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<SEC-DOCUMENT>0000891092-00-000474.txt : 20000525
<SEC-HEADER>0000891092-00-000474.hdr.sgml : 20000525
ACCESSION NUMBER:		0000891092-00-000474
CONFORMED SUBMISSION TYPE:	N-14 8C/A
PUBLIC DOCUMENT COUNT:		5
FILED AS OF DATE:		20000524

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/A
		SEC ACT:		
		SEC FILE NUMBER:	333-34836
		FILM NUMBER:		642428

	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/A
<SEQUENCE>1
<DESCRIPTION>AMENDMENT NO. 1 TO 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>&lt;R&gt;As filed with the Securities and
      Exchange Commission on May 24, 2000&lt;/R&gt;</B></font></td>
  </tr></TABLE>

<table width=600><tr>
    <td align=right><font size=2><B>Securities Act File No.
333-34836<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>
      <font size="2">&lt;R&gt;</font></td>
  </tr></TABLE>

<table width=600>
  <tr>
    <td width="11" valign="top"><font size="2">|<u>X</u>|<br>
      |<u>&nbsp;&nbsp;&nbsp;</u>| </font></td>
    <td width="577" align="center"><FONT SIZE="2"><b>Pre-Effective Amendment No.
      1&lt;/R&gt; &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. &lt;R&gt;</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">Previously paid by wire transfer to the designated
      lockbox of the Securities and Exchange Commission in Pittsburgh, Pennsylvania.&lt;/R&gt;</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>&lt;R&gt;&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 Fund 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 under state corporate law and the
termination of their respective registrations under the Investment Company Act
of 1940, as amended; and&lt;/R&gt;</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>&lt;R&gt;&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 each Fund, 800 Scudders Mill Road, Plainsboro, New Jersey.&lt;/R&gt;</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><table width=600><tr>
    <td><font size=2>&lt;R&gt;&nbsp;&nbsp;If you
have any questions regarding the enclosed proxy material or need assistance in voting
your shares of Common Stock or shares of AMPS, please contact our proxy solicitor, Shareholder
Communications Corporation, at
      1-800-553-1752.</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 Boards of Directors,&lt;/R&gt;</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" valign="top"><font size="2">&lt;R&gt;</font></td>
    <td align=left width="291"><font size=2>W<font size="1">ILLIAM</font> E. Z<font size="1">ITELLI</font>,
      J<font size="1">R</font>.&lt;/R&gt;<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>&lt;R&gt;Plainsboro, New Jersey <BR>
      Dated: May 24, 2000 &lt;/R&gt;</font></td>
  </tr></TABLE><p></p>


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




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<p>
<p></p>

<p><table width=600><tr>
    <td  align=center><font size=2><B>&lt;R&gt;JOINT PROXY STATEMENT AND PROSPECTUS&lt;/R&gt; <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>&lt;R&gt;&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 listed below and discussed
      in greater detail elsewhere in this Joint Proxy Statement and Prospectus.
      The Board of Directors of each of the funds is requesting its stockholders
      to submit a proxy to be used at the applicable Meeting to vote the shares
      held by the stockholder submitting the proxy.&lt;/R&gt;</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>&lt;R&gt;&nbsp;&nbsp;The Agreement and Plan of Reorganization
      that you are being asked to consider involves a transaction that will be
      referred to in this Joint Proxy Statement and Prospectus as the Reorganization.
      The Reorganization involves the combination of three funds into one. The
      three funds are:&lt;/R&gt;</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>&lt;R&gt;&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 Auction Market Preferred Stock (&#147;AMPS&#148;)
      of Insured II, 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 under state
      corporate law 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, non-diversified, leveraged,
      closed-end investment company with the investment objective and policies
      described in this Joint Proxy Statement and Prospectus.&lt;/R&gt;</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>&lt;R&gt;The Securities and
Exchange Commission has not approved or disapproved these securities or passed
      upon the adequacy of this Joint Proxy Statement and Prospectus. Any representation to the contrary is a criminal offense.&lt;/R&gt;</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>&lt;R&gt;The date of this Joint Proxy Statement
      and Prospectus is May 24, 2000.&lt;/R&gt;</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;












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









<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>&lt;R&gt;&nbsp;&nbsp;This Joint 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 Joint 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 Joint Proxy Statement and Prospectus and the accompanying
      documents.&lt;/R&gt;</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;









<!-- *************************************************************************** -->
<!-- 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%" height="14"><FONT SIZE="-1">&nbsp;&nbsp;<a href="#18a">&nbsp;COMPARISON
      OF THE FUNDS</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%" height="14"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%" height="14"><FONT SIZE="-1">18</FONT></TD>
    <TD ALIGN="LEFT" width="5%" height="14"><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">Other
      Investment Policies</a></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">&lt;R&gt;<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;&lt;/R&gt;</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%" height="12"><FONT SIZE="-1">&lt;R&gt;<a href="#47">Terms
      of the Agreement and Plan</a> <a href="#45b">of Reorganization</a></FONT></TD>
    <TD ALIGN="LEFT" width="2%" height="12"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="5%" height="12"><FONT SIZE="-1">46</FONT></TD>
    <TD ALIGN="LEFT" width="5%" height="12"><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">50</FONT></TD>
    <TD ALIGN="LEFT" width="5%"><FONT SIZE="-1">&nbsp;&lt;/R&gt;</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%">&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="#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>&lt;R&gt;&nbsp;&nbsp;This Joint Proxy Statement
      and Prospectus is furnished to you in connection with the solicitation of
      proxies on behalf of the Board of Directors of Insured II, Insured III and
      Insured IV for use at the Meetings to be held at the offices of Fund Asset
      Management, L.P. (&#147;FAM&#148;), 800 Scudders Mill Road, Plainsboro,
      New Jersey on June 27, 2000, at the time specified for each Fund in Appendix
      I to this Joint Proxy Statement and Prospectus. The mailing address for
      each Fund is P.O. Box 9011, Princeton, New Jersey 08543-9011. The approximate
      mailing date of this Joint Proxy Statement and Prospectus is May 25, 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 applicable Meeting. All properly executed
      proxies received prior to the Meetings will be voted at the Meetings in
      accordance with the instructions marked thereon or otherwise as provided
      therein. Unless instructions to the contrary are marked, 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;).&lt;/R&gt;</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>&lt;R&gt;&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. As of the Record Date, each Fund
      had outstanding the number of shares of Common Stock and AMPS set forth
      in Appendix I to this Joint 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.&lt;/R&gt;</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 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">&lt;R&gt;&nbsp;&nbsp;<I>The following is a summary
      of certain information contained elsewhere in this Joint</I> <I>Proxy Statement
      and Prospectus and is qualified in its entirety by reference to the more
      complete information contained in this Joint Proxy Statement and Prospectus
      and in the Agreement and Plan attached hereto as Appendix II.</I></FONT></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>In this Joint 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,
      (iii) the subsequent distribution of Insured II Series C AMPS to the holders
      of Insured III Series A AMPS and Insured IV Series A AMPS, and (iv) 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 Board 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 under
      the Investment Company Act and its dissolution under the laws of the State
      of Maryland. The &lt;/R&gt;</font></td>
  </tr></TABLE><p></p>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
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>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>&lt;R&gt;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The investment objective of
      each Fund is to seek to provide its 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 materity and interest when due.</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 net 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 net 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 the laws of the State of Maryland.&lt;/R&gt;</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, including
      a majority of the non-interested Directors of each Fund, has determined
      (1) that participation in the Reorganization is in the best interests of
      the applicable Fund and (2) that the interests of existing stockholders
      of the applicable Fund will not be diluted as a result of effecting the
      Reorganization. Specifically, after the Reorganization, stockholders of
      each Acquired Fund will remain invested in a non-diversified, leveraged,
      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 estimated pro
      forma total operating expenses and the estimated total assets of the Combined
      Fund after the Reorganization. The Boards of Directors of the Funds 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 any
      series of AMPS of any Fund; however, the Reorganization will not adversely
      affect the holders of shares of any series of AMPS of any Fund. 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 stockholders of the Funds, 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.&lt;/R&gt;</font></td>
  </tr></TABLE><p></p>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
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>&lt;R&gt; Pro Forma 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 pro forma fee
      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" width="320"><FONT SIZE="-1">Common Stockholder Transaction Expenses:</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="center" colspan="2">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1"></FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1"></FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="48"><FONT SIZE="-1"></FONT></TD>
    <TD ALIGN="LEFT" width="39"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">&nbsp;&nbsp;Maximum Sales Load (as a percentage</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;of the offering price)
      imposed on</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;purchases of Common
      Stock</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">(b)</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">(b)</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">(b)</FONT></TD>
    <TD ALIGN="RIGHT" width="48"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="39"><FONT SIZE="-1">(c)</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">&nbsp;&nbsp;Dividend Reinvestment and</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;Cash Purchase Plan
      Fees</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="48"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="39"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">Annual Expenses (as a percentage of</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">&nbsp;&nbsp;net assets attributable to Common
      Stock</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">&nbsp;&nbsp;at March 31, 2000) (d):</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">&nbsp;&nbsp;Investment Advisory Fees(e)</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">0.85%</FONT></TD>
    <TD ALIGN="LEFT" width="20">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">0.85%</FONT></TD>
    <TD ALIGN="LEFT" width="20">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">0.85%</FONT></TD>
    <TD ALIGN="LEFT" width="20">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="48"><FONT SIZE="-1">0.85%</FONT></TD>
    <TD ALIGN="LEFT" width="39">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">&nbsp;&nbsp;Interest Payments on Borrowed
      Funds</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="20"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="48"><FONT SIZE="-1">None</FONT></TD>
    <TD ALIGN="LEFT" width="39"><FONT SIZE="-1">&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"><FONT SIZE="-1">&nbsp;&nbsp;Other Expenses</FONT></TD>
    <TD ALIGN="LEFT" width="4"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">0.39%</FONT></TD>
    <TD ALIGN="LEFT" width="20">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">0.47%</FONT></TD>
    <TD ALIGN="LEFT" width="20">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="43"><FONT SIZE="-1">0.57%</FONT></TD>
    <TD ALIGN="LEFT" width="20">&nbsp;</TD>
    <TD ALIGN="RIGHT" width="48"><FONT SIZE="-1">0.32%</FONT></TD>
    <TD ALIGN="LEFT" width="39">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"> </TD>
    <TD ALIGN="LEFT" width="4"> </TD>
    <TD ALIGN="RIGHT" width="43">
      <hr noshade size="1" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT" width="20"> </TD>
    <TD ALIGN="RIGHT" width="43">
      <hr noshade size="1" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT" width="20"> </TD>
    <TD ALIGN="RIGHT" width="43">
      <hr noshade size="1" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT" width="20"> </TD>
    <TD ALIGN="RIGHT" width="48">
      <hr noshade size="1" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT" width="39"> </TD>
  </TR>
  <tr valign="BOTTOM">
    <td align="LEFT" width="320"><font size="-1">Total Annual Expenses(f)</font></td>
    <td align="LEFT" width="4"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="43"><font size="-1">1.24%</font></td>
    <td align="LEFT" width="20">&nbsp;</td>
    <td align="RIGHT" width="43"><font size="-1">1.32%</font></td>
    <td align="LEFT" width="20">&nbsp;</td>
    <td align="RIGHT" width="43"><font size="-1">1.42%</font></td>
    <td align="LEFT" width="20">&nbsp;</td>
    <td align="RIGHT" width="48"><font size="-1">1.17%</font></td>
    <td align="LEFT" width="39"> </td>
  </tr>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="320"> </TD>
    <TD ALIGN="LEFT" width="4"> </TD>
    <TD ALIGN="RIGHT" width="43">
      <hr noshade size="3" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT" width="20"> </TD>
    <TD ALIGN="RIGHT" width="43">
      <hr noshade size="3" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT" width="20"> </TD>
    <TD ALIGN="RIGHT" width="43">
      <hr noshade size="3" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT" width="20"> </TD>
    <TD ALIGN="RIGHT" width="48">
      <hr noshade size="3" width="80%" align="right">
    </TD>
    <TD ALIGN="LEFT" width="39"><font size="2">&lt;/R&gt;</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">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%.
&lt;R&gt;</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. It is not anticipated that FAM will waive its advisory fee
      or reimburse certain expenses with respect to Insured II, Insured III or
      Insured IV on an ongoing basis or with respect to the Combined Fund after
      the Reorganization. </font></td>
  </tr></TABLE>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;The foregoing Pro Forma 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.&lt;/R&gt;</font></td>
  </tr></TABLE><p></p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 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> <!-- *************************************************************************** -->
  <!-- MARKER LABEL="sheet: 10, page: 10" --> </p>
<p>
<font size="2">&lt;R&gt;</font>
<table width=600><tr>
    <td><font size=2><B>Example: &lt;/R&gt;</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><FONT SIZE="2">&lt;R&gt;&nbsp;&nbsp; <B>The example set forth
      above assumes that shares of common stock were purchased in the initial
      offerings and that  all dividends were reinvested 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>  &nbsp;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;&lt;/R&gt;</FONT></td>
  </tr></TABLE>
<p>&nbsp;</p><table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 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; <!-- *************************************************************************** -->
  <!-- MARKER LABEL="sheet: 11, page: 11" -->
<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> &lt;R&gt;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 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 $243,164,211.&lt;/R&gt;</font></TD>
  </TR></TABLE><p></P>

<P>
<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> &lt;R&gt;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 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 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>
<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>
      Each Fund is a non-diversified, leveraged, closed-end management investment
      company. 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. Each Fund 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 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 when
      due. Each Fund intends to invest primarily in long-term Municipal Bonds
      with a maturity of more than ten years. 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 temporary defensive periods. As of March
      31, 2000, the weighted average maturity of the portfolio of Insured II,
      Insured III and Insured IV was 21.72 years, 25.89 years and 24.29 years,
      respectively. The average maturity of each Fund&#146;s portfolio securities,
      and therefore each Fund&#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 Objective and Policies&#148; on page 22 of
      this Joint Proxy Statement and Prospectus.&lt;/R&gt;</FONT></TD>
  </TR></TABLE>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
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>&nbsp;</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"><I>&lt;R&gt;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 Joint Proxy Statement
      and Prospectus.</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>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 Joint 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></P>
<font size="1"> </font>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
  <TR VALIGN="BOTTOM">
    <TH align="left" width="241">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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="122" 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="middle">
    <TD ALIGN="left" width="241">&nbsp;</TD>
    <TD width="122">
      <hr size="1" noshade width="60%">
    </TD>
    <TD width="13">&nbsp;</TD>
    <TD width="102">
      <hr size="1" noshade width="35%">
    </TD>
    <TD width="1">&nbsp;</TD>
    <TD width="54">
      <hr width="30" size="1" noshade>
    </TD>
    <TD width="1">&nbsp;</TD>
    <TD colspan="2">
      <hr size="1" noshade width="100%">
    </TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="right" width="241">&nbsp;</TD>
    <TD ALIGN="center" width="122"><font size="2">May 18, 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">4.850</font></TD>
    <td align="LEFT" width="26"><font size="2">%</font></td>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="left" width="241">&nbsp;</TD>
    <TD ALIGN="center" width="122"><font size="2">May 17, 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">4.850</font></TD>
    <td align="LEFT" width="26"><font size="2">%</font></td>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="left" width="241">&nbsp;</TD>
    <TD ALIGN="center" width="122"><font size="2">May 16, 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">4.698</font></TD>
    <td align="LEFT" width="26"><font size="2">%</font></td>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="left" width="241">&nbsp;</TD>
    <TD ALIGN="center" width="122"><font size="2">May 17, 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">4.800</font></TD>
    <td align="LEFT" width="26"><font size="2">%</font></td>
  </TR>
</TABLE>

<font size="2">&lt;/R&gt;</font><font size=2> &nbsp;&nbsp;&nbsp; </font><br>
<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.&lt;R&gt;</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>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. Stuebe and
      Mr. DiMella. After the Reorganization, the portfolio of the Combined Fund
      will be managed by Mr. DiMella.&lt;/R&gt;</font></TD>
  </TR></TABLE><p></P>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
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>
<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>&lt;R&gt;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
      or 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;&lt;/R&gt;</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"><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>


<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>

<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"><font size="2">&lt;R&gt;</font></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="right" 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">$138,164,211</FONT></TD>
    <TD ALIGN="LEFT" width="44"><FONT SIZE="-1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD ALIGN="RIGHT" width="49"><FONT SIZE="-1">1.24</FONT></TD>
    <TD ALIGN="LEFT" width="38"><FONT SIZE="-1">%</FONT></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT" width="242">&nbsp;</TD>
    <TD ALIGN="LEFT" width="98"><b><FONT SIZE="-1">Insured III</FONT></b></TD>
    <TD ALIGN="LEFT" width="24"><FONT SIZE="-1">&nbsp;</FONT></TD>
    <TD ALIGN="center" width="105"><FONT SIZE="-1">$&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">$279,232,978</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"><font size="2">&lt;/R&gt;</font></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;<font size="2">&lt;R&gt;</font></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="right" width="240">&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">$243,164,211</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">$483,732,978</font></td>
    <td align="LEFT" width="44"><font size="-1">&nbsp;</font></td>
    <td align="RIGHT" width="49"><font size="2">0.68</font></td>
    <td align="LEFT" width="38"><font size="-1">%</font></td>
  </tr>
</TABLE>
<table width=600>
  <tr>
    <td width="234"><font size="2">&lt;/R&gt;</font></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>

<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>

<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>&lt;R&gt;However, no assurance can be given that
      a secondary market will develop, or, if it does develop, that it will provide
      holders with a liquid trading market for the AMPS of any of the Funds.&lt;/R&gt; </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"><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>


<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>

<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>&lt;R&gt;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 &#151; &#147;Ratings of Municipal Bonds.&#148;&lt;/R&gt;</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><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>

<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>

<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>

<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>

<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>

<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></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> &lt;R&gt;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
      of Reorganization &#151; Tax Consequences of the Reorganization.&#148;&lt;/R&gt;</font></TD>
  </TR></TABLE><p></P>

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

<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">&lt;R&gt;&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.&lt;/R&gt;</FONT></td>
  </tr></TABLE><p></p>

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

<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>

<p><table width=600><tr>
    <td><font size=2>&lt;R&gt;&nbsp;&nbsp;The portfolio management strategies
      of the Funds are substantially similar. 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.&lt;/R&gt;</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>

<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>

<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>

<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>

<p><table width=600><tr>
    <td><font size=2>&lt;R&gt;&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. The Funds do not, however, intend to enter into
      options and futures transactions for speculative purposes. The Funds are
      not required to hedge their respective portfolios and may choose not to do
      so. The Funds cannot guarantee that any hedging strategies they use will
      work.&lt;/R&gt;</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>

<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>

<p><table width=600><tr>
    <td><FONT SIZE="2">&lt;R&gt;&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 Ernst &amp; Young <font size="1">LLP</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 <br>
        Six Months Ended <br>
        March 31, 2000 </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 valign="BOTTOM">
    <td align="LEFT">&nbsp;</td>
    <td align="LEFT">&nbsp;</td>
    <td align="center" valign="top"><font size="1"><b>(Unaudited)</b></font></td>
    <td align="LEFT">&nbsp;</td>
    <td align="center" colspan="2">&nbsp;</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="right"><font size="2">&nbsp;$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.72</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="right"><font size="2">&nbsp;.57</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="right"><font size="2">(.18</font></td>
    <td align="LEFT"><font size="2">)</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="right"><font size="2">&nbsp;.39</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="right"><font size="2">(.39</font></td>
    <td align="LEFT"><font size="2">)</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 to
      Common Stock shareholders</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">(.39</font></td>
    <td align="LEFT"><font size="2">)</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="right"><font size="2">&nbsp;&#151;</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="right"><font size="2">&nbsp;(.18</font></td>
    <td align="LEFT"><font size="2">)</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="right"><font size="2">&nbsp;&#151;</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="right"><font size="2">(.18&nbsp;</font></td>
    <td align="LEFT"><font size="2">)</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="right"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.54&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.72</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Market price per share, end of period</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;&nbsp;&nbsp;10.5625 </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="right"><font size="2">(8.81</font></td>
    <td align="LEFT"><font size="2">%)#</font><font size="1"> </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="right"><font size="2">&nbsp;2.14</font></td>
    <td align="LEFT"><font size="2">%#</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="right"><font size="2">&nbsp;1.15</font></td>
    <td align="LEFT"><font size="2">%*</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="right"><font size="2">&nbsp;1.42</font></td>
    <td align="LEFT"><font size="2">%*</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="right"><font size="2">&nbsp;9.39</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="right"><font size="2">&nbsp;2.99</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="right"><font size="2">&nbsp;6.40</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="right"><font size="2">&nbsp;.64</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="right"><font size="2">&nbsp;.79</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="right"><font size="2">&nbsp;5.24</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 valign="BOTTOM">
    <td align="LEFT" 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="right"><font size="2">&nbsp;3.77</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="right"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;138,164</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;139,929</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Preferred Stock outstanding, end of
      period (in thousands)</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;105,000</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="right"><font size="2">&nbsp;103.65</font></td>
    <td align="LEFT"><font size="2">%</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 $1,000</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,316</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,333</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2"><b>&nbsp;Dividends Per Share on Preferred
      Stock Outstanding:</b></font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">&nbsp;</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Series A &#151; Investment income &#151;
      net</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;477</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="RIGHT"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;443</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="6">
      <hr color="Black" size="1">
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT"><font size="2">&nbsp;Series B &#151; Investment income &#151;
      net</font></td>
    <td align="LEFT"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      480</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 size="1">&lt;/R&gt;</font></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>

<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="75%" align="left" valign="top"><font size="2">&lt;R&gt;</font></th>
    <th width="4%">&nbsp;</th>
    <th width="14%"><font size="-1"><b><font size="1">For the Period<br>
      May 28, 1999&#134; To<br>
      October 31, 1999<br>
      (Unaudited) </font></b></font></th>
    <th width="7%">&nbsp;</th>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td width="75%" 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="14%" align="right">&nbsp;</td>
    <td width="7%" align="LEFT"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="75%"><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="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="7%"><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="75%"><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="right" width="14%"><font size="-1">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.00</font></td>
    <td align="LEFT" width="7%"><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="75%"><font size="-1">&nbsp;Investment income &#151;
      net</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">&nbsp;.51</font></td>
    <td align="LEFT" width="7%"><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="75%"><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="right" width="14%"><font size="-1">&nbsp;(2.45</font></td>
    <td align="LEFT" width="7%"><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="75%"><font size="-1">&nbsp;Total from investment operations</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">&nbsp;(1.94</font></td>
    <td align="LEFT" width="7%"><font size="-1">)</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="75%"><font size="-1">&lt;R&gt;&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="right" width="14%"><font size="-1">&nbsp;(.30</font></td>
    <td align="LEFT" width="7%"><font size="-1">)</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="75%"><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="right" width="14%"><font size="-1">&nbsp;(.03</font></td>
    <td align="LEFT" width="7%"><font size="-1">)</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="75%"><font size="-1">&lt;R&gt;Effect of Preferred
      Stock activity:&#134;&#134;&lt;/R&gt;</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="7%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="75%"><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="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="7%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="75%"><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="right" width="14%"><font size="-1">&nbsp;(.12</font></td>
    <td align="LEFT" width="7%"><font size="-1">)</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="75%"><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="right" width="14%"><font size="-1">&nbsp;(.10</font></td>
    <td align="LEFT" width="7%"><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="75%"><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="right" width="14%"><font size="-1">&nbsp;(.22</font></td>
    <td align="LEFT" width="7%"><font size="-1">)</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="75%"><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="right" width="14%"><font size="-1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.51</font></td>
    <td align="LEFT" width="7%"><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="75%"><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="right" width="14%"><font size="-1">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.00</font></td>
    <td align="LEFT" width="7%"><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="75%"><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="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="7%"><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="75%"><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="right" width="14%"><font size="-1">&nbsp;(18.08</font></td>
    <td align="LEFT" width="7%"><font size="-1">%)#</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="75%"><font size="-1">&nbsp;Based on net asset value
      per share </font></td>
    <td align="LEFT" width="4%">&nbsp;</td>
    <td align="right" width="14%"><font size="2">(14.60</font></td>
    <td align="LEFT" width="7%"><font size="-1">%)#</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="75%"><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="14%">&nbsp;</td>
    <td align="LEFT" width="7%">&nbsp;</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="75%"><font size="-1">&nbsp;Total expenses, net of
      reimbursement***</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">&nbsp;.34</font></td>
    <td align="LEFT" width="7%"><font size="-1">%*</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="75%"><font size="-1">&nbsp;Total expenses***</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">1.27&nbsp;</font></td>
    <td align="LEFT" width="7%"><font size="-1">%*</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="75%"><font size="-1">&nbsp;Total investment income
      &#151; net***</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">8.79</font></td>
    <td align="LEFT" width="7%"><font size="-1">%*</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="75%"><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="right" width="14%"><font size="-1">&nbsp;2.04</font></td>
    <td align="LEFT" width="7%"><font size="-1">%*</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="75%"><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="right" width="14%"><font size="-1">&nbsp;&nbsp;6.75</font></td>
    <td align="LEFT" width="7%"><font size="-1">%*</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="75%"><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="right" width="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="7%"><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="75%"><font size="-1">&nbsp;Total expenses, net of
      reimbursement</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">&nbsp;.21</font></td>
    <td align="LEFT" width="7%"><font size="-1">%*</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="75%"><font size="-1">&nbsp;Total expenses</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">.78</font></td>
    <td align="LEFT" width="7%"><font size="-1">%*</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="75%"><font size="-1">&nbsp;Total investment income
      &#151; net</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">&nbsp;5.37</font></td>
    <td align="LEFT" width="7%"><font size="-1">%*</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="75%"><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="14%">&nbsp;</td>
    <td align="LEFT" width="7%"><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="75%"><font size="-1">&nbsp;Dividends to Preferred
      Stock shareholders</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">3.21</font></td>
    <td align="LEFT" width="7%"><font size="-1">%*</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="75%"><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="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="7%"><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="75%"><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="right" width="14%"><font size="-1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;85,166</font></td>
    <td align="LEFT" width="7%"><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="75%"><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="right" width="14%"><font size="-1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;67,850</font></td>
    <td align="LEFT" width="7%"><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="75%"><font size="-1">&nbsp;Portfolio turnover</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">&nbsp;42.13</font></td>
    <td align="LEFT" width="7%"><font size="-1">%</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="75%"><font size="-1">&nbsp;<b>Leverage:</b></font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="14%">&nbsp;</td>
    <td align="LEFT" width="7%"><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="75%"><font size="-1">&nbsp;Asset coverage per $1,000</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,255</font></td>
    <td align="LEFT" width="7%"><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="75%"><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="14%"><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="7%"><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="75%"><font size="-1">&nbsp;Investment income &#151;
      net</font></td>
    <td align="LEFT" width="4%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;301</font></td>
    <td align="LEFT" width="7%"><font size="-1">&nbsp;&lt;/R&gt;</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 </font> <font size="1">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
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;













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<!-- 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>

<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%" align="left"><font size="2">&lt;R&gt;</font></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 February 29, 2000<br>
        (Unaudited) </font></b> </p>
    </th>
    <th width="3%">&nbsp;</th>
  </tr>
  <tr valign="BOTTOM">
    <th colspan="4" height="18">&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="right"><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="right" 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" width="81%"> <font size="2"> &nbsp;Net asset value, beginning
      of period</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">$ &nbsp;&nbsp;15.00&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="right" width="14%"><font size="-1">.52&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="right" width="14%"><font size="-1">(.37</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="right" width="14%"><font size="-1">.15&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="2">Less dividends to Common Stock
      shareholders from investment income &#151; net</font></td>
    <td align="LEFT" width="2%">&nbsp;</td>
    <td align="right" width="14%"><font size="-1">(.31</font></td>
    <td align="LEFT" width="3%"><font size="2">)</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="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="right" width="14%"><font size="-1">(.04</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="right" 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;Dividends to Preferred Stock shareholders:</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%">&nbsp;</td>
    <td align="LEFT" width="3%">&nbsp;</td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;&nbsp;&nbsp;Investment
      income &#151; net</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">(.12</font></td>
    <td align="LEFT" width="3%"><font size="2">)</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;&nbsp;&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="right" width="14%"><font size="2">(.12</font></td>
    <td align="LEFT" width="3%"><font size="-1">)</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="right" width="14%"><font size="-1">(.24</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="right" width="14%"><font size="-1">$&nbsp;&nbsp;14.56&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="right" width="14%"><font size="-1">$12.875&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="right" 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="right" width="14%"><font size="-1">(12.06</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="right" width="14%"><font size="-1">(.55</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="right" 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="right" width="14%"><font size="-1">.59</font></td>
    <td align="LEFT" width="3%"><font size="-1">%*</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="right" width="14%"><font size="-1">1.49</font></td>
    <td align="LEFT" width="3%"><font size="-1">%*</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="right" width="14%"><font size="-1">9.21</font></td>
    <td align="LEFT" width="3%"><font size="-1">%*</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="right" width="14%"><font size="-1">2.09</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="right" width="14%"><font size="-1">7.12</font></td>
    <td align="LEFT" width="3%"><font size="-1">%*</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="right" height="16" width="14%">&nbsp;</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" width="81%"><font size="-1">Total expenses, net of reimbursement</font><font size="-1">&nbsp;</font><font size="-1"></font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">.35</font></td>
    <td align="LEFT" width="3%"><font size="-1">%*</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="right" width="14%"><font size="-1">.88</font></td>
    <td align="LEFT" width="3%"><font size="-1">%*</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><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">5.46</font></td>
    <td align="LEFT" width="3%"><font size="-1">%*</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="right" 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;&nbsp;Dividends to Preferred
      Stock shareholders</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font><font size="-1">&nbsp;</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">3.04</font></td>
    <td align="LEFT" width="3%"><font size="-1">%*</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="right" 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="right" width="14%"><font size="-1">$50,102</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="right" width="14%"><font size="-1">$31,650</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="right" width="14%"><font size="-1">43.63</font></td>
    <td align="LEFT" width="3%"><font size="-1">%</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="right" 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="right" width="14%"><font size="-1">$2,583</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;<b>Dividends Per Share
      on Preferred Stock Outstanding:</b></font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%">&nbsp;</td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;</font></td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" colspan="4">
      <hr color="Black" size="1" noshade>
    </td>
  </tr>
  <tr valign="BOTTOM">
    <td align="LEFT" width="81%"><font size="-1">&nbsp;Investment income &#151;
      net</font></td>
    <td align="LEFT" width="2%"><font size="-1">&nbsp;</font></td>
    <td align="right" width="14%"><font size="-1">$ 319</font></td>
    <td align="LEFT" width="3%"><font size="-1">&nbsp;&lt;/R&gt;</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.&lt;R&gt;</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.&lt;/R&gt;</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>

<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" width="95%">
    </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"><font size="1">&lt;R&gt;</font></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">&lt;/R&gt;</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></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" width="95">
    </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="left" WIDTH="74"><font size="1">&lt;R&gt;</font></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> )%&lt;/R&gt;</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></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" width="95">
    </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"><font size="1">&lt;R&gt;</font></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" height="18"> <FONT SIZE=2> March 31, 2000##</FONT></TD>
    <TD VALIGN="TOP" WIDTH="24" height="18">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="42" height="18"> <FONT SIZE=2> $12.875</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18" height="18">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="39" height="18"> <FONT SIZE=2> $12.1875</FONT></TD>
    <TD VALIGN="TOP" WIDTH="16" height="18">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="41" height="18"> <FONT SIZE=2> $15.15</FONT></TD>
    <TD VALIGN="TOP" WIDTH="27" height="18">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="33" height="18"> <FONT SIZE=2> $14.59</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18" height="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="35" height="18"> <FONT SIZE=2> (12.97</FONT></TD>
    <TD VALIGN="bottom" WIDTH="16" height="18"> <FONT SIZE=2> )%</FONT></TD>
    <TD VALIGN="TOP" WIDTH="18" height="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="42" height="18"> <FONT SIZE=2> (17.33</FONT></TD>
    <TD VALIGN="bottom" WIDTH="87" height="18"> <FONT SIZE=2> )%&lt;/R&gt;</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>&lt;R&gt;&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.&lt;/R&gt;</font></td>
  </tr></TABLE><p></p>

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

<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>&lt;R&gt;&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 at maturity 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. For
      purposes of each Fund&#146;s investment objective and policies. Non-Municipal
      Tax-Exempt Securities that pay interest that is exempt from Federal income
      tax are considered &#147;Municipal Bonds.&#148; </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 Bonds 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;&lt;/R&gt;</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 </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">
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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<p><table width=600><tr>
    <td><font size=2>payment of the unpaid principal balance plus accrued interest
      on the Participating VRDOs from the financial 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>

<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>&lt;R&gt;&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 Joint 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.&lt;/R&gt;</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
      </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">
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>it meets certain requirements of the insurance company set
      forth in a Policy. In the event interest or principal on 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>

<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>&lt;R&gt;&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 Joint 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 Joint Proxy Statement and Prospectus, Non-Municipal
      Tax-Exempt Securities that pay interesr that is exempt from Federal income
      tax will be considered Municipal Bonds.&lt;/R&gt;</font></td>
  </tr></TABLE><p></p>

<p>
<p></p>

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

<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 </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">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.<br>
      <br>
      &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 </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>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.<br>
      <br>
      &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</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> 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.<br>
      <br>
      &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>
<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">
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>&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 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>

<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>

<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>

<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>

<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>

<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>

<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>

<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>
<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">
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><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;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 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>

<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>

<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>

<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>

<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 </font></td>
  </tr></TABLE><p></p>

<p>
<p></p>

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













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









<p>
<table width=600>
  <tr>
    <td><font size=2>composition and asset coverage that supplement (and in some
      cases are more restrictive than) the applicable requirements under the Investment
      Company Act.<br>
      <br>
      &lt;R&gt;&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
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;&lt;/R&gt;</font></td>
  </tr></TABLE><p></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>

<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.&nbsp;&lt;R&gt;</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"><font size="2">&nbsp;&nbsp;&nbsp;</font>&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" align="center"> <font size="2">&nbsp;6</font>
      <hr noshade size="1" width="30%">
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106" align="center"> <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;23,531</font>
      <hr noshade size="1" width="45%">

    </td>
    <td valign="TOP" width="28">

    </td>
    <td valign="TOP" width="86" align="center"> <font size="2">&nbsp;9.9</font>
      <hr noshade size="1" width="50%" align="center">

    </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"><font size="2">Total</font></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>
      <hr noshade size="3" width="30%">
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106" align="center"><font size="2">&nbsp;238,418</font>
      <hr noshade size="3" width="45%">
    </td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td valign="TOP" width="86" align="center"><font size="2">&nbsp;&nbsp;&nbsp;100.0%&nbsp;</font>
      <hr noshade size="3" width="50%" align="center">
      <font size="2">&nbsp;&nbsp;&nbsp;</font></td>
  </TR>
</TABLE>


<font size="2">&lt;/R&gt;</font>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

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

<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.&nbsp;&lt;R&gt;</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"><font size="2">&nbsp;</font>&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" align="center">
      <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;&nbsp;&nbsp;3,987&nbsp;&nbsp;</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" align="center"> <font size="2">&nbsp;&nbsp;1</font>
      <hr noshade size="1" width="30%">

    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106" align="center"> <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,068</font>
      <hr noshade size="1" width="45%">
    </td>
    <td valign="TOP" width="28">

    </td>
    <td valign="TOP" width="86" align="center"> <font size="2">2.0</font>
      <hr noshade size="1" width="50%" align="center">

    </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"><font size="2">Total</font></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>
      <hr noshade size="3" width="30%">
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106" align="center"><font size="2">&nbsp;153,789</font>
      <hr noshade size="3" width="45%">
    </td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td valign="TOP" width="86" align="center"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;100.0%</font>
      <hr noshade size="3" width="50%" align="center">
      <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
</TABLE>
<font size="2">&lt;/R&gt;</font>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">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;













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<!-- 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>

<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.&nbsp;&lt;R&gt;</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;</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">35</font></div>
    </td>
    <td valign="TOP" width="29">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" width="106" align="center">
      <div align="center"><font size="2">$77,555</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;94.8%</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" align="center"> <font size="2">&nbsp;&nbsp;3</font>
      <hr noshade size="1" width="30%">

    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106" align="center"> <font size="2">&nbsp;&nbsp;&nbsp;4,285</font>
      <hr noshade size="1" width="45%">

    </td>
    <td valign="TOP" width="28">

    </td>
    <td valign="TOP" width="86" align="center"> <font size="2">5.2</font>
      <hr noshade size="1" width="50%" align="center">

    </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"><font size="2">Total</font></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">38</font>
      <hr noshade size="3" width="30%">
    </td>
    <td valign="TOP" width="29">&nbsp;</td>
    <td valign="TOP" width="106" align="center"><font size="2">$81,840</font>
      <hr noshade size="3" width="45%">
    </td>
    <td valign="TOP" width="28">&nbsp;</td>
    <td valign="TOP" width="86" align="center"><font size="2">100.0%</font>
      <hr noshade size="3" width="50%" align="center">
    </td>
  </TR>
</TABLE>

<font size="2">&lt;/R&gt;</font>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

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


<font size="2">&lt;R&gt;</font>
<TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="bottom" align="center" WIDTH="126"><b></b>

    </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="bottom" WIDTH="126" align="center"><b><font size="1">Insured II </font></b></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="bottom" WIDTH="51" align="right">&nbsp; </TD>
    <TD VALIGN="bottom" WIDTH="165" align="center"><font size="2"><b>103.65%</b></font></TD>
    <TD VALIGN="bottom" 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">
      </font></b>

    </td>
    <td valign="TOP" width="50">&nbsp;</td>
    <td valign="bottom" align="center" width="155"> <b><font size="1"> </font></b></td>
    <td valign="bottom" width="51" align="right">&nbsp;</td>
    <td valign="bottom" align="center" width="165"><b><font size="1">Period May
      28, 1999&#134;<br>
      to October 31, 1999<br>
      (Unaudited) </font> </b>
      <hr noshade size="1">
    </td>
    <td valign="bottom" align="center" width="51">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="126" align="center"><b><font size="1">Insured III </font></b></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="bottom" width="165" align="center"><font size="2"><b>42.13%</b></font></td>
    <td valign="bottom" 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">
      </font></b>

    </td>
    <td valign="TOP" width="50">&nbsp;</td>
    <td valign="bottom" align="center" width="155"> <b><font size="1"> </font></b></td>
    <td valign="bottom" width="51" align="right">&nbsp;</td>
    <td valign="bottom" align="center" width="165"><b><font size="1">Period September
      24, 1999&#134;<br>
      to February 29, 2000<br>
      (Unaudited) </font> </b>
      <hr noshade size="1">
    </td>
    <td valign="bottom" align="center" width="51">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="126" align="center"><b><font size="1">Insured IV </font></b></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="bottom" width="165" align="center"><font size="2"><b>43.63%</b></font></td>
    <td valign="bottom" width="51"><font size="2">&lt;/R&gt;</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">&#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>

<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>

<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="left"><font size="2">&lt;R&gt;</font></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" align="right">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="85">
      <P><font size="2">May 18, 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">4.850</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">May 17, 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">4.850</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">May 16, 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">4.698</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">May 17, 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">4.800</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="22">
      <P><font size="2">%</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="106"><font size="2">&lt;/R&gt;</font></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>

<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>&lt;R&gt;&nbsp;&nbsp;In
addition, the Charter of each Fund requires the favorable vote of the holders of
at least 66<font size=1><sup>2</sup>/3</font>% 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:&lt;/R&gt;</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>

