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<SEC-DOCUMENT>0000950136-02-002149.txt : 20020725
<SEC-HEADER>0000950136-02-002149.hdr.sgml : 20020725
<ACCEPTANCE-DATETIME>20020725164357
ACCESSION NUMBER:		0000950136-02-002149
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		17
FILED AS OF DATE:		20020725

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BLACKROCK MUNICIPAL INCOME TRUST II
		CENTRAL INDEX KEY:			0001176194

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-91080
		FILM NUMBER:		02711074

	BUSINESS ADDRESS:	
		STREET 1:		40 EAST 52ND STREET
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
		BUSINESS PHONE:		2127545300

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BLACKROCK MUNICIPAL INCOME TRUST II
		CENTRAL INDEX KEY:			0001176194

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-21126
		FILM NUMBER:		02711075

	BUSINESS ADDRESS:	
		STREET 1:		40 EAST 52ND STREET
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
		BUSINESS PHONE:		2127545300
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>file001.txt
<DESCRIPTION>REGISTRATION STATEMENT
<TEXT>
<PAGE>








     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 2002
                                      SECURITIES ACT REGISTRATION NO. 333-91080
                                   INVESTMENT COMPANY REGISTRATION NO. 811-21124

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


                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                                   FORM N-2

            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933         [X]

                         PRE-EFFECTIVE AMENDMENT NO. 2                      [X]
                          POST-EFFECTIVE AMENDMENT NO.                      [ ]
                                    AND/OR

                         REGISTRATION STATEMENT UNDER

                       THE INVESTMENT COMPANY ACT OF 1940                   [X]
                               AMENDMENT NO. 2                              [X]

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

                      BLACKROCK MUNICIPAL INCOME TRUST II
        (EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)


                             100 BELLEVUE PARKWAY
                          WILMINGTON, DELAWARE 19809
                   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                                (888) 825-2257
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                        RALPH L. SCHLOSSTEIN, PRESIDENT
                      BLACKROCK MUNICIPAL INCOME TRUST II
                              40 EAST 52ND STREET
                           NEW YORK, NEW YORK 10022
                    (NAME AND ADDRESS OF AGENT FOR SERVICE)


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

                                  COPIES TO:


<TABLE>
<S>                                           <C>
              MICHAEL K. HOFFMAN, ESQ.           LEONARD B. MACKEY, JR., ESQ.
   SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP   CLIFFORD CHANCE ROGERS & WELLS LLP
              FOUR TIMES SQUARE                         200 PARK AVENUE
              NEW YORK, NEW YORK 10036             NEW YORK, NEW YORK 10166
</TABLE>

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

     APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.



<TABLE>
<CAPTION>
                             CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
=====================================================================================================================
                                                                PROPOSED            PROPOSED
                                           AMOUNT BEING     MAXIMUM OFFERING   MAXIMUM AGGREGATE      AMOUNT OF
 TITLE OF SECURITIES BEING REGISTERED       REGISTERED       PRICE PER UNIT      OFFERING PRICE    REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                 <C>                <C>                 <C>
Common Shares, $.001 par value........ 26,500,000 shares        $ 15.00           $397,500,000       $  36,570(1)
=====================================================================================================================
</TABLE>



(1)   $5,520 previously paid.







     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 THE 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 DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.


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

<PAGE>

                      BLACKROCK MUNICIPAL INCOME TRUST II

                             CROSS REFERENCE SHEET

                             PART A -- PROSPECTUS




<TABLE>
<CAPTION>
                     ITEMS IN PART A OF FORM N-2                       LOCATION IN PROSPECTUS
           -----------------------------------------------  -------------------------------------------
<S>        <C>                                              <C>
Item 1.    Outside Front Cover ...........................  Cover page
Item 2.    Inside Front and Outside Back Cover Page.......  Cover page
Item 3.    Fee Table and Synopsis ........................  Prospectus Summary; Summary of Trust
                                                            Expenses
Item 4.    Financial Highlights ..........................  Not Applicable
Item 5.    Plan of Distribution ..........................  Cover Page; Prospectus Summary;
                                                            Underwriting
Item 6.    Selling Shareholders ..........................  Not Applicable
Item 7.    Use of Proceeds ...............................  Use of Proceeds; The Trust's Investments
Item 8.    General Description of the Registrant .........  The Trust; The Trust's Investments; Risks;
                                                            Description of Shares; Certain Provisions
                                                            in the Agreement and Declaration of
                                                            Trust; Closed-End Trust Structure;
                                                            Preferred Shares and Leverage
Item 9.    Management ....................................  Management of the Trust; Custodian and
                                                            Transfer Agent; Trust Expenses
Item 10.   Capital Stock, Long-Term Debt, and Other
           Securities ....................................  Description of Shares; Distributions;
                                                            Dividend Reinvestment Plan; Certain
                                                            Provisions in the Agreement and
                                                            Declaration of Trust; Tax Matters
Item 11.   Defaults and Arrears on Senior Securities .....  Not Applicable
Item 12.   Legal Proceedings .............................  Legal Opinions
Item 13.   Table of Contents of the Statement of
           Additional Information ........................  Table of Contents for the Statement of
                                                            Additional Information

                               PART B -- STATEMENT OF ADDITIONAL INFORMATION

Item 14.   Cover Page ....................................  Cover Page
Item 15.   Table of Contents .............................  Cover Page
Item 16.   General Information and History ...............  Not Applicable
Item 17.   Investment Objective and Policies .............  Investment Objective and Policies;
                                                            Investment Policies and Techniques; Other
                                                            Investment Policies and Techniques;
                                                            Portfolio Transactions
Item 18.   Management ....................................  Management of the Trust; Portfolio
                                                            Transactions and Brokerage
Item 19.   Control Persons and Principal Holders of
           Securities ....................................  Not Applicable
Item 20.   Investment Advisory and Other Services ........  Management of the Trust; Experts
Item 21.   Brokerage Allocation and Other Practices ......  Portfolio Transactions and Brokerage
Item 22.   Tax Status ....................................  Tax Matters; Distributions
Item 23.   Financial Statements ..........................  Financial Statements; Report of
                                                            Independent Auditors
</TABLE>

                          PART C -- OTHER INFORMATION

Items 24-33 have been answered in Part C of this Registration Statement
<PAGE>


PROSPECTUS                                                   [GRAPHIC OMITTED]





                                          SHARES
                      BLACKROCK MUNICIPAL INCOME TRUST II
                                 COMMON SHARES
                                $15.00 PER SHARE

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

     Investment Objective. BlackRock Municipal Income Trust II (the "Trust") is
a newly organized, diversified, closed-end management investment company. The
Trust's investment objective is to provide current income exempt from regular
Federal income tax.

     Portfolio Contents. The Trust will invest primarily in municipal bonds
that pay interest that is exempt from regular Federal income tax. The Trust
will invest in municipal bonds that, in the opinion of the Trust's investment
advisor and sub-advisor, are underrated or undervalued. Under normal market
conditions, the Trust expects to be fully invested in these tax-exempt
municipal bonds. The Trust will invest at least 80% of its Managed Assets (as
defined herein) in municipal bonds that at the time of investment are
investment grade quality. Investment grade quality bonds are bonds rated within
the four highest grades (Baa or BBB or better by Moody's Investor Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P") or Fitch IBCA, Inc.
("Fitch")) or bonds that are unrated but judged to be of comparable quality by
the Trust's investment advisor or sub-advisor. The Trust may invest up to 20%
of its Managed Assets in municipal bonds that at the time of investment are
rated Ba/BB or B by Moody's, S&P or Fitch or bonds that are unrated but judged
to be of comparable quality by the Trust's investment advisor or sub-advisor.
Bonds of below investment grade quality are regarded as having predominately
speculative characteristics with respect to the issuer's capacity to pay
interest and repay principal, and are commonly referred to as "junk bonds." The
Trust intends to invest primarily in long-term bonds and expects bonds in its
portfolio to have a dollar weighted average maturity of 15 years or more under
current market conditions. The Trust cannot ensure that it will achieve its
investment objective.


     No Prior History. Because the Trust is newly organized, its shares have no
history of public trading. Shares of closed-end investment companies frequently
trade at a discount from their net asset value. This risk may be greater for
investors expecting to sell their shares in a relatively short period after
completion of the public offering. The Trust's common shares will be listed on
the American Stock Exchange under the symbol "BLE".


     Preferred Shares. Within approximately one to three months after
completion of this offering of common shares, the Trust intends to offer
preferred shares representing approximately 38% of the Trust's capital
immediately after the issuance of such preferred shares. There can be no
assurance, however, that preferred shares representing such percentage of the
Trust's capital will actually be issued. The use of preferred shares to
leverage the common shares can create risks.

     INVESTING IN THE COMMON SHARES INVOLVES CERTAIN RISKS. SEE "RISKS" ON PAGE
18 OF THIS PROSPECTUS.




<TABLE>
<CAPTION>
                                                        PER SHARE     TOTAL
                                                       -----------   ------
<S>                                                    <C>           <C>
   Public offering price ...........................   $             $
   Sales load ......................................   $             $
   Estimated offering expenses(1) ..................   $             $
   Proceeds, after expenses, to the Trust ..........   $             $
</TABLE>

(1)   Aggregate offering expenses are expected to be $       . BlackRock has
      agreed to reimburse offering expenses in excess of $0.03 per common
      share.


     The underwriters may also purchase up to           additional common
shares at the public offering price, less the sales load, within 45 days from
the date of this prospectus to cover over-allotments.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.


     The common shares will be ready for delivery on or about July 30, 2002.


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

MERRILL LYNCH & CO.                                                UBS WARBURG

A.G. EDWARDS & SONS, INC.                                PRUDENTIAL SECURITIES

LEGG MASON WOOD WALKER,                                    WACHOVIA SECURITIES
     INCORPORATED

H&R BLOCK FINANCIAL ADVISORS, INC.           J.J.B. HILLIARD, W.L. LYONS, INC.

FAHNESTOCK & CO. INC.                                     QUICK & REILLY, INC.

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

                 The date of this prospectus is July 25, 2002.

<PAGE>


     You should read this prospectus, which contains important information
about the Trust, before deciding whether to invest in the common shares and
retain it for future reference. A Statement of Additional Information, dated
July 25, 2002, containing additional information about the Trust, has been
filed with the Securities and Exchange Commission and is incorporated by
reference in its entirety into this prospectus. You may request a free copy of
the Statement of Additional Information, the table of contents of which is on
page 37 of this prospectus, by calling (888) 825-2257 or by writing to the
Trust, or obtain a copy (and other information regarding the Trust) from the
Securities and Exchange Commission's web site (http://www.sec.gov).



     The Trust's common shares do not represent a deposit or obligation of, and
are not guaranteed or endorsed by, any bank or other insured depository
institution, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency.




                                       2
<PAGE>

                               TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                          PAGE
                                                                         -----
<S>                                                                      <C>
Prospectus Summary .....................................................   4
Summary of Trust Expenses ..............................................  11
The Trust ..............................................................  13
Use of Proceeds ........................................................  13
The Trust's Investments ................................................  13
Preferred Shares and Leverage ..........................................  16
Risks ..................................................................  18
How the Trust Manages Risk .............................................  21
Management of the Trust ................................................  22
Net Asset Value ........................................................  26
Distributions ..........................................................  26
Dividend Reinvestment Plan .............................................  26
Description of Shares ..................................................  28
Certain Provisions in the Agreement and Declaration of Trust ...........  31
Closed-End Trust Structure .............................................  32
Repurchase of Common Shares ............................................  33
Tax Matters ............................................................  33
Underwriting ...........................................................  35
Custodian and Transfer Agent ...........................................  36
Legal Opinions .........................................................  36
Table of Contents for the Statement of Additional Information ..........  37
</TABLE>

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT, AND THE UNDERWRITERS HAVE NOT,
AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF
ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT
RELY ON IT. WE ARE NOT, AND THE UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
YOU SHOULD ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE ONLY AS
OF THE DATE OF THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION AND PROSPECTS
MAY HAVE CHANGED SINCE THAT DATE.


     Until August 19, 2002 (25 days after the date of this prospectus), all
dealers that buy, sell or trade the common shares, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.




                        PRIVACY PRINCIPLES OF THE TRUST

     The Trust is committed to maintaining the privacy of its shareholders and
to safeguarding their non-public personal information. The following
information is provided to help you understand what personal information the
Trust collects, how the Trust protects that information and why, in certain
cases, the Trust may share information with select other parties.

     Generally, the Trust does not receive any non-public personal information
relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the Trust. The Trust does not
disclose any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third
party administrator).

     The Trust restricts access to non-public personal information about its
shareholders to employees of the Trust's investment advisor and its affiliates
with a legitimate business need for the information. The Trust maintains
physical, electronic and procedural safeguards designed to protect the
non-public personal information of its shareholders.


                                       3
<PAGE>

                               PROSPECTUS SUMMARY

     This is only a summary. This summary may not contain all of the
information that you should consider before investing in our common shares. You
should review the more detailed information contained in this prospectus and in
the Statement of Additional Information.


THE TRUST...................   BlackRock Municipal Income Trust II is a newly
                               organized, diversified, closed-end management
                               investment company. Throughout the prospectus, we
                               refer to BlackRock Municipal Income Trust II
                               simply as the "Trust" or as "we," "us" or "our."
                               See "The Trust."


THE OFFERING................   The Trust is offering           common shares
                               of beneficial interest at $15.00 per share
                               through a group of underwriters (the
                               "Underwriters") led by Merrill Lynch, Pierce,
                               Fenner & Smith Incorporated ("Merrill Lynch") and
                               UBS Warburg LLC.

                               The common shares of beneficial interest are
                               called "common shares" in the rest of this
                               prospectus. You must purchase at least 100
                               common shares ($1,500) in order to participate
                               in this offering. The Trust has given the
                               Underwriters an option to purchase up to
                                         additional common shares to cover
                               orders in excess of           common shares.
                               BlackRock Advisors, Inc., has agreed to pay
                               organizational expenses and offering costs
                               (other than sales load) that exceed $0.03 per
                               common share. See "Underwriting."


INVESTMENT OBJECTIVE........   The Trust's investment objective is to provide
                               current income exempt from regular Federal income
                               tax.


INVESTMENT POLICIES.........   The Trust will invest primarily in municipal
                               bonds that pay interest that is exempt from
                               regular Federal income tax. The Trust will invest
                               in municipal bonds that, in the opinion of
                               BlackRock Advisors, Inc. ("BlackRock Advisors" or
                               the "Advisor") and BlackRock Financial
                               Management, Inc. ("BlackRock Financial
                               Management" or the "Sub-Advisor") are underrated
                               or undervalued. Underrated municipal bonds are
                               those whose ratings do not, in the Advisor's or
                               Sub-Advisor's opinion, reflect their true
                               creditworthiness. Undervalued municipal bonds are
                               bonds that, in the Advisor's or Sub-Advisor's
                               opinion, are worth more than the value assigned
                               to them in the marketplace. Under normal market
                               conditions, the Trust expects to be fully
                               invested in these tax-exempt municipal bonds. The
                               Trust will invest at least 80% of its Managed
                               Assets in municipal bonds that at the time of
                               investment are investment grade quality.
                               Investment grade quality bonds are bonds rated
                               within the four highest grades (Baa or BBB or
                               better by Moody's, S&P or Fitch) or bonds that
                               are unrated but judged to be of comparable
                               quality by the Advisor or the Sub-Advisor. The
                               Trust may invest up to 20% of its Managed Assets
                               in municipal bonds that at the time of investment
                               are rated Ba/BB or B by


                                       4
<PAGE>

                               Moody's, S&P or Fitch or bonds that are unrated
                               but judged to be of comparable quality by the
                               Advisor or the Sub-Advisor. Bonds of below
                               investment grade quality are regarded as having
                               predominately speculative characteristics with
                               respect to the issuer's capacity to pay interest
                               and repay principal, and are commonly referred
                               to as "junk bonds." The Trust intends to invest
                               primarily in long-term bonds and expects bonds
                               in its portfolio to have a dollar weighted
                               average maturity of 15 years or more under
                               current market conditions. The Trust cannot
                               ensure that it will achieve its investment
                               objective. See "The Trust's Investments."


SPECIAL TAX CONSIDERATIONS...  While exempt-interest dividends are excluded
                               from gross income for Federal income tax
                               purposes, they may be subject to the Federal
                               alternative minimum tax in certain circumstances.
                               Distributions of any capital gain or other
                               taxable income will be taxable to shareholders.
                               The Trust may not be a suitable investment for
                               investors subject to the Federal alternative
                               minimum tax or who would become subject to such
                               tax by investing in the Trust. See "Tax Matters."


PROPOSED OFFERING OF PREFERRED
SHARES......................   Approximately one to three months after
                               completion of this offering of the common shares
                               (subject to market conditions), the Trust intends
                               to offer preferred shares of beneficial interest
                               ("Preferred Shares") that will represent
                               approximately 38% of the Trust's capital
                               immediately after their issuance. For purposes of
                               this prospectus, the Trust's capital means the
                               total assets of the Trust less all liabilities
                               and indebtedness not representing the Preferred
                               Shares or other senior securities. The issuance
                               of Preferred Shares will leverage the common
                               shares. Leverage involves greater risks. The
                               Trust's leveraging strategy may not be
                               successful. See "Risks--Leverage Risk." The money
                               the Trust obtains by selling the Preferred Shares
                               will be invested in long-term municipal bonds
                               that will generally pay fixed rates of interest
                               over the life of the bonds.

                               The Preferred Shares will pay adjustable rate
                               dividends based on shorter-term interest rates.
                               The adjustment period could be as short as a day
                               or as long as a year or more. If the rate of
                               return, after the payment of applicable expenses
                               of the Trust, on the long-term bonds purchased
                               by the Trust is greater than the dividends paid
                               by the Trust on the Preferred Shares, the Trust
                               will generate more income by investing the
                               proceeds of the Preferred Shares than it will
                               need to pay dividends on the Preferred Shares.
                               If so, the excess income may be used to pay
                               higher dividends to holders of common shares.
                               However, the Trust cannot assure you that the
                               issuance of Preferred Shares will result in a
                               higher yield on the common shares. Once
                               Preferred Shares are issued, the


                                       5
<PAGE>

                               net asset value and market price of the common
                               shares and the yield to holders of common shares
                               will be more volatile. See "Preferred Shares and
                               Leverage" and "Description of Shares--Preferred
                               Shares."


INVESTMENT ADVISOR..........   BlackRock Advisors will be the Trust's
                               investment advisor and BlackRock Advisors'
                               affiliate, BlackRock Financial Management, will
                               provide certain day-to-day investment management
                               services to the Trust. Throughout the prospectus,
                               we sometimes refer to BlackRock Advisors and
                               BlackRock Financial Management collectively as
                               "BlackRock." BlackRock Advisors will receive an
                               annual fee, payable monthly, in a maximum amount
                               equal to 0.55% of the average weekly value of the
                               Trust's Managed Assets. "Managed Assets" means
                               the total assets of the Trust (including any
                               assets attributable to any Preferred Shares that
                               may be outstanding) minus the sum of accrued
                               liabilities (other than debt representing
                               financial leverage). The liquidation preference
                               of the Preferred Shares is not a liability.
                               BlackRock Advisors has voluntarily agreed to
                               waive receipt of a portion of the management fee
                               or other expenses of the Trust in the amount of
                               0.15% of the average weekly values of the Trust's
                               Managed Assets for the first five years of the
                               Trust's operations (through July 31, 2007), and
                               for a declining amount for an additional five
                               years (through July 31, 2012). See "Management of
                               the Trust."


