortization schedule&#151;the larger the final maturity relative to other
maturities, the more likely it will be treated as a note.</font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151; Source of payment &#151;
      the more dependent the issue is on the market for its refinancing, the more
      likely it will be treated as a note.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>Note rating symbols are as follows:</font></td></tr></TABLE><p></p>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
SP-1
</FONT></TD><TD width=90% valign=top><font size=2>Strong capacity to pay
principal and interest. An issue determined to possess a very strong capacity
to pay debt service is given a plus (+) designation.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
SP-2
</FONT></TD><TD width=90% valign=top><font size=2>Satisfactory capacity to pay
principal and interest with some vulnerability to adverse financial and
economic changes over the term of the notes.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
SP-3
</FONT></TD><TD width=90% valign=top><font size=2>Speculative capacity to pay
principal and interest.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
c
</FONT></TD><TD width=90% valign=top><font size=2>The &#147;c&#148; subscript is used to
provide additional information to investors that the bank may terminate its
obligation to purchase tendered bonds if the long-term credit rating of the
issuer is below an investment-grade level and/or the issuer&#146;s bonds are deemed
taxable.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
p
</FONT></TD><TD width=90% valign=top><font size=2>The letter &#147;p&#148; indicates that
the rating is provisional. A provisional rating assumes the successful
completion of the project financed by the debt being rated and indicates that
payment of debt service requirements is largely or entirely dependent upon the
successful, timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes no
comment on the likelihood of or the risk of default upon failure of such
completion. The investor should exercise his own judgment with respect to such
likelihood and risk.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
*
</FONT></TD><TD width=90% valign=top><font size=2>Continuance of the ratings is
contingent upon Standard &amp; Poor&#146;s receipt of an executed copy of the escrow
agreement or closing documentation confirming investments and cash flows.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
r
</FONT></TD><TD width=90% valign=top><font size=2>The &#147;r&#148; highlights
derivative, hybrid and certain other obligations that Standard &amp; Poor&#146;s believes
may experience high volatility or high variability in expected returns as a
result of noncredit risks. Examples of such obligations are securities with
principal or interest return indexed to equities, commodities, or currencies;
certain swaps and options, and interest-only and principal-only mortgage
securities. The absence of an &#147;r&#148; symbol should not be taken as an indication
that an obligation will exhibit no volatility or variability in total return.</font></TD></TR></TABLE><p></P>

<p><table width=600><tr>
    <td><font size=2><B>Description of Fitch IBCA, Inc.&#146;s (&#147;Fitch&#148;)
      Investment Grade Bond Ratings</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
investment grade bond ratings provide a guide to investors in determining the
credit risk associated with a particular security. The rating represents
Fitch&#146;s assessment of the issuer&#146;s ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
rating takes into consideration special features of the issue, its relationship
to other obligations of the issuer, the current and prospective financial
condition and operating performance of the issuer and any guarantor, as well as
the economic and political environment that might affect the issuer&#146;s
future financial strength and credit quality.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
ratings do not reflect any credit enhancement that may be provided by insurance
policies or financial guarantees unless otherwise indicated.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bonds
carrying the same rating are of similar but not necessarily identical credit
quality since the rating categories do not fully reflect small differences in
the degrees of credit risk.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
ratings are not recommendations to buy, sell, or hold any security. Ratings do
not comment on the adequacy of market price, the suitability of any security for
a particular investor, or the tax-exempt nature or taxability of payments made
in respect of any security.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended, or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.</font></td></tr></TABLE><p></p>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
AAA
</FONT></TD><TD width=90% valign=top><font size=2>Bonds considered to be
investment grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
AA
</FONT></TD><TD width=90% valign=top><font size=2>Bonds considered to be
investment grade and of very high credit quality. The obligor&#146;s ability to pay
interest and repay principal is very strong, although not quite as strong as
bonds rated &#147;AAA.&#148; Because bonds rated in the &#147;AAA&#148; and &#147;AA&#148; categories are not
significantly vulnerable to foreseeable future developments, short-term debt of
these issuers is generally rated &#147;F-1+.&#148;</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A
</FONT></TD><TD width=90% valign=top><font size=2>Bonds considered to be
investment grade and of high credit quality. The obligor&#146;s ability to pay
interest and repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and circumstances than
bonds with higher ratings.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
BBB
</FONT></TD><TD width=90% valign=top><font size=2>Bonds considered to be
investment grade and of satisfactory-credit quality. The obligor&#146;s ability to
pay interest and repay principal is considered to be adequate. Adverse changes
in economic conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.</font></TD></TR></TABLE><p></P>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Plus (+) or Minus ( &#150; ): Plus
      and minus signs are used with a rating symbol to indicate the relative position
      of a credit within the rating category. Plus and minus signs, however, are
      not used in the &#147;AAA&#148; category.</font></td>
  </tr></TABLE><p></p>

<P><table width=600><TR><TD width=15% valign=top><font size=2>
NR
</FONT></TD><TD width=85% valign=top><font size=2>Indicates that Fitch does not
rate the specific issue.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=15% valign=top><font size=2>
Conditional
</FONT></TD><TD width=85% valign=top><font size=2>A conditional rating is
premised on the successful completion of a project or the occurrence of a
specific event.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=15% valign=top><font size=2>
Suspended
</FONT></TD><TD width=85% valign=top><font size=2>A rating is suspended when
Fitch deems the amount of information available from the issuer to be
inadequate for rating purposes.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=15% valign=top><font size=2>
Withdrawn
</FONT></TD><TD width=85% valign=top><font size=2>A rating will be withdrawn
when an issue matures or is called or refinanced and, at Fitch&#146;s discretion,
when an issuer fails to furnish proper and timely information.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=15% valign=top><font size=2>
FitchAlert
</FONT></TD><TD width=85% valign=top><font size=2>Ratings are placed on
FitchAlert to notify investors of an occurrence that is likely to result in a
rating change and the likely direction of such change. These are designated as
&#147;Positive,&#148; indicating a potential upgrade, &#147;Negative,&#148; for potential
downgrade, or &#147;Evolving,&#148; where ratings may be raised or lowered. FitchAlert is
relatively short-term, and should be resolved within 12 months.</font></TD></TR></TABLE><p></P>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ratings
Outlook: An outlook is used to describe the most likely direction of any rating
change over the intermediate term. It is described as &#147;Positive&#148; or &#147;Negative.&#148;
The absence of a designation indicates a stable outlook.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2><B>Description of Fitch&#146;s
Speculative Grade Bond Ratings</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
speculative grade bond ratings provide a guide to investors in determining the
credit risk associated with a particular security. The ratings (&#147;BB&#148;
to &#147;C&#148;) represent Fitch&#146;s assessment of the likelihood of timely
payment of principal and interest in accordance with the terms of obligation for
bond issues not in default. For defaulted bonds, the rating (&#147;DDD&#148; to
&#147;D&#148;) is an assessment of the ultimate recovery value through
reorganization or liquidation.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
rating takes into consideration special features of the issue, its relationship
to other obligations of the issuer, the current and prospective financial
condition and operating performance of the issuer and any guarantor, as well as
the economic and political environment that might affect the issuer&#146;s
future financial strength.</font></td></tr></TABLE><p></p>

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













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<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bonds
that have the rating are of similar but not necessarily identical credit quality
since rating categories cannot fully reflect the differences in degrees of
credit risk.</font></td></tr></TABLE><p></p>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
BB
</FONT></TD><TD width=90% valign=top><font size=2>Bonds are considered
speculative. The obligor&#146;s ability to pay interest and repay principal may be
affected over time by adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in satisfying its
debt service requirements.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
B
</FONT></TD><TD width=90% valign=top><font size=2>Bonds are considered highly
speculative. While bonds in this class are currently meeting debt service
requirements, the probability of continued timely payment of principal and
interest reflects the obligor&#146;s limited margin of safety and the need for
reasonable business and economic activity throughout the life of the issue.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
CCC
</FONT></TD><TD width=90% valign=top><font size=2>Bonds have certain
identifiable characteristics which, if not remedied, may lead to default. The
ability to meet obligations requires an advantageous business and economic
environment.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
CC
</FONT></TD><TD width=90% valign=top><font size=2>Bonds are minimally
protected. Default in payment of interest and/or principal seems probable over
time.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
C
</FONT></TD><TD width=90% valign=top><font size=2>Bonds are in imminent default
in payment of interest or principal.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
DDD
</FONT></TD><TD width=90% valign=top><font size=2>Bonds are in default on
interest and/or principal payments. Such bonds are extremely speculative DD and
should be valued on the basis of their ultimate recovery value in liquidation
or reorganization D of the obligor. &#147;DDD&#148; represents the highest potential for
recovery on these bonds, and &#147;D&#148; represents the lowest potential for recovery.</font></TD></TR></TABLE><p></P>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Plus (+) or Minus (&#150;): Plus
      and minus signs are used with a rating symbol to indicate the relative position
      of a credit within the rating category. Plus and minus signs, however, are
      not used in the &#147;DDD,&#148; &#147;DD,&#148; or &#147;D&#148; categories.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2><B>Description of Fitch&#146;s
Short-Term Ratings</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch&#146;s
short-term ratings apply to debt obligations that are payable on demand or have
original maturities of up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer&#146;s obligations in a
timely manner.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
short-term ratings are as follows:</font></td></tr></TABLE><p></p>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
F-1+
</FONT></TD><TD width=90% valign=top><font size=2>Exceptionally Strong Credit
Quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
F-1
</FONT></TD><TD width=90% valign=top><font size=2>Very Strong Credit Quality.
Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated &#147;F-1+.&#148;</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
F-2
</FONT></TD><TD width=90% valign=top><font size=2>Good Credit Quality. Issues
assigned this rating have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues assigned &#147;F-1+&#147;
and &#147;F-1&#147; ratings.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
F-3
</FONT></TD><TD width=90% valign=top><font size=2>Fair Credit Quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
F-S
</FONT></TD><TD width=90% valign=top><font size=2>Weak Credit Quality. Issues
assigned this rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
D
</FONT></TD><TD width=90% valign=top><font size=2>Default. Issues assigned this
rating are in actual or imminent payment default.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
LOC
</FONT></TD><TD width=90% valign=top><font size=2>The symbol &#147;LOC&#148; indicates
that the rating is based on a letter of credit issued by a commercial bank.</font></TD></TR></TABLE><p></P>

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













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

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

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is further
      information with respect to the insurance policies (the &#147;Policies&#148;)
      that MuniHoldings Insured Fund II, Inc. MuniHoldings Insured Fund III, Inc.
      and MuniHoldings Insured Fund IV, Inc. (each, a &#147;Fund&#148; and collectvelly,
      the &#147;Funds&#148;) may obtain from several insurance companies with
      respect to insured Municipal Bonds held by the Funds. The Funds have no
      obligation to obtain any such Policies, and the terms of any Policies actually
      obtained may vary significantly from the terms discussed below.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In determining eligibility
      for insurance, insurance companies will apply their own standards. These
      standards correspond generally to the standards such companies normally
      use in establishing the insurability of new issues of Municipal Bonds and
      are not necessarily the criteria that would be used in regard to the purchase
      of such bonds by the Funds. The Policies do not insure (i) municipal securities
      ineligible for insurance and (ii) municipal securities no longer owned by
      the Funds.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Policies do not guarantee
      the market value of the insured Municipal Bonds or the value of the shares
      of the Fund. In addition, if the provider of an original issuance insurance
      policy is unable to meet its obligations under such policy or if the rating
      assigned to the insurance claims-paying ability of any such insurer deteriorates,
      the insurance company will not have any obligation to insure any issue held
      by a Fund that is aversely affected by either of the above described events.
      In addition to the payment of premium, the policies may require that a Fund
      notify the insurance company as to all Municipal Bonds in a Fund&#146;s
      portfolio and permit the insurance company to audit their records.The insurance
      premiums will be payable monthly by a Fund in accordance with a premium
      schedule to be furnished by the insurance company at the time the Policies
      are issued. Premiums are based upon the amounts covered and the composition
      of the portfolio.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds will seek to utilize
      insurance companies that have insurance claims-paying ability ratings of
      AAA from Standard &amp; Poor&#146;s, a division of The McGraw-Hill Companies,
      Inc. (&#147;S&amp;P&#148;) or Fitch IBCA, Inc. (&#147;Fitch&#148;) or Aaa
      fromMoody&#146;s Investors Service (&#147;Moody&#146;s&#148;). No assurance
      can be given, however, that insurance from insurance carriers meeting these
      criteria will be at all times available.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
S&amp;P insurance claims-paying ability rating is an assessment of an operating
insurance company&#146;s financial capacity to meet obligations under an
insurance policy in accordance with the terms. An insurer with an insurance
claims-paying ability rating of AAA has the highest rating assigned byS&amp;P.
Capacity to honor insurance contracts is considered by S&amp;P to be extremely
strong and highly likely to remain so over a long period of time. A Fitch
insurance claims-paying ability rating provides an assessment of an insurance
company&#146;s financial strength and, therefore, its ability to pay policy and
contract claims under the terms indicated. An insurer with an insurance
claims-paying ability rating of AAA has the highest rating assigned by Fitch.
The ability to pay claims is adjudged by Fitch to be extremely strong for
insurance companies with this highest rating. In the opinion of Fitch,
foreseeable business and economic risk factors should not have any material
adverse impact on the ability of these insurers to pay claims. In Fitch&#146;s
opinion, profitability, overall balance sheet strength, capitalization and
liquidity are all at very secure levels and are likely to be affected by
potential adverse underwriting, investment or cyclical events. A Moody&#146;s
insurance claims-paying ability rating is an opinion of the ability of an
insurance company to repay punctually senior policyholder obligations and
claims. An insurer with an insurance claims-paying ability rating of Aaa is
considered by Moody&#146;s to be of the best quality. In the opinion of
Moody&#146;s, the policy obligations of an insurance company with an insurance
claims-paying ability rating of Aaa carry the smallest degree of credit risk
and, while the financial strength of these companies is likely to change, such
changes as can be visualized are most unlikely to impair the company&#146;s
fundamentally strong position.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
insurance claims-paying ability rating of S&amp;P, Fitch or Moody&#146;s does
not constitute an opinion on any specific contract in that such an opinion can
only be rendered upon the review of the specific insurance contract.
Furthermore, an insurance claims-paying ability rating does not take into
account deductibles, surrender or cancellation penalties or the timeliness of
payment; nor does it address the ability of a company to meet non policy
obligations (i.e., debt contracts). The assignment of ratings by S&amp;P, Fitch
or Moody&#146;s to debt issues that are fully or partially supported by
insurance policies, contracts or guarantees is a separate process from the
determination of claims-paying ability ratings. The likelihood of a timely flow
of funds from the insurer to the trustee for the bondholders is a key element in
the rating determination for such debt issues.</font></td></tr></TABLE><p></p>

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













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<!-- MARKER LABEL="sheet: 90, page: 90" -->







<p><table width=600><tr><td  align=center><font size=2><B>PART C. OTHER
INFORMATION</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2"><B>Item 15. <I>Indemnification.</I></B></FONT></td></tr></TABLE><p></p>

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

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended (the &#147;1933 Act&#148;), may be provided to directors, officers and
controlling persons of the Registrant, pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with any successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
is made to (i) Section 6 of the Purchase Agreement relating to the
Registrant&#146;s Common Stock, a form of which was filed as an exhibit to the
Common Stock Registration Statement, and (ii) Section 7 of the Purchase
Agreement relating to the Registrant&#146;s AMPS, a form of which was filed as
an exhibit to the AMPS Registration Statement (as defined below), for provisions
relating to the indemnification of the underwriter.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><FONT SIZE="2"><B>Item 16. <I>Exhibits.</I></B></FONT></td></tr></TABLE><p></p>
<br>
<table 0 cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">1</font>
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(a)</font>
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Articles of Incorporation of the Registrant,
        dated December 28, 1998. (a)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(b)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Articles Supplementary creating
        the Registrant&#146;s Series A AMPS and the Registrant&#146;s Series B AMPS. (b)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(c)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Articles Supplementary creating
        the Registrant&#146;s Series C AMPS. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">2</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">By-Laws of the Registrant. (a) </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">3</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Not Applicable.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">4</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Agreement and Plan of Reorganization
        among the Registrant and MuniHoldings Insured Fund III, Inc., and MuniHoldings
        Insured Fund IV, Inc. (included as Appendix II to the Proxy Statement
        and Prospectus contained in this Registration Statement).</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">5</font>
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(a)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Copies of instruments defining the rights
        of stockholders, including the relevant portions of the Articles of Incorporation
        and the By-Laws of the Registrant. (c)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(b)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of specimen certificate for the Common
        Stock of the Registrant. (d)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(c)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of specimen certificate for the AMPS
        of the Registrant. (b)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">6</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Investment Advisory Agreement
        between Registrant and Fund Asset Management, L.P. (d)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">7</font>
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(a) </font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Purchase Agreement for the Common
        Stock of the Registrant. (d)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(b)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Purchase Agreement for the AMPS
        of the Registrant. (b)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(c)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Merrill Lynch Standard Dealer
        Agreement.(d)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">8</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Not applicable.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">9</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Custodian Contract between the Registrant
        and State Street Bank and Trust Company. (d) </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">10</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Not applicable.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">11</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><FONT SIZE="2">Opinion and Consent of Brown &amp; Wood
        <FONT SIZE="1">LLP</FONT>, counsel for the Registrant. (e)</FONT>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">12</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Private Letter Ruling from the Internal
        Revenue Service. (e)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">13</font>
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(a)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Registrar, Transfer Agency and
        Service Agreement between the Registrant and State Street Bank and Trust
        Company.(d)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(b)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Auction Agent Agreement between
        the Registrant and The Bank of New York. (b)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(c)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Broker-Dealer Agreement. (b)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(d)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Letter of Representations. (b)</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">14</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Consent of _____________, independent
        auditors for the Registrant and MuniHoldings Insured Fund IV, Inc.(c)</font>
    </td>
  </tr>
</TABLE>
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
C-1</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;








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<!-- MARKER LABEL="sheet: 91, page: 91" -->






<p>
<table 0 cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">15</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Not applicable.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">16</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Power of Attorney (included on the signature
        page).</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">17</font>
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(a)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Letter to Stockholders of each Fund</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(b)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Question and Answer Sheet</font>
    </td>
  </tr>
</TABLE>
<p>&nbsp;
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>
<table width=600><tr><td width=3% valign=top><font size="2">(a)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="2">Incorporated
herein by reference from the Registrant&#146;s initial Registration Statement under
the Securities Act of 1933, as amended, on Form N-2 relating to the
Registrant&#146;s Common Stock (File No. 333-70183), filed on January 6, 1999 (the
&#147;Common Stock Registration Statement&#148;).</font></td></tr></TABLE>

<table width=600><tr><td width=3% valign=top><font size="2">(b)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="2">Incorporated
herein by reference from the Registrant&#146;s initial Registration Statement under
the Securities Act of 1933, as amended, on Form N-2 relating to the
Registrant&#146;s Auction Market Preferred Stock (File No. 333-70183), filed on
February 22, 1999 (the &#147;AMPS Registration Statement&#148;).</font></td></tr></TABLE>

<table width=600><tr><td width=3% valign=top><font size="2">(c)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="2">Reference
is made to Article V, Article VI (sections 2, 3, 4, 5 and 6), Article VII,
Article VIII, Article X, Article XI, Article XII and Article XIII of the
Registrant&#146;s Articles of Incorporation, previously filed as Exhibit (a) to the
Common Stock Registration Statement, to Article II, Article III (sections 1, 2,
3, 5 and 17), Article VI, Article VII, Article XII, Article XIII and Article
XIV of the Registrant&#146;s By-Laws, previously filed as Exhibit (b) to the Common
Stock Registration Statement, and to the Form of Articles Supplementary
relating to the Registrant&#146;s Series A AMPS and Series B AMPS, previously filed
as Exhibit (a)(2) to the AMPS Registration Statement. Reference is also made to
the Form of Articles Supplementary relating to the Registrant&#146;s Series C AMPS,
filed as Exhibit 1(c) hereto.</font></td></tr></TABLE>

<table width=600><tr><td width=3% valign=top><font size="2">(d)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="2">Incorporated
herein by reference from Pre-Effective Amendment No. 1 to the Common Stock
Registration Statement, filed on February 23, 1999.</font></td></tr></TABLE>

<table width=600><tr><td width=3% valign=top><font size="2">(e)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="2">To
be filed by amendment to this Registration Statement on Form N-14.</font></td></tr></TABLE>