<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">&lt;R&gt;&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, see 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. Stuebe 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 Stuebe
      is contained in Appendix I to this Joint Proxy Statement and Prospectus.</font></td>
  </tr></TABLE><p></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
      $560 billion in investment company and other portfolio assets under management
      (approximately $35.4 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.&lt;/R&gt;</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>

<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>

<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>

<p><table width=600><tr>
    <td><font size=2>&lt;R&gt;&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 elects otherwise, all dividends
      and 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.&lt;/R&gt;</font></td>
  </tr></TABLE><p></p>

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

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









<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>

<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>

<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>

<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>

<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>

<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></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>
<br>
<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>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="47"></a>&lt;R&gt;Terms of the 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;The following is a summary
      of the significant terms of the Agreement and Plan. This summary is qualified
      in its entirety by reference to the Agreement and Plan, attached hereto
      as Appendix II.&lt;/R&gt;</font></td>
  </tr>
</TABLE>
<p></p>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
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>
<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.<br>
      <br>
      &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 </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">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>

<p><table width=600><tr>
    <td><font size=2>&lt;R&gt;&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 their
      similar portfolios of Municipal Bonds. The Boards also considered the relative
      tax positions of the portfolios of the Funds. As of March 31, 2000, each
      Fund had net realized capital losses; Insured II and Insured III had significant
      realized capital losses that will be shared by the stockholders of the Combined
      Fund. Please see &#147;Pro Forma Combined Statement of Assets and Liabilities.&#148;
      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 another 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).&lt;/R&gt;</font></td>
  </tr></TABLE><p></p>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
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>
<p></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"><font size=2>&lt;R&gt;</font></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> $138,164,211
      </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> $279,232,978
      </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="bottom" WIDTH="88"><font size=2>&lt;/R&gt;</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">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"><font size=2>&lt;R&gt;</font></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="bottom" 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> $243,164,211</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> $483,732,978</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="bottom" width="88"><font size=2>&lt;/R&gt;</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">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>
<br>
<table width=600>
  <tr>
    <td><font size=2>&lt;R&gt;&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 potential benefits discussed above.</font></td>
  </tr>
</TABLE>
<p></p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&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 $0.02 as a result of the estimated
      costs of the Reorganization, management of each Fund advised &lt;/R&gt;</font></td>
  </tr>
</TABLE>
<p></p>

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

<p><table width=600><tr>
    <td> <font size="2">&lt;R&gt;its Board that it expects that such costs would
      be recovered within approximately six months to two years after the Exchange
      Date due to the anticipated  decrease in the operating expense ratio of the Combined Fund.&lt;/R&gt;<br>
      <br>
      &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">&lt;R&gt;&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.&lt;/R&gt;</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>
<br>
<table width=601>
  <tr>
    <td><font size=2><b><a name="51"></a>Tax Consequences of the Reorganization<br>
      <br>
      <br>
      </b>&lt;R&gt;&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 &lt;/R&gt;</font></td>
  </tr>
</TABLE>
<p></p>

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

<p><table width=600><tr>
    <td><FONT SIZE="2"> &lt;R&gt;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.&lt;/R&gt;</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>
<br>
<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>

<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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<!-- MARKER LABEL="sheet: 54, page: 54" -->









<p>
<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></p>


<TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="TOP" WIDTH="165"><font size="2">&lt;R&gt;</font></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="bottom" 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">$138,164,211</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="bottom" WIDTH="52" align="right"><font size="2">(2,224,577 </font></TD>
    <TD VALIGN="bottom" WIDTH="14" align="left"><font size="2">)</font></TD>
    <TD VALIGN="bottom" WIDTH="73" align="right"><font size="2">$277,008,401 </font></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="bottom" WIDTH="73" align="right"><font size="2">$204,500,000 </font></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="bottom" WIDTH="73" align="right">&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="bottom" WIDTH="52" align="right"><font size="2">996,507</font></TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="73" align="right"><font size="2">22,260,375</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">&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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.15</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P><font size="2">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="73" align="right"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.44</font></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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P><font size="2">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="14">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="73">
      <P><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 11,244,656 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 expensesof $335,400 and distribution of undistributed
      net investment income of $919,091 for Insured II, $618,541 for Insured III
      and $351,572 for Insured IV.&lt;/R&gt;</font></td>
  </tr></TABLE>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
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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<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></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>&lt;R&gt;&nbsp;&nbsp;The Meetings will be held on June 27,
      2000 at the offices of Fund Asset Management, L.P., 800 Scudders Mill Road,
      Plainsboro, New Jersey at the times listed on Appendix I to this Joint Proxy
      Statement and Prospectus.&lt;/R&gt;</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>&lt;R&gt;&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 Joint Proxy Statement and Prospectus.&lt;/R&gt;</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>&lt;R&gt;&nbsp;&nbsp;As of the Record Date, the
      Directors and officers of Insured IV as a group (13 persons) owned an aggregate
      of less than 1% of the outstanding shares of Insured IV Common Stock and
      owned no Insured IV AMPS.&lt;/R&gt;</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 proxies may propose one or more adjournments of a Meeting to permit
      further solicitation of proxies from </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">
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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<p><table width=600><tr>
    <td><font size=2>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></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>

<p><table width=600><tr>
    <td><font size=2>&lt;R&gt;&nbsp;&nbsp;The expenses of preparation, printing
      and mailing of the enclosed form of proxy, the accompanying Notice and this
      Joint 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.&lt;/R&gt;</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>&lt;R&gt;&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 the Funds of approximately $7,500, plus aggregate out-of-pocket expenses
      of approximately $12,000.&lt;/R&gt;</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,
      including Merrill Lynch, will not be permitted to grant voting authority
      without instructions with respect to the </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">
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>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>

<p><table width=600><tr>
    <td><font size=2>&lt;R&gt;&nbsp;&nbsp;This
Joint Proxy Statement and Prospectus does not contain all of the information set forth
in the registration statement and the exhibits relating thereto that 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.&lt;/R&gt;</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>

<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>

<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>

<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>

<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>

<p><table width=600><tr>
    <td><font size=2>&lt;R&gt;&nbsp;&nbsp;Ernst &amp; Young LLP, 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 Joint Proxy Statement and Prospectus. The financial statements and
      financial highlights of Insured II are included in reliance upon their 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;Ernst &amp; Young LLP will serve
      as the independent auditors for the Combined Fund after the Reorganization.
      The principal business address of Ernst &amp; Young LLP is 99 Wood Avenue
      South, Iselin, New Jersey 08830-0471.&lt;/R&gt;</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>

<p><table width=600><tr>
    <td><font size=2>&lt;R&gt;&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.&lt;/R&gt;</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>

<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>

<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>
<font size=2>&lt;R&gt;</font>
<table width=600><tr><td><font size=2>Plainsboro, New Jersey<BR>
      Dated: May 24, 2000 &lt;/R&gt;</font></td>
  </tr></TABLE><p></p>


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


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<p>
<table width=600>
  <tr>
    <td  align=center><font size="2"><b><u><a name="f1"></a></u>INDEX TO FINANCIAL
      STATEMENTS</b></font></td>
  </tr>
</TABLE>
<p></p>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="532"><font size="2">&lt;R&gt;</font></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</font></b></font>
    </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"></td>
    <td valign="TOP" width="42">
      <p align="center"><font size="2">&nbsp;&nbsp;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-12</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 October 31, 1999</font>
    </td>
    <td valign="TOP" width="26">&nbsp;</td>
    <td valign="TOP" width="42">
      <p align="center"><font size="2">F-23</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 February 29,
        2000</font>
    </td>
    <td valign="TOP" width="26">&nbsp;</td>
    <td valign="TOP" width="42">
      <p align="center"><font size="2">F-35</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-44</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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<p>&nbsp;
<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>
<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></p>
<hr size=5 noshade width=600 align=LEFT><p>&nbsp;




















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<pre>

                          MuniHoldings Insured Fund II, Inc., September 30, 1999


REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors,
MuniHoldings Insured Fund II, Inc.:

We have audited the accompanying statement of assets, liabilities
and capital of MuniHoldings Insured Fund II, Inc., including the
schedule of investments, as of September 30, 1999, and the related
statements of operations and changes in net assets, and financial
highlights for the period from February 26, 1999 (commencement of
operations) to September 30, 1999. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements
and financial highlights. Our procedures included confirmation of
securities owned as of September 30, 1999, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of MuniHoldings Insured Fund II, Inc. at
September 30, 1999, the results of its operations, the changes in
its net assets, and the financial highlights for the period from
February 26, 1999 to September 30, 1999 in conformity with generally
accepted accounting principles.

Ernst & Young LLP
MetroPark, New Jersey
October 22, 1999


                                      F-3

</pre>





















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<pre>

                                                                 MuniHoldings Insured Fund II, Inc., September 30, 1999
SCHEDULE OF INVESTMENTS                                                                                   (in Thousands)

                S&P      Moody's   Face                                                                          Value
STATE         Ratings    Ratings  Amount    Issue                                                              (Note 1a)

Alabama--3.0%   AAA       NR*     $ 8,570   Jefferson County, Alabama, Sewer Revenue Bonds, RIB, Series 124,
                                            6.62% due 2/01/2036 (b)(e)                                         $   7,225

California      AAA       Aaa       8,000   California State, GO, 5% due 10/01/2023 (d)                            7,215
- --17.3%         BBB       NR*       2,500   Contra Costa County, California, Public Financing Authority,
                                            Tax Allocation Revenue Refunding Bonds (Pleasant Hill Bart Etc.
                                            Redevelopment), 5.25% due 8/01/2028                                    2,201
                AAA       Aaa      15,000   Los Angeles, California, Unified School District, GO, Series A,
                                            5% due 7/01/2021 (b)                                                  13,630
                AAA       Aaa      10,000   San Francisco, California, City and County Airport Commission,
                                            International Airport Revenue Bonds, Second Series, Issue 15-B,
                                            4.50% due 5/01/2028 (d)                                                8,124
                AAA       NR*       2,000   Santa Clara, California, Unified School District, GO, 5% due
                                            8/01/2022 (b)                                                          1,810
                AAA       Aaa      10,000   University of California, Revenue Refunding Bonds (Multiple
                                            Purpose Projects), Series E, 5.125% due 9/01/2020 (d)                  9,291

Connecticut     NR*       Baa3      8,500   Mashantucket Western Pequot Tribe, Connecticut, Special Revenue
- --3.2%                                      Refunding Bonds, Sub-Series B, 5.75% due 9/01/2027                   7,899

Florida--2.7%   AAA       Aaa       5,000   Lake County, Florida, School Board, COP, 5% due 7/01/2023 (d)          4,470
                NR*       Aaa       2,500   Orange County, Florida, School Board, COP, RIB, Series 130,
                                            6.36% due 8/01/2023 (d)(e)                                             2,147

Georgia--1.7%   AAA       Aaa       4,500   Metropolitan Atlanta, Georgia, Rapid Transit Authority, Sales
                                            Tax Revenue Bonds, Second Indenture, Series B, 5.10% due
                                            7/01/2020 (d)                                                          4,127

Hawaii--4.1%    AAA       Aaa      10,000   Hawaii State, GO, Series CT, 5.875% due 9/01/2018 (c)                 10,106

Illinois--8.5%  AAA       Aaa      10,000   Chicago, Illinois, Board of Education, GO (Chicago School
                                            Reform), Series A, 5.25% due 12/01/2022 (a)                            9,148
                AAA       Aaa       3,400   Chicago, Illinois, Skyway Toll Bridge Revenue Refunding Bonds,
                                            5.50% due 1/01/2023 (d)                                                3,237
                AAA       Aaa       5,000   Illinois Development Finance Authority, PCR, Refunding (Illinois
                                            Power Company Project), Series A, 5.40% due 3/01/2028 (d)              4,612
                AAA       Aaa       4,000   Melrose Park, Illinois, Water Revenue Bonds, Series A, 5.20%
                                            due 7/01/2018 (d)                                                      3,697

Indiana--3.7%   AAA       NR*       9,280   Shelbyville, Indiana, Elementary School Building Corporation
                                            Revenue Bonds (First Mortgage), 5.75% due 1/15/2022 (c)                9,142

Massachusetts   AAA       Aaa       8,635   Massachusetts Bay Transportation Authority, Massachusetts,
- --3.1%                                      Revenue Refunding Bonds (General Transportation System),
                                            Series B, 5% due 3/01/2028 (d)                                         7,548

Mississippi     BBB-      Ba1       3,550   Mississippi Business Finance Corporation, Mississippi, PCR,
- --1.3%                                      Refunding (System Energy Resources Inc. Project), 5.90%
                                            due 5/01/2022                                                          3,286

New Jersey      AAA       Aaa       3,595   New Jersey EDA, Revenue Bonds (Transportation Project Sub-Lease),
- --3.0%                                      Series A, 5% due 5/01/2008 (c)                                       3,617
                AAA       Aaa       3,800   New Jersey State Housing and Mortgage Finance Agency, Revenue
                                            Refunding Bonds (Home Buyer), AMT, Series AA, 5.90% due
                                            10/01/2029 (d)                                                         3,758

New York                                    Long Island Power Authority, New York, Electric System Revenue
- --18.5%                                     Refunding Bonds, Series A:
                AAA       Aaa      15,000     5.125% due 12/01/2022 (c)                                           13,650

                                       F-4

</pre>










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<pre>
                AAA       Aaa      10,000     5.50% due 12/01/2029 (d)                                             9,574
                AAA       Aaa       5,500   Metropolitan Transportation Authority, New York, Dedicated Tax
                                            Fund Revenue Bonds, Series A, 5% due 4/01/2023 (b)                     4,901
                AAA       Aaa      10,000   Nassau Health Care Corporation, New York, Health System Revenue
                                            Bonds, 5.75% due 8/01/2022 (c)                                         9,899
                AAA       Aaa       7,500   Port Authority of New York and New Jersey, Consolidated Revenue
                                            Bonds, AMT, 119th Series, 5.50% due 9/15/2016 (b)                      7,378

Ohio--3.9%      BBB+      Baa2      5,000   Ohio State Solid Waste Disposal Revenue Bonds (USG Corporation
                                            Project), AMT, 5.60% due 8/01/2032                                     4,504
                AAA       Aaa       5,260   Ohio State Water Development Authority Revenue Bonds (Water
                                            Development-Community Assistance), 5.375% due 12/01/2024 (a)           5,012

Pennsylvania    NR*       Aaa       4,015   Beaver County, Pennsylvania, GO, Refunding, 5.15% due
- --8.2%                                      10/01/2017 (d)                                                       3,746
                NR*       Aaa       5,600   Lycoming County, Pennsylvania, College Authority Revenue
                                            Bonds (Pennsylvania College of Technology), 5.25% due
                                            7/01/2018 (d)                                                          5,281
                AAA       Aaa       5,450   Pennsylvania State Turnpike Commission, Oil Franchise Tax
                                            Revenue Refunding Bonds, Senior Series A, 4.75% due 12/01/2027 (a)     4,535
                AAA       Aaa       7,500   Philadelphia, Pennsylvania, GO, 5% due 5/15/2025 (d)                   6,622

Rhode                                       Providence, Rhode Island, Public Building Authority, General
Island--2.3%                                Revenue Bonds (School and Public Facilities Projects),
                                            Series A (a):
                AAA       Aaa       2,785     5.25% due 12/15/2017                                                 2,632
                AAA       Aaa       1,435     5.25% due 12/15/2018                                                 1,350
                AAA       Aaa       1,855     5.25% due 12/15/2019                                                 1,736

Tennessee       AAA       Aaa       7,000   Harpeth Valley, Tennessee, Davidson and Williamson Counties
- --2.5%                                      Utilities District, Utilities Improvement Revenue Bonds, 5%
                                            due 9/01/2028 (d)                                                      6,157

Texas--14.3%    AAA       NR*      15,260   Colorado River, Texas, Municipal Water District, Revenue
                                            Refunding Bonds, RIB, Series 119, 6.165% due 1/01/2021 (a)(e)         12,571
                AA        Aa3       6,000   Harris County, Texas, Health Facilities Development
                                            Corporation, Revenue Refunding Bonds (School Health Care
                                            System), Series B, 5.75% due 7/01/2027 (f)                             6,004
                AAA       Aaa      17,775   Texas State Turnpike Authority, Dallas North Thruway Revenue
                                            Bonds (President George Bush Turnpike), 5.25% due 1/01/2023 (b)       16,385

                Total Investments (Cost--$259,898)--101.3%                                                       248,227

                Liabilities in Excess of Other Assets--(1.3%)                                                     (3,298)
                                                                                                               ---------
                Net Assets--100.0%                                                                             $ 244,929
                                                                                                               =========

             (a)AMBAC Insured.
             (b)FGIC Insured.
             (c)FSA Insured.
             (d)MBIA Insured.
             (e)The interest rate is subject to change periodically and inversely
                based upon prevailing market rates. The interest rate shown is the
                rate in effect at September 30, 1999.
             (f)Escrowed to maturity.
               *Not Rated.
                Ratings of issues shown have not been audited by Ernst & Young LLP.

                See Notes to Financial Statements.
Portfolio Abbreviations

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

AMT  Alternative Minimum Tax
     (subject to)
COP  Certificates of Participation
EDA  Economic Development Authority
GO   General Obligation Bonds
PCR  Pollution Control Revenue
     Bonds
RIB  Residual Interest Bonds


                                       F-5

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<pre>

                                                                  MuniHoldings Insured Fund II, Inc., September 30, 1999
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL

                    As of September 30, 1999

Assets:             Investments, at value (identified cost--$259,898,232)(Note 1a)                          $248,226,576
                    Cash                                                                                          10,072
                    Receivables:
                      Interest                                                             $  3,463,188
                      Securities sold                                                         1,496,833        4,960,021
                                                                                           ------------
                    Prepaid expenses                                                                              15,528
                                                                                                            ------------
                    Total assets                                                                             253,212,197
                                                                                                            ------------

Liabilities:        Payables:
                      Securities purchased                                                    7,793,982
                      Dividends to shareholders (Note 1f)                                       269,552
                      Offering costs (Note 1e)                                                   54,000
                      Investment adviser (Note 2)                                                 9,916        8,127,450
                                                                                           ------------
                    Accrued expenses and other liabilities                                                       155,285
                                                                                                            ------------
                    Total liabilities                                                                          8,282,735
                                                                                                            ------------

Net Assets:         Net assets                                                                              $244,929,462
                                                                                                            ============

Capital:            Capital Stock (200,000,000 shares authorized)(Note 4):
                      Preferred Stock, par value $.10 per share (4,200 shares of
                      AMPS* issued and outstanding at $25,000
                      per share liquidation preference)                                                     $105,000,000
                      Common Stock, par value $.10 per share (10,996,667 shares
                      issued and outstanding)                                              $  1,099,667
                    Paid-in capital in excess of par                                        162,650,964
                    Undistributed investment income--net                                        917,886
                    Accumulated realized capital losses on investments--net                 (13,067,399)
                    Unrealized depreciation on  investments--net                            (11,671,656)
                                                                                           ------------
                    Total--Equivalent to $12.72 net asset value per share of Common
                    Stock (market price--$12.00)                                                             139,929,462
                                                                                                            ------------
                    Total capital                                                                           $244,929,462
                                                                                                            ============

                   *Auction Market Preferred Stock.

                    See Notes to Financial Statements.


                                       F-6
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<pre>
STATEMENT OF OPERATIONS

                    For the Period February 26, 1999++ to September 30, 1999

Investment          Interest and amortization of premium and discount earned                                $  7,993,134
Income
(Note 1d):

Expenses:           Investment advisory fees (Note 2)                                      $    806,576
                    Commission fees (Note 4)                                                    140,885
                    Professional fees                                                            37,901
                    Accounting services (Note 2)                                                 31,252
                    Transfer agent fees                                                          23,354
                    Directors' fees and expenses                                                 20,214
                    Printing and shareholder reports                                             11,487
                    Custodian fees                                                                9,209
                    Listing fees                                                                  9,149
                    Pricing fees                                                                  3,530
                    Other                                                                         7,980
                                                                                           ------------
                    Total expenses before reimbursement                                       1,101,537
                    Reimbursement of expenses (Note 2)                                         (547,658)
                                                                                           ------------
                    Total expenses after reimbursement                                                           553,879
                                                                                                            ------------
                    Investment income--net                                                                     7,439,255
                                                                                                            ------------

Realized &          Realized loss on investments--net                                                        (13,067,399)
Unrealized          Unrealized depreciation on investments--net                                              (11,671,656)
Loss on                                                                                                     ------------
Investments--Net    Net Decrease in Net Assets Resulting from Operations                                    $(17,299,800)
(Notes 1b,                                                                                                  ============
1d & 3):
                  ++Commencement of operations.

                    See Notes to Financial Statements.


                                       F-7
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<pre>

                                                                  MuniHoldings Insured Fund II, Inc., September 30, 1999
STATEMENT OF CHANGES IN NET ASSETS
                                                                                                          For the Period
                                                                                                  February 26, 1999++ to
                    Increase (Decrease) in Net Assets:                                                September 30, 1999

Operations:         Investment income--net                                                                  $  7,439,255
                    Realized loss on investments--net                                                        (13,067,399)
                    Unrealized depreciation on investments--net                                              (11,671,656)
                                                                                                            ------------
                    Net decrease in net assets resulting from operations                                     (17,299,800)
                                                                                                            ------------

Dividends to        Investment income--net:
Shareholders          Common Stock                                                                            (4,682,689)
(Note 1f):            Preferred Stock                                                                         (1,838,680)
                                                                                                            ------------
                    Net decrease in net assets resulting from dividends to shareholders                       (6,521,369)
                                                                                                            ------------

Capital Stock       Proceeds from issuance of Common Stock                                                   164,850,000
Transactions        Proceeds from issuance of Preferred Stock                                                105,000,000
(Notes 1e & 4):     Offering costs resulting from the issuance of Common Stock                                  (228,434)
                    Offering and underwriting costs resulting from the issuance of Preferred Stock              (970,940)
                                                                                                            ------------
                    Net increase in net assets derived from capital stock transactions                       268,650,626
                                                                                                            ------------

Net Assets:         Total increase in net assets                                                             244,829,457
                    Beginning of period                                                                          100,005
                                                                                                            ------------
                    End of period*                                                                          $244,929,462
                                                                                                            ============

                   *Undistributed investment income--net                                                    $    917,886
                                                                                                            ============
                  ++Commencement of operations.

                    See Notes to Financial Statements.


FINANCIAL HIGHLIGHTS
                    The following per share data and ratios have been derived
                    from information provided in the financial statements.                                For the Period
                                                                                                  February 26, 1999++ to
                    Increase (Decrease) in Net Asset Value:                                          September  30, 1999

Per Share           Net asset value, beginning of period                                                    $      15.00
Operating                                                                                                   ------------
Performance:        Investment income--net                                                                           .68
                    Realized and unrealized loss on investments--net                                               (2.24)
                                                                                                            ------------
                    Total from investment operations                                                               (1.56)
                                                                                                            ------------
                    Less dividends to Common Stock shareholders:
                      Investment income--net                                                                        (.43)
                                                                                                            ------------


                                       F-8

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<PRE>
                    Total dividends and distributions to Common Stock shareholders                                  (.43)
                                                                                                            ------------
                    Capital change resulting from issuance of Common Stock                                          (.03)
                                                                                                            ------------
                    Effect of Preferred Stock activity:++++
                      Dividends to Preferred Stock shareholders:
                        Investment income--net                                                                      (.17)
                      Capital charge resulting from issuance of Preferred Stock                                     (.09)
                                                                                                            ------------
                    Total effect of Preferred Stock activity                                                        (.26)
                                                                                                            ------------
                    Net asset value, end of period                                                          $      12.72
                                                                                                            ============
                    Market price per share, end of period                                                   $      12.00
                                                                                                            ============

Total Investment    Based on market price per share                                                              (17.36%)+++
Return:**                                                                                                   ============
                    Based on net asset value per share                                                           (12.40%)+++
                                                                                                            ============

Ratios Based on     Total expenses, net of reimbursement***                                                         .62%*
Average Net                                                                                                 ============
Assets of           Total expenses***                                                                              1.22%*
Common Stock:                                                                                               ============
                    Total investment income--net***                                                                8.27%*
                                                                                                            ============
                    Amount of dividends to Preferred Stock shareholders                                            2.04%*
                                                                                                            ============
                    Investment income--net, to Common Stock shareholders                                           6.23%*
                                                                                                            ============

Ratios Based on     Total expenses, net of reimbursement                                                            .38%*
Total Average Net                                                                                           ============
Assets:++++++***    Total expenses                                                                                  .75%*
                                                                                                            ============
                    Total investment income--net                                                                   5.07%*
                                                                                                            ============

Ratios Based on     Dividends to Preferred Stock shareholders                                                      3.24%*
Average Net                                                                                                 ============
Assets of
Preferred Stock:

Supplemental        Net assets, net of Preferred Stock, end of period (in thousands)                        $    139,929
Data:                                                                                                       ============
                    Preferred Stock outstanding, end of period (in thousands)                               $    105,000
                                                                                                            ============
                    Portfolio turnover                                                                           159.29%
                                                                                                            ============

Leverage:           Asset coverage per $1,000                                                               $      2,333
                                                                                                            ============

Dividends           Series A--Investment income--net                                                        $        443
Per Share on                                                                                                ============
Preferred Stock     Series B--Investment income--net                                                        $        432
Outstanding:                                                                                                ============


                   *Annualized.
                  **Total investment returns based on market value, which can be
                    significantly greater or lesser than the net asset value, may result
                    in substantially different returns. Total investment returns exclude
                    the effects of sales charges.
                 ***Do not reflect the effect of dividends to Preferred Stock
                    shareholders.
                  ++Commencement of operations.
                ++++The Fund's Preferred Stock was issued on March 18, 1999.
              ++++++Includes Common and Preferred Stock average net assets.
                 +++Aggregate total investment return.

                    See Notes to Financial Statements.


                                        F-9
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<pre>





                          MuniHoldings Insured Fund II, Inc., September 30, 1999

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies:
MuniHoldings Insured Fund II, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Fund's financial statements are
prepared in accordance with generally accepted accounting
principals, which may require the use of management accruals and
estimates. Prior to commencement of operations on February 26, 1999,
the Fund had no operations other than those relating to
organizational matters and the sale of 6,667 shares of Common Stock
on February 18, 1999, to Fund Asset Management, L.P. ("FAM") for
$100,005. The Fund determines and makes available for publication
the net asset value of its Common Stock on a weekly basis. The
Fund's Common Stock is listed on the New York Stock Exchange under
the symbol MUE. The following is a summary of significant accounting
policies followed by the Fund.

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

(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.

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

* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.

When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).

Written and purchased options are non-income producing investments.

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

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

(e) Offering expenses--Direct expenses relating to the public
offering of the Fund's Common and Preferred Stock were charged to
capital at the time of issuance of the shares.


                                       F-10
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<PRE>
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.

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

FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .55% of
the Fund's average weekly net assets, including proceeds from the
issuance of Preferred Stock. For the period February 26, 1999 to
September 30, 1999, FAM earned fees of $806,576 of which $521,435
was voluntarily waived. FAM also reimbursed the Fund additional
expenses of $26,223.

During the period February 26, 1999 to September 30, 1999, Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate
of FAM, received underwriting fees of $787,500 in connection with
the issuance of the Fund's Preferred Stock.

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

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

3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period February 26, 1999 to September 30, 1999 were
$635,165,760 and $361,597,955, respectively.

Net realized gains (losses) for the period February 26, 1999 to
September 30, 1999 and net unrealized losses as of September 30,
1999 were as follows:

- ------------------------------------------------------------
                                  Realized       Unrealized
                                Gains (Losses)     Losses
- ------------------------------------------------------------
Long-term investments            $(13,638,573)  $(11,671,656)
Financial futures contracts           571,174             --
                                 ------------   ------------
Total                            $(13,067,399)  $(11,671,656)
                                 ============   ============
- ------------------------------------------------------------

As of September 30, 1999, net unrealized depreciation for Federal
income tax purposes aggregated $11,915,481, of which $275,923
related to appreciated securities and $12,191,404 related to
depreciated securities. The aggregate cost of investments at
September 30, 1999 for Federal income tax purposes was $260,142,057.

4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of holders of Common Stock.

Common Stock
Shares issued and outstanding during the period February 26, 1999 to
September 30, 1999 increased by 10,990,000 from shares sold.

Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund, with a par value of $.10 per share and a
liquidation preference of $25,000 per share, that entitle their
holders to receive cash dividends at an annual rate that may vary
for the successive dividend periods. The yields in effect at
September 30, 1999 were as follows: Series A, 3.90% and Series B,
3.80%.

In connection with the offering AMPS, the Board of Directors
reclassified 4,200 shares of unissued capital stock as AMPS. Shares
issued and outstanding during the period February 26, 1999 to
September 30, 1999 increased by 4,200 as a result of the AMPS
offering.

The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the period February
26, 1999 to September 30, 1999, MLPF&S earned $127,038 as
commissions.

5. Capital Loss Carryforward:
At September 30, 1999, the Fund had a capital loss carryforward of
approximately $12,824,000, all of which expires in 2007. This amount
will be available to offset like amounts of any future taxable
gains.

6. Subsequent Event:
On October 6, 1999, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.069000 per share, payable on October 28, 1999 to shareholders
of record as of October 22, 1999.


                                       F-11

</pre>



<p>&nbsp;
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<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>
<p></p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> F-12</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</TABLE>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp; <!-- *************************************************************************** -->
  <!-- MARKER LABEL="sheet: 13, page: 13" -->
<pre>
SCHEDULE OF INVESTMENTS (unaudited)                                                                         (in Thousands)
                S&P     Moody's     Face
STATE         Ratings   Ratings    Amount   Issue                                                                Value

Arizona--0.9%   BBB+    Baa1      $ 2,170   Arizona Health Facilities Authority Revenue Bonds (Catholic
                                            Healthcare West), Series A, 6.625% due 7/01/2020                   $   2,132


California      BBB     NR*         2,500   Contra Costa County, California, Public Financing Authority,
- --0.9%                                      Tax Allocation Revenue Refunding Bonds (Pleasant Hill Bart Etc.
                                            Redevelopment), 5.25% due 8/01/2028                                    2,149


Colorado--2.0%  AAA     Aaa         5,000   Denver, Colorado, City and County Airport Revenue Refunding
                                            Bonds, Series E, 5.50% due 11/15/2025 (d)                              4,788


Connecticut     NR*     Baa3        8,000   Mashantucket Western Pequot Tribe, Connecticut, Special Revenue
- --2.9%                                      Refunding Bonds, Sub-Series A, 5.50% due 9/01/2028                     6,981


District of     A1+     VMIG1++     3,300   District of Columbia, GO, General Fund Recovery, VRDN, Series B-1,
Columbia--5.2%                              3.85% due 6/01/2003 (e)                                                3,300

                AAA     Aaa         5,115   District Of Columbia, Water and Sewer Authority, Public Utility
                                            Revenue Refunding Bonds, 5.50% due 10/01/2023 (c)                      4,945

                AAA     Aaa         5,000   Washington, D.C., Convention Center Authority, Dedicated Tax
                                            Revenue Bonds, Senior Lien, 5% due 10/01/2021 (a)                      4,461


Georgia--2.2%                               Metropolitan Atlanta, Georgia, Rapid Transit Authority, Sales
                                            Tax Revenue Bonds, Second Indenture, Series B (d):
                AAA     Aaa         4,390     5.10% due 7/01/2017                                                  4,119
                AAA     Aaa         1,355     5.10% due 7/01/2020                                                  1,244


Hawaii--4.2%    AAA     Aaa        10,000   Hawaii State, GO, Series CT, 5.875% due 9/01/2018 (c)                 10,187


Illinois--12.4% AAA     Aaa         5,000   Chicago, Illinois, Board of Education, GO (Chicago School
                                            Reform), 5.75% due 12/01/2027 (a)                                      4,894

                                            Chicago, Illinois, GO, Series A (b):
                AAA     Aaa         8,800     6% due 1/01/2021                                                     8,943
                AAA     Aaa         9,330     6% due 1/01/2022                                                     9,459

                AAA     Aaa         3,400   Chicago, Illinois, Skyway Toll Bridge Revenue Refunding Bonds,
                                            5.50% due 1/01/2023 (d)                                                3,239

                AAA     Aaa         4,000   Melrose Park, Illinois, Water Revenue Bonds, Series A, 5.20%
                                            due 7/01/2018 (d)                                                      3,768


Portfolio
Abbreviations

To simplify the listings of MuniHoldings Insured Fund II, Inc.'s
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list below.

AMT        Alternative Minimum Tax
           (subject to)
GO         General Obligation Bonds
HDA        Housing Development Authority
IDA        Industrial Development
           Authority
PCR        Pollution Control Revenue Bonds
VRDN       Variable Rate Demand Notes


                                      F-13</pre>
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<PRE>
                                                                       MuniHoldings Insured Fund II, Inc., March 31, 2000
SCHEDULE OF INVESTMENTS (concluded)                                                                         (in Thousands)

                S&P     Moody's     Face
STATE         Ratings   Ratings    Amount   Issue                                                                Value

Indiana--4.0%   A1      VMIG1++   $   500   Jasper County, Indiana, PCR, Refunding (Northern Indiana
                                            Public Service), VRDN, Series C, 3.85% due 4/01/2019 (e)           $     500

                AAA     NR*         9,280   Shelbyville, Indiana, Elementary School Building Corporation
                                            Revenue Bonds (First Mortgage), 5.75% due 1/15/2022 (c)                9,154


Kentucky--1.8%  AAA     Aaa         4,250   Kentucky State Property and Buildings Commission, Revenue
                                            Refunding Bonds (Project No. 64), 5.75% due 5/01/2011 (d)              4,434


Louisiana--0.1% A1+     VMIG1++       400   Louisiana State Offshore Terminal Authority, Deepwater Port
                                            Revenue Refunding Bonds (1st Stage A-Loop Inc.), VRDN, 3.85%
                                            due 9/01/2008 (e)                                                        400


Mississippi     BBB-    Ba1         3,550   Mississippi Business Finance Corporation, Mississippi,
- --1.3%                                      PCR, Refunding (System Energy Resources Inc. Project),
                                            5.90% due 5/01/2022                                                    3,158


Nevada--2.9%    AAA     Aaa         7,000   Las Vegas, Nevada, New Convention and Visitors Authority
                                            Revenue Bonds, 5.75% due 7/01/2016 (a)                                 7,097


New Jersey      AAA     Aaa           660   New Jersey State Housing and Mortgage Finance Agency, Home Buyer
- --0.3%                                      Revenue Refunding Bonds, AMT, Series AA, 5.90% due 10/01/2029 (d)        660


New Mexico      AAA     Aaa         5,000   Farmington, New Mexico, PCR, Refunding (Public Service Company
- --2.1%                                      of San Juan), Series C, 5.70% due 12/01/2016 (a)                       5,053


New York        A-      VMIG1++     4,500   Long Island Power Authority, New York, Electric System Revenue
- --24.9%                                     Bonds, VRDN, Sub-Series 5, 3.80% due 5/01/2033 (e)                     4,500

                                            Long Island Power Authority, New York, Electric System Revenue
                                            Refunding Bonds, Series A:
                AAA     Aaa         5,000     5.125% due 12/01/2022 (c)                                            4,513
                AAA     Aaa        10,000     5.25% due 12/01/2026 (d)                                             9,181

                AAA     Aaa         2,000   Metropolitan Transportation Authority, New York, Commuter
                                            Facilities Revenue Refunding Bonds, Series B, 5% due
                                            7/01/2017 (a)                                                          1,852

                AAA     Aaa        10,000   Nassau Health Care Corporation, New York, Health System
                                            Revenue Bonds, 5.75% due 8/01/2022 (c)                                 9,937

                                            New York City, New York, GO, Refunding:
                AAA     NR*        10,000     Series G, 5.75% due 2/01/2017 (c)                                   10,118
                AAA     Aaa         5,480     Series H, 5.375% due 8/01/2027 (d)                                   5,136

                A1c     VMIG1++     4,400   New York City, New York, GO, VRDN, Series B, Sub-Series B-6,
                                            3.80% due 8/15/2005 (d)(e)                                             4,400

                AAA     Aaa         3,500   New York State Urban Development Corporation, Revenue
                                            Refunding Bonds (Correctional Facilities), 5.75% due
                                            1/01/2013 (c)                                                          3,564

                AAA     Aaa         7,500   Port Authority of New York and New Jersey, Consolidated
                                            Revenue Refunding Bonds, AMT, 119th Series, 5.50% due
                                            9/15/2016 (b)                                                          7,428


North           AAA     Aaa        22,000   Oliver County, North Dakota, PCR, Refunding (Square Butte Electric
Dakota--8.3%                                Cooperative), Series A, 5.30% due 1/01/2027 (a)                       20,145


Ohio--3.0%      BBB+    Baa1        5,000   Ohio State Solid Waste Disposal Revenue Bonds (USG Corporation
                                            Project), AMT, 5.65% due 3/01/2033                                     4,317


                                       F-14</PRE>













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










<PRE>
                AA      A1          3,000   Ohio State Turnpike Commission, Turnpike Revenue Bonds,
                                            Series A, 5.55% due 2/15/2013                                          3,040


Pennsylvania    AAA     Aaa        12,930   Allegheny County, Pennsylvania, Hospital Development
- --9.5%                                      Authority Revenue Bonds (University of Pittsburgh Medical
                                            Center), 5.375% due 12/01/2025 (d)                                    11,925

                NR*     Aaa         5,600   Lycoming County, Pennsylvania, College Authority Revenue
                                            Bonds (Pennsylvania College of Technology), 5.25% due
                                            7/01/2018 (d)                                                          5,334

                AAA     Aaa         5,830   Philadelphia, Pennsylvania, Gas Works Revenue Bonds,
                                            Second Series, 5% due 7/01/2029 (c)                                    5,073

                A1+     NR*           700   Schuylkill County, Pennsylvania, IDA, Resource Recovery
                                            Revenue Refunding Bonds (Northeastern Power Company), VRDN,
                                            Series A, 4% due 12/01/2022 (e)                                          700


Puerto Rico     AAA     Aaa        10,000   Puerto Rico Commonwealth, GO, Public Improvement, 6% due
- --4.2%                                      7/01/2029 (d)                                                         10,284


Rhode                                       Providence, Rhode Island, Public Building Authority, General
Island--3.8%                                Revenue Bonds (School and Public Facilities Projects), Series
                                            A (a):
                AAA     Aaa         2,785     5.25% due 12/15/2017                                                 2,664
                AAA     Aaa         1,300     5.25% due 12/15/2018                                                 1,235
                AAA     Aaa         1,305     5.25% due 12/15/2019                                                 1,228

                NR*     Aaa         4,055   Providence, Rhode Island, Redevelopment Agency Revenue Refunding
                                            Bonds (Public Safety and Municipal Buildings), Series A, 5.75%
                                            due 4/01/2019 (a)                                                      4,062


Texas--4.5%     BBB-    Baa1        5,000   Dallas-Fort Worth, Texas, International Airport Facilities,
                                            Improvement Corporation Revenue Bonds (American Airlines Inc.),
                                            AMT, 6.375% due 5/01/2035                                              4,794

                AA      Aa3         6,000   Harris County, Texas, Health Facilities Development Corporation,
                                            Revenue Refunding Bonds (School Health Care System), Series B,
                                            5.75% due 7/01/2027 (f)                                                6,003


Virginia        AA+     Aa1         2,250   Virginia State, HDA, Rental Housing Revenue Bonds, AMT, Series B,
- --0.9%                                      6% due 8/01/2017                                                       2,258


Washington      AAA     Aaa         3,485   Grant County, Washington, Public Utility District No. 2 Revenue
- --1.4%                                      Bonds (Priest Rapids Hydro Electric), AMT, Second Series,
                                            Series B, 5.90% due 1/01/2021 (d)                                      3,462


                Total Investments (Cost--$248,789)--103.7%                                                       252,218

                Liabilities in Excess of Other Assets--(3.7%)                                                     (9,054)
                                                                                                               ---------
                Net Assets--100.0%                                                                             $ 243,164
                                                                                                               =========



             (a)AMBAC Insured.
             (b)FGIC Insured.
             (c)FSA Insured.
             (d)MBIA Insured.
             (e)The interest rate is subject to change periodically based upon
                prevailing market rates. The interest rate shown is the rate in
                effect at March 31, 2000.
             (f)Escrowed to maturity.
               *Not Rated.
              ++Highest short-term rating by Moody's Investors Service, Inc.
                Ratings of issues shown have not been audited by Ernst & Young  llp.