DISTRIBUTIONS...............   The Trust intends to distribute monthly all or
                               a portion of its net investment income to holders
                               of common shares. We expect to declare the
                               initial monthly dividend on the Trust's common
                               shares approximately 45 days after completion of
                               this offering and to pay that initial monthly
                               dividend approximately 60 to 90 days after
                               completion of this offering. Unless an election
                               is made to receive dividends in cash,
                               shareholders will automatically have all
                               dividends and distributions reinvested in common
                               shares through the receipt of additional unissued
                               but authorized common shares from the Trust or by
                               purchasing common shares in the open market
                               through the Trust's Dividend Reinvestment Plan.
                               See "Dividend Reinvestment Plan."

                               The Trust will distribute to holders of its
                               common shares monthly dividends of all or a
                               portion of its tax-exempt interest income after
                               payment of dividends on any Preferred Shares of
                               the Trust that may be outstanding. If the Trust
                               realizes a capital gain or other taxable income,
                               it will be required to allocate such income
                               between the common shares and the Preferred
                               Shares in proportion to the total dividends paid
                               to each class for the year in which or with
                               respect to which the income is paid. See
                               "Distributions" and "Preferred Shares and
                               Leverage."


                                       6
<PAGE>


LISTING.....................   The common shares will be listed on the
                               American Stock Exchange under the symbol "BLE".
                               See "Description of Shares--Common Shares."



CUSTODIAN AND
 TRANSFER AGENT..............  State Street Bank and Trust Company will serve as
                               the Trust's Custodian, and EquiServe Trust
                               Company, N.A. will serve as the Trust's Transfer
                               Agent. See "Custodian and Transfer Agent."


MARKET PRICE OF SHARES......   Common shares of closed-end investment
                               companies frequently trade at prices lower than
                               their net asset value. Common shares of
                               closed-end investment companies like the Trust
                               that invest primarily in investment grade
                               municipal bonds have during some periods traded
                               at prices higher than their net asset value and
                               during other periods traded at prices lower than
                               their net asset value. The Trust cannot assure
                               you that its common shares will trade at a price
                               higher than or equal to net asset value. The
                               Trust's net asset value will be reduced
                               immediately following this offering by the sales
                               load and the amount of the organization and
                               offering expenses paid by the Trust. See "Use of
                               Proceeds." In addition to net asset value, the
                               market price of the Trust's common shares may be
                               affected by such factors as dividend levels,
                               which are in turn affected by expenses, call
                               protection for portfolio securities, dividend
                               stability, portfolio credit quality, liquidity
                               and market supply and demand. See "Preferred
                               Shares and Leverage," "Risks," "Description of
                               Shares" and the section of the Statement of
                               Additional Information with the heading
                               "Repurchase of Common Shares." The common shares
                               are designed primarily for long-term investors
                               and you should not purchase common shares of the
                               Trust if you intend to sell them shortly after
                               purchase.


SPECIAL RISK
 CONSIDERATIONS..............  No Operating History. The Trust is a newly
                               organized, closed-end management investment
                               company with no operating history.

                               Market Discount Risk. Shares of closed-end
                               management investment companies frequently trade
                               at a discount from their net asset value.

                               Interest Rate Risk. Generally, when market
                               interest rates fall, bond prices rise, and vice
                               versa. Interest rate risk is the risk that the
                               municipal bonds in the Trust's portfolio will
                               decline in value because of increases in market
                               interest rates. The prices of longer-term bonds
                               fluctuate more than prices of shorter-term bonds
                               as interest rates change. Because the Trust will
                               invest primarily in long-term bonds, net asset
                               value and market price per share of the common
                               shares will fluctuate more in response to
                               changes in market interest rates than if the
                               Trust invested primarily in shorter-term bonds.
                               The Trust's use of leverage, as described below,
                               will tend to increase common share interest rate
                               risk.


                                       7
<PAGE>

                               Credit Risk. Credit risk is the risk that one or
                               more municipal bonds in the Trust's portfolio
                               will decline in price, or fail to pay interest
                               or principal when due, because the issuer of the
                               bond experiences a decline in its financial
                               status. Under normal market conditions, the
                               Trust will invest at least 80% of its Managed
                               Assets in municipal bonds rated Baa/BBB or
                               higher or that are unrated but judged to be of
                               comparable quality by BlackRock. The Trust may
                               invest up to 20% (measured at the time of
                               investment) of its Managed Assets in municipal
                               bonds that are rated Ba/BB or B or that are
                               unrated but judged to be of comparable quality
                               by BlackRock. The prices of these lower grade
                               bonds are more sensitive to negative
                               developments, such as a decline in the issuer's
                               revenues or a general economic downturn, than
                               are the prices of higher grade securities.
                               Municipal bonds of below investment grade
                               quality are predominantly speculative with
                               respect to the issuer's capacity to pay interest
                               and repay principal when due and therefore
                               involve a greater risk of default.

                               Economic Sector Risk. The Trust may invest 25%
                               or more of its Managed Assets in municipal
                               obligations of issuers in the same economic
                               sector, such as hospitals or life care
                               facilities and transportation related issuers.
                               This may make the Trust more susceptible to
                               adverse economic, political or regulatory
                               occurrences affecting a particular economic
                               sector.

                               Leverage Risk. The use of leverage through the
                               issuance of Preferred Shares creates an
                               opportunity for increased common share net
                               investment income dividends, but also creates
                               risks for the holders of common shares. The
                               Trust's leveraging strategy may not be
                               successful. We anticipate that Preferred Shares
                               will pay adjustable rate dividends based on
                               shorter-term interest rates that would be
                               periodically reset. The Trust intends to invest
                               the proceeds of the Preferred Shares offering in
                               long-term, typically fixed rate, municipal
                               bonds. So long as the Trust's municipal bond
                               portfolio provides a higher rate of return, net
                               of Trust expenses, than the Preferred Share
                               dividend rate, as reset periodically, the
                               leverage may cause the holders of common shares
                               to receive a higher current rate of return than
                               if the Trust were not leveraged. If, however,
                               long- and/or short-term rates rise, the
                               Preferred Share dividend rate could exceed the
                               rate of return on long-term bonds held by the
                               Trust that were acquired during periods of
                               generally lower interest rates, reducing return
                               to the holders of common shares. Leverage
                               creates two major types of risks for the holders
                               of common shares:

                                o the likelihood of greater volatility of net
                                  asset value and market price of the common
                                  shares because changes in the value of the
                                  Trust's bond portfolio, including bonds
                                  bought with the proceeds of the Preferred
                                  Shares offering, are borne entirely by the
                                  holders of common shares; and


                                       8
<PAGE>

                                o the possibility either that common share
                                  net investment income will fall if the
                                  Preferred Share dividend rate rises or that
                                  common share net investment income will
                                  fluctuate because the Preferred Share
                                  dividend rate varies.

                               Municipal Bond Market Risk. The amount of public
                               information available about the municipal bonds
                               in the Trust's portfolio is generally less than
                               that for corporate equities or bonds and the
                               investment performance of the Trust may
                               therefore be more dependent on the analytical
                               abilities of BlackRock than would be a stock
                               fund or taxable bond fund. The secondary market
                               for municipal bonds, particularly the below
                               investment grade bonds in which the Trust may
                               invest, also tends to be less well-developed or
                               liquid than many other securities markets, which
                               may adversely affect the Trust's ability to sell
                               its bonds at attractive prices.

                               The ability of municipal issuers to make timely
                               payments of interest and principal may be
                               diminished in general economic downturns and as
                               governmental cost burdens are reallocated among
                               Federal, state and local governments. In
                               addition, laws enacted in the future by Congress
                               or state legislatures or referenda could extend
                               the time for payment of principal and/or
                               interest, or impose other constraints on
                               enforcement of such obligations, or on the
                               ability of municipalities to levy taxes. Issuers
                               of municipal bonds might seek protection under
                               the bankruptcy laws. In the event of bankruptcy
                               of such an issuer, the Trust could experience
                               delays in collecting principal and interest and
                               the Trust may not, in all circumstances, be able
                               to collect all principal and interest to which
                               it is entitled. To enforce its rights in the
                               event of a default in the payment of interest or
                               repayment of principal, or both, the Trust may
                               take possession of and manage the assets
                               securing the issuer's obligations on such
                               securities, which may increase the Trust's
                               operating expenses. Any income derived from the
                               Trust's ownership or operation of such assets
                               may not be tax-exempt.


                                       9
<PAGE>

                               High Yield Risk. The Trust may invest a portion
                               of its assets in high-risk, high yield
                               securities of lower grade quality, which are
                               commonly referred to as "junk bonds."
                               Investments in lower grade securities will
                               expose the Trust to greater risks than if the
                               Trust owned only higher grade securities.

                               Anti-Takeover Provisions. The Trust's Agreement
                               and Declaration of Trust includes provisions
                               that could limit the ability of other entities
                               or persons to acquire control of the Trust or
                               convert the Trust to open-end status. These
                               provisions could deprive the holders of common
                               shares of opportunities to sell their common
                               shares at a premium over the then current market
                               price of the common shares or at net asset
                               value. In addition, if the Trust issues
                               Preferred Shares the holders of the Preferred
                               Shares will have voting rights that could
                               deprive holders of common shares of such
                               opportunities.


                                       10
<PAGE>

                           SUMMARY OF TRUST EXPENSES

     The following table assumes the issuance of Preferred Shares in an amount
equal to 38% of the Trust's capital (after their issuance), and shows Trust
expenses as a percentage of net assets attributable to Common Shares.


SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S>                                                                     <C>
 Sales Load Paid by You (as a percentage of offering price) .........    4.50%
 Dividend Reinvestment Plan Fees ....................................    None*
</TABLE>


<TABLE>
<CAPTION>
                                      PERCENTAGE OF
                                        NET ASSETS
                                     ATTRIBUTABLE TO
                                      COMMON SHARES
                                         (ASSUMES
                                     PREFERRED SHARES
                                      ARE ISSUED)**
                                    -----------------
<S>                                 <C>
ANNUAL EXPENSES
 Management Fees ................          0.89%
 Other Expenses .................          0.40%
                                          -----
 Total Annual Expenses ..........          1.29%***
                                          =====
 Fee and Expense Waiver .........         (0.24)%***
                                          -----
 Net Annual Expenses ............          1.05%***

</TABLE>

- ----------
*     You will be charged a $2.50 service charge and pay brokerage charges if
      you direct the Plan Agent (as defined below) to sell your common shares
      held in a dividend reinvestment account.

**    The table presented in this footnote estimates what the Trust's annual
      expenses would be stated as percentages of the Trust's net assets
      attributable to Common Shares. This table assumes the Trust is the same
      size as in the table above, but unlike the table above, assumes that no
      Preferred Shares are issued or outstanding. In accordance with these
      assumptions, the Trust's expenses would be estimated to be as follows:



<TABLE>
<CAPTION>
                                      PERCENTAGE OF
                                        NET ASSETS
                                     ATTRIBUTABLE TO
                                      COMMON SHARES
                                       (ASSUMES NO
                                     PREFERRED SHARES
                                        ARE ISSUED
                                     OR OUTSTANDING)
                                    -----------------
<S>                                 <C>
ANNUAL EXPENSES
 Management Fees ................          0.55%
 Other Expenses .................          0.25%
                                          -----
 Total Annual Expenses ..........          0.80%***
                                          =====
 Fee and Expense Waiver .........         (0.15)%***
                                          -----
 Net Annual Expenses ............          0.65%***
</TABLE>

- ----------
***   BlackRock Advisors has voluntarily agreed to waive receipt of a portion
      of the management fee or other expenses of the Trust in the amount of
      0.24% of average weekly net assets attributable to common shares (0.15%
      of average weekly Managed Assets) for the first 5 years of the Trust's
      operations, 0.16% (0.10%) in year 6, 0.16% (0.10%) in year 7, 0.08%
      (0.05%) in year 8, 0.08% (0.05%) in year 9 and 0.08% (0.05%) in year 10.
      Without the waiver, "Total Annual Expenses" would be estimated to be
      1.29% of average weekly net assets attributable to common shares and
      0.80% of average weekly Managed Assets.


                                       11
<PAGE>

     The purpose of the table above and the example below is to help you
understand all fees and expenses that you, as a holder of common shares, would
bear directly or indirectly. The expenses shown in the table under "Other
Expenses" and "Net Annual Expenses" are based on estimated amounts for the
Trust's first full year of operations and assume that the Trust issues
5,000,000 common shares. If the Trust issues fewer common shares, all other
things being equal, these expenses would increase. See "Management of the
Trust" and "Dividend Reinvestment Plan."

     The following example illustrates the expenses (including the sales load
of $45) that you would pay on a $1,000 investment in common shares, assuming
(1) total net annual expenses of 1.05% of net assets attributable to common
shares in years 1 through 5, and (2) a 5% annual return:(1)




<TABLE>
<CAPTION>
                                    1 YEAR   3 YEARS   5 YEARS   10 YEARS(2)
                                   -------- --------- --------- ------------
<S>                                <C>      <C>       <C>       <C>
Total Expenses Incurred ..........   $55       $77       $100       $176
</TABLE>

- ----------
(1)   THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
      EXPENSES. The example assumes that the estimated "Other Expenses" set
      forth in the Annual Expenses table are accurate, that fees and expenses
      increase as described in note 2 below and that all dividends and
      distributions are reinvested at net asset value. Actual expenses may be
      greater or less than those assumed. Moreover, the Trust's actual rate of
      return may be greater or less than the hypothetical 5% return shown in
      the example.

(2)   Assumes waiver of fees and expenses of 0.16% of average weekly net assets
      attributable to common shares in year 6 (0.10% of average weekly Managed
      Assets), 0.16% (0.10%) in year 7, 0.08% (0.05%) in year 8, 0.08% (0.05%)
      in year 9 and 0.08% (0.05%) in year 10 and assumes that leverage remains
      38% of the Trust's capital throughout the periods reflected. BlackRock
      Advisors has not agreed to waive any portion of its fees and expenses
      beyond July 31, 2012. See "Management of the Trust--Investment Management
      Agreement."


                                       12
<PAGE>

                                   THE TRUST

     The Trust is a newly organized, diversified, closed-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Trust was organized as a Delaware
business trust on June 21, 2002, pursuant to an Agreement and Declaration of
Trust governed by the laws of the State of Delaware. As a newly organized
entity, the Trust has no operating history. The Trust's principal office is
located at 100 Bellevue Parkway, Wilmington, Delaware 19809, and its telephone
number is (888) 825-2257.


                                USE OF PROCEEDS

     The net proceeds of the offering of common shares will be approximately
$            ($            if the Underwriters exercise the over-allotment
option in full) after payment of the estimated organization and offering costs.
The Trust will invest the net proceeds of the offering in accordance with the
Trust's investment objective and policies as stated below. We currently
anticipate that the Trust will be able to invest primarily in tax exempt
municipal bonds that meet the Trust's investment objective and policies within
approximately three months after the completion of the offering. Pending such
investment, it is anticipated that the proceeds will be invested in short-term,
tax-exempt or taxable investment grade securities.


                            THE TRUST'S INVESTMENTS


INVESTMENT OBJECTIVE AND POLICIES

     The Trust's investment objective is to provide current income exempt from
regular Federal income tax.

     The Trust will invest primarily in municipal bonds that pay interest that
is exempt from regular Federal income tax. Under normal market conditions, the
Trust expects to be fully invested in such tax-exempt municipal bonds. Under
normal market conditions, the Trust will invest at least 80% of its Managed
Assets in investment grade quality municipal bonds. Investment grade quality
means that such bonds are rated, at the time of investment, within the four
highest grades (Baa or BBB or better by Moody's, S&P or Fitch) or are unrated
but judged to be of comparable quality by BlackRock. Municipal bonds rated Baa
by Moody's are investment grade, but Moody's considers municipal bonds rated
Baa to have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity for issuers
of municipal bonds that are rated BBB or Baa (or that have equivalent ratings)
to make principal and interest payments than is the case for issues of higher
grade municipal bonds. The Trust may invest up to 20% of its Managed Assets in
municipal bonds that are rated, at the time of investment, Ba/BB or B by
Moody's, S&P or Fitch or that are unrated but judged to be of comparable
quality by BlackRock. Bonds of below investment grade quality (Ba/BB or below)
are commonly referred to as "junk bonds." Bonds of below investment grade
quality are regarded as having predominantly speculative characteristics with
respect to the issuer's capacity to pay interest and repay principal. These
credit quality policies apply only at the time a security is purchased, and the
Trust is not required to dispose of a security if a rating agency downgrades
its assessment of the credit characteristics of a particular issue. In
determining whether to retain or sell a security that a rating agency has
downgraded, BlackRock may consider such factors as BlackRock's assessment of
the credit quality of the issuer of the security, the price at which the
security could be sold and the rating, if any, assigned to the security by
other rating agencies. Appendix A to the Statement of Additional Information
contains a general description of Moody's, S&P's and Fitch's ratings of
municipal bonds. The Trust may also invest in securities of other open- or
closed-end investment companies that invest primarily in municipal bonds of the
types in which the Trust may invest directly and in tax-exempt preferred shares
that pay dividends exempt from regular Federal income tax. See "--Other
Investment Companies," "--Tax-Exempt Preferred Securities" and "--Initial
Portfolio Composition."

     The Trust will invest in municipal bonds that, in BlackRock's opinion, are
underrated or undervalued. Underrated municipal bonds are those whose ratings
do not, in BlackRock's opinion,


                                       13
<PAGE>

reflect their true creditworthiness. Undervalued municipal bonds are bonds
that, in the opinion of BlackRock, are worth more than the value assigned to
them in the marketplace. BlackRock may at times believe that bonds associated
with a particular municipal market sector (for example, but not limited to,
electrical utilities), or issued by a particular municipal issuer, are
undervalued. BlackRock may purchase those bonds for the Trust's portfolio
because they represent a market sector or issuer that BlackRock considers
undervalued, even if the value of those particular bonds appears to be
consistent with the value of similar bonds. Municipal bonds of particular types
(for example, but not limited to, hospital bonds, industrial revenue bonds or
bonds issued by a particular municipal issuer) may be undervalued because there
is a temporary excess of supply in that market sector, or because of a general
decline in the market price of municipal bonds of the market sector for reasons
that do not apply to the particular municipal bonds that are considered
undervalued. The Trust's investment in underrated or undervalued municipal
bonds will be based on BlackRock's belief that their yield is higher than that
available on bonds bearing equivalent levels of interest rate risk, credit risk
and other forms of risk, and that their prices will ultimately rise, relative
to the market, to reflect their true value. Any capital appreciation realized
by the Trust will generally result in capital gains distributions subject to
Federal capital gains taxation.

     The Trust may purchase municipal bonds that are additionally secured by
insurance, bank credit agreements or escrow accounts. The credit quality of
companies which provide these credit enhancements will affect the value of
those securities. Although the insurance feature reduces certain financial
risks, the premiums for insurance and the higher market price paid for insured
obligations may reduce the Trust's income. Insurance generally will be obtained
from insurers with a claims-paying ability rated Aaa by Moody's or AAA by S&P
or Fitch. The insurance feature does not guarantee the market value of the
insured obligations or the net asset value of the common shares. The Trust may
purchase insured bonds and may purchase insurance for bonds in its portfolio.