<p><table width=600><tr><td><FONT SIZE="2"><B>Item 17. <I>Undertakings.</I></B></FONT></td></tr></TABLE><p></p>

<table width=600><tr><td width=3% valign=top><font size="2">(1)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="2">The
undersigned Registrant agrees that prior to any public reoffering of the
securities registered through use of a prospectus which is part of this
Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, as
amended, the reoffering prospectus will contain information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by other items of the
applicable form.</font></td></tr></TABLE>

<table width=600><tr><td width=3% valign=top><font size="2">(2)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="2">The
undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, as amended, each
post-effective amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of securities at that time
shall be deemed to be the initial bona fide offering of them.</font></td></tr></TABLE>

<table width=600><tr><td width=3% valign=top><font size="2">(3)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="2">The
Registrant undertakes to file, by post-effective amendment, either a copy of
the Internal Revenue Service private letter ruling applied for or an opinion of
counsel as to certain tax matters within a reasonable time after receipt of
such ruling or opinion.</font></td></tr></TABLE>

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













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<!-- MARKER LABEL="sheet: 92, page: 92" -->







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

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As required by the Securities
      Act of 1933, this Registration Statement has been signed on behalf of the
      Registrant, in the Township of Plainsboro and State of New Jersey, on the
      14th day of April, 2000.</font></td>
  </tr></TABLE><p></p>
<br>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="53">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td width="293">
      <div align="right"></div>
    </td>
    <td width="254">
      <div align="center"><font size="2">M<font size="1">UNIHOLDINGS</font> I<font size="1">NSURED</font>
        F<font size="1">UND</font> II, I<font size="1">NC</font>.</font></div>
    </td>
  </tr>
  <tr>
    <td width="53">&nbsp;</td>
    <td width="293">
      <div align="right"></div>
    </td>
    <td width="254">
      <div align="center"><font size="2">(Registrant)</font></div>
    </td>
  </tr>
  <tr>
    <td width="53" height="11">&nbsp;</td>
    <td width="293" height="11">&nbsp;</td>
    <td width="254" height="11">&nbsp;</td>
  </tr>
  <tr>
    <td width="53" height="25">&nbsp;</td>
    <td width="293" height="25" valign="middle">
      <div align="right"> <font size="2">By: </font></div>
    </td>
    <td width="254" rowspan="2" align="center">
      <div align="center"><font size="2">/s/ T<font size="1">ERRY</font> K. G<font size="1">LENN</font></font></div>
      <hr size="1" noshade>
      <font size="2"><b><font size="1">(Terry K. Glenn, President)</font></b></font>
    </td>
  </tr>
  <tr>
    <td width="53" height="10">&nbsp;</td>
    <td width="293" height="10">
      <div align="right"></div>
    </td>
  </tr>
  <tr>
    <td width="53">&nbsp;</td>
    <td width="293">
      <div align="right"></div>
    </td>
    <td width="254" align="center" valign="top">
      <div align="center"> </div>
    </td>
  </tr>
</TABLE>
<br>
<table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
person whose signature appears below hereby authorizes Terry K. Glenn, Donald C.
Burke and Bradley J. Lucido, or any of them, as attorney-in-fact, to sign on his
or her behalf, individually and in each capacity stated below, any amendments to
this Registration Statement (including post-effective amendments) and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.</font></td></tr></TABLE><p></p>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="231">
      <p align="center"><font size="1"><b>Signatures </b></font>
      <hr size="1" noshade align="center" width="50">
    </td>
    <td width="41">
      <p align="JUSTIFY"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="171">
      <p align="center"><font size="1"><b>Title </b></font>
      <hr size="1" noshade align="center" width="35">
    </td>
    <td width="51">
      <p align="JUSTIFY"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="106">
      <p align="center"><font size="1"><b>Date </b></font>
      <hr size="1" noshade align="center" width="30">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">&nbsp;</td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">&nbsp;</td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <p align="center"><font size="2">/s/ </font><font size="2">T<font size="1">ERRY</font>
        K. G<font size="1">LENN</font></font> <br>
      <hr size="1" noshade align="center">
      <div align="center"><font size="2"><b><font size="1">(Terry K. Glenn)</font></b></font>
      </div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">
      <p><font size="2">President and Director</font> <font size="2">&nbsp;&nbsp;(Principal
        Executive Officer)</font>
    </td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">April&nbsp;&nbsp;14, 2000</font></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">&nbsp;</td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <p align="center"><font size="2">/s/ D<font size="1">ONALD</font> C. B<font size="1">URKE</font></font>
        <br>
      <hr size="1" noshade align="center">
      <div align="center"><font size="2"><b><font size="1">(Donald C. Burke)</font></b></font>
      </div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">
      <p><font size="2">Vice President and Treasurer &nbsp;&nbsp;(Principal Financial</font>
        <font size="2">and &nbsp;&nbsp;Accounting Officer)</font>
    </td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">April&nbsp;&nbsp;14, 2000</font> </div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">&nbsp;</td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <p align="center"><font size="2">/s/ J<font size="1">OE</font> G<font size="1">RILLS</font></font>
      <hr size="1" noshade align="center">
      <div align="center"><font size="2"><b><font size="1">(Joe Grills)</font></b></font>
      </div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">
      <p><font size="2">Director</font>
    </td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">April&nbsp;&nbsp;14, 2000</font> </div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">&nbsp;</td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <p align="center"><font size="2">/s/ W<font size="1">ALTER</font> M<font size="1">INTZ</font></font>
        <br>
      <hr size="1" noshade align="center">
      <div align="center"><font size="2"><b><font size="1">(Walter Mintz)</font></b></font>
      </div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">
      <p><font size="2">Director </font>
    </td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">April&nbsp;&nbsp;14, 2000</font> </div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">&nbsp;</td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <p align="center"><font size="2">/s/ R<font size="1">OBERT</font> S. S<font size="1">ALOMON</font>,
        J<font size="1">R</font>.</font> <br>

      <hr size="1" noshade align="center">
      <div align="center"><font size="2"><b><font size="1">(Robert S. Salomon,
        Jr.)</font></b></font> </div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">
      <p><font size="2">Director </font>
    </td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">April&nbsp;&nbsp;14, 2000</font> </div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">&nbsp;</td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <p align="center"><font size="2">/s/ M<font size="1">ELVIN</font> R. S<font size="1">EIDEN</font></font>
        <br>
      <hr size="1" noshade align="center">
      <div align="center"><font size="2"><b><font size="1">(Melvin R. Seiden)</font></b></font>
      </div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">
      <p><font size="2">Director </font>
    </td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">April&nbsp;&nbsp;14, 2000</font> </div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">&nbsp;</td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <p align="center"><font size="2">/s/ S<font size="1">TEPHEN</font> B. S<font size="1">WENSRUD</font></font>
        <br>
      <hr size="1" noshade align="center">
      <div align="center"><font size="2"><b><font size="1">(Stephen B. Swensrud)</font></b></font>
      </div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">
      <p><font size="2">Director </font>
    </td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"><font size="2">April&nbsp;&nbsp;14, 2000</font> </div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">&nbsp;</td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"></div>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="231">
      <p align="center"><font size="2">/s/ A<font size="1">RTHUR</font> Z<font size="1">EIKEL</font></font>
        <br>
      <hr size="1" noshade align="center">
      <div align="center"><font size="2"><b><font size="1">(Arthur Zeikel)</font></b></font>
      </div>
    </td>
    <td valign="TOP" width="41">&nbsp;</td>
    <td valign="TOP" width="171">
      <p><font size="2">Director</font>
    </td>
    <td valign="TOP" width="51">&nbsp;</td>
    <td valign="TOP" width="106">
      <p align="center"><font size="2">April&nbsp;&nbsp;14, 2000</font>
    </td>
  </tr>
</TABLE>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> C-3</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</TABLE>
<p>&nbsp;</p>
<p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>





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<p><table width=600><tr><td align=right><font size=2><B>COMMON STOCK</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B>MUNIHOLDINGS INSURED
FUND II, INC.<BR>
       P.O. Box 9011<BR>
       Princeton, New Jersey 08543-9011</B></font></td>
  </tr></TABLE><p></p>

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

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints
      Terry K. Glenn, Donald C. Burke and Bradley J. Lucido as proxies, each with
      the power to appoint his substitute, and hereby authorizes each of them
      to represent and to vote, as designated on the reverse hereof, all of the
      shares of Common Stock of MuniHoldings Insured Fund II, Inc. (the &#147;Fund&#148;)
      held of record by the undersigned on May 2, 2000 at the Special Meeting
      of Stockholders of the Fund to be held on June 27, 2000, or any adjournment
      thereof.</font></td>
  </tr></TABLE><p></p>

<p>
<table width=600>
  <tr>
    <td width=44 height="34">&nbsp;</td>
    <td width=435 height="34"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>This Proxy, when properly executed, will be voted in the manner herein directed by the undersigned stockholder.  If no direction is made, this proxy will be voted
&#147;FOR&#148; Item 1.</b></font></td>
  </tr>
</TABLE>
<p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
signing and dating the reverse side of this card, you authorize the proxies to
vote the proposal as marked, or if not marked, to vote &#147;FOR&#148; the proposal, and
to use their discretion to vote for any other matter as may properly come
before the meeting or any adjournment thereof. If you do not intend to
personally attend the meeting, please complete and return the card at once in
the enclosed envelope.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td align=right><font size=1>(Continued and to be
signed on the reverse side)</font></td></tr></TABLE><p></p>

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









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<!-- MARKER LABEL="sheet: 94, page: 94" -->






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

<table width=600><tr><td width=2% valign=top><font size="2">1.
</font></td><td width=95%><font size="2">To
consider and act upon a proposal to approve the Agreement and Plan of
Reorganization among the Fund, MuniHoldings Insured Fund III, Inc. and
MuniHoldings Insured Fund IV, Inc.</font></td></tr></TABLE><BR>

<TABLE border=0 cellPadding=0 cellSpacing=0 width=342>

  <TR vAlign=bottom>
    <TD width="33%"><B><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FOR
      </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="39%"><B><FONT size=1>AGAINST </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="28%"><B><FONT size=1>ABSTAIN </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD></TR></TABLE>
<BR><BR>

<table width=600><tr><td width=2% valign=top><font size="2">2.
</font></td><td width=95%><font size="2">In
the discretion of such proxies, upon such other business as properly may come
before the meeting or any adjournment thereof.</font></td></tr></TABLE><p><p>


<TABLE border=0 cellPadding=0 cellSpacing=0 width=600>

  <TR>
    <TD vAlign=top width="30%">&nbsp;</TD>
    <TD vAlign=top width="16%">&nbsp;</TD>
    <TD vAlign=top width="54%">
      <P>
      <P><FONT size=1>Please sign exactly as name appears hereon. When shares
      are held by joint tenants, both should sign. When signing as attorney or
      as executor, administrator, trustee or guardian, please give full title as
      such. If a corporation, please sign in full corporate name by president or
      other authorized officer. If a partnership, please sign in partnership
      name by authorized person. </FONT></P>
      <P><FONT size=1>Dated: ________________________________________________, 2000</FONT></P>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
      </FONT>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature,
      if held jointly </FONT></P></TD></TR></TABLE><BR>
<P>
<TABLE width=600>

  <TR>
    <TD width=600><FONT size=2><B><FONT size=1>Sign, Date and Return the Proxy
      Card Promptly Using the Enclosed
Envelope.</FONT></B></FONT></TD></TR></TABLE>


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









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 95, page: 95" -->








<p><table width=600><tr><td align=right><font size=2><B>AUCTION MARKET<BR>
PREFERRED STOCK</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr><td  align=center><font size=2><B>MUNIHOLDINGS INSURED
FUND II, INC.<BR>
       P.O. Box 9011<BR>
       Princeton, New Jersey 08543-9011</B></font></td>
  </tr></TABLE><p></p>

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

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints
      Terry K. Glenn, Donald C. Burke and Bradley J. Lucido as proxies, each with
      the power to appoint his substitute, and hereby authorizes each of them
      to represent and to vote, as designated on the reverse hereof, all of the
      shares of Auction Market Preferred Stock of MuniHoldings Insured Fund II,
      Inc. (the &#147;Fund&#148;) held of record by the undersigned on May 2,
      2000 at the Special Meeting of Stockholders of the Fund to be held on June
      27, 2000, or any adjournment thereof.</font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td width=44 height="34">&nbsp;</TD>
    <TD width=435 height="34"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>This Proxy, when properly executed, will be voted in the manner herein directed by the undersigned stockholder.  If no direction is made, this proxy will be voted
&#147;FOR&#148; Item 1.</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
signing and dating the reverse side of this card, you authorize the proxies to
vote the proposal as marked, or if not marked, to vote &#147;FOR&#148; the
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return the card at
once in the enclosed envelope.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td align=right><font size=1>(Continued and to be
signed on the reverse side)</font></td></tr></TABLE><p></p>

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









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 96, page: 96" -->






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


<table width=600><tr><td width=2% valign=top><font size="2">1.
</font></td><td width=95%><font size="2">To
consider and act upon a proposal to approve the Agreement and Plan of
Reorganization among the Fund, MuniHoldings Insured Fund III, Inc. and
MuniHoldings Insured Fund IV, Inc.</font></td></tr></TABLE>

<BR>

<TABLE border=0 cellPadding=0 cellSpacing=0 width=342>

  <TR vAlign=bottom>
    <TD width="33%"><B><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FOR
      </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="39%"><B><FONT size=1>AGAINST </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="28%"><B><FONT size=1>ABSTAIN </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD></TR></TABLE><BR><BR>



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

<table width=600><tr><td width=2% valign=top><font size="1">
</font></td><td width=95%><font size="2">If the
undersigned is a broker-dealer, it hereby instructs the proxies, pursuant to
Rule 452 of the New York Stock Exchange, to vote any uninstructed Auction
Market Preferred Stock, in the same proportion as votes cast by holders of
Auction Market Preferred Stock, who have responded to this proxy solicitation.</font></td></tr></TABLE><BR>

<TABLE border=0 cellPadding=0 cellSpacing=0 width=600>

  <TR>
    <TD vAlign=top width="30%">&nbsp;</TD>
    <TD vAlign=top width="16%">&nbsp;</TD>
    <TD vAlign=top width="54%">
      <P>
      <P><FONT size=1>Please sign exactly as name appears hereon. When shares
        are held by joint tenants, both should sign. When signing as attorney
        or as executor, administrator, trustee or guardian, please give full title
        as such. If a corporation, please sign in full corporate name by president
        or other authorized officer. If a partnership, please sign in partnership
        name by authorized persons. </FONT></P>
      <P><FONT size=1>Dated: ________________________________________________, 2000</FONT></P>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
      </FONT>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature,
      if held jointly </FONT></P></TD></TR></TABLE><BR>
<P>
<TABLE width=600>

  <TR>
    <TD width=600><FONT size=2><B><FONT size=1>Sign, Date and Return the Proxy
      Card Promptly Using the Enclosed
Envelope.</FONT></B></FONT></TD></TR></TABLE>



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









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 97, page: 97" -->







<p><table width=600><tr><td align=right><font size=2><B>COMMON STOCK</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B>MUNIHOLDINGS INSURED
FUND III, INC.<BR>
       P.O. Box 9011<BR>
       Princeton, New Jersey 08543-9011</B></font></td>
  </tr></TABLE><p></p>

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


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

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints
      Terry K. Glenn, Donald C. Burke and Bradley J. Lucido as proxies, each with
      the power to appoint his substitute, and hereby authorizes each of them
      to represent and to vote, as designated on the reverse hereof, all of the
      shares of Common Stock of MuniHoldings Insured Fund III, Inc. (the &#147;Fund&#148;)
      held of record by the undersigned on May 2, 2000 at the Special Meeting
      of Stockholders of the Fund to be held on June 27, 2000, or any adjournment
      thereof.</font></td>
  </tr></TABLE><p></p>

<p>
<table width=600>
  <tr>
    <td width=44 height="34">&nbsp;</td>
    <td width=435 height="34"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>This Proxy, when properly executed, will be voted in the manner herein directed by the undersigned stockholder.  If no direction is made, this proxy will be voted
&#147;FOR&#148; Item 1.</b></font></td>
  </tr>
</TABLE>
<p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
signing and dating the reverse side of this card, you authorize the proxies to
vote the proposal as marked, or if not marked, to vote &#147;FOR&#148; the
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return the card at
once in the enclosed envelope.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td align=right><font size=1>(Continued and to be
signed on the reverse side)</font></td></tr></TABLE><p></p>

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









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 98, page: 98" -->






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


<table width=600><tr><td width=2% valign=top><font size="2">1.
</font></td><td width=95%><font size="2">To
consider and act upon a proposal to approve the Agreement and Plan of
Reorganization among the Fund, MuniHoldings Insured Fund II, Inc. and
MuniHoldings Insured Fund IV, Inc.</font></td></tr></TABLE>

<BR>

<TABLE border=0 cellPadding=0 cellSpacing=0 width=342>

  <TR vAlign=bottom>
    <TD width="33%"><B><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FOR
      </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="39%"><B><FONT size=1>AGAINST </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="28%"><B><FONT size=1>ABSTAIN </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD></TR></TABLE><BR><BR>


<table width=600><tr><td width=2% valign=top><font size="2">2.
</font></td><td width=95%><font size="2">In
the discretion of such proxies, upon such other business as properly may come
before the meeting or any adjournment thereof.</font></td></tr></TABLE>
<p><p>
<TABLE border=0 cellPadding=0 cellSpacing=0 width=600>

  <TR>
    <TD vAlign=top width="30%">&nbsp;</TD>
    <TD vAlign=top width="16%">&nbsp;</TD>
    <TD vAlign=top width="54%">
      <P>
      <P><FONT size=1>Please sign exactly as name appears hereon. When shares
      are held by joint tenants, both should sign. When signing as attorney or
      as executor, administrator, trustee or guardian, please give full title as
      such. If a corporation, please sign in full corporate name by president or
      other authorized officer. If a partnership, please sign in partnership
      name by authorized person. </FONT></P>
      <P><FONT size=1>Dated: ________________________________________________, 2000</FONT></P>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
      </FONT>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature,
      if held jointly </FONT></P></TD></TR></TABLE><BR>
<P>
<TABLE width=600>

  <TR>
    <TD width=600><FONT size=2><B><FONT size=1>Sign, Date and Return the Proxy
      Card Promptly Using the Enclosed
Envelope.</FONT></B></FONT></TD></TR></TABLE>


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









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 99, page: 99" -->








<p><table width=600><tr><td align=right><font size=2><B>AUCTION MARKET<BR>
PREFERRED STOCK</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B>MUNIHOLDINGS INSURED
FUND III, INC.<BR>
       P.O. Box 9011<BR>
       Princeton, New Jersey 08543-9011</B></font></td>
  </tr></TABLE><p></p>

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

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints
      Terry K. Glenn, Donald C. Burke and Bradley J. Lucido as proxies, each with
      the power to appoint his substitute, and hereby authorizes each of them
      to represent and to vote, as designated on the reverse hereof, all of the
      shares of Auction Market Preferred Stock of MuniHoldings Insured Fund III,
      Inc. (the &#147;Fund&#148;) held of record by the undersigned on May 2,
      2000 at the Special Meeting of Stockholders of the Fund to be held on June
      27, 2000, or any adjournment thereof.</font></td>
  </tr></TABLE><p></p>

<p>
<table width=600>
  <tr>
    <td width=44 height="34">&nbsp;</td>
    <td width=435 height="34"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>This Proxy, when properly executed, will be voted in the manner herein directed by the undersigned stockholder.  If no direction is made, this proxy will be voted
&#147;FOR&#148; Item 1.</b></font></td>
  </tr>
</TABLE>
<p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
signing and dating the reverse side of this card, you authorize the proxies to
vote the proposal as marked, or if not marked, to vote &#147;FOR&#148; the
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return the card at
once in the enclosed envelope.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td align=right><font size=1>(Continued and to be
signed on the reverse side)</font></td></tr></TABLE><p></p>

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









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 100, page: 100" -->






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


<table width=600><tr><td width=2% valign=top><font size="2">1.
</font></td><td width=95%><font size="2">To
consider and act upon a proposal to approve the Agreement and Plan of
Reorganization among the Fund, MuniHoldings Insured Fund II, Inc. and
MuniHoldings Insured Fund IV, Inc.</font></td></tr></TABLE>