                See Notes to Financial Statements.


                                       F-15
</pre>
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<!-- MARKER LABEL="sheet: 16, page: 16" -->
<pre>
                                                                      MuniHoldings Insured Fund II, Inc., March 31, 2000
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL (unaudited)
                    As of March 31, 2000

Assets:             Investments, at value (identified cost--$248,788,700)                                   $252,218,071
                    Cash                                                                                          40,996
                    Receivables:
                      Securities sold                                                      $  7,462,825
                      Interest                                                                3,543,058       11,005,883
                                                                                           ------------
                    Prepaid expenses                                                                              16,064
                                                                                                            ------------
                    Total assets                                                                             263,281,014
                                                                                                            ------------

Liabilities:        Payables:
                      Securities purchased                                                   19,835,233
                      Dividends to shareholders                                                 166,224
                      Investment adviser                                                         76,035
                      Offering costs                                                             10,594       20,088,086
                                                                                           ------------
                    Accrued expenses and other liabilities                                                        28,717
                                                                                                            ------------
                    Total liabilities                                                                         20,116,803
                                                                                                            ------------

Net Assets:         Net assets                                                                              $243,164,211
                                                                                                            ============

Capital:            Capital Stock (200,000,000 shares authorized):
                      Preferred Stock, par value $.10 per share (4,200 shares of
                      AMPS* issued and outstanding at $25,000 per share
                      liquidation preference)                                                               $105,000,000
                      Common Stock, par value $.10 per share (11,015,719 shares
                      issued and outstanding)                                              $  1,101,572
                    Paid-in capital in excess of par                                        162,874,062
                    Undistributed investment income--net                                        919,091
                    Accumulated realized capital losses on investments--net                 (30,159,885)
                    Unrealized appreciation on  investments--net                              3,429,371
                                                                                           ------------
                    Total--Equivalent to $12.54 net asset value per share of
                    Common Stock (market price--$10.5625)                                                    138,164,211
                                                                                                            ------------
                    Total capital                                                                           $243,164,211
                                                                                                            ============

                   *Auction Market Preferred Stock.

                    See Notes to Financial Statements.


                                       F-16</PRE>














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<PRE>
STATEMENT OF OPERATIONS (unaudited)
                    For the Six Months Ended March 31, 2000
Investment          Interest and amortization of premium and discount earned                                $  7,076,927
Income:

Expenses:           Investment advisory fees                                               $    662,152
                    Commission fees                                                             129,283
                    Professional fees                                                            52,947
                    Accounting services                                                          31,381
                    Transfer agent fees                                                          19,554
                    Printing and shareholder reports                                             12,474
                    Directors' fees and expenses                                                 12,263
                    Listing fees                                                                  7,771
                    Custodian fees                                                                5,700
                    Pricing fees                                                                  3,085
                    Other                                                                        14,446
                                                                                           ------------
                    Total expenses before reimbursement                                         951,056
                    Reimbursement of expenses                                                  (179,157)
                                                                                           ------------
                    Total expenses after reimbursement                                                           771,899
                                                                                                            ------------
                    Investment income--net                                                                     6,305,028
                                                                                                            ------------

Realized &          Realized loss on investments--net                                                        (17,092,485)
Unrealized          Change in unrealized appreciation/depreciation on investments--net                        15,101,027
Gain (Loss) on                                                                                              ------------
Investments--Net:   Net Increase in Net Assets Resulting from Operations                                    $  4,313,570
                                                                                                            ============

                    See Notes to Financial Statements.


                                       F-17
</pre>
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<pre>

                                                                      MuniHoldings Insured Fund II, Inc., March 31, 2000

STATEMENTS OF CHANGES IN NET ASSETS

                                                                                             For the      For the Period
                                                                                           Six Months      February 26,
                                                                                              Ended          1999++ to
                                                                                            March 31,      September 30,
                                                                                              2000             1999

                    Increase (Decrease) in Net Assets:                                      (unaudited)
Operations:         Investment income--net                                                 $  6,305,028     $  7,439,255
                    Realized loss on investments--net                                       (17,092,485)     (13,067,399)
                    Change in unrealized appreciation/depreciation on
                    investments--net                                                         15,101,027      (11,671,656)
                                                                                           ------------     ------------
                    Net increase (decrease) in net assets resulting from
                    operations                                                                4,313,570      (17,299,800)
                                                                                           ------------     ------------

Dividends to        Investment income--net:
Shareholders:         Common Stock                                                           (4,294,816)      (4,682,689)
                      Preferred Stock                                                        (2,009,007)      (1,838,680)
                                                                                           ------------     ------------
                    Net decrease in net assets resulting from dividends to
                    shareholders                                                             (6,303,823)      (6,521,369)
                                                                                           ------------     ------------

Capital Stock       Proceeds from issuance of Common Stock                                           --      164,850,000
Transactions:       Proceeds from issuance of Preferred Stock                                        --      105,000,000
                    Offering costs resulting from the issuance of Common Stock                       --         (228,434)
                    Offering and underwriting costs resulting from the issuance
                    of Preferred Stock                                                                          (970,940)
                    Value of shares issued to Common Stock shareholders in
                    reinvestment of dividends                                                   225,002               --
                                                                                           ------------     ------------
                    Net increase in net assets derived from capital stock
                    transactions                                                                225,002      268,650,626
                                                                                           ------------     ------------

Net Assets:         Total increase (decrease) in net assets                                  (1,765,251)     244,829,457
                    Beginning of period                                                     244,929,462          100,005
                                                                                           ------------     ------------
                    End of period*                                                         $243,164,211     $244,929,462
                                                                                           ============     ============

                   *Undistributed investment income--net                                   $    919,091     $    917,886
                                                                                           ============     ============

                  ++Commencement of operations.

                    See Notes to Financial Statements.


FINANCIAL HIGHLIGHTS

                                                                                            For the       For the Period
                    The following per share data and ratios have been derived              Six Months      February 26,
                    from information provided in the financial statements.                    Ended          1999++ to
                                                                                            March 31,      September 30,
                    Increase (Decrease) in Net Assets:                                        2000             1999
                                                                                           (unaudited)

Per Share           Net asset value, beginning of period                                   $      12.72     $      15.00
Operating                                                                                  ------------     ------------
Performance:        Investment income--net                                                          .57              .68
                    Realized and unrealized gain (loss) on investments--net                        (.18)           (2.24)
                                                                                           ------------     ------------
                    Total from investment operations                                                .39            (1.56)
                                                                                           ------------     ------------


                                       F-18</PRE>












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<PRE>




                    Less dividends to Common Stock shareholders:
                      Investment income--net                                                       (.39)            (.43)
                                                                                           ------------     ------------
                    Total dividends to Common Stock shareholders                                   (.39)            (.43)
                                                                                           ------------     ------------
                    Capital change resulting from issuance of Common Stock                           --             (.03)
                                                                                           ------------     ------------
                    Effect of Preferred Stock activity:++++
                      Dividends to Preferred Stock shareholders:
                        Investment income--net                                                     (.18)            (.17)
                                                                                           ------------     ------------
                      Capital charge resulting from issuance of Preferred Stock                      --             (.09)
                                                                                           ------------     ------------
                    Total effect of Preferred Stock activity                                       (.18)            (.26)
                                                                                           ------------     ------------
                    Net asset value, end of period                                         $      12.54     $      12.72
                                                                                           ============     ============
                    Market price per share, end of period                                  $    10.5625     $      12.00
                                                                                           ============     ============

Total Investment    Based on market price per share                                              (8.81%)+++      (17.36%)+++
Return:**                                                                                  ============     ============
                    Based on net asset value per share                                            2.14%+++      (12.40%)+++
                                                                                           ============     ============

Ratios Based on     Total expenses, net of reimbursement***                                       1.15%*            .62%*
Average Net                                                                                ============     ============
Assets of           Total expenses***                                                             1.42%*           1.22%*
Common Stock:                                                                              ============     ============
                    Total investment income--net***                                               9.39%*           8.27%*
                                                                                           ============     ============
                    Amount of dividends to Preferred Stock shareholders                           2.99%*           2.04%*
                                                                                           ============     ============
                    Investment income--net, to Common Stock shareholders                          6.40%*           6.23%*
                                                                                           ============     ============

Ratios Based on     Total expenses, net of reimbursement                                           .64%*            .38%*
Total Average Net                                                                          ============     ============
Assets:++++++***    Total expenses                                                                 .79%*            .75%*
                                                                                           ============     ============
                    Total investment income--net                                                  5.24%*           5.07%*
                                                                                           ============     ============

Ratios Based on     Dividends to Preferred Stock shareholders                                     3.77%*           3.24%*
Average Net                                                                                ============     ============
Assets of
Preferred Stock:

Supplemental        Net assets, net of Preferred Stock, end of period (in thousands)       $    138,164     $    139,929
Data:                                                                                      ============     ============
                    Preferred Stock outstanding, end of period (in thousands)              $    105,000     $    105,000
                                                                                           ============     ============
                    Portfolio turnover                                                          103.65%          159.29%
                                                                                           ============     ============

Leverage:           Asset coverage per $1,000                                              $      2.316     $      2,333
                                                                                           ============     ============

Dividends           Series A--Investment income--net                                       $        477     $        443
Per Share on                                                                               ============     ============
Preferred Stock     Series B--Investment income--net                                       $        480     $        432
Outstanding:                                                                               ============     ============



                   *Annualized.
                  **Total investment returns based on market value, which can be
                    significantly greater or lesser than the net asset value, may result
                    in substantially different returns. Total investment returns exclude
                    the effects of sales charges.
                 ***Do not reflect the effect of dividends to Preferred Stock
                    shareholders.
                  ++Commencement of operations.
                ++++The Fund's Preferred Stock was issued on March 18, 1999.
              ++++++Includes Common and Preferred Stock average net assets.
                 +++Aggregate total investment return.

                    See Notes to Financial Statements.


                                       F-19
</pre>
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<pre>
                              MuniHoldings Insured Fund II, Inc., March 31, 2000


NOTES TO FINANCIAL STATEMENTS (unaudited)

1. Significant Accounting Policies:
MuniHoldings Insured Fund II, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Fund's financial statements are
prepared in accordance with generally accepted accounting
principals, which may require the use of management accruals and
estimates. These unaudited financial statements reflect all
adjustments, which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All
such adjustments are of a normal recurring nature. The Fund
determines and makes available for publication the net asset value
of its Common Stock on a weekly basis. The Fund's Common Stock is
listed on the New York Stock Exchange under the symbol MUE. The
following is a summary of significant accounting policies followed
by the Fund.

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

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

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

* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.

When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).

Written and purchased options are non-income producing investments.

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

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

(e) Offering expenses--Direct expenses relating to the public
offering of the Fund's Common and Preferred Stock were charged to
capital at the time of issuance of the shares.

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


                                       F-20</PRE>
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<PRE>
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with FAM.
The general partner of FAM is Princeton Services, Inc. ("PSI"), an
indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.

FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .55% of
the Fund's average weekly net assets, including proceeds from the
issuance of Preferred Stock. For the six months ended March 31,
2000, FAM earned fees of $662,152 of which $179,157 was voluntarily
waived.

During the period February 26, 1999 to September 30, 1999, Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate
of FAM, received underwriting fees of $787,500 in connection with
the issuance of the Fund's Preferred Stock.

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

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

3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended March 31, 2000 were $241,641,471 and
$249,493,354, respectively.

Net realized losses for the six months ended March 31, 2000 and net
unrealized gains as of March 31, 2000 were as follows:

- ------------------------------------------------------------
                                  Realized        Unrealized
                                    Losses          Gains
- ------------------------------------------------------------
Long-term investments            $(17,081,644)  $  3,429,371
Financial futures contracts           (10,841)            --
                                 ------------   ------------
Total                            $(17,092,485)  $  3,429,371
                                 ============   ============
- ------------------------------------------------------------

As of March 31, 2000, net unrealized appreciation for Federal income
tax purposes aggregated $3,429,371, of which $4,726,134 related to
appreciated securities and $1,296,763 related to depreciated
securities. The aggregate cost of investments at March 31, 2000 for
Federal income tax purposes was $248,788,700.

4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of holders of Common Stock.

Common Stock
Shares issued and outstanding during the six months ended March 31,
2000 increased by 19,052 as a result of dividend reinvestment and
during the period February 26, 1999 to September 30, 1999 increased
by 10,990,000 from shares sold.

Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund, with a par value of $.10 per share and a
liquidation preference of $25,000 per share, that entitle their
holders to receive cash dividends at an annual rate that may vary
for the successive dividend periods. The yields in effect at March
31, 2000 were as follows: Series A, 4.05% and Series B, 3.95%.

Shares issued and outstanding during the six months ended March 31,
2000 remained constant and during the period February 26, 1999 to
September 30, 1999 increased by 4,200 as a result of the AMPS
offering.

The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the six months ended
March 31, 2000, MLPF&S earned $101,472 as commissions.

5. Capital Loss Carryforward:
At September 30, 1999, the Fund had a capital loss carryforward of
approximately $12,824,000, all of which expires in 2007. This amount
will be available to offset like amounts of any future taxable
gains.

6. Subsequent Event:
On April 7, 2000, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.063794 per share, payable on April 27, 2000 to shareholders of
record as of April 17, 2000.

7. Reorganization Plan:
On April 12, 2000, the Fund's Board of Directors approved a plan of
reorganization, subject to shareholder approval and certain other
conditions, whereby the Fund would acquire substantially all of the
assets and liabilities of MuniHoldings Insured Fund III, Inc. and
MuniHoldings Insured Fund IV, Inc. in exchange for newly issued
shares of the Fund. These Funds are registered, non-diversified,
closed-end management investment companies. All three entities have
a similar investment objective and are managed by FAM.


                                       F-21
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      MuniHoldings Insured Fund III, Inc. <br>
      for the Period May 28, 1999 to October 31, 1999 </font></td>
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<pre>
                                                                               MuniHoldings Insured Fund III, Inc., October 31, 1999

SCHEDULE OF INVESTMENTS(unaudited)                                                                                    (in Thousands)

                               S&P     Moody's     Face                                                                      Value
STATE                        Ratings   Ratings    Amount     Issue                                                         (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------------------

Alabama -- 3.3%              AAA       Aaa       $ 6,000     Jefferson County, Alabama, Sewer Revenue Bonds, Capital
                                                             Improvement Warrants, Series A, 5% due 2/01/2033 (b)          $  5,012
- ------------------------------------------------------------------------------------------------------------------------------------
Arizona -- 0.8%              A1+       P1          1,200     Pinal County, Arizona, IDA, PCR (Newmont Mining), DATES,
                                                             3.55% due 12/01/2009 (d)                                         1,200
- ------------------------------------------------------------------------------------------------------------------------------------
California -- 2.3%           AAA       Aaa         4,000     San Francisco, California, City and County Airport Commission,
                                                             International Airport Revenue Bonds, Second Series, Issue 15B,
                                                             5% due 5/01/2024 (c)                                             3,490
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado -- 2.7%             A1+       VMIG1+      1,500     Moffat County, Colorado, PCR, Refunding (Pacificorp Projects),
                                                             VRDN, 3.55% due 5/01/2013(a)(d)                                  1,500
                             A1+       NR*         2,600     Pitkin County, Colorado, IDR, Refunding (Aspen Skiing Company
                                                             Project), VRDN, AMT, Series B, 3.60% due 4/01/2014 (d)           2,600
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware  -- 2.1%            AAA       Aaa         3,430     Delaware State Housing Authority, S/F Mortgage Revenue
                                                             Refunding Bonds, AMT, Senior Series A-1, 5.55%
                                                             due 7/01/2019 (a)                                                3,171
- ------------------------------------------------------------------------------------------------------------------------------------
District of                  AAA       Aaa         8,000     District of Columbia, GO, Refunding, Series A, 5.25%
Columbia  -- 4.6%                                            due 6/01/2027 (c)                                                7,011
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois -- 13.4%            AAA       Aaa         3,370     Chicago, Illinois, Board of Education, GO (Chicago School
                                                             Reform Project), Series A, 5.25% due 12/01/2030 (a)              2,939
                             AAA       Aaa         8,485     Chicago, Illinois, GO, Project and Refunding, Series A, 5.125%
                                                             due 1/01/2029 (b)                                                7,262
                             AAA       Aaa         7,500     Illinois State, GO, 5.375% due 6/01/2024 (b)                     6,785
                             AAA       Aaa         4,000     Metropolitan Pier and Exposition Authority, Illinois, Dedicated
                                                             State Tax Revenue Refunding Bonds (McCormick Place Expansion
                                                             Project), Series A, 5.25% due 6/15/2027 (a)                      3,515
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana -- 2.0%              AAA       Aaa         3,500     Indiana Health Facilities Financing Authority, Hospital Revenue
                                                             Refunding Bonds (Sisters of Saint Francis Health), Series A,
                                                             5.375% due 11/01/2027 (c)                                        3,129
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts -- 2.7%        AAA       Aaa         5,000     Massachusetts State Turnpike Authority, Metropolitan Highway
                                                             System, Revenue Refunding Bonds, Sub-Series A,
                                                             5% due 1/01/2039 (a)                                             4,152
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan -- 4.5%             A1+       VMIG1+      1,200     University of Michigan, University Hospital Revenue Refunding
                                                             Bonds, VRDN, Series A, 3.50% due 12/01/2019 (d)                  1,200
                             A1+       VMIG1+        900     University of Michigan, University Revenue Refunding Bonds
                                                             (Medical Service Plan), VRDN, Series A-1, 3.50%
                                                             due 12/01/2021 (d)                                                 900
                             AAA       Aaa         5,790     Wayne Charter County, Michigan, Airport Revenue Bonds (Detroit
                                                             Metropolitan -- Wayne County Airport), AMT, Series A,
                                                             5% due 12/01/2028 (c)                                            4,832
- ------------------------------------------------------------------------------------------------------------------------------------
Nevada -- 3.1%               AAA       Aaa         3,000     Clark County, Nevada, Airport Revenue Bonds, Sub-Lien,
                                                             Series A, 6% due 7/01/2029 (c)                                   2,975
                             A1+       P1          1,700     Washoe County, Nevada, Water Facility Revenue Bonds (Sierra
                                                             Pacific Power Company Project), AMT, VRDN,
                                                             3.60% due 12/01/2020 (d)                                         1,700
- ------------------------------------------------------------------------------------------------------------------------------------
New York -- 8.0%             AA        Aa3         5,000     New York City, New York, City Transitional Finance Authority
                                                             Revenue Bonds, Future Tax Secured, Series A, 6%
                                                             due 8/15/2029                                                    4,972
                             A-        A3          5,000     New York City, New York, GO, Series H, 5% due 3/15/2029          4,187
                             AAA       Aaa         3,600     New York State Dormitory Authority, Revenue Refunding Bonds
                                                             (Consolidated City University System), Series 1,
                                                             5.125% due 7/01/2027 (c)                                         3,134


                                       F-24</PRE>


















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<PRE>
- ------------------------------------------------------------------------------------------------------------------------------------
North Carolina -- 2.0%       A1+       NR*         3,100     Raleigh Durham, North Carolina, Airport Authority, Special
                                                             Facility Revenue Refunding Bonds (American Airlines Inc.),
                                                             VRDN, Series B, 3.55% due 11/01/2005 (d)                         3,100
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania -- 2.8%         AAA       Aaa         3,830     Pittsburgh and Allegheny County, Pennsylvania, Public
                                                             Auditorium Revenue Bonds (Regional Asset District Sales Tax),
                                                             5% due 2/01/2029 (a)                                             3,258
                             A1+       NR*         1,000     Schuylkill County, Pennsylvania, IDA, Resource Recovery
                                                             Revenue Refunding Bonds (Northeastern Power Company),
                                                             VRDN, Series A, 3.50% due 12/01/2022 (d)                         1,000
- ------------------------------------------------------------------------------------------------------------------------------------
Texas -- 18.1%               AAA       Aaa         4,205     Coastal Water Authority, Texas, Contract Revenue Refunding
                                                             Bonds (City of Houston Projects), 5% due 12/15/2025 (e)          3,594
                             BBB-      Baa1        3,200     Dallas-Fort Worth, Texas, International Airport Facilities,
                                                             Improvement Corporation Revenue Bonds (American Airlines Inc.),
                                                             AMT, 6.375% due 5/01/2035                                        3,064
                             AAA       Aaa        10,000     Houston, Texas, Airport System Revenue Refunding Bonds,
                                                             Sub Lien, Series C, 5% due 7/01/2028 (b)                         8,482
                             AAA       Aaa         8,000     Houston, Texas, Water and Sewer System Revenue Bonds,
                                                             Junior Lien, Series C, 5.375% due 12/01/2027 (b)                 7,244
                             AAA       Aaa         6,000     Matagorda County, Texas, Navigation District Number 1,
                                                             Revenue Refunding Bonds (Reliant Energy Inc.), Series A,
                                                             5.25% due 6/01/2026 (a)                                          5,290
- ------------------------------------------------------------------------------------------------------------------------------------
Utah -- 5.8%                 AAA       Aaa         5,055     Salt Lake City, Utah, Metropolitan Water District, Water
                                                             Revenue Bonds, 5.375% due 7/01/2029 (a)                          4,510
                             AAA       Aaa         4,850     Utah Water Finance Agency Revenue Bonds (Pooled Loan
                                                             Financing Program), Series A, 5.50% due 10/01/2029 (a)           4,415
- ------------------------------------------------------------------------------------------------------------------------------------
Washington -- 18.4%          AAA       NR*        15,000     King County, Washington, GO, Refunding, RIB, Series 47,
                                                             6.655% due 1/01/2034 (c)(f)                                     11,162
                                                             King County, Washington, Sewer Revenue Bonds (b):
                             AAA       Aaa         3,000        5.25% due 1/01/2026                                           2,651
                             AAA       Aaa         5,970        5.25% due 1/01/2030                                           5,236
                             AAA       Aaa        10,000     Washington State Health Care Facilities Authority, Revenue
                                                             Refunding Bonds (Providence Services), 5.375%
                                                             due 12/01/2019 (c)                                               9,102
- ------------------------------------------------------------------------------------------------------------------------------------

Portfolio Abbreviations

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

AMT       Alternative Minimum Tax (subject to)
DATES     Daily Adjustable Tax-Exempt Securities
GO        General Obligation Bonds
IDA       Industrial Development Authority
IDR       Industrial Development Revenue Bonds
PCR       Pollution Control Revenue Bonds
RIB       Residual Interest Bonds
S/F       Single-Family
VRDN      Variable Rate Demand Notes


                                       F-25
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<pre>
                                                                               MuniHoldings Insured Fund III, Inc., October 31, 1999

SCHEDULE OF INVESTMENTS (concluded) (in Thousands)

                               S&P     Moody's     Face                                                                      Value
STATE                        Ratings   Ratings    Amount     Issue                                                         (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------------------

Wyoming -- 3.5%              AAA       Aaa       $ 6,000     Central Wyoming Regional Water System, Joint Powers Board
                                                             Revenue Refunding Bonds, 5.25% due 6/01/2030 (e)              $  5,364
- ------------------------------------------------------------------------------------------------------------------------------------
                             Total Investments (Cost -- $166,082) -- 100.1%                                                 153,138

                             Liabilities in Excess of Other Assets -- (0.1%)                                                   (122)
                                                                                                                           --------
                             Net Assets -- 100.0%                                                                          $153,016
                                                                                                                           ========
- ------------------------------------------------------------------------------------------------------------------------------------

(a)   AMBAC Insured.
(b)   FGIC Insured.
(c)   MBIA Insured.
(d)   The interest rate is subject to change periodically based upon prevailing
      market rates. The interest rate shown is the rate in effect at October 31,
      1999.
(e)   FSA Insured.
(f)   The interest rate is subject to change periodically and inversely based
      upon prevailing market rates. The interest rate shown is the rate in
      effect at October 31, 1999.
  *   Not Rated.
  +   Highest short-term rating by Moody's Investors Service, Inc.

See Notes to Financial Statements.

Quality Profile

The quality ratings of securities in the Fund as of October 31, 1999 were as
follows:

- --------------------------------------------------------------------------------
                                                                      Percent of
S&P Rating/Moody's Rating                                             Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa ..............................................................   83.5%
AA/Aa ................................................................    3.3
A/A ..................................................................    2.7
BBB/Baa ..............................................................    2.0
Other+ ...............................................................    8.6
- --------------------------------------------------------------------------------
+     Temporary investments in short-term municipal securities.


                                       F-26</PRE>
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<PRE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL (unaudited)
                             As of October 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------

Assets:                      Investments, at value (identified cost -- $166,082,317) (Note 1a) .......                 $153,137,712
                             Cash ....................................................................                       14,801
                             Receivables:
                               Securities sold .......................................................  $ 3,528,876
                               Interest ..............................................................    3,153,431       6,682,307
                                                                                                        -----------    ------------
                             Total assets ............................................................                  159,834,820
                                                                                                                       ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:                 Payables:
                               Securities purchased ..................................................    6,418,106
                               Dividends to shareholders (Note 1f) ...................................      181,457
                               Offering costs (Note 1e) ..............................................      154,899
                               Investment adviser (Note 2) ...........................................       15,503       6,769,965
                                                                                                        -----------
                             Accrued expenses and other liabilities ..................................                       48,909
                                                                                                                       ------------
                             Total liabilities .......................................................                    6,818,874
                                                                                                                       ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets:                  Net assets ..............................................................                 $153,015,946
                                                                                                                       ============
- ------------------------------------------------------------------------------------------------------------------------------------
Capital:                     Capital Stock (200,000,000 shares authorized) (Note 4):
                               Preferred Stock, par value $.10 per share (2,714 shares of AMPS* issued
                               and outstanding at $25,000 per share liquidation preference) ..........                 $ 67,850,000
                               Common Stock, par value $.10 per share (6,806,667 shares issued and
                               outstanding) .......................................................... $    680,667
                             Paid-in capital in excess of par ........................................  100,535,260
                             Undistributed investment income -- net ..................................      630,935
                             Accumulated realized capital losses on investments -- net ...............   (3,736,311)
                             Unrealized depreciation on investments -- net ...........................  (12,944,605)
                                                                                                       ------------
                             Total -- Equivalent to $12.51 net asset value per share of Common Stock
                             (market price -- $12.00) ................................................                   85,165,946
                                                                                                                       ------------
                             Total capital ...........................................................                 $153,015,946
                                                                                                                       ============
- ------------------------------------------------------------------------------------------------------------------------------------
*     Auction Market Preferred Stock.

      See Notes to Financial Statements.


                                       F-27
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<pre>
                                                                               MuniHoldings Insured Fund III, Inc., October 31, 1999

STATEMENT OF OPERATIONS (unaudited)
                             For the Period May 28, 1999+ to October 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------

Investment                   Interest and amortization of premium and discount earned ...............                  $  3,661,947
Income (Note 1d):
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:                    Investment advisory fees (Note 2) ......................................  $   360,701
                             Commission fees (Note 4) ...............................................       63,848
                             Accounting services (Note 2) ...........................................       25,079
                             Professional fees ......................................................       17,455
                             Directors' fees and expenses ...........................................       10,921
                             Transfer agent fees ....................................................       10,567
                             Listing fees ...........................................................        6,230
                             Printing and shareholder reports .......................................        4,542
                             Custodian fees .........................................................        4,500
                             Pricing fees ...........................................................        2,617
                             Other ..................................................................        2,809
                                                                                                       -----------
                             Total expenses before reimbursement ....................................      509,269
                             Reimbursement of expenses (Note 2) .....................................     (371,595)
                                                                                                       -----------
                             Total expenses after reimbursement .....................................                       137,674
                                                                                                                       ------------
                             Investment income -- net ...............................................                     3,524,273
                                                                                                                       ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Realized &                   Realized loss on investments -- net ....................................                    (3,736,311)
Unrealized Loss on           Unrealized depreciation on investments -- net ..........................                   (12,944,605)
Investments -- Net                                                                                                     ------------
(Notes 1b, 1d & 3):          Net Decrease in Net Assets Resulting from Operations ...................                  $(13,156,643)
                                                                                                                       ============
- ------------------------------------------------------------------------------------------------------------------------------------

+     Commencement of operations.

      See Notes to Financial Statements.


                                  F-28</PRE>
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<PRE>
STATEMENT OF CHANGES IN NET ASSETS (unaudited)
                                                                                                                    For the Period
                                                                                                                    May 28, 1999+ to
                             Increase (Decrease) in Net Assets:                                                     October 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------

Operations:                  Investment income -- net ..............................................................   $  3,524,273
                             Realized loss on investments -- net ...................................................     (3,736,311)
                             Unrealized depreciation on investments -- net .........................................    (12,944,605)
                                                                                                                       ------------
                             Net decrease in net assets resulting from operations ..................................    (13,156,643)
                                                                                                                       ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends to                 Investment income -- net:
Shareholders                   Common Stock ........................................................................     (2,075,094)
(Note 1f):                     Preferred Stock .....................................................................       (818,244)
                                                                                                                       ------------
                             Net decrease in net assets resulting from dividends to shareholders ...................     (2,893,338)
                                                                                                                       ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Stock                Proceeds from issuance of Common Stock ................................................    102,000,000
Transactions                 Proceeds from issuance of Preferred Stock .............................................     67,850,000
(Notes 1e & 4):              Offering costs resulting from the issuance of Common Stock ............................       (219,940)
                             Offering and underwriting costs resulting from the issuance of Preferred Stock ........       (664,138)
                                                                                                                       ------------
                             Net increase in net assets derived from capital stock transactions ....................    168,965,922
                                                                                                                       ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets:                  Total increase in net assets ..........................................................    152,915,941
                             Beginning of period ...................................................................        100,005
                                                                                                                       ------------
                             End of period* ........................................................................   $153,015,946
                                                                                                                       ============
- ------------------------------------------------------------------------------------------------------------------------------------
                            *Undistributed investment income -- net ................................................   $    630,935
                                                                                                                       ============
- ------------------------------------------------------------------------------------------------------------------------------------
+     Commencement of operations.

      See Notes to Financial Statements.


                                       F-29
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<pre>
                                                                               MuniHoldings Insured Fund III, Inc., October 31, 1999

FINANCIAL HIGHLIGHTS (unaudited)

                             The following per share data and ratios have been derived
                             from information provided in the financial statements.                                  For the Period
                                                                                                                    May 28, 1999+ to
                             Increase (Decrease) in Net Asset Value:                                                October 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------

Per Share                    Net asset value, beginning of period ................................................  $      15.00
Operating                                                                                                            -----------
Performance:                 Investment income -- net ............................................................           .51
                             Realized and unrealized loss on investments -- net ..................................         (2.45)
                                                                                                                    ------------
                             Total from investment operations ....................................................         (1.94)
                                                                                                                    ------------
                             Less dividends to Common Stock shareholders from investment income -- net ...........          (.30)
                                                                                                                    ------------
                             Capital charge resulting from issuance of Common Stock ..............................          (.03)
                                                                                                                    ------------
                             Effect of Preferred Stock activity:++
                               Dividends to Preferred Stock shareholders:
                                 Investment income -- net ........................................................          (.12)
                               Capital charge resulting from issuance of Preferred Stock .........................          (.10)
                                                                                                                    ------------
                             Total effect of Preferred Stock activity ............................................          (.22)
                                                                                                                    ------------
                             Net asset value, end of period ......................................................  $      12.51
                                                                                                                    ============
                             Market price per share, end of period ...............................................  $      12.00
                                                                                                                    ============
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment             Based on market price per share .....................................................       (18.08%)@
Return:**                                                                                                           ============
                             Based on net asset value per share ..................................................       (14.60%)@
                                                                                                                    ============
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios Based on              Total expenses, net of reimbursement*** .............................................          .34%*
Average Net Assets                                                                                                  ============
of Common Stock:             Total expenses*** ...................................................................         1.27%*
                                                                                                                    ============
                             Total investment income -- net*** ...................................................         8.79%*
                                                                                                                    ============
                             Amount of dividends to Preferred Stock shareholders .................................         2.04%*
                                                                                                                    ============
                             Investment income -- net, to Common Stock shareholders ..............................         6.75%*
                                                                                                                    ============
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios Based on              Total expenses, net of reimbursement ................................................          .21%*
Total Average                                                                                                       ============
Net Assets:+++***            Total expenses ......................................................................          .78%*
                                                                                                                    ============
                             Total investment income -- net ......................................................         5.37%*
                                                                                                                    ============
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios Based on              Dividends to Preferred Stock shareholders ...........................................         3.21%*
Average Net Assets                                                                                                  ============
Of Preferred Stock:

- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:           Net assets, net of Preferred Stock, end of period (in thousands) ....................  $    85,166
                                                                                                                    ============
                             Preferred Stock outstanding, end of period (in thousands) ...........................  $    67,850
                                                                                                                    ============
                             Portfolio turnover ..................................................................       42.13%
                                                                                                                    ============
- ------------------------------------------------------------------------------------------------------------------------------------
Leverage:                    Asset coverage per $1,000 ...........................................................  $     2,255
                                                                                                                    ============


                                       F-30</PRE>















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<PRE>
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends Per                Investment income -- net ............................................................  $       301
Share on Preferred                                                                                                  ============
Stock Outstanding:
- ------------------------------------------------------------------------------------------------------------------------------------

  *   Annualized.
 **   Total investment returns based on market value, which can be significantly
      greater or lesser than the net asset value, may result in substantially
      different returns. Total investment returns exclude the effects of sales
      charges.
***   Do not reflect the effect of dividends to Preferred Stock shareholders.
  +   Commencement of operations.
 ++   The Fund's Preferred Stock was issued on June 17, 1999.
+++   Includes Common and Preferred Stock average net assets.
  @   Aggregate total investment return.

      See Notes to Financial Statements.


NOTES TO FINANCIAL STATEMENTS (unaudited)

1. Significant Accounting Policies:
MuniHoldings Insured Fund III, Inc. (the "Fund") is reg-istered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The Fund's financial statements are prepared in accordance
with generally accepted accounting principles, which may require the use of
management accruals and estimates. These unaudited financial statements reflect
all adjustments, which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. Prior to commencement of operations on May 28,
1999, the Fund had no operations other than those relating to organizational
matters and the sale of 6,667 shares of Common Stock on May 20, 1999 to Fund
Asset Management, L.P. ("FAM") for $100,005. The Fund determines and makes
available for publication the net asset value of its Common Stock on a weekly
basis. The Fund's Common Stock is listed on the New York Stock Exchange under
the symbol MSR. The following is a summary of significant accounting policies
followed by the Fund.

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

(b) Derivative financial instruments -- The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.

o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on


                                       F-31
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<pre>
                           MuniHoldings Insured Fund III, Inc., October 31, 1999


NOTES TO FINANCIAL STATEMENTS (concluded)

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

o Options -- The Fund is authorized to write covered call options and purchase
call and put options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an equivalent
liability. The amount of the liability is subsequently marked to market to
reflect the current market value of the option written.

When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).

Written and purchased options are non-income producing investments.

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

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

(e) Offering expenses -- Direct expenses relating to the public offering of the
Fund's Common and Preferred Stock were charged to capital at the time of
issuance of the shares.

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

2. Investment Advisory Agreement and Transactions with Affiliates:

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

FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .55% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock. For the period May 28, 1999 to
October 31, 1999, FAM earned fees of $360,701, of which $339,031 was voluntarily
waived. In addition, FAM also reimbursed the Fund $32,564 in additional
expenses.

During the period May 28, 1999 to October 31, 1999, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, received
underwriting fees of $508,875 in connection with the issuance of the Fund's
Preferred Stock.

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

                                       F-32</PRE>















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

3. Investments:

Purchases and sales of investments, excluding short-term securities, for the
period May 28, 1999 to October 31, 1999 were $213,328,152 and $56,489,132,
respectively.

Net realized gains (losses) for the period May 28, 1999 to October 31, 1999 and
net unrealized losses as of October 31, 1999 were as follows:

- --------------------------------------------------------------------------------
                                                 Realized           Unrealized
                                              Gains (Losses)          Losses
- --------------------------------------------------------------------------------
Long-term investments ..................       $ (3,980,031)       $(12,944,605)
Financial futures contracts ............            243,720                  --
                                               ------------        ------------
Total ..................................       $ (3,736,311)       $(12,944,605)
                                               ============        ============
- --------------------------------------------------------------------------------

As of October 31, 1999, net unrealized depreciation for Federal income tax
purposes aggregated $12,944,605, of which $13,008,451 related to appreciated
securities and $63,846 related to depreciated securities. The aggregate cost of
investments at October 31, 1999 for Federal income tax purposes was
$166,082,317.

4. Capital Stock Transactions:

The Fund is authorized to issue 200,000,000 shares of capital stock, including
Preferred Stock, par value $.10 per share, all of which were initially
classified as Common Stock. The Board of Directors is authorized, however, to
reclassify any unissued shares of capital stock without approval of holders of
Common Stock.

Common Stock

Shares issued and outstanding during the period May 28, 1999 to October 31, 1999
increased by 6,800,000 from shares sold.

Preferred Stock

Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the
Fund, with a par value of $.10 per share and a liquidation preference of $25,000
per share, that entitle their holders to receive cash dividends at an annual
rate that may vary for the successive dividend periods. The yield in effect at
October 31, 1999 was 3.34%.

In connection with the offering of AMPS, the Board of Directors reclassified
2,714 shares of unissued capital stock as AMPS. Shares issued and outstanding
during the period May 28, 1999 to October 31, 1999 increased by 2,714 as a
result of the AMPS offering.

The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the period May 28, 1999 to October 31, 1999, MLPF&S, an affiliate
of FAM, earned $51,572 as commissions.

5. Subsequent Event:

On November 8, 1999, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.072000 per share,
payable on November 29, 1999 to shareholders of record as of November 22, 1999.