     During temporary defensive periods, including the period during which the
net proceeds of this offering are being invested, and in order to keep the
Trust's cash fully invested, the Trust may invest up to 100% of its total
assets in liquid, short-term investments, including high quality, short-term
securities that may be either tax-exempt or taxable. The Trust may not achieve
its investment objective under these circumstances. The Trust intends to invest
in taxable short-term investments only if suitable tax-exempt short-term
investments are not available at reasonable prices and yields. If the Trust
invests in taxable short-term investments, a portion of your dividends would be
subject to regular Federal income tax.

     The Trust cannot change its investment objective without the approval of
the holders of a majority of the outstanding common shares and, once the
Preferred Shares are issued, the Preferred Shares voting together as a single
class, and of the holders of a majority of the outstanding Preferred Shares
voting as a separate class. A "majority of the outstanding" means (1) 67% or
more of the shares present at a meeting, if the holders of more than 50% of the
shares are present or represented by proxy, or (2) more than 50% of the shares,
whichever is less. See "Description of Shares--Preferred Shares--Voting Rights"
and the Statement of Additional Information under "Description of
Shares--Preferred Shares" for additional information with respect to the voting
rights of holders of Preferred Shares.


MUNICIPAL BONDS

     Municipal bonds are either general obligation or revenue bonds and
typically are issued to finance public projects, such as roads or public
buildings, to pay general operating expenses or to refinance outstanding debt.
Municipal bonds may also be issued for private activities, such as housing,
medical and educational facility construction or for privately owned industrial
development and pollution control projects. General obligation bonds are backed
by the full faith and credit, or taxing authority, of the issuer and may be
repaid from any revenue source. Revenue bonds may be repaid only from the
revenues of a specific facility or source. The Trust also may purchase
municipal bonds that represent lease obligations. These carry special risks
because the issuer of the bonds may not be obligated to appropriate money
annually to make payments under the lease. In order to reduce this


                                       14
<PAGE>

risk, the Trust will only purchase municipal bonds representing lease
obligations where BlackRock believes the issuer has a strong incentive to
continue making appropriations until maturity.

     The municipal bonds in which the Trust will invest pay interest that, in
the opinion of bond counsel to the issuer, or on the basis of another authority
believed by BlackRock to be reliable, is exempt from regular Federal income
tax. BlackRock will not conduct its own analysis of the tax status of the
interest paid by municipal bonds held by the Trust. The Trust may also invest
in municipal bonds issued by United States Territories (such as Puerto Rico or
Guam) that are exempt from regular Federal income tax. In addition to the types
of municipal bonds described in the prospectus, the Trust may invest in other
securities that pay interest that is, or make other distributions that are,
exempt from regular Federal income tax and/or state and local personal taxes,
regardless of the technical structure of the issuer of the instrument. The
Trust treats all of such tax-exempt securities as municipal bonds.

     The yields on municipal bonds are dependent on a variety of factors,
including prevailing interest rates and the condition of the general money
market and the municipal bond market, the size of a particular offering, the
maturity of the obligation and the rating of the issue. The market value of
municipal bonds will vary with changes in interest rate levels and as a result
of changing evaluations of the ability of bond issuers to meet interest and
principal payments.

     The Trust will invest primarily in municipal bonds with long-term
maturities in order to maintain a weighted average maturity of 15 or more
years, but the weighted average maturity of obligations held by the Trust may
be shortened, depending on market conditions.


WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES

     The Trust may buy and sell municipal bonds on a when-issued basis and may
purchase or sell municipal bonds on a "forward commitment" basis. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment
for the securities takes place at a later date. This type of transaction may
involve an element of risk because no interest accrues on the bonds prior to
settlement and, because bonds are subject to market fluctuations, the value of
the bonds at the time of delivery may be less or more than cost. The Trust will
designate on its books and records cash or other liquid debt securities having
a market value at all times, at least equal to the amount of the commitment.


OTHER INVESTMENT COMPANIES

     The Trust may invest up to 10% of its total assets in securities of other
open- or closed-end investment companies that invest primarily in municipal
bonds of the types in which the Trust may invest directly. The Trust generally
expects to invest in other investment companies either during periods when it
has large amounts of uninvested cash, such as the period shortly after the
Trust receives the proceeds of the offering of its common shares or Preferred
Shares, or during periods when there is a shortage of attractive, high-yielding
municipal bonds available in the market. As a shareholder in an investment
company, the Trust will bear its ratable share of that investment company's
expenses, and will remain subject to payment of the Trust's advisory and other
fees and expenses with respect to assets so invested. Holders of common shares
will therefore be subject to duplicative expenses to the extent the Trust
invests in other investment companies. BlackRock will take expenses into
account when evaluating the investment merits of an investment in an investment
company relative to available municipal bond investments. In addition, the
securities of other investment companies may also be leveraged and will
therefore be subject to the same leverage risks to which the Trust is subject.
As described in this prospectus in the sections entitled "Risks" and "Preferred
Shares and Leverage," the net asset value and market value of leveraged shares
will be more volatile and the yield to shareholders will tend to fluctuate more
than the yield generated by unleveraged shares. Investment companies may have
investment policies that differ from those of the


                                       15
<PAGE>

Trust. In addition, to the extent the Trust invests in other investment
companies, the Trust will be dependent upon the investment and research
abilities of persons other than BlackRock. The Trust treats its investments in
such open- or closed-end investment companies as investments in municipal
bonds.


TAX-EXEMPT PREFERRED SECURITIES

     The Trust may also invest up to 10% of its total assets in preferred
interests of other investment funds that pay dividends that are exempt from
regular Federal income tax. A portion of such dividends may be capital gain
distributions subject to Federal capital gains tax. Such funds in turn invest
in municipal bonds and other assets that generally pay interest or make
distributions that are exempt from regular Federal income tax, such as revenue
bonds issued by state or local agencies to fund the development of low-income,
multi-family housing. Investing in such tax-exempt preferred shares involves
many of the same issues as investing in other open- or closed-end investment
companies as discussed above. These investments also have additional risks,
including liquidity risk, the absence of regulation governing investment
practices, capital structure and leverage, affiliated transactions and other
matters, and concentration of investments in particular issuers or industries.


HIGH YIELD SECURITIES

     The Trust may invest up to 20% of its Managed Assets in securities rated
below investment grade such as those rated Ba or B by Moody's and BB or B by
S&P or securities comparably rated by other rating agencies or in unrated
securities determined by BlackRock to be of comparable quality. These lower
grade securities are commonly known as "junk bonds." Securities rated below
investment grade are judged to have speculative characteristics with respect to
their interest and principal payments. Such securities may face major ongoing
uncertainties or exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments.

     Lower grade securities, though high yielding, are characterized by high
risk. They may be subject to certain risks with respect to the issuing entity
and to greater market fluctuations than certain lower yielding, higher rated
securities. The retail secondary market for lower grade securities may be less
liquid than that of higher rated securities; adverse conditions could make it
difficult at times for the Trust to sell certain of these securities or could
result in lower prices than those used in calculating the Trust's net asset
value.


INITIAL PORTFOLIO COMPOSITION

     If current market conditions persist, the Trust expects that approximately
90% of its initial portfolio will consist of investment grade quality municipal
bonds, rated as such at the time of investment, meaning that such bonds are
rated by national rating agencies within the four highest grades or are unrated
but judged to be of comparable quality by BlackRock (approximately 35% in
Aaa/AAA; 5% in Aa/AA; 25% in A; and 25% in Baa/BBB). BlackRock generally
expects to select obligations that may not be redeemed at the option of the
issuer for approximately ten years from the date of purchase by the Trust. See
"--Investment Objective and Policies."


                         PREFERRED SHARES AND LEVERAGE

     Approximately one to three months after the completion of the offering of
the common shares, subject to market conditions, the Trust intends to offer
Preferred Shares representing approximately 38% of the Trust's capital
immediately after the issuance of the Preferred Shares. The Preferred Shares
will have complete priority upon distribution of assets over the common shares.
The issuance of Preferred Shares will leverage the common shares. Leverage
involves greater risks. The Trust's leveraging strategy may not be successful.
Although the timing and other terms of the offering of Preferred Shares and the
terms of the Preferred Shares will be determined by the Trust's board of
trustees, the Trust expects to invest the proceeds of the Preferred Shares
offering in long-term


                                       16
<PAGE>

municipal bonds. The Preferred Shares will pay adjustable rate dividends based
on shorter-term interest rates, which would be redetermined periodically by an
auction process. The adjustment period for Preferred Share dividends could be
as short as one day or as long as a year or more. So long as the Trust's
portfolio is invested in securities that provide a higher rate of return than
the dividend rate of the Preferred Shares, after taking expenses into
consideration, the leverage will cause you to receive a higher current rate of
income than if the Trust were not leveraged.

     Changes in the value of the Trust's bond portfolio, including bonds bought
with the proceeds of the Preferred Shares offering, will be borne entirely by
the holders of common shares. If there is a net decrease, or increase, in the
value of the Trust's investment portfolio, the leverage will decrease, or
increase (as the case may be), the net asset value per common share to a
greater extent than if the Trust were not leveraged. During periods in which
the Trust is using leverage, the fees paid to BlackRock for advisory and
sub-advisory services will be higher than if the Trust did not use leverage
because the fees paid will be calculated on the basis of the Trust's Managed
Assets, including the gross proceeds from the issuance of Preferred Shares.

     For tax purposes, the Trust is currently required to allocate tax-exempt
interest income, net capital gain and other taxable income, if any, between the
common shares and Preferred Shares in proportion to total dividends paid to
each class for the year in which or with respect to which the net capital gain
or other taxable income is paid. If net capital gain or other taxable income is
allocated to Preferred Shares, instead of solely tax-exempt income, the Trust
will likely have to pay higher total dividends to Preferred Shareholders or
make special payments to Preferred Shareholders to compensate them for the
increased tax liability. This would reduce the total amount of dividends paid
to the holders of common shares, but would increase the portion of the dividend
that is tax-exempt. If the increase in dividend payments or the special
payments to Preferred Shareholders are not entirely offset by a reduction in
the tax liability of, and an increase in the tax-exempt dividends received by,
the holders of common shares, the advantage of the Trust's leveraged structure
to holders of common shares will be reduced.

     Under the Investment Company Act, the Trust is not permitted to issue
Preferred Shares unless immediately after such issuance the value of the
Trust's capital is at least 200% of the liquidation value of the outstanding
Preferred Shares (i.e., the liquidation value may not exceed 50% of the Trust's
capital). In addition, the Trust is not permitted to declare any cash dividend
or other distribution on its common shares unless, at the time of such
declaration, the value of the Trust's capital is at least 200% of such
liquidation value. If Preferred Shares are issued, the Trust intends, to the
extent possible, to purchase or redeem Preferred Shares from time to time to
the extent necessary in order to maintain coverage of any Preferred Shares of
at least 200%. In addition, as a condition to obtaining ratings on the
Preferred Shares, the terms of any Preferred Shares issued are expected to
include asset coverage maintenance provisions which will require the redemption
of the Preferred Shares in the event of non-compliance by the Trust and may
also prohibit dividends and other distributions on the common shares in such
circumstances. In order to meet redemption requirements, the Trust may have to
liquidate portfolio securities. Such liquidations and redemptions would cause
the Trust to incur related transaction costs and could result in capital losses
to the Trust. Prohibitions on dividends and other distributions on the common
shares could impair the Trust's ability to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"). If
the Trust has Preferred Shares outstanding, two of the Trust's trustees will be
elected by the holders of Preferred Shares voting separately as a class. The
remaining trustees of the Trust will be elected by holders of common shares and
Preferred Shares voting together as a single class. In the event the Trust
failed to pay dividends on Preferred Shares for two years, holders of Preferred
Shares would be entitled to elect a majority of the trustees of the Trust.

     The Trust will be subject to certain restrictions imposed by guidelines of
one or more rating agencies that may issue ratings for Preferred Shares issued
by the Trust. These guidelines are expected to impose asset coverage or
portfolio composition requirements that are more stringent than those imposed
on the Trust by the Investment Company Act. It is not anticipated that these
covenants or guidelines will impede BlackRock from managing the Trust's
portfolio in accordance with the Trust's investment objective and policies.


                                       17
<PAGE>

     The Trust may also borrow money as a temporary measure for extraordinary
or emergency purposes, including the payment of dividends and the settlement of
securities transactions which otherwise might require untimely dispositions of
Trust securities.


EFFECTS OF LEVERAGE

     Assuming that the Preferred Shares will represent approximately 38% of the
Trust's capital and pay dividends at an annual average rate of 2.00%, the
income generated by the Trust's portfolio (net of estimated expenses) must
exceed 0.76% in order to cover the dividend payments and other expenses
specifically related to the Preferred Shares. Of course, these numbers are
merely estimates used for illustration. Actual Preferred Share dividend rates
will vary frequently and may be significantly higher or lower than the rate
estimated above.

     The following table is furnished in response to requirements of the
Securities and Exchange Commission. It is designed to illustrate the effect of
leverage on common share total return, assuming investment portfolio total
returns (comprised of income and changes in the value of bonds held in the
Trust's portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment
portfolio returns are hypothetical figures and are not necessarily indicative
of the investment portfolio returns experienced or expected to be experienced
by the Trust. See "Risks." The table further reflects the issuance of Preferred
Shares representing 38% of the Trust's capital, a 3.81% yield on the Trust's
investment portfolio, net of expenses, and the Trust's currently projected
annual Preferred Share dividend rate of 2.00%.



<TABLE>
<CAPTION>
<S>                                         <C>              <C>             <C>            <C>          <C>
   Assumed Portfolio Total Return (Net of
    Expenses) ...........................        (10.00)%         (5.00)%         0.00%         5.00%        10.00%
   Common Share Total Return ............        (17.35)%         (9.29)%        (1.23)%        6.84%        14.90%
</TABLE>

     Common share total return is composed of two elements: the common share
dividends paid by the Trust (the amount of which is largely determined by the
net investment income of the Trust after paying dividends on Preferred Shares)
and gains or losses on the value of the securities the Trust owns. As required
by Securities and Exchange Commission rules, the table assumes that the Trust
is more likely to suffer capital losses than to enjoy capital appreciation. For
example, to assume a total return of 0% the Trust must assume that the
tax-exempt interest it receives on its municipal bond investments is entirely
offset by losses in the value of those bonds.

     Unless and until Preferred Shares are issued, the common shares will not
be leveraged and this section will not apply.


                                     RISKS

     The net asset value of the common shares will fluctuate with and be
affected by, among other things, interest rate risk, credit risk, reinvestment
risk and leverage risk, and an investment in common shares will be subject to
market discount risk, inflation risk and municipal bond market risk, each of
which is more fully described below.

     Newly Organized. The Trust is a newly organized, diversified, closed-end
management investment company and has no operating history.

     Market Discount Risk. As with any stock, the price of the Trust's shares
will fluctuate with market conditions and other factors. If shares are sold,
the price received may be more or less than the original investment. Net asset
value will be reduced immediately following the initial offering by the amount
of the sales load and organizational and selling expenses paid by the Trust.
Common shares are designed for long-term investors and should not be treated as
trading vehicles. Shares of closed-end management investment companies
frequently trade at a discount from their net asset value. The Trust's shares
may trade at a price that is less than the initial offering price. This risk
may be greater for investors who sell their shares in a relatively short period
of time after completion of the initial offering.


                                       18
<PAGE>

     Interest Rate Risk. Interest rate risk is the risk that bonds, and the
Trust's assets, will decline in value because of changes in interest rates.
Generally, municipal bonds will decrease in value when interest rates rise and
increase in value when interest rates decline. This means that the net asset
value of the common shares will fluctuate with interest rate changes and the
corresponding changes in the value of the Trust's municipal bond holdings. The
value of the longer-term bonds in which the Trust generally invests fluctuates
more in response to changes in interest rates than does the value of
shorter-term bonds. Because the Trust will invest primarily in long-term bonds,
the net asset value and market price per share of the common shares will
fluctuate more in response to changes in market interest rates than if the
Trust invested primarily in shorter-term bonds. The Trust's use of leverage, as
described below, will tend to increase common share interest rate risk.

     Credit Risk. Credit risk is the risk that an issuer of a municipal bond
will become unable to meet its obligation to make interest and principal
payments. In general, lower rated municipal bonds carry a greater degree of
risk that the issuer will lose its ability to make interest and principal
payments, which could have a negative impact on the Trust's net asset value or
dividends. The Trust may invest up to 20% of its Managed Assets in municipal
bonds that are rated Ba/BB or B by Moody's, S&P or Fitch or that are unrated
but judged to be of comparable quality by BlackRock. Bonds rated Ba/BB or B are
regarded as having predominately speculative characteristics with respect to
the issuer's capacity to pay interest and repay principal, and these bonds are
commonly referred to as "junk bonds." These securities are subject to a greater
risk of default. The prices of these lower grade bonds are more sensitive to
negative developments, such as a decline in the issuer's revenues or a general
economic downturn, than are the prices of higher grade securities. Lower grade
securities tend to be less liquid than investment grade securities. The market
values of lower grade securities tend to be more volatile than investment grade
securities.

     Municipal Bond Market Risk. Investing in the municipal bond market
involves certain risks. The amount of public information available about the
municipal bonds in the Trust's portfolio is generally less than that for
corporate equities or bonds, and the investment performance of the Trust may
therefore be more dependent on the analytical abilities of BlackRock than would
be a stock fund or taxable bond fund. The secondary market for municipal bonds,
particularly the below investment grade bonds in which the Trust may invest,
also tends to be less well-developed or liquid than many other securities
markets, which may adversely affect the Trust's ability to sell its bonds at
attractive prices.

     The ability of municipal issuers to make timely payments of interest and
principal may be diminished in general economic downturns and as governmental
cost burdens are reallocated among Federal, state and local governments. In
addition, laws enacted in the future by Congress or state legislatures or
referenda could extend the time for payment of principal and/or interest, or
impose other constraints on enforcement of such obligations or on the ability
of municipalities to levy taxes. Issuers of municipal bonds might seek
protection under the bankruptcy laws. In the event of bankruptcy of such an
issuer, the Trust could experience delays in collecting principal and interest
and the Trust may not, in all circumstances, be able to collect all principal
and interest to which it is entitled. To enforce its rights in the event of a
default in the payment of interest or repayment of principal, or both, the
Trust may take possession of and manage the assets securing the issuer's
obligations on such securities, which may increase the Trust's operating
expenses. Any income derived from the Trust's ownership or operation of such
assets may not be tax-exempt.

     Revenue bonds issued by state or local agencies to finance the development
of low-income, multi-family housing involve special risks in addition to those
associated with municipal bonds generally, including that the underlying
properties may not generate sufficient income to pay expenses and interest
costs. Such bonds are generally non-recourse against the property owner, may be
junior to the rights of others with an interest in the properties, may pay
interest that changes based in part on the financial performance of the
property, may be prepayable without penalty and may be used to finance the
construction of housing developments which, until completed and rented, do not
generate income to pay interest. Increases in interest rates payable on senior
obligations may make it more difficult for issuers to meet payment obligations
on subordinated bonds. The Trust will treat investments in tax-exempt preferred
shares as investments in municipal bonds.


                                       19
<PAGE>

     Reinvestment Risk. Reinvestment risk is the risk that income from the
Trust's bond portfolio will decline if and when the Trust invests the proceeds
from matured, traded, prepaid or called bonds at market interest rates that are
below the portfolio's current earnings rate. A decline in income could affect
the common shares' market price or their overall returns.