<BR>

<TABLE border=0 cellPadding=0 cellSpacing=0 width=342>

  <TR vAlign=bottom>
    <TD width="33%"><B><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FOR
      </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="39%"><B><FONT size=1>AGAINST </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="28%"><B><FONT size=1>ABSTAIN </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD></TR></TABLE><BR><BR>


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

<table width=600><tr><td width=2% valign=top><font size="1">
</font></td><td width=95%><font size="2">If the
undersigned is a broker-dealer, it hereby instructs the proxies, pursuant to
Rule 452 of the New York Stock Exchange, to vote any uninstructed Auction
Market Preferred Stock, in the same proportion as votes cast by holders of
Auction Market Preferred Stock, who have responded to this proxy solicitation.</font></td></tr></TABLE><BR>


<TABLE border=0 cellPadding=0 cellSpacing=0 width=600>

  <TR>
    <TD vAlign=top width="30%">&nbsp;</TD>
    <TD vAlign=top width="16%">&nbsp;</TD>
    <TD vAlign=top width="54%">
      <P>
      <P><FONT size=1>Please sign exactly as name appears hereon. When shares
        are held by joint tenants, both should sign. When signing as attorney
        or as executor, administrator, trustee or guardian, please give full title
        as such. If a corporation, please sign in full corporate name by president
        or other authorized officer. If a partnership, please sign in partnership
        name by authorized persons. </FONT></P>
      <P><FONT size=1>Dated: ________________________________________________, 2000</FONT></P>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
      </FONT>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature,
      if held jointly </FONT></P></TD></TR></TABLE><BR>
<P>
<TABLE width=600>

  <TR>
    <TD width=600><FONT size=2><B><FONT size=1>Sign, Date and Return the Proxy
      Card Promptly Using the Enclosed
Envelope.</FONT></B></FONT></TD></TR></TABLE>


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









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 101, page: 101" -->






<p><table width=600><tr><td align=right><font size=2><B>COMMON STOCK</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B>MUNIHOLDINGS INSURED
FUND IV, INC.<BR>
       P.O. Box 9011<BR>
       Princeton, New Jersey 08543-9011</B></font></td>
  </tr></TABLE><p></p>

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

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints
      Terry K. Glenn, Donald C. Burke and Ira P. Shapiro, as proxies, each with
      the power to appoint his substitute, and hereby authorizes each of them
      to represent and to vote, as designated on the reverse hereof, all of the
      shares of Common Stock of MuniHoldings Insured Fund IV, Inc. (the &#147;Fund&#148;)
      held of record by the undersigned on May 2, 2000 at the Special Meeting
      of Stockholders of the Fund to be held on June 27, 2000, or any adjournment
      thereof.</font></td>
  </tr></TABLE><p></p>

<p>
<table width=600>
  <tr>
    <td width=44 height="34">&nbsp;</td>
    <td width=435 height="34"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>This Proxy, when properly executed, will be voted in the manner herein directed by the undersigned stockholder.  If no direction is made, this proxy will be voted
&#147;FOR&#148; Item 1.</b></font></td>
  </tr>
</TABLE>
<p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
signing and dating the reverse side of this card, you authorize the proxies to
vote the proposal as marked, or if not marked, to vote &#147;FOR&#148; the
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return the card at
once in the enclosed envelope.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td align=right><font size=1>(Continued and to be
signed on the reverse side)</font></td></tr></TABLE><p></p>

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









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 102, page: 102" -->






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


<table width=600><tr><td width=2% valign=top><font size="2">1.
</font></td><td width=95%><font size="2">To
consider and act upon a proposal to approve the Agreement and Plan of
Reorganization among the Fund, MuniHoldings Insured Fund II, Inc. and
MuniHoldings Insured Fund III, Inc.</font></td></tr></TABLE>

<BR>

<TABLE border=0 cellPadding=0 cellSpacing=0 width=342>

  <TR vAlign=bottom>
    <TD width="33%"><B><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FOR
      </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="39%"><B><FONT size=1>AGAINST </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="28%"><B><FONT size=1>ABSTAIN </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD></TR></TABLE><BR><BR>



<table width=600><tr><td width=2% valign=top><font size="2">2.
</font></td><td width=95%><font size="2">In
the discretion of such proxies, upon such other business as properly may come
before the meeting or any adjournment thereof.</font></td></tr></TABLE><p><p>

<TABLE border=0 cellPadding=0 cellSpacing=0 width=600>

  <TR>
    <TD vAlign=top width="30%">&nbsp;</TD>
    <TD vAlign=top width="16%">&nbsp;</TD>
    <TD vAlign=top width="54%">
      <P>
      <P><FONT size=1>Please sign exactly as name appears hereon. When shares
        are held by joint tenants, both should sign. When signing as attorney
        or as executor, administrator, trustee or guardian, please give full title
        as such. If a corporation, please sign in full corporate name by president
        or other authorized officer. If a partnership, please sign in partnership
        name by authorized persons. </FONT></P>
      <P><FONT size=1>Dated: ________________________________________________, 2000</FONT></P>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
      </FONT>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature,
      if held jointly </FONT></P></TD></TR></TABLE><BR>
<P>
<TABLE width=600>

  <TR>
    <TD width=600><FONT size=2><B><FONT size=1>Sign, Date and Return the Proxy
      Card Promptly Using the Enclosed
Envelope.</FONT></B></FONT></TD></TR></TABLE>

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









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<!-- MARKER LABEL="sheet: 103, page: 103" -->








<p><table width=600><tr><td align=right><font size=2><B>AUCTION MARKET<BR>
PREFERRED STOCK</B></font></td></tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B>MUNIHOLDINGS INSURED
FUND IV, INC.<BR>
       P.O. Box 9011<BR>
       Princeton, New Jersey 08543-9011</B></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B>PROXY</B></font></td>
  </tr></TABLE>
<p></p>
<table width=600>
  <tr>
    <td  align=center height="24"><font size=2><b>This proxy is solicited on behalf of the Board of Directors </b></font></td>
  </tr>
</TABLE>
<p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints
      Terry K. Glenn, Donald C. Burke and Ira P. Shapiro, as proxies, each with
      the power to appoint his substitute, and hereby authorizes each of them
      to represent and to vote, as designated on the reverse hereof, all of the
      shares of Auction Market Preferred Stock of MuniHoldings Insured Fund IV,
      Inc. (the &#147;Fund&#148;) held of record by the undersigned on May 2,
      2000 at the Special Meeting of Stockholders of the Fund to be held on June
      27, 2000, or any adjournment thereof.</font></td>
  </tr></TABLE><p></p>

<p>
<table width=600>
  <tr>
    <td width=44 height="34">&nbsp;</td>
    <td width=435 height="34"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>This Proxy, when properly executed, will be voted in the manner herein directed by the undersigned stockholder.  If no direction is made, this proxy will be voted
&#147;FOR&#148; Item 1.</b></font></td>
  </tr>
</TABLE>
<p></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
signing and dating the reverse side of this card, you authorize the proxies to
vote the proposal as marked, or if not marked, to vote &#147;FOR&#148; the
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return the card at
once in the enclosed envelope.</font></td></tr></TABLE><p></p>

<p><table width=600><tr><td align=right><font size=1>(Continued and to be
signed on the reverse side)</font></td></tr></TABLE><p></p>

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









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<!-- MARKER LABEL="sheet: 104, page: 104" -->






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


<table width=600><tr><td width=2% valign=top><font size="2">1.
</font></td><td width=95%><font size="2">To
consider and act upon a proposal to approve the Agreement and Plan of
Reorganization among the Fund, MuniHoldings Insured Fund II, Inc. and
MuniHoldings Insured Fund III, Inc.</font></td></tr></TABLE>

<BR>

<TABLE border=0 cellPadding=0 cellSpacing=0 width=342>

  <TR vAlign=bottom>
    <TD width="33%"><B><FONT size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FOR
      </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="39%"><B><FONT size=1>AGAINST </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD>
    <TD width="28%"><B><FONT size=1>ABSTAIN </FONT></B><FONT size=1>|<U>&nbsp;&nbsp;&nbsp;</U>|</FONT></TD></TR></TABLE><BR><BR>



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

<table width=600><tr><td width=2% valign=top><font size="1">
</font></td><td width=95%><font size="2">If the
undersigned is a broker-dealer, it hereby instructs the proxies, pursuant to
Rule 452 of the New York Stock Exchange, to vote any uninstructed Auction
Market Preferred Stock, in the same proportion as votes cast by holders of
Auction Market Preferred Stock, who have responded to this proxy solicitation.</font></td></tr></TABLE><BR>

<TABLE border=0 cellPadding=0 cellSpacing=0 width=600>

  <TR>
    <TD vAlign=top width="30%">&nbsp;</TD>
    <TD vAlign=top width="16%">&nbsp;</TD>
    <TD vAlign=top width="54%">
      <P>
      <P><FONT size=1>Please sign exactly as name appears hereon. When shares
        are held by joint tenants, both should sign. When signing as attorney
        or as executor, administrator, trustee or guardian, please give full title
        as such. If a corporation, please sign in full corporate name by president
        or other authorized officer. If a partnership, please sign in partnership
        name by authorized persons. </FONT></P>
      <P><FONT size=1>Dated: ________________________________________________, 2000</FONT></P>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
      </FONT>
      <P><FONT size=1>X_________________________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature,
      if held jointly </FONT></P></TD></TR></TABLE><BR>
<P>
<TABLE width=600>

  <TR>
    <TD width=600><FONT size=2><B><FONT size=1>Sign, Date and Return the Proxy
      Card Promptly Using the Enclosed
Envelope.</FONT></B></FONT></TD></TR></TABLE>


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









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<!-- MARKER LABEL="sheet: 105, page: 105" -->







<table width=600>
  <tr>
    <td  align=center><font size=2><b>Index to Exhibits</b></font></td>
  </tr>
</TABLE>
<p>
<table 0 cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" colspan="4"><font size="2"><b>Exhibits Number</b></font></td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">1</font>
    </td>
    <td valign="TOP"><font size="2">(c)</font></td>
    <td valign="TOP"><font size="2"></font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP"><font size="2"></font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Articles Supplementary creating
        the Registrant&#146;s Series C AMPS. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">16</font>
    </td>
    <td valign="TOP"><font size="2"></font></td>
    <td valign="TOP"><font size="2"></font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP"><font size="2"></font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Power of Attorney</font> <font size="2">(included
        on signature page).</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">17</font>
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(a)</font>
    </td>
    <td valign="TOP"><font size="2"></font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP"><font size="2"></font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Letter to Stockholders of each Fund</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">(b)</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Question and Answer Sheet</font>
    </td>
  </tr>
</TABLE>
<p>&nbsp;


<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></TABLE><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;
</body>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.C
<SEQUENCE>2
<DESCRIPTION>FORM OF ARTICLES SUPPLEMENTARY
<TEXT>


                                                                    EXHIBIT 1(C)

                       MUNIHOLDINGS INSURED FUND II, INC.

                  Articles Supplementary creating one series of

                        Auction Market Preferred Stock(R)

         MUNIHOLDINGS INSURED 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 3,980 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 C.

      SECOND: The preferences,  voting powers,  restrictions,  limitations as to
dividends, qualifications, and terms and conditions of redemption, of the shares
of such series of preferred stock are as follows:

- --------------------------------------------------------
(R)   Registered trademark of Merrill Lynch & Co., Inc.

<PAGE>

                                   DESIGNATION

         Series C: A series of 3,980 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 C." Each share of
Auction Market Preferred Stock, Series C (sometimes referred to herein as
"AMPS") shall be issued on a date to be determined by the Board of Directors of
the Corporation or pursuant to their delegated authority; have an Initial
Dividend Rate and an Initial Dividend Payment Date as shall be determined in
advance of the issuance thereof by the Board of Directors of the Corporation or
pursuant to their delegated authority; and have such other preferences, voting
powers, limitations as to dividends, qualifications and terms and conditions of
redemption as are set forth in these Articles Supplementary. The Auction Market
Preferred Stock, Series A 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


                                       2
<PAGE>

commercial paper placed on behalf of such issuers, as quoted on a discount basis
or otherwise by Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
successors that are Commercial Paper Dealers, to the Auction Agent for the close
of business on the Business Day immediately preceding such date. If one of the
Commercial Paper Dealers does not quote a rate required to determine the "AA"
Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate will
be determined on the basis of the quotation or quotations furnished by any
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers
selected by the Corporation to provide such rate or rates not being supplied by
the Commercial Paper Dealer. If the number of Dividend Period days shall be (i)
7 or more but fewer than 49 days, such rate shall be the Interest Equivalent of
the 30-day rate on such commercial paper; (ii) 49 or more but fewer than 70
days, such rate shall be the Interest Equivalent of the 60-day rate on such
commercial paper; (iii) 70 or more days but fewer than 85 days, such rate shall
be the arithmetic average of the Interest Equivalent on the 60-day and 90-day
rates on such commercial paper; (iv) 85 or more days but fewer than 99 days,
such rate shall be the Interest Equivalent of the 90-day rate on such commercial
paper; (v) 99 or more days but fewer than 120 days, such rate shall be the
arithmetic average of the Interest Equivalent of the 90-day and 120-day rates on
such commercial paper; (vi) 120 or more days but fewer than 141 days, such rate
shall be the Interest Equivalent of the 120-day rate on such commercial paper;
(vii) 141 or more days but fewer than 162 days, such rate shall be the
arithmetic average of the Interest Equivalent of the 120-day and 180-day rates
on such commercial paper; and (viii) 162 or more days but fewer than 183 days,
such rate shall be the Interest Equivalent of the 180-day rate on such
commercial paper.

      "Accountant's Confirmation" has the meaning set forth in paragraph 7(c) of
these Articles Supplementary.


                                       3
<PAGE>

      "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 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 each series and Other AMPS Outstanding on such Valuation Date multiplied
by the sum of (a) $25,000 and (b) any applicable redemption premium attributable
to the designation of a Premium Call Period; (B) the aggregate amount of cash
dividends (whether or not earned or declared) that will have accumulated for
each share of AMPS and Other AMPS Outstanding, in each case, to (but not
including) the end of the current Dividend Period that follows such Valuation
Date in the event the then current Dividend Period will end within 49 calendar
days of such Valuation Date or through the 49th day after such Valuation Date in
the event the then current Dividend Period will not end within 49 calendar days
of such Valuation Date; (C) in the event the then current Dividend Period will
end within 49 calendar days of such Valuation Date, the aggregate amount of cash
dividends that would accumulate at the Maximum Applicable Rate applicable to a
Dividend Period of 28 or fewer days on any shares of AMPS and Other AMPS
Outstanding from


                                       4
<PAGE>

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 (including any
premiums payable with respect to a Policy); (E) the amount of the Corporation's
Maximum Potential Additional Dividend Liability as of such Valuation Date; and
(F) any current liabilities as of such Valuation Date to the extent not
reflected in any of (i)(A) through (i)(E) (including, without limitation, and
immediately upon determination, any amounts due and payable by the Corporation
pursuant to repurchase agreements and any amounts payable for Municipal Bonds
purchased as of such Valuation Date) less (ii) either (A) the Discounted Value
of any of the Corporation's assets, or (B) the face value of any of the
Corporation's assets if such assets mature prior to or on the date of redemption
of AMPS or payment of a liability and are either securities issued or guaranteed
by the United States Government or Deposit Securities, in both cases irrevocably
deposited by the Corporation for the payment of the amount needed to redeem
shares of AMPS subject to redemption or to satisfy any of (i)(B) through (i)(F).
For Moody's and S&P, the Corporation shall include as a liability an amount
calculated semi-annually equal to 150% of the estimated cost of obtaining other
insurance guaranteeing the timely payment of interest on a Moody's Eligible
Asset or an S&P Eligible Asset and principal thereof to maturity with respect to
Moody's Eligible Assets and S&P Eligible Assets that (i) are covered by a Policy
which provides the Corporation with the option to obtain such other insurance
and (ii) are discounted by a Moody's


                                       5
<PAGE>

Discount Factor or an S&P Discount Factor determined by reference to the
insurance claims-paying ability rating of the issuer of such Policy.

      "AMPS Basic Maintenance Cure Date," with respect to the failure by the
Corporation to satisfy the AMPS Basic Maintenance Amount (as required by
paragraph 7(a) of these Articles Supplementary) as of a given Valuation Date,
means the sixth Business Day following such Valuation Date.

      "AMPS Basic Maintenance Report" means a report signed by any of the
President, Treasurer, any Senior Vice President or any Vice President of the
Corporation which sets forth, as of the related Valuation Date, the assets of
the Corporation, the Market Value and the Discounted Value thereof (seriatim and
in aggregate), and the AMPS Basic Maintenance Amount.

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

      "Applicable Percentage" has the meaning set forth in paragraph 10(a)(vii)
of these Articles Supplementary.

      "Applicable Rate" means the rate per annum at which cash dividends are
payable on the AMPS or Other AMPS, as the case may be, for any Dividend Period.

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

      "Auction Agent" means The Bank of New York unless and until another
commercial bank, trust company or other financial institution appointed by a
resolution of the Board of Directors of the Corporation or a duly authorized
committee thereof enters into an agreement with the Corporation to follow the
Auction Procedures for the purpose of determining the


                                       6
<PAGE>

Applicable Rate and to act as transfer agent, registrar, dividend disbursing
agent and redemption agent for the AMPS and Other AMPS.

      "Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 10 of these Articles Supplementary.

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

      "Broker-Dealer" means any broker-dealer,  or other entity permitted by law
to perform the functions  required of a  Broker-Dealer  in paragraph 10 of these
Articles  Supplementary,  that  has been  selected  by the  Corporation  and has
entered  into a  Broker-Dealer  Agreement  with the Auction  Agent that  remains
effective.

      "Broker-Dealer Agreement" means an agreement between the Auction Agent and
a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in paragraph 10 of these Articles Supplementary.

      "Business Day" means a day on which the New York Stock Exchange, Inc. is
open for trading and which is not a Saturday, Sunday or other day on which banks
in The City of New York are authorized or obligated by law to close.

      "Charter" means the Articles of Incorporation, as amended and supplemented
(including these Articles Supplementary), of the Corporation on file in the
State Department of Assessments and Taxation of Maryland.

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


                                       7
<PAGE>

      "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 MuniHoldings Insured 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.

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

      "Dividend Payment Date," with respect to AMPS, has the meaning set forth
in paragraph 2(b)(i) of these Articles Supplementary and, with respect to Other
AMPS, has the equivalent meaning.

      "Dividend Period" means the Initial Dividend Period, any 7-Day Dividend
Period and any Special Dividend Period.

      "Existing Holder" means a Broker-Dealer or any such other Person as may be
permitted by the Corporation that is listed as the holder of record of shares of
AMPS in the Stock Books.

      "Fitch" means Fitch ICBA, Inc. or its successors.


                                       8
<PAGE>


      "Forward Commitment" has the meaning set forth in paragraph 8(c) of these
Articles Supplementary.

      "Holder" means a Person identified as a holder of record of shares of AMPS
in the Stock Register.

      "Independent Accountant" means a nationally recognized accountant, or firm
of accountants, that is, with respect to the Corporation, an independent public
accountant or firm of independent public accountants under the Securities Act of
1933, as amended.

      "Initial Dividend Payment Date" means the Initial Dividend Payment Date as
determined by the Board of Directors of the Corporation with respect to the AMPS
or Other AMPS, as the case may be.

      "Initial Dividend Period," with respect to the AMPS, has the meaning
set forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect
to Other AMPS, has the equivalent meaning.

      "Initial Dividend Rate," with respect to the AMPS, means the rate per
annum applicable to the Initial Dividend Period for the AMPS and, with respect
to Other AMPS, has the equivalent meaning.

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

      "Interest Equivalent" means a yield on a 360-day basis of a discount basis
security which is equal to the yield on an equivalent interest-bearing security.

         "Inverse Floaters" means trust certificates or other instruments
evidencing interests in one or more Municipal Bonds that qualify as S&P Eligible
Assets (and are not part of a private placement of Municipal Bonds and satisfy
the issuer and original issue size requirements of


                                       9
<PAGE>

clause (vii) of the definition of S&P Eligible Assets) the interest rates on
which are adjusted at short term intervals on a basis that is inverse to the
simultaneous readjustment of the interest rates on corresponding floating rate
trust certificates or other instruments issued by the same issuer, provided that
the ratio of the aggregate dollar amount of floating rate instruments to inverse
floating rate instruments issued by the same issuer does not exceed one to one
at their time of original issuance unless the floating rate instrument has only
one reset remaining until maturity.