                                       F-33</pre>




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<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 February 29, 2000 </font></td>
  </tr>
</TABLE>
<p></p>

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<pre>
                                                                  MuniHoldings Insured Fund IV, Inc., February 29, 2000
 SCHEDULE OF INVESTMENTS (unaudited)                                                                     (in Thousands)

                  S&P     Moody's   Face
STATE           Ratings   Ratings  Amount   Issue                                                                Value

Alabama--2.4%   AAA       Aaa     $ 2,000   Jefferson County, Alabama, Sewer Revenue Bonds, Series D, 5.75%
                                            due 2/01/2027 (b)                                                   $  1,931

Alaska--1.2%    AAA       Aaa       1,000   Anchorage, Alaska, Water Revenue Refunding Bonds, 6% due
                                            9/01/2024 (a)                                                            991

Arizona--1.2%   A1+       P1        1,000   Pinal County, Arizona, IDA, PCR (Newmont Mining), DATES, 3.80%
                                            due 12/01/2009 (e)                                                     1,000

Colorado--1.2%  NR*       Aa2       1,000   Colorado HFA, Revenue Refunding Bonds (S/F Program), AMT,
                                            Senior Series A-2, 6.60% due 5/01/2028                                 1,014

District of     AAA       Aaa       2,500   District of Columbia, GO, Refunding, Series B, 5.25% due
Columbia--2.7%                              6/01/2026 (c)                                                          2,179

Florida--5.1%   NR*       VMIG1++     100   Hillsborough County, Florida, IDA, PCR, Refunding (Tampa
                                            Electric Company Project), VRDN, 3.80% due 9/01/2025 (e)                 100
                AAA       Aaa       4,000   Tampa Bay, Florida, Water Utility System Revenue Bonds, 6%
                                            due 10/01/2024 (b)                                                     4,036

Illinois--10.5% AAA       Aaa       2,500   Chicago, Illinois, GO, Series A, 6.75% due 1/01/2035 (b)(f)            2,678
                AAA       Aaa       1,200   Chicago, Illinois, Wastewater Transmission, Revenue Bonds,
                                            Second Lien, 6% due 1/01/2030 (d)                                      1,183
                AAA       Aaa       1,725   Chicago, Illinois, Water Revenue Refunding Bonds, 5.50% due
                                            11/01/2022 (b)                                                         1,593
                AAA       Aaa       2,000   Metropolitan Pier and Exposition Authority, Illinois, Dedicated
                                            State Tax Revenue Refunding Bonds (McCormick Plant Expansion
                                            Project), 5.50% due 12/15/2024 (b)                                     1,850
                NR*       Aaa       1,250   Northern Illinois University Revenue Refunding Bonds (Auxiliary
                                            Facilities System), 6% due 4/01/2024 (a)                               1,245

Massachusetts                               Massachusetts State Water Resources Authority, Revenue
- --3.5%                                      Refunding Bonds, Series A (b):
                AAA       Aaa       1,270     6% due 8/01/2016                                                     1,305
                AAA       Aaa       1,500     6% due 8/01/2017                                                     1,534

Michigan--8.4%  AAA       Aaa       2,000   Detroit, Michigan, Water Supply System Revenue Bonds, Senior
                                            Lien, Series A, 5.875% due 7/01/2029 (b)                               1,960
                AA        Aa2       2,000   Michigan State Hospital Finance Authority, Revenue Refunding
                                            Bonds (Ascension Health Credit), Series A, 6.125% due 11/15/2026       1,950
                AAA       Aaa       3,635   Wayne Charter County, Michigan, Airport Revenue Bonds (Detroit
                                            Metropolitan--Wayne County Airport), AMT, Series A, 5% due
                                            12/01/2028 (d)                                                         2,986

Mississippi     AAA       Aaa       1,000   Walnut Grove, Mississippi, Correctional Authority, COP, 6% due
- --1.2%                                      11/01/2019 (a)                                                         1,000

Nevada--3.6%    AAA       Aaa       3,000   Washoe County, Nevada, School District, GO, 5.875% due
                                            6/01/2020 (c)                                                          2,963

New             AAA       Aaa       4,000   Nassau Health Care Corporation, New York, Health System
York--18.4%                                 Revenue Bonds, 5.75% due 8/01/2022 (c)                                 3,882
                AAA       Aaa       4,000   New York City, New York, GO, Refunding, Series H, 5.375%
                                            due 8/01/2027 (c)                                                      3,613
                AAA       Aaa       3,115   New York State Dormitory Authority Revenue Bonds (Mental
                                            Health Services Facilities), Series B, 5.375% due 2/15/2026 (c)        2,808
                                            New York State Urban Development Corporation Revenue Bonds (a):
                AAA       Aaa       2,480     (Correctional Capital Facilities), Series 6, 5.375% due
                                              1/01/2025                                                            2,248


                                       F-36</PRE>















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<PRE>
                AAA       Aaa       2,500     (Correctional Facilities Service Contract), Series C, 6%
                                              due 1/01/2029                                                        2,496

Ohio--3.4%      NR*       Aaa       1,745   Aurora, Ohio, City School District, COP, 6.10% due 12/01/2019 (d)      1,764
                AAA       Aaa       1,000   Kent State University, Ohio, University Revenue Bonds, 6%
                                            due 5/01/2024 (a)                                                      1,002

Pennsylvania    AAA       Aaa       1,500   Allegheny County, Pennsylvania, Port Authority, Special
- --1.8%                                      Transportation Revenue Bonds, 6% due 3/01/2024 (d)                     1,500

South           AAA       Aaa       2,250   Spartanburg, South Carolina, Sanitation Sewer District, Sewer
Carolina--2.3%                              System Revenue Refunding Bonds, Series B, 5% due 3/01/2026 (d)         1,914

Tennessee--4.1% AAA       Aaa       3,500   Metropolitan Government of Nashville and Davidson County,
                                            Tennessee, Health and Education Facilities Board Revenue
                                            Refunding Bonds (Ascension Health Credit), Series A, 5.875%
                                            due 11/15/2028 (a)                                                     3,385

Texas--11.6%    A1+       NR*       2,200   Harris County, Texas, Health Facilities Development
                                            Corporation, Hospital Revenue Refunding Bonds (Methodist
                                            Hospital), VRDN, 3.85% due 12/01/2025 (e)                              2,200
                AAA       Aaa       2,835   Houston, Texas, Water and Sewer System Revenue Bonds, Junior
                                            Lien, Series C, 5.25% due 12/01/2022 (b)                               2,543
                AAA       Aaa       2,700   Texas Technology University, Financing System Revenue Refunding
                                            and Improvement Bonds, 6th Series, 5% due 2/15/2029 (a)                2,267
                AAA       Aaa       2,500   Travis County, Texas, Health Facilities Development Corporation,
                                            Revenue Refunding Bonds (Ascension Health Credit), Series A,
                                            5.875% due 11/15/2024 (a)                                              2,419

Washington      AAA       Aaa       1,505   King County, Washington, Sewer Revenue Bonds, Second Series, 6%
- --13.2%                                     due 1/01/2020 (b)                                                      1,506
                NR*       Aaa       3,445   Lewis County, Washington, GO, Refunding, 5.75% due 12/01/2024 (a)      3,321
                AAA       Aaa       2,500   Seattle, Washington, Municipal Light and Power Revenue Bonds,
                                            6% due 10/01/2024 (d)                                                  2,462
                AAA       Aaa       3,500   Seattle, Washington, Water System Revenue Bonds, Series B, 6%
                                            due 7/01/2029 (b)                                                      3,476

                Total Investments (Cost--$79,055)--95.8%                                                          78,304

                Variation Margin on Financial Futures Contracts**--(0.1%)                                            (56)

                Other Assets Less Liabilities--4.3%                                                                3,504
                                                                                                               ---------
                Net Assets--100.0%                                                                             $  81,752
                                                                                                               =========

             (a)AMBAC Insured.
             (b)FGIC Insured.
             (c)FSA Insured.
             (d)MBIA Insured.
             (e)The interest rate is subject to change periodically based upon
                prevailing market rates. The interest rate shown is the rate in
                effect at February 29, 2000.
             (f)Represents collateral in connection with open financial futures
                contracts.
              ++Highest short-term rating by Moody's Investors Service, Inc.
               *Not Rated.
              **Financial futures contracts sold as of February 29, 2000 were as
                follows:
              ------------------------------------------------------------------
                                                              (in Thousands)
              ------------------------------------------------------------------
                Number of                          Expiration
                Contracts        Issue                Date            Value
                ------------------------------------------------------------
                      90   US Treasury Bonds       June 2000       $   8,522
                ------------------------------------------------------------
                Total Financial Futures Contracts Sold
                (Total Contract Price--$8,497)                     $   8,522
                                                                   =========
                ------------------------------------------------------------

                See Notes to Financial Statements.

Portfolio
Abbreviations

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

AMT    Alternative Minimum Tax (subject to)
COP    Certificates of Participation
DATES  Daily Adjustable Tax-Exempt Securities
GO     General Obligation Bonds
HFA    Housing Finance Agency
IDA    Industrial Development Authority
PCR    Pollution Control Revenue Bonds
S/F    Single-Family
VRDN   Variable Rate Demand Notes



                                       F-37
</Pre>
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<pre>
                                                                   MuniHoldings Insured Fund IV, Inc., February 29, 2000
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL (unaudited)
                    As of February 29, 2000

Assets:             Investments, at value (identified cost--$79,055,077)                                     $78,304,197
                    Cash                                                                                          73,342
                    Receivables:
                      Securities sold                                                       $ 5,469,799
                      Interest                                                                1,164,960
                      Investment adviser                                                         11,371        6,646,130
                                                                                            -----------      -----------
                    Total assets                                                                              85,023,669
                                                                                                             -----------

Liabilities:        Payables:
                      Securities purchased                                                    2,837,866
                      Offering costs                                                            240,366
                      Dividends to shareholders                                                  82,199
                      Variation margin                                                           56,250        3,216,681
                                                                                            -----------
                    Accrued expenses                                                                              54,498
                                                                                                             -----------
                    Total liabilities                                                                          3,271,179
                                                                                                             -----------

Net Assets:         Net assets                                                                               $81,752,490
                                                                                                             ===========

Capital:            Capital Stock (200,000,000 shares authorized):
                      Preferred Stock, par value $.10 per share (1,266 shares of
                      AMPS* issued and outstanding at $25,000
                      per share liquidation preference)                                                      $31,650,000
                      Common Stock, par value $.10 per share (3,441,482 shares issued
                      and outstanding)                                                      $   344,148
                    Paid-in capital in excess of par                                         50,769,541
                    Undistributed investment income--net                                        311,346
                    Accumulated realized capital losses on investments--net                    (546,352)
                    Unrealized depreciation on investments--net                                (776,193)
                                                                                            -----------
                    Total--Equivalent to $14.56 net asset value per share of
                    Common Stock (market price--$12.875)                                                      50,102,490
                                                                                                             -----------
                    Total capital                                                                            $81,752,490
                                                                                                             ===========

                    *Auction Market Preferred Stock.

                    See Notes to Financial Statements.


STATEMENT OF OPERATIONS (unaudited)
                    For the Period September 24, 1999++ to February 29, 2000
Investment          Interest and amortization of premium and discount earned                                 $ 1,889,368
Income:

Expenses:           Investment advisory fees                                                $   178,562
                    Commission fees                                                              30,927
                    Accounting services                                                          23,159


                                       F-38</PRE>













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<!-- MARKER LABEL="sheet: 39, page: 39" -->
<PRE>
                    Professional fees                                                            17,240
                    Transfer agent fees                                                          12,338
                    Directors' fees and expenses                                                  8,913
                    Custodian fees                                                                3,881
                    Listing fees                                                                  3,663
                    Printing and shareholder reports                                              2,906
                    Pricing fees                                                                  2,371
                    Other                                                                         2,472
                                                                                            -----------
                    Total expenses before reimbursement                                         286,432
                    Reimbursement of expenses                                                  (173,007)
                                                                                            -----------
                    Total expenses after reimbursement                                                           113,425
                                                                                                             -----------
                    Investment income--net                                                                     1,775,943
                                                                                                             -----------

Realized &          Realized loss on investments--net                                                           (546,352)
Unrealized          Unrealized depreciation on investments--net                                                 (776,193)
Loss on                                                                                                      -----------
Investments--Net:   Net Increase in Net Assets Resulting from Operations                                     $   453,398
                                                                                                             ===========

                  ++Commencement of operations.

                    See Notes to Financial Statements.


STATEMENT OF CHANGES IN NET ASSETS (unaudited)

                                                                                                           For the Period
                                                                                                  September 24, 1999++ to
                    Increase (Decrease) in Net Assets:                                                  February 29, 2000

Operations:         Investment income--net                                                                   $ 1,775,943
                    Realized loss on investments--net                                                           (546,352)
                    Unrealized depreciation on investments--net                                                 (776,193)
                                                                                                             -----------
                    Net increase in net assets resulting from operations                                         453,398
                                                                                                             -----------

Dividends to        Investment income--net:
Shareholders:         Common Stock                                                                            (1,061,356)
                      Preferred Stock                                                                           (403,241)
                                                                                                             -----------
                    Net decrease in net assets resulting from dividends to shareholders                       (1,464,597)
                                                                                                             -----------

Capital Stock       Proceeds from issuance of Common Stock                                                    51,522,225
Transactions:       Proceeds from issuance of Preferred Stock                                                 31,650,000
                    Offering costs resulting from the issuance of Common Stock                                  (131,366)
                    Offering and underwriting costs resulting from the issuance of Preferred Stock              (377,175)
                                                                                                             -----------
                    Net increase in net assets derived from capital stock transactions                        82,663,684
                                                                                                             -----------

Net Assets:         Total increase in net assets                                                              81,652,485
                    Beginning of period                                                                          100,005
                                                                                                             -----------
                    End of period*                                                                           $81,752,490
                                                                                                             ===========

                   *Undistributed investment income--net                                                     $   311,346
                                                                                                             ===========
                  ++Commencement of operations.

                    See Notes to Financial Statements.


                                       F-39
</PRE>

























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<!-- MARKER LABEL="sheet: 40, page: 40" -->
<PRE>
                                                                   MuniHoldings Insured Fund IV, Inc., February 29, 2000
FINANCIAL HIGHLIGHTS (unaudited)
The following per share data and ratios have been derived
from information provided in the financial statements.                                                    For the Period
                                                                                                 September 24, 1999++ to
Increase (Decrease) in Net Asset Value:                                                                February 29, 2000

Per Share           Net asset value, beginning of period                                                     $     15.00
Operating                                                                                                    -----------
Performance:        Investment income--net                                                                           .52
                    Realized and unrealized loss on investments--net                                                (.37)
                                                                                                             -----------
                    Total from investment operations                                                                 .15
                                                                                                             -----------
                    Less dividends to Common Stock shareholders from investment income--net                         (.31)
                                                                                                             -----------
                    Capital charge resulting from issuance of Common Stock                                          (.04)
                                                                                                             -----------
                    Effect of Preferred Stock activity:++++
                      Dividends to Preferred Stock shareholders:
                           Investment income--net                                                                   (.12)
                    Capital charge resulting from issuance of Preferred Stock                                       (.12)
                                                                                                             -----------
                    Total effect of Preferred Stock activity                                                        (.24)
                                                                                                             -----------
                    Net asset value, end of period                                                           $     14.56
                                                                                                             ===========
                    Market price per share, end of period                                                    $    12.875
                                                                                                             ===========

Total Investment    Based on market price per share                                                              (12.06%)+++
Return:**                                                                                                    ===========
                    Based on net asset value per share                                                             (.55%)+++
                                                                                                             ===========

Ratios Based on     Total expenses, net of reimbursement***                                                         .59%*
Average Net                                                                                                  ===========
Assets of           Total expenses***                                                                              1.49%*
Common Stock:                                                                                                ===========
                    Total investment income--net***                                                                9.21%*
                                                                                                             ===========
                    Amount of dividends to Preferred Stock shareholders                                            2.09%*
                                                                                                             ===========
                    Investment income--net, to Common Stock shareholders                                           7.12%*
                                                                                                             ===========

Ratios Based on     Total expenses, net of reimbursement                                                            .35%*
Total Average                                                                                                ===========
Net                 Total expenses                                                                                  .88%*
Assets:++++++***                                                                                             ===========
                    Total investment income--net                                                                   5.46%*
                                                                                                             ===========

Ratios Based on     Dividends to Preferred Stock Shareholders                                                      3.04%*
Average Net                                                                                                  ===========
Assets of
Preferred Stock:

Supplemental        Net assets, net of Preferred Stock, end of period (in thousands)                         $    50,102
Data:                                                                                                        ===========
                    Preferred Stock outstanding, end of period (in thousands)                                $    31,650
                                                                                                             ===========
                    Portfolio turnover                                                                            43.63%
                                                                                                             ===========

Leverage:           Asset coverage per $1,000                                                                $     2,583
                                                                                                             ===========

Dividends           Investment income--net                                                                   $       319
Per Share                                                                                                    ===========
On Preferred
Stock
Outstanding:

                                       F-40</PRE>















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











<PRE>
- ------------------------------------------------------------------------------------------------------------------------------------
                   *Annualized.
                  **Total investment returns based on market value, which can be
                    significantly greater or lesser than the net asset value, may result
                    in substantially different returns. Total investment returns exclude
                    the effects of sales charges.
                 ***Do not reflect the effect of dividends to Preferred Stock
                    shareholders.
                  ++Commencement of operations.
                ++++The Fund's Preferred Stock was issued on September 30, 1999.
              ++++++Includes Common and Preferred Stock average net assets.
                 +++Aggregate total investment return.

                    See Notes to Financial Statements.


NOTES TO FINANCIAL STATEMENTS (unaudited)

1. Significant Accounting Policies:
MuniHoldings Insured Fund IV, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Fund's financial statements are
prepared in accordance with generally accepted accounting
principles, which may require the use of management accruals and
estimates. These unaudited financial statements reflect all
adjustments, which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All
such adjustments are of a normal recurring nature. Prior to
commencement of operations on September 24, 1999, the Fund had no
operations other than those relating to organizational matters and
the sale of 6,667 shares of Common Stock on September 14, 1999 to
Fund Asset Management, L.P. ("FAM") for $100,005. The Fund
determines and makes available for publication the net asset value
of its Common Stock on a weekly basis. The Fund's Common Stock is
listed on the New York Stock Exchange under the symbol MOU. The
following is a summary of significant accounting policies followed
by the Fund.

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

(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.

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

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


                                       F-41

</PRE>

























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
















<PRE>
MuniHoldings Insured Fund IV, Inc., February 29, 2000


NOTES TO FINANCIAL STATEMENTS (concluded)

proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).

Written and purchased options are non-income producing investments.

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

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

(e) Offering expenses--Direct expenses relating to the public
offering of the Fund's Common and Preferred Stock were charged to
capital at the time of issuance of the shares.

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


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

FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .55% of
the Fund's average weekly net assets, including proceeds from the
issuance of Preferred Stock. For the period September 24, 1999 to
February 29, 2000, FAM earned fees of $178,562, of which $143,413
was voluntarily waived. In addition, FAM also reimbursed the Fund
$29,594 in additional expenses.

During the period September 24, 1999 to February 29, 2000, Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate
of FAM, received underwriting fees of $237,375 in connection with
the issuance of the Fund's Preferred Stock.

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

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


3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period September 24, 1999 to February 29, 2000 were
$104,317,936 and $28,031,258, respectively.

Net realized losses for the period September 24, 1999 to February
29, 2000 and net unrealized losses as of February 29, 2000 were as
follows:

- ------------------------------------------------------------
                                    Realized      Unrealized
                                      Losses        Losses
- ------------------------------------------------------------
Long-term investments             $  (540,107)   $  (750,880)
Financial futures contracts            (6,245)       (25,313)
                                  -----------    -----------
Total                             $  (546,352)   $  (776,193)
                                  ===========    ===========
- ------------------------------------------------------------

As of February 29, 2000, net unrealized depreciation for Federal
income tax purposes aggregated $750,880, of which $375,973 related
to appreciated securities and $1,126,853 related to depreciated
securities. The aggregate cost of investments at February 29, 2000
for Federal income tax purposes was $79,055,077.

4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of holders of Common Stock.

Common Stock
Shares issued and outstanding during the period September 24, 1999
to February 29, 2000 increased by 3,434,815 from shares sold.

Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund, with a par value of $.10 per share and a
liquidation preference of $25,000 per share, that entitle their
holders to



                                       F-42</PRE>
















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












<PRE>
receive cash dividends at an annual rate that may vary
for the successive dividend periods. The yield in effect at February
29, 2000 was 2.32%.

In connection with the offering of AMPS, the Board of Directors
reclassified 1,266 shares of unissued capital stock as AMPS. Shares
issued and outstanding during the period September 24, 1999 to
February 29, 2000 increased by 1,266 as a result of the AMPS
offering.

The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the period September
24, 1999 to February 29, 2000, MLPF&S, an affiliate of FAM, earned
$23,827 as commissions.

5. Subsequent Event:
On March 7, 2000, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.075200 per share, payable on March 30, 2000 to shareholders of
record as of March 17, 2000.


                                       F-43
</PRE>





















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















<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>

<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-44</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</TABLE>
<br>
<hr size=5 noshade width=600 align=LEFT><p>&nbsp;

























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
















<p><table width=600><tr>
    <td  align=center><font size=2><B>Pro Forma Combined Schedule of Investments
      for Muniholdings Insured Fund II, Inc. <BR>
      Muniholdings Insured Fund
III, Inc. And Muniholdings Insured Fund IV, Inc. <BR>
      as of March 31, 2000 (Unaudited) </B></font></td>
  </tr></TABLE>
<TABLE 0 CELLSPACING=0 CELLPADDING=0 border="0">
  <tr>
    <td valign="bottom" align="left" width="131">&nbsp;</td>
    <td valign="TOP" width="9">&nbsp;</td>
    <td valign="bottom" align="center" width="34">&nbsp;</td>
    <td valign="TOP" width="7">&nbsp;</td>
    <td valign="bottom" align="center" width="40">&nbsp;</td>
    <td valign="TOP" width="10">&nbsp;</td>
    <td valign="bottom" align="center" width="35">&nbsp;</td>
    <td valign="TOP" width="4">&nbsp;</td>
    <td valign="TOP" width="118">&nbsp;</td>
    <td valign="TOP" width="1">&nbsp;</td>
    <td valign="bottom" align="center" colspan="8" rowspan="2"><font size="1"><b>Value (In
      Thousands) </b></font>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr>
    <td valign="bottom" align="left" height="21" width="131">&nbsp;</td>
    <td valign="TOP" height="21" width="9">&nbsp;</td>
    <td valign="bottom" align="center" height="21" width="34">&nbsp;</td>
    <td valign="TOP" height="21" width="7">&nbsp;</td>
    <td valign="bottom" align="center" height="21" width="40">&nbsp;</td>
    <td valign="TOP" height="21" width="10">&nbsp;</td>
    <td valign="bottom" align="center" height="21" width="35">&nbsp;</td>
    <td valign="TOP" height="21" width="4">&nbsp;</td>
    <td valign="TOP" height="21" width="118">&nbsp;</td>
    <td valign="TOP" height="21" width="1">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" align="left" width="131"> <font size=1>
      <p><b>State</b>
      </font></td>
    <td valign="TOP" width="9">&nbsp;</td>
    <td valign="bottom" align="center" width="34"> <font size=1>
      <p><b>S&amp;P<br>
        Ratings</b>
      </font></td>
    <td valign="TOP" width="7">&nbsp;</td>
    <td valign="bottom" align="center" width="40"> <font size=1>
      <p><b>Moody&#146;s<br>
        Ratings </b>
      </font></td>
    <td valign="TOP" width="10">&nbsp;</td>
    <td valign="bottom" align="center" width="35"> <font size=1>
      <p><b>Face<br>
        Amount</b>
      </font></td>
    <td valign="TOP" width="4">&nbsp;</td>
    <td valign="TOP" width="118"> <font size=1>
      <p><font size="2"> </font>
      </font></td>
    <td valign="TOP" width="1">&nbsp;</td>
    <td valign="bottom" align="center" width="58"><font size="1"><b>MuniHoldings<br>
      Insured<br>
      Fund II, Inc. <br>
      </b> </font></td>
    <td valign="bottom" align="center" width="1">&nbsp;</td>
    <td valign="bottom" align="center" width="4"><font size="1"></font></td>
    <td valign="bottom" align="center" width="58"><font size="1"><b>MuniHoldings<br>
      Insured<br>
      Fund III, Inc. <br>
      </b></font></td>
    <td valign="bottom" align="center" width="1">&nbsp;</td>
    <td valign="bottom" align="center" width="58"><font size="1"><b>MuniHoldings<br>
      Insured<br>
      Fund IV, Inc. </b></font></td>
    <td valign="bottom" align="right" width="1">&nbsp;</td>
    <td valign="bottom" align="center" width="64"><font size=1><b>Combined Fund</b></font></td>
  </tr>
  <TR>
    <TD VALIGN="TOP" colspan="18">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" align="left" width="131"><font size="1">Alabama</font><font size="1">
      &#151; 0.4%</font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">AAA</font></TD>
    <TD VALIGN="TOP" width="7"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="center" width="40"><font size="1">Aaa</font></TD>
    <TD VALIGN="TOP" width="10"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="35"><font size="1">&nbsp;2,000&nbsp;</font></TD>
    <TD VALIGN="TOP" width="4"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="118"><font size="1">Jefferson County, Alabama,<br>
      &nbsp;&nbsp;&nbsp;&nbsp;Sewer Revenue Bonds,<br>
      &nbsp;&nbsp;&nbsp;&nbsp;Series D, 5.75% <br>
      &nbsp;&nbsp;&nbsp;&nbsp;due 2/01/2027(b)</font></TD>
    <TD VALIGN="TOP" width="1"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="TOP" width="1"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="4"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;&nbsp;</font></TD>
    <TD VALIGN="bottom" align="right" width="1"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">$1,981</font></TD>
    <TD VALIGN="bottom" align="right" width="1"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">$1,981</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="18">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">
      <font size="1">Alaska &#151; 1.2% </font>
    </TD>
    <TD VALIGN="TOP" width="9">&nbsp;</TD>
    <TD VALIGN="TOP" width="34">
      <font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" width="35">
      <font size="1">1,000 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1">Anchorage, Alaska, Water<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Revenue Refunding<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Bonds,6% due<br>
        &nbsp;&nbsp;&nbsp;&nbsp;9/01/2024(a) </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;&nbsp;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">1,011</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">1,011</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">AAA </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">&nbsp; Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" width="35">
      <P><font size="1">&nbsp; 2,995 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1">Alaska, Energy Authority<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Power Revenue<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Refunding Bonds<br>
        &nbsp;&nbsp;&nbsp;&nbsp;(Bradley Lake),<br>
        &nbsp;&nbsp;&nbsp;&nbsp;4th Series, 6% <br>
        &nbsp;&nbsp;&nbsp;&nbsp;
        due 7/01/2020 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58">
      <P><font size="1">&nbsp; &#151;</font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">$3,120&nbsp;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">3,120</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">AAA </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">&nbsp; Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" width="35">
      <P><font size="1">&nbsp; 1,700 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1">Matanuska-Susitna Boro,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Alaska, GO, Series<br>
        &nbsp;&nbsp;&nbsp;&nbsp;A, 6% due 3/01/2020 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58">
      <P><font size="1">&nbsp; &#151;</font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;&nbsp;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">1,733</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">1,733</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="18">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">
      <P><font size="1">Arizona &#151; 0.9%</font>
    </TD>
    <TD VALIGN="TOP" width="9">&nbsp;</TD>
    <TD VALIGN="TOP" width="34">
      <P><font size="1">BBB+ </font>
    </TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">Baa1 </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" width="35">
      <P><font size="1">&nbsp;&nbsp;2,170 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1">Arizona Health Facilities<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Authority Revenue<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Bonds (Catholic<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Healthcare West),<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Series A, 6.625%<br>
        &nbsp;&nbsp;&nbsp;&nbsp;
         due 7/01/2020 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">$2,132</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;&nbsp;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">2,132</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">A-1+ </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">&nbsp; P-1 </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" width="35">
      <P><font size="1">&nbsp; 1,700 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="top" align="left" width="118">
      <P><font size="1">Coconino County, Arizona,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Pollution Control<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Corporation Revenue<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Bonds (Arizona<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Public Service<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Co. Project),<br>
        &nbsp;&nbsp;&nbsp;&nbsp;VRDN, AMT,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Series A, 3.95% due<br>
        &nbsp;&nbsp;&nbsp;&nbsp;2/01/2031(e) </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58">
      <P><font size="1">&nbsp; &#151;</font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">1,700&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">1,700</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="top" align="left" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">A-1 </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">&nbsp; P-1 </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="35">
      <P><font size="1">&nbsp; 400 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="top" align="left" width="118">
      <P><font size="1">Coconino County, Arizona,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Pollution Control<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Corporation Revenue<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Bonds (Arizona<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Public Service<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Co.-Navajo<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Project), VRDN,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;AMT, Series A,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;3.90% due<br>
        &nbsp;&nbsp;&nbsp;&nbsp;10/01/2029(e) </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"> <font size="1"> &#151;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">400&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">400</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="18">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"> <font size="1"> California &#151; 2.4% &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" width="35">
      <P><font size="1">&nbsp;&nbsp;5,000 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1">California HFA, Home<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Mortgage Revenue<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Bonds, AMT,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Series F, 0%<br>
        &nbsp;&nbsp;&nbsp;&nbsp;due 8/01/2031 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">652&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">652</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">NR* </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">&nbsp; A2 </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" width="35">
      <P><font size="1">&nbsp; 4,000 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P> <font size="1">California Health Facilities<br>
        &nbsp;&nbsp;&nbsp;&nbsp;
         Finance Authority<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Revenue
         Bonds<br>
        &nbsp;&nbsp;&nbsp;&nbsp;(Sedars-Sinai<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Medical Center),<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Series A,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;6.125% due<br>
        &nbsp;&nbsp;&nbsp;&nbsp;12/01/2024 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58">
      <P><font size="1">&nbsp; &#151;</font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">3,987&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">3,987</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">AA&#150; </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40"><font size="1"> Aa3 </font></TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" width="35">
      <P><font size="1">&nbsp; 1,500 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1">California State, GO,<br>
      &nbsp;&nbsp;&nbsp;&nbsp;Refunding, 5.50%<br>
      &nbsp;&nbsp;&nbsp;&nbsp;due 3/01/2018 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58">
      <P><font size="1">&nbsp; &#151;</font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">
      <P>&nbsp;
    </TD>
    <TD VALIGN="bottom" align="right" width="58">
      <P><font size="1">1,498&nbsp; </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64">
      <P><font size="1">1,498</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">BBB </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40"> <font size="1"> NR* </font></TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="35">
      <P><font size="1"> 2,500 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1"> Contra Costa County<br>
        &nbsp;&nbsp;&nbsp;&nbsp;California
         Public<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Financing Authority,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;
        Tax Allocation<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Revenue Refunding<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Bonds (Pleasant<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Hill Bart<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Etc. Redevelopment),<br>
        &nbsp;&nbsp;&nbsp;&nbsp;5.25% due 8/01/2028
        </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"> <font size="1"> 2,149 </font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;&nbsp;&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">2,149</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">A+ </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40"><font size="1">&nbsp;Aa3&nbsp; </font></TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="35"><font size="1">4,000 </font></TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="top" align="left" width="118">
      <P><font size="1">Los Angeles, California,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;
         Department of Water<br>
        &nbsp;&nbsp;&nbsp;&nbsp;and Power, Electric<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Plant Revenue<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Refunding Bonds,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;6% due<br>
        &nbsp;&nbsp;&nbsp;&nbsp;2/15/2028 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"> <font size="1"> &#151;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">4,040&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">4,040</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">AAA </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">&nbsp; Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="35">
      <P><font size="1">&nbsp; 3,000 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1">Port Oakland, California,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;
        AMT, Series K, 5.75%<br>
        &nbsp;&nbsp;&nbsp;&nbsp;
        due 11/01/202(b) </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58">
      <P><font size="1">&nbsp; &#151;</font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">2,989&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">2,989</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">AAA </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">&nbsp; Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="35">
      <P><font size="1">&nbsp; 4,000 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1">San Bernardino County,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;California, COP,<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Refunding (Medical<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Center Financing<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Project), 5.50%<br>
        &nbsp;&nbsp;&nbsp;&nbsp;due 8/01/2019(d) </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"> <font size="1"> &#151;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">3,916&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">3,916</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="center" width="34"><font size="1">&nbsp;AAA&nbsp; </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">&nbsp;Aaa&nbsp; </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="35">
      <P><font size="1">&nbsp; 4,000 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="left" width="118"> <font size="1">San Francisco, California,<br>
      &nbsp;&nbsp;&nbsp;&nbsp;City and County<br>
      &nbsp;&nbsp;&nbsp;&nbsp;Airport Commission,<br>
      &nbsp;&nbsp;&nbsp;&nbsp;International Airport<br>
      &nbsp;&nbsp;&nbsp;&nbsp;Revenue Bonds<br>
      &nbsp;&nbsp;&nbsp;&nbsp;
      Second Series, Issue<br>
      &nbsp;&nbsp;&nbsp;&nbsp;15B, 5% due<br>
      &nbsp;&nbsp;&nbsp;&nbsp;5/01/2024(d) </font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58">
      <P><font size="1">&nbsp; &#151;</font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">3,611&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">3,611</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="18">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">
      <P><font size="1">Colorado &#151; 2.4% </font><font size="1" face="Times">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34">&nbsp;</TD>
    <TD VALIGN="TOP" width="7"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="40">&nbsp;</TD>
    <TD VALIGN="TOP" width="10"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="35">&nbsp;</TD>
    <TD VALIGN="TOP" width="4"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1">Colorado HFA Revenue<br>
        &nbsp;&nbsp;&nbsp;&nbsp;
         Refunding Bonds (S/F<br>
        &nbsp;&nbsp;&nbsp;&nbsp;
         Program), AMT, Senior<br>
        &nbsp;&nbsp;&nbsp;&nbsp;
         Series A-2: </font>
    </TD>
    <TD VALIGN="TOP" width="1"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="58">&nbsp;</TD>
    <TD VALIGN="TOP" width="1"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58">&nbsp;</TD>
    <TD VALIGN="TOP" width="1"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="58">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="1"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="64">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"> <FONT SIZE=1>
      <P><font size="1">&nbsp;&nbsp;</font>
      </FONT></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="bottom" width="34"><font size="1">NR* </font></TD>
    <TD VALIGN="bottom" width="7">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" width="40"><font size="1">Aa2 </font></TD>
    <TD VALIGN="bottom" width="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" width="35"><font size="1">&nbsp;3,000</font></TD>
    <TD VALIGN="bottom" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" width="118"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.50%
      due 4/01/2031 </font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;&nbsp;&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">3,348&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">3,348</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34">&nbsp;</TD>
    <TD VALIGN="TOP" width="7"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="40"> <FONT  SIZE=1>
      <P>&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" width="10"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="center" width="35">
      <P><font size="1">&nbsp; 1,000 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118">
      <P><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.60%
        due 5/01/2028 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="top" align="right" width="58">
      <P><font size="1">&nbsp;&#151;</font>
    </TD>
    <TD VALIGN="top" width="1">&nbsp;</TD>
    <TD VALIGN="top" width="4">
      <P>&nbsp;
    </TD>
    <TD VALIGN="top" align="right" width="58">
      <P><font size="1">&nbsp; &#151;</font>
    </TD>
    <TD VALIGN="top" width="1">&nbsp;</TD>
    <TD VALIGN="top" align="right" width="58">
      <P><font size="1">&nbsp; 1,021</font>
    </TD>
    <TD VALIGN="top" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="top" align="right" width="64">
      <P><font size="1">&nbsp; 1,021</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131">&nbsp;</TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="34"><font size="1">AAA </font></TD>
    <TD VALIGN="TOP" width="7">&nbsp;</TD>
    <TD VALIGN="TOP" align="center" width="40">
      <P><font size="1">&nbsp; Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="10">&nbsp;</TD>
    <TD VALIGN="TOP" width="35">
      <P><font size="1">&nbsp; 2,000 </font>
    </TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="TOP" width="118"> <font size="1"> Colorado Health Facilities<br>
      &nbsp;&nbsp;&nbsp;&nbsp;
       Authority, Hospital<br>
      &nbsp;&nbsp;&nbsp;&nbsp;

      Revenue Refunding<br>
      &nbsp;&nbsp;&nbsp;&nbsp;
       Bonds (Poudre Valley<br>
      &nbsp;&nbsp;&nbsp;&nbsp;
       Health Care), Series A,<br>
      &nbsp;&nbsp;&nbsp;&nbsp;
       5.75% due
      12/01/2023 </font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"> <font size="1"> &#151;&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">1,977&nbsp;</font></TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="58"><font size="1">&#151;</font></TD>
    <TD VALIGN="bottom" align="right" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="64"><font size="1">1,977</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="131"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="9"><font size="1"></font></TD>
    <TD VALIGN="TOP" colspan="16">
      <hr size="1" noshade>
    </TD>
  </TR>
</TABLE>