     Leverage Risk. Leverage risk is the risk associated with the issuance of
the Preferred Shares to leverage the common shares. There is no assurance that
the Trust's leveraging strategy will be successful. Once the Preferred Shares
are issued, the net asset value and market value of the common shares will be
more volatile, and the yield to the holders of common shares will tend to
fluctuate with changes in the shorter-term dividend rates on the Preferred
Shares. If the dividend rate on the Preferred Shares approaches the net rate of
return on the Trust's investment portfolio, the benefit of leverage to the
holders of the common shares would be reduced. If the dividend rate on the
Preferred Shares exceeds the net rate of return on the Trust's portfolio, the
leverage will result in a lower rate of return to the holders of common shares
than if the Trust were not leveraged. Because the long-term bonds included in
the Trust's portfolio will typically pay fixed rates of interest while the
dividend rate on the Preferred Shares will be adjusted periodically, this could
occur even when both long-term and short-term municipal rates rise. In
addition, the Trust will pay (and the holders of common shares will bear) any
costs and expenses relating to the issuance and ongoing maintenance of the
Preferred Shares. Accordingly, the Trust cannot assure you that the issuance of
Preferred Shares will result in a higher yield or return to the holders of the
common shares.

     Similarly, any decline in the net asset value of the Trust's investments
will be borne entirely by the holders of common shares. Therefore, if the
market value of the Trust's portfolio declines, the leverage will result in a
greater decrease in net asset value to the holders of common shares than if the
Trust were not leveraged. This greater net asset value decrease will also tend
to cause a greater decline in the market price for the common shares. The Trust
might be in danger of failing to maintain the required 200% asset coverage or
of losing its ratings on the Preferred Shares or, in an extreme case, the
Trust's current investment income might not be sufficient to meet the dividend
requirements on the Preferred Shares. In order to counteract such an event, the
Trust might need to liquidate investments in order to fund a redemption of some
or all of the Preferred Shares. Liquidation at times of low municipal bond
prices may result in capital loss and may reduce returns to the holders of
common shares.

     While the Trust may from time to time consider reducing leverage in
response to actual or anticipated changes in interest rates in an effort to
mitigate the increased volatility of current income and net asset value
associated with leverage, there can be no assurance that the Trust will
actually reduce leverage in the future or that any reduction, if undertaken,
will benefit the holders of common shares. Changes in the future direction of
interest rates are very difficult to predict accurately. If the Trust were to
reduce leverage based on a prediction about future changes to interest rates,
and that prediction turned out to be incorrect, the reduction in leverage would
likely operate to reduce the income and/or total returns to holders of common
shares relative to the circumstance where the Trust had not reduced leverage.
The Trust may decide that this risk outweighs the likelihood of achieving the
desired reduction to volatility in income and share price if the prediction
were to turn out to be correct, and determine not to reduce leverage as
described above.

     The Trust may invest in the securities of other investment companies. Such
securities may also be leveraged and will therefore be subject to the leverage
risks described above. This additional leverage may in certain market
conditions reduce the net asset value of the Trust's common shares and the
returns to the holders of common shares.

     Inflation Risk. Inflation risk is the risk that the value of assets or
income from investment will be worth less in the future as inflation decreases
the value of money. As inflation increases, the real value of the common shares
and distributions on those shares can decline. In addition, during any periods
of rising inflation, Preferred Share dividend rates would likely increase,
which would tend to further reduce returns to the holders of common shares.


                                       20
<PAGE>

     Economic Sector and Geographic Risk. The Trust may invest 25% or more of
its Managed Assets in municipal obligations of issuers in the same state (or
U.S. territory) or in municipal obligations in the same economic sector,
including without limitation the following: lease rental obligations of state
and local authorities; obligations dependent on annual appropriations by a
state's legislature for payment; obligations of state and local housing finance
authorities, municipal utilities systems or public housing authorities;
obligations of hospitals or life care facilities; and industrial development or
pollution control bonds issued for electrical utility systems, steel companies,
paper companies or other purposes. This may make the Trust more susceptible to
adverse economic, political or regulatory occurrences affecting a particular
state or economic sector. For example, health care related issuers are
susceptible to Medicare, Medicaid and other third party payor reimbursement
policies, and national and state health care legislation. As concentration
increases, so does the potential for fluctuation in the net asset value of the
Trust's common shares.

     High Yield Risk. Investing in high yield bonds involves additional risks,
including credit risk. The value of high yield, lower quality bonds is affected
by the creditworthiness of the issuers of the securities and by general
economic and specific industry conditions. Issuers of high yield bonds are not
as strong financially as those with higher credit ratings, so their bonds are
usually considered speculative investments. These issuers are more vulnerable
to financial setbacks and recession than more creditworthy issuers which may
impair their ability to make interest and principal payments. Investments in
lower grade securities will expose the Trust to greater risks than if the Trust
owned only higher grade securities.

     Recent Developments. As a result of the terrorist attacks on the World
Trade Center and the Pentagon on September 11, 2001, some of the U.S.
securities markets were closed for a four-day period. These terrorist attacks
and related events have led to increased short-term market volatility and may
have long-term effects on U.S. and world economies and markets. A similar
disruption of the financial markets could impact interest rates, auctions,
secondary trading, ratings, credit risk, inflation and other factors relating
to the securities.


                           HOW THE TRUST MANAGES RISK


INVESTMENT LIMITATIONS

     The Trust has adopted certain investment limitations designed to limit
investment risk. These limitations are fundamental and may not be changed
without the approval of the holders of a majority of the outstanding common
shares and, if issued, Preferred Shares voting together as a single class, and
the approval of the holders of a majority of the Preferred Shares voting as a
separate class. Among other restrictions, the Trust may not invest more than
25% of its Managed Assets in securities of issuers in any one industry, except
that this limitation does not apply to municipal bonds backed by the assets and
revenues of governments or political subdivisions of governments. In addition,
with respect to 75% of its Managed Assets the Trust may not invest more than 5%
of the value of its Managed Assets in the securities of any single issuer or
purchase more than 10% of the outstanding voting securities of any one issuer.

     The Trust may become subject to guidelines which are more limiting than
its investment restrictions in order to obtain and maintain ratings from
Moody's or S&P on the Preferred Shares that it intends to issue. The Trust does
not anticipate that such guidelines would have a material adverse effect on the
Trust's common shareholders or the Trust's ability to achieve its investment
objective. See "Investment Objective and Policies" in the Statement of
Additional Information for a complete list of the fundamental and
non-fundamental investment policies of the Trust.


QUALITY OF INVESTMENTS

     The Trust will invest at least 80% of its Managed Assets in bonds of
investment grade quality at the time of investment. Investment grade quality
means that such bonds are rated by national rating agencies within the four
highest grades (Baa or BBB or better by Moody's, S&P or Fitch) or are unrated
but judged to be of comparable quality by BlackRock.


                                       21
<PAGE>

LIMITED ISSUANCE OF PREFERRED SHARES

     Under the Investment Company Act, the Trust could issue Preferred Shares
having a total liquidation value (original purchase price of the shares being
liquidated plus any accrued and unpaid dividends) of up to 50% of the value of
the capital of the Trust. If the total liquidation value of the Preferred
Shares were ever more than 50% of the value of the Trust's capital, the Trust
would not be able to declare dividends on the common shares until the
liquidation value, as a percentage of the Trust's assets, was reduced.
Approximately one to three months after the completion of the offering of the
common shares, the Trust intends to issue Preferred Shares representing about
38% of the Trust's capital immediately after the time of issuance of the
Preferred Shares. This higher than required margin of net asset value provides
a cushion against later fluctuations in the value of the Trust's portfolio and
will subject common shareholders to less income and net asset value volatility
than if the Trust were more leveraged. The Trust intends to purchase or redeem
Preferred Shares, if necessary, to keep the liquidation value of the Preferred
Shares below 50% of the value of the Trust's capital.


MANAGEMENT OF INVESTMENT PORTFOLIO AND CAPITAL STRUCTURE TO LIMIT LEVERAGE RISK


     The Trust may take certain actions if short-term interest rates increase
or market conditions otherwise change (or the Trust anticipates such an
increase or change) and the Trust's leverage begins (or is expected) to
adversely affect common shareholders. In order to attempt to offset such a
negative impact of leverage on common shareholders, the Trust may shorten the
average maturity of its investment portfolio (by investing in short-term, high
quality securities) or may extend the auction period of outstanding Preferred
Shares. The Trust may also attempt to reduce the leverage by redeeming or
otherwise purchasing Preferred Shares. As explained above under
"Risks--Leverage Risk," the success of any such attempt to limit leverage risk
depends on BlackRock's ability to accurately predict interest rate or other
market changes. Because of the difficulty of making such predictions, the Trust
may never attempt to manage its capital structure in the manner described in
this paragraph.

     If market conditions suggest that additional leverage would be beneficial,
the Trust may sell previously unissued Preferred Shares or Preferred Shares
that the Trust previously issued but later repurchased.

     Currently, the Trust may not invest in inverse floating securities, which
are securities that pay interest at rates that vary inversely with changes in
prevailing short-term tax-exempt interest rates and which represent a leveraged
investment in an underlying municipal bond. This restriction is a
non-fundamental policy of the Trust that may be changed by vote of the Trust's
board of trustees.


HEDGING STRATEGIES

     The Trust may use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures or
options based on either an index of long-term municipal securities or on
taxable debt securities whose prices, in the opinion of BlackRock, correlate
with the prices of the Trust's investments. Successful implementation of most
hedging strategies would generate taxable income and the Trust has no present
intention to use these strategies.


                            MANAGEMENT OF THE TRUST


TRUSTEES AND OFFICERS

     The board of trustees is responsible for the overall management of the
Trust, including supervision of the duties performed by BlackRock. There are
eight trustees of the Trust. Two of the trustees are "interested persons" (as
defined in the Investment Company Act). The name and business address of the
trustees and officers of the Trust and their principal occupations and other
affiliations during the past five years are set forth under "Management of the
Trust" in the Statement of Additional Information.


                                       22
<PAGE>

INVESTMENT ADVISOR AND SUB-ADVISOR


     BlackRock Advisors acts as the Trust's investment advisor. BlackRock
Financial Management acts as the Trust's sub-advisor. BlackRock Advisors,
located at 100 Bellevue Parkway, Wilmington, Delaware 19809, and BlackRock
Financial Management, located at 40 East 52nd Street, New York, New York 10022,
are wholly owned subsidiaries of BlackRock, Inc., which is one of the largest
publicly traded investment management firms in the United States with
approximately $250 billion of assets under management as of June 30, 2002.
BlackRock manages assets on behalf of institutional and individual investors
worldwide through a variety of equity, fixed income, liquidity and alternative
investment products, including the BlackRock Funds and BlackRock Provident
Institutional Funds. In addition, BlackRock provides risk management and
investment system services to institutional investors under the BlackRock
Solutions name.

     The BlackRock organization has over 13 years of experience managing
closed-end products and currently advises a closed-end family of 37 funds with
approximately $9.4 billion in assets. BlackRock has 28 leveraged municipal
closed-end funds and six open-end municipal funds under management. As of June
30, 2002, BlackRock had approximately $17.5 billion in municipal assets
firm-wide. Clients are served from the company's headquarters in New York City,
as well as offices in Wilmington, San Francisco, Boston, Edinburgh, Tokyo and
Hong Kong. BlackRock, Inc. is a member of The PNC Financial Services Group,
Inc. ("PNC"), one of the largest diversified financial services organizations
in the United States, and is majority-owned by PNC and by BlackRock employees.


     Investment Philosophy. BlackRock's investment decision-making process for
the municipal bond sector is subject to the same discipline, oversight and
investment philosophy that the firm applies to other sectors of the fixed
income market.

     BlackRock uses a relative value strategy that evaluates the trade-off
between risk and return to seek to achieve the Trust's investment objective of
generating current income exempt from regular Federal income tax. This strategy
is combined with disciplined risk control techniques and applied in sector,
sub-sector and individual security selection decisions. BlackRock's extensive
personnel and technology resources are the key drivers of the investment
philosophy.

     BlackRock's Municipal Bond Team. BlackRock uses a team approach in
managing municipal portfolios. BlackRock believes that this approach offers
substantial benefits over one that is dependent on the market wisdom or
investment expertise of only a few individuals.

     BlackRock's municipal bond team includes three portfolio managers with an
average experience of 20 years and five credit research analysts with an
average experience of 13 years. Kevin M. Klingert, senior portfolio manager and
head of municipal bonds at BlackRock, leads the team, a position he has held
since joining BlackRock in 1991. A Managing Director since 1996, Mr. Klingert
was a Vice President from 1991 through 1993 and a Director in 1994 and 1995.
Mr. Klingert has over 18 years of experience in the municipal market. Prior to
joining BlackRock in 1991, Mr. Klingert was an Assistant Vice President at
Merrill Lynch, Pierce, Fenner & Smith Incorporated, which he joined in 1985.
The portfolio management team also includes James McGinley and F. Howard Downs.
Mr. McGinley has been a portfolio manager and a member of the Investment
Strategy Group at BlackRock since 1999. Prior to joining BlackRock in 1999, Mr.
McGinley was Vice President of Municipal Trading from 1996 to 1999 and Manager
of the Municipal Strategy Group from 1995 to 1999 with Prudential Securities
Incorporated. Mr. McGinley joined Prudential Securities Incorporated in 1993 as
an Associate in Municipal Research. F. Howard Downs has been a portfolio
manager since joining BlackRock in 1999. Prior to joining BlackRock in 1999,
Mr. Downs was a Vice President, Institutional Salesman and Sales Manager from
1990 to 1999 at William E. Simon & Sons Municipal Securities, Inc. Mr. Downs
was one of the original employees of William E. Simon & Sons Municipal
Securities, Inc., founded in 1990, and was responsible for sales of municipal
bonds.


     As of June 30, 2002, BlackRock's municipal bond portfolio managers were
responsible for over 85 municipal bond portfolios, valued at approximately
$12.7 billion. Municipal mandates include the management of open- and
closed-end mutual funds, municipal-only separate accounts or municipal



                                       23
<PAGE>


allocations within larger institutional mandates. In addition, BlackRock
manages 12 municipal liquidity accounts valued at approximately $4.8 billion.
The team currently manages 28 closed-end municipal funds with over $6.6 billion
in assets under management.


     BlackRock's Investment Process. BlackRock has in-depth expertise in the
fixed income market. BlackRock applies the same risk-controlled, active sector
rotation style to the management process for all of its fixed income
portfolios. BlackRock believes that it is unique in its integration of taxable
and municipal bond specialists. Both taxable and municipal bond portfolio
managers share the same trading floor and interact frequently for determining
the firm's overall investment strategy. This interaction allows each portfolio
manager to access the combined experience and expertise of the entire portfolio
management group at BlackRock.

     BlackRock's portfolio management process emphasizes research and analysis
of specific sectors and securities, not interest rate speculation. BlackRock
believes that market-timing strategies can be highly volatile and potentially
produce inconsistent results. Instead, BlackRock thinks that value over the
long-term is best achieved through a risk-controlled approach, focusing on
sector allocation, security selection and yield curve management.

     In the municipal market, BlackRock believes one of the most important
determinants of value is supply and demand. BlackRock's ability to monitor
investor flows and frequency and seasonality of issuance is helpful in
anticipating the supply and demand for sectors. BlackRock believes that the
breadth and expertise of its municipal bond team allow it to anticipate
issuance flows, forecast which sectors are likely to have the most supply and
plan its investment strategy accordingly.


     BlackRock also believes that over the long-term, intense credit analysis
will add incremental value and avoid significant relative performance
impairments. The municipal credit team is led by Susan C. Heide, Ph.D., who has
been, since 1999, Managing Director, Head of Municipal Credit Research and
co-chair of BlackRock's Credit Committee. From 1995 to 1999, Dr. Heide was a
Director and Head of Municipal Credit Research. Dr. Heide specializes in the
credit analysis of municipal securities and as such chairs the monthly
municipal bond presentation to the Credit Committee. In addition, Dr. Heide
supervises the team of municipal bond analysts that assists with the ongoing
surveillance of approximately $12.7 billion in municipal bonds managed by
BlackRock.


     Prior to joining BlackRock as a Vice President and Head of Municipal
Credit Research in 1993, Dr. Heide was Director of Research and a portfolio
manager at OFFITBANK. For eight years prior to this assignment (1984 to 1992),
Dr. Heide was with American Express Company's Investment Division where she was
the Vice President of Credit Research, responsible for assessing the
creditworthiness of $6 billion in municipal securities. Dr. Heide began her
investment career in 1983 at Moody's Investors Service, Inc. where she was a
municipal bond analyst.

     Dr. Heide initiated the Disclosure Task Force of the National Federation
of Municipal Analysts in 1988 and was co-chairperson of this committee from its
inception through the completion of the Disclosure Handbook for Municipal
Securities--1992 Update, published in January 1993. Dr. Heide has authored a
number of articles on municipal finance and edited The Handbook of Municipal
Bonds published in the fall of 1994. Dr. Heide was selected by the Bond Buyer
as a first team All-American Municipal Analyst in 1990 and was recognized in
subsequent years.

     BlackRock's approach to credit risk incorporates a combination of
sector-based, top-down macro-analysis of industry sectors to determine relative
weightings with a name-specific (issuer-specific), bottom-up detailed credit
analysis of issuers and structures. The sector-based approach focuses on
rotating into sectors that are undervalued and exiting sectors when
fundamentals or technicals become unattractive. The name-specific approach
focuses on identifying special opportunities where the market undervalues a
credit, and devoting concentrated resources to research the credit and monitor
the position. BlackRock's analytical process focuses on anticipating change in
credit trends before market recognition. Credit research is a critical,
independent element of BlackRock's municipal process.


                                       24
<PAGE>

INVESTMENT MANAGEMENT AGREEMENT


     Pursuant to an investment management agreement between BlackRock Advisors
and the Trust, the Trust has agreed to pay for the investment advisory services
and facilities provided by BlackRock Advisors a fee payable monthly in arrears
at an annual rate equal to 0.55% of the average weekly value of the Trust's
Managed Assets (the "Management Fee"). BlackRock has voluntarily agreed to
waive receipt of a portion of its Management Fee in the amount of 0.15% of the
average weekly value of the Trust's Managed Assets for the first five years of
the Trust's operations (through July 31, 2007), and for a declining amount for
an additional five years (through July 31, 2012). The Trust will also reimburse
BlackRock Advisors for certain expenses BlackRock Advisors incurs in connection
with performing certain services for the Trust. In addition, with the approval
of the board of trustees, a pro rata portion of the salaries, bonuses, health
insurance, retirement benefits and similar employment costs for the time spent
on Trust operations (other than the provision of services required under the
investment management agreement) of all personnel employed by BlackRock
Advisors who devote substantial time to Trust operations may be reimbursed to
BlackRock Advisors. Managed Assets are the total assets of the Trust, which
includes any proceeds from the Preferred Shares, minus the sum of accrued
liabilities (other than indebtedness attributable to leverage). This means that
during periods in which the Trust is using leverage, the fee paid to BlackRock
Advisors will be higher than if the Trust did not use leverage because the fee
is calculated as a percentage of the Trust's Managed Assets, which include
those assets purchased with leverage.


     In addition to the Management Fee of BlackRock Advisors, the Trust pays
all other costs and expenses of its operations, including compensation of its
trustees (other than those affiliated with BlackRock Advisors), custodian,
transfer and dividend disbursing agent expenses, legal fees, leverage expenses,
rating agency fees, listing fees and expenses, expenses of independent
auditors, expenses of repurchasing shares, expenses of preparing, printing and
distributing shareholder reports, notices, proxy statements and reports to
governmental agencies, and taxes, if any.