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

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

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

      "Market Value" of any asset of the Corporation shall be the market value
thereof determined by the Pricing Service. Market Value of any asset shall
include any interest accrued thereon. The Pricing Service shall value portfolio
securities at the quoted bid prices or the mean between the quoted bid and asked
price or the yield equivalent when quotations are not readily available.
Securities for which quotations are not readily available shall be valued at
fair value as determined by the Pricing Service using methods which include
consideration of: yields or prices of municipal bonds of comparable quality,
type of issue, coupon, maturity and rating; indications as to value from
dealers; and general market conditions. The Pricing Service


                                       10
<PAGE>

may employ electronic data processing techniques and/or a matrix system to
determine valuations. In the event the Pricing Service is unable to value a
security, the security shall be valued at the lower of two dealer bids obtained
by the Corporation from dealers who are members of the National Association of
Securities Dealers, Inc. and who make a market in the security, at least one of
which shall be in writing. Futures contracts and options are valued at closing
prices for such instruments established by the exchange or board of trade on
which they are traded, or if market quotations are not readily available, are
valued at fair value on a consistent basis using methods determined in good
faith by the Board of Directors.

      "Maximum Applicable Rate," with respect to AMPS, has the meaning set forth
in paragraph 10(a)(vii) of these Articles Supplementary and, with respect to
Other AMPS, has the equivalent meaning.

      "Maximum Potential Additional Dividend Liability," as of any Valuation
Date, means the aggregate amount of Additional Dividends that would be due if
the Corporation were to make Retroactive Taxable Allocations, with respect to
any fiscal year, estimated based upon dividends paid and the amount of
undistributed realized net capital gains and other taxable income earned by the
Corporation, as of the end of the calendar month immediately preceding such
Valuation Date and assuming such Additional Dividends are fully taxable.

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

      "Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes a Moody's Eligible
Asset, the percentage determined by reference to (a)(i) the rating by Moody's or
S&P on such Bond or (ii) in the event the Moody's Eligible Asset is insured
under a Policy and the terms of the Policy permit the Corporation, at its
option, to obtain other insurance guaranteeing the timely payment of interest on
such Moody's


                                       11
<PAGE>

Eligible Asset and principal thereof to maturity, the Moody's insurance
claims-paying ability rating of the issuer of the Policy or (iii) in the event
the Moody's Eligible Asset is insured under an insurance policy which guarantees
the timely payment of interest on such Moody's Eligible Asset and principal
thereof to maturity, the Moody's insurance claims-paying ability rating of the
issuer of the insurance policy (provided that for purposes of clauses (ii) and
(iii) if the insurance claims-paying ability of an issuer of a Policy or
insurance policy is not rated by Moody's but is rated by S&P, such issuer shall
be deemed to have a Moody's insurance claims-paying ability rating which is two
full categories lower than the S&P insurance claims-paying ability rating) 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.

; provided, however, in the event a Moody's Discount Factor applicable to a
Moody's Eligible Asset is determined by reference to an insurance claims-paying
ability rating in accordance with clause (a)(ii) or (a)(iii), such Moody's
Discount Factor shall be increased by an amount equal to 50% of the difference
between (a) the percentage set forth in the foregoing table under the applicable
rating category and (b) the percentage set forth in the foregoing table under
the rating category which is one category lower than the applicable rating
category.


                                       12
<PAGE>

      Notwithstanding the foregoing, (i) a 102% Moody's Discount Factor will be
applied to short-term Municipal Bonds so long as such Municipal Bonds are rated
at least MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand feature at
par exercisable within the Moody's Exposure Period, and the Moody's Discount
Factor for such Bonds will be 125% if such Bonds are not rated by Moody's but
are rated A-1+ or SP-1+ or AA by S&P and mature or have a demand feature at par
exercisable within the Moody's Exposure Period, and (ii) no Moody's Discount
Factor will be applied to cash or to Receivables for Municipal Bonds Sold.
"Receivables for Municipal Bonds Sold," for purposes of calculating Moody's
Eligible Assets as of any Valuation Date, means no more than the aggregate of
the following: (i) the book value of receivables for Municipal Bonds sold as of
or prior to such Valuation Date if such receivables are due within five Business
Days of such Valuation Date, and if the trades which generated such receivables
are (x) settled through clearing house firms with respect to which the
Corporation has received prior written authorization from Moody's or (y) with
counterparties having a Moody's long-term debt rating of at least Baa3; and (ii)
the Moody's Discounted Value of Municipal Bonds sold as of or prior to such
Valuation Date which generated receivables, if such receivables are due within
five Business Days of such Valuation Date but do not comply with either of
conditions (x) or (y) of the preceding clause (i).

      "Moody's Eligible Asset" means cash, Receivables for Municipal Bonds Sold
or a Municipal Bond that (i) pays interest in cash, (ii) is publicly rated Baa
or higher by Moody's or, if not rated by Moody's but rated by S&P, is rated at
least BBB- by S&P (provided that, for purposes of determining the Moody's
Discount Factor applicable to any such S&P-rated Municipal Bond, such Municipal
Bond (excluding any short-term Municipal Bond) will be deemed to have a Moody's
rating which is one full rating category lower than its S&P rating),


                                       13
<PAGE>

(iii) does not have its Moody's rating suspended by Moody's; and (iv) is part of
an issue of Municipal Bonds of at least $10,000,000. In addition, Municipal
Bonds in the Corporation's portfolio must be within the following
diversification requirements in order to be included within Moody's Eligible
Assets:

<TABLE>
<CAPTION>
                                                                                                     Maximum State
                                                   Minimum                    Maximum                 or Territory
                                                 Issue Size                 Underlying               Concentration
Rating                                          ($ Millions)              Obligor (%) (1)             (%) (1) (3)
- -------------------------------------           ------------              ---------------             -----------
<S>                                                  <C>                      <C>                          <C>
Aaa............................                      10                       100                          100
Aa.............................                      10                        20                           60
A..............................                      10                        10                           40
Baa............................                      10                         6                           20
Other (2)......................                      10                         4                           12
</TABLE>

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

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

      When the Corporation sells a Municipal Bond and agrees to repurchase it at
a future date, the Discounted Value of such Bond will constitute a Moody's
Eligible Asset and the amount the Corporation is required to pay upon repurchase
of such Bond will count as a liability for purposes of calculating the AMPS
Basic Maintenance Amount. For so long as the AMPS are rated by Moody's, the
Corporation will not enter into any such reverse repurchase agreements unless it
has received written confirmation from Moody's that such transactions would not
impair the rating then assigned the AMPS by Moody's. When the Corporation
purchases a Municipal Bond and



                                       14
<PAGE>

agrees to sell it at a future date to another party, cash receivable by the
Corporation thereby will constitute a Moody's Eligible Asset if the long-term
debt of such other party is rated at least A2 by Moody's and such agreement has
a term of 30 days or less; otherwise the Discounted Value of such Bond will
constitute a Moody's Eligible Asset.

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

         "Moody's Exposure Period" means a period that is the same length or
longer than the number of days used in calculating the cash dividend component
of the AMPS Basic Maintenance Amount and shall initially be the period
commencing on and including a given Valuation Date and ending 48 days
thereafter.

      "Moody's Hedging Transactions" has the meaning set forth in paragraph 8(b)
of these Articles Supplementary.

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


                                       15
<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-14 (File No. 333-______) relating to the AMPS
on file with the Securities and Exchange Commission, as such Registration
Statement may be amended from time to time, as well as short-term municipal
obligations and Inverse Floaters.

      "Municipal Index" has the meaning set forth in paragraph 8(a) of these
Articles Supplementary.

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

      "1940 Act AMPS Asset Coverage" means asset coverage, as defined in section
18(h) of the 1940 Act, of at least 200% with respect to all outstanding senior
securities of the Corporation which are stock, including all outstanding shares
of AMPS and Other AMPS (or such other asset coverage as may in the future be
specified in or under the 1940 Act as the minimum asset coverage for senior
securities which are stock of a closed-end investment company as a condition of
paying dividends on its common stock).


                                       16
<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, New York City time, on
the Business Day preceding such Dividend Payment Date, the full amount of any
dividend on shares of AMPS payable on such Dividend Payment Date or (ii)
deposit, irrevocably in trust, in same-day funds, with the Auction Agent by
12:00 noon, New York City time, (A) on such Dividend Payment Date the full
amount of any cash dividend on such shares payable (if declared) on such
Dividend Payment Date or (B) on any redemption date for any shares of AMPS
called for redemption, the Mandatory Redemption Price per share of such AMPS or,
in the case of an optional redemption, the Optional Redemption Price per share,
and ending on and including the Business Day on which, by 12:00 noon, New York
City time, all unpaid cash dividends and unpaid redemption prices shall have
been so deposited or shall have otherwise been made available to Holders in
same-day funds; provided that, a Non-Payment Period shall not end unless the
Corporation shall have given at least five days' but no more than 30 days'
written notice of such deposit or availability to the Auction Agent, all
Existing Holders (at their addresses appearing in the Stock Books) and the
Securities Depository. Notwithstanding the


                                       17
<PAGE>

foregoing, the failure by the Corporation to deposit funds as provided for by
clauses (ii)(A) or (ii)(B) above within three Business Days after any Dividend
Payment Date or redemption date, as the case may be, in each case to the extent
contemplated by paragraph 2(c)(i) of these Articles Supplementary, shall not
constitute a "Non-Payment Period."

      "Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 275% of such rate if the Corporation has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net
capital gains or other taxable income will be included in such dividend on
shares of AMPS), provided that the Board of Directors of the Corporation shall
have the authority to adjust, modify, alter or change from time to time the
initial Non-Payment Period Rate if the Board of Directors of the Corporation
determines and Moody's and S&P (and any Substitute Rating Agency in lieu of
Moody's or S&P in the event either of such parties shall not rate the AMPS)
advise the Corporation in writing that such adjustment, modification, alteration
or change will not adversely affect their then current ratings on the AMPS.

      "Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of these Articles Supplementary.

      "Notice of Redemption" means any notice with respect to the redemption of
shares of AMPS pursuant to paragraph 4 of these Articles Supplementary.

      "Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii) of
these Articles Supplementary.

      "Notice of Special Dividend Period" has the meaning set forth in paragraph
2(c)(iii) of these Articles Supplementary.


                                       18
<PAGE>


      "Optional Redemption Price" means $25,000 per share plus an amount equal
to accumulated but unpaid dividends (whether or not earned or declared) to the
date fixed for redemption and excluding Additional Dividends plus any applicable
redemption premium attributable to the designation of a Premium Call Period.

      "Other AMPS" means the auction rate preferred stock of the Corporation,
other than the AMPS.

      "Outstanding" means, as of any date (i) with respect to AMPS, shares of
AMPS theretofore issued by the Corporation except, without duplication, (A) any
shares of AMPS theretofore cancelled or delivered to the Auction Agent for
cancellation, or redeemed by the Corporation, or as to which a Notice of
Redemption shall have been given and Deposit Securities shall have been
deposited in trust or segregated by the Corporation pursuant to paragraph 4(c)
and (B) any shares of AMPS as to which the Corporation or any Affiliate thereof
shall be a Beneficial Owner, provided that shares of AMPS held by an Affiliate
shall be deemed outstanding for purposes of calculating the AMPS Basic
Maintenance Amount and (ii) with respect to shares of other Preferred Stock, has
the equivalent meaning.

      "Parity Stock" means the AMPS and each other outstanding series of
Preferred Stock the holders of which, together with the holders of the AMPS,
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion to the
full respective preferential amounts to which they are entitled, without
preference or priority one over the other.

      "Person" means and includes an individual, a partnership, a corporation, a
trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.


                                       19
<PAGE>

      "Policy" means an insurance policy purchased by the Corporation which
guarantees the payment of principal and interest on specified Municipal Bonds
during the period in which such Municipal Bonds are owned by the Corporation;
provided, however, that, as long as the AMPS are rated by Moody's and S&P, the
Corporation will not obtain any Policy unless Moody's and S&P advise the
Corporation in writing that the purchase of such Policy will not adversely
affect their then-current rating on the 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 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, 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-first 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 ______________, 2000.


                                       20
<PAGE>

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

      "Reference Rate" means: (i) with respect to a Dividend Period or a Short
Term Dividend Period having 28 or fewer days, the higher of the applicable "AA"
Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate, (ii) with respect to any Short Term Dividend Period having
more than 28 but fewer than 183 days, the applicable "AA" Composite Commercial
Paper Rate, (iii) with respect to any Short Term Dividend Period having 183 or
more but fewer than 364 days, the applicable U.S. Treasury Bill Rate and (iv)
with respect to any Long Term Dividend Period, the applicable U.S. Treasury Note
Rate.

      "Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.

      "Response" has the meaning set forth in paragraph 2(c)(iii) of these
Articles Supplementary.

      "Retroactive Taxable Allocation" has the meaning set forth in paragraph
2(e) of these Articles Supplementary.

      "Right" with respect to the AMPS, has the meaning set forth in paragraph
2(e) of these Articles Supplementary and, with respect to Other AMPS, has the
equivalent meaning.

      "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., or its successors.

      "S&P Discount Factor" means, for purposes of determining the Discounted
Value of any Municipal Bond which constitutes an S&P Eligible Asset, the
percentage determined by reference to (a)(i) the rating by S&P, Moody's or Fitch
on such Bond or (ii) in the event the


                                       21
<PAGE>

Municipal Bond is insured under a Policy and the terms of the Policy permit the
Corporation, at its option, to obtain other permanent insurance guaranteeing the
timely payment of interest on such Municipal Bond and principal thereof to
maturity, the S&P insurance claims-paying ability rating of the issuer of the
Policy or (iii) in the event the Municipal Bond is insured under an insurance
policy which guarantees the timely payment of interest on such Municipal Bond
and principal thereof to maturity, the S&P insurance claims-paying ability
rating of the issuer of the insurance policy and (b) the S&P Exposure Period, in
accordance with the tables set forth below:

                                              Rating Category
                            ----------------------------------------------------
S&P Exposure Period         AAA*             AA*              A*            BBB*
- -------------------         ----             ---              --            ----
45 Business Days            190%            195%             210%           250%
25 Business Days            170%            175%             190%           230%
10 Business Days            155%            160%             175%           215%
 7 Business Days            150%            155%             170%           210%
 3 Business Days            130%            135%             150%           190%

- ----------
* S&P rating.

         Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term Municipal Bonds will be 115%, so long as such Municipal Bonds are
rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable in 30
days or less, or 120% so long as such Municipal Bonds are rated A-1 or SP-1 by
S&P and mature or have a demand feature exercisable in 30 days or less, or 125%
if such Municipal Bonds are not rated by S&P but are rated VMIG-1, P-1 or MIG-1
by Moody's or F-1+ by Fitch; provided, however, such short-term Municipal Bonds
rated by Moody's or Fitch but not rated by S&P having a demand feature
exercisable in 30 days or less must be backed by a letter of credit, liquidity
facility or guarantee from a bank or other financial institution having a
short-term rating of at least A-1+ from S&P; and further provided that such
short-term Municipal Bonds rated by Moody's or Fitch but not rated by S&P


                                       22
<PAGE>

may comprise no more than 50% of short-term Municipal Bonds that qualify as S&P
Eligible Assets, (ii) the S&P Discount Factor for Receivables for Municipal
Bonds Sold that are due in more than five Business Days from such Valuation Date
will be the S&P Discount Factor applicable to the Municipal Bonds sold, and
(iii) no S&P Discount Factor will be applied to cash or to Receivables for
Municipal Bonds Sold if such receivables are due within five Business Days of
such Valuation Date. "Receivables for Municipal Bonds Sold," for purposes of
calculating S&P Eligible Assets as of any Valuation Date, means the book value
of receivables for Municipal Bonds sold as of or prior to such Valuation Date.
For purposes of the foregoing, Anticipation Notes rated SP-1 or, if not rated by
S&P, rated VMIG-1 by Moody's or F-1+ by Fitch, which do not mature or have a
demand feature exercisable in 30 days and which do not have a long-term rating,
shall be considered to be short-term Municipal Bonds.

      "S&P Eligible Asset" means cash, Receivables for Municipal Bonds Sold or a
Municipal Bond that (i) is issued by any of the 50 states, the territories and
their subdivisions, counties, cities, towns, villages, and school districts,
agencies, such as authorities and special districts created by the states, and
certain federally sponsored agencies such as local housing authorities (payments
made on these bonds are exempt from regular federal income taxes and are
generally exempt from state and local taxes in the state of issuance); (ii) is
interest bearing and pays interest at least semi-annually; (iii) is payable with
respect to principal and interest in United States Dollars; (iv) is publicly
rated BBB or higher by S&P or, except in the case of Anticipation Notes that are
grant anticipation notes or bond anticipation notes which must be rated by S&P
to be included in S&P Eligible Assets, if not rated by S&P but rated by Moody's
or Fitch, is rated at least A by Moody's or Fitch (provided that such
Moody's-rated or Fitch-rated Municipal Bonds will be included in S&P Eligible
Assets only to the extent the Market Value of such Municipal


                                       23
<PAGE>

Bonds does not exceed 50% of the aggregate Market Value of the S&P Eligible
Assets; and further provided that, for purposes of determining the S&P Discount
Factor applicable to any such Moody's-rated or Fitch-rated Municipal Bond, such
Municipal Bond will be deemed to have an S&P rating which is one full rating
category lower than its Moody's rating or Fitch rating); (v) is not subject to a
covered call or covered put option written by the Corporation; (vi) except for
Inverse Floaters, is not part of a private placement of Municipal Bonds; and
(vii) except for Inverse Floaters, is part of an issue of Municipal Bonds with
an original issue size of at least $20 million or, if of an issue with an
original issue size below $20 million (but in no event below $10 million), is
issued by an issuer with a total of at least $50 million of securities
outstanding. Notwithstanding the foregoing:

                  (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 every 1% by which
         the Market Value of such Municipal Bonds exceeds 5% of the aggregate
         Market Value of the S&P Eligible Assets; and

                  (2) Municipal Bonds issued by issuers in any one state or
         territory will be considered S&P Eligible Assets only to the extent the
         Market Value of such Municipal Bonds does not exceed 25% of the
         aggregate Market Value of S&P Eligible Assets.

      "S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the AMPS Basic Maintenance Cure
Date, that the Corporation has under these Articles Supplementary to cure any
failure to maintain, as of such Valuation


                                       24
<PAGE>

Date, the Discounted Value for its portfolio at least equal to the AMPS Basic
Maintenance Amount (as described in paragraph 7(a) of these Articles
Supplementary).

      "S&P Hedging Transactions" has the meaning set forth in paragraph 8(a) of
these Articles Supplementary.

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

      "Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Corporation as securities
depository for the shares of AMPS that agrees to follow the procedures required
to be followed by such securities depository in connection with the shares of
AMPS.

      "Service" means the United States Internal Revenue Service.

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

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

      "Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than seven), evenly divisible by seven and not
fewer than seven nor more than 364 or (ii) a specified period of one whole year
or more but not greater than five years (in each case subject to adjustment as
provided in paragraph 2(b)(i)).

      "Specific Redemption Provisions" means, with respect to a Special Dividend
Period either, or any combination of, (i) a period (a "Non-Call Period")
determined by the Board of Directors of the Corporation, after consultation with
the Auction Agent and the Broker-Dealers, during which the shares of AMPS
subject to such Dividend Period shall not be subject to


                                       25
<PAGE>

redemption at the option of the Corporation and (ii) a period (a "Premium Call
Period"), consisting of a number of whole years and determined by the Board of
Directors of the Corporation, after consultation with the Auction Agent and the
Broker-Dealers, during each year of which the shares of AMPS subject to such
Dividend Period shall be redeemable at the Corporation's option at a price per
share equal to $25,000 plus accumulated but unpaid dividends plus a premium
expressed as a percentage of $25,000, as determined by the Board of Directors of
the Corporation after consultation with the Auction Agent and the
Broker-Dealers.

      "Stock Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the AMPS.

      "Stock Register" means the register of Holders maintained on behalf of the
Corporation by the Auction Agent in its capacity as transfer agent and registrar
for the AMPS.

      "Subsequent Dividend Period," with respect to AMPS, has the meaning set
forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect to
Other AMPS, has the equivalent meaning.

      "Substitute Commercial Paper Dealers" means such Substitute Commercial
Paper Dealer or Dealers as the Corporation may from time to time appoint or, in
lieu of any thereof, their respective affiliates or successors.

      "Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by Merrill
Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and successors,
after consultation with the Corporation, to act as the substitute rating agency
or substitute rating agencies, as the case may be, to determine the credit
ratings of the shares of AMPS.