<font size="2"> </font>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> F-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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<TABLE 0 CELLSPACING=0 CELLPADDING=0>
  <TR align="center" valign="bottom">
    <TD colspan="17" height="35"> <font size="1"><b><font size="2">Pro Forma Combined
      Schedule of Invesments for Muniholdings Insured Fund II, Inc.<br>
      Muniholdings Insured Fund III, Inc. and Muniholdings Insured Fund IV, Inc.
      <br>
      As of March 31, 2000 (Unaudited)(Continued) </font></b></font> </TD>
  </TR>
  <TR align="left">
    <TD valign="top" colspan="9">&nbsp;</TD>
    <TD valign="top" width="8">&nbsp;</TD>
    <TD align="center" colspan="7" valign="bottom">&nbsp;</TD>
  </TR>
  <TR align="left">
    <TD valign="top" colspan="9"><b></b></TD>
    <TD valign="top" width="8"><b></b></TD>
    <TD align="center" colspan="7" valign="bottom"><b><font size="1">Value (In
      Thousands)</font></b>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR align="left">
    <TD valign="bottom" width="83"><b><font size="1">State </font></b></TD>
    <TD valign="top" width="12"></TD>
    <TD valign="bottom" align="center" width="34"><b><font size="1">S&amp;P <br>
      Ratings </font></b></TD>
    <TD valign="bottom" align="center" width="12"></TD>
    <TD valign="bottom" align="center" width="36"><b><font size="1">Moody&#146;s<br>
      Ratings </font></b></TD>
    <TD valign="bottom" align="center" width="16"></TD>
    <TD align="center" valign="bottom" width="35"><b><font size="1">Face <br>
      Amount </font></b></TD>
    <TD valign="bottom" align="center" width="8"></TD>
    <TD valign="bottom" align="center" width="143"></TD>
    <TD valign="bottom" align="center" width="8"></TD>
    <TD align="center" valign="bottom" colspan="2"><b><font size="1">MuniHoldings
      <br>
      Insured <br>
      Fund II, Inc. </font></b></TD>
    <TD valign="bottom" align="center" colspan="2"><b><font size="1">MuniHoldings<br>
      Insured <br>
      Fund III, Inc. </font></b></TD>
    <TD align="center" valign="bottom" colspan="2"><b><font size="1">MuniHoldings<br>
      Insured <br>
      Fund IV, Inc. </font></b></TD>
    <TD valign="bottom" align="center" width="42"><b><font size="1">Combined<br>
      Fund </font></b></TD>
  </TR>
  <TR align="left">
    <TD colspan="17" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"> <font size="1">Colorado &#151; (Concluded)<br>
      </font></TD>
    <TD valign="top" width="12"><font size="1">&nbsp; &nbsp;&nbsp;</font></TD>
    <TD valign="top" width="34"> <font size="1">AAA</font></TD>
    <TD valign="top" width="12"><font size="1">&nbsp; &nbsp;&nbsp;</font></TD>
    <TD valign="top" width="36"> <font size="1">Aaa</font></TD>
    <TD valign="top" width="16"><font size="1">&nbsp; &nbsp;&nbsp;</font></TD>
    <TD align="right" valign="top" width="35"> <font size="1">5,000</font></TD>
    <TD valign="top" width="8"><font size="1">&nbsp; &nbsp;&nbsp;</font></TD>
    <TD valign="top" width="143"><font size="1">Denver, Colorado, City and <br>
      &nbsp;&nbsp;County Airport Revenue<br>
      &nbsp;&nbsp;Refunding Bonds, Series E, <br>
      &nbsp;&nbsp;5.50% due 11/15/2025(d)</font></TD>
    <TD valign="top" width="8"> <font size="1">&nbsp; &nbsp;&nbsp;</font></TD>
    <TD align="right" valign="top" width="54"><font size="1">4,788</font></TD>
    <TD valign="top" align="right" width="13"> <font size="1">&nbsp;&nbsp;&nbsp;</font></TD>
    <TD align="right" valign="top" width="48"><font size="1">&#151;</font></TD>
    <TD valign="top" align="right" width="22"> <font size="1">&nbsp;&nbsp;&nbsp
      </font></TD>
    <TD align="right" valign="top" width="41"><font size="1">&#151;</font></TD>
    <TD valign="top" align="right" width="19"> <font size="1">&nbsp;&nbsp;&nbsp;</font></TD>
    <TD valign="top" align="right" width="42"><font size="1">4,788</font></TD>
  </TR>
  <TR align="left">
    <TD colspan="17" valign="top"></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"></TD>
    <TD valign="top" width="12"></TD>
    <TD colspan="15" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"></TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34">
      <P><font size="1">A1+ </font>
    </TD>
    <TD valign="top" width="12"> </TD>
    <TD valign="top" width="36"> <font size="1"> NR* </font> </TD>
    <TD valign="top" width="16"> </TD>
    <TD align="right" valign="top" width="35"> <font size="1"> 600 </font> </TD>
    <TD valign="top" width="8"> </TD>
    <TD valign="top" width="143"> <font size="1"> Pitkin County, Colorado, IDR,<br>
      &nbsp;&nbsp;Refunding (Aspen Skiing &nbsp;&nbsp;<br>
      &nbsp;&nbsp;Company Project), VRDN, AMT, <br>
      &nbsp;&nbsp;Series B, 4% due &nbsp;&nbsp;4/01/2014(e) </font> </TD>
    <TD valign="top" width="8"> </TD>
    <TD align="right" valign="top" width="54"><font size="1">&#151;</font></TD>
    <TD valign="top" align="right" width="13"><font size="1"></font></TD>
    <TD valign="top" align="right" width="48"><font size="1">600</font></TD>
    <TD valign="top" align="right" width="22"><font size="1"></font></TD>
    <TD align="right" valign="top" width="41"><font size="1">&#151;</font></TD>
    <TD valign="top" align="right" width="19"><font size="1"></font></TD>
    <TD valign="top" align="right" width="42"><font size="1">600 </font></TD>
  </TR>
  <TR align="left">
    <TD colspan="17" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">
      <P><font size="1">Connecticut &#151; 1.5%</font>
    </TD>
    <TD valign="top" width="12">&nbsp;
    <TD valign="top" width="34">
      <P><font size="1">NR* </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="36">
      <P><font size="1">Baa3 </font>
    </TD>
    <TD valign="top" width="16"><font size="1"></font></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">8,000 </font>
    </TD>
    <TD valign="top" width="8"></TD>
    <TD valign="top" width="143">
      <P><font size="1">Mashantucket Western Pequot <br>
        &nbsp;&nbsp;Tribe, Connecticut, Special &nbsp;<br>
        &nbsp;&nbsp;&nbsp;Revenue Refunding Bonds,<br>
        &nbsp;&nbsp;Sub-Series A, 5.50%<br>
        &nbsp;&nbsp; due 9/01/2028 </font>
    </TD>
    <TD valign="top" width="8"> </TD>
    <TD align="right" valign="top" width="54"><font size="1">6,981 </font></TD>
    <TD valign="top" align="right" width="13"> </TD>
    <TD align="right" valign="top" width="48"><font size="1">&#151; </font></TD>
    <TD valign="top" align="right" width="22"> </TD>
    <TD align="right" valign="top" width="41"><font size="1">&#151; </font></TD>
    <TD valign="top" align="right" width="19"> </TD>
    <TD valign="top" align="right" width="42"><font size="1">6,981 </font></TD>
  </TR>
  <TR align="left">
    <TD colspan="17" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">
      <P><font size="1">Delaware &#151; 0.7% </font>
    </TD>
    <TD valign="top" width="12">&nbsp;&nbsp;&nbsp;</TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12">&nbsp;&nbsp;&nbsp;</TD>
    <TD valign="top" width="36">
      <P><font size="1">Aaa </font>
    </TD>
    <td width="16"> </TD>
    <font size="1"></font>
    <td align="right" valign="top" width="35"><font size="1">3,430 </font>
    <TD align="right" valign="top" width="8">
      <P>&nbsp;
    </TD>
    <TD valign="top" align="left" width="143"><font size="1">Delaware State Housing
      Authority,<br>
      &nbsp;&nbsp;S/F Mortgage Revenue &nbsp;&nbsp;Refunding <br>
      &nbsp;&nbsp;Bonds, AMT, Senior Series A-1,<br>
      &nbsp;&nbsp;5.55% due 7/01/2019(a) </font></TD>
    <TD valign="top" width="8"> </TD>
    <TD valign="top" align="right" width="54"><font size="1">&#151; </font></TD>
    <TD align="right" valign="top" width="13">
      <P>&nbsp;
    </TD>
    <TD valign="top" align="right" width="48"><font size="1">3,283 </font></TD>
    <TD align="right" valign="top" width="22">
      <P>&nbsp;
    </TD>
    <TD valign="top" align="right" width="41"></TD>
    <TD align="right" valign="top" width="19">
      <P><font size="1">&#151; </font>
    </TD>
    <TD valign="top" align="right" width="42"><font size="1">3,283 </font></TD>
  </TR>
  <TR align="left">
    <TD colspan="17" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">
      <P><font size="1">District of Columbia<br>
        &#151; 4.6% </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34">
      <P><font size="1">A1+ </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="36">
      <P><font size="1">VMIG1&#134; </font>
    </TD>
    <TD valign="top" width="16"></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">3,300 </font>
    </TD>
    <TD valign="top" width="8"></TD>
    <TD valign="top" width="151" colspan="2"><font size="1">District of Columbia,
      GO, <br>
      &nbsp;&nbsp;General Fund Recovery, VRDN,<br>
      &nbsp;&nbsp;Series B-1, 3.85% due 6/01/2003(e) </font> </TD>
    <TD align="right" valign="top" width="54"><font size="1">3,300 </font></TD>
    <TD valign="top" align="right" width="13"></TD>
    <TD valign="top" align="right" width="48"><font size="1">&#151;</font></TD>
    <td align="right" valign="top" width="22">&nbsp; <font size="1"></font>
    <td align="right" valign="top" width="41"><font size="1">&#151; </font>
    <TD align="right" valign="top" width="19">&nbsp;</TD>
    <TD valign="top" align="right" width="42"><font size="1">3,300 </font></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">&nbsp;</TD>
    <TD valign="top" width="12">&nbsp;</TD>
    <TD colspan="15" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"><font size="1"></font></TD>
    <TD valign="top" width="12"><font size="1"></font></TD>
    <TD valign="middle" align="left" width="34"><font size="1"><br>
      AAA</font></TD>
    <TD valign="bottom" width="12"><font size="1"></font></TD>
    <TD valign="middle" width="36"> <font size="1"> <br>
      Aaa </font> </TD>
    <TD valign="bottom" width="16"><font size="1"></font></TD>
    <TD align="right" valign="bottom" width="35"> <font size="1"> 8,000<br>
      2,500 </font></TD>
    <TD valign="top" width="8"><font size="1"></font></TD>
    <TD valign="bottom" width="151" colspan="2"> <font size="1"> District of Columbia,
      GO, <br>
      &nbsp; Refunding:<br>
      &nbsp;&nbsp;&nbsp;&nbsp;Series A, 5.25% due 6/01/2027(d)<br>
      &nbsp;&nbsp;&nbsp;&nbsp;Series B, 5.25% due 6/01/2026(c) </font> </TD>
    <TD align="right" valign="bottom" width="54"> <font size="1">&#151; <br>
      &#151; </font> </TD>
    <TD valign="bottom" align="right" width="13"><font size="1"></font></TD>
    <TD valign="bottom" align="right" width="48"> <font size="1"> 7,208<br>
      &#151; </font> </TD>
    <TD valign="bottom" align="right" width="22"><font size="1"></font></TD>
    <TD align="right" valign="bottom" width="41"> <font size="1">&#151;<br>
      2,257 </font></TD>
    <TD valign="bottom" align="right" width="19"><font size="1"></font></TD>
    <TD valign="bottom" align="right" width="42"> <font size="1"> 7,208 <br>
      2,257 </font> </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">&nbsp;</TD>
    <TD valign="top" width="12">&nbsp;</TD>
    <TD colspan="15" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"><font size="1"></font></TD>
    <TD valign="top" width="12"><font size="1"></font></TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12"><font size="1"></font></TD>
    <TD valign="top" width="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD valign="top" width="16"><font size="1"></font></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">5,115 </font>
    </TD>
    <TD valign="top" width="8"> </TD>
    <TD valign="top" width="143"><font size="1">District of Columbia, Water and
      <br>
      &nbsp;&nbsp;Sewer Authority, Public &nbsp;Utility<br>
      &nbsp;&nbsp;Revenue Refunding Bonds, <br>
      &nbsp;&nbsp;5.50% due 10/01/2023(c) </font></TD>
    <TD valign="top" width="8"> </TD>
    <TD align="right" valign="top" width="54"><font size="1">4,945 </font></TD>
    <TD valign="top" align="right" width="13">
      <P>&nbsp;
    </TD>
    <TD align="right" valign="top" width="48"><font size="1">&#151; </font></TD>
    <TD valign="top" align="right" width="22">
      <P>&nbsp;
    </TD>
    <TD align="right" valign="top" width="41"><font size="1">&#151; </font></TD>
    <TD valign="top" align="right" width="19">
      <P>&nbsp;
    </TD>
    <TD valign="top" align="right" width="42"><font size="1">4,945 </font></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">&nbsp;</TD>
    <TD valign="top" width="12">&nbsp;</TD>
    <TD colspan="15" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"><font size="1"></font></TD>
    <TD valign="top" width="12"><font size="1"></font></TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12"><font size="1"></font></TD>
    <TD valign="top" width="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD valign="top" width="16"><font size="1"></font></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">5,000 </font>
    </TD>
    <TD valign="top" width="8"><font size="1"></font></TD>
    <TD valign="top" width="143">
      <P><font size="1">Washington, D.C., Convention <br>
        &nbsp;&nbsp;Center Authority, Dedicated Tax<br>
        &nbsp;&nbsp;Revenue Bonds, Senior Lien, <br>
        &nbsp;&nbsp;5% due 10/01/2021(a) </font>
    </TD>
    <TD valign="top" width="8"><font size="1"></font></TD>
    <TD align="right" valign="top" width="54">
      <P><font size="1">4,461 </font>
    </TD>
    <TD valign="top" align="right" width="13"><font size="1"></font></TD>
    <TD align="right" valign="top" width="48">
      <P><font size="1">&#151; </font>
    </TD>
    <TD valign="top" align="right" width="22"><font size="1"></font></TD>
    <TD align="right" valign="top" width="41">
      <P><font size="1">&#151; </font>
    </TD>
    <TD valign="top" align="right" width="19"></TD>
    <TD valign="top" align="right" width="42">
      <P><font size="1">4,461 </font>
    </TD>
  </TR>
  <TR align="left">
    <TD colspan="17" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">
      <P><font size="1">Florida &#151; 1.5% </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD valign="top" width="16"></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">3,000 </font>
    </TD>
    <TD valign="top" width="8"> </TD>
    <TD valign="top" width="143"><font size="1">Miami-Dade County, Florida, <br>
      &nbsp;&nbsp;Expressway Authority, Toll <br>
      &nbsp;&nbsp; System Revenue Bonds, 6.375%<br>
      &nbsp;&nbsp;due 7/01/2029(b)</font></TD>
    <TD valign="top" width="8"> </TD>
    <TD align="right" valign="top" width="54"><font size="1">&#151; </font></TD>
    <TD valign="top" align="right" width="13"> </TD>
    <TD align="right" valign="top" width="48"><font size="1">3,202 </font></TD>
    <TD valign="top" align="right" width="22"> </TD>
    <TD align="right" valign="top" width="41"><font size="1">&#151; </font></TD>
    <TD valign="top" align="right" width="19"> </TD>
    <TD valign="top" align="right" width="42"><font size="1">3,202 </font></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">&nbsp;</TD>
    <TD valign="top" width="12">&nbsp;</TD>
    <TD colspan="15" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"></TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD valign="top" width="16"></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">4,000 </font>
    </TD>
    <TD valign="top" width="8"></TD>
    <TD valign="top" width="143">
      <P><font size="1">Tampa Bay, Florida, Water <br>
        &nbsp;&nbsp;Utility System Revenue Bonds,<br>
        &nbsp;&nbsp;6% due 10/01/2024(b) </font>
    </TD>
    <TD valign="top" width="8"></TD>
    <TD align="right" valign="top" width="54">
      <P><font size="1">&#151; </font>
    </TD>
    <TD valign="top" align="right" width="13"></TD>
    <TD valign="top" align="right" width="48">
      <P><font size="1">&#151; </font>
    </TD>
    <TD valign="top" align="right" width="22"></TD>
    <TD align="right" valign="top" width="41">
      <P><font size="1">4,121 </font>
    </TD>
    <TD valign="top" align="right" width="19"></TD>
    <TD valign="top" align="right" width="42">
      <P><font size="1">4,121 </font>
    </TD>
  </TR>
  <TR align="left">
    <TD colspan="17" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">
      <P><font size="1">Georgia &#151; 1.1% </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="bottom" width="34"><font size="1">AAA <br>AAA </font></TD>
    <TD valign="bottom" width="12"></TD>
    <TD valign="bottom" width="36"><font size="1">Aaa<br>
      Aaa </font></TD>
    <TD valign="bottom" width="16"></TD>
    <TD align="right" valign="bottom" width="35"><font size="1">4,390 <br>1,355 </font>
    </TD>
    <TD valign="top" width="8"></TD>
    <TD valign="top" width="143"><font size="1">Metropolitan Atlanta, Georgia,<br>
      &nbsp;&nbsp;Rapid Transit Authority, Sales<br>
      &nbsp;&nbsp;Tax Revenue Bonds, Second <br>
      &nbsp;&nbsp;Indenture, Series B (d): <br>
      &nbsp;&nbsp;&nbsp;5.10% due 7/01/2017 <br>
       &nbsp;&nbsp;&nbsp;5.10% due 7/01/2020 </font>  </TD>
    <TD valign="top" width="8"></TD>
    <TD align="right" valign="bottom" width="54"><font size="1">4,119<br>
      1,244 </font> </TD>
    <TD valign="bottom" align="right" width="13"></TD>
    <TD valign="bottom" align="right" width="48"><font size="1">&#151; <br>
      &#151; </font> </TD>
    <TD valign="bottom" align="right" width="22"></TD>
    <TD align="right" valign="bottom" width="41"><font size="1">&#151;<br>
      &#151; </font></TD>
    <TD valign="bottom" align="right" width="19"></TD>
    <TD valign="bottom" align="right" width="42"><font size="1">4,119 <br>1,244 </font></TD>
  </TR>
  <TR align="left">
    <TD colspan="17" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">
      <P><font size="1">Hawaii &#151; 2.1% </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD valign="top" width="16"></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">10,000 </font>
    </TD>
    <TD valign="top" width="8"> </TD>
    <TD valign="top" width="143"><font size="1">Hawaii State, GO, Series <br>
      &nbsp;&nbsp; CT, 5.875% due 9/01/2018(c) </font></TD>
    <TD valign="top" width="8"> </TD>
    <TD align="right" valign="top" width="54"><font size="1">10,187 </font></TD>
    <TD valign="top" width="13"> </TD>
    <TD valign="top" align="right" width="48"><font size="1">&#151; </font></TD>
    <TD valign="top" width="22"> </TD>
    <TD align="right" valign="top" width="41"><font size="1">&#151; </font></TD>
    <TD valign="top" width="19"> </TD>
    <TD valign="top" align="right" width="42"><font size="1">10,187 </font></TD>
  </TR>
  <TR align="left">
    <TD colspan="17" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">
      <P><font size="1">Illinois &#151; 13.2% </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12"><font size="1"></font></TD>
    <TD valign="top" width="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD valign="top" width="16"><font size="1"></font></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">5,000 </font>
    </TD>
    <TD valign="top" width="8"> </TD>
    <TD valign="top" width="151" colspan="2"><font size="1">Chicago, Illinois,
      Board of<br>
      &nbsp;&nbsp;Education, GO (Chicago School <br>
      &nbsp;&nbsp;Reform), 5.75% due 12/01/2027(a) </font> </TD>
    <TD align="right" valign="top" width="54"><font size="1">4,894 </font></TD>
    <TD valign="top" width="13"> </TD>
    <TD valign="top" align="right" width="48"> <font size="1">&#151; </font> </TD>
    <TD valign="top" width="22"> </TD>
    <TD align="right" valign="top" width="41"><font size="1">&#151; </font></TD>
    <TD valign="top" width="19"><font size="1"></font></TD>
    <TD valign="top" align="right" width="42"><font size="1">4,894</font></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">&nbsp;</TD>
    <TD valign="top" width="12">&nbsp;</TD>
    <TD colspan="15" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"><font size="1"></font></TD>
    <TD valign="top" width="12"><font size="1"></font></TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12"> </TD>
    <TD valign="top" width="36"> <font size="1"> Aaa </font> </TD>
    <TD valign="top" width="16"> </TD>
    <TD align="right" valign="top" width="35"> <font size="1"> 8,485 </font> </TD>
    <TD valign="top" width="8"></TD>
    <TD valign="top" width="143"> <font size="1"> Chicago, Illinois, GO, Project<br>
      &nbsp;&nbsp;and Refunding, Series A, <br>
      &nbsp;&nbsp;5.125% due 1/01/2029(b) </font> </TD>
    <TD valign="top" width="8"><font size="1"></font></TD>
    <TD align="right" valign="top" width="54"> </TD>
    <TD valign="top" width="13"><font size="1"></font></TD>
    <TD valign="top" align="right" width="48"> <font size="1"> 7,507 </font> </TD>
    <TD valign="top" width="22"><font size="1"></font></TD>
    <TD align="right" valign="top" width="41"> <font size="1">&#151; </font> </TD>
    <TD valign="top" width="19"><font size="1"></font></TD>
    <TD valign="top" align="right" width="42"><font size="1">7,507 </font></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">&nbsp;</TD>
    <TD valign="top" width="12">&nbsp;</TD>
    <TD colspan="15" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"></TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD valign="top" width="16"></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">4,000 </font>
    </TD>
    <TD valign="top" width="8"></TD>
    <TD valign="top" width="143"><font size="1">Chicago, Illinois, GO, Refunding,<br>
      &nbsp;&nbsp; Series A-2, 6.25% due 1/01/2014</font></TD>
    <TD valign="top" width="8"> </TD>
    <TD align="right" valign="top" width="54"><font size="1">&#151; </font></TD>
    <TD valign="top" width="13"> </TD>
    <TD valign="top" align="right" width="48"><font size="1">4,310 </font></TD>
    <TD valign="top" width="22"> </TD>
    <TD align="right" valign="top" width="41"><font size="1">&#151; </font></TD>
    <TD valign="top" width="19"> </TD>
    <TD valign="top" align="right" width="42"><font size="1">4,310 </font></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">&nbsp;</TD>
    <TD valign="top" width="12">&nbsp;</TD>
    <TD colspan="15" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"></TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34"></TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="36"></TD>
    <TD valign="top" width="16"> </TD>
    <TD align="right" valign="top" width="35"></TD>
    <TD valign="top" width="8"></TD>
    <TD valign="bottom" width="143">&nbsp;</TD>
    <TD valign="top" width="8"><font size="1"></font></TD>
    <TD align="right" valign="top" width="54"><font size="1"></font></TD>
    <TD valign="top" width="13"><font size="1"></font></TD>
    <TD valign="top" align="right" width="48"><font size="1"></font></TD>
    <TD valign="top" width="22"><font size="1"></font></TD>
    <TD align="right" valign="top" width="41"><font size="1"></font></TD>
    <TD valign="top" width="19"><font size="1"></font></TD>
    <TD valign="top" align="right" width="42"><font size="1"></font></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83" height="12"><font size="1"></font></TD>
    <TD valign="top" width="12" height="12"><font size="1"></font></TD>
    <TD valign="bottom" width="34" height="12">
      <P><font size="1">AAA</font>
    </TD>
    <TD valign="top" width="12" height="12"><font size="1"></font></TD>
    <TD valign="bottom" width="36" height="12">
      <P><font size="1">Aaa</font>
    </TD>
    <TD valign="bottom" width="16" height="12">&nbsp;</TD>
    <TD align="right" valign="bottom" width="35" height="12">
      <P><font size="1">8,800 </font>
    </TD>
    <TD valign="bottom" width="8" height="12"></TD>
    <TD valign="bottom" width="151" height="12" colspan="2">
      <P><font size="1">Chicago, Illinois, GO, Series A (b):<br>
        &nbsp;&nbsp;&nbsp; 6% due 1/01/2021 </font>
    </TD>
    <TD align="right" valign="bottom" width="54" height="12"><font size="1">8,943
      </font></TD>
    <TD valign="bottom" width="13" height="12"> </TD>
    <TD valign="bottom" align="right" width="48" height="12"><font size="1">&#151;
      </font></TD>
    <TD valign="bottom" width="22" height="12"> </TD>
    <TD align="right" valign="bottom" width="41" height="12"><font size="1">&#151;
      </font></TD>
    <TD valign="bottom" width="19" height="12"> </TD>
    <TD valign="bottom" align="right" width="42" height="12"><font size="1">8,943
      </font></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"></TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD valign="top" width="16"></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">9,330 </font>
    </TD>
    <TD valign="top" width="8"></TD>
    <TD valign="top" width="143">
      <P><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;6% due 1/01/2022 </font>
    </TD>
    <TD valign="top" width="8"> </TD>
    <TD align="right" valign="top" width="54"><font size="1">9,459 </font></TD>
    <TD valign="top" width="13"> </TD>
    <TD valign="top" align="right" width="48"><font size="1">&#151; </font></TD>
    <TD valign="top" width="22"> </TD>
    <TD align="right" valign="top" width="41"><font size="1">&#151; </font></TD>
    <TD valign="top" width="19"> </TD>
    <TD valign="top" align="right" width="42"><font size="1">9,459 </font></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"></TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34"></TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="36"> </TD>
    <TD valign="top" width="16"></TD>
    <TD align="right" valign="top" width="35"> <font size="1"> 2,500 </font> </TD>
    <TD valign="top" width="8"></TD>
    <TD valign="top" width="143"> <font size="1"> &nbsp;&nbsp;&nbsp;&nbsp;6.75%
      due 1/01/2035 </font> </TD>
    <TD valign="top" width="8">&nbsp;</TD>
    <TD align="right" valign="top" width="54"> <font size="1">&#151; </font> </TD>
    <TD valign="top" width="13"></TD>
    <TD valign="top" align="right" width="48"> <font size="1">&#151; </font> </TD>
    <TD valign="top" width="22"></TD>
    <TD align="right" valign="top" width="41"> <font size="1"> 2,721 </font> </TD>
    <TD valign="top" width="19"></TD>
    <TD valign="top" align="right" width="42"><font size="1">2,721</font></TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83">&nbsp;</TD>
    <TD valign="top" width="12">&nbsp;</TD>
    <TD colspan="15" valign="top">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR align="left">
    <TD valign="top" width="83"></TD>
    <TD valign="top" width="12"></TD>
    <TD valign="top" width="34">
      <P><font size="1">AAA </font>
    </TD>
    <TD valign="top" width="12"><font size="1"></font></TD>
    <TD valign="top" width="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD valign="top" width="16"></TD>
    <TD align="right" valign="top" width="35">
      <P><font size="1">2,185 </font>
    </TD>
    <TD valign="top" width="8"></TD>
    <TD valign="top" width="143">
      <P><font size="1">Chicago, Illinois, Neighborhoods<br>
        &nbsp;&nbsp;Alive 21, GO, Series PG-A,<br>
        &nbsp;&nbsp;6% due 1/01/2017 </font>
    </TD>
    <TD valign="top" width="8"></TD>
    <TD align="right" valign="top" width="54">
      <P><font size="1">&#151; </font>
    </TD>
    <TD valign="top" width="13"></TD>
    <TD valign="top" align="right" width="48">
      <P><font size="1">&#151; </font>
    </TD>
    <TD valign="top" width="22"></TD>
    <TD align="right" valign="top" width="41">
      <P><font size="1">2,255 </font>
    </TD>
    <TD valign="top" width="19"></TD>
    <TD valign="top" align="right" width="42">
      <P><font size="1">2,255 </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"> F-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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<TABLE 0 CELLSPACING=0 CELLPADDING=0 WIDTH=630>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <P ALIGN="CENTER"><b><font size="2">Pro Forma Combined Schedule of Investments
        for MuniHoldings Insured Fund II, Inc.</font> <font size="2"><br>
        MuniHoldings Insured Fund III, Inc. and MuniHoldings Insured Fund IV,
        Inc.</font> <font size="2"><br>
        as of March 31, 2000 (Unaudited)(Continued)</font> </b>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="42"> </TD>
    <TD VALIGN="TOP" WIDTH="38"> </TD>
    <TD VALIGN="TOP" WIDTH="168"> </TD>
    <TD VALIGN="TOP" WIDTH="53"> </TD>
    <TD VALIGN="TOP" WIDTH="13"></TD>
    <TD VALIGN="TOP" WIDTH="50"> </TD>
    <TD VALIGN="TOP" WIDTH="11"></TD>
    <TD VALIGN="TOP" WIDTH="51"> </TD>
    <TD VALIGN="TOP" WIDTH="15"></TD>
    <TD VALIGN="TOP" WIDTH="40"></TD>
    <TD VALIGN="TOP" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="42"> </TD>
    <TD VALIGN="TOP" WIDTH="38"> </TD>
    <TD VALIGN="TOP" WIDTH="168"> </TD>
    <TD VALIGN="bottom" colspan="8" align="center"> <font size=1><b>Value (In
      Thousands)</b></font>
      <hr noshade size="1">
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align="left" WIDTH="99"> <b><font size="1">State </font> </b></TD>
    <TD align="center" WIDTH="37"> <b><font size="1">S&amp;P<br>
      Ratings </font> </b></TD>
    <TD align="center" WIDTH="42"> <b><font size="1">Moody&#146;s<br>
      Ratings </font> </b></TD>
    <TD align="center" WIDTH="38"> <b><font size="1">Face<br>
      Amount </font> </b></TD>
    <TD WIDTH="168">&nbsp;</TD>
    <TD align="center" colspan="2"> <b><font size="1">MuniHoldings <br>
      Insured<br>
      Fund II, Inc. </font> </b></TD>
    <TD align="center" colspan="2"> <b><font size="1">MuniHoldings<br>
      Insured<br>
      Fund III, Inc. </font> </b></TD>
    <TD align="center" colspan="2"> <b><font size="1">MuniHoldings <br>
      Insured<br>
      Fund IV, Inc. </font> </b></TD>
    <TD align="center" colspan="2"> <b><font size="1">Combined <br>
      Fund </font> </b></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> <font size="1">Illinois &#151; <br>
      (Concluded) </font> </TD>
    <TD VALIGN="top" align="center" WIDTH="37"> <font size="1">AAA </font> </TD>
    <TD VALIGN="top" align="center" WIDTH="42"> <font size="1">Aaa </font> </TD>
    <TD VALIGN="top" align="center" WIDTH="38"> <font size="1">3,400 </font> </TD>
    <TD VALIGN="TOP" WIDTH="168"> <font size="1">Chicago, Illinois, Skyway Toll
      Bridge &nbsp;&nbsp;<br>
      &nbsp;&nbsp; Revenue Refunding Bonds, 5.50%<br>
      &nbsp;&nbsp;due 1/01/2023(d) </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">3,239 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50"> <font size="1">&#151; </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51"> <font size="1">&#151; </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">3,239 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" WIDTH="37"> <font size="1">AAA </font> </TD>
    <TD VALIGN="top" align="center" WIDTH="42"> <font size="1">Aaa </font> </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">1,200 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168">
      <P><font size="1">Chicago, Illinois, Wastewater &nbsp;&nbsp;<br>
        &nbsp; Transmission Revenue Bonds,<br>
        &nbsp;&nbsp;Second Lien,<br>
        &nbsp;&nbsp;6% due 1/01/2030(d) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">1,210 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">1,210 </font></TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">1,725 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168">
      <P><font size="1">Chicago, Illinois, Water &nbsp;<br>
        &nbsp;&nbsp;Revenue Refunding Bonds, <br>
        &nbsp;&nbsp;5.50% due 11/01/2022(b) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">1,646 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">1,646 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">7,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168">
      <P><font size="1">Illinois State, GO, 5.375% <br>
        &nbsp;&nbsp; due 6/01/2024(b) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">7,106 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">7,106 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">4,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168">
      <P><font size="1">Melrose Park, Illinois, Water <br>
        &nbsp;&nbsp;RevenueBonds, Series A, <br>
        &nbsp;&nbsp;5.20% due 7/01/2018(d) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">3,768 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">3,768 </font></TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="bottom" align="center" WIDTH="37"> <font size="1">AAA<br>
      AAA </font> </TD>
    <TD VALIGN="bottom" align="center" WIDTH="42"> <font size="1">Aaa<br>
      Aaa </font> </TD>
    <TD VALIGN="bottom" align="center" WIDTH="38"> <font size="1">2,000<br>
      4,000 </font> </TD>
    <TD VALIGN="bottom" WIDTH="168"> <font size="1">Metropolitan Pier and Exposition
      <br>
      &nbsp; Authority, Illinois<br>
      &nbsp; Dedicated State Tax Revenue <br>
      &nbsp; Refunding Bonds (McCormick<br>
      &nbsp;&nbsp;Place Expansion Project):<br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.50% due 12/15/2024(b)<br>
      &nbsp;&nbsp;&nbsp;&nbsp; Series A, 5.25% due6/15/2027(a) </font> </TD>
    <TD VALIGN="bottom" align="right" WIDTH="53">
      <P><font size="1">&#151;<br>
        &#151; </font></P>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="50">
      <P><font size="1">&#151;<br>
        3,649 </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="51">
      <P><font size="1">1,917<br>
        &#151; </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="40"><font size="1">1,917<br>
      3,649 </font></TD>
    <TD VALIGN="bottom" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">NR* </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">1,250 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168"> <font size="1">Northern Illinois University
      Revenue <br>
      &nbsp;&nbsp; Refunding Bonds (Auxiliary<br>
      &nbsp;&nbsp; Facilities&nbsp;&nbsp;System),<br>
      &nbsp;&nbsp;6% due 4/01/2024(a) </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">1,267 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">1,267 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99">
      <P><font size="1">Indiana &#151; 2.7% </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">A1 </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">VMIG1&#134; </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168"> <font size="1">Jasper County, Indiana, PCR,
      &nbsp;&nbsp;<br>
      &nbsp;&nbsp; Refunding (Northern Indiana<br>
      &nbsp;&nbsp;Public Service), VRDN, Series<br>
      &nbsp;&nbsp;C, 3.85% due 4/01/2019(e) </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">500 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">500 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">3,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168">
      <p><font size="1">Indiana Health Facilities&nbsp;Financing &nbsp;<br>
        &nbsp;&nbsp; </font><font size="1">Authority, Hospital <br>
        &nbsp;&nbsp;Revenue Refunding Bonds<br>
        &nbsp;&nbsp;(Sisters of Saint Francis<br>
        &nbsp;&nbsp;Health), Series A, 5.375%<br>
        &nbsp;&nbsp;due 11/01/2027(d) </font> </p>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">3,196 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">3,196 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">NR* </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">9,280 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168"> <font size="1">Shelbyville, Indiana, &nbsp;&nbsp;Elementary
      &nbsp;<br>
      &nbsp;&nbsp; &nbsp;School Building<br>
      &nbsp;&nbsp;Corporation Revenue Bonds,<br>
      &nbsp;&nbsp; First Mortgage, <br>
      &nbsp;&nbsp;5.75% due 1/15/2022(c) </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">9,154 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">9,154 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> <font size="1">Kentucky &#151; 0.9% </font> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">4,250 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168"> <font size="1">Kentucky State Property and<br>
      &nbsp;&nbsp;Buildings Commission<br>
      </font><font size="1"> &nbsp;&nbsp;Revenue Refunding Bonds<br>
      &nbsp;&nbsp;(Project Number 64),<br>
      &nbsp;&nbsp;5.75% due 5/01/2011(d) </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">4,434 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">4,434 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> <font size="1">Louisiana &#151; 0.1% </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">A1+ </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">VMIG1&#134; </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">400 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168"> <font size="1">Louisiana State Offshore Terminal
      &nbsp;<br>
      &nbsp; Authority, Deepwater<br>
      &nbsp;&nbsp;Port Revenue Refunding<br>
      &nbsp;&nbsp;Bonds (1st Stage A-Loop<br>
      &nbsp;&nbsp;Inc.), &nbsp;VRDN, 3.85% due<br>
      &nbsp;&nbsp;9/01/2008(e) </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">400 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">400 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> <font size="1">Maryland &#151; 0.2% </font> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">A-1+ </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">VMIG-1 </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">900 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168"> <font size="1">University of Maryland, &nbsp;<br>
      &nbsp;&nbsp;University &nbsp;Revenue Bonds<br>
      &nbsp;&nbsp;&nbsp;(Equipment Loan<br>
      &nbsp;&nbsp;&nbsp;Program), VRDN, Series A,<br>
      &nbsp;&nbsp;&nbsp;3.80% due 7/01/2015(e) </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">900 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">900 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> <font size="1">Massachusetts &#151; 0.6% </font>
    </TD>
    <TD VALIGN="bottom" align="center" WIDTH="37">
      <P><font size="1">AAA<BR>
        AAA </font>
    </TD>
    <TD VALIGN="bottom" align="center" WIDTH="42">
      <P><font size="1">Aaa<br>
        Aaa </font>
    </TD>
    <TD VALIGN="bottom" align="center" WIDTH="38">
      <P><font size="1">1,270<br>
        1,500 </font>
    </TD>
    <TD VALIGN="bottom" WIDTH="168"> <font size="1">Massachusetts State Water
      <br>
      &nbsp;&nbsp;Resources Authority<br>
      &nbsp;&nbsp;RevenueRefunding <br>
      &nbsp;&nbsp;Bonds,Series A(b): &nbsp;&nbsp;&nbsp;<br>
      &nbsp;&nbsp;&nbsp; </font><font size="1">&nbsp;6% due 8/01/2016<br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6% due 8/01/2017 </font> </TD>
    <TD VALIGN="bottom" align="right" WIDTH="53">
      <P><font size="1">&#151;<br>
        </font><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="50">
      <P><font size="1">&#151;<br>
        </font><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="51">
      <P><font size="1">1,329<br>
        1,562 </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="40"><font size="1">1,329<br>
      1,562 </font></TD>
    <TD VALIGN="bottom" align="right" WIDTH="11">
      <P><font size="1"><br>
        </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> <font size="1">Michigan &#151; 3.5% </font> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">2,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168"> <font size="1">Detroit, Michigan, Water &nbsp;<br>
      &nbsp;&nbsp; Supply System Revenue<br>
      &nbsp;&nbsp; Bonds, Senior Lien, Series <br>
      &nbsp;&nbsp; A, 5.875% due 7/01/2029(b) </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">2,006 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">2,006 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">AA </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">Aa2 </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">2,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168"> <font size="1">Michigan State Hospital Finance
      <br>
      &nbsp;&nbsp;Authority Revenue Refunding<br>
      &nbsp;&nbsp;Bonds &nbsp;(Ascension Health <br>
      &nbsp;&nbsp;Credit), Series A, &nbsp;6.125% <br>
      &nbsp;&nbsp;due 11/15/2026 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">2,004 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">2,004 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" WIDTH="37">
      <P><font size="1">NR* </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="42">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="top" align="center" WIDTH="38">
      <P><font size="1">1,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="168"> <font size="1">Saint Clair County, Michigan,<br>
      &nbsp;&nbsp;Ecomomic Revenue Refunding<br>
      &nbsp;&nbsp;Bonds (Detroit Edison Company),<br>
      &nbsp;&nbsp;RIB, Series 282, 8.54% due 8/01/2024 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">1,661 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="40"><font size="1">1,661 </font> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="99"> </TD>
    <TD VALIGN="top" align="center" colspan="12">
      <hr noshade size="1">
    </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"> F-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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<!-- MARKER LABEL="sheet: 48, page: 48" -->
