     For the first 10 years of the Trust's operation, BlackRock Advisors has
undertaken to waive its investment advisory fees and expenses payable by the
Trust in the amounts, and for the time periods, set forth below:




<TABLE>
<CAPTION>
                                 PERCENTAGE WAIVED
TWELVE MONTH                    (AS A PERCENTAGE OF
PERIOD ENDING                     AVERAGE WEEKLY
JULY 31                          MANAGED ASSETS*)
- ----------------------------   --------------------
<S>                            <C>
  2003** ...................            0.15%
  2004 .....................            0.15%
  2005 .....................            0.15%
  2006 .....................            0.15%
  2007 .....................            0.15%
  2008 .....................            0.10%
  2009 .....................            0.10%
  2010 .....................            0.05%
  2011 .....................            0.05%
  2012 .....................            0.05%
</TABLE>

- ----------
*     Including net assets attributable to Preferred Shares.

**    From the commencement of operations.



     BlackRock Advisors has not undertaken to waive any portion of the Trust's
fees and expenses beyond July 31, 2012 or after termination of the investment
management agreement.


                                       25
<PAGE>

                                NET ASSET VALUE

     The net asset value of the common shares of the Trust will be computed
based upon the value of the Trust's portfolio securities and other assets. Net
asset value per common share will be determined as of the close of the regular
trading session on the New York Stock Exchange no less frequently than on the
Friday of each week and on the last business day of each month. In the event
that any Friday is not a business day, the net asset value will be calculated
on a date determined by BlackRock Advisors. The Trust calculates net asset
value per common share by subtracting the Trust's liabilities (including
accrued expenses, dividends payable and any borrowings of the Trust) and the
liquidation value of any outstanding Preferred Shares of the Trust from the
Trust's Managed Assets (the value of the securities the Trust holds plus cash
or other assets, including interest accrued but not yet received) and dividing
the result by the total number of common shares of the Trust outstanding.

     The Trust values its fixed income securities by using market quotations,
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics
in accordance with procedures established by the board of trustees of the
Trust. A substantial portion of the Trust's fixed income investments will be
valued utilizing one or more pricing services approved by the Trust's board of
trustees. Debt securities having a remaining maturity of 60 days or less when
purchased and debt securities originally purchased with maturities in excess of
60 days but which currently have maturities of 60 days or less may be valued at
cost adjusted for amortization of premiums and accretion of discounts. Any
securities or other assets for which current market quotations are not readily
available are valued at their fair value as determined in good faith under
procedures established by and under the general supervision and responsibility
of the Trust's board of trustees.


                                 DISTRIBUTIONS

     The Trust will distribute to holders of its common shares monthly
dividends of all or a portion of its tax-exempt interest income after payment
of dividends on any Preferred Shares of the Trust which may be outstanding. It
is expected that the initial monthly dividend on shares of the Trust's common
shares will be declared approximately 45 days and paid approximately 60 to 90
days after completion of this offering. The Trust expects that all or a portion
of any capital gain and other taxable income will be distributed at least
annually.

     Various factors will affect the level of the Trust's income, including the
asset mix, the amount of leverage utilized by the Trust and the effects thereof
and the Trust's use of hedging. To permit the Trust to maintain a more stable
monthly distribution, the Trust may from time to time distribute less than the
entire amount of tax-exempt interest income earned in a particular period. The
undistributed tax-exempt interest income would be available to supplement
future distributions. As a result, the distributions paid by the Trust for any
particular monthly period may be more or less than the amount of tax-exempt
interest income actually earned by the Trust during the period. Undistributed
tax-exempt interest income will add to the Trust's net asset value and,
correspondingly, distributions from undistributed tax-exempt interest income
will deduct from the Trust's net asset value. Shareholders will automatically
have all dividends and distributions reinvested in common shares of the Trust
issued by the Trust or purchased in the open-market in accordance with the
Trust's Dividend Reinvestment Plan unless an election is made to receive cash.
See "Dividend Reinvestment Plan."


                          DIVIDEND REINVESTMENT PLAN

     Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Trust will be automatically reinvested by EquiServe Trust Company, N.A.
(the "Plan Administrator"), Administrator for shareholders in administering the
Trust's Dividend Reinvestment Plan (the "Plan"), in additional common shares of
the Trust. Shareholders who elect not to participate in the Plan will receive
all dividends and other distributions in cash paid by check mailed directly to
the shareholder of record (or, if the common shares are held in street or other
nominee name, then to such nominee) by EquiServe Trust Company,


                                       26
<PAGE>

N.A., as dividend disbursing agent. You may elect not to participate in the
Plan and to receive all dividends in cash by contacting EquiServe Trust
Company, N.A., as dividend disbursing agent, at the address set forth below.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such
termination or resumption will be effective with respect to any subsequently
declared dividend or other distribution. Some brokers may automatically elect
to receive cash on your behalf and may re-invest that cash in additional common
shares of the Trust for you. If you wish for all dividends declared on your
common shares of the Trust to be automatically reinvested pursuant to the Plan,
please contact your broker.

     The Plan Administrator will open an account for each common shareholder
under the Plan in the same name in which such common shareholder's common
shares are registered. Whenever the Trust declares a dividend or other
distribution (together, a "Dividend") payable in cash, non-participants in the
Plan will receive cash and participants in the Plan will receive the equivalent
in common shares. The common shares will be acquired by the Plan Administrator
for the participants' accounts, depending upon the circumstances described
below, either (i) through receipt of additional unissued but authorized common
shares from the Trust ("Newly Issued Common Shares") or (ii) by purchase of
outstanding common shares on the open market ("Open-Market Purchases") on the
American Stock Exchange or elsewhere. If, on the payment date for any Dividend,
the closing market price plus estimated brokerage commissions per common share
is equal to or greater than the net asset value per common share, the Plan
Administrator will invest the Dividend amount in Newly Issued Common Shares on
behalf of the participants. The number of Newly Issued Common Shares to be
credited to each participant's account will be determined by dividing the
dollar amount of the Dividend by the net asset value per common share on the
payment date; provided that, if the net asset value is less than or equal to
95% of the closing market value on the payment date, the dollar amount of the
Dividend will be divided by 95% of the closing market price per common share on
the payment date. If, on the payment date for any Dividend, the net asset value
per common share is greater than the closing market value plus estimated
brokerage commissions, the Plan Administrator will invest the Dividend amount
in common shares acquired on behalf of the participants in Open-Market
Purchases. In the event of a market discount on the payment date for any
Dividend, the Plan Administrator will have until the last business day before
the next date on which the common shares trade on an "ex-dividend" basis or 30
days after the payment date for such Dividend, whichever is sooner (the "Last
Purchase Date"), to invest the Dividend amount in common shares acquired in
Open-Market Purchases. It is contemplated that the Trust will pay monthly
income Dividends. Therefore, the period during which Open-Market Purchases can
be made will exist only from the payment date of each Dividend through the date
before the next "ex-dividend" date which typically will be approximately ten
days. If, before the Plan Administrator has completed its Open-Market
Purchases, the market price per common share exceeds the net asset value per
common share, the average per common share purchase price paid by the Plan
Administrator may exceed the net asset value of the common shares, resulting in
the acquisition of fewer common shares than if the Dividend had been paid in
Newly Issued Common Shares on the Dividend payment date. Because of the
foregoing difficulty with respect to Open-Market Purchases, the Plan provides
that if the Plan Administrator 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 Plan Administrator
may cease making Open-Market Purchases and may invest the uninvested portion of
the Dividend amount in Newly Issued Common Shares at the net asset value per
common share at the close of business on the Last Purchase Date provided that,
if the net asset value is less than or equal to 95% of the then current market
price per common share; the dollar amount of the Dividend will be divided by
95% of the market price on the payment date.

     The Plan Administrator maintains all shareholders' accounts in the Plan
and furnishes written confirmation of all transactions in the accounts,
including information needed by shareholders for tax records. Common shares in
the account of each Plan participant will be held by the Plan Administrator on
behalf of the Plan participant, and each shareholder proxy will include those
shares purchased or received pursuant to the Plan. The Plan Administrator will
forward all proxy solicitation materials to participants and vote proxies for
shares held under the Plan in accordance with the instructions of the
participants.


                                       27
<PAGE>

     In the case of shareholders such as banks, brokers or nominees which hold
shares for others who are the beneficial owners, the Plan Administrator will
administer the Plan on the basis of the number of common shares certified from
time to time by the record shareholder's name and held for the account of
beneficial owners who participate in the Plan.

     There will be no brokerage charges with respect to common shares issued
directly by the Trust. However, each participant will pay a pro rata share of
brokerage commissions incurred in connection with Open-Market Purchases. The
automatic reinvestment of Dividends will not relieve participants of any
Federal, state or local income tax that may be payable (or required to be
withheld) on such Dividends. See "Tax Matters." Participants that request a
sale of shares through the Plan Administrator are subject to a $2.50 sales fee
and a $0.15 per share sold brokerage commission.

     The Trust reserves the right to amend or terminate the Plan. There is no
direct service charge to participants with regard to purchases in the Plan;
however, the Trust reserves the right to amend the Plan to include a service
charge payable by the participants.

     All correspondence or questions concerning the Plan should be directed to
the Plan Administrator, EquiServe Trust Company , N.A., PO Box 43011
Providence, RI 02940-3011 or EquiServe Trust Company, N.A., 150 Royall St
Canton, MA 02021 PH: (800)-699-1236.


                             DESCRIPTION OF SHARES


COMMON SHARES

     The Trust is an unincorporated business trust organized under the laws of
Delaware pursuant to an Agreement and Declaration of Trust dated as of June 21,
2002. The Trust is authorized to issue an unlimited number of common shares of
beneficial interest, par value $.001 per share. Each common share has one vote
and, when issued and paid for in accordance with the terms of this offering,
will be fully paid and non-assessable, except that the trustees shall have the
power to cause shareholders to pay expenses of the Trust by setting off charges
due from shareholders from declared but unpaid dividends or distributions owed
the shareholders and/or by reducing the number of common shares owned by each
respective shareholder. Whenever Preferred Shares are outstanding, the holders
of common shares will not be entitled to receive any distributions from the
Trust unless all accrued dividends on Preferred Shares have been paid, unless
asset coverage (as defined in the Investment Company Act) with respect to
Preferred Shares would be at least 200% after giving effect to the
distributions and unless certain other requirements imposed by any rating
agencies rating the Preferred Shares have been met. See "--Preferred Shares"
below. All common shares are equal as to dividends, assets and voting
privileges and have no conversion, preemptive or other subscription rights. The
Trust will send annual and semi-annual reports, including financial statements,
to all holders of its shares.

     The Trust has no present intention of offering any additional shares other
than the Preferred Shares and common shares issued under the Trust's Dividend
Reinvestment Plan. Any additional offerings of shares will require approval by
the Trust's board of trustees. Any additional offering of common shares will be
subject to the requirements of the Investment Company Act, which provides that
shares may not be issued at a price below the then current net asset value,
exclusive of sales load, except in connection with an offering to existing
holders of common shares or with the consent of a majority of the Trust's
outstanding voting securities.


     The Trust's common shares will be listed on the American Stock Exchange
under the symbol "BLE".


     The Trust's net asset value per share generally increases when interest
rates decline, and decreases when interest rates rise, and these changes are
likely to be greater because the Trust intends to have a leveraged capital
structure. Net asset value will be reduced immediately following the offering
of common shares by the amount of the sales load and organization and offering
expenses paid by the Trust. See "Use of Proceeds."


                                       28
<PAGE>

     Unlike open-end funds, closed-end funds like the Trust do not continuously
offer shares and do not provide daily redemptions. Rather, if a shareholder
determines to buy additional common shares or sell shares already held, the
shareholder may do so by trading through a broker on the American Stock
Exchange or otherwise. Shares of closed-end investment companies frequently
trade on an exchange at prices lower than net asset value. Shares of closed-end
investment companies like the Trust that invest predominantly in investment
grade municipal bonds have during some periods traded at prices higher than net
asset value and during other periods have traded at prices lower than net asset
value. Because the market value of the common shares may be influenced by such
factors as dividend levels (which are in turn affected by expenses), call
protection on its portfolio securities, dividend stability, portfolio credit
quality, net asset value, relative demand for and supply of such shares in the
market, general market and economic conditions and other factors beyond the
control of the Trust, the Trust cannot assure you that common shares will trade
at a price equal to or higher than net asset value in the future. The common
shares are designed primarily for long-term investors and you should not
purchase the common shares if you intend to sell them soon after purchase. See
"Preferred Shares and Leverage" and the Statement of Additional Information
under "Repurchase of Common Shares."


PREFERRED SHARES

     The Agreement and Declaration of Trust provides that the Trust's board of
trustees may authorize and issue Preferred Shares with rights as determined by
the board of trustees, by action of the board of trustees without the approval
of the holders of the common shares. Holders of common shares have no
preemptive right to purchase any Preferred Shares that might be issued.

     The Trust's board of trustees has indicated its intention to authorize an
offering of Preferred Shares, representing approximately 38% of the Trust's
capital immediately after the Preferred Shares are issued, within approximately
one to three months after completion of this offering of common shares, subject
to market conditions and to the board of trustees' continuing belief that
leveraging the Trust's capital structure through the issuance of Preferred
Shares is likely to achieve the potential benefits to the holders of common
shares described in this prospectus. The Trust may conduct other offerings of
Preferred Shares in the future subject to the same percentage restriction,
after giving effect to previously issued Preferred Shares. The board of
trustees also reserves the right to change the foregoing percentage limitation
and may issue Preferred Shares to the extent permitted by the Investment
Company Act, which currently limits the aggregate liquidation preference of all
outstanding Preferred Shares to 50% of the value of the Trust's capital. We
cannot assure you, however, that any Preferred Shares will be issued. Although
the terms of any Preferred Shares, including dividend rate, liquidation
preference and redemption provisions, will be determined by the board of
trustees, subject to applicable law and the Agreement and Declaration of Trust,
it is likely that the Preferred Shares will be structured to carry a relatively
short-term dividend rate reflecting interest rates on short-term tax-exempt
debt securities, by providing for the periodic redetermination of the dividend
rate at relatively short intervals through an auction, remarketing or other
procedure. The Trust also believes that it is likely that the liquidation
preference, voting rights and redemption provisions of the Preferred Shares
will be similar to those stated below.

     Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Trust, the holders of Preferred
Shares will be entitled to receive a preferential liquidating distribution,
which is expected to equal the original purchase price per Preferred Share plus
accrued and unpaid dividends, whether or not declared, before any distribution
of assets is made to holders of common shares. After payment of the full amount
of the liquidating distribution to which they are entitled, the holders of
Preferred Shares will not be entitled to any further participation in any
distribution of assets by the Trust.

     Voting Rights. The Investment Company Act requires that the holders of any
Preferred Shares, voting separately as a single class, have the right to elect
at least two trustees at all times. The remaining trustees will be elected by
holders of common shares and Preferred Shares, voting together as a single
class. In addition, subject to the prior rights, if any, of the holders of any
other class of


                                       29
<PAGE>

senior securities outstanding, the holders of any Preferred Shares have the
right to elect a majority of the trustees of the Trust at any time two years'
dividends on any Preferred Shares are unpaid. The Investment Company Act also
requires that, in addition to any approval by shareholders that might otherwise
be required, the approval of the holders of a majority of any outstanding
Preferred Shares, voting separately as a class, would be required to (1) adopt
any plan of reorganization that would adversely affect the Preferred Shares,
and (2) take any action requiring a vote of security holders under Section
13(a) of the Investment Company Act, including, among other things, changes in
the Trust's subclassification as a closed-end investment company or changes in
its fundamental investment restrictions. See "Certain Provisions in the
Agreement and Declaration of Trust." As a result of these voting rights, the
Trust's ability to take any such actions may be impeded to the extent that
there are any Preferred Shares outstanding. The board of trustees presently
intends that, except as otherwise indicated in this prospectus and except as
otherwise required by applicable law, holders of Preferred Shares will have
equal voting rights with holders of common shares (one vote per share, unless
otherwise required by the Investment Company Act) and will vote together with
holders of common shares as a single class.


     The affirmative vote of the holders of a majority of the outstanding
Preferred Shares, voting as a separate class, will be required to amend, alter
or repeal any of the preferences, rights or powers of holders of Preferred
Shares so as to affect materially and adversely such preferences, rights or
powers, or to increase or decrease the authorized number of Preferred Shares.
The class vote of holders of Preferred Shares described above will in each case
be in addition to any other vote required to authorize the action in question.


     Redemption, Purchase and Sale of Preferred Shares by the Trust. The terms
of the Preferred Shares are expected to provide that (1) they are redeemable by
the Trust in whole or in part at the original purchase price per share plus
accrued dividends per share, (2) the Trust may tender for or purchase Preferred
Shares and (3) the Trust may subsequently resell any shares so tendered for or
purchased. Any redemption or purchase of Preferred Shares by the Trust will
reduce the leverage applicable to the common shares, while any resale of shares
by the Trust will increase that leverage.


     The discussion above describes the possible offering of Preferred Shares
by the Trust. If the board of trustees determines to proceed with such an
offering, the terms of the Preferred Shares may be the same as, or different
from, the terms described above, subject to applicable law and the Trust's
Agreement and Declaration of Trust. The board of trustees, without the approval
of the holders of common shares, may authorize an offering of Preferred Shares
or may determine not to authorize such an offering, and may fix the terms of
the Preferred Shares to be offered.


                                       30
<PAGE>

          CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST

     The Agreement and Declaration of Trust includes provisions that could have
the effect of limiting the ability of other entities or persons to acquire
control of the Trust or to change the composition of its board of trustees.
This could have the effect of depriving shareholders of an opportunity to sell
their shares at a premium over prevailing market prices by discouraging a third
party from seeking to obtain control over the Trust. Such attempts could have
the effect of increasing the expenses of the Trust and disrupting the normal
operation of the Trust. The board of trustees is divided into three classes,
with the terms of one class expiring at each annual meeting of shareholders. At
each annual meeting, one class of trustees is elected to a three-year term.
This provision could delay for up to two years the replacement of a majority of
the board of trustees. A trustee may be removed from office by the action of a
majority of the remaining trustees followed by a vote of the holders of at
least 75% of the shares then entitled to vote for the election of the
respective trustee.

     In addition, the Trust's Agreement and Declaration of Trust requires the
favorable vote of a majority of the Trust's board of trustees followed by the
favorable vote of the holders of at least 75% of the outstanding shares of each
affected class or series of the Trust, voting separately as a class or series,
to approve, adopt or authorize certain transactions with 5% or greater holders
of a class or series of shares and their associates, unless the transaction has
been approved by at least 80% of the trustees, in which case "a majority of the
outstanding voting securities" (as defined in the Investment Company Act) of
the Trust shall be required. For purposes of these provisions, a 5% or greater
holder of a class or series of shares (a "Principal Shareholder") refers to any
person who, whether directly or indirectly and whether alone or together with
its affiliates and associates, beneficially owns 5% or more of the outstanding
shares of any class or series of shares of beneficial interest of the Trust.