                                       26
<PAGE>

      "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 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 8(a) of these
Articles Supplementary.


                                       27
<PAGE>

      "U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent of
the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on
any date means the Interest Equivalent of the yield as calculated by reference
to the arithmetic average of the bid price quotations of the actively traded
Treasury Bill with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by bid price quotations as of any time on
the Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the Auction
Agent.

      "U.S. Treasury Note Rate" on any date means (i) the yield as calculated by
reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Note
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the Auction Agent.


                                       28
<PAGE>

      "Valuation Date" means, for purposes of determining whether the
Corporation is maintaining the AMPS Basic Maintenance Amount, each Business Day
commencing with the Date of Original Issue.

      "Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Corporation, the amount of cash or securities paid
to or received from a broker (subsequent to the Initial Margin payment) from
time to time as the price of such futures contract fluctuates.

      (b) The foregoing definitions of Accountant's Confirmation, AMPS Basic
Maintenance Amount, AMPS Basic Maintenance Cure Date, AMPS Basic Maintenance
Report, Deposit Securities, Discounted Value, Independent Accountant, Initial
Margin, Inverse Floaters, Market Value, Maximum Potential Additional Dividend
Liability, Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure
Period, Moody's Hedging Transactions, Moody's Volatility Factor, S&P Discount
Factor, S&P Eligible Asset, S&P Exposure Period, S&P Hedging Transactions, S&P
Volatility Factor, Valuation Date and Variation Margin have been determined by
the Board of Directors of the Corporation in order to obtain a "aaa" rating from
Moody's and a AAA rating from S&P on the AMPS on their Date of Original Issue;
and the Board of Directors of the Corporation shall have the authority, without
shareholder approval, to amend, alter or repeal from time to time the foregoing
definitions and the restrictions and guidelines set forth thereunder if Moody's
and S&P or any Substitute Rating Agency advises the Corporation in writing that
such amendment, alteration or repeal will not adversely affect their then
current ratings on the AMPS.

      2. Dividends. (a) The Holders shall be entitled to receive, when, as and
if declared by the Board of Directors of the Corporation, out of funds legally
available therefor, cumulative



                                       29
<PAGE>

dividends each consisting of (i) cash at the Applicable Rate, (ii) a Right to
receive cash as set forth in paragraph 2(e) below, and (iii) any additional
amounts as set forth in paragraph 2(f) below, and no more, payable on the
respective dates set forth below. Dividends on the shares of AMPS so declared
and payable shall be paid (i) in preference to and in priority over any
dividends declared and payable on the Common Stock, and (ii) to the extent
permitted under the Code and to the extent available, out of net tax-exempt
income earned on the Corporation's investments. To the extent permitted under
the Code, dividends on shares of AMPS will be designated as exempt-interest
dividends. For the purposes of this section, the term "net tax-exempt income"
shall exclude capital gains of the Corporation.

      (b) (i) Cash dividends on shares of AMPS shall accumulate from the Date of
Original Issue and shall be payable, when, as and if declared by the Board of
Directors, out of funds legally available therefor, commencing on the Initial
Dividend Payment Date with respect to the AMPS. Following the Initial Dividend
Payment Date for the AMPS, dividends on the AMPS will be payable, at the option
of the Corporation, either (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


                                       30
<PAGE>

above, the next succeeding Dividend Payment Date, subject to such exception,
will occur on the next following originally scheduled date. If for any reason a
Dividend Payment Date cannot be fixed as described above, then the Board of
Directors shall fix the Dividend Payment Date. The Board of Directors by
resolution prior to authorization of a dividend by the Board of Directors may
change a Dividend Payment Date if such change does not adversely affect the
contract rights of the Holders of shares of AMPS set forth in the Charter. The
Initial Dividend Period, 7-Day Dividend Periods and Special Dividend Periods are
hereinafter sometimes referred to as Dividend Periods. Each dividend payment
date determined as provided above is hereinafter referred to as a "Dividend
Payment Date."

      (ii) Each dividend shall be paid to the Holders as they appear in the
Stock Register as of 12:00 noon, New York City time, on the Business Day
preceding the Dividend Payment Date. Dividends in arrears for any past Dividend
Period may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the Holders as they appear on the Stock Register on a
date, not exceeding 15 days prior to the payment date therefor, as may be fixed
by the Board of Directors of the Corporation.

      (c) (i) During the period from and including the Date of Original Issue to
but excluding the Initial Dividend Payment Date (the "Initial Dividend Period"),
the Applicable Rate shall be the Initial Dividend Rate. Commencing on the
Initial Dividend Payment Date, the Applicable Rate for each subsequent dividend
period (hereinafter referred to as a "Subsequent Dividend Period"), which
Subsequent Dividend Period shall commence on and include a Dividend Payment Date
and shall end on and include the calendar day prior to the next Dividend Payment
Date (or last Dividend Payment Date in a Dividend Period if there is more than
one Dividend


                                       31
<PAGE>

Payment Date), shall be equal to the rate per annum that results
from implementation of the Auction Procedures.

      The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a 7-Day Dividend Period. Except in the case of the willful
failure of the Corporation to pay a dividend on a Dividend Payment Date or to
redeem any shares of AMPS on the date set for such redemption, any amount of any
dividend due on any Dividend Payment Date (if, prior to the close of business on
the second Business Day preceding such Dividend Payment Date, the Corporation
has declared such dividend payable on such Dividend Payment Date to the Holders
of such shares of AMPS as of 12:00 noon, New York City time, on the Business Day
preceding such Dividend Payment Date) or redemption price with respect to any
shares of AMPS not paid to such Holders when due may be paid to such Holders in
the same form of funds by 12:00 noon, New York City time, on any of the first
three Business Days after such Dividend Payment Date or due date, as the case
may be, provided that, such amount is accompanied by a late charge calculated
for such period of non-payment at the Non-Payment Period Rate applied to the
amount of such non-payment based on the actual number of days comprising such
period divided by 365. In the case of a willful failure of the Corporation to
pay a dividend on a Dividend Payment Date or to redeem any shares of AMPS on the
date set for such redemption, the preceding sentence shall not apply and the
Applicable Rate for the Dividend Period commencing during the Non-Payment Period
resulting from such failure shall be the Non-Payment Period Rate. For the
purposes of the foregoing, payment to a person in same-day funds on any Business
Day at any time shall be considered equivalent to payment to such person in New
York Clearing House (next day) funds at the same


                                       32
<PAGE>

time on the preceding Business Day, and any payment made after 12:00 noon, New
York City time, on any Business Day shall be considered to have been made
instead in the same form of funds and to the same person before 12:00 noon, New
York City time, on the next Business Day.

      (ii) The amount of cash dividends per share of AMPS payable (if declared)
on the Initial Dividend Payment Date, each 7-Day Dividend Period and each
Dividend Payment Date of each Short Term Dividend Period shall be computed by
multiplying the Applicable Rate for such Dividend Period by a fraction, the
numerator of which will be the number of days in such Dividend Period or part
thereof that such share was outstanding and the denominator of which will be
365, multiplying the amount so obtained by $25,000, and rounding the amount so
obtained to the nearest cent. During any Long Term Dividend Period, the amount
of cash dividends per share of AMPS payable (if declared) on any Dividend
Payment Date shall be computed by multiplying the Applicable Rate for such
Dividend Period by a fraction, the numerator of which will be such number of
days in such part of such Dividend Period that such share was outstanding and
for which dividends are payable on such Dividend Payment Date and the
denominator of which will be 360, multiplying the amount so obtained by $25,000,
and rounding the amount so obtained to the nearest cent.

      (iii) With respect to each Dividend Period that is a Special Dividend
Period, the Corporation may, at its sole option and to the extent permitted by
law, by telephonic and written notice (a "Request for Special Dividend Period")
to the Auction Agent and to each Broker-Dealer, request that the next succeeding
Dividend Period for the AMPS be a number of days (other than seven), evenly
divisible by seven and not fewer than seven nor more than 364 in the case of a
Short Term Dividend Period or one whole year or more but not greater than five
years in the case of a Long Term Dividend Period, specified in such notice,
provided that the


                                       33
<PAGE>

Corporation may not give a Request for Special Dividend Period of greater than
28 days (and any such request shall be null and void) unless, for any Auction
occurring after the initial Auction, Sufficient Clearing Bids were made in the
last occurring Auction and unless full cumulative dividends, any amounts due
with respect to redemptions, and any Additional Dividends payable prior to such
date have been paid in full. Such Request for Special Dividend Period, in the
case of a Short Term Dividend Period, shall be given on or prior to the second
Business Day but not more than seven Business Days prior to an Auction Date for
the AMPS and, in the case of a Long Term Dividend Period, shall be given on or
prior to the second Business Day but not more than 28 days prior to an Auction
Date for the AMPS. Upon receiving such Request for Special Dividend Period, the
Broker-Dealer(s) shall jointly determine whether, given the factors set forth
below, it is advisable that the Corporation issue a Notice of Special Dividend
Period for the AMPS as contemplated by such Request for Special Dividend Period
and the Optional Redemption Price of the AMPS during such Special Dividend
Period and the Specific Redemption Provisions and shall give the Corporation and
the Auction Agent written notice (a "Response") of such determination by no
later than the second Business Day prior to such Auction Date. In making such
determination the Broker-Dealer(s) will consider (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


                                       34
<PAGE>

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 Provisions, if any, as specified in
the related Response. The Corporation also shall provide a copy of such Notice
of Special Dividend Period to Moody's and S&P. The Corporation shall not give a
Notice of Special Dividend Period and, if the Corporation has given a Notice of
Special Dividend Period, the Corporation is required to give telephonic and
written notice of its revocation (a "Notice of Revocation") to the Auction
Agent, each Broker-Dealer, and the Securities Depository on or prior to the
Business Day prior to the relevant Auction Date if (x) either the 1940 Act AMPS
Asset Coverage is not satisfied or the Corporation shall fail to maintain S&P
Eligible Assets and Moody's Eligible Assets each with an aggregate Discounted
Value at least equal to the AMPS Basic Maintenance Amount, in each case on each
of the two Valuation Dates immediately preceding the Business Day prior to the
relevant Auction Date on an actual basis and on a pro forma basis giving effect
to the proposed Special Dividend Period (using as a pro forma dividend rate with
respect to such Special Dividend Period the dividend rate which the
Broker-Dealers shall advise the Corporation is an approximately equal rate for
securities similar to the AMPS with an equal dividend period), provided that, in
calculating the aggregate Discounted Value of


                                       35
<PAGE>

Moody's Eligible Assets for this purpose, the Moody's Exposure Period shall be
deemed to be one week longer, (y) sufficient funds for the payment of dividends
payable on the immediately succeeding Dividend Payment Date have not been
irrevocably deposited with the Auction Agent by the close of business on the
third Business Day preceding the related Auction Date or (z) the
Broker-Dealer(s) jointly advise the Corporation that after consideration of the
factors listed above they have concluded that it is advisable to give a Notice
of Revocation. The Corporation also shall provide a copy of such Notice of
Revocation to Moody's and S&P. If the Corporation is prohibited from giving a
Notice of Special Dividend Period as a result of any of the factors enumerated
in clause (x), (y) or (z) above or if the Corporation gives a Notice of
Revocation with respect to a Notice of Special Dividend Period for the AMPS, the
next succeeding Dividend Period will be a 7-Day Dividend Period. In addition, in
the event Sufficient Clearing Bids are not made in the applicable Auction or
such Auction is not held for any reason, such next succeeding Dividend Period
will be a 7-Day Dividend Period and the Corporation may not again give a Notice
of Special Dividend Period for the AMPS (and any such attempted notice shall be
null and void) until Sufficient Clearing Bids have been made in an Auction with
respect to a 7-Day Dividend Period.

      (d) (i) Holders shall not be entitled to any dividends, whether payable in
cash, property or stock, in excess of full cumulative dividends and applicable
late charges, as herein provided, on the shares of AMPS (except for Additional
Dividends as provided in paragraph 2(e) hereof and additional payments as
provided in paragraph 2(f) hereof). Except for the late charge payable pursuant
to paragraph 2(c)(i) hereof, no interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment on the shares of AMPS that
may be in arrears.


                                       36
<PAGE>

      (ii) For so long as any share of AMPS is Outstanding, the Corporation
shall not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares of, or
options, warrants or rights to subscribe for or purchase, Common Stock or other
stock, if any, ranking junior to the shares of AMPS as to dividends or upon
liquidation) in respect of the Common Stock or any other stock of the
Corporation ranking junior to or on a parity with the shares of AMPS as to
dividends or upon liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any shares of the Common Stock or any other
such junior stock (except by conversion into or exchange for stock of the
Corporation ranking junior to the shares of AMPS as to dividends and upon
liquidation) or any other such Parity Stock (except by conversion into or
exchange for stock of the Corporation ranking junior to or on a parity with the
shares of AMPS as to dividends and upon liquidation), unless (A) immediately
after such transaction, the Corporation shall have S&P Eligible Assets and
Moody's Eligible Assets each with an aggregate Discounted Value equal to or
greater than the AMPS Basic Maintenance Amount and the Corporation shall
maintain the 1940 Act AMPS Asset Coverage, (B) full cumulative dividends on
shares of AMPS and shares of Other AMPS due on or prior to the date of the
transaction have been declared and paid or shall have been declared and
sufficient funds for the payment thereof deposited with the Auction Agent, (C)
any Additional Dividend required to be paid under paragraph 2(e) below on or
before the date of such declaration or payment has been paid and (D) the
Corporation has redeemed the full number of shares of AMPS required to be
redeemed by any provision for mandatory redemption contained herein.

      (e) Each dividend shall consist of (i) cash at the Applicable Rate, (ii)
an uncertificated right (a "Right") to receive an Additional Dividend (as
defined below), and (iii) any additional


                                       37
<PAGE>

amounts as set forth in paragraph 2(f) below. Each Right shall thereafter be
independent of the share or shares of AMPS on which the dividend was paid. The
Corporation shall cause to be maintained a record of each Right received by the
respective Holders. A Right may not be transferred other than by operation of
law. If the Corporation retroactively allocates any net capital gains or other
income subject to regular Federal income taxes to shares of AMPS without having
given advance notice thereof to the Auction Agent as described in paragraph 2(f)
hereof solely by reason of the fact that such allocation is made as a result of
the redemption of all or a portion of the outstanding shares of AMPS or the
liquidation of the Corporation (the amount of such allocation referred to herein
as a "Retroactive Taxable Allocation"), the Corporation will, within 90 days
(and generally within 60 days) after the end of the Corporation's fiscal year
for which a Retroactive Taxable Allocation is made, provide notice thereof to
the Auction Agent and to each holder of a Right applicable to such shares of
AMPS (initially Cede & Co. as nominee of The Depository Trust Company) during
such fiscal year at such holder's address as the same appears or last appeared
on the Stock Books of the Corporation. The Corporation will, within 30 days
after such notice is given to the Auction Agent, pay to the Auction Agent (who
will then distribute to such holders of Rights), out of funds legally available
therefor, an amount equal to the aggregate Additional Dividend with respect to
all Retroactive Taxable Allocations made to such holders during the fiscal year
in question.

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


                                       38
<PAGE>

amount of the dividends which would have been received by such holder if the
amount of the aggregate Retroactive Taxable Allocations would have been
excludable from the gross income of such holder. Such Additional Dividend shall
be calculated (i) without consideration being given to the time value of money;
(ii) assuming that no holder of shares of AMPS is subject to the Federal
alternative minimum tax with respect to dividends received from the Corporation;
and (iii) assuming that each Retroactive Taxable Allocation would be taxable in
the hands of each holder of shares of AMPS at the greater of: (x) the maximum
marginal regular Federal individual income tax rate applicable to ordinary
income or capital gains depending on the taxable character of the distribution
(including any surtax); or (y) the maximum marginal regular Federal corporate
income tax rate applicable to ordinary income or capital gains depending on the
taxable character of the distribution (disregarding in both (x) and (y) the
effect of any state or local taxes and the phase out of, or provision limiting,
personal exemptions, itemized deductions, or the benefit of lower tax brackets).

      (f) Except as provided below, whenever the Corporation intends to include
any net capital gains or other income subject to regular Federal income taxes in
any dividend on shares of AMPS, the Corporation will notify the Auction Agent of
the amount to be so included at least five Business Days prior to the Auction
Date on which the Applicable Rate for such dividend is to be established. The
Corporation may also include such income in a dividend on shares of a series of
AMPS without giving advance notice thereof if it increases the dividend by an
additional amount calculated as if such income was a Retroactive Taxable
Allocation and the additional amount was an Additional Dividend, provided that
the Corporation will notify the Auction Agent of the additional amounts to be
included in such dividend at least five Business Days prior to the applicable
Dividend Payment Date.


                                       39
<PAGE>

      (g) No fractional shares of AMPS shall be issued.

      3. Liquidation Rights. Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the Holders shall be entitled
to receive, out of the assets of the Corporation available for distribution to
shareholders, before any distribution or payment is made upon any Common Stock
or any other capital stock ranking junior in right of payment upon liquidation
to the AMPS, the sum of $25,000 per share plus accumulated but unpaid dividends
(whether or not earned or declared) thereon to the date of distribution, and
after such payment the Holders will be entitled to no other payments other than
Additional Dividends as provided in paragraph 2(e) hereof. If upon any
liquidation, dissolution or winding up of the Corporation, the amounts payable
with respect to the AMPS and any other Outstanding class or series of Preferred
Stock of the Corporation ranking on a parity with the AMPS as to payment upon
liquidation are not paid in full, the Holders and the holders of such other
class or series will share ratably in any such distribution of assets in
proportion to the respective preferential amounts to which they are entitled.
After payment of the full amount of the liquidating distribution to which they
are entitled, the Holders will not be entitled to any further participation in
any distribution of assets by the Corporation except for any Additional
Dividends. A consolidation, merger or statutory share exchange of the
Corporation with or into any other corporation or entity or a sale, whether for
cash, shares of stock, securities or properties, of all or substantially all or
any part of the assets of the Corporation shall not be deemed or construed to be
a liquidation, dissolution or winding up of the Corporation.

      4. Redemption. (a) Shares of AMPS shall be redeemable by the Corporation
as provided below:


                                       40
<PAGE>

            (i) To the extent permitted under the 1940 Act and Maryland law,
      upon giving a Notice of Redemption, the Corporation at its option may
      redeem shares of AMPS, in whole or in part, out of funds legally available
      therefor, at the Optional Redemption Price per share, on any Dividend
      Payment Date; provided that no share of AMPS may be redeemed at the option
      of the Corporation during (A) the Initial Dividend Period with respect to
      such shares or (B) a Non-Call Period to which such share is subject. In
      addition, holders of AMPS which are redeemed shall be entitled to receive
      Additional Dividends to the extent provided herein. The Corporation may
      not give a Notice of Redemption relating to an optional redemption as
      described in this paragraph 4(a)(i) unless, at the time of giving such
      Notice of Redemption, the Corporation has available Deposit Securities
      with maturity or tender dates not later than the day preceding the
      applicable redemption date and having a value not less than the amount due
      to Holders by reason of the redemption of their shares of AMPS on such
      redemption date.