<p><TABLE 0 CELLSPACING=0 CELLPADDING=0 width="630">
  <TR align="center" valign="bottom">
    <TD colspan="17"><b></b>
      <p align="CENTER"><font size="1"><b><font size="2"> Pro Forma Combined Schedule
        of Investments for Muniholdings Insured Fund II, Inc.<br>
        Muniholdings Insured Fund III, Inc. and Muniholdings Insured Fund IV,
        Inc.<br>
        as of March 31, 2000 (Unaudited)(Continued)</font></b></font></p>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD width="107">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD align="left" width="33">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD align="left" width="46">&nbsp;</TD>
    <TD width="14">&nbsp;</TD>
    <TD align="right" width="34">&nbsp;</TD>
    <TD width="1">&nbsp;</TD>
    <TD width="128">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD align="center" colspan="7"><font size="1"><b>Value (In Thousands) </b></font>
      <hr size="1" noshade>
</TD>
  </TR>
  <TR valign="bottom">
    <TD width="107"><font size="1"><b>State</b></font></TD>
    <TD width="12">&nbsp;</TD>
    <TD align="center" width="33"><font size="1"><b>S&amp;P<br>
      Ratings</b></font></TD>
    <TD align="center" width="12">&nbsp;</TD>
    <TD align="center" width="46"><font size="1"><b>Moody&#146;s<br>
      Ratings</b></font></TD>
    <TD align="center" width="14">&nbsp;</TD>
    <TD align="center" width="34"><font size="1"><b>Face<br>
      Amount</b></font></TD>
    <TD align="center" width="1">&nbsp;</TD>
    <TD align="center" width="128">&nbsp;</TD>
    <TD align="center" width="12">&nbsp;</TD>
    <TD align="center" colspan="2"><font size="1"><b>MuniHoldings<br>
      Insured<br>
       Fund II, Inc. </b></font> </TD>
    <TD align="center" colspan="2"><font size="1"><b>MuniHoldings<br>
      Insured<br>
      Fund III, Inc. </b></font></TD>
    <TD align="center" colspan="2"><font size="1"><b>MuniHoldings<br>
      Insured<br>
      </b></font><font size="1"><b>Fund IV, Inc. </b></font></TD>
    <TD align="center" width="47"><font size="1"><b>Combined<br>
      Fund </b></font> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">
      <P><font size="1"> Michigan &#151; (Concluded) </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">A-1+ </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">VMIG-1</font><font size="1">&#134;</font>
    </TD>
    <TD VALIGN="TOP" width="14"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">2,900 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">University of Michigan,<br>
        &nbsp;&nbsp;University Hospital Revenue<br>
        &nbsp;&nbsp;Bonds,VRDN, Series A,<br>&nbsp;&nbsp; 3.85% due 12/01/2027(e) </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="20"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">2,900 </font>
    </TD>
    <TD VALIGN="bottom" width="21"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="25"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">2,900 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">&nbsp;</TD>
    <TD VALIGN="TOP" width="12">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15" align="left">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107"></TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="14"></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">9,425 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Wayne Charter County,<br>
        &nbsp;&nbsp;Michigan,Airport Revenue<br>
        &nbsp;&nbsp;Bonds (Detroit Metropolitan-<br>&nbsp;&nbsp;Wayne County Airport),<br>&nbsp;&nbsp;AMT, Series A,
        5% due<br>&nbsp;&nbsp;12/01/2028(d) </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="20"></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">4,960 </font>
    </TD>
    <TD VALIGN="bottom" width="21"></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">3,114 </font>
    </TD>
    <TD VALIGN="bottom" width="25"></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">8,074 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">
      <P><font size="1">Minnesota &#151; 0.9% </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="14"></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">4,250 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Minneapolis, Minnesota,<br>&nbsp;&nbsp;Special School District<br>&nbsp;&nbsp;Number, COP, Series A,<br>&nbsp;&nbsp;5.90% due 2/01/2017 </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="20"></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">4,321 </font>
    </TD>
    <TD VALIGN="bottom" width="21"></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="25"></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">4,321 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">
      <P><font size="1">Mississippi &#151; 0.9% </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">BBB&#150; </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Ba1 </font>
    </TD>
    <TD VALIGN="TOP" width="14"></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">3,550 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Mississippi Business Finance<br>&nbsp;&nbsp;Corporation, Mississippi,<br>
        &nbsp;&nbsp;PCR, Refunding (System<br>&nbsp;&nbsp;Energy Resources Inc.<br>&nbsp;&nbsp;Project), 5.90% due<br>&nbsp;&nbsp;5/01/2022 </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">3,158 </font>
    </TD>
    <TD VALIGN="bottom" width="20"></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="21"></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="25"></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">3,158 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">&nbsp;</TD>
    <TD VALIGN="TOP" width="12">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15" align="left">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107"></TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="14"></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">1,000 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Walnut Grove, Mississippi,<br>&nbsp;&nbsp;Correctional Authority, COP,<br>&nbsp;&nbsp;6% due 11/01/2019(a) </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="20"></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="21"></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">1,019 </font>
    </TD>
    <TD VALIGN="bottom" width="25"></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">1,019 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">
      <P><font size="1">Nevada &#151; 3.4% </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA</font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" width="14"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">3,000 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Clark County, Nevada,<br>
        &nbsp;&nbsp;Airport Revenue Bonds,<br>&nbsp;&nbsp;Sub-Lien, Series A, 6%<br>
        &nbsp;&nbsp;due 7/01/2029(d) </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="20"></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">3,044 </font>
    </TD>
    <TD VALIGN="bottom" width="21"></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="25"></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">3,044 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">&nbsp;</TD>
    <TD VALIGN="TOP" width="12">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15" align="left">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107"></TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="14"></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">3,500 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Clark County, Nevada,<br>&nbsp;&nbsp;Passenger Facilities<br>&nbsp;&nbsp;Charge Revenue
        Refunding<br>
        &nbsp;&nbsp;Bonds (Las Vegas McCarran<br>
        &nbsp;&nbsp;International), 4.75% due<br>
         &nbsp;&nbsp;7/01/2022 </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="20"></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">2,989 </font>
    </TD>
    <TD VALIGN="bottom" width="21"></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="25"></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">2,989 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">&nbsp;</TD>
    <TD VALIGN="TOP" width="12">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15" align="left">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107"></TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="14"></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">7,000 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Las Vegas, Nevada, New<br>
         &nbsp;&nbsp;Convention and Visitors<br>
         &nbsp;&nbsp;Authority Revenue Bonds,<br>
         &nbsp;&nbsp; 5.75% due 7/01/2016(a) </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">7,097 </font>
    </TD>
    <TD VALIGN="bottom" width="20"></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="21"></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="25"></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">7,097 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">&nbsp;</TD>
    <TD VALIGN="TOP" width="12">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15" align="left">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107"></TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="14"></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">3,000 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Washoe County, Nevada,<br>
         &nbsp;&nbsp;School District, GO,<br>
         &nbsp;&nbsp;5.875% due 6/01/2020(c) </font>
    </TD>
    <TD VALIGN="TOP" width="12">
      <P>&nbsp;
    </TD>
    <TD VALIGN="bottom" align="right" width="42"><font size="1">&#151; </font></TD>
    <TD VALIGN="bottom" width="20"></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="21"></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">3,027 </font>
    </TD>
    <TD VALIGN="bottom" width="25"></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">3,027 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">&nbsp;</TD>
    <TD VALIGN="TOP" width="12">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15" align="left">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107"></TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">A1+ </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">P1 </font>
    </TD>
    <TD VALIGN="TOP" width="14"></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">300 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Washoe County, Nevada,<br>
        &nbsp;&nbsp;Water Facility Revenue<br>
        &nbsp;&nbsp;Bonds (Sierra Pacific Power<br>
        &nbsp;&nbsp;Company Project), AMT,<br>
        &nbsp;&nbsp;VRDN, 4% due<br>
        &nbsp;&nbsp;12/01/2020(e)
        </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="20"></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">300 </font>
    </TD>
    <TD VALIGN="bottom" width="21"></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="25"></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">300 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">
      <P><font size="1">New Jersey &#151; 0.1% </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="14"></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">660 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">New Jersey State Housing<br>
        &nbsp;&nbsp;and Mortgage Finance<br>
        &nbsp;&nbsp;Agency, Home Buyer<br>
        &nbsp;&nbsp;Revenue Refunding Bonds,<br>
        &nbsp;&nbsp;AMT, Series AA, 5.90%
        due<br>
        &nbsp;&nbsp;10/01/2029(d) </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">660 </font>
    </TD>
    <TD VALIGN="bottom" width="20"></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" width="21"></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1"> </font>
    </TD>
    <TD VALIGN="bottom" width="25"></TD>
    <TD VALIGN="bottom" align="right" width="47"><font size="1">660</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">
      <P><font size="1">New Mexico &#151; 1.0% </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="12"></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" width="14"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">5,000 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Farmington, New Mexico,<br>&nbsp;&nbsp;PCR, Refunding (Public<br>&nbsp;&nbsp;Service Company of<br>
        &nbsp;&nbsp;San Juan), Series C,<br>&nbsp;&nbsp;5.70% due<br>&nbsp;&nbsp;12/01/2016(a) </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">5,053</font>
    </TD>
    <TD VALIGN="bottom" width="20"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="21"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="25"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">5,053</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">
      <P><font size="1">New York &#151; 20.3%</font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">A&#150;</font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">VMIG1&#134;</font>
    </TD>
    <TD VALIGN="TOP" width="14"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">4,500 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Long Island Power<br>&nbsp;&nbsp;Authority, New York,<br>&nbsp;&nbsp;Electric System Revenue<br>&nbsp;&nbsp;Bonds, VRDN, Sub-Series<br>&nbsp;&nbsp;5, 3.80% due 5/01/2033(e) </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">4,500</font>
    </TD>
    <TD VALIGN="bottom" width="20"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="21"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="25"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">4,500</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">&nbsp;</TD>
    <TD VALIGN="TOP" width="12">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15" align="left">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" rowspan="3" width="107"><font size="1"></font><font size="1"></font><font size="1"></font></TD>
    <TD VALIGN="TOP" rowspan="3" width="12"><font size="1"></font><font size="1"></font><font size="1"></font></TD>
    <TD VALIGN="bottom" align="left" rowspan="3" width="33"><font size="1"></font>
      <font size="1">AAA<br>
      AAA</font> </TD>
    <TD VALIGN="bottom" rowspan="3" width="12"><font size="1"></font><font size="1"></font><font size="1"></font></TD>
    <TD VALIGN="bottom" align="left" rowspan="3" width="46"><font size="1"></font>
      <font size="1">Aaa<br>
      Aaa</font> </TD>
    <TD VALIGN="bottom" rowspan="3" width="14">
      <P>&nbsp;
      <font size="1"></font><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" rowspan="3" width="34"><font size="1"></font>
      <font size="1">5,000&nbsp;<br>
      10,000 </font> </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="bottom" rowspan="3" width="128"><font size="1">Long Island Power
      Authority,<br>
      &nbsp;&nbsp;New York, Electric System<br>&nbsp;&nbsp;Revenue Refunding Bonds,<br>&nbsp;&nbsp;Series A:<br>
      &nbsp;&nbsp;&nbsp;&nbsp;5.125% due 12/01/2022(c)<br>
      &nbsp;&nbsp;&nbsp;&nbsp;5.25% due 12/01/2026(d)</font></TD>
    <TD VALIGN="TOP" rowspan="3" width="12"><font size="1"></font>
      <P>&nbsp;
      <P>&nbsp;
    </TD>
    <TD VALIGN="bottom" align="right" rowspan="3" width="42"><font size="1"></font><font size="1">4,513<br>
      9,181</font></TD>
    <TD VALIGN="bottom" rowspan="3" width="20"><font size="1"></font>
      <P>&nbsp;
      <P>&nbsp;
    </TD>
    <TD VALIGN="bottom" align="right" rowspan="3" width="41"><font size="1"></font><font size="1">&#151;<br>
      &#151;</font></TD>
    <TD VALIGN="bottom" rowspan="3" width="21"><font size="1"></font>
      <P>&nbsp;
      <P>&nbsp;
    </TD>
    <TD VALIGN="bottom" align="right" rowspan="3" width="39"><font size="1"></font><font size="1">&#151;<br>
      &#151;</font></TD>
    <TD VALIGN="bottom" rowspan="3" width="25"><font size="1"></font>
      <P>&nbsp;
      <P>&nbsp;
    </TD>
    <TD VALIGN="bottom" align="right" rowspan="3" width="47"><font size="1"></font><font size="1">4,513<br>
      </font><font size="1">9,181</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">&nbsp;</TD>
    <TD VALIGN="TOP" width="12">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15" align="left">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA</font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" width="14"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">2,000</font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Metropolitan Transportation<br>&nbsp;&nbsp;Authority, New York,<br>&nbsp;&nbsp;Commuter Facilities Revenue<br>&nbsp;&nbsp;Bonds, Series A, 6% due<br>&nbsp;&nbsp;7/01/2016(b) </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="20"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">2,069</font>
    </TD>
    <TD VALIGN="bottom" width="21"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="25"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">2,069</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">&nbsp;</TD>
    <TD VALIGN="TOP" width="12">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15" align="left">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA</font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" width="14"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">2,000 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Metropolitan Transportation<br>&nbsp;&nbsp;Authority, New York,<br>&nbsp;&nbsp;Commuter Facilities<br>&nbsp;&nbsp;Revenue Refunding
        Bonds,<br>&nbsp;&nbsp;Series B, 5% due 7/01/2017(a) </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">1,852</font>
    </TD>
    <TD VALIGN="bottom" width="20"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="21"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="25"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">1,852 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107">&nbsp;</TD>
    <TD VALIGN="TOP" width="12">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15" align="left">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" width="107"><font size="1"></font></TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="left" width="33">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="left" width="46">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" width="14"><font size="1"> </font></TD>
    <TD VALIGN="TOP" align="right" width="34">
      <P><font size="1">10,000 </font>
    </TD>
    <TD VALIGN="TOP" width="1">&nbsp;</TD>
    <TD VALIGN="TOP" width="128">
      <P><font size="1">Metropolitan Transportation<br>
        &nbsp;&nbsp;Authority, New York,<br>
        &nbsp;&nbsp;Dedicated Tax Fund Revenue<br>
        &nbsp;&nbsp;Bonds, Series A,
        5% due<br>&nbsp;&nbsp;4/01/2029(c) </font>
    </TD>
    <TD VALIGN="TOP" width="12"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="42">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="20"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="41">
      <P><font size="1">8,745</font>
    </TD>
    <TD VALIGN="bottom" width="21"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="39">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" width="25"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" width="47">
      <P><font size="1">8,745 </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"> F-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;






















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
















<p>
<TABLE 0 CELLSPACING=0 CELLPADDING=0 WIDTH=630>
  <TR align="center" valign="bottom">
    <TD colspan="16"><b><font size="2"> Pro Forma Combined Schedule of Investments
      for MuniHoldings Insured Fund II, Inc.</font> <font size="2"><br>
      MuniHoldings Insured Fund III, Inc. and MuniHoldings Insured Fund IV, Inc.</font>
      <font size="2"><br>
      as of March 31, 2000 (Unaudited)(Continued) </font> </b></TD>
  </TR>
  <tr>
    <td valign="TOP" width="94"> </td>
    <td valign="TOP" width="31"> </td>
    <td valign="TOP" width="5"></td>
    <td valign="TOP" width="36"> </td>
    <td valign="TOP" width="4"></td>
    <td valign="TOP" width="34"> </td>
    <td valign="TOP" width="4"></td>
    <td valign="TOP" width="176"> </td>
    <td valign="bottom" colspan="8" align="center"> <font size=1><b>Value (In
      Thousands) </b></font>
      <hr noshade size="1">
    </td>
  </tr>
  <tr valign="bottom">
    <td align="left" width="94"> <b><font size="1">State </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">S&amp;P<br>
      Ratings </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">Moody&#146;s<br>
      Ratings </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">Face<br>
      Amount </font> </b></td>
    <td width="176">&nbsp;</td>
    <td align="center" colspan="2"> <b><font size="1">MuniHoldings <br>
      Insured<br>
      Fund II, Inc. </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">MuniHoldings<br>
      Insured<br>
      Fund III, Inc. </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">MuniHoldings <br>
      Insured<br>
      Fund IV, Inc. </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">Combined <br>
      Fund </font> </b></td>
  </tr>
  <TR>
    <TD VALIGN="TOP" WIDTH="628" colspan="16">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">
      <P><font size="1">New York &#151; (Concluded) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">14,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">Nassau Health Care Corporation,<br>
        &nbsp;&nbsp;New York, &nbsp;Health System<br>
        &nbsp;&nbsp;Revenue Bonds, <br>
        &nbsp;&nbsp;5.75% due 8/01/2022(c) </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">9,937 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">3,975 </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">13,912 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">AA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Aa3 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">5,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">New York City, New York, City <br>
        &nbsp;&nbsp;Transitional Finance Authority<br>
        &nbsp;&nbsp;Revenue Bonds, Future Tax Secured,<br>
        &nbsp;&nbsp;Series A, 6% due 8/15/2029 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">5,086 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">5,086 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">NR* </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Aa3 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">1,125 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">New York City, New York, City<br>
        &nbsp;&nbsp;Transitional Finance Authority <br>
        &nbsp;&nbsp;Revenue Bonds, RIB, Series 283,<br>
        &nbsp;&nbsp;8.28% due 11/15/2015 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">1,260 </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">1,260 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="31">
      <P><font size="1">AAA <br>
        AAA</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="36">
      <P><font size="1">NR* <br>
        </font><font size="1">Aaa </font></P>
    </TD>
    <TD VALIGN="bottom" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="34">
      <P><font size="1">10,000<br>
        9,480 </font>
    </TD>
    <TD VALIGN="bottom" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="176">
      <P><font size="1">New York City, New York, <br>
        &nbsp;&nbsp; GO, Refunding<br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series G, 5.75% due 2/01/2017(c): <br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series H, 5.375% due 8/01/2027(d) </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="50">
      <P><font size="1">10,118<br>
        5,136 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="47">
      <P><font size="1">&#151;<br>
        &#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="48">
      <P><font size="1">&#151;<br>
        3,749 </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="bottom" align="right" width="46">
      <p><font size="1">10,118 <br>
        8,885 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">A1c </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">VMIG1&#134; </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">4,400 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">New York City, New York, GO, VRDN,<br>
        &nbsp;&nbsp;Series B, Sub-Series B-6, 3.80%<br>
        &nbsp;&nbsp;due 8/15/2005(d)(e) </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">4,400 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">4,400 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp; </TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">3,115 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">New York State Dormitory Authority<br>
        &nbsp;&nbsp;Revenue Bonds&nbsp;&nbsp;(Mental Health <br>
        &nbsp;&nbsp;Services Facilities), Series B, 5.375% &nbsp;<br>
        &nbsp;&nbsp;due 2/15/2026(c) </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">2,923 </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">2,923 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">7,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">&nbsp;(State University Educational<br>
        &nbsp;&nbsp;Facilities), 5.75% due 5/15/2024 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">7,451 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">7,451 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">2,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">New York State Urban Development<br>
        &nbsp;&nbsp;Corporation Revenue Bonds<br>
        &nbsp;&nbsp;(Correctional Facilities Service<br>
        &nbsp;&nbsp;Contract), Series C, 6% due 1/01/2029(a) </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">2,544 </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">2,544 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">3,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">New York State Urban Development <br>
        &nbsp;&nbsp;Corporation Revenue Refunding Bonds <br>
        &nbsp;&nbsp;(Correctional Facilities), 5.75% <br>
        &nbsp;&nbsp;due1/01/2013(c) </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">3,564 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">3,564 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94"></TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">7,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">Port Authority of New York and <br>
        &nbsp;&nbsp;New Jersey, Consolidated Revenue<br>
        &nbsp;&nbsp;Refunding Bonds, AMT, 119th Series, <br>
        &nbsp;&nbsp;5.50% due 9/15/2016(b) </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">7,428 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">7,428 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="628" colspan="16">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94" height="48">
      <P><font size="1">North Dakota &#151; 4.2% </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="31" height="48">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5" height="48">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36" height="48">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4" height="48">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34" height="48">
      <P><font size="1">22,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4" height="48">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176" height="48">
      <P><font size="1">Oliver County, North Dakota, PCR,<br>
        &nbsp;&nbsp;Refunding (Square Butte Electric<br>
        &nbsp;&nbsp;Cooperative), Series A, 5.30% <br>
        &nbsp;&nbsp;due 1/01/2027(a) </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50" height="48">
      <P><font size="1">20,145 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15" height="48">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47" height="48">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13" height="48">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48" height="48">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="top" align="right" width="15" height="48">&nbsp;</td>
    <td valign="top" align="right" width="46" height="48">
      <p><font size="1">20,145 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10" height="48">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="628" colspan="16"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="628" colspan="16"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="628" colspan="16">
      <hr noshade size="1">
    </TD>
  </TR>
  <tr>
    <td valign="TOP" width="94">
      <p><font size="1">Ohio &#151; 2.1% </font>
    </td>
    <td valign="TOP" align="right" width="31">
      <p><font size="1">NR* </font>
    </td>
    <td valign="TOP" width="5">&nbsp;</td>
    <td valign="TOP" align="right" width="36">
      <p><font size="1">Aaa</font><font size="1"> </font>
    </td>
    <td valign="TOP" width="4">&nbsp;</td>
    <td valign="TOP" align="right" width="34">
      <p><font size="1">1,745 </font>
    </td>
    <td valign="TOP" width="4">&nbsp;</td>
    <td valign="TOP" width="176">
      <p><font size="1">Aurora, Ohio, City School District<br>
        &nbsp;&nbsp;COP, 6.10% due 12/01/2019(d) </font>
    </td>
    <td valign="top" align="right" width="50">
      <p><font size="1">&#151; </font> <font size="1"> </font>
    </td>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="47">
      <p><font size="1">&#151; </font>
    </td>
    <td valign="top" align="right" width="13">&nbsp;</td>
    <td valign="top" align="right" width="48">
      <p><font size="1">1,800&nbsp;</font>
    </td>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">1,800 </font>
    </td>
    <td valign="TOP" width="10">&nbsp;</td>
  </tr>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">1,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">Kent State Univesity, Ohio, <br>
        &nbsp;&nbsp;University Revenue Bonds, 6% <br>
        &nbsp;&nbsp;due 5/01/2024(a) </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">1,020 </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">1,020 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">BBB+ </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Baa1 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">5,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">Ohio State Solid Waste Disposal<br>
        &nbsp;&nbsp;Revenue Bonds (USG Corporation<br>
        &nbsp;&nbsp;Project), AMT, 5.65% due 3/01/2033 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">4,317 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">4,317 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">AA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">A1 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">3,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">Ohio State Turnpike Commission, <br>
        &nbsp;&nbsp;Turnpike Revenue Bonds, Series A, <br>
        &nbsp;&nbsp;5.55% due 2/15/2013 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">3,040 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">3,040 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="628" colspan="16"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="628" colspan="16">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">
      <P><font size="1">Oklahoma &#151; 0.5% </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="31">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34">
      <P><font size="1">2,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176">
      <P><font size="1">Grand River Dam Authority, <br>
        &nbsp;&nbsp;Oklahoma, Revenue Refunding <br>
        &nbsp;&nbsp;Bonds, 6.25% due 6/01/2011 </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="50">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48">
      <P><font size="1">2,190 </font>
    </TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46">
      <p><font size="1">2,190 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="628" colspan="16"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="628" colspan="16">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94">
      <P><font size="1">Pennsylvania &#151; 5.1% </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="31"> <FONT SIZE=2>
      <P><font size="1">AAA </font>
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="5">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36"> <FONT SIZE=2>
      <P><font size="1">Aaa </font>
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="34"> <FONT SIZE=2>
      <P><font size="1">12,930 </font>
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="4">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="176"> <FONT SIZE=2>
      <P><font size="1">Allegheny County, Pennsylvania, <br>
        &nbsp;&nbsp;Hospital Development Authority <br>
        &nbsp;&nbsp;Revenue &nbsp;Bonds (University of <br>
        &nbsp;&nbsp;Pittsburgh Medical Center), <br>
        &nbsp;&nbsp;5.375% due 12/01/2025(d) </font><font size="2"></font>
      </FONT></TD>
    <TD VALIGN="top" align="right" WIDTH="50"> <FONT SIZE=2>
      <P><font size="1">11,925 </font>
      </FONT></TD>
    <TD VALIGN="top" align="right" WIDTH="15">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="47"> <FONT SIZE=2>
      <P><font size="1">&#151; </font>
      </FONT></TD>
    <TD VALIGN="top" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="top" align="right" WIDTH="48"> <FONT SIZE=2>
      <P><font size="1">&#151; </font>
      </FONT></TD>
    <td valign="top" align="right" width="15">&nbsp;</td>
    <td valign="top" align="right" width="46"> <font size=2>
      <p><font size="1">11,925 </font>
      </font></td>
    <TD VALIGN="TOP" WIDTH="10">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="94"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="534" colspan="15">
      <hr noshade size="1">
    </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"> F-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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<!-- MARKER LABEL="sheet: 50, page: 50" -->
















<p>
<TABLE 0 CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <tr>
    <td valign="TOP" colspan="17"></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="17"></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="17"></td>
  </tr>
  <tr align="center" valign="bottom">
    <td colspan="17"><b><font size="2"> Pro Forma Combined Schedule of Investments
      for MuniHoldings Insured Fund II, INC.</font> <font size="2"><br>
      MuniHoldings Insured Fund III, Inc. and MuniHoldings Insured Fund IV, Inc.</font>
      <font size="2"><br>
      as of March 31, 2000 (Unaudited)(Continued)</font> </b> </td>
  </tr>
  <tr>
    <td valign="TOP" colspan="17"></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="17"></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="17"></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="17"></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="17"></td>
  </tr>
  <tr>
    <td valign="TOP" width="92"> </td>
    <td valign="TOP" width="1"></td>
    <td valign="TOP" width="35"> </td>
    <td valign="TOP" width="1"></td>
    <td valign="TOP" width="32"> </td>
    <td valign="TOP" width="2"></td>
    <td valign="TOP" width="36"> </td>
    <td valign="TOP" width="1"></td>
    <td valign="TOP" width="161"> </td>
    <td valign="bottom" colspan="8" align="center"> <font size=1><b>Value (In
      Thousands)</b></font>
      <hr noshade size="1">
    </td>
  </tr>
  <tr valign="bottom">
    <td align="left" width="92"> <b><font size="1">State </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">S&amp;P<br>
      Ratings </font> </b></td>
    <td align="center" colspan="3"> <b><font size="1">Moody&#146;s<br>
      Ratings </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">Face<br>
      Amount </font> </b></td>
    <td width="161">&nbsp;</td>
    <td align="center" colspan="2"> <b><font size="1">MuniHoldings <br>
      Insured<br>
      Fund II, Inc. </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">MuniHoldings<br>
      Insured<br>
      Fund III, Inc. </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">MuniHoldings <br>
      Insured<br>
      Fund IV, Inc. </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">Combined <br>
      Fund </font> </b></td>
  </tr>
  <TR>
    <TD VALIGN="TOP" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">
      <P><font size="1">Pennsylvania &#151;<br>
        (Concluded)</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">AAA</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">1,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Allegheny County, Pennsylvania,<br>
        &nbsp;&nbsp;Port Authority, Special &nbsp;<br>
        &nbsp;&nbsp; Transportation Revenue Bonds,<br>
        &nbsp;&nbsp;6% due 3/01/2024(d) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">1,523</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">1,523</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="505" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1"><font size="1"></font></TD>
    <TD VALIGN="TOP" WIDTH="35"><font size="1">NK*</font></TD>
    <TD VALIGN="TOP" WIDTH="1"><font size="1"></font></TD>
    <TD VALIGN="TOP" WIDTH="32"><font size="1">Aaa</font></TD>
    <TD VALIGN="TOP" WIDTH="2"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="right" WIDTH="36"><font size="1">5,600</font></TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161"><font size="1">Lycoming County, Pennsylvania,
      <br>
      &nbsp;&nbsp;College Authority Revenue Bonds <br>
      &nbsp;&nbsp;&nbsp;(Pennsylvania College of Technology), <br>
      &nbsp;&nbsp;&nbsp;5.25% due 7/01/2018(d)<br>
      </font></TD>
    <TD VALIGN="TOP" align="right" WIDTH="55"><font size="1">5,334</font></TD>
    <TD VALIGN="TOP" WIDTH="8"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="right" WIDTH="51"><font size="1">&#151;</font></TD>
    <TD VALIGN="TOP" WIDTH="8"><font size="1"></font></TD>
    <TD VALIGN="TOP" align="right" WIDTH="53"><font size="1">&#151;</font></TD>
    <td valign="TOP" width="8"><font size="1"></font></td>
    <td valign="TOP" align="right" width="45"><font size="1">5,334</font></td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92"> <FONT SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">AAA</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">5,830 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Philadelphia, Pennsylvania, Gas <br>
        &nbsp;&nbsp;Works Revenue Bonds, Second <br>
        &nbsp;&nbsp;Series, 5% due 7/01/2029(c) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">5,073</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151;</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">5,073</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92"> <FONT SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">A1+</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">NR*</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">700</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Schuylkill County, Pennsylvania, <br>
        &nbsp;&nbsp;IDA, Resource Recovery Revenue <br>
        &nbsp;&nbsp;Refunding Bonds (Northeastern <br>
        &nbsp;&nbsp;Power Company), VRDN, Series A,<br>
        &nbsp;&nbsp;4% due 12/01/2022(e) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">700</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151;</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">700</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92"> <FONT SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">
      <P><font size="1">Puerto Rico &#151; 2.1%</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">AAA</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">10,000</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Puerto Rico Commonwealth, GO, <br>
        &nbsp;&nbsp;Public Improvement, 6%<br>
        &nbsp;&nbsp;due 7/01/2029(d) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">10,284</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151;</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">10,284</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">
      <P><font size="1">Rhode Island &#151; 1.9%</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="35">
      <P><font size="1">AAA<br>
        AAA <br>
        AAA </font>
    </TD>
    <TD VALIGN="bottom" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="32">
      <P><font size="1">Aaa<br>
        Aaa<br>
        Aaa </font></P>
    </TD>
    <TD VALIGN="bottom" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="36">
      <P><font size="1">2,785<br>
        1,300<br>
        1,305</font></P>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Providence, Rhode Island, Public<br>
        &nbsp;&nbsp;Building Authority, General <br>
        &nbsp;&nbsp;Revenue Bonds (School and Public <br>
        &nbsp;&nbsp;Facilities Projects), Series A (a): <br>
        &nbsp;&nbsp;&nbsp;&nbsp;5.25% due 12/15/2017<br>
        &nbsp;&nbsp;&nbsp;&nbsp;5.25% due 12/15/2018<br>
        &nbsp;&nbsp;&nbsp;&nbsp;5.25% due 12/15/2019 </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="55">
      <P><font size="1">2,664<br>
        1,235<br>
        1,228</font></P>
    </TD>
    <TD VALIGN="bottom" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="51">
      <P><font size="1">&#151;<br>
        &#151;<br>
        &#151;</font></P>
    </TD>
    <TD VALIGN="bottom" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="53">
      <P><font size="1">&#151;<br>
        &#151;<br>
        &#151;</font></P>
    </TD>
    <td valign="bottom" width="8">&nbsp;</td>
    <td valign="bottom" align="right" width="45">
      <p><font size="1">2,664<br>
        1,235<br>
        1,228</font></p>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="505" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">NR*</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">4,055 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Providence, Rhode Island, <br>
        &nbsp;&nbsp;Redevelopment Agency Revneue<br>
        &nbsp;&nbsp;Refunding Bonds (Public Safety and<br>
        &nbsp;&nbsp;Municipal Buildings), Series A,<br>
        &nbsp;&nbsp;5.75% due 4/01/2019(a) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">4,062 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151;</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">4,062</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="598" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">
      <P><font size="1">Tennessee &#151; 1.0%</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">AAA</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">3,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Metropolitan Government of <br>
        &nbsp;&nbsp;Nashville and Davidson County, <br>
        &nbsp;&nbsp;Tennessee, Health and Education <br>
        &nbsp;&nbsp;Facilities Board Revenue Refunding <br>
        &nbsp;&nbsp;Bonds (Ascension Health C, <br>
        &nbsp;&nbsp;5.875% due11/15/2028(a) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">3,469</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">3,469</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92"> <FONT SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="505" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">AAA</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">1,515 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Tennessee HDA Revenue Refunding<br>
        &nbsp;&nbsp;Bonds (Homeownership Program),<br>
        &nbsp;&nbsp;AMT, Series 1, 6.05% due 7/01/2014 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">1,553</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">1,553</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="598" colspan="17">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">
      <P><font size="1">Texas &#151; 7.5%</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">AAA</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">NR*</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">4,205 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Coastal Water Authority, Texas, <br>
        &nbsp;&nbsp;Contract Revenue Refunding Bonds<br>
        &nbsp;&nbsp;(City of Houston Projects), <br>
        &nbsp;&nbsp;5% due 12/15/2025(c) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">3,697</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151;</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">3,697</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92"> <FONT SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="505" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">BBB&#150;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">Baa1</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">8,200 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Dallas-Fort Worth, Texas, International<br>
        &nbsp;&nbsp;Airport Facilities, Improvement <br>
        &nbsp;&nbsp;Corporation Revenue Bonds <br>
        &nbsp; &nbsp;(American Airlines Inc.), AMT,<br>
        </font><font size="1">&nbsp;&nbsp;&nbsp;6.375% due 5/01/2035 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">4,794</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">3,068</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151;</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">7,862</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92"> <FONT SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="505" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">AA</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">Aa3</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">6,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Harris County, Texas, Health Facilities<br>
        &nbsp;&nbsp;Development Corporation Revenue<br>
        &nbsp;&nbsp;Refunding Bonds (School Health<br>
        &nbsp;&nbsp;Care System), Series B, <br>
        &nbsp;&nbsp;5.75% due 7/01/2027(f) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">6,003</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151;</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">6,003</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92"> <FONT SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="505" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="35">
      <P><font size="1">AAA<br>
        AAA</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="32">
      <P><font size="1">Aaa<br>
        Aaa</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="36">
      <P><font size="1">2,835<br>
        8,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Houston, Texas, Water and Sewer &nbsp;<br>
        &nbsp; &nbsp;System Revenue Bonds, Junior <br>
        &nbsp;&nbsp;</font><font size="1">Lien,Series C (b):<br>
        &nbsp;&nbsp;&nbsp;&nbsp;5.25% due 12/01/2022&nbsp;<br>
        &nbsp;&nbsp;&nbsp;&nbsp;5.375% due 12/01/2027 </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="55">
      <P><font size="1">&#151;<br>
        &#151;</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="51">
      <P><font size="1">&#151;<br>
        7,466</font>
    </TD>
    <TD VALIGN="bottom" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="53">
      <P><font size="1">2,623<br>
        &#151;</font>
    </TD>
    <td valign="bottom" width="8">&nbsp;</td>
    <td valign="bottom" align="right" width="45">
      <p><font size="1">2,623<br>
        7,466 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="505" colspan="15">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="35">
      <P><font size="1">AAA</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="32">
      <P><font size="1">Aaa</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="2">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="36">
      <P><font size="1">6,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="161">
      <P><font size="1">Matagorda County, Texas, Navigation <br>
        &nbsp;&nbsp;District Number 1, Revenue Refunding<br>
        &nbsp;&nbsp;Bonds (Reliant Energy Inc.),<br>
        &nbsp;&nbsp;Series A, 5.25%<br>
        &nbsp;&nbsp;due 6/01/2026(a) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="55">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="51">
      <P><font size="1">5,483</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="8">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151;</font>
    </TD>
    <td valign="TOP" width="8">&nbsp;</td>
    <td valign="TOP" align="right" width="45">
      <p><font size="1">5,483</font>
    </td>
    <TD VALIGN="TOP" WIDTH="9">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="92"> <FONT SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="1">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="505" colspan="15">
      <hr noshade size="1">
    </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"> F-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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<!-- MARKER LABEL="sheet: 51, page: 51" -->
















<p>
<TABLE 0 CELLSPACING=0 CELLPADDING=0 width="630">
  <tr>
    <td valign="bottom" colspan="13" align="center"><b><font size="2"> Pro Forma
      Combined Schedule of Investments for MuniHoldings Insured Fund II, INC.</font>
      <font size="2"><br>
      MuniHoldings Insured Fund III, Inc. and MuniHoldings Insured Fund IV, Inc.</font>
      <font size="2"><br>
      as of March 31, 2000 (Unaudited)(Continued)</font> </b> </td>
  </tr>
  <tr>
    <td valign="TOP" width="87"> </td>
    <td valign="TOP" width="37"> </td>
    <td valign="TOP" width="37"> </td>
    <td valign="TOP" width="38"> </td>
    <td valign="TOP" width="169"></td>
    <td valign="bottom" colspan="8" align="center"> <font size=1><b>Value (In
      Thousands)</b></font>
      <hr noshade size="1">
    </td>
  </tr>
  <tr valign="bottom">
    <td align="left" width="87"> <b><font size="1">State </font> </b></td>
    <td align="center" width="37"> <b><font size="1">S&amp;P<br>
      Ratings </font> </b></td>
    <td align="center" width="37"> <b><font size="1">Moody&#146;s<br>
      Ratings </font> </b></td>
    <td align="center" width="38"> <b><font size="1">Face<br>
      Amount </font> </b></td>
    <td width="169">&nbsp;</td>
    <td align="center" colspan="2"> <b><font size="1">MuniHoldings <br>
      Insured<br>
      Fund II, Inc. </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">MuniHoldings<br>
      Insured<br>
      Fund III, Inc. </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">MuniHoldings <br>
      Insured<br>
      Fund IV, Inc. </font> </b></td>
    <td align="center" colspan="2"> <b><font size="1">Combined <br>
      Fund </font> </b></td>
  </tr>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> <FONT SIZE=1> Texas &#151; <br>
      (Concluded) </FONT></TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38">
      <P><font size="1">2,700 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Texas Technology University Revenue<br>
        &nbsp;&nbsp;Refunding and Improvement Bonds, <br>
        &nbsp;&nbsp;Financing System, 6th Series,<br>
        &nbsp;&nbsp;5% due 2/15/2029(a) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <P><font size="1">2,351 </font>
    </TD>
    <td valign="TOP" align="right" width="14">&nbsp;</td>
    <td valign="TOP" align="right" width="41">
      <p><font size="1">2,351 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> </TD>
    <TD VALIGN="TOP" colspan="12">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38">
      <P><font size="1">1,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Travis County, Texas, Health Facilities<br>
        &nbsp;&nbsp;Development Corporation Revenue<br>
        &nbsp;&nbsp;Refunding Bonds (Ascension Health<br>
        &nbsp;&nbsp;Credit), Series A, 5.875%<br>
        &nbsp;&nbsp;due 11/15/2024(a) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <P><font size="1">992 </font>
    </TD>
    <td valign="TOP" align="right" width="14">&nbsp;</td>
    <td valign="TOP" align="right" width="41">
      <p><font size="1">992 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">
      <P><font size="1">Utah &#151; 0.9% </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38">
      <P><font size="1">4,850 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Utah Water Finance Agency Revenue <br>
        &nbsp;&nbsp;Bonds (Pooled Loan &nbsp;Financing<br>
        &nbsp;&nbsp;Program), Series A, 5.50% <br>
        &nbsp;&nbsp;due 10/01/2029(a) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52"><font size=1>&#151; </font></TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53"><font size=1>4,580 </font></TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49"><font size=1>&#151; </font></TD>
    <td valign="TOP" align="right" width="14">&nbsp;</td>
    <td valign="TOP" align="right" width="41"><font size=1>4,580 </font></td>
    <TD VALIGN="TOP" WIDTH="29">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87" height="42">
      <P><font size="1">Virginia &#151; 0.5% </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37" height="42">
      <P><font size="1">AA+ </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37" height="42">
      <P><font size="1">Aa1 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38" height="42">
      <P><font size="1">2,250 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169" height="42">
      <P><font size="1">Virginia State HDA, Rental<br>
        &nbsp;&nbsp; Housing Revenue Bonds, AMT, &nbsp;&nbsp;<br>
        &nbsp;&nbsp; Series B, 6% due 8/01/2017 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52" height="42"><font size=1>2,258 </font></TD>
    <TD VALIGN="TOP" align="right" WIDTH="13" height="42">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53" height="42"><font size=1>&#151;
      </font></TD>
    <TD VALIGN="TOP" align="right" WIDTH="11" height="42">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49" height="42"><font size=1>&#151;
      </font></TD>
    <td valign="TOP" align="right" width="14" height="42">&nbsp;</td>
    <td valign="TOP" align="right" width="41" height="42"><font size=1>2,258 </font></td>
    <TD VALIGN="TOP" WIDTH="29" height="42">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">
      <P><font size="1">Washington &#151; 6.9% </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38">
      <P><font size="1">3,485 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Grant County, Washington, Public<br>
        &nbsp;&nbsp;Utility District Number 2 Revenue<br>
        &nbsp;&nbsp;Bonds (Priest Rapids Hydro Electric),<br>
        &nbsp;&nbsp;AMT, Second Series, Series B, <br>
        &nbsp;&nbsp;5.90% due 1/01/2021(d) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <P><font size="1">3,462 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="TOP" align="right" width="14">&nbsp;</td>
    <td valign="TOP" align="right" width="41">
      <p><font size="1">3,462 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> <FONT FACE="Times" SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" colspan="12">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">NR* </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38">
      <P><font size="1">7,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">King County, Washington, GO,<br>
        &nbsp;&nbsp;Refunding, RIB, Series 47, <br>
        &nbsp;&nbsp;6.235% due 1/01/2034(d)(g) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">6,119 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="TOP" align="right" width="14">&nbsp;</td>
    <td valign="TOP" align="right" width="41">
      <p><font size="1">6,119 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="12">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="bottom" WIDTH="37">
      <P><font size="1">AAA<br>
        AAA<br>
        AAA </font>
    </TD>
    <TD VALIGN="bottom" WIDTH="37">
      <P><font size="1">Aaa<br>
        Aaa<br>
        Aaa </font></P>
    </TD>
    <TD VALIGN="bottom" WIDTH="38">
      <P><font size="1">3,000 <br>
        5,970<br>
        1,505 </font></P>
    </TD>
    <TD VALIGN="bottom" WIDTH="169">
      <P><font size="1">King County, Washington, Sewer<br>
        &nbsp;&nbsp;Revenue Bonds b):<br>
        &nbsp;&nbsp;&nbsp;&nbsp;(5.25% due 1/01/2026&nbsp;&nbsp;&nbsp;<br>
        &nbsp;&nbsp;&nbsp;&nbsp;5.25% due 1/01/2030 <br>
        &nbsp;&nbsp;&nbsp;&nbsp;Second Series, 6% due 1/01/2020(b) </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P><font size="1">&#151;<br>
        &#151;<br>
        &#151; </font></P>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="53">
      <P><font size="1">2,751<br>
        5,436<br>
        &#151; </font></P>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="49">
      <P><font size="1">&#151;<br>
        &#151;<br>
        1,535 </font></P>
    </TD>
    <td valign="bottom" align="right" width="14">&nbsp;</td>
    <td valign="bottom" align="right" width="41">
      <p><font size="1">2,751<br>
        5,436<br>
        1,535 </font></p>
    </td>
    <TD VALIGN="TOP" WIDTH="29">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="TOP" colspan="12">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">NR* </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38">
      <P><font size="1">3,445 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Lewis County, Washington, <br>
        &nbsp;&nbsp;GO, Refunding, 5.75% <br>
        &nbsp;&nbsp;due 12/01/2024(a) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <P><font size="1">3,409 </font>
    </TD>
    <td valign="TOP" align="right" width="14">&nbsp;</td>
    <td valign="TOP" align="right" width="41">
      <p><font size="1">3,409 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> <FONT SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" colspan="12">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38">
      <P><font size="1">2,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Seattle, Washington, Municipal<br>
        &nbsp;&nbsp;Light and Power Revenue Bonds,<br>
        &nbsp;&nbsp;6% due 10/01/2024(d) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <P><font size="1">2,517 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="TOP" align="right" width="14">&nbsp;</td>
    <td valign="TOP" align="right" width="41">
      <p><font size="1">2,517 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> <FONT FACE="Times" SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" colspan="12">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38">
      <P><font size="1">3,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Seattle, Washington, Water<br>
        &nbsp;&nbsp;System Revenue Bonds, Series B,<br>
        &nbsp;&nbsp;6% due 7/01/2029(b) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <P><font size="1">3,545 </font>
    </TD>
    <td valign="TOP" align="right" width="14">&nbsp;</td>
    <td valign="TOP" align="right" width="41">
      <p><font size="1">3,545 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> <FONT FACE="Times" SIZE=1>
      <P>&nbsp;&nbsp;
      </FONT></TD>
    <TD VALIGN="TOP" colspan="12">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38">
      <P><font size="1">5,000 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Washington State Health Care<br>
        &nbsp;&nbsp;Facilities Authority Revenue<br>
        &nbsp;&nbsp;Refunding Bonds (Providence<br>
        &nbsp;&nbsp;Services), 5.375% due12/01/2019(d) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">4,735 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="TOP" align="right" width="14">&nbsp;</td>
    <td valign="TOP" align="right" width="41">
      <p><font size="1">4,735 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87">
      <P><font size="1">Wyoming &#151; 0.7% </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">AAA </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="37">
      <P><font size="1">Aaa </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="38">
      <P><font size="1">3,500 </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Central Wyoming Regional Water<br>
        &nbsp;&nbsp;System, Joint Powers Board<br>
        &nbsp;&nbsp;Revenue Refunding Bonds, <br>
        &nbsp;&nbsp;5.25% due 6/01/2030(c) </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1">3,190 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <P><font size="1">&#151; </font>
    </TD>
    <td valign="TOP" align="right" width="14">&nbsp;</td>
    <td valign="TOP" align="right" width="41">
      <p><font size="1">3,190 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="13">
      <hr noshade size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="38"> </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Total Investments (Cost &#151;<br>
        $492,221) &#151; 102.3% </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P><font size="1">252,218 </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="13"> </TD>
    <TD VALIGN="bottom" align="right" WIDTH="53">
      <P><font size="1">160,589 </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="11"> </TD>
    <TD VALIGN="bottom" align="right" WIDTH="49">
      <P><font size="1">81,840 </font>
    </TD>
    <td valign="bottom" align="right" width="14"> </td>
    <td valign="bottom" align="right" width="41">
      <p><font size="1">494,647 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="38"> </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Liabilities in Excess of Other<br>
        Assets &#151; (2.3%) </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="52">
      <P><font size="1">(9,054) </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="13"> </TD>
    <TD VALIGN="bottom" align="right" WIDTH="53"> <font size="1">(3,821) </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="11">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="49"> <font size="1">1,961 </font>
    </TD>
    <td valign="bottom" align="right" width="14"> </td>
    <td valign="bottom" align="right" width="41">
      <p><font size="1">(13,139 </font>
    </td>
    <TD VALIGN="bottom" WIDTH="29"><font size="1">)&#134;&#134; </font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="38"> </TD>
    <TD VALIGN="TOP" WIDTH="169"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <hr noshade size="1" align="right" width="80%">
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <hr noshade size="1" width="85%" align="right">
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <hr noshade size="1" align="right" width="80%">
    </TD>
    <td valign="TOP" align="right" width="14"> </td>
    <td valign="TOP" align="right" width="41">
      <hr noshade size="1" align="right" width="85%">
    </td>
    <TD VALIGN="TOP" WIDTH="29"> </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="38"> </TD>
    <TD VALIGN="TOP" WIDTH="169">
      <P><font size="1">Net Assets &#151; 100% </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <P><font size="1">$243,164 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <P><font size="1"> $156,768 </font>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <P><font size="1"> $83,801 </font>
    </TD>
    <td valign="TOP" align="right" width="14"> </td>
    <td valign="TOP" align="right" width="41">
      <p><font size="1">$481,508 </font>
    </td>
    <TD VALIGN="TOP" WIDTH="29"><font size="1">&#134;&#134;</font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="87"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="37"> </TD>
    <TD VALIGN="TOP" WIDTH="38"> </TD>
    <TD VALIGN="TOP" WIDTH="169"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="52">
      <hr size="3" align="right" width="80%" noshade>
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="13"> </TD>
    <TD VALIGN="TOP" align="right" WIDTH="53">
      <hr noshade size="4" width="85%" align="right">
    </TD>
    <TD VALIGN="TOP" align="right" WIDTH="11">&nbsp; </TD>
    <TD VALIGN="TOP" align="right" WIDTH="49">
      <hr noshade size="3" align="right" width="80%">
    </TD>
    <td valign="TOP" align="right" width="14"> </td>
    <td valign="TOP" align="right" width="41">
      <hr noshade size="3" align="right" width="85%">
    </td>
    <TD VALIGN="TOP" WIDTH="29"> </TD>
  </TR>
</TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="16"><font size="2">&#134;&#134;</font></td>
    <td width="584"><font size="2"><i>Amounts reflect Pro Forma adjustments to
      the Statement of Assets and Liabilities. </i></font></td>
  </tr>
</TABLE>
<br>
<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"> F-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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<!-- MARKER LABEL="sheet: 52, page: 52" -->

