     The 5% holder transactions subject to these special approval requirements
are:

    o the merger or consolidation of the Trust or any subsidiary of the Trust
      with or into any Principal Shareholder;

    o the issuance of any securities of the Trust to any Principal Shareholder
      for cash (other than pursuant to any automatic dividend reinvestment
      plan);

    o the sale, lease or exchange of all or any substantial part of the assets
      of the Trust to any Principal Shareholder, except assets having an
      aggregate fair market value of less than $1,000,000, aggregating for the
      purpose of such computation all assets sold, leased or exchanged in any
      series of similar transactions within a twelve-month period; or

    o the sale, lease or exchange to the Trust or any subsidiary of the Trust,
      in exchange for securities of the Trust, of any assets of any Principal
      Shareholder, except assets having an aggregate fair market value of less
      than $1,000,000, aggregating for purposes of such computation all assets
      sold, leased or exchanged in any series of similar transactions within a
      twelve-month period.

     To convert the Trust to an open-end investment company, the Trust's
Agreement and Declaration of Trust requires the favorable vote of a majority of
the board of the trustees followed by the favorable vote of the holders of at
least 75% of the outstanding shares of each affected class or series of shares
of the Trust, voting separately as a class or series, unless such amendment has
been approved by at least 80% of the trustees, in which case "a majority of the
outstanding voting securities" (as defined in the Investment Company Act) of
the Trust shall be required. The foregoing vote would satisfy a separate
requirement in the Investment Company Act that any conversion of the Trust to
an open-end investment company be approved by the shareholders. If approved in
the foregoing manner, conversion of the Trust to an open-end investment company
could not occur until 90 days after the shareholders' meeting at which such
conversion was approved and would also require at least 30 days' prior notice
to all shareholders. Conversion of the Trust to an open-end investment company
would require the redemption of any outstanding Preferred Shares, which could
eliminate or alter the leveraged capital structure of the Trust with respect to
the common shares. Following any such conversion, it is also possible that
certain of the Trust's investment policies and


                                       31
<PAGE>

strategies would have to be modified to assure sufficient portfolio liquidity.
In the event of conversion, the common shares would cease to be listed on the
American Stock Exchange or other national securities exchanges or market
systems. Shareholders of an open-end investment company may require the company
to redeem their shares 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. The Trust expects to pay all such redemption requests in cash, but
reserves the right to pay redemption requests in a combination of cash or
securities. If such partial payment in securities were made, investors may
incur brokerage costs in converting such securities to cash. If the Trust were
converted to an open-end fund, it is likely that new shares would be sold at
net asset value plus a sales load. The board of trustees believes, however,
that the closed-end structure is desirable in light of the Trust's investment
objective and policies. Therefore, you should assume that it is not likely that
the board of trustees would vote to convert the Trust to an open-end fund.

     To liquidate the Trust, the Trust's Agreement and Declaration of Trust
requires the favorable vote of a majority of the board of trustees followed by
the favorable vote of the holders of at least 75% of the outstanding shares of
each affected class or series of the Trust, voting separately as a class or
series, unless such liquidation has been approved by at least 80% of trustees,
in which case "a majority of the outstanding voting securities" (as defined in
the Investment Company Act) of the Trust shall be required.

     For the purposes of calculating "a majority of the outstanding voting
securities" under the Trust's Agreement and Declaration of Trust, each class
and series of the Trust shall vote together as a single class, except to the
extent required by the Investment Company Act or the Trust's Agreement and
Declaration of Trust with respect to any class or series of shares. If a
separate vote is required, the applicable proportion of shares of the class or
series, voting as a separate class or series, also will be required.

     The board of trustees has determined that provisions with respect to the
board of trustees and the shareholder voting requirements described above,
which voting requirements are greater than the minimum requirements under
Delaware law or the Investment Company Act, are in the best interest of
shareholders generally. Reference should be made to the Agreement and
Declaration of Trust on file with the Securities and Exchange Commission for
the full text of these provisions.



                           CLOSED-END TRUST STRUCTURE

     The Trust is a newly organized, diversified, closed-end management
investment company (commonly referred to as a closed-end fund). Closed-end
funds differ from open-end funds (which are generally referred to as mutual
funds) in that closed-end funds generally list their shares for trading on a
stock exchange and do not redeem their shares at the request of the
shareholder. This means that if you wish to sell your shares of a closed-end
fund you must trade them on the market like any other stock at the prevailing
market price at that time. In a mutual fund, if the shareholder wishes to sell
shares of the fund, the mutual fund will redeem or buy back the shares at "net
asset value." Also, mutual funds generally offer new shares on a continuous
basis to new investors, and closed-end funds generally do not. The continuous
inflows and outflows of assets in a mutual fund can make it difficult to manage
the fund's investments. By comparison, closed-end funds are generally able to
stay more fully invested in securities that are consistent with their
investment objective, and also have greater flexibility to make certain types
of investments, and to use certain investment strategies, such as financial
leverage and investments in illiquid securities.

     Shares of closed-end funds frequently trade at a discount to their net
asset value. Because of this possibility and the recognition that any such
discount may not be in the interest of shareholders, the Trust's board of
trustees might consider from time to time engaging in open-market repurchases,
tender offers for shares or other programs intended to reduce the discount. We
cannot guarantee or assure, however, that the Trust's board of trustees will
decide to engage in any of these actions. Nor is there any guarantee or
assurance that such actions, if undertaken, would result in the shares trading
at


                                       32
<PAGE>

a price equal or close to net asset value per share. The board of trustees
might also consider converting the Trust to an open-end mutual fund, which
would also require a vote of the shareholders of the Trust.


                          REPURCHASE OF COMMON SHARES

     Shares of closed-end investment companies often trade at a discount to
their net asset values, and the Trust's common shares may also trade at a
discount to their net asset value, although it is possible that they may trade
at a premium above net asset value. The market price of the Trust's common
shares will be determined by such factors as relative demand for and supply of
such common shares in the market, the Trust's net asset value, general market
and economic conditions and other factors beyond the control of the Trust. See
"Net Asset Value." Although the Trust's common shareholders will not have the
right to redeem their common shares, the Trust may take action to repurchase
common shares in the open-market or make tender offers for its common shares.
This may have the effect of reducing any market discount from net asset value.

     There is no assurance that, if action is undertaken to repurchase or
tender for common shares, such action will result in the common shares' trading
at a price which approximates their net asset value. Although share repurchases
and tenders could have a favorable effect on the market price of the Trust's
common shares, you should be aware that the acquisition of common shares by the
Trust will decrease the capital of the Trust and, therefore, may have the
effect of increasing the Trust's expense ratio and decreasing the asset
coverage with respect to any Preferred Shares outstanding. Any share
repurchases or tender offers will be made in accordance with requirements of
the Securities Exchange Act of 1934, as amended, the Investment Company Act and
the principal stock exchange on which the common shares are traded.


                                  TAX MATTERS

     The discussion below and in the Statement of Additional Information
provides general tax information related to an investment in the common shares.
The discussion reflects applicable tax laws of the United States as of the date
of this prospectus, which tax laws may be changed or subject to new
interpretations by the courts or the Internal Revenue Service retroactively or
prospectively. Because tax laws are complex and often change, you should
consult your tax advisor about the tax consequences of an investment in the
Trust.

     The Trust primarily invests in municipal bonds the income of which is
exempt from regular Federal income tax. Consequently, the regular monthly
dividends you receive will generally be exempt from regular Federal income tax.
A portion of these dividends, however, may be subject to the Federal
alternative minimum tax.

     Although the Trust does not seek to realize taxable income or capital
gains, the Trust may realize and distribute taxable income or capital gains
from time to time as a result of the Trust's normal investment activities. The
Trust will distribute at least annually any taxable income or realized capital
gains. Distributions of net short-term gains are taxable as ordinary income.
Distributions of net long-term capital gains are taxable to you as long-term
capital gains regardless of how long you have owned your common shares.
Dividends will not qualify for a dividends received deduction generally
available to corporate shareholders.

     Each year, you will receive a year-end statement designating the amounts
of tax-exempt dividends, capital gain dividends and ordinary income dividends
paid to you during the preceding year, including the source of investment
income by state and the portion of income that is subject to the Federal
alternative minimum tax. You will receive this statement from the firm where
you purchased your common shares if you hold your investment in street name;
the Trust will send you this statement if you hold your shares in registered
form.

     The tax status of your dividends is not affected by whether you reinvest
your dividends or receive them in cash.


                                       33
<PAGE>

     In order to avoid corporate taxation of its taxable income and be
permitted to pay tax-exempt dividends, the Trust must elect to be treated as a
regulated investment company under Subchapter M of the Code and meet certain
requirements that govern the Trust's sources of income, diversification of
assets and distribution of earnings to shareholders. The Trust intends to make
such an election and meet these requirements. If the Trust failed to do so, the
Trust would be required to pay corporate taxes on its taxable income and all
the distributions would be taxable as ordinary income to the extent of the
Trust's earnings and profits. In particular, in order for the Trust to pay
tax-exempt dividends, at least 50% of the value of the Trust's total assets
must consist of tax-exempt obligations on a quarterly basis. The Trust intends
to meet this requirement. If the Trust failed to do so, it would not be able to
pay tax-exempt dividends and your distributions attributable to interest
received by the Trust from any source would be taxable as ordinary income to
the extent of the Trust's earnings and profits.


     The Trust may be required to withhold taxes on certain of your dividends
if you have not provided the Trust with your correct taxpayer identification
number (if you are an individual, normally your Social Security number), or if
you are otherwise subject to back-up withholding. If you receive Social
Security benefits, you should be aware that tax-free income is taken into
account in calculating the amount of these benefits that may be subject to
Federal income tax. If you borrow money to buy Trust shares, you may not be
permitted to deduct the interest on that loan. Under Federal income tax rules,
Trust shares may be treated as having been bought with borrowed money even if
the purchase of the Trust shares cannot be traced directly to borrowed money.
Holders are urged to consult their own tax advisors regarding the impact of an
investment in common shares upon the deductibility of interest payable by the
holder.


     If you are subject to the Federal alternative minimum tax, a portion of
your regular monthly dividends may be taxable.


STATE AND LOCAL TAX MATTERS


     The exemption from Federal income tax for exempt-interest dividends does
not necessarily result in exemption for such dividends under the income or
other tax laws of any state or local taxing authority. In some states, the
portion of any exempt-interest dividend that is derived from interest received
by a regulated investment company on its holdings of that state's securities
and its political subdivisions and instrumentalities is exempt from that
state's income tax. Therefore, the Trust will report annually to its
shareholders the percentage of interest income earned by the Trust during the
preceding year on tax-exempt obligations indicating, on a state-by-state basis,
the source of such income. Shareholders of the Trust are advised to consult
with their own tax advisors about state and local tax matters.


     Please refer to the Statement of Additional Information for more detailed
information. You are urged to consult your tax advisor.


                                       34
<PAGE>

                                  UNDERWRITING


     Subject to the terms and conditions of a purchase agreement dated July 25,
2002, each underwriter named below has severally agreed to purchase, and the
Trust has agreed to sell to such underwriter the number of common shares set
forth opposite the name of such underwriter.




<TABLE>
<CAPTION>
                                                             NUMBER OF
                        UNDERWRITER                        COMMON SHARES
                        -----------                        -------------
<S>                                                       <C>
           Merrill Lynch, Pierce, Fenner & Smith
            Incorporated ................................
           UBS Warburg LLC ..............................
           A.G. Edwards & Sons, Inc. ....................
           Prudential Securities Incorporated ...........
           Legg Mason Wood Walker, Incorporated .........
           Wachovia Securities, Inc. ....................
           H&R Block Financial Advisors, Inc. ...........
           J.J.B. Hilliard, W.L. Lyons, Inc. ............
           Fahnestock & Co. Inc. ........................
           Quick & Reilly, Inc. .........................
                                                          --------------

   Total ................................................
                                                          ==============
</TABLE>

     The purchase agreement provides that the obligations of the underwriters
to purchase the shares included in this offering are subject to the approval of
certain legal matters by counsel and certain other conditions. The underwriters
are obligated to purchase all the common shares sold under the purchase
agreement if any of the common shares are purchased. In the purchase agreement,
the Trust, the Advisor and the Sub-Advisor have agreed to indemnify the
underwriters against certain liabilities, including liabilities arising under
the Securities Act of 1933, as amended, or to contribute payments the
underwriters may be required to make for any of those liabilities.

     The underwriters propose to initially offer some of the common shares
directly to the public at the public offering price set forth on the cover page
of this prospectus and some of the common shares to certain dealers at the
public offering price less a concession not in excess of $       per share. The
sales load the Trust will pay of $.675 per shares is equal to 4.5% of the
initial offering price. The underwriters may allow, and the dealers may
reallow, a discount in excess of $       per share on sales to other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.

     The following table shows the public offering price, sales load and
proceeds before expenses to the Trust. The information assumes either no
exercise or full exercise by the underwriters of their over-allotment option.



<TABLE>
<CAPTION>
                                                         PER SHARE     WITHOUT OPTION     WITH OPTION
                                                        -----------   ----------------   ------------
<S>                                                     <C>           <C>                <C>
   Public offering price ............................   $                     $                $
   Sales load .......................................   $                     $                $
   Proceeds, before expenses, to the Trust ..........   $                     $                $
</TABLE>

     The expenses of the offering are estimated at             and are payable
by the Trust. BlackRock has agreed to pay organizational expenses and offering
costs of the Trust (other than sales load) that exceed $.03 per share.

     BlackRock has also agreed to pay a fee to Merrill Lynch payable quarterly
at the annual rate of 0.10% of the Trust's managed assets during the
continuance of the Investment Management Agreement or other advisory agreement
between BlackRock and the Trust. The maximum amount of this fee will not exceed
5% of the aggregate initial offering price of the Common Shares offered hereby;
provided, that in determining when the maximum amount has been paid, the value
of each of


                                       35
<PAGE>

the quarterly payments shall be discounted at the annual rate of 10% to the
closing date of this offering. Merrill Lynch has agreed to provide certain
after-market shareholder support services designed to maintain the visibility
of the Trust on an ongoing basis and to provide relevant information, studies
or reports regarding the Trust and the closed-end investment company industry.


     The Trust has granted the underwriters an option to purchase up to
additional common shares at the public offering price, less the sales load,
within 45 days from the date of this prospectus solely to cover any
over-allotments. If the underwriters exercise this option, each will be
obligated, subject to conditions contained in the purchase agreement, to
purchase a number of additional shares proportionate to that underwriter's
initial amount reflected in the above table.


     Until the distribution of the common shares in complete, SEC rules may
limit underwriters and selling group members from bidding for and purchasing
our common shares. However, the representatives may engage in transactions that
stabilize the price of our common shares, such as bids or purchases to peg, fix
or maintain that price.


     If the underwriters create a short position in our common shares in
connection with the offering, i.e., if they sell more common shares than are
listed on the cover of this prospectus, the representatives may reduce that
short position by purchasing common shares in the open market. The
representatives may also elect to reduce any short position by exercising all
or part of the over-allotment option described above. Purchases of our common
shares to stabilize its price or to reduce a short position may cause the price
of our common shares to be higher than it might be in the absence of such
purchases.


     Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transaction
described above may have on the price of our common shares. In addition,
neither we nor any of the underwriters make any representation that the
representatives will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.


     The Trust has agreed not to offer or sell any additional common shares for
a period of 180 days after the date of the purchase agreement without the prior
written consent of the underwriters, except for the sale of the common shares
to the underwriters pursuant to the purchase agreement.


     The Trust anticipates that the underwriters may from time to time act as
brokers or dealers in executing the Trust's portfolio transactions after they
have ceased to be underwriters. The underwriters are active underwriters of,
and dealers in, securities and act as market makers in number of such
securities, and therefore can be expected to engage in portfolio transactions
with the Trust.


                          CUSTODIAN AND TRANSFER AGENT


     The Custodian of the assets of the Trust is State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110. The Custodian
performs custodial, fund accounting and portfolio accounting services.
EquiServe Trust Company, N.A., 150 Royall Street, Canton, Massachusetts 02021,
will serve as the Trust's Transfer Agent with respect to the common shares.


                                 LEGAL OPINIONS


     Certain legal matters in connection with the common shares will be passed
upon for the Trust by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York and for the Underwriters by Clifford Chance Rogers & Wells LLP. Clifford
Chance Rogers & Wells LLP may rely as to certain matters of Delaware law on the
opinion of Skadden, Arps, Slate, Meagher & Flom LLP.


                                       36
<PAGE>

                           TABLE OF CONTENTS FOR THE
                      STATEMENT OF ADDITIONAL INFORMATION





<TABLE>
<CAPTION>
                                                                               PAGE
                                                                              -----
<S>                                                                           <C>
Use of Proceeds ...........................................................   B-2
Investment Objective and Policies .........................................   B-2
Investment Policies and Techniques ........................................   B-4
Other Investment Policies and Techniques ..................................   B-11
Management of the Trust ...................................................   B-14
Portfolio Transactions and Brokerage ......................................   B-22
Description of Shares .....................................................   B-23
Repurchase of Common Shares ...............................................   B-24
Tax Matters ...............................................................   B-25
Performance Related and Comparative Information ...........................   B-28
Experts ...................................................................   B-32
Additional Information ....................................................   B-32
Independent Auditors' Report ..............................................   F-1
Financial Statements ......................................................   F-2
APPENDIX A Ratings of Investments .........................................   A-1
APPENDIX B Taxable Equivalent Yield Table .................................   B-1
APPENDIX C General Characteristics and Risks of Hedging Transactions ......   C-1
</TABLE>



                                       37
<PAGE>

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



                                          SHARES


                      BLACKROCK MUNICIPAL INCOME TRUST II



                                 COMMON SHARES


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


                              MERRILL LYNCH & CO.


                                  UBS WARBURG


                           A.G. EDWARDS & SONS, INC.


                             PRUDENTIAL SECURITIES


                            LEGG MASON WOOD WALKER,
                                  INCORPORATED


                              WACHOVIA SECURITIES


                      H&R BLOCK FINANCIAL ADVISORS, INC.


                       J.J.B. HILLIARD, W.L. LYONS, INC.


                             FAHNESTOCK & CO. INC.


                              QUICK & REILLY, INC.




                                 JULY 25, 2002

================================================================================
<PAGE>


                      BLACKROCK MUNICIPAL INCOME TRUST II

                      STATEMENT OF ADDITIONAL INFORMATION


     BlackRock Municipal Income Trust II (the "Trust") is a newly organized,
diversified, closed-end management investment company. This Statement of
Additional Information relating to common shares does not constitute a
prospectus, but should be read in conjunction with the prospectus relating
thereto dated July 25, 2002. This Statement of Additional Information, which is
not a prospectus, does not include all information that a prospective investor
should consider before purchasing common shares, and investors should obtain
and read the prospectus prior to purchasing such shares. A copy of the
prospectus may be obtained without charge by calling (888) 825-2257. You may
also obtain a copy of the prospectus on the Securities and Exchange
Commission's web site (http://www.sec.gov). Capitalized terms used but not
defined in this Statement of Additional Information have the meanings ascribed
to them in the prospectus.




                               TABLE OF CONTENTS





<TABLE>
<CAPTION>
                                                                              PAGE
                                                                             -----
<S>                                                                           <C>
Use of Proceeds ...........................................................   B-2
Investment Objective and Policies .........................................   B-2
Investment Policies and Techniques ........................................   B-4
Other Investment Policies and Techniques ..................................   B-11
Management of the Trust ...................................................   B-14
Portfolio Transactions and Brokerage ......................................   B-22
Description of Shares .....................................................   B-23
Repurchase of Common Shares ...............................................   B-24
Tax Matters ...............................................................   B-25
Performance Related and Comparative Information ...........................   B-28
Experts ...................................................................   B-32
Additional Information ....................................................   B-32
Independent Auditors' Report ..............................................   F-1
Financial Report ..........................................................   F-2
APPENDIX A Ratings of Investments .........................................   A-1
APPENDIX B Taxable Equivalent Yield Table .................................   B-1
APPENDIX C General Characteristics and Risks of Hedging Transactions ......   C-1
</TABLE>



        This Statement of Additional Information is dated July 25, 2002.