            (ii) The Corporation shall redeem, out of funds legally available
      therefor, at the Mandatory Redemption Price per share, shares of AMPS to
      the extent permitted under the 1940 Act and Maryland law, on a date fixed
      by the Board of Directors, if the Corporation fails to maintain S&P
      Eligible Assets and Moody's Eligible Assets each with an aggregate
      Discounted Value equal to or greater than the AMPS Basic Maintenance
      Amount as provided in paragraph 7(a) or to satisfy the 1940 Act AMPS Asset
      Coverage as provided in paragraph 6 and such failure is not cured on or
      before the AMPS Basic Maintenance Cure Date or the 1940 Act Cure Date
      (herein collectively referred to as a "Cure Date"), as the case may be. In
      addition, holders of AMPS so redeemed shall be entitled to receive
      Additional Dividends to the extent provided herein. The number of


                                       41
<PAGE>

      shares of AMPS to be redeemed shall be equal to the lesser of (i) the
      minimum number of shares of AMPS the redemption of which, if deemed to
      have occurred immediately prior to the opening of business on the Cure
      Date, together with all shares of other Preferred Stock subject to
      redemption or retirement, would result in the Corporation having S&P
      Eligible Assets and Moody's Eligible Assets each with an aggregate
      Discounted Value equal to or greater than the AMPS Basic Maintenance
      Amount or satisfaction of the 1940 Act AMPS Asset Coverage, as the case
      may be, on such Cure Date (provided that, if there is no such minimum
      number of shares of AMPS and shares of other Preferred Stock the
      redemption of which would have such result, all shares of AMPS and shares
      of other Preferred Stock then Outstanding shall be redeemed), and (ii) the
      maximum number of shares of AMPS, together with all shares of other
      Preferred Stock subject to redemption or retirement, that can be redeemed
      out of funds expected to be legally available therefor on such redemption
      date. In determining the number of shares of AMPS required to be redeemed
      in accordance with the foregoing, the Corporation shall allocate the
      number required to be redeemed which would result in the Corporation
      having S&P Eligible Assets and Moody's Eligible Assets each with an
      aggregate Discounted Value equal to or greater than the AMPS Basic
      Maintenance Amount or satisfaction of the 1940 Act AMPS Asset Coverage, as
      the case may be, pro rata among shares of AMPS of all series, Other AMPS
      and other Preferred Stock subject to redemption pursuant to provisions
      similar to those contained in this paragraph 4(a)(ii); provided that,
      shares of AMPS which may not be redeemed at the option of the Corporation
      due to the designation of a Non-Call Period applicable to such shares (A)
      will be subject to mandatory redemption only to the extent that other
      shares are not available to satisfy the number of shares required to be
      redeemed


                                       42
<PAGE>

      and (B) will be selected for redemption in an ascending order of
      outstanding number of days in the Non-Call Period (with shares with the
      lowest number of days to be redeemed first) and by lot in the event of
      shares having an equal number of days in such Non-Call Period. The
      Corporation shall effect such redemption on a Business Day which is not
      later than 35 days after such Cure Date, except that if the Corporation
      does not have funds legally available for the redemption of all of the
      required number of shares of AMPS and shares of other Preferred Stock
      which are subject to mandatory redemption or the Corporation otherwise is
      unable to effect such redemption on or prior to 35 days after such Cure
      Date, the Corporation shall redeem those shares of AMPS which it is unable
      to redeem on the earliest practicable date on which it is able to effect
      such redemption out of funds legally available therefor.

      (b) Notwithstanding any other provision of this paragraph 4, no shares of
AMPS may be redeemed pursuant to paragraph 4(a)(i) of these Articles
Supplementary (i) unless all dividends in arrears on all remaining outstanding
shares of Parity Stock shall have been or are being contemporaneously paid or
declared and set apart for payment and (ii) if redemption thereof would result
in the Corporation's failure to maintain Moody's Eligible Assets or S&P Eligible
Assets with an aggregate Discounted Value equal to or greater than the AMPS
Basic Maintenance Amount. In the event that less than all the outstanding shares
of the AMPS are to be redeemed and there is more than one Holder, the shares of
that series of AMPS to be redeemed shall be selected by lot or such other method
as the Corporation shall deem fair and equitable.

      (c) Whenever shares of AMPS are to be redeemed, the Corporation, not less
than 17 nor more than 60 days prior to the date fixed for redemption, shall mail
a notice ("Notice of


                                       43
<PAGE>

Redemption") by first-class mail, postage prepaid, to each Holder of shares of
AMPS to be redeemed and to the Auction Agent. The Corporation shall cause the
Notice of Redemption to also be published in the eastern and national editions
of The Wall Street Journal. The Notice of Redemption shall set forth (i) the
redemption date, (ii) the amount of the redemption price, (iii) the aggregate
number of shares of AMPS to be redeemed, (iv) the place or places where shares
of AMPS are to be surrendered for payment of the redemption price, (v) a
statement that dividends on the shares to be redeemed shall cease to accumulate
on such redemption date (except that holders may be entitled to Additional
Dividends) and (vi) the provision of these Articles Supplementary pursuant to
which such shares are being redeemed. No defect in the Notice of Redemption or
in the mailing or publication thereof shall affect the validity of the
redemption proceedings, except as required by applicable law.

      If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Corporation shall have deposited in trust with
the Auction Agent, or segregated in an account at the Corporation's custodian
bank for the benefit of the Auction Agent, Deposit Securities (with a right of
substitution) having an aggregate Discounted Value (utilizing in the case of S&P
an S&P Exposure Period of 22 Business Days) equal to the redemption payment for
the shares of AMPS as to which such Notice of Redemption has been given with
irrevocable instructions and authority to pay the redemption price to the
Holders of such shares, then upon the date of such deposit or, if no such
deposit is made, then upon such date fixed for redemption (unless the
Corporation shall default in making the redemption payment), all rights of the
Holders of such shares as shareholders of the Corporation by reason of the
ownership of such shares will cease and terminate (except their right to receive
the redemption price in respect thereof and any Additional Dividends, but
without interest), and such shares shall no longer be


                                       44
<PAGE>

deemed outstanding. The Corporation shall be entitled to receive, from time to
time, from the Auction Agent the interest, if any, on such Deposit Securities
deposited with it and the Holders of any shares so redeemed shall have no claim
to any of such interest. In case the Holder of any shares so called for
redemption shall not claim the redemption payment for his shares within one year
after the date of redemption, the Auction Agent shall, upon demand, pay over to
the Corporation such amount remaining on deposit and the Auction Agent shall
thereupon be relieved of all responsibility to the Holder of such shares called
for redemption and such Holder thereafter shall look only to the Corporation for
the redemption payment.

      5. Voting Rights. (a) General. Except as otherwise provided in the Charter
or By-Laws, each Holder of shares of AMPS shall be entitled to one vote for each
share held on each matter submitted to a vote of shareholders of the
Corporation, and the holders of outstanding shares of Preferred Stock, including
AMPS, and of shares of Common Stock shall vote together as a single class;
provided that, at any meeting of the shareholders of the Corporation held for
the election of directors, the holders of outstanding shares of Preferred Stock,
including AMPS, shall be entitled, as a class, to the exclusion of the holders
of all other securities and classes of capital stock of the Corporation, to
elect two directors of the Corporation. Subject to paragraph 5(b) hereof, the
holders of outstanding shares of capital stock of the Corporation, including the
holders of outstanding shares of Preferred Stock, including AMPS, voting as a
single class, shall elect the balance of the directors.

      (b) Right to Elect Majority of Board of Directors. During any period in
which any one or more of the conditions described below shall exist (such period
being referred to herein as a "Voting Period"), the number of directors
constituting the Board of Directors shall be automatically increased by the
smallest number that, when added to the two directors elected


                                       45
<PAGE>

exclusively by the holders of shares of Preferred Stock, would constitute a
majority of the Board of Directors as so increased by such smallest number; and
the holders of shares of Preferred Stock shall be entitled, voting separately as
one class (to the exclusion of the holders of all other securities and classes
of capital stock of the Corporation), to elect such smallest number of
additional directors, together with the two directors that such holders are in
any event entitled to elect. A Voting Period shall commence:

            (i) if at any time accumulated dividends (whether or not earned or
      declared, and whether or not funds are then legally available in an amount
      sufficient therefor) on the outstanding shares of AMPS equal to at least
      two full years' dividends shall be due and unpaid and sufficient cash or
      specified securities shall not have been deposited with the Auction Agent
      for the payment of such accumulated dividends; or

            (ii) if at any time holders of any other shares of Preferred Stock
      are entitled to elect a majority of the directors of the Corporation under
      the 1940 Act.

      Upon the termination of a Voting Period, the voting rights described in
this paragraph 5(b) shall cease, subject always, however, to the reverting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this paragraph 5(b).

      (c) Right to Vote with Respect to Certain Other Matters. So long as any
shares of AMPS are outstanding, the Corporation shall not, without the
affirmative vote of the holders of a majority of the shares of Preferred Stock
Outstanding at the time, voting separately as one class: (i) authorize, create
or issue any class or series of stock ranking prior to the AMPS or any other
series of Preferred Stock with respect to payment of dividends or the
distribution of assets on liquidation, or (ii) amend, alter or repeal the
provisions of the Charter, whether by merger, consolidation or otherwise, so as
to adversely affect any of the contract rights expressly set forth


                                       46
<PAGE>

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
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 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


                                       47
<PAGE>

         to the Auction Agent or if the Corporation does not call such a special
         meeting, it may be called by any such holder on like notice. The record
         date for determining  the holders  entitled to notice of and to vote at
         such  special  meeting  shall be the  close of  business  on the  fifth
         Business Day preceding  the day on which such notice is mailed.  At any
         such special  meeting and at each meeting held during a Voting  Period,
         such  Holders,  voting  together  as a class (to the  exclusion  of the
         holders of all other  securities  and  classes of capital  stock of the
         Corporation),  shall be  entitled  to elect  the  number  of  directors
         prescribed in paragraph 5(b) above.  At any such meeting or adjournment
         thereof in the absence of a quorum,  a majority of such holders present
         in  person or by proxy  shall  have the power to  adjourn  the  meeting
         without notice, other than by an announcement at the meeting, to a date
         not more than 120 days after the original record date.

                  (ii) For purposes of determining any rights of the Holders to
         vote on any matter or the number of shares required to constitute a
         quorum, whether such right is created by these Articles Supplementary,
         by the other provisions of the Charter, by statute or otherwise, a
         share of AMPS which is not Outstanding shall not be counted.

                  (iii) The terms of office of all persons who are directors of
         the Corporation at the time of a special meeting of Holders and holders
         of other Preferred Stock to elect directors shall continue,
         notwithstanding the election at such meeting by the Holders and such
         other holders of the number of directors that they are entitled to
         elect, and the persons so elected by the Holders and such other
         holders, together with the two incumbent directors elected by the
         Holders and such other holders of Preferred Stock and the remaining
         incumbent directors elected by the holders of the Common Stock and
         Preferred Stock, shall constitute the duly elected directors of the
         Corporation.


                                       48
<PAGE>

                  (iv) Simultaneously with the expiration of a Voting Period,
         the terms of office of the additional directors elected by the Holders
         and holders of other Preferred Stock pursuant to paragraph 5(b) above
         shall terminate, the remaining directors shall constitute the directors
         of the Corporation and the voting rights of the Holders and such other
         holders to elect additional directors pursuant to paragraph 5(b) above
         shall cease, subject to the provisions of the last sentence of
         paragraph 5(b).

      (e) Exclusive Remedy. Unless otherwise required by law, the Holders of
shares of AMPS shall not have any rights or preferences other than those
specifically set forth herein. The Holders of shares of AMPS shall have no
preemptive rights or rights to cumulative voting. In the event that the
Corporation fails to pay any dividends on the shares of AMPS, the exclusive
remedy of the Holders shall be the right to vote for directors pursuant to the
provisions of this paragraph 5.

      (f) Notification to S&P and Moody's. In the event a vote of Holders of
AMPS is required pursuant to the provisions of Section 13(a) of the 1940 Act,
the Corporation shall, not later than ten Business Days prior to the date on
which such vote is to be taken, notify S&P and Moody's that such vote is to be
taken and the nature of the action with respect to which such vote is to be
taken and, not later than ten Business Days after the date on which such vote is
taken, notify S&P and Moody's of the result of such vote.

      6. 1940 Act AMPS Asset Coverage. The Corporation shall maintain, as of the
last Business Day of each month in which any share of AMPS is outstanding, the
1940 Act AMPS Asset Coverage.

      7. AMPS Basic Maintenance Amount. (a) The Corporation shall maintain, on
each Valuation Date, and shall verify to its satisfaction that it is maintaining
on such Valuation Date,


                                       49
<PAGE>

(i) S&P Eligible Assets having an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount and (ii) Moody's Eligible Assets having
an aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount. Upon any failure to maintain the required Discounted Value,
the Corporation will use its best efforts to alter the composition of its
portfolio to reattain a Discounted Value at least equal to the AMPS Basic
Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date.

      (b) On or before 5:00 p.m., New York City time, on the third Business Day
after a Valuation Date on which the Corporation fails to satisfy the AMPS Basic
Maintenance Amount, the Corporation shall complete and deliver to the Auction
Agent, and Moody's and S&P, as the case may be, a complete AMPS Basic
Maintenance Report as of the date of such failure, which will be deemed to have
been delivered to the Auction Agent if the Auction Agent receives a copy or
telecopy, telex or other electronic transcription thereof and on the same day
the Corporation mails to the Auction Agent for delivery on the next Business Day
the complete AMPS Basic Maintenance Report. The Corporation will deliver an AMPS
Basic Maintenance Report to the Auction Agent and Moody's and S&P, as the case
may be, on or before 5:00 p.m., New York City time, on the third Business Day
after a Valuation Date on which the Corporation cures its failure to maintain
Moody's Eligible Assets or S&P Eligible Assets, as the case may be, with an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount or on which the Corporation fails to maintain Moody's Eligible Assets or
S&P Eligible Assets, as the case may be, with an aggregate Discounted Value
which exceeds the AMPS Basic Maintenance Amount by 5% or more. The Corporation
will also deliver an AMPS Basic Maintenance Report to the Auction Agent, Moody's
and S&P as of each Quarterly Valuation Date on or before the third Business Day
after such date. Additionally, on or before 5:00 p.m., New York City time, on


                                       50
<PAGE>

the third Business Day after the first day of a Special Dividend Period, the
Corporation will deliver an AMPS Basic Maintenance Report to S&P and the Auction
Agent. The Corporation shall also provide Moody's and S&P with an AMPS Basic
Maintenance Report when specifically requested by either Moody's or S&P. A
failure by the Corporation to deliver an AMPS Basic Maintenance Report under
this paragraph 7(b) shall be deemed to be delivery of an AMPS Basic Maintenance
Report indicating the Discounted Value for S&P Eligible Assets and Moody's
Eligible Assets of the Corporation is less than the AMPS Basic Maintenance
Amount, as of the relevant Valuation Date.

      (c) Within ten Business Days after the date of delivery of an AMPS Basic
Maintenance Report in accordance with paragraph 7(b) above relating to a
Quarterly Valuation Date, the Independent Accountant will confirm in writing to
the Auction Agent, S&P and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report (and in any other AMPS Basic Maintenance
Report, randomly selected by the Independent Accountant, that was delivered by
the Corporation during the quarter ending on such Quarterly Valuation Date),
(ii) that, in such Report (and in such randomly selected Report), the
Corporation correctly determined the assets of the Corporation which constitute
S&P Eligible Assets or Moody's Eligible Assets, as the case may be, at such
Quarterly Valuation Date in accordance with these Articles Supplementary, (iii)
that, in such Report (and in such randomly selected Report), the Corporation
determined whether the Corporation had, at such Quarterly Valuation Date (and at
the Valuation Date addressed in such randomly selected Report) in accordance
with these Articles Supplementary, S&P Eligible Assets of an aggregate
Discounted Value at least equal to the AMPS Basic Maintenance Amount and Moody's
Eligible Assets of an aggregate Discounted Value at least equal to the AMPS
Basic Maintenance Amount, (iv) with respect to the S&P


                                       51
<PAGE>

ratings on Municipal Bonds, the issuer name, issue size and coupon rate listed
in such Report, that the Independent Accountant has requested that S&P verify
such information and the Independent Accountant shall provide a listing in its
letter of any differences, (v) with respect to the Moody's ratings on Municipal
Bonds, the issuer name, issue size and coupon rate listed in such Report, that
such information has been verified by Moody's (in the event such information is
not verified by Moody's, the Independent Accountant will inquire of Moody's what
such information is, and provide a listing in its letter of any differences),
(vi) with respect to the bid or mean price (or such alternative permissible
factor used in calculating the Market Value) provided by the custodian of the
Corporation's assets to the Corporation for purposes of valuing securities in
the Corporation's portfolio, the Independent Accountant has traced the price
used in such Report to the bid or mean price listed in such Report as provided
to the Corporation and verified that such information agrees (in the event such
information does not agree, the Independent Accountant will provide a listing in
its letter of such differences) and (vii) with respect to such confirmation to
Moody's, that the Corporation has satisfied the requirements of paragraph 8(b)
of these Articles Supplementary (such confirmation is herein called the
"Accountant's Confirmation").

      (d) Within ten Business Days after the date of delivery to the Auction
Agent, S&P and Moody's of an AMPS Basic Maintenance Report in accordance with
paragraph 7(b) above relating to any Valuation Date on which the Corporation
failed to maintain S&P Eligible Assets with an aggregate Discounted Value and
Moody's Eligible Assets with an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount, and relating to the AMPS Basic
Maintenance Cure Date with respect to such failure, the Independent Accountant
will


                                       52
<PAGE>

provide to the Auction Agent, S&P and Moody's an Accountant's Confirmation
as to such AMPS Basic Maintenance Report.

      (e) If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this paragraph 7 shows that an error was made in the AMPS Basic
Maintenance Report for a particular Valuation Date for which such Accountant's
Confirmation as required to be delivered, or shows that a lower aggregate
Discounted Value for the aggregate of all S&P Eligible Assets or Moody's
Eligible Assets, as the case may be, of the Corporation was determined by the
Independent Accountant, the calculation or determination made by such
Independent Accountant shall be final and conclusive and shall be binding on the
Corporation, and the Corporation shall accordingly amend and deliver the AMPS
Basic Maintenance Report to the Auction Agent, S&P and Moody's promptly
following receipt by the Corporation of such Accountant's Confirmation.

      (f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of the shares of AMPS, the Corporation will
complete and deliver to S&P and Moody's an AMPS Basic Maintenance Report as of
the close of business on such Date of Original Issue. Within five Business Days
of such Date of Original Issue, the Independent Accountant will confirm in
writing to S&P and Moody's (i) the mathematical accuracy of the calculations
reflected in such Report and (ii) that the aggregate Discounted Value of S&P
Eligible Assets and the aggregate Discounted Value of Moody's Eligible Assets
reflected thereon equals or exceeds the AMPS Basic Maintenance Amount reflected
thereon. Also, on or before 5:00 p.m., New York City time, on the first Business
Day after shares of Common Stock are repurchased by the Corporation, the
Corporation will complete and deliver to S&P and Moody's an AMPS Basic
Maintenance Report as of the close of business on such date that Common Stock is
repurchased.


                                       53
<PAGE>


      (g) For so long as shares of AMPS are rated by Moody's, in managing the
Corporation's portfolio, the Adviser will not alter the composition of the
Corporation's portfolio if, in the reasonable belief of the Adviser, the effect
of any such alteration would be to cause the Corporation to have Moody's
Eligible Assets with an aggregate Discounted Value, as of the immediately
preceding Valuation Date, less than the AMPS Basic Maintenance Amount as of such
Valuation Date; provided, however, that in the event that, as of the immediately
preceding Valuation Date, the aggregate Discounted Value of Moody's Eligible
Assets exceeded the AMPS Basic Maintenance Amount by five percent or less, the
Adviser will not alter the composition of the Corporation's portfolio in a
manner reasonably expected to reduce the aggregate Discounted Value of Moody's
Eligible Assets unless the Corporation shall have confirmed that, after giving
effect to such alteration, the aggregate Discounted Value of Moody's Eligible
Assets would exceed the AMPS Basic Maintenance Amount.