<table 0 cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td width="5%" valign="TOP">
      <p><font size="2">(a)</font>
    </td>
    <td valign="TOP" colspan=2 width="95%">
      <p><font size="2">AMBAC Insured.</font>
    </td>
  </tr>
  <tr>
    <td width="5%" valign="TOP">
      <p><font size="2">(b)</font>
    </td>
    <td valign="TOP" colspan=2 width="95%">
      <p><font size="2">FGIC Insured.</font>
    </td>
  </tr>
  <tr>
    <td width="5%" valign="TOP">
      <p><font size="2">(c)</font>
    </td>
    <td valign="TOP" colspan=2 width="95%">
      <p><font size="2">FSA Insured.</font>
    </td>
  </tr>
  <tr>
    <td width="5%" valign="TOP">
      <p><font size="2">(d)</font>
    </td>
    <td valign="TOP" colspan=2 width="95%">
      <p><font size="2">MBIA Insured.</font>
    </td>
  </tr>
  <tr>
    <td width="5%" valign="TOP">
      <p><font size="2">(e) </font>
    </td>
    <td valign="TOP" colspan=2 width="95%">
      <p><font size="2">The interest rate is subject to change periodically based
        upon prevailing market rates. The interest rate shown is the rate in effect
        at March 31, 2000. </font>
    </td>
  </tr>
  <tr>
    <td width="5%" valign="TOP">
      <p><font size="2">(f)</font>
    </td>
    <td valign="TOP" colspan=2 width="95%">
      <p><font size="2">Escrowed to Maturity.</font>
    </td>
  </tr>
  <tr>
    <td width="5%" valign="TOP">
      <p><font size="2"> *</font>
    </td>
    <td valign="TOP" colspan=2 width="95%">
      <p><font size="2">Not Rated.</font>
    </td>
  </tr>
  <tr>
    <td width="5%" valign="TOP">
      <p> <font size="2">&#134;</font>
    </td>
    <td valign="TOP" colspan=2 width="95%">
      <p><font size="2">Highest short-term rating by Moody's Investors Service,
        Inc. </font>
    </td>
  </tr>
</TABLE>
<table width="600" border="0">
  <tr>
    <td><font size="2">See Notes to Financial Statements.</font> </td>
  </tr>
</TABLE>
<br>
<TABLE 0 CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="TOP" COLSPAN=2>
      <P><font size="2"><b>Portfolio Abbreviations </b></font>
    </TD>
    <TD WIDTH="88%" VALIGN="TOP">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" COLSPAN=2 height="39">&nbsp;</TD>
    <TD WIDTH="88%" VALIGN="TOP" height="39">
      <P><font size="2">To simplify the listings of funds&#146; portfolio holdings in
        this Schedule of Investments, we have abbreviated the names of many of
        the securities according to the list below. </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" COLSPAN=2>
      <P><font size="2">AMT</font>
    </TD>
    <TD WIDTH="88%" VALIGN="TOP">
      <P><font size="2">Alternative Minimum Tax (subject to) </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" COLSPAN=2>
      <P><font size="2">GO</font>
    </TD>
    <TD WIDTH="88%" VALIGN="TOP">
      <P><font size="2">General Obligation Bonds</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" COLSPAN=2>
      <P><font size="2">HDA</font>
    </TD>
    <TD WIDTH="88%" VALIGN="TOP">
      <P><font size="2">Housing Development Authority</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" COLSPAN=2>
      <P><font size="2">IDA</font>
    </TD>
    <TD WIDTH="88%" VALIGN="TOP">
      <P><font size="2">Industrial Development Authority</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" COLSPAN=2>
      <P><font size="2">PCR</font>
    </TD>
    <TD WIDTH="88%" VALIGN="TOP">
      <P><font size="2">Pollution Control Revenue Bonds</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" COLSPAN=2>
      <P><font size="2">VRDN</font>
    </TD>
    <TD WIDTH="88%" VALIGN="TOP">
      <P><font size="2">Variable Rate Demand Notes</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-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: 53, page: 53" --></p>













<p><table 0 cellspacing=0 cellpadding=0 width="630">
  <tr align="center">
    <td valign="bottom" colspan="17"><b><font size="2"> <b> PRO FORMA COMBINED
      STATEMENT OF ASSETS AND LIABILITIES<br>
      FOR MUNIHOLDINGS INSURED FUND II, INC., MUNIHOLDINGS INSURED FUND III, INC.
      AND <br>
      MUNIHOLDINGS INSURED FUND IV, INC. <br>
      AS OF MARCH 31, 2000 (UNAUDITED)</b></font></b></td>
  </tr>
  <tr>
    <td valign="bottom" align="left" colspan="6">&nbsp;</td>
    <td valign="bottom" align="center" width="37">&nbsp;</td>
    <td valign="bottom" align="center" width="82">&nbsp;</td>
    <td valign="bottom" align="center" width="6"></td>
    <td valign="bottom" align="center" width="109">&nbsp;</td>
    <td valign="bottom" align="center" width="6"></td>
    <td valign="bottom" align="center" width="108">&nbsp;</td>
    <td valign="bottom" align="center" width="6"></td>
    <td valign="bottom" align="center" width="67">&nbsp;</td>
    <td valign="bottom" align="center" width="19">&nbsp;</td>
    <td valign="bottom" align="center" width="83">&nbsp;</td>
    <td valign="bottom" align="left" width="14"></td>
  </tr>
  <tr>
    <td valign="bottom" align="left" colspan="17">
      <p align="JUSTIFY"><font size="1">The following unaudited Pro Forma Combined
        Statement of Assets and Liabilities has been derived from the Statements
        of Assets and Liabilities of the respective Funds for the period October
        1, 1999 to March 31, 2000 and such information has been adjusted to give
        effect to the Reorganization as if the Reorganization had occurred on
        March 31, 2000. The Pro Forma Combined Statement of Assets and Liabilities
        is presented for informational purposes only and does not purport to be
        indicative of the results of operations that actually would have resulted
        if the Reorganization had been consummated on March 31, 2000, nor which
        may result from future operations. The Pro Forma Combined Statement of
        Assets and Liabilities should be read in conjunction with the Funds&#146;
        financial statements and related notes thereto which are included in the
        Joint Proxy Statement and Prospectus. </font></p>
    </td>
  </tr>
</TABLE>
<p>&nbsp;
<TABLE 0 CELLSPACING=0 CELLPADDING=0 width="600">
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6"></TD>
    <TD VALIGN="bottom" align="center" width="2"></TD>
    <TD VALIGN="bottom" align="center" width="97"></TD>
    <TD VALIGN="bottom" align="center" width="6"></TD>
    <TD VALIGN="bottom" align="center" width="101"></TD>
    <TD VALIGN="bottom" align="center" width="6"></TD>
    <TD VALIGN="bottom" align="center" width="99"></TD>
    <TD VALIGN="bottom" align="center" width="8"></TD>
    <TD VALIGN="bottom" align="center" width="62"></TD>
    <TD VALIGN="bottom" align="center" width="18"></TD>
    <TD VALIGN="bottom" align="center" width="77"></TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1"><b>Assets: </b></font> &nbsp;&nbsp;&nbsp;&nbsp;
    </TD>
    <TD VALIGN="bottom" align="center" width="2"></TD>
    <TD VALIGN="bottom" align="center" width="97"><b><i><font size="1">MuniHoldings
      <br>
      Insured Fund II, Inc. </font> </i> </b>
      <hr size="1" noshade>
    </TD>
    <TD VALIGN="bottom" align="center" width="6"></TD>
    <TD VALIGN="bottom" align="center" width="101"><b><i><font size="1">MuniHoldings
      <br>
      Insured Fund III, Inc. </font> </i> </b>
      <hr size="1" noshade>
    </TD>
    <TD VALIGN="bottom" align="center" width="6"></TD>
    <TD VALIGN="bottom" align="center" width="99"><b><i><font size="1">MuniHoldings
      <br>
      Insured Fund IV, Inc. </font> </i> </b>
      <hr size="1">
    </TD>
    <TD VALIGN="bottom" align="center" width="8"></TD>
    <td valign="bottom" align="center" width="62"><i><b><font size="1">Adjustments</font>
      </b> </i>
      <hr noshade size="1">
    </td>
    <td valign="bottom" align="center" width="18">&nbsp;</td>
    <TD VALIGN="bottom" align="center" width="77"><b><i><font size="1">Combined
      Fund </font> </i> </b>
      <hr size="1" noshade>
    </TD>
    <TD VALIGN="bottom" align="left" width="11">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Investments, at value*</font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">$252,218,071 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">$160,588,565 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">$81,840,477 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">$494,647,113 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Cash </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">40,996 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">73,654 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">(235,762 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8">
      <P><font size="1">)</font>
    </TD>
    <td valign="bottom" align="right" width="62">&nbsp;</td>
    <td valign="bottom" align="left" width="18">&nbsp;</td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">(121,112) </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Receivables for securities sold </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">7,462,825 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">2,388,586 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">957,913 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62">&nbsp;</td>
    <td valign="bottom" align="left" width="18">&nbsp;</td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">10,809,324 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Interest receivable </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">3,543,058 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">2,981,800 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">1,526,791 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62">&nbsp; </td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">8,051,649 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Prepaid expenses and other assets </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">16,064 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">72,144 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">&#151; </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">88,208 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR valign="top">
    <TD colspan="6"></TD>
    <TD align="right" width="2">&nbsp;</TD>
    <TD align="right" width="97">
      <hr size="1" noshade align="right" width="70%">
    </TD>
    <TD align="right" width="6"></TD>
    <TD align="right" width="101">
      <hr noshade size="1" width="60%" align="right">
    </TD>
    <TD align="right" width="6"></TD>
    <TD align="right" width="99">
      <hr size="1" noshade align="right" width="60%">
    </TD>
    <TD align="left" valign="bottom" width="8"></TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18"></td>
    <TD align="right" width="77">
      <hr noshade align="right" size="1" width="90%">
    </TD>
    <TD width="11"></TD>
  </TR>
  <TR valign="top">
    <TD colspan="6" valign="bottom"> <font size="1">Total assets </font></TD>
    <TD align="right" valign="bottom" width="2">&nbsp;</TD>
    <TD align="right" valign="bottom" width="97"><font size="1">263,281,014 </font>
    </TD>
    <TD align="right" valign="bottom" width="6"></TD>
    <TD align="right" valign="bottom" width="101"><font size="1">166,104,749 </font>
    </TD>
    <TD align="right" valign="bottom" width="6"></TD>
    <TD align="right" valign="bottom" width="99"><font size="1">84,089,419 </font>
    </TD>
    <TD align="left" valign="bottom" width="8"></TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18"></td>
    <TD align="right" valign="bottom" width="77"><font size="1">513,475,182 </font>
    </TD>
    <TD width="11"></TD>
  </TR>
  <TR valign="top">
    <TD align="left" colspan="6"></TD>
    <TD align="right" width="2">&nbsp;</TD>
    <TD align="right" width="97">
      <hr size="1" noshade align="right" width="70%">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="101">
      <hr noshade size="1" width="60%" align="right">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="99">
      <hr size="1" noshade align="right" width="60%">
    </TD>
    <TD align="left" VALIGN="bottom" width="8"></TD>
    <td valign="bottom" align="right" width="62">
      <p>&nbsp;
    </td>
    <td valign="bottom" align="left" width="18">
      <p><font size="1"> </font>
    </td>
    <TD align="right" width="77">
      <hr noshade align="right" size="1" width="90%">
    </TD>
    <TD align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1"><b>Liabilities: </b></font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2"></TD>
    <TD VALIGN="bottom" align="right" width="97"> </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101"> </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99"> </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62">
      <p><font size="1"> </font>
    </td>
    <td valign="bottom" align="left" width="18">
      <p><font size="1"> </font>
    </td>
    <TD VALIGN="bottom" align="right" width="77"> </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Payables: </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2"></TD>
    <TD VALIGN="bottom" align="right" width="97"></TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="101"></TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="99"></TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77"> </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">&nbsp;&nbsp;Securities purchased</font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">19,835,233</font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">9,029,403</font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">&#151;</font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62">&nbsp;</td>
    <td valign="bottom" align="left" width="18">
      <p><font size="1"> </font>
    </td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">28,864,636 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">&nbsp;&nbsp;Dividends to shareholders </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">166,224 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">126,835 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">65,868 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62">
      <p><font size="1">1,889,177 </font>
    </td>
    <td valign="bottom" align="left" width="18">
      <p><font size="1" fsize="1">(1)</font>
    </td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">2,248,104 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">&nbsp;&nbsp;Offering costs </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">10,594 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">58,172 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">138,864</font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62">
      <p>&nbsp;
    </td>
    <td valign="bottom" align="left" width="18">
      <p><font size="1"> </font>
    </td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">207,630 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">&nbsp;&nbsp;Investment adviser </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">76,035</font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">38,343 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">19,848</font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62">
      <p>&nbsp;
    </td>
    <td valign="bottom" align="left" width="18">&nbsp;</td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">134,226 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="top" align="left" colspan="6">
      <P><font size="1">Accrued expenses and other liabilities</font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">28,717 </font>
    </TD>
    <TD VALIGN="top" align="right" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">83,729 </font>
    </TD>
    <TD VALIGN="top" align="right" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">64,339 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62">
      <p><font size="1">335,400 </font>
    </td>
    <td valign="bottom" align="left" width="18">
      <p><font size="1">(2) </font>
    </td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">512,185 </font>
    </TD>
    <TD VALIGN="top" align="right" width="11"></TD>
  </TR>
  <TR valign="top">
    <TD align="left" colspan="6"></TD>
    <TD align="right" width="2">&nbsp;</TD>
    <TD align="right" width="97">
      <hr size="1" noshade align="right" width="70%">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="101">
      <hr noshade size="1" width="60%" align="right">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="99">
      <hr size="1" noshade align="right" width="60%">
    </TD>
    <TD align="left" VALIGN="bottom" width="8"></TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18"></td>
    <TD align="right" width="77">
      <hr noshade align="right" size="1" width="90%">
    </TD>
    <TD align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="top" align="left" colspan="6">
      <P><font size="1">Total liabilities </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">20,116,803 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">9,336,482 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">288,919 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"><font size="1">2,224,577 </font>
    </td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">31,966,781 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR valign="top">
    <TD align="left" colspan="6"></TD>
    <TD align="right" width="2">&nbsp;</TD>
    <TD align="right" width="97">
      <hr size="1" noshade align="right" width="70%">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="101">
      <hr noshade size="1" width="60%" align="right">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="99">
      <hr size="1" noshade align="right" width="60%">
    </TD>
    <TD align="left" VALIGN="bottom" width="8"></TD>
    <td valign="bottom" align="right" width="62">
      <p>&nbsp;
    </td>
    <td valign="bottom" align="left" width="18">
      <p><font size="1"> </font>
    </td>
    <TD align="right" width="77">
      <hr noshade align="right" size="1" width="90%">
    </TD>
    <TD align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1"><b>Net Assets: </b></font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2"></TD>
    <TD VALIGN="bottom" align="right" width="97"> </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101"> </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99"> </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77"> </TD>
    <TD VALIGN="bottom" align="left" width="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Net Assets </font>
    </TD>
    <TD VALIGN="top" align="right" width="2"></TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">$243,164,211</font>
    </TD>
    <TD VALIGN="top" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">$156,768,267 </font>
    </TD>
    <TD VALIGN="top" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">$83,800,500 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"><font size="1">$(2,224,577 </font>
    </td>
    <td valign="bottom" align="left" width="18"><font size="1">) </font></td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">$481,508,401 </font>
    </TD>
    <TD VALIGN="top" align="left" width="11"></TD>
  </TR>
  <TR valign="top">
    <TD align="left" colspan="6"> </TD>
    <TD align="right" width="2"></TD>
    <TD align="right" width="97">
      <hr size="3" noshade align="right" width="70%">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="101">
      <hr noshade size="3" width="60%" align="right">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="99">
      <hr size="3" noshade align="right" width="60%">
    </TD>
    <TD align="left" VALIGN="bottom" width="8"></TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18">
      <p><font size="1"> </font>
    </td>
    <TD align="right" width="77">
      <hr noshade align="right" size="3" width="90%">
    </TD>
    <TD align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P align="left"><font size="1"><b>Capital </b></font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2"></TD>
    <TD VALIGN="bottom" align="right" width="97"> </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101"> </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99"> </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"> </td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77"> </TD>
    <TD VALIGN="bottom" align="left" width="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Capital Stock 200,000,000 shares authorized) </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2"></TD>
    <TD VALIGN="bottom" align="right" width="97"> </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101"> </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99"> </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"> </td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77"> </TD>
    <TD VALIGN="bottom" align="left" width="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Preferred Stock, par &nbsp;value $.10 &nbsp;per share
        of AMPS** <br>
        &nbsp;issued and &nbsp;outstanding &#134; at $25,000 </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2"></TD>
    <TD VALIGN="bottom" align="right" width="97"> </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101"> </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99"> </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"> </td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77"> </TD>
    <TD VALIGN="bottom" align="left" width="11"> </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1"> per share liquidation preference </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2"></TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">$105,000,000 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">$&nbsp;67,850,000 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">$31,650,000 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">$204,500,000 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11">
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Common Stock par value $.10 per share issued and outstanding&#134;&#134;</font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2"></TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">1,101,572 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">680,667 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">344,148 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"><font size="1">99,651 </font></td>
    <td valign="bottom" align="left" width="18"><font size="1">(3)</font></td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">2,226,038 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6" height="26">
      <P><font size="1">Paid-in capital in excess of par</font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2" height="26"></TD>
    <TD VALIGN="bottom" align="right" width="97" height="26">
      <P><font size="1">162,874,062 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6" height="26"> </TD>
    <TD VALIGN="bottom" align="right" width="101" height="26">
      <P><font size="1">100,535,260 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6" height="26"> </TD>
    <TD VALIGN="bottom" align="right" width="99" height="26">
      <P><font size="1">50,769,541 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8" height="26"></TD>
    <td valign="bottom" align="right" width="62" height="26"><font size="1">(435,051</font></td>
    <td valign="bottom" align="left" width="18" height="26"><font size="1">) </font></td>
    <TD VALIGN="bottom" align="right" width="77" height="26">
      <P><font size="1">313,743,812 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11" height="26"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Undistributed &nbsp;investment income &nbsp;&#151; net
        </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2"></TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">919,091 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">618,514 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">351,572 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"><font size="1">(1,889,177</font>
    </td>
    <td valign="bottom" align="left" width="18"><font size="1">) </font></td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">&#151; </font> <font size="1"> </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6"> <font size="1">Accumulated realized
      capital losses on &nbsp;investments &#151; net </font> </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">(30,159,885 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6">
      <P><font size="1">) </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">(10,484,677 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6">
      <P><font size="1">) </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">(743,582 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8">
      <P><font size="1">)</font>
    </TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">(41,388,144 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11">
      <P><font size="1">)</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Unrealized <br>
        &nbsp;appreciation/depreciation<br>
        on &nbsp;investments-net </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">3,429,371 </font>
    </TD>
    <TD VALIGN="top" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">(2,431,497 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6">
      <P><font size="1">) </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">1,428,821 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <td valign="bottom" align="right" width="62"></td>
    <td valign="bottom" align="left" width="18"></td>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">2,426,695 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR valign="top">
    <TD align="left" colspan="6"></TD>
    <TD align="right" width="2">&nbsp;</TD>
    <TD align="right" width="97">
      <hr size="1" noshade align="right" width="70%">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="101">
      <hr noshade size="1" width="60%" align="right">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="99">
      <hr size="1" noshade align="right" width="60%">
    </TD>
    <TD align="left" width="8"></TD>
    <TD align="right" width="62">&nbsp;</TD>
    <TD align="right" width="18">&nbsp;</TD>
    <TD align="right" width="77">
      <hr noshade align="right" size="1" width="90%">
    </TD>
    <TD align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="top" align="left" colspan="6">
      <P><font size="1">Total capital </font>
    </TD>
    <TD VALIGN="top" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="top" align="right" width="97">
      <P><font size="1">$243,164,211 </font>
    </TD>
    <TD VALIGN="top" align="left" width="6"></TD>
    <TD VALIGN="top" align="right" width="101">
      <P><font size="1">$156,768,267 </font>
    </TD>
    <TD VALIGN="top" align="left" width="6"></TD>
    <TD VALIGN="top" align="right" width="99">
      <P><font size="1">$83,800,500 </font>
    </TD>
    <TD VALIGN="top" align="left" width="8"></TD>
    <TD VALIGN="top" align="right" width="62"><font size="1">$(2,224,577 </font></TD>
    <TD VALIGN="top" align="left" width="18"><font size="1">) </font></TD>
    <TD VALIGN="top" align="right" width="77">
      <P><font size="1">$481,508,401 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR valign="top">
    <TD align="left" colspan="6"> </TD>
    <TD align="right" width="2">&nbsp;</TD>
    <TD align="right" width="97">
      <hr size="3" noshade align="right" width="70%">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="101">
      <hr noshade size="3" width="60%" align="right">
    </TD>
    <TD align="left" width="6"></TD>
    <TD align="right" width="99">
      <hr size="3" noshade align="right" width="60%">
    </TD>
    <TD align="left" width="8"></TD>
    <TD align="right" width="62">&nbsp;</TD>
    <TD align="left" width="18">&nbsp;</TD>
    <TD align="right" width="77">
      <hr noshade align="right" size="3" width="90%">
    </TD>
    <TD align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="6">
      <P><font size="1">Net asset value per share of Common &nbsp;Stock </font>
    </TD>
    <TD VALIGN="bottom" align="right" width="2">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="97">
      <P><font size="1">$12.54 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="101">
      <P><font size="1">$13.06 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="99">
      <P><font size="1">$15.15 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <TD VALIGN="bottom" align="right" width="62">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" width="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" width="77">
      <P><font size="1">$12.44 </font>
    </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="17">
      <hr noshade size="2" width="99%">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="right" width="44"><font size="1">* </font></TD>
    <TD VALIGN="bottom" align="left" colspan="6"><i><font size="1">Identified
      cost </font></i> </TD>
    <TD VALIGN="bottom" align="right" width="97"><i><font size="1">$248,788,700
      </font></i></TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101"><i><font size="1">$163,020,062
      </font></i></TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99"><i><font size="1">$80,411,655
      </font></i></TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <TD VALIGN="bottom" align="right" width="62"></TD>
    <TD VALIGN="bottom" align="left" width="18"></TD>
    <TD VALIGN="bottom" align="right" width="77"><i><font size="1">$492,220,417
      </font></i></TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="top" align="right" width="44"><font size="1">&#134; </font></TD>
    <TD VALIGN="bottom" align="left" colspan="6"><i><font size="1">Shares issued
      and outstanding</font></i> </TD>
    <TD VALIGN="bottom" align="right" width="97"><i><font size="1">4,200 </font></i></TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="101"><i><font size="1">2,714 </font></i></TD>
    <TD VALIGN="bottom" align="left" width="6"> </TD>
    <TD VALIGN="bottom" align="right" width="99"><i><font size="1">1,266 </font></i></TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <TD VALIGN="bottom" align="right" width="62"></TD>
    <TD VALIGN="bottom" align="left" width="18"></TD>
    <TD VALIGN="bottom" align="right" width="77"><i><font size="1">8,180 </font></i></TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="top" align="right" width="44"><font size="1">&#134;&#134; </font></TD>
    <TD VALIGN="bottom" align="left" colspan="6"><i><font size="1">Shares issued
      and outstanding </font> </i></TD>
    <TD VALIGN="bottom" align="right" width="97"><i><font size="1">11,015,719
      </font></i></TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="101"><i><font size="1">6,806,667
      </font></i></TD>
    <TD VALIGN="bottom" align="left" width="6"></TD>
    <TD VALIGN="bottom" align="right" width="99"><i><font size="1">3,441,482 </font></i></TD>
    <TD VALIGN="bottom" align="left" width="8"></TD>
    <TD VALIGN="bottom" align="right" width="62"><i><font size="1">996,507 </font></i></TD>
    <TD VALIGN="bottom" align="left" width="18"></TD>
    <TD VALIGN="bottom" align="right" width="77"><i><font size="1">22,260,375
      </font></i></TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="right" colspan="17">
      <hr noshade size="2" width="99%">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="16"><font size="1">** Auction Market
      Preferred Stock. </font> </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="16" rowspan="2"><font size="1">(1)
      Assumes the distribution of undistributed net investment income.<br>
      </font> <font size="1">(2) </font> <font size="1">Reflects the charge for
      estimated Reorganization expenses of $335,400. </font> </TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="16"><font size="1">(3) Reflects
      the adjusted shares outstanding. </font></TD>
    <TD VALIGN="bottom" align="left" width="11"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="16"> <font size="1">See Notes to
      Financial Statements. </font></TD>
    <TD VALIGN="bottom" align="left" width="11"> </TD>
  </TR>
</TABLE>
<p>

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




















<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 54, page: 54" -->















<TABLE 0 CELLSPACING=0 CELLPADDING=0 WIDTH=630>

  <TR>
    <TD VALIGN="TOP" colspan="11">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="11">
      <P ALIGN="CENTER"><font size="2"><b>PRO FORMA COMBINED STATEMENT OF OPERATIONS<br>
        FOR MUNIHOLDINGS INSURED FUND II, INC., MUNIHOLDINGS INSURED FUND III,
        INC. AND<br>
        MUNIHOLDINGS INSURED FUND IV, INC. <br>
        FOR THE PERIOD OCTOBER 1, 1999 TO MARCH 31, 2000
        (UNAUDITED)</b></font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" WIDTH="165"><font size="1"> </font></TD>
    <TD VALIGN="bottom" align="center" WIDTH="84">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="center" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="center" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="66">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="80">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" WIDTH="14">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="632" colspan="11"><font size=1>
      <p align="JUSTIFY">The following unaudited Pro Forma Combined Statement
        of Operations has been derived from the Statements of Operations of the
        respective Funds for the period October 1, 1999 to March 31, 2000 and
        such information has been adjusted to give effect to the Reorganization
        as if the Reorganization had occurred at the beginning of &nbsp;the period.
        The Pro Forma Combined Statement of Operations is presented for informational
        purposes only and does not purport to be indicative of the results of
        operations that actually would have resulted if the Reorganization had
        been consummated at the beginning of &nbsp;the period, &nbsp;nor which
        may result from future operations. The Pro Forma Combined Statement of
        Operations should be read in conjunction with the Funds&#146; financial
        statements and related notes thereto which are included in the Joint Proxy
        Statement and Prospectus.</p>
      </font></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="165">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="84">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="center" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="center" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="66">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="80">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" WIDTH="14">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="165">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="84"> <i><b><font size=1>MuniHoldings<br>
      Insured Fund II, Inc. </font> </b></i>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="center" WIDTH="10"> </TD>
    <TD VALIGN="bottom" align="center" WIDTH="92"> <i><b><font size="1">MuniHoldings<br>
      Insured Fund III, Inc. </font> </b></i>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="center" WIDTH="7"> </TD>
    <TD VALIGN="bottom" align="center" WIDTH="87"> <i><b><font size=1>MuniHoldings<br>
      Insured Fund IV, Inc. </font></b></i>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="center" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="66"><i><b><font size="1">Adjustments</font>
      </b> </i>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="center" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="center" WIDTH="80"><i><b><font size=1>Combined
      Fund (2)</font> </b> </i>
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" height="21" WIDTH="165"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" height="21" WIDTH="84">
      <P><b><i></i></b>
    </TD>
    <TD VALIGN="bottom" align="left" height="21" WIDTH="10"> <B><I><FONT SIZE=1>
      <P>&nbsp;
      </font></i></B></TD>
    <TD VALIGN="bottom" align="right" height="21" WIDTH="92">
      <P><b><i></i></b>
    </TD>
    <TD VALIGN="bottom" align="left" height="21" WIDTH="7"> <B><I><FONT SIZE=1>
      <P>&nbsp;
      </font></i></B></TD>
    <TD VALIGN="bottom" align="right" height="21" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" height="21" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" height="21" WIDTH="66">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" height="21" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" height="21" WIDTH="80">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" height="21" WIDTH="14">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1"><b>Investment Income:</b></font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" WIDTH="10">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" WIDTH="7">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" WIDTH="9">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" WIDTH="18">&nbsp;</TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">&nbsp;</TD>
    <TD VALIGN="bottom" align="left" WIDTH="14">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Interest and amortization of<br>
        &nbsp;&nbsp; premium and discount earned</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">$&nbsp;&nbsp;7,076,927 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">$&nbsp;4,551,100 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">$&nbsp;2,283,046</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">$&nbsp;13,911,073 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">&nbsp; </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1"><b>Expenses: </b></font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Investment advisory fees </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">662,152 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">387,929 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87"> <font size="1"> 197,761 </font></TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80"> <font size="1">1,247,842 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Commission fees</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">129,283</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">83,560</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">41,483 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">254,326</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Accounting services</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">31,381 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">44,492 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">26,996 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <P><font size="1">(35,630 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18">
      <P><font size="1">)(1)
      </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">67,239</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Professional fees</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">52,947</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">28,607</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">20,418 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <P><font size="1">(49,025 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18">
      <P><font size="1">)(1)
      </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">52,947</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Transfer agent fees</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">19,554</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">11,784</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">12,398 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">43,736</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Directors&#146; fees and expenses</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">12,263</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">14,293</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">10,431 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <P><font size="1">(24,724 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18">
      <P><font size="1">)(1)
      </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">12,263</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165" height="14">
      <P><font size="1">Printing and shareholder reports</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84" height="14">
      <P><font size="1">12,474</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10" height="14"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92" height="14">
      <P><font size="1">5,756</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7" height="14"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87" height="14">
      <P><font size="1">3,509 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9" height="14"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66" height="14">
      <P><font size="1">(5,000 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18" height="14">
      <P><font size="1" fsize="1">)(1)</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="80" height="14">
      <P><font size="1">16,739</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14" height="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Listing fees</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">7,771</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">8,174</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">4,292 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <P><font size="1">(12,466 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18">
      <P><font size="1">)(1)
      </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">7,771</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Custodian fees</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">5,700</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">4,590</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">4,551 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <P><font size="1">(1,050 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18">
      <P><font size="1">)(1)
      </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">13,791 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Pricing fees </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">3,085 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">2,549 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">2,860 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <P><font size="1">(500 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18">
      <P><font size="1">)(1)
      </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">7,994</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Other</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">14,446</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">3,839</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">3,364 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">21,649 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14">
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165"> <font size="1">Total expenses
      before reimbursement </font> </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">951,056 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">595,573</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">328,063 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <P><font size="1">(128,395 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18">
      <P><font size="1">)
      </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">1,746,297</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Reimbursement of expenses</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">(179,157</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"> <FONT SIZE=1>
      <P>)
      </FONT></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">(205,763</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"> <FONT SIZE=1>
      <P>)
      </FONT></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">(167,541 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"> <FONT SIZE=1>
      <P>)
      </FONT></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80"> <font size="1">(552,461 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"><font size="1">) </font></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Total expenses after reimbursement</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">771,899</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">389,810</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">160,522 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <P><font size="1">(128,395 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18">
      <P><font size="1">)
      </font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">1,193,836</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1"><b>Investment income &#151; net </b></font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">6,305,028</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">4,161,290</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">2,122,524 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <P><font size="1">128,395</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">12,717,237 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1"><b>Realized &amp; Unrealized Gains(Loss) on &nbsp;&nbsp;Investments
        &#151; Net</b></font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87"><font size="1"></font></TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Realized loss on investments &#151; net</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">(17,092,485</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"> <FONT SIZE=1>
      <P>)
      </FONT></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">(8,939,607</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"> <FONT SIZE=1>
      <P>)
      </FONT></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">(743,582 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"> <FONT SIZE=1>
      <P>)
      </FONT></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">(26,775,674</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"> <FONT SIZE=1>
      <P>)
      </FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165">
      <P><font size="1">Change in unrealized appreciation/<br>
        &nbsp;&nbsp; depreciation on investments &#151; net</font>
    </TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <P><font size="1">15,101,027</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <P><font size="1">8,584,346</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <P><font size="1">1,504,868 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <P><font size="1">25,190,241 </font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"> </TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <hr noshade size="1">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165"><font size="1"><b>Net Increase
      in Net Assets Resulting &nbsp;&nbsp;from Operations </b></font></TD>
    <TD VALIGN="bottom" align="right" WIDTH="84"><font size="1">$&nbsp; 4,313,570
      </font> </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92"><font size="1">$ 3,806,029</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87"><font size="1">$ 2,883,810</font></TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80"><font size="1">$&nbsp;11,003,409</font>
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" WIDTH="165"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="84">
      <hr noshade size="2">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="10"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="92">
      <hr noshade size="2">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="7"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="87">
      <hr noshade size="2">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="9"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="66"></TD>
    <TD VALIGN="bottom" align="left" WIDTH="18"></TD>
    <TD VALIGN="bottom" align="right" WIDTH="80">
      <hr noshade size="2">
    </TD>
    <TD VALIGN="bottom" align="left" WIDTH="14"></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="11"><font size=1><i>&nbsp;&#134;&nbsp;&nbsp;Commencement
      of operations.</i></font></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="11"><font size=1>(1) Reflects the
      anticipated savings as a result of the Reorganization through fewer audits
      and consolidation of printing, accounting and other services.</font></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="11"><font size=1>(2) This Pro-Forma
      Combined Statement of Operations excludes non-recurring aggregate estimated
      Reorganization expenses of $335,400.</font></TD>
  </TR>
  <TR>
    <TD VALIGN="bottom" align="left" colspan="11"><font  size=1>See Notes to Financial
      Statements. </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"> F-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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<!-- MARKER LABEL="sheet: 55, page: 55" -->
