<PAGE>

                                USE OF PROCEEDS

     Pending investment in municipal bonds that meet the Trust's investment
objective and policies, the net proceeds of the offering will be invested in
high quality, short-term tax-exempt money market securities or in high quality
municipal bonds with relatively low volatility (such as pre-refunded and
intermediate-term bonds), to the extent such securities are available. If
necessary to invest fully the net proceeds of the offering immediately, the
Trust may also purchase, as temporary investments, short-term taxable
investments of the type described under "Investment Policies and Techniques--
Short-Term Taxable Fixed Income Securities," the income on which is subject to
regular Federal income tax, and securities of other open- or closed-end
investment companies that invest primarily in municipal bonds of the type in
which the Trust may invest directly.


                       INVESTMENT OBJECTIVE AND POLICIES

     The Trust has not established any limit on the percentage of its portfolio
that may be invested in municipal bonds subject to the alternative minimum tax
provisions of Federal tax law, and the Trust expects that a portion of the
income it produces will be includable in alternative minimum taxable income.
Common shares therefore would not ordinarily be a suitable investment for
investors who are subject to the Federal alternative minimum tax or who would
become subject to such tax by purchasing common shares. The suitability of an
investment in common shares will depend upon a comparison of the after-tax
yield likely to be provided from the Trust with that from comparable tax-exempt
investments not subject to the alternative minimum tax, and from comparable
fully taxable investments, in light of each such investor's tax position.
Special considerations apply to corporate investors. See "Tax Matters."


INVESTMENT RESTRICTIONS

     Except as described below, the Trust, as a fundamental policy, may not,
without the approval of the holders of a majority of the outstanding common
shares and Preferred Shares voting together as a single class, and of the
holders of a majority of the outstanding Preferred Shares voting as a separate
class:

     (1) invest 25% or more of the value of its Managed Assets in any one
   industry, provided that this limitation does not apply to municipal bonds
   other than those municipal bonds backed only by assets and revenues of
   non-governmental issuers;

     (2) with respect to 75% of its Managed Assets, invest more than 5% of the
   value of its Managed Assets in the securities of any single issuer or
   purchase more than 10% of the outstanding securities of any one issuer.

     (3) issue senior securities or borrow money other than as permitted by
   the Investment Company Act or pledge its assets other than to secure such
   issuances or in connection with hedging transactions, short sales,
   when-issued and forward commitment transactions and similar investment
   strategies;

     (4) make loans of money or property to any person, except through loans
   of portfolio securities, the purchase of fixed income securities consistent
   with the Trust's investment objective and policies or the entry into
   repurchase agreements;

     (5) underwrite the securities of other issuers, except to the extent that
   in connection with the disposition of portfolio securities or the sale of
   its own securities the Trust may be deemed to be an underwriter;

     (6) purchase or sell real estate or interests therein other than
   municipal bonds secured by real estate or interests therein, provided that
   the Trust may hold and sell any real estate acquired in connection with its
   investment in portfolio securities; or

     (7) purchase or sell commodities or commodity contracts for any purposes
   except as, and to the extent, permitted by applicable law without the Trust
   becoming subject to registration with the Commodity Futures Trading
   Commission (the "CFTC") as a commodity pool.


                                      B-2
<PAGE>

     When used with respect to particular shares of the Trust, "majority of the
outstanding" means (i) 67% or more of the shares present at a meeting, if the
holders of more than 50% of the shares are present or represented by proxy, or
(ii) more than 50% of the shares, whichever is less.

     For purposes of applying the limitation set forth in subparagraph (1)
above, securities of the U.S. government, its agencies, or instrumentalities,
and securities backed by the credit of a governmental entity are not considered
to represent industries. However, obligations backed only by the assets and
revenues of non-governmental issuers may for this purpose be deemed to be
issued by such non-governmental issuers. Thus, the 25% limitation would apply
to such obligations. It is nonetheless possible that the Trust may invest more
than 25% of its Managed Assets in a broader economic sector of the market for
municipal obligations, such as revenue obligations of hospitals and other
health care facilities or electrical utility revenue obligations. The Trust
reserves the right to invest more than 25% of its Managed Assets in industrial
development bonds and private activity securities.

     For the purpose of applying the limitation set forth in subparagraph (1)
above, a non-governmental issuer shall be deemed the sole issuer of a security
when its assets and revenues are separate from other governmental entities and
its securities are backed only by its assets and revenues. Similarly, in the
case of a non-governmental issuer, such as an industrial corporation or a
privately owned or operated hospital, if the security is backed only by the
assets and revenues of the non-governmental issuer, then such non-governmental
issuer would be deemed to be the sole issuer. Where a security is also backed
by the enforceable obligation of a superior or unrelated governmental or other
entity (other than a bond insurer), it shall also be included in the
computation of securities owned that are issued by such governmental or other
entity. Where a security is guaranteed by a governmental entity or some other
facility, such as a bank guarantee or letter of credit, such a guarantee or
letter of credit would be considered a separate security and would be treated
as an issue of such government, other entity or bank. When a municipal bond is
insured by bond insurance, it shall not be considered a security that is issued
or guaranteed by the insurer; instead, the issuer of such municipal bond will
be determined in accordance with the principles set forth above. The foregoing
restrictions do not limit the percentage of the Trust's assets that may be
invested in municipal bonds insured by any given insurer.

     Under the Investment Company Act, the Trust may invest up to 10% of its
total assets in the aggregate in shares of other investment companies and up to
5% of its total assets in any one investment company, provided the investment
does not represent more than 3% of the voting stock of the acquired investment
company at the time such shares are purchased. As a shareholder in any
investment company, the Trust will bear its ratable share of that investment
company's expenses, and will remain subject to payment of the Trust's advisory
fees and other expenses with respect to assets so invested. Holders of common
shares will therefore be subject to duplicative expenses to the extent the
Trust invests in other investment companies. In addition, the securities of
other investment companies may also be leveraged and will therefore be subject
to the same leverage risks described herein and in the prospectus. As described
in the prospectus in the section entitled "Risks," the net asset value and
market value of leveraged shares will be more volatile and the yield to
shareholders will tend to fluctuate more than the yield generated by
unleveraged shares.

     In addition to the foregoing fundamental investment policies, the Trust is
also subject to the following non-fundamental restrictions and policies, which
may be changed by the board of trustees. The Trust may not:

     (1) make any short sale of securities except in conformity with
   applicable laws, rules and regulations and unless after giving effect to
   such sale, the market value of all securities sold short does not exceed
   25% of the value of the Trust's Managed Assets and the Trust's aggregate
   short sales of a particular class of securities does not exceed 25% of the
   then outstanding securities of that class. The Trust may also make short
   sales "against the box" without respect to such limitations. In this type
   of short sale, at the time of the sale, the Trust owns or has the immediate
   and unconditional right to acquire at no additional cost the identical
   security;


                                      B-3
<PAGE>

     (2) purchase securities of open-end or closed-end investment companies
   except in compliance with the Investment Company Act or any exemptive
   relief obtained
   thereunder; or

     (3) purchase securities of companies for the purpose of exercising
   control.

     As a fundamental policy, under normal market conditions, the Trust will
invest at least 80% of its Managed Assets in municipal bonds, the interest of
which is exempt from regular Federal income tax.

     The restrictions and other limitations set forth above will apply only at
the time of purchase of securities and will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of
the acquisition of securities.

     In addition, to comply with Federal tax requirements for qualification as
a "regulated investment company," the Trust's investments will be limited in a
manner such that at the close of each quarter of each taxable year, (a) no more
than 25% of the value of the Trust's total assets are invested in the
securities (other than United States government securities or securities of
other regulated investment companies) of a single issuer or two or more issuers
controlled by the Trust and engaged in the same, similar or related trades or
businesses and (b) with regard to at least 50% of the Trust's total assets, no
more than 5% of its total assets are invested in the securities (other than
United States government securities or securities of other regulated investment
companies) of a single issuer. These tax-related limitations may be changed by
the Trustees to the extent appropriate in light of changes to applicable tax
requirements.

     The Trust intends to apply for ratings for the Preferred Shares from
Moody's and/or S&P. In order to obtain and maintain the required ratings, the
Trust will be required to comply with investment quality, diversification and
other guidelines established by Moody's and/or S&P. Such guidelines will likely
be more restrictive than the restrictions set forth above. The Trust does not
anticipate that such guidelines would have a material adverse effect on the
Trust's holders of common shares or its ability to achieve its investment
objective. The Trust presently anticipates that any Preferred Shares that it
intends to issue would be initially given the highest ratings by Moody's (Aaa)
or by S&P (AAA), but no assurance can be given that such ratings will be
obtained. No minimum rating is required for the issuance of Preferred Shares by
the Trust. Moody's and S&P receive fees in connection with their ratings
issuances.


                      INVESTMENT POLICIES AND TECHNIQUES

     The following information supplements the discussion of the Trust's
investment objective, policies and techniques that are described in the
prospectus.


PORTFOLIO INVESTMENTS

     The Trust will invest primarily in a portfolio of investment grade
municipal bonds that are exempt from regular Federal income tax.

     Issuers of bonds rated Ba/BB or B are regarded as having current capacity
to make principal and interest payments but are subject to business, financial
or economic conditions which could adversely affect such payment capacity.
Municipal bonds rated Baa or BBB are considered "investment grade" securities;
municipal bonds rated Baa are considered medium grade obligations which lack
outstanding investment characteristics and have speculative characteristics,
while municipal bonds rated BBB are regarded as having adequate capacity to pay
principal and interest. Municipal bonds rated AAA in which the Trust may invest
may have been so rated on the basis of the existence of insurance guaranteeing
the timely payment, when due, of all principal and interest. Municipal bonds
rated below investment grade quality are obligations of issuers that are
considered predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal according to the terms of the obligation and,
therefore, carry greater investment risk, including the possibility of issuer
default and bankruptcy and increased market price volatility. Municipal bonds
rated below investment grade tend to be less marketable than higher-quality
bonds because the market for them is less broad. The


                                      B-4
<PAGE>

market for unrated municipal bonds is even narrower. During periods of thin
trading in these markets, the spread between bid and asked prices is likely to
increase significantly and the Trust may have greater difficulty selling its
portfolio securities. The Trust will be more dependent on BlackRock's research
and analysis when investing in these securities.

     A general description of Moody's, S&P's and Fitch's ratings of municipal
bonds is set forth in Appendix A hereto. The ratings of Moody's, S&P and Fitch
represent their opinions as to the quality of the municipal bonds they rate. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, municipal bonds with the same maturity,
coupon and rating may have different yields while obligations of the same
maturity and coupon with different ratings may have the same yield.

     The Trust will primarily invest in municipal bonds with long-term
maturities in order to maintain a weighted average maturity of 15 or more
years, but the average weighted maturity may be shortened from time to time
depending on market conditions. As a result, the Trust's portfolio at any given
time may include both long-term and intermediate-term municipal bonds.
Moreover, during temporary defensive periods (e.g., times when, in BlackRock's
opinion, temporary imbalances of supply and demand or other temporary
dislocations in the tax-exempt bond market adversely affect the price at which
long-term or intermediate-term municipal bonds are available), and in order to
keep cash on hand fully invested, including the period during which the net
proceeds of the offering are being invested, the Trust may invest any
percentage of its assets in short-term investments including high quality,
short-term securities which may be either tax-exempt or taxable and securities
of other open- or closed-end investment companies that invest primarily in
municipal bonds of the type in which the Trust may invest directly. The Trust
intends to invest in taxable short-term investments only in the event that
suitable tax-exempt temporary investments are not available at reasonable
prices and yields. Tax-exempt temporary investments include various obligations
issued by state and local governmental issuers, such as tax-exempt notes (bond
anticipation notes, tax anticipation notes and revenue anticipation notes or
other such municipal bonds maturing in three years or less from the date of
issuance) and municipal commercial paper. The Trust will invest only in taxable
temporary investments which are U.S. government securities or securities rated
within the highest grade by Moody's, S&P or Fitch, and which mature within one
year from the date of purchase or carry a variable or floating rate of
interest. Taxable temporary investments of the Trust may include certificates
of deposit issued by U.S. banks with assets of at least $1 billion, commercial
paper or corporate notes, bonds or debentures with a remaining maturity of one
year or less, or repurchase agreements. See "Other Investment Policies and
Techniques--Repurchase Agreements." To the extent the Trust invests in taxable
investments, the Trust will not at such times be in a position to achieve its
investment objective of tax-exempt income.

     The foregoing policies as to ratings of portfolio investments will apply
only at the time of the purchase of a security and the Trust will not be
required to dispose of securities in the event Moody's, S&P or Fitch downgrades
its assessment of the credit characteristics of a particular issuer.

     Also included within the general category of municipal bonds described in
the prospectus are participations in lease obligations or installment purchase
contract obligations (hereinafter collectively called "Municipal Lease
Obligations") of municipal authorities or entities. Although a Municipal Lease
Obligation does not constitute a general obligation of the municipality for
which the municipality's taxing power is pledged, a Municipal Lease Obligation
is ordinarily backed by the municipality's covenant to budget for, appropriate
and make the payments due under the Municipal Lease Obligation. However,
certain Municipal Lease Obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on a yearly basis. In the case of a "non-appropriation" lease, the Trust's
ability to recover under the lease in the event of non-appropriation or default
will be limited solely to the repossession of the leased property, without
recourse to the general credit of the lessee, and the disposition or re-leasing
of the property might prove difficult. In order to reduce this risk, the Trust
will only purchase Municipal Lease Obligations where BlackRock believes the
issuer has a strong incentive to continue making appropriations until maturity.



                                      B-5
<PAGE>

     Obligations of issuers of municipal bonds are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Bankruptcy Reform Act of 1978. In addition, the
obligations of such issuers may become subject to the laws enacted in the
future by Congress, state legislatures or referenda extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon municipalities to levy taxes. There is
also the possibility that, as a result of legislation or other conditions, the
power or ability of any issuer to pay, when due, the principal of and interest
on its municipal bonds may be materially affected.

     In addition to the types of municipal bonds described in the prospectus,
the Trust may invest in other securities that pay interest that is, or make
other distributions that are, exempt from regular Federal income tax and/or
state and local personal taxes, regardless of the technical structure of the
issuer of the instrument. The Trust treats all such tax-exempt securities as
municipal bonds.


SHORT-TERM TAXABLE FIXED INCOME SECURITIES

     For temporary defensive purposes or to keep cash on hand fully invested,
the Trust may invest up to 100% of its total assets in cash equivalents and
short-term taxable fixed income securities, although the Trust intends to
invest in taxable short-term investments only in the event that suitable
tax-exempt short-term investments are not available at reasonable prices and
yields. Short-term taxable fixed income investments are defined to include,
without limitation, the following:

     (1) U.S. government securities, including bills, notes and bonds
   differing as to maturity and rates of interest that are either issued or
   guaranteed by the U.S. Treasury or by U.S. government agencies or
   instrumentalities. U.S. government securities include securities issued by
   (a) the Federal Housing Administration, Farmers Home Administration,
   Export-Import Bank of the United States, Small Business Administration, and
   the Government National Mortgage Association, whose securities are
   supported by the full faith and credit of the United States; (b) the
   Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
   Tennessee Valley Authority, whose securities are supported by the right of
   the agency to borrow from the U.S. Treasury; (c) the Federal National
   Mortgage Association, whose securities are supported by the discretionary
   authority of the U.S. government to purchase certain obligations of the
   agency or instrumentality; and (d) the Student Loan Marketing Association,
   whose securities are supported only by its credit. While the U.S.
   government provides financial support to such U.S. government-sponsored
   agencies or instrumentalities, no assurance can be given that it always
   will do so since it is not so obligated by law. The U.S. government, its
   agencies and instrumentalities do not guarantee the market value of their
   securities. Consequently, the value of such securities may fluctuate.

     (2) Certificates of deposit issued against funds deposited in a bank or a
   savings and loan association. Such certificates are for a definite period
   of time, earn a specified rate of return, and are normally negotiable. The
   issuer of a certificate of deposit agrees to pay the amount deposited plus
   interest to the bearer of the certificate on the date specified thereon.
   Certificates of deposit purchased by the Trust may not be fully insured by
   the Federal Deposit Insurance Corporation.

     (3) Repurchase agreements, which involve purchases of debt securities. At
   the time the Trust purchases securities pursuant to a repurchase agreement,
   it simultaneously agrees to resell and redeliver such securities to the
   seller, who also simultaneously agrees to buy back the securities at a
   fixed price and time. This assures a predetermined yield for the Trust
   during its holding period, since the resale price is always greater than
   the purchase price and reflects an agreed-upon market rate. Such actions
   afford an opportunity for the Trust to invest temporarily available cash.
   The Trust may enter into repurchase agreements only with respect to
   obligations of the U.S. government, its agencies or instrumentalities;
   certificates of deposit; or bankers' acceptances in which the Trust may
   invest. Repurchase agreements may be considered loans to the seller,
   collateralized by the underlying securities. The risk to the Trust is
   limited to the ability of the seller to pay the agreed-upon sum on the
   repurchase


                                      B-6
<PAGE>

   date; in the event of default, the repurchase agreement provides that the
   Trust is entitled to sell the underlying collateral. If the value of the
   collateral declines after the agreement is entered into, and if the seller
   defaults under a repurchase agreement when the value of the underlying
   collateral is less than the repurchase price, the Trust could incur a loss
   of both principal and interest. BlackRock monitors the value of the
   collateral at the time the action is entered into and at all times during
   the term of the repurchase agreement. BlackRock does so in an effort to
   determine that the value of the collateral always equals or exceeds the
   agreed-upon repurchase price to be paid to the Trust. If the seller were to
   be subject to a Federal bankruptcy proceeding, the ability of the Trust to
   liquidate the collateral could be delayed or impaired because of certain
   provisions of the bankruptcy laws.

     (4) Commercial paper, which consists of short-term unsecured promissory
   notes, including variable rate master demand notes issued by corporations
   to finance their current operations. Master demand notes are direct lending
   arrangements between the Trust and a corporation. There is no secondary
   market for such notes. However, they are redeemable by the Trust at any
   time. BlackRock will consider the financial condition of the corporation
   (e.g., earning power, cash flow and other liquidity ratios) and will
   continuously monitor the corporation's ability to meet all of its financial
   obligations, because the Trust's liquidity might be impaired if the
   corporation were unable to pay principal and interest on demand.
   Investments in commercial paper will be limited to commercial paper rated
   in the highest categories by a major rating agency and which mature within
   one year of the date of purchase or carry a variable or floating rate of
   interest.


SHORT-TERM TAX-EXEMPT FIXED INCOME SECURITIES

     Short-term tax-exempt fixed income securities are securities that are
exempt from regular Federal income tax and mature within three years or less
from the date of issuance. Short-term tax-exempt fixed income securities are
defined to include, without limitation, the following:

     Bond Anticipation Notes ("BANs") are usually general obligations of state
and local governmental issuers which are sold to obtain interim financing for
projects that will eventually be funded through the sale of long-term debt
obligations or bonds. The ability of an issuer to meet its obligations on its
BANs is primarily dependent on the issuer's access to the long-term municipal
bond market and the likelihood that the proceeds of such bond sales will be
used to pay the principal and interest on the BANs.