      8. Certain Other Restrictions and Requirements.

      (a) For so long as any shares of AMPS are rated by S&P, the Corporation
will not purchase or sell futures contracts, write, purchase or sell options on
futures contracts or write put options (except covered put options) or call
options (except covered call options) on portfolio securities unless it receives
written confirmation from S&P that engaging in such transactions will not impair
the ratings then assigned to the shares of AMPS by S&P, except that the
Corporation may purchase or sell futures contracts based on the Bond Buyer
Municipal Bond Index (the "Municipal Index") or United States Treasury Bonds or
Notes ("Treasury Bonds") and write, purchase or sell put and call options on
such contracts (collectively, "S&P Hedging Transactions"), subject to the
following limitations:


                                       54
<PAGE>

            (i) the Corporation will not engage in any S&P Hedging Transaction
      based on the Municipal Index (other than transactions which terminate a
      futures contract or option held by the Corporation by the Corporation's
      taking an opposite position thereto ("Closing Transactions")), which would
      cause the Corporation at the time of such transaction to own or have sold
      the least of (A) more than 1,000 outstanding futures contracts based on
      the Municipal Index, (B) outstanding futures contracts based on the
      Municipal Index exceeding in number 25% of the quotient of the Market
      Value of the Corporation's total assets divided by $1,000 or (C)
      outstanding futures contracts based on the Municipal Index exceeding in
      number 10% of the average number of daily traded futures contracts based
      on the Municipal Index in the 30 days preceding the time of effecting such
      transaction as reported by The Wall Street Journal;

            (ii) the Corporation will not engage in any S&P Hedging Transaction
      based on Treasury Bonds (other than Closing Transactions) which would
      cause the Corporation at the time of such transaction to own or have sold
      the lesser of (A) outstanding futures contracts based on Treasury Bonds
      exceeding in number 50% of the quotient of the Market Value of the
      Corporation's total assets divided by $100,000 ($200,000 in the case of
      the two-year United States Treasury Note) or (B) outstanding futures
      contracts based on Treasury Bonds exceeding in number 10% of the average
      number of daily traded futures contracts based on Treasury Bonds in the 30
      days preceding the time of effecting such transaction as reported by The
      Wall Street Journal;

            (iii) the Corporation will engage in Closing Transactions to close
      out any outstanding futures contract which the Corporation owns or has
      sold or any outstanding option thereon owned by the Corporation in the
      event (A) the Corporation does not have


                                       55
<PAGE>

S&P Eligible Assets with an aggregate Discounted Value equal to or greater than
the AMPS Basic Maintenance Amount on two consecutive Valuation Dates and (B) the
Corporation is required to pay Variation Margin on the second such Valuation
Date;

            (iv) the Corporation will engage in a Closing Transaction to close
      out any outstanding futures contract or option thereon in the month prior
      to the delivery month under the terms of such futures contract or option
      thereon unless the Corporation holds the securities deliverable under such
      terms; and

            (v) when the Corporation writes a futures contract or option
      thereon, it will either maintain an amount of cash, cash equivalents or
      high grade (rated A or better by S&P), fixed-income securities in a
      segregated account with the Corporation's custodian, so that the amount so
      segregated plus the amount of Initial Margin and Variation Margin held in
      the account of or on behalf of the Corporation's broker with respect to
      such futures contract or option equals the Market Value of the futures
      contract or option, or, in the event the Corporation writes a futures
      contract or option thereon which requires delivery of an underlying
      security, it shall hold such underlying security in its portfolio.

      For purposes of determining whether the Corporation has S&P Eligible
Assets with a Discounted Value that equals or exceeds the AMPS Basic Maintenance
Amount, the Discounted Value of cash or securities held for the payment of
Initial Margin or Variation Margin shall be zero and the aggregate Discounted
Value of S&P Eligible Assets shall be reduced by an amount equal to (i) 30% of
the aggregate settlement value, as marked to market, of any outstanding futures
contracts based on the Municipal Index which are owned by the Corporation plus
(ii) 25% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on Treasury Bonds which contracts are owned
by the Corporation.


                                       56
<PAGE>

      (b) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not buy or sell futures contracts, write, purchase or sell call
options on futures contracts or purchase put options on futures contracts or
write call options (except covered call options) on portfolio securities unless
it receives written confirmation from Moody's that engaging in such transactions
would not impair the ratings then assigned to the shares of AMPS by Moody's,
except that the Corporation may purchase or sell exchange-traded futures
contracts based on the Municipal Index or Treasury Bonds and purchase, write or
sell exchange-traded put options on such futures contracts and purchase, write
or sell exchange-traded call options on such futures contracts (collectively,
"Moody's Hedging Transactions"), subject to the following limitations:

            (i) the Corporation will not engage in any Moody's Hedging
      Transaction based on the Municipal Index (other than Closing Transactions)
      which would cause the Corporation at the time of such transaction to own
      or have sold (A) outstanding futures contracts based on the Municipal
      Index exceeding in number 10% of the average number of daily traded
      futures contracts based on the Municipal Index in the 30 days preceding
      the time of effecting such transaction as reported by The Wall Street
      Journal or (B) outstanding futures contracts based on the Municipal Index
      having a Market Value exceeding the Market Value of all Municipal Bonds
      constituting Moody's Eligible Assets owned by the Corporation (other than
      Moody's Eligible Assets already subject to a Moody's Hedging Transaction);

            (ii) the Corporation will not engage in any Moody's Hedging
      Transaction based on Treasury Bonds (other than Closing Transactions)
      which would cause the Corporation at the time of such transaction to own
      or have sold (A) outstanding futures contracts based on Treasury Bonds
      having an aggregate Market Value exceeding


                                       57
<PAGE>

      40% of the aggregate Market Value of Moody's Eligible Assets owned
      by the Corporation and rated Aa by Moody's (or, if not rated by
      Moody's but rated by S&P, rated AAA by S&P) or (B) outstanding
      futures contracts based on Treasury Bonds having an aggregate Market
      Value exceeding 80% of the aggregate Market Value of all Municipal
      Bonds constituting Moody's Eligible Assets owned by the Corporation
      (other than Moody's Eligible Assets already subject to a Moody's
      Hedging Transaction) and rated Baa or A by Moody's (or, if not rated
      by Moody's but rated by S&P, rated A or AA by S&P) (for purposes of
      the foregoing clauses (i) and (ii), the Corporation shall be deemed
      to own the number of futures contracts that underlie any outstanding
      options written by the Corporation);

            (iii) the Corporation will engage in Closing Transactions to close
      out any outstanding futures contract based on the Municipal Index if the
      amount of open interest in the Municipal Index as reported by The Wall
      Street Journal is less than 5,000;

            (iv) the Corporation will engage in a Closing Transaction to close
      out any outstanding futures contract by no later than the fifth Business
      Day of the month in which such contract expires and will engage in a
      Closing Transaction to close out any outstanding option on a futures
      contract by no later than the first Business Day of the month in which
      such option expires;

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

            (vi) the Corporation will not engage in options and futures
      transactions for leveraging or speculative purposes and will not write any
      call options or sell any


                                       58
<PAGE>

      futures contracts for the purpose of hedging the anticipated purchase of
      an asset prior to completion of such purchase; and

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

      For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of Moody's Eligible Assets which the
Corporation is obligated to deliver or receive pursuant to an outstanding
futures contract or option shall be as follows: (i) assets subject to call
options written by the Corporation which are either exchange-traded and "readily
reversible" or which expire within 49 days after the date as of which such
valuation is made shall be valued at the lesser of (a) Discounted Value and (b)
the exercise price of the call option written by the Corporation; (ii) assets
subject to call options written by the Corporation not meeting the requirements
of clause (i) of this sentence shall have no value; (iii) assets subject to put
options written by the Corporation shall be valued at the lesser of (A) the
exercise price and (B) the Discounted Value of the subject security; (iv)
futures contracts shall be valued at the lesser of (A) settlement price and (B)
the Discounted Value of the subject security, provided that, if a contract
matures within 49 days after the date as of which such valuation is made, where
the Corporation is the seller the contract may be valued at the settlement price
and where the Corporation is the buyer the contract may be valued at the
Discounted Value of the subject securities; and (v) where delivery may be made
to the Corporation with any security of a class of


                                       59
<PAGE>

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:

            (viii) 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


                                       60
<PAGE>

      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

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

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

      (d) For so long as shares of AMPS are rated by S&P or Moody's, the
Corporation will not, unless it has received written confirmation from S&P
and/or Moody's, as the case may be, that such action would not impair the
ratings then assigned to shares of AMPS by S&P and/or Moody's, as the case may
be, (i) borrow money except for the purpose of clearing transactions in
portfolio securities (which borrowings shall under any circumstances be limited
to the lesser of $10 million and an amount equal to 5% of the Market Value of
the Corporation's assets at the time of such borrowings and which borrowings
shall be repaid within 60 days and not be extended or renewed and shall not
cause the aggregate Discounted Value of Moody's Eligible Assets and S&P Eligible
Assets to be less than the AMPS Basic Maintenance Amount), (ii) engage in short
sales of securities, (iii) lend any securities, (iv) issue any class or series
of stock ranking prior to or on a parity with the AMPS with respect to the
payment of dividends or the distribution of assets upon dissolution, liquidation
or winding up of the Corporation,


                                       61
<PAGE>

(v) reissue any AMPS previously purchased or redeemed by the Corporation, (vi)
merge or consolidate into or with any other corporation or entity, (vii) change
the Pricing Service or (viii) engage in reverse repurchase agreements.

      (e) For so long as shares of AMPS are rated by Moody's, the Corporation
agrees to provide Moody's with the following, unless the Corporation has
received written confirmation from Moody's that the provision of such
information is no longer required and that the current rating then assigned to
the shares of AMPS by Moody's would not be impaired: a notification letter at
least 30 days prior to any material change in the Charter; a copy of the AMPS
Basic Maintenance Report prepared by the Corporation in accordance with these
Articles Supplementary; and a notice upon the occurrence of any of the following
events: (i) any failure by the Corporation to declare or pay any dividends on
the AMPS or successfully remarket the AMPS; (ii) any mandatory or optional
redemption of the AMPS effected by the Corporation; (iii) any assumption of
control of the Board of Directors of the Corporation by the holders of the AMPS;
(iv) a general unavailability of dealer quotes on the assets of the Corporation;
(v) any material auditor discrepancies on valuations; (vi) the dividend rate on
the AMPS equals or exceeds 95% of the Aaa Composite Commercial Paper Rate; (vii)
the occurrence of any Special Dividend Period; (viii) any change in the Maximum
Applicable Rate or the Reference Rate; (ix) the acquisition by any person of
beneficial ownership of more than 5% of the Corporation's voting stock
(inclusive of Common Stock and Preferred Stock); (x) the occurrence of any
change in Internal Revenue Service rules with respect to the payment of
Additional Dividends; (xi) any change in the Pricing Service employed by the
Corporation; (xii) any change in the Investment Adviser; (xiii) any increase of
greater than 40% to the maximum marginal Federal income tax rate applicable to
individuals or corporations; and (xiv) the maximum marginal Federal income tax


                                       62
<PAGE>

rate applicable to individuals or corporations is increased to a rate in excess
of 50%.

      9. Notice. All notices or communications, unless otherwise specified in
the By-Laws of the Corporation or these Articles Supplementary, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.

      10. Auction Procedures. (a) Certain definitions. As used in this paragraph
10, the following terms shall have the following meanings, unless the context
otherwise requires:

            (i) "AMPS" means the shares of AMPS being auctioned pursuant to this
      paragraph 10.

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

            (iii) "Available AMPS" has the meaning specified in paragraph
      10(d)(i) below.

            (iv) "Bid" has the meaning specified in paragraph 10(b)(i) below.

            (v) "Bidder" has the meaning specified in paragraph 10(b)(i) below.

            (vi) "Hold Order" has the meaning specified in paragraph 10(b)(i)
      below.

            (vii) "Maximum Applicable Rate" for any Dividend Period will be the
      Applicable Percentage of the Reference Rate. The Applicable Percentage
      will be determined based on (i) the lower of the credit rating or ratings
      assigned on such date to such shares by Moody's and S&P (or if Moody's or
      S&P or both shall not make such rating available, the equivalent of either
      or both of such ratings by a Substitute Rating Agency or two Substitute
      Rating Agencies or, in the event that only one such rating shall be
      available, such rating) and (ii) whether the Corporation has provided
      notification to the


                                       63
<PAGE>

      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
                                               Percentage of     Percentage of
                                               Reference         Reference
                                               Rate -            Rate -
               Credit Ratings                  No Notification   No Notification
- --------------------------------------------   ---------------   ---------------
      Moody's                       S&P

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

"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 the AMPS. If either S&P or Moody's shall
not make such a rating available, or neither S&P nor Moody's shall make such a
rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
affiliates and successors, after consultation with the Corporation, shall select
a nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations to act as a Substitute Rating Agency
or Substitute Rating Agencies, as the case may be.

            (viii) "Order" has the meaning specified in paragraph 10(b)(i)
      below.

            (ix) "Sell Order" has the meaning specified in paragraph 10(b)(i)
      below.

            (x) "Submission Deadline" means 1:00 P.M., New York City time, on
      any Auction Date or such other time on any Auction Date as may be
      specified by the Auction Agent from time to time as the time by which each
      Broker-Dealer must submit to the Auction Agent in writing all Orders
      obtained by it for the Auction to be conducted on such Auction Date.

            (xi) "Submitted Bid" has the meaning specified in paragraph 10(d)(i)
      below.


                                       64
<PAGE>

            (xii) "Submitted Hold Order" has the meaning specified in paragraph
      10(d)(i) below.

            (xiii) "Submitted Order" has the meaning specified in paragraph
      10(d)(i) below.

            (xiv) "Submitted Sell Order" has the meaning specified in paragraph
      10(d)(i) below.

            (xv) "Sufficient Clearing Bids" has the meaning specified in
      paragraph 10(d)(i) below.

            (xvi) "Winning Bid Rate" has the meaning specified in paragraph
      10(d)(i) below.

      (b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders.

            (i) Unless otherwise permitted by the Corporation, Beneficial Owners
and Potential Beneficial Owners may only participate in Auctions through their
Broker-Dealers. Broker-Dealers will submit the Orders of their respective
customers who are Beneficial Owners and Potential Beneficial Owners to the
Auction Agent, designating themselves as Existing Holders in respect of shares
subject to Orders submitted or deemed submitted to them by Beneficial Owners and
as Potential Holders in respect of shares subject to Orders submitted to them by
Potential Beneficial Owners. A Broker-Dealer may also hold shares of AMPS in its
own account as a Beneficial Owner. A Broker-Dealer may thus submit Orders to the
Auction Agent as a Beneficial Owner or a Potential Beneficial Owner and
therefore participate in an Auction as an Existing Holder or Potential Holder on
behalf of both itself and its customers. On or prior to the Submission Deadline
on each Auction Date:

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


                                       65
<PAGE>

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

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

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

      (B)   each Broker-Dealer, using a list of Potential Beneficial Owners that
shall be maintained in good faith for the purpose of conducting a competitive
Auction, shall contact Potential Beneficial Owners, including Persons that are
not Beneficial Owners, on such list to determine the number of Outstanding
shares, if any, of AMPS which each such Potential Beneficial Owner offers to
purchase, provided that the Applicable Rate for the next succeeding Dividend
Period shall not be less than the rate per annum specified by such Potential
Beneficial Owner.

      For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this paragraph 10(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an Order
containing the information referred to in clause (A)(1) of this paragraph
10(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the
information


                                       66
<PAGE>

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

            (1)  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

            (2)  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:


                                       67
<PAGE>

            (1) the number of Outstanding shares of AMPS specified in such Sell
      Order; or

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

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

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

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

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

         (i) Each Broker-Dealer shall submit in writing or through the Auction
Agent's Auction Processing System to the Auction Agent prior to the Submission
Deadline on each Auction Date all Orders obtained by such Broker-Dealer,
designating itself (unless otherwise permitted by the Corporation) as an
Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
specifying with respect to each Order:


                                       68
<PAGE>

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

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

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

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

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

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

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

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

      (iii) If an Order or Orders covering all of the Outstanding shares of AMPS
held by an Existing Holder are not submitted to the Auction Agent prior to the
Submission Deadline, the Auction Agent shall deem a Hold Order (in the case of
an Auction relating to a Dividend Period which is not a Special Dividend Period
of 28 days or more) and a Sell Order (in the case of an Auction relating to a
Special Dividend Period of 28 days or more) to have been submitted on


                                       69
<PAGE>

behalf of such Existing Holder covering the number of Outstanding shares of AMPS
held by such Existing Holder and not subject to Orders submitted to the Auction
Agent.

      (iv) If one or more Orders on behalf of an Existing Holder covering in the
aggregate more than the number of Outstanding shares of AMPS held by such
Existing Holder are submitted to the Auction Agent, such Order shall be
considered valid as follows and in the following order of priority:

            (A) any Hold Order submitted on behalf of such Existing Holder shall
      be considered valid up to and including the number of Outstanding shares
      of AMPS held by such Existing Holder; provided that if more than one Hold
      Order is submitted on behalf of such Existing Holder and the number of
      shares of AMPS subject to such Hold Orders exceeds the number of
      Outstanding shares of AMPS held by such Existing Holder, the number of
      shares of AMPS subject to each of such Hold Orders shall be reduced pro
      rata so that such Hold Orders, in the aggregate, will cover exactly the
      number of Outstanding shares of AMPS held by such Existing Holder;

            (B) any Bids submitted on behalf of such Existing Holder shall be
      considered valid, in the ascending order of their respective rates per
      annum if more than one Bid is submitted on behalf of such Existing Holder,
      up to and including the excess of the number of Outstanding shares of AMPS
      held by such Existing Holder over the number of shares of AMPS subject to
      any Hold Order referred to in paragraph 10(c)(iv)(A) above (and if more
      than one Bid submitted on behalf of such Existing Holder specifies the
      same rate per annum and together they cover more than the remaining number
      of shares that can be the subject of valid Bids after application of
      paragraph 10(c)(iv)(A) above and of the foregoing portion of this
      paragraph 10(c)(iv)(B) to any Bid or Bids specifying a lower


                                       70
<PAGE>

      rate or rates per annum, the number of shares subject to each of such Bids
      shall be reduced pro rata so that such Bids, in the aggregate, cover
      exactly such remaining number of shares); and the number of shares, if
      any, subject to Bids not valid under this paragraph 10(c)(iv)(B) shall be
      treated as the subject of a Bid by a Potential Holder; and

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

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

      (vi) Any Order submitted by a Beneficial Owner as a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date shall be irrevocable.

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

      (i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to


                                       71
<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
            specifying lower



                                       72
<PAGE>

                  rates per annum were rejected, thus entitling such Existing
                  Holders to continue to hold the shares of AMPS that are the
                  subject of such Submitted Bids, and

                  (2) each Submitted Bid from Potential Holders specifying the
            Winning Bid Rate and all other Submitted Bids from Potential Holders
            specifying lower rates per annum were accepted, thus entitling the
            Potential Holders to purchase the shares of AMPS that are the
            subject of such Submitted Bids,

would result in the number of shares subject to all Submitted Bids specifying
the Winning Bid Rate or a lower rate per annum being at least equal to the
Available AMPS.

      (ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 10(d)(i), the Auction Agent shall advise the Corporation
of the Maximum Applicable Rate and, based on such determinations, the Applicable
Rate for the next succeeding Dividend Period as follows:

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

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

            (C) if all of the Outstanding shares of AMPS are the subject of
      Submitted Hold Orders, that the Dividend Period next succeeding the
      Auction shall automatically be the same length as the immediately
      preceding Dividend Period and the Applicable Rate for the next succeeding
      Dividend Period shall be equal to 40% of the Reference Rate (or 60% of
      such rate if the Corporation has provided notification to the Auction
      Agent prior


                                       73
<PAGE>

to the Auction establishing the Applicable Rate for any dividend pursuant to
paragraph 2(f) hereof that net capital gains or other taxable income will be
included in such dividend on shares of AMPS) on the date of the Auction.

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

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

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

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

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

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

            (D) the Submitted Bid of each of the Existing Holders specifying a
      rate per annum that is equal to the Winning Bid Rate shall be rejected,
      thus entitling each such


                                       74
<PAGE>

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

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


                                       75
<PAGE>

            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


                                       76
<PAGE>

      by such Existing Holder subject to such Submitted Bid or Submitted Sell
      Order and the denominator of which shall be the number of Outstanding
      shares of AMPS subject to all such Submitted Bids and Submitted Sell
      Orders.

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

      (iv) If, as a result of the procedures described in paragraph 10(e)(i),
any Potential Holder would be entitled or required to purchase less than a whole
share of AMPS on any Auction Date, the Auction Agent shall, in such manner as in
its sole discretion it shall determine, allocate shares of AMPS for purchase
among Potential Holders so that only whole shares of AMPS are purchased on such
Auction Date by any Potential Holder, even if such allocation results in one or
more of such Potential Holders not purchasing any shares of AMPS on such Auction
Date.

      (v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders
on behalf of Existing Holders or Potential Holders, the aggregate number of
Outstanding shares of AMPS to be purchased and the aggregate number of the
Outstanding shares of AMPS to be sold by such Potential Holders and Existing
Holders and, to the extent that such aggregate number of Outstanding shares to
be purchased and such aggregate number of Outstanding shares to be sold differ,
the Auction Agent


                                       77
<PAGE>

shall determine to which other Broker-Dealer or Broker-Dealers acting for one or
more purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, Outstanding shares of AMPS.