<p><table width=600><tr>
    <td  align=center><font size=2><B> MUNIHOLDINGS INSURED FUND II, INC.</B></font></td>
  </tr></TABLE>
<p><table width=600><tr>
    <td  align=center><font size=2><B>NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
      (UNAUDITED)</B></font></td>
  </tr></TABLE>
<p><table width=600><tr><td><font size=2><B>1. Significant Accounting Policies:</B></font></td></tr></TABLE>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniHoldings Insured Fund II,
      Inc. (the &#147;Fund,&#148; which term as used herein shall refer to MuniHoldings
      Insured Fund II, Inc. after giving effect to the Reorganization) is registered
      under the Investment Company Act of 1940 as a non-diversified, closed-end
      management investment company. The Fund&#146;s financial statements are
      prepared in accordance with generally accepted accounting principles, which
      may require the use of management accruals and estimates. These unaudited
      financial statements reflect all adjustments, which are, in the opinion
      of management, necessary to a fair statement of the results for the interim
      period presented. All such adjustments are of a normal recurring nature.
      The Fund determines and makes available for publication the net asset value
      of its Common Stock on a weekly basis. The Fund&#146;s Common Stock is listed
      on the New York Stock Exchange under the symbol MUE. The following is a
      summary of significant accounting policies followed by the Fund.</font></td>
  </tr></TABLE>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Valuation of investments &#151; Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund&#146;s pricing service from dealers that
make markets in such securities. Financial futures contracts and options
thereon, which are traded on exchanges, are valued at their closing prices as
of the close of such exchanges. Options written or purchased are valued at the
last sale price in the case of exchange-traded options. In the case of options
traded in the over-the-counter market, valuation is the last asked price
(options written) or the last bid price (options purchased). Securities with
remaining maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations
are not readily available are valued at fair value as determined in good faith
by or under the direction of the Board of Directors of the Fund, including
valuations furnished by a pricing service retained by the Fund, which may
utilize a matrix system for valuations. The procedures of the pricing service
and its valuations are reviewed by the officers of the Fund under the general
supervision of the Board of Directors.</font></td></tr></TABLE>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Derivative financial instruments &#151; The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its portfolio
against adverse movements in the debt markets. Losses may arise due to changes
in the value of the contract or if the counterparty does not perform under the
contract.</font></td></tr></TABLE>
<br>
<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>Financial
futures contracts&#151; The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a
specific future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.</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>Options&#151; The
Fund is authorized to write covered call options and purchase put options. When
the Fund writes an option, an amount equal to the premium received by the Fund
is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market value
of the option written. When a security is purchased or sold through an exercise
of an option, the related premium paid (or received) is added to (or deducted
from) the basis of the security acquired or deducted from (or added to) the
proceeds of the security sold. When an option expires (or the Fund enters into
a closing transaction), the Fund realizes a gain or loss on the option to the
extent of the premiums received or paid (or gain or loss to the extent the cost
of the closing transaction exceeds the premium paid or received).</font></td></tr></TABLE>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Written
and purchased options are non-income producing investments.</font></td></tr></TABLE>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;(c) Income taxes</i> &#151;
      It is the Fund&#146;s policy to comply with the requirements of the Internal
      Revenue Code applicable to regulated investment companies and to distribute
      substantially all of its taxable income to its shareholders. Therefore,
      no Federal income tax provision is required.</font></td>
  </tr></TABLE>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>(d) Security transactions
      and investment income</i> &#151; Security transactions are recorded on the
      dates the transactions are entered into (the trade dates). Interest income
      is recognized on the accrual basis. Discounts and market premiums are amortized
      into interest income. Realized gains and losses on security transactions
      are determined on the identified cost basis. </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-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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<!-- MARKER LABEL="sheet: 56, page: 56" -->



<p><table width=600><tr>
    <td><font size=2> <b> </b>&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;(e) Offering expenses</i>
      &#151; Direct expenses relating to the public offering of the Fund&#146;s
      Common and Preferred Stock were charged to capital at the time of issuance
      of the shares.</font></td>
  </tr></TABLE>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;(f) Dividends and distributions</i>
      &#151; Dividends from net investment income are declared and paid monthly.
      Distributions of capital gains are recorded on the ex-dividend dates.</font></td>
  </tr></TABLE>
<p><table width=600><tr><td><font size=2><B>2. Investment Advisory Agreement
and Transactions with Affiliates:</B></font></td></tr></TABLE>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Fund has entered into an
      Investment Advisory Agreement with FAM. The general partner of FAM is Princeton
      Services, Inc. (&#147;PSI&#148;), an indirect wholly-owned subsidiary of
      Merrill Lynch &amp; Co., Inc. (&#147;ML &amp; Co.&#148;), which is the limited
      partner.</font></td>
  </tr></TABLE>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FAM is responsible for the
      management of the Fund&#146;s portfolio and provides the necessary personnel,
      facilities, equipment and certain other services necessary to the operations
      of the Fund. For such services, the Fund pays a monthly fee at an annual
      rate of 0.55% of the Fund&#146;s average weekly net assets, including proceeds
      from the issuance of Preferred Stock. For MuniHoldings Insured Fund II,
      Inc., FAM earned fees for the six months ended March 31, 2000 of $662,152
      of which $179,157 was voluntarily waived. For MuniHoldings Insured Fund
      III, Inc., FAM earned fees for the six months ended March 31, 2000 of $387,929
      of which $205,763 was voluntarily waived. For MuniHoldings Insured Fund
      IV, Inc., FAM earned fees for the six months ended March 31, 2000 of $197,761
      of which $167,541 was voluntarily waived.</font></td>
  </tr></TABLE>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounting
services are provided to the Fund by FAM at cost.</font></td></tr></TABLE>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain officers and/or directors
      of the Fund are officers and/or directors of FAM, PSI, and/or ML &amp; Co.&lt;/R&gt;</font></td>
  </tr></TABLE>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> F-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: 58, page: 58" -->


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

      </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" align="right">
      <p><font size="2">&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td valign="TOP">
      <div align="center"><font size="2">11,015,719</font></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 valign="top">
    <td>
      <p align="JUSTIFY"><font size="2">Insured III</font>
    </td>
    <td>
      <div align="center"></div>
    </td>
    <td>
      <div align="center"><font size="2">&nbsp;&nbsp;6,806,667</font></div>
    </td>
    <td>
      <div align="center"></div>
    </td>
    <td>
      <p align="center"><font size="2">2,714</font>
    </td>
  </tr>
  <tr valign="top">
    <td>
      <p align="JUSTIFY"><font size="2">Insured IV</font>
    </td>
    <td>
      <div align="center"></div>
    </td>
    <td>
      <div align="center"><font size="2">&nbsp;&nbsp;&nbsp;3,441,482</font></div>
    </td>
    <td>&nbsp;</td>
    <td>
      <p align="center"><font size="2">1,266</font>
    </td>
  </tr>
</TABLE>
<font size="2">&lt;/R&gt;</font> <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>&lt;R&gt;&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 (commencement of operations) to September
      30, 1999 (Insured II) and during the period May 28, 1999 (commencement of
      operations) to April 30, 2000 (Insured III).</font></td>
  </tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td valign="top" align="left">&nbsp; </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 ($)** </font> </b>
      <hr size="1" noshade align="center">
    </td>
    <td>
      <p align="center"><b><font size="1">&nbsp;</font></b>
    </td>
    <td>
      <p align="center"><b><font size="1">Per Meeting<br>
        Fee ($)*** </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="bottom">
      <p align="JUSTIFY"><font size="2">Insured II</font>
    </td>
    <td valign="bottom">&nbsp;</td>
    <td valign="bottom">
      <div align="center"><font size="2">3</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">1,500</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">250</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">2</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">1,500</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">250</font></div>
    </td>
    <td valign="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom">
      <p align="JUSTIFY"><font size="2">Insured III</font>
    </td>
    <td valign="bottom" align="right">&nbsp;</td>
    <td valign="bottom">
      <div align="center"><font size="2">5</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">1,500</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">250</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">4</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">1,500</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">250</font></div>
    </td>
    <td valign="bottom"><font size="2">&lt;/R&gt;</font></td>
  </tr>
</TABLE>
<b><font size="1">&nbsp;&nbsp;&nbsp;</font> </b>
<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.&lt;R&gt;</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 additional annual fee of $1,000.&lt;/R&gt;</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>&lt;R&gt;&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 (commencement
      of operations) to September 30, 1999 (Insured II) and during the period
      May 28, 1999 (commencement of operations) to April 30, 2000 (Insured III).</font></td>
  </tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="121">
      <p align="left"><font size="1"><b>Fund </b></font>
      <hr size="1" noshade align="left" width="25">
    </td>
    <td width="45">
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td width="40">
      <p align="center"><font size="1"><b>Grills </b></font>
      <hr size="1" noshade align="center" width="70%">
    </td>
    <td width="50">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="39">
      <p align="center"><font size="1"><b>Mintz</b></font>
      <hr size="1" noshade align="center" width="70%">
    </td>
    <td width="57">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="39">
      <p align="center"><font size="1"><b>Salomon </b></font>
      <hr size="1" noshade align="center" width="80%">
    </td>
    <td width="46">
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td width="38">
      <div align="center"><font size="1"><b>Seiden</b></font></div>
      <hr size="1" noshade align="center" width="80%">
    </td>
    <td width="45">
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td width="46">
      <div align="center"><font size="1"><b>Swensrud</b></font></div>
      <hr size="1" noshade align="center" width="90%">
    </td>
    <td width="34">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="121">
      <p align="JUSTIFY"><font size="2">Insured II</font>
    </td>
    <td valign="bottom" align="center" width="45">
      <p align="JUSTIFY"><font size="2"></font>
    </td>
    <td valign="bottom" align="right" width="40"><font size="2">$4,250&nbsp;</font></td>
    <td valign="bottom" align="center" width="50">
      <p align="JUSTIFY"><font size="2">**</font>
    </td>
    <td valign="bottom" align="right" width="39"><font size="2">$4,250&nbsp;</font></td>
    <td valign="bottom" align="center" width="57">
      <p align="JUSTIFY"><font size="2">**</font>
    </td>
    <td valign="bottom" align="right" width="39"><font size="2">$4,250&nbsp;</font></td>
    <td valign="bottom" align="center" width="46">
      <p align="JUSTIFY"><font size="2">**</font>
    </td>
    <td valign="bottom" align="right" width="38"><font size="2">$4,250&nbsp;</font></td>
    <td valign="bottom" align="center" width="45">
      <p align="JUSTIFY"><font size="2">**</font>
    </td>
    <td valign="bottom" align="right" width="46"><font size="2">$4,250&nbsp;&nbsp;</font></td>
    <td valign="bottom" align="left" width="34"><font size="2">**</font></td>
  </tr>
  <tr valign="bottom">
    <td width="121">
      <p align="JUSTIFY"><font size="2">Insured III</font>
    </td>
    <td width="45" align="right"><font size="2"> </font></td>
    <td align="right" width="40"><font size="2"> 5,250&nbsp;</font></td>
    <td align="left" width="50"><font size="2">**</font></td>
    <td align="right" width="39"><font size="2">5,250&nbsp;</font></td>
    <td align="left" width="57"><font size="2">**</font></td>
    <td align="right" width="39"><font size="2">5,250&nbsp;</font></td>
    <td align="left" width="46"><font size="2">**</font></td>
    <td align="right" width="38"><font size="2">5,250&nbsp;</font></td>
    <td align="left" width="45"><font size="2">**</font></td>
    <td align="right" width="46"><font size="2">5,250&nbsp;&nbsp;</font></td>
    <td align="left" width="34"><font size="2">**</font></td>
  </tr>
</TABLE>
<font size="2">&lt;/R&gt;</font>
<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.&lt;R&gt;</font></td>
  </tr></TABLE>

<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">** </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95% valign="top"><font size="1">Includes the $250 fee for the organizational
      meeting that was paid by the Investment Adviser.&lt;/R&gt;</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>&lt;R&gt;Aggregate Compensation from FAM/MLAM <br>
        Advised Funds Paid to Directors($)* &lt;/R&gt; </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>

<font size="2">&lt;R&gt;&lt;/R&gt;</font>
<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>&lt;R&gt;&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 (commencement of operations) 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="bottom">
      <p align="JUSTIFY"><font size="2">Insured IV</font>
    </td>
    <td valign="bottom">&nbsp;</td>
    <td valign="bottom">
      <div align="center"><font size="2">4</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">2,000</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">200</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">3</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">800</font></div>
    </td>
    <td valign="bottom">
      <div align="center"></div>
    </td>
    <td valign="bottom">
      <div align="center"><font size="2">0</font></div>
    </td>
    <td valign="bottom"><font size="2">&lt;/R&gt;</font></td>
  </tr>
</TABLE>
<br>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>
<table width=600><tr><td width=3% 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.&lt;R&gt;</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 additional annual fee of $1,000.&lt;/R&gt;</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>&lt;R&gt;&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 valign="bottom">
    <td width="117">
      <p align="left"><font size="1"><b>Fund </b></font>
      <hr size="1" noshade align="left" width="25">
    </td>
    <td width="43">

    </td>
    <td width="40">
      <p align="center"><font size="1"><b>Forbes </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td width="41">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="54">
      <p align="center"><font size="1"><b>Montgomery </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td width="40">
      <p align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="38">
      <p align="center"><font size="1"><b>Reilly </b></font>
      <hr size="1" noshade align="center">
    </td>
    <td width="38">
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td width="40">
      <div align="center"><font size="1"><b>Ryan</b></font></div>
      <hr size="1" noshade align="center">
    </td>
    <td width="40">
      <div align="center"><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></font></div>
    </td>
    <td width="39">
      <div align="center"><font size="1"><b>West</b></font></div>
      <hr size="1" noshade align="center">
    </td>
    <td width="70">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="117">
      <p align="JUSTIFY"><font size="2">Insured IV</font>
    </td>
    <td width="43" align="right">&nbsp; </td>
    <td width="40" align="right"><font size="2">$3,600</font></td>
    <td width="41" align="center">
      <p align="JUSTIFY"><font size="2">**</font>
    </td>
    <td width="54" align="right"><font size="2">$3,600</font></td>
    <td width="40" align="center">
      <p align="JUSTIFY"><font size="2">**</font>
    </td>
    <td width="38" align="center"><font size="2">$4,600</font></td>
    <td width="38" align="center">
      <p align="JUSTIFY"><font size="2">**</font>
    </td>
    <td width="40" align="center"><font size="2">$3,600</font></td>
    <td width="40" align="center">
      <p align="JUSTIFY"><font size="2">**</font>
    </td>
    <td width="39" align="right"><font size="2">$3,600</font></td>
    <td width="70" align="left"><font size="2">**&lt;/R&gt;</font></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.&lt;R&gt;</font></td>
  </tr></TABLE>

<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">** </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95% valign="top"><font size="1">Includes the $200 fee for the organizational
      meeting that was paid by the Investment Adviser.&lt;/R&gt;</font></td>
  </tr>
</TABLE>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth
in the table below is information regarding the aggregate compensation paid by
all FAM/MLAM Advised Funds, including Insured IV, to the non-affiliated
Directors for the year ended December 31, 1999.</font></td></tr></TABLE>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="245">
      <p><font size="1"><b>Name of Insured IV Director</b></font>
      <hr size="1" noshade align="left" width="53%">
    </td>
    <td width="137">
      <p><font size="1"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font>
    </td>
    <td width="218">
      <p align="center"><font size="1"><b>Aggregate Compensation from FAM/MLAM
        <br>
        Advised Funds Paid to Directors($)(*) </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>

<font size="2">&lt;R&gt;&lt;/R&gt;</font>
<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" valign="top"><font size="2">&lt;R&gt;</font></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; International Consultant, Urban Institute, <br>
        &nbsp;&nbsp;&nbsp; Washington, D.C. since 1995. &lt;/R&gt;</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"><font size="2">&lt;R&gt;</font></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">65</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">71</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="bottom" 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 <br>
        &nbsp;&nbsp;&nbsp; Corporation since 1990 and Director of Newell <br>
        &nbsp;&nbsp;&nbsp; Rubbermaid since 1995.&lt;/R&gt;
        </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;








<!-- *************************************************************************** -->
<!-- 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 <br>
        &nbsp;&nbsp;&nbsp; since 1990; President and Chief Investment Officer
        <br>
        &nbsp;&nbsp;&nbsp; of Verus Capital, Inc. from 1979 to 1990; Senior <br>
        &nbsp;&nbsp;&nbsp;&nbsp;Vice President of Arnhold and S. Bleichroeder,
        Inc.<br>
        &nbsp;&nbsp;&nbsp; from 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"><font size="2">&lt;R&gt;</font></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 Emeritus of The <br>
        &nbsp;&nbsp;&nbsp; Boston University Center for the Advancement of <br>
        &nbsp;&nbsp;&nbsp; Ethics and Character and Director thereof until 1999;<br>
        &nbsp;&nbsp;&nbsp;&nbsp;Professor until 1999 and currently Professor <br>
        &nbsp;&nbsp;&nbsp; Emeritus of Education at Boston University since<br>
        &nbsp;&nbsp;&nbsp; 1982; formerly taught on the faculties of The <br>
        &nbsp;&nbsp;&nbsp; University of Chicago, Stanford University and <br>
        &nbsp;&nbsp;&nbsp; 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. &lt;/R&gt;</font>
    </td>
    <td valign="TOP" width="46">&nbsp;</td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">63</font>
    </td>
    <td valign="TOP" width="15">&nbsp; </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.<br>
        &nbsp;&nbsp;&nbsp; (real estate, investment and consulting) since 1987;<br>
        &nbsp;&nbsp;&nbsp; Chairman and President of Seiden &amp; de Cuevas, <br>
        &nbsp;&nbsp;&nbsp; Inc. 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;








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<p>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td width="306"><font size="2">&lt;R&gt;</font></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). &lt;/R&gt;</font>
    </td>
    <td valign="TOP" width="45" align="right">&nbsp;</td>
    <td valign="TOP" width="50">
      <p align="center"><font size="2">62</font>
    </td>
    <td valign="top" width="15" align="left">&nbsp; </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" align="left">
      <p align="JUSTIFY"><font size="2">Terry K. Glenn <br>
        &nbsp;&nbsp;&nbsp; Executive Vice President of <br>
        &nbsp;&nbsp;&nbsp; MLAM and FAM since 1983; <br>
        &nbsp;&nbsp;&nbsp; Executive Vice President and <br>
        &nbsp;&nbsp;&nbsp; Director of Princeton Services <br>
        &nbsp;&nbsp;&nbsp; since 1993; President of PFD since <br>
        &nbsp;&nbsp;&nbsp; 1986 and Director thereof since <br>
        &nbsp;&nbsp;&nbsp; 1991; 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"><font size="2">&lt;R&gt;</font></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 <br>
        &nbsp;&nbsp;&nbsp; since 1997; Vice President of <br>
        &nbsp;&nbsp;&nbsp; MLAM from 1984 to 1997; Vice<br>
        &nbsp;&nbsp;&nbsp; President of FAM since 1984. &lt;/R&gt;</font>
    </td>
    <td valign="TOP" width="13">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">49</font>
    </td>
    <td valign="TOP" width="14">&nbsp; </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" align="left">
      <p align="JUSTIFY"><font size="2">Donald C. Burke <br>
        &nbsp;&nbsp;&nbsp; Senior Vice President and <br>
        &nbsp;&nbsp;&nbsp; Treasurer&nbsp;of MLAM and FAM <br>
        &nbsp;&nbsp;&nbsp; since 1999; Senior Vice President <br>
        &nbsp;&nbsp;&nbsp; and Treasurer of Princeton <br>
        &nbsp;&nbsp;&nbsp; Services since 1999;&nbsp;Vice <br>
        &nbsp;&nbsp;&nbsp; President of PFD since 1999; <br>
        &nbsp;&nbsp;&nbsp; First Vice President of MLAM <br>
        &nbsp;&nbsp;&nbsp; from&nbsp;1997 to 1999; Vice President <br>
        &nbsp;&nbsp;&nbsp; of MLAM from 1990 to 1997; <br>
        &nbsp;&nbsp;&nbsp; Director&nbsp;of Taxation of MLAM <br>
        &nbsp;&nbsp;&nbsp; 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;








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<!-- 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">&lt;R&gt;</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. Stuebe <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; Vice President of MLAM since <br>
        &nbsp;&nbsp;&nbsp; 2000; attorney with MLAM since <br>
        &nbsp;&nbsp;&nbsp; 1998; attorney associated with <br>
        &nbsp;&nbsp;&nbsp; Pepper Hamilton LLP from 1997 <br>
        &nbsp;&nbsp;&nbsp; to 1998; attorney associated with <br>
        &nbsp;&nbsp;&nbsp; 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. &lt;/R&gt;</font>
    </td>
    <td valign="TOP" width="15">&nbsp;</td>
    <td valign="TOP" width="55">
      <p align="center"><font size="2">34</font>
    </td>
    <td valign="TOP" width="14">&nbsp; </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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<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>&lt;R&gt;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS AGREEMENT AND
      PLAN OF REORGANIZATION (this &#147;Agreement&#148;) is made as of the 22nd
      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).&lt;/R&gt;</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;); </font></td>
  </tr></TABLE>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;all upon and subject to the
      terms hereinafter set forth (collectively, the &#147;Reorganization&#148;).</font></td>
  </tr>
</TABLE>
<p></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;&lt;R&gt;&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 &lt;/R&gt;</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;













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<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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<!-- MARKER LABEL="sheet: 68, page: 68" -->







<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 height="20"><font size=1>&nbsp;</font></td>
    <td width=480 align=center height="20"><font size="2">
II-5</font></td>
    <td width=60 align=right height="20"><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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<!-- MARKER LABEL="sheet: 70, page: 70" -->







<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;&lt;R&gt;&nbsp;(d) The Valuation
      Time shall be 4:00 p.m., Eastern time, on July 28, 2000, or such earlier
      or later day and time as may be mutually agreed upon in writing (the &#147;Valuation
      Time&#148;).&lt;/R&gt;</font></td>
  </tr></TABLE><p></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>&lt;R&gt;&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 and 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 and Trust
      Company, 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.&lt;/R&gt;</font></td>
  </tr>
</TABLE>
<p></p>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
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">&lt;R&gt;&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 and 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.&lt;/R&gt;</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 height="141"><FONT SIZE="2">&lt;R&gt;&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 and  Trust
Company at the earliest practicable date thereafter.&lt;/R&gt;</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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<!-- MARKER LABEL="sheet: 75, page: 75" -->







<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;













<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 76, page: 76" -->







<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 <font size="1">LLP </font>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 <font size="1">LLP</font>,
      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, provided<i>,</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;













<!-- *************************************************************************** -->
<!-- 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, provided, that such counsel shall have requested
      such orders as promptly as practicable, and all such orders shall be in
      full force and effect.</FONT></td>
  </tr></TABLE><p></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 LLP (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> &lt;R&gt;with the applicable accounting requirements of
      the 1933 Act and the published rules and regulations thereunder, (b) such
      unaudited financial statements are not fairly presented in conformity with
      generally accepted accounting principles, or (c) such unaudited supplementary
      information is not fairly stated in all material respects in relation to
      the unaudited financial statements taken as a whole; 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.&lt;/R&gt;</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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<!-- MARKER LABEL="sheet: 82, page: 82" -->







<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 valign="bottom">
    <td width="290"><font size="2">&lt;R&gt;</font></td>
    <td width="25">
      <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
    </td>
    <td width="285">
      <p><font size="2">MUNIHOLDINGS INSURED FUND II, INC.</font>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">
      <p align="JUSTIFY"><font size="2">&nbsp;</font>
    </td>
  </tr>
  <tr valign="bottom">
    <td align="right" width="290">&nbsp;</td>
    <td width="25" align="right">&nbsp;</td>
    <td width="285"><font size="2">&nbsp;&nbsp;By:</font> <u>/s/ <font size="2">D<font size="1">ONALD&nbsp;
      </font>C.&nbsp; B<font size="1">URKE</font></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="290">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td width="25">&nbsp;</td>
    <td width="285"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vice
      President</font></td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290"><font size="2">Attest:</font> </td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290">
      <p align="JUSTIFY"><font size="2"><u>/s/
B<font size="1">RADLEY</font> J. L<font size="1">UCIDO</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>   </font>
    </td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290"><font size="2">Secretary</font></td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">
      <p><font size="2">MUNIHOLDINGS INSURED FUND III, INC.</font>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">
      <p align="JUSTIFY"><font size="2">&nbsp;&nbsp;</font>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285"><font size="2">&nbsp;&nbsp;By:</font><font size="2"> </font>
      <u>/s/ <font size="2">D<font size="1">ONALD </font>&nbsp;C.&nbsp; B<font size="1">URKE</font></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="290">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td width="25">&nbsp;</td>
    <td width="285"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vice
      President</font></td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290"><font size="2">Attest:</font> </td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td valign="bottom" width="290">
      <p align="JUSTIFY"><font size="2"><u>/s/
B<font size="1">RADLEY</font> J. L<font size="1">UCIDO</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>   </font>
    </td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td valign="bottom" width="290"><font size="2">Secretary</font></td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">
      <p><font size="2">MUNIHOLDINGS INSURED FUND IV, INC.</font>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">
      <p align="JUSTIFY">&nbsp;
    </td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285"><font size="2">&nbsp;&nbsp;By: </font> <u>/s/ <font size="2">D<font size="1">ONALD
      </font> &nbsp;C.&nbsp; B<font size="1">URKE</font></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="290">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td width="25">&nbsp;</td>
    <td width="285"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vice
      President</font></td>
  </tr>


  <tr valign="bottom">
    <td width="290"><font size="2">Attest:</font> </td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="290">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td valign="bottom" width="290">
      <p align="JUSTIFY"><font size="2"><u>/s/
W<font size="1">ILLIAM</font> E. Z<font size="1">ITELLI</font>, J<font size="1">R</font>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>   </font>
    </td>
    <td width="25">&nbsp;</td>
    <td width="285">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td valign="bottom" width="290"><font size="2">Secretary</font></td>
    <td width="25">&nbsp;</td>
    <td width="285"><font size="2">&lt;/R&gt;</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">
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<br>
      DD<br>
      D </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 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;&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"><font size="2">&lt;R&gt;</font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Articles Supplementary creating
        the Registrant&#146;s Series C AMPS. (c)&lt;/R&gt;</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"><font size="2">&lt;R&gt;</font></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. (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 specimen certificate for the Common
        Stock of the Registrant. (e)&lt;/R&gt;</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"><font size="2">&lt;R&gt;</font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Investment Advisory Agreement
        between Registrant and Fund Asset Management, L.P. (e)</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. (e)&lt;/R&gt;</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"><font size="2">&lt;R&gt;</font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Form of Merrill Lynch Standard Dealer
        Agreement.(e)&lt;/R&gt;</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"><font size="2">&lt;R&gt;</font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Custodian Contract between the Registrant
        and State Street Bank and Trust Company. (d)&lt;/R&gt; </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"><font size="2">&lt;R&gt;</font></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. </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. (f)</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.(e)&lt;/R&gt;</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"><font size="2">&lt;R&gt;</font></td>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">Consent of Ernst &amp; Young LLP, independent
        auditors for the Registrant.&lt;/R&gt;</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="38">
      <p align="JUSTIFY"><font size="2">15</font>
    </td>
    <td valign="TOP" width="23">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="20">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="471">
      <p align="JUSTIFY"><font size="2">Not applicable.</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; <!-- *************************************************************************** -->
  <!-- MARKER LABEL="sheet: 91, page: 91" -->
<p><br>

<table 0 cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="38">
      <p align="JUSTIFY"><font size="1">&lt;R&gt;</font> <font size="2">16</font>
    </td>
    <td valign="TOP" width="23">&nbsp;</td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="20">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="471">
      <p align="JUSTIFY"><font size="2">Power of Attorney (g).&lt;/R&gt;</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="38">
      <p align="JUSTIFY"><font size="2">17</font>
    </td>
    <td valign="TOP" width="23">
      <p align="JUSTIFY"><font size="2">(a)</font>
    </td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="20">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="471">
      <p align="JUSTIFY"><font size="2">Letter to Stockholders of each Fund</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="38">
      <p align="JUSTIFY">&nbsp;
    </td>
    <td valign="TOP" width="23">
      <p align="JUSTIFY"><font size="2">(b)</font>
    </td>
    <td valign="TOP" width="24">&nbsp;</td>
    <td valign="TOP" width="20">
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="471">
      <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;).&lt;R&gt;</font></td>
  </tr></TABLE>

<table width=600>
  <tr>
    <td width=3% valign=top><font size="2">(c)
</font></td>
    <td width=2%>&nbsp;</td>
    <td width=95%><font size="2">Filed on April 14, 2000, as Appendix II to the
      Registrant&#146;s Registration Statement on Form N-14 (File No. 333-34836)
      under the Securities Act of 1933, as amended (the &#147;N-14 Registration
      Statement&#148;)</font></td>
  </tr>
  <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">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">(e)
</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">(f)
</font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="2">To be filed by post-effective to the N-14 Registration
      Statement.</font></td>
  </tr>
  <tr>
    <td width=3% valign=top><font size="2">(g)</font></td>
    <td width=2%>&nbsp;</td>
    <td width=95%><font size="2">Included on the signature page of the N-14 Registration Statement filed on April 14, 2000 and incorporated herein by reference.&lt;/R&gt;</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;













<!-- *************************************************************************** -->
<!-- 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>&lt;R&gt;&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 24th day of
      May, 2000.&lt;/R&gt;</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;<font size="2">&lt;R&gt;</font></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/ D<font size="1">ONALD</font>&nbsp;
        C.&nbsp; B<font size="1">URKE</font></font></div>
      <hr size="1" noshade>
      <font size="2"><b><font size="1">(Vice President and Treasurer)</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="left" valign="top"> <font size="2">&lt;/R&gt;</font>
    </td>
  </tr>
</TABLE>
<br>
<font size="2">&lt;R&gt;&lt;/R&gt;</font>
<br>
<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"><font size="2">&lt;R&gt;</font> </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"> </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" align="right">&nbsp;</td>
    <td valign="TOP" width="106">
      <div align="center"></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"> 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"></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"> 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"></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"> 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"></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"> 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"></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"> 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"></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<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"></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"> A<font size="1">RTHUR</font> Z<font size="1">EIKEL</font><font size="2">*</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">&nbsp;
    </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">&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="bottom" width="231"><font size="2">*By:<u> /s/ D<font size="1">ONALD</font>&nbsp;
      C. &nbsp;B<font size="1">URKE</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></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" align="center"><font size="2">May 24, 2000</font></td>
  </tr>
  <tr>
    <td valign="bottom" width="231"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><font size="1">(Donald
      C. Burke, Attorney-in-Fact)&nbsp;&nbsp;&nbsp;&nbsp;</font></b></font></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"><font size="2">&lt;/R&gt;</font></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>
</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"> 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>
<br>
<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 1, page: 1" -->



<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;





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



<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: 3, page: 3" -->





<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: 4, page: 4" -->



<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: 5, page: 5" -->




<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: 6, page: 6" -->



<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: 7, page: 7" -->





<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: 8, page: 8" -->



<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: 9, page: 9" -->



<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>&lt;R&gt;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby
      appoints Terry K. Glenn, Donald C. Burke and William E. Zitelli, Jr., 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.&lt;/R&gt;</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: 10, page: 10" -->



<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;





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





<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>
<font size="2"><br>
&lt;R&gt;</font>
<table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints
      Terry K. Glenn, Donald C. Burke and William E. Zitelli, Jr., 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. &lt;/R&gt;</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: 12, page: 12" -->



<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;


<p>&nbsp; <!-- *************************************************************************** -->
  <!-- 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>
<font size="2">&lt;R&gt;</font>
<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="bottom">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>
      <p align="JUSTIFY"><font size="2">11</font>
    </td>
    <td>&nbsp;</td>
    <td><font size="2"></font></td>
    <td>
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td><font size="2"></font></td>
    <td>
      <p align="JUSTIFY"><font size="2">Opinion and Consent of Brown &amp; Wood <font size="1">LLP</font>, counsel for the Registrant. </font>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p align="JUSTIFY"><font size="2">14</font>
    </td>
    <td><font size="2"></font></td>
    <td><font size="2"></font></td>
    <td>
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td><font size="2"></font></td>
    <td>
      <p align="JUSTIFY"><font size="2">Consent of Ernst &amp; Young LLP, independent auditors for the Registrant.&lt;/R&gt;</font><font size="2"></font>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p align="JUSTIFY"><font size="2">17</font>
    </td>
    <td>
      <p align="JUSTIFY"><font size="2">(a)</font>
    </td>
    <td><font size="2"></font></td>
    <td>
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td><font size="2"></font></td>
    <td>
      <p align="JUSTIFY"><font size="2">Letter to Stockholders of each Fund</font>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p align="JUSTIFY">&nbsp;
    </td>
    <td>
      <p align="JUSTIFY"><font size="2">(b)</font>
    </td>
    <td>&nbsp;</td>
    <td>
      <p align="JUSTIFY"><font size="2">&#151;</font>
    </td>
    <td>&nbsp;</td>
    <td>
      <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-11
<SEQUENCE>2
<DESCRIPTION>OPINION AND CONSENT OF BROWN & WOOD LLP
<TEXT>


<HTML>
<head>
<TITLE> Exhibit 11 </TITLE>
</head>
<body>
<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 1, page: 1" -->

<p><table width=600><tr><td align=right><font size=3><B>Exhibit 11</B></font></td></tr></TABLE>
<p><table width=600><tr><td  align=center><font size=2>Brown &amp; Wood <font size=1>LLP</font><BR>
One World Trade Center<BR> New York, N.Y. 10048-0057<BR> Telephone: 212-839-5300<BR>
Facsimile: 212-839-5599 </font></td></tr></TABLE>
<p>
<table width=600>
  <tr>
    <td align=right width="443"><font size=2>May 23, 2000</font></td>
    <td align=right width="145">&nbsp;</td>
  </tr>
</TABLE>
<p><table width=600><tr><td><font size=2>MuniHoldings Insured Fund II, Inc.<BR> 800
Scudders Mill Road <BR>Plainsboro, New Jersey 08536</font></td></tr></TABLE>
<p><table width=600><tr><td><font size=2>Ladies and Gentlemen:</font></td></tr></TABLE>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have acted as counsel for
      MuniHoldings Insured Fund II, Inc. (the &#147;Fund&#148;) in connection
      with the proposed acquisition by the Fund of substantially all of the assets
      and the assumption by the Fund of substantially all of the liabilities of
      MuniHoldings Insured Fund III, Inc. and MuniHoldings Insured Fund IV, Inc.,
      in exchange for newly-issued shares of common stock and auction market preferred
      stock of the Fund (collectively, the &#147;Reorganization&#148;). This opinion
      is furnished in connection with the Fund&#146;s Registration Statement on
      Form N-14 under the Securities Act of 1933, as amended (File No. 333-34836)
      (the &#147;Registration Statement&#148;), relating to shares of common stock
      and shares of auction market preferred stock of the Fund, each par value
      $0.10 per share (the &#147;Shares&#148;), to be issued in the Reorganization.</font></td>
  </tr></TABLE>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
counsel for the Fund, we are familiar with the proceedings taken by it and to
be taken by it in connection with the authorization, issuance and sale of the
Shares. In addition, we have examined and are familiar with the Articles of
Incorporation of the Fund, as supplemented, the By-Laws of the Fund, and such
other documents as we have deemed relevant to the matters referred to in this
opinion.</font></td></tr></TABLE>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon the foregoing, we
      are of the opinion that subsequent to the approval of the Agreement and
      Plan of Reorganization by and among the Fund, MuniHoldings Insured Fund
      III, Inc. and MuniHoldings Insured Fund IV, Inc., and set forth in the joint
      proxy statement and prospectus constituting a part of the Registration Statement
      (the &#147;Proxy Statement and Prospectus&#148;), the Shares, upon issuance
      in the manner referred to in the Registration Statement, for consideration
      not less than the par value thereof, will be legally issued, fully paid
      and non-assessable shares of common stock or auction market preferred stock,
      as the case may be, of the Fund.</font></td>
  </tr></TABLE>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name in the Proxy Statement and Prospectus
constituting a part thereof.</font></td></tr></TABLE>
<p>
<table width=600>
  <tr>
    <td align=right width="370">&nbsp;</td>
    <td align=left width="218"><font size=2>Very truly yours,<br>
      <br>
      /s/ Brown &amp; Wood<font size="1"> LLP</font></font></td>
  </tr>
</TABLE>
</body>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14
<SEQUENCE>3
<DESCRIPTION>CONSENT OF ERNST & YOUNG LLP
<TEXT>




<HTML>
<head>
<TITLE> Exhibit 14 </TITLE>
</head>
<body>

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



<p><table width=600><tr>
    <td align=right><font size="3"><b>Exhibit 14</b></font></td>
  </tr></TABLE><p></p>


<p><table width=600><tr>
    <td  align=center><font size=2><b>CONSENT OF INDEPENDENT AUDITORS</b></font></td>
  </tr></TABLE><p></p>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consent to the reference
      to our firm under the captions &#147;The Reorganization-Comparison of the
      Funds-Financial Highlights&#148; and &#147;Experts&#148; and to the use
      of our report dated October 22, 1999 for MuniHoldings Insured Fund II, Inc.
      included in this Registration Statement on Form N-14 and related Joint Proxy
      Statement and Prospectus of MuniHoldings Insured Fund II, Inc., MuniHoldings
      Insured Fund III, Inc. and MuniHoldings Insured Fund IV, Inc. filed 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Ernst &amp; Young <font size="1">LLP</font></font></td>
  </tr></TABLE><p></p>




<p><table width=600><tr>
    <td><font size=2>MetroPark, New Jersey<BR>
      May 18, 2000</font></td>
  </tr></TABLE><p></p>

</body>
</HTML>




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-17.(A)
<SEQUENCE>4
<DESCRIPTION>LETTER TO STOCKHOLDERS OF EACH FUND
<TEXT>


<HTML>
<head>
<TITLE> Exhibit 17(a) </TITLE>
</head>
<body>

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

<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="30%">
    </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
      joint 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 substantially all of the
      assets and assume substantially all of 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 joint 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 vote by telephone by calling 1-800-553-1752
      and entering the <br>
       12-digit control number located on your proxy card. 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>5
<DESCRIPTION>QUESTION AND ANSWER
<TEXT>


<HTML>
<head>
<TITLE> Exhibit 17(b) </TITLE>
</head>
<body>


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<p><table width=600><tr><td align=right><font size=2><B>EXHIBIT 17(b)</B></font></td></tr></TABLE>
<br>
<table width=600>
  <tr align="left">
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this Question and
      Answer Sheet, we will refer to MuniHoldings Insured Fund II, Inc. as Insured
      II, MuniHoldings Insured Fund III, Inc. as Insured III and MuniHoldings
      Insured Fund IV, Inc. as Insured IV.</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=3>&#149;</font><font size=2> </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> </font><font size=3>&#149;</font></td>
    <td width=75% valign=top><font size="2">a lower anticipated 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> </font><font size=3>&#149;</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> </font><font size=3>&#149;</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. Stuebe 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 Special 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 Special
      Stockholders&#146; Meeting to achieve the necessary quorums or the necessary
      quorums are present but there are not sufficient votes to approve the proposal
      by the time of a Special 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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