      (f) Miscellaneous. The Corporation may interpret the provisions of this
paragraph 10 to resolve any inconsistency or ambiguity, remedy any formal defect
or make any other change or modification that does not substantially adversely
affect the rights of Beneficial Owners of AMPS. A Beneficial Owner or an
Existing Holder (A) may sell, transfer or otherwise dispose of shares of AMPS
only pursuant to a Bid or Sell Order in accordance with the procedures described
in this paragraph 10 or to or through a Broker-Dealer, provided that in the case
of all transfers other than pursuant to Auctions such Beneficial Owner or
Existing Holder, its Broker-Dealer, if applicable, or its Agent Member advises
the Auction Agent of such transfer and (B) except as otherwise required by law,
shall have the ownership of the shares of AMPS held by it maintained in book
entry form by the Securities Depository in the account of its Agent Member,
which in turn will maintain records of such Beneficial Owner's beneficial
ownership. Neither the Corporation nor any Affiliate shall submit an Order in
any Auction. Any Beneficial Owner that is an Affiliate shall not sell, transfer
or otherwise dispose of shares of AMPS to any Person other than the Corporation.
All of the Outstanding shares of AMPS of a series shall be represented by a
single certificate registered in the name of the nominee of the Securities
Depository unless otherwise required by law or unless there is no Securities
Depository. If there is no Securities Depository, at the Corporation's option
and upon its receipt of such documents as it deems appropriate, any shares of
AMPS may be registered in the Stock Register in the name of the Beneficial Owner
thereof and such Beneficial Owner thereupon will be entitled to receive

                                       78
<PAGE>

certificates therefor and required to deliver certificates therefor upon
transfer or exchange thereof.

      11. Securities Depository; Stock Certificates. (a) If there is a
Securities Depository, one certificate for all of the shares of AMPS shall be
issued to the Securities Depository and registered in the name of the Securities
Depository or its nominee. Additional certificates may be issued as necessary to
represent shares of AMPS. All such certificates shall bear a legend to the
effect that such certificates are issued subject to the provisions restricting
the transfer of shares of AMPS contained in these Articles Supplementary. Unless
the Corporation shall have elected, during a Non-Payment Period, to waive this
requirement, the Corporation will also issue stop-transfer instructions to the
Auction Agent for the shares of AMPS. Except as provided in paragraph (b) below,
the Securities Depository or its nominee will be the Holder, and no Beneficial
Owner shall receive certificates representing its ownership interest in such
shares.

      (b) If the Applicable Rate applicable to all shares of AMPS shall be the
Non-Payment Period Rate or there is no Securities Depository, the Corporation
may at its option issue one or more new certificates with respect to such shares
(without the legend referred to in paragraph 11(a)) registered in the names of
the Beneficial Owners or their nominees and rescind the stop-transfer
instructions referred to in paragraph 11(a) with respect to such shares.


                                       79
<PAGE>

         IN WITNESS WHEREOF, MUNIHOLDINGS INSURED 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 ____________, 2000.

                                            MUNIHOLDINGS INSURED FUND II, INC.

                                            By ____________________
                                                  Name:
                                                  Title:

Attest:

______________________
Name:
Title:

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-17.(A)
<SEQUENCE>3
<DESCRIPTION>LETTER TO STOCKHOLDERS OF EACH FUND
<TEXT>

<HTML>
<head>
<TITLE> Exhibit 17(a) </TITLE>
</head>
<body>

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<p><table width=600><tr><td align=right><font size=2><B>EXHIBIT 17(a)</B></font></td></tr></TABLE></p>

<p><table width=600><tr><td  align=center><font size=2><B>MUNIHOLDINGS INSURED
FUND II, INC.<BR>MUNIHOLDINGS INSURED
FUND III, INC.<BR>MUNIHOLDINGS INSURED
FUND IV, INC.</B></font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>Dear Stockholder:</font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are
being asked to consider a transaction involving the funds listed above. The
transaction is a reorganization of similar funds in which one fund will acquire
the other two funds. The following chart outlines the reorganization structure.</font></td></tr></TABLE></p>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="38">
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td width="253">
      <p align="center"><font size="1"><b>Surviving Fund </b></font>
      <hr size="1" noshade align="center" width="30%">
    </td>
    <td width="16">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="253">
      <div align="center"><font size="1"><b>Acquired Funds </b></font></div>
      <hr size="1" noshade align="center" width="35%">
    </td>
    <td width="40">
      <p align="center"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="38">&nbsp;</td>
    <td valign="TOP" width="253">
      <p align="center"><font size="2">MuniHoldings Insured Fund II, Inc.</font>
    </td>
    <td valign="TOP" width="16">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="253">
      <div align="center"><font size="2">MuniHoldings Insured Fund III, Inc.</font>
      </div>
    </td>
    <td valign="TOP" width="40">
      <p>&nbsp;
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="38">&nbsp;</td>
    <td valign="TOP" width="253">
      <p align="center"><font size="2">.</font>
    </td>
    <td valign="TOP" width="16">
      <div align="center"></div>
    </td>
    <td valign="TOP" width="253">
      <div align="center"><font size="2">MuniHoldings Insured Fund IV, Inc.&nbsp;</font></div>
    </td>
    <td valign="TOP" width="40">&nbsp;</td>
  </tr>
</TABLE>
<br>
<table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June
27, 2000, each Fund will hold a Special Meeting of Stockholders to consider the
Reorganization. The Reorganization must be approved by the stockholders of each
Fund. A combined proxy statement and prospectus which provides information about
the proposed Reorganization and about each Fund is enclosed along with a
Question and Answer sheet that addresses frequently asked questions.</font></td></tr></TABLE></p>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are
being asked to approve the Agreement and Plan of Reorganization among the Funds
pursuant to which MuniHoldings Insured Fund II, Inc. will acquire the assets and
assume the liabilities of each of the Acquired Funds in exchange for newly
issued shares of Common Stock and Auction Market Preferred Stock of MuniHoldings
Insured Fund II, Inc. The Acquired Funds will distribute these shares to their
respective stockholders so that holders of Common Stock in an Acquired Fund will
receive Common Stock in MuniHoldings Insured Fund II, Inc. and holders of
Auction Market Preferred Stock in an Acquired Fund will receive Auction Market
Preferred Stock in MuniHoldings Insured Fund II, Inc. as described in the
combined proxy statement and prospectus.</font></td></tr></TABLE></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors of each
      Fund has reviewed the proposed Reorganization and recommends that you vote
      FOR the proposed Reorganization after carefully reviewing the enclosed materials.</font></td>
  </tr></TABLE></p>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your vote
is important. Please take a moment now to sign and return your proxy card in the
enclosed postage paid return envelope. You may also vote on the Internet by
visiting <U>www.proxyvote.com</U> and entering the 12 digit control number located on
your proxy card. If we do not hear from you after a reasonable amount of time,
you may receive a telephone call from our proxy solicitor, Shareholder
Communications Corporation, reminding you to vote your shares.</FONT></td></tr></TABLE></p>
<br>
<table width=600>
  <tr>
    <td width=50% valign=top><font size=2> </font></td>
    <td width=50% valign=top><font size=2>Sincerely,</font></td>
  </tr>
</TABLE></P>
<P><table width=600><TR>
    <TD width=50% valign=top><font size=2> </FONT></TD>
    <TD width=50% valign=top><font size=2>Bradley J. Lucido<br>
      Secretary of MuniHoldings
      Insured Fund II, Inc. and <br>
      MuniHoldings Insured Fund III, Inc.</font></TD>
  </TR></TABLE></P>
<table width=600><TR>
    <TD width=50% valign=top><font size=2> </FONT></TD>
    <TD width=50% valign=top><font size=2>William E. Zitelli, Jr.<br>
      Secretary of MuniHoldings Insured Fund IV, Inc. </font></TD>
  </TR></TABLE>
<table width=600>
  <tr>
    <td width=50% valign=top><font size=2> </font></td>
    <td width=50% valign=top>&nbsp;</td>
  </tr>
</TABLE></P>
<p><table width=600><tr>
    <td><font size=2>Enclosure</font></td>
  </tr></TABLE></p>


</body>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-17.(B)
<SEQUENCE>4
<DESCRIPTION>QUESTIONS AND ANSWER SHEET
<TEXT>

<HTML>
<head>
<TITLE> Exhibit 17(b) </TITLE>
</head>
<body>


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

<p><table width=600><tr><td align=right><font size=2><B>EXHIBIT 17(b)</B></font></td></tr></TABLE></p>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>Why am I receiving this proxy?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>As a stockholder of Insured
II, Insured III or Insured IV, you are being asked to consider a transaction in
which one fund will acquire the other two funds. This transaction is referred
to in this question and answer sheet as the Reorganization. The Reorganization
requires the approval of each Fund&#146;s stockholders.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>Which Fund will be the
Surviving Fund and which Funds will be the Acquired Funds in the Reorganization?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>Insured II will be the
Surviving Fund. Insured III and Insured IV will be the Acquired Funds.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>Will the Reorganization
change my privileges as a stockholder?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>Your rights as a stockholder
will not change in any substantial way as a result of the Reorganization. In
addition, the stockholder services available to you after the Reorganization
will be substantially the same as the stockholder services currently available
to you.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>How will the Reorganization
benefit stockholders?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>Stockholders should consider
the following:</font></TD></TR></TABLE>
<br>
<table width=600>
  <tr>
    <td width=10% valign=top>&nbsp;</td>
    <td width=7% valign=top><font size=2> |X|</font></td>
    <td width=83% valign=top><font size="2">After the Reorganization, each Fund&#146;s
      stockholders will be invested in a fund with an increased level of net assets
      with substantially similar investment objectives and policies:</font></td>
  </tr>
</TABLE>
<br>
<table width=600>
  <tr>
    <td width=10% valign=top>&nbsp;</td>
    <td width=7% valign=top><font size=2> </font></td>
    <td width=83% valign=top><font size="2">After the Reorganization, holders
      of Common Stock in the Surviving Fund are expected to experience</font></td>
  </tr>
</TABLE>
<br>
<table width=600>
  <tr>
    <td width=17% valign=top>&nbsp;</td>
    <td width=8% valign=top><font size=2> |&nbsp;&nbsp;&nbsp;|</font></td>
    <td width=75% valign=top><font size="2">a lower aggregate operating expense
      ratio (the ratio of operating expenses to total fund assets) than any individual
      Fund prior to the Reorganization</font></td>
  </tr>
</TABLE>
<table width=600>
  <tr>
    <td width=17% valign=top>&nbsp;</td>
    <td width=8% valign=top><font size=2> |&nbsp;&nbsp;&nbsp;|</font></td>
    <td width=75% valign=top><font size="2">greater efficiency and flexibility
      in portfolio management</font></td>
  </tr>
</TABLE>
<table width=600>
  <tr>
    <td width=17% valign=top>&nbsp;</td>
    <td width=8% valign=top><font size=2> |&nbsp;&nbsp;&nbsp;|</font></td>
    <td width=75% valign=top><font size="2">a more liquid market for shares of
      Common Stock</font></td>
  </tr>
</TABLE>
<font size="2"> </font>
<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>Will the Reorganization
affect the value of my investment?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>The value of your investment
will not change.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>If I own shares of Common
Stock of Insured III or Insured IV, will I own the same number of shares of
Common Stock of Insured II after the Reorganization as I currently own?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>No. You will receive shares
of Common Stock of Insured II with the same aggregate net asset value as the
shares of Common Stock of the Acquired Fund you own on the business day prior
to the closing date of the Reorganization (the &#147;Valuation Date&#148;). The number of
shares you receive will depend on the relative net asset values of the shares
of Common Stock of the Funds on that date. For example, let us assume that you
own 10 shares of Common Stock of an Acquired Fund. If the net asset value of
the Acquired Fund&#146;s Common Stock on the Valuation Date is $6 per share, and the
net asset value of Insured II&#146;s Common Stock on the Valuation Date is $12 per
share, you will receive 5 shares of Insured II&#146;s Common Stock in the
Reorganization. The aggregate net asset value of your investment will not
change. (10 Acquired Fund shares x $6 = $60; 5 Insured II shares x $12 = $60).</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>I currently hold Auction
Market Preferred Stock of an Acquired Fund. After the Reorganization, what will
I hold?</B></FONT></TD></TR></TABLE></P>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="2"></TH>
    <TH COLSPAN="3"></TH>
    <TH COLSPAN="2" width="13"></TH>
  </TR>
  <TR VALIGN="TOP">
    <TD ALIGN="LEFT" WIDTH="26"><font size="2">A.</font></TD>
    <TD ALIGN="LEFT" WIDTH="36">&nbsp;</TD>
    <TD ALIGN="LEFT" WIDTH="293"><font size="2">If prior to the Reorganization
      you hold:</font>
      <hr size="1" noshade align="left" width="210">
    </TD>
    <TD ALIGN="LEFT" WIDTH="29">&nbsp;</TD>
    <TD ALIGN="LEFT" colspan="3"><font size="2">After the Reorganization you will
      hold</font><font size="2">:</font>
      <hr size="1" noshade align="left" width="210">
    </TD>
  </TR>
  <TR VALIGN="TOP">
    <TD ALIGN="LEFT" width="26">&nbsp;</TD>
    <TD ALIGN="LEFT" width="36">&nbsp;</TD>
    <TD ALIGN="LEFT" width="293">&nbsp;</TD>
    <TD ALIGN="LEFT" width="29">&nbsp;</TD>
    <TD ALIGN="LEFT" width="203">&nbsp;</TD>
  </TR>
  <TR VALIGN="TOP">
    <TD ALIGN="LEFT" width="26"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
    <TD ALIGN="LEFT" width="36"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
    <TD ALIGN="LEFT" width="293"><font size="2">Insured III Series A AMPS</font></TD>
    <TD ALIGN="LEFT" width="29">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD ALIGN="LEFT" width="203"><font size="2">Insured II Series C AMPS</font></TD>
  </TR>
  <TR VALIGN="TOP">
    <TD ALIGN="LEFT" width="26"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
    <TD ALIGN="LEFT" width="36"><font size="2"></font></TD>
    <TD ALIGN="LEFT" width="293"><font size="2">Insured IV Series A AMPS</font></TD>
    <TD ALIGN="LEFT" width="29">&nbsp;</TD>
    <TD ALIGN="LEFT" width="203"><font size="2">Insured II Series C AMPS</font></TD>
  </TR>
</TABLE>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
&nbsp;
</FONT></TD>
    <TD width=90% valign=top><font size=2>You will receive shares of Insured II&#146;s
      AMPS with the same aggregate liquidation preference as the shares of AMPS
      of the Acquired Fund you currently hold. Since all of the AMPS have a $25,000
      liquidation preference, the holders of AMPS of an Acquired Fund will receive
      one share of AMPS of Insured II for each share of AMPS they currently hold.
      The auction and dividend payment dates for the shares of AMPS of Insured
      II that you will receive in the Reorganization will be the same as the auction
      and dividend payment dates for the shares of AMPS of Insured III but will
      be different than the auction and dividend payment dates for the shares
      of AMPS of Insured IV. This will not adversely affect the value of your
      investment.</font></TD>
  </TR></TABLE></P>

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






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<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>Should I send in my stock
certificates now?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD>
    <TD width=90% valign=top><font size=2>No. After the Reorganization is completed,
      we will send holders of Common Stock of the Acquired Funds written instructions
      for exchanging their stock certificates. Holders of Auction Market Preferred
      Stock will not be required to surrender their stock certificates. All exchanges
      of Auction Market Preferred Stock will be accomplished by book entry. Stockholders
      of Insured II will keep their stock certificates.</font></TD>
  </TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>What are the tax consequences
for stockholders?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>The Reorganization is
structured as a tax-free transaction so that the completion of the
Reorganization itself will not result in Federal income tax liability for
stockholders of any Fund, except for taxes on any cash received for a
fractional share of Common Stock. The Funds have applied for a private letter
ruling from the Internal Revenue Service with respect to the tax treatment of
the Reorganization.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>Who will manage the Surviving
Fund after the Reorganization?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>Fund Asset Management L.P.
serves as the manager for the Funds and will be the manager of the Surviving
Fund after the Reorganization. The portfolio of Insured II is managed by Robert
A. DiMella. The portfolio of Insured III is managed by William R. Bock and Mr.
DiMella. The portfolio of Insured IV is managed by Fred K. Steube and Mr.
DiMella. After the Reorganization, the portfolio of the Surviving Fund will be
managed by Mr. DiMella. Mr. DiMella has managed the portfolio of Insured II
since it commenced operations in 1999.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>Will there be a Stockholders&#146;
Meeting for each Fund?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>Yes, a Stockholders&#146; Meeting
for each Fund will be held on June 27, 2000, at 800 Scudders Mill Road,
Plainsboro, New Jersey at the time specified below.</font></TD></TR></TABLE></P>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="85">
      <div align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</div>
    </td>
    <td width="159">
      <p align="left"><font size="1"><b>Fund </b></font>
      <hr size="1" noshade align="left" width="25">
    </td>
    <td width="57">
      <p align="left"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="299">
      <p align="left"><font size="1"><b>Time </b></font>
      <hr size="1" noshade align="left" width="25">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="85">&nbsp;</td>
    <td valign="TOP" width="159">
      <p><font size="2">Insured II</font>
    </td>
    <td valign="TOP" width="57">&nbsp;</td>
    <td valign="TOP" width="299">
      <p><font size="2">9:00 a.m.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="85">&nbsp;</td>
    <td valign="TOP" width="159">
      <p><font size="2">Insured III</font>
    </td>
    <td valign="TOP" width="57">&nbsp;</td>
    <td valign="TOP" width="299">
      <p><font size="2">9:20 a.m.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="85">&nbsp;</td>
    <td valign="TOP" width="159">
      <p><font size="2">Insured IV</font>
    </td>
    <td valign="TOP" width="57">&nbsp;</td>
    <td valign="TOP" width="299">
      <p><font size="2">9:40 a.m.</font>
    </td>
  </tr>
</TABLE>
<br>
<table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>Why is my vote important?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>Approval of the
Reorganization requires the affirmative vote of stockholders representing a
majority of the outstanding shares of Common Stock and AMPS of each Fund,
voting together as a single class, and a majority of the outstanding shares of
AMPS of each Fund, voting separately as a single class. For purposes of any
vote at a Meeting which requires the approval of the outstanding shares of a
Fund&#146;s Common Stock and AMPS, voting together as a single class, a quorum
consists of one-third of the shares of Common Stock and AMPS entitled to vote
at that Meeting. For purposes of any vote at a Meeting which requires the
approval of the outstanding shares of a Fund&#146;s AMPS, voting separately as a
single class, a quorum consists of one-third of the shares of AMPS entitled to
vote at that Meeting. The Board of Directors of each Fund urges every
stockholder to vote. Please read all proxy materials thoroughly before casting
your vote.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>How can I vote?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD>
    <TD width=90% valign=top><font size=2>You may vote by signing and returning
      your proxy card in the enclosed postage-paid envelope. You may also vote
      your shares on the Internet at http://www.proxyvote.com. Or refer to the
      &#147;800&#148; number printed on your voting instruction form. On the Internet
      you will be asked for a control number that you received in your proxy mailing.
      You may also vote in person at the Stockholders&#146; Meeting. If you submitted
      a proxy by mail, by telephone or on the Internet, you may withdraw it at
      the Meeting and then vote in person at the Meeting or you may submit a superseding
      proxy by mail, by telephone or on the Internet.</font></TD>
  </TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>Have the Funds retained a
proxy solicitation firm?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>Yes, each Fund has hired
Shareholder Communications Corporation to assist in the solicitation of proxies
for the Meeting. While the Funds expect most proxies to be returned by mail,
the Funds may also solicit proxies by telephone, fax, telegraph or personal
interview.</font></TD></TR></TABLE></P>

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





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<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
Q.</B></FONT>
</TD><TD width=90% valign=top><FONT SIZE="2"><B>What if there are not enough
votes to reach a quorum by the scheduled meeting date?</B></FONT></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>In order to ensure that we
receive enough votes, we may need to take further action. We or our proxy
solicitation firm may contact you by mail or telephone. Therefore, we encourage
stockholders to vote as soon as they review the enclosed proxy materials to
avoid additional mailings or telephone calls. If enough shares are not
represented at a Stockholders&#146; Meeting for the necessary quorums or the
necessary quorums are present but there are not sufficient votes to approve the
proposal by the time of a Stockholders&#146; Meeting on June 27, 2000, such
Stockholders&#146; Meeting may be adjourned to permit further solicitation of proxy
votes.</font></TD></TR></TABLE></P>

<P><table width=600><TR>
    <TD width=10% valign=top><FONT SIZE="2"><B> Q.</B></FONT> </TD>
    <TD width=90% valign=top><FONT SIZE="2"><B>What is the Board&#146;s recommendation?</B></FONT></TD>
  </TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
A.
</FONT></TD><TD width=90% valign=top><font size=2>The Board of Directors of
each Fund believes the Reorganization is in the best interests of the Fund and
its stockholders. It encourages stockholders to vote FOR the Reorganization.</font></TD></TR></TABLE></P>

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

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