     Tax Anticipation Notes ("TANs") are issued by state and local governments
to finance the current operations of such governments. Repayment is generally
to be derived from specific future tax revenues. TANs are usually general
obligations of the issuer. A weakness in an issuer's capacity to raise taxes
due to, among other things, a decline in its tax base or a rise in
delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs.

     Revenue Anticipation Notes ("RANs") are issued by governments or
governmental bodies with the expectation that future revenues from a designated
source will be used to repay the notes. In general, they also constitute
general obligations of the issuer. A decline in the receipt of projected
revenues, such as anticipated revenues from another level of government, could
adversely affect an issuer's ability to meet its obligations on outstanding
RANs. In addition, the possibility that the revenues would, when received, be
used to meet other obligations could affect the ability of the issuer to pay
the principal and interest on RANs.

     Construction Loan Notes are issued to provide construction financing for
specific projects. Frequently, these notes are redeemed with funds obtained
from the Federal Housing Administration.

     Bank Notes are notes issued by local government bodies and agencies as
those described above to commercial banks as evidence of borrowings. The
purposes for which the notes are issued are varied but they are frequently
issued to meet short-term working capital or capital-project needs. These notes
may have risks similar to the risks associated with TANs and RANs.


                                      B-7
<PAGE>

     Tax-Exempt Commercial Paper ("municipal paper") represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities and
their agencies. Payment of principal and interest on issues of municipal paper
may be made from various sources, to the extent the funds are available
therefrom. Maturities on municipal paper generally will be shorter than the
maturities of TANs, BANs or RANs. There is a limited secondary market for
issues of municipal paper.

     Certain municipal bonds may carry variable or floating rates of interest
whereby the rate of interest is not fixed but varies with changes in specified
market rates or indices, such as a bank prime rate or tax-exempt money market
indices.

     While the various types of notes described above as a group represent the
major portion of the tax-exempt note market, other types of notes are available
in the marketplace and the Trust may invest in such other types of notes to the
extent permitted under its investment objective, policies and limitations. Such
notes may be issued for different purposes and may be secured differently from
those mentioned above.


DURATION MANAGEMENT AND OTHER MANAGEMENT TECHNIQUES

     The Trust may use a variety of other investment management techniques and
instruments. The Trust may purchase and sell futures contracts, enter into
various interest rate transactions and may purchase and sell exchange-listed
and over-the-counter put and call options on securities, financial indices and
futures contracts (collectively, "Additional Investment Management
Techniques"). These Additional Investment Management Techniques may be used for
duration management and other risk management techniques in an attempt to
protect against possible changes in the market value of the Trust's portfolio
resulting from trends in the debt securities markets and changes in interest
rates, to protect the Trust's unrealized gains in the value of its portfolio
securities, to facilitate the sale of such securities for investment purposes,
to establish a position in the securities markets as a temporary substitute for
purchasing particular securities and to enhance income or gain. There is no
particular strategy that requires use of one technique rather than another as
the decision to use any particular strategy or instrument is a function of
market conditions and the composition of the portfolio. The Additional
Investment Management Techniques are described below. The ability of the Trust
to use them successfully will depend on BlackRock's ability to predict
pertinent market movements as well as sufficient correlation among the
instruments, which cannot be assured. Inasmuch as any obligations of the Trust
that arise from the use of Additional Investment Management Techniques will be
covered by designating liquid assets on the books and records of the Trust or
offsetting transactions, the Trust and BlackRock believe such obligations do
not constitute senior securities and, accordingly, will not treat them as being
subject to its borrowing restrictions. Commodity options and futures contracts
regulated by the CFTC have specific margin requirements described below and are
not treated as senior securities. The use of certain Additional Investment
Management Techniques may give rise to taxable income and have certain other
consequences. See "Tax Matters."

     Interest Rate Transactions. The Trust may enter into interest rate swaps
and the purchase or sale of interest rate caps and floors. The Trust expects to
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio as a duration management
technique or to protect against any increase in the price of securities the
Trust anticipates purchasing at a later date. The Trust will ordinarily use
these transactions as a hedge or for duration or risk management although it is
permitted to enter into them to enhance income or gain. The Trust will not sell
interest rate caps or floors that it does not own. Interest rate swaps involve
the exchange by the Trust with another party of their respective commitments to
pay or receive interest, e.g., an exchange of floating rate payments for fixed
rate payments with respect to a notional amount of principal. The purchase of
an interest rate cap entitles the purchaser, to the extent that a specified
index exceeds a predetermined interest rate, to receive payments of interest on
a notional principal amount from the party selling such interest rate cap. The
purchase of an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to receive payments
of interest on a notional principal amount from the party selling such interest
rate floor.


                                      B-8
<PAGE>

     The Trust may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, and will usually enter into interest rate
swaps on a net basis, i.e., the two payment streams are netted out, with the
Trust receiving or paying, as the case may be, only the net amount of the two
payments on the payment dates. The Trust will accrue the net amount of the
excess, if any, of the Trust's obligations over its entitlements with respect
to each interest rate swap on a daily basis and will designate on its books and
records an amount of cash or liquid high grade securities having an aggregate
net asset value at all times at least equal to the accrued excess. The Trust
will not enter into any interest rate swap, cap or floor transaction unless the
unsecured senior debt or the claims-paying ability of the other party thereto
is rated in the highest rating category of at least one nationally recognized
statistical rating organization at the time of entering into such transaction.
If there is a default by the other party to such a transaction, the Trust will
have contractual remedies pursuant to the agreements related to the
transaction.

     Futures Contracts and Options on Futures Contracts. The Trust may also
enter into contracts for the purchase or sale for future delivery ("futures
contracts") of debt securities, aggregates of debt securities or indices or
prices thereof, other financial indices and U.S. government debt securities or
options on the above. The Trust will ordinarily engage in such transactions
only for bona fide hedging, risk management (including duration management) and
other portfolio management purposes. However, the Trust is also permitted to
enter into such transactions for non-hedging purposes to enhance income or
gain, in accordance with the rules and regulations of the CFTC, which currently
provide that no such transaction may be entered into if at such time more than
5% of the Trust's net assets would be posted as initial margin and premiums
with respect to such non-hedging transactions.

     Calls on Securities, Indices and Futures Contracts. The Trust may sell or
purchase call options ("calls") on municipal bonds and indices based upon the
prices of futures contracts and debt securities that are traded on U.S. and
foreign securities exchanges and in the over-the-counter markets. A call gives
the purchaser of the option the right to buy, and obligates the seller to sell,
the underlying security, futures contract or index at the exercise price at any
time or at a specified time during the option period. All such calls sold by
the Trust must be "covered" as long as the call is outstanding (i.e., the Trust
must own the securities or futures contract subject to the call or other
securities acceptable for applicable escrow requirements). A call sold by the
Trust exposes the Trust during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying
security, index or futures contract and may require the Trust to hold a
security or futures contract which it might otherwise have sold. The purchase
of a call gives the Trust the right to buy a security, futures contract or
index at a fixed price. Calls on futures on municipal bonds must also be
covered by deliverable securities or the futures contract or by liquid high
grade debt securities segregated to satisfy the Trust's obligations pursuant to
such instruments.

     Puts on Securities, Indices and Futures Contracts. The Trust may purchase
put options ("puts") that relate to municipal bonds (whether or not it holds
such securities in its portfolio), indices or futures contracts. The Trust may
also sell puts on municipal bonds, indices or futures contracts on such
securities if the Trust's contingent obligations on such puts are secured by
segregated assets consisting of cash or liquid high grade debt securities
having a value not less than the exercise price. The Trust will not sell puts
if, as a result, more than 50% of the Trust's total assets would be required to
cover its potential obligations under its hedging and other investment
transactions. In selling puts, there is a risk that the Trust may be required
to buy the underlying security at a price higher than the current market price.


     Municipal Market Data Rate Locks. The Trust may purchase and sell
Municipal Market Data Rate Locks ("MMD Rate Locks"). An MMD Rate Lock permits
the Trust to lock in a specified municipal interest rate for a portion of its
portfolio to preserve a return on a particular investment or a portion of its
portfolio as a duration management technique or to protect against any increase
in the price of securities to be purchased at a later date. The Trust will
ordinarily use these transactions as a hedge or for duration or risk management
although it is permitted to enter into them to enhance income or gain. An MMD
Rate Lock is a contract between the Trust and an MMD Rate Lock provider
pursuant to which the parties agree to make payments to each other on a
notional amount,


                                      B-9
<PAGE>

contingent upon whether the Municipal Market Data AAA General Obligation Scale
is above or below a specified level on the expiration date of the contract. For
example, if the Trust buys an MMD Rate Lock and the Municipal Market Data AAA
General Obligation Scale is below the specified level on the expiration date,
the counterparty to the contract will make a payment to the Trust equal to the
specified level minus the actual level, multiplied by the notional amount of
the contract. If the Municipal Market Data AAA General Obligation Scale is
above the specified level on the expiration date, the Trust will make a payment
to the counterparty equal to the actual level minus the specified level,
multiplied by the notional amount of the contract. In entering into MMD Rate
Locks, there is a risk that municipal yields will move in the direction
opposite of the direction anticipated by the Trust. The Trust will not enter
into MMD Rate Locks if, as a result, more than 50% of its total assets would be
required to cover its potential obligations under its hedging and other
investment transactions.

     Appendix C contains further information about the characteristics, risks
and possible benefits of Additional Investment Management Techniques and the
Trust's other policies and limitations (which are not fundamental policies)
relating to investment in futures contracts and options. The principal risks
relating to the use of futures contracts and other Additional Investment
Management Techniques are: (a) less than perfect correlation between the prices
of the instrument and the market value of the securities in the Trust's
portfolio; (b) possible lack of a liquid secondary market for closing out a
position in such instruments; (c) losses resulting from interest rate or other
market movements not anticipated by BlackRock; and (d) the obligation to meet
additional variation margin or other payment requirements, all of which could
result in the Trust being in a worse position than if such techniques had not
been used.

     Certain provisions of the Code may restrict or affect the ability of the
Trust to engage in Additional Investment Management Techniques. See "Tax
Matters."


SHORT SALES

     The Trust may make short sales of bonds. A short sale is a transaction in
which the Trust sells a security it does not own in anticipation that the
market price of that security will decline. The Trust may make short sales to
hedge positions, for duration and risk management, in order to maintain
portfolio flexibility or to enhance income or gain.

     When the Trust makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. The Trust may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.

     The Trust's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other liquid securities. The Trust will also be required to
earmark similar collateral with its custodian to the extent, if any, necessary
so that the aggregate collateral value is at all times at least equal to the
current market value of the security sold short. Depending on arrangements made
with the broker-dealer from which it borrowed the security regarding payment
over of any payments received by the Trust on such security, the Trust may not
receive any payments (including interest) on its collateral deposited with such
broker-dealer.

     If the price of the security sold short increases between the time of the
short sale and the time the Trust replaces the borrowed security, the Trust
will incur a loss; conversely, if the price declines, the Trust will realize a
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. Although the Trust's gain is limited to the price at
which it sold the security short, its potential loss is theoretically
unlimited.

     The Trust will not make a short sale if, after giving effect to such sale,
the market value of all securities sold short exceeds 25% of the value of its
Managed Assets or the Trust's aggregate short sales of a particular class of
securities exceeds 25% of the outstanding securities of that class. The Trust
may also make short sales "against the box" without respect to such
limitations. In this type of short sale, at the time of the sale, the Trust
owns or has the immediate and unconditional right to acquire at no additional
cost the identical security.


                                      B-10
<PAGE>

                   OTHER INVESTMENT POLICIES AND TECHNIQUES


RESTRICTED AND ILLIQUID SECURITIES

     Certain of the Trust's investments may be illiquid. Illiquid securities
are subject to legal or contractual restrictions on disposition or lack an
established secondary trading market. The sale of restricted and illiquid
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of securities
eligible for trading on national securities exchanges or in the
over-the-counter markets. Restricted securities may sell at a price lower than
similar securities that are not subject to restrictions on resale.


WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES

     The Trust may purchase Securities on a "when-issued" basis and may
purchase or sell Securities on a "forward commitment" basis in order to acquire
the security or to hedge against anticipated changes in interest rates and
prices. When such transactions are negotiated, the price, which is generally
expressed in yield terms, is fixed at the time the commitment is made, but
delivery and payment for the securities take place at a later date. When-issued
securities and forward commitments may be sold prior to the settlement date,
but the Trust will enter into when-issued and forward commitments only with the
intention of actually receiving or delivering the securities, as the case may
be. If the Trust disposes of the right to acquire a when-issued Security prior
to its acquisition or disposes of its right to deliver or receive against a
forward commitment, it might incur a gain or loss. At the time the Trust enters
into a transaction on a when-issued or forward commitment basis, it will
designate on its books and records cash or liquid debt securities equal to at
least the value of the when-issued or forward commitment securities. The value
of these assets will be monitored daily to ensure that their marked to market
value will at all times equal or exceed the corresponding obligations of the
Trust. There is always a risk that the securities may not be delivered and that
the Trust may incur a loss. Settlements in the ordinary course, which may take
substantially more than five business days, are not treated by the Trust as
when-issued or forward commitment transactions and accordingly are not subject
to the foregoing restrictions.


BORROWING

     Although it has no present intention of doing so, the Trust reserves the
right to borrow funds to the extent permitted as described under the caption
"Investment Objective and Policies--Investment Restrictions." The proceeds of
borrowings may be used for any valid purpose including, without limitation,
liquidity, investments and repurchases of shares of the Trust. Borrowing is a
form of leverage and, in that respect, entails risks comparable to those
associated with the issuance of Preferred Shares.


REVERSE REPURCHASE AGREEMENTS

     The Trust may enter into reverse repurchase agreements with respect to its
portfolio investments subject to the investment restrictions set forth herein.
Reverse repurchase agreements involve the sale of securities held by the Trust
with an agreement by the Trust to repurchase the securities at an agreed upon
price, date and interest payment. At the time the Trust enters into a reverse
repurchase agreement, it may designate on its books and records liquid
instruments having a value not less than the repurchase price (including
accrued interest). If the Trust establishes and maintains such a segregated
account, a reverse repurchase agreement will not be
considered a borrowing by the Trust; however, under certain circumstances in
which the Trust does not establish and maintain such a segregated account, such
reverse repurchase agreement will be considered a borrowing for the purpose of
the Trust's limitation on borrowings. The use by the Trust of reverse
repurchase agreements involves many of the same risks of leverage since the
proceeds derived from such reverse repurchase agreements may be invested in
additional securities. Reverse repurchase agreements involve the risk that the
market value of the securities acquired in connection


                                      B-11
<PAGE>

with the reverse repurchase agreement may decline below the price of the
securities the Trust has sold but is obligated to repurchase. Also, reverse
repurchase agreements involve the risk that the market value of the securities
retained in lieu of sale by the Trust in connection with the reverse repurchase
agreement may decline in price.

     If the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Trust's
obligation to repurchase the securities, and the Trust's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision. Also, the Trust would bear the risk of loss to the extent that the
proceeds of the reverse repurchase agreement are less than the value of the
securities subject to such agreement.


REPURCHASE AGREEMENTS

     As temporary investments, the Trust may invest in repurchase agreements. A
repurchase agreement is a contractual agreement whereby the seller of
securities agrees to repurchase the same security at a specified price on a
future date agreed upon by the parties. The agreed-upon repurchase price
determines the yield during the Trust's holding period. Repurchase agreements
are considered to be loans collateralized by the underlying security that is
the subject of the repurchase contract. The Trust will only enter into
repurchase agreements with registered securities dealers or domestic banks
that, in the opinion of BlackRock, present minimal credit risk. The risk to the
Trust is limited to the ability of the issuer to pay the agreed-upon repurchase
price on the delivery date; however, although the value of the underlying
collateral at the time the transaction is entered into always equals or exceeds
the agreed-upon repurchase price, if the value of the collateral declines there
is a risk of loss of both principal and interest. In the event of default, the
collateral may be sold but the Trust might incur a loss if the value of the
collateral declines, and might incur disposition costs or experience delays in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by the Trust may be delayed or limited.
BlackRock will monitor the value of the collateral at the time the transaction
is entered into and at all times subsequent during the term of the repurchase
agreement in an effort to determine that such value always equals or exceeds
the agreed-upon repurchase price. In the event the value of the collateral
declines below the repurchase price, BlackRock will demand additional
collateral from the issuer to increase the value of the collateral to at least
that of the repurchase price, including interest.


ZERO COUPON BONDS

     The Trust may invest in zero coupon bonds. A zero coupon bond is a bond
that does not pay interest for its entire life. The market prices of zero
coupon bonds are affected to a greater extent by changes in prevailing levels
of interest rates and thereby tend to be more volatile in price than securities
that pay interest periodically. In addition, because the Trust accrues income
with respect to these securities prior to the receipt of such interest, it may
have to dispose of portfolio securities under disadvantageous circumstances in
order to obtain cash needed to pay income dividends in amounts necessary to
avoid unfavorable tax consequences.


LENDING OF SECURITIES

     The Trust may lend its portfolio securities to banks or dealers which meet
the creditworthiness standards established by the Board of Trustees of the
Trust ("Qualified Institutions"). By lending its portfolio securities, the
Trust attempts to increase its income through the receipt of interest on the
loan. Any gain or loss in the market price of the securities loaned that may
occur during the term of the loan will be for the account of the Trust. The
Trust may lend its portfolio securities so long as the terms and the structure
of such loans are not inconsistent with requirements of the Investment Company
Act, which currently require that (i) the borrower pledge and maintain with the
Trust collateral consisting of cash, a letter of credit issued by a domestic
U.S. bank, or securities issued or guaranteed by the U.S. government having a
value at all times not less than 100% of the value of the


                                      B-12
<PAGE>

securities loaned, (ii) the borrower add to such collateral whenever the price
of the securities loaned rises (i.e., the value of the loan is "marked to the
market" on a daily basis), (iii) the loan be made subject to termination by the
Trust at any time and (iv) the Trust receive reasonable interest on the loan
(which may include the Trust's investing any cash collateral in interest
bearing short term investments), any distributions on the loaned securities and
any increase in their market value. The Trust will not lend portfolio
securities if, as a result, the aggregate of such loans exceeds 33 1/3% of the
value of the Trust's total assets (including such loans). Loan arrangements
made by the Trust will comply with all other applicable regulatory
requirements, including the rules of the New York Stock Exchange, which rules
presently require the borrower, after notice, to redeliver the securities
within the normal settlement time of five business days. All relevant facts and
circumstances, including the creditworthiness of the Qualified Institution,
will be monitored by BlackRock, and will be considered in making decisions with
respect to lending securities, subject to review by the Trust's Board of
Trustees.

     The Trust may pay reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the Trust's board of trustees. In addition, voting rights may pass
with the loaned securities, but if a material event were to occur affecting
such a loan, the loan must be called and the securities voted.


HIGH YIELD SECURITIES

     The Trust may invest up to 20% of its Managed Assets in securities rated
below investment grade such as those rated Ba or B by Moody's and BB or B by
S&P or securities comparably rated by other rating agencies or in unrated
securities determined by BlackRock to be of comparable quality. Securities
rated Ba by Moody's are judged to have speculative elements; their future
cannot be considered as well assured and often the protection of interest and
principle payments may be very moderate. Securities rated BB by S&P are
regarded as having predominantly speculative characteristics and, while such
obligations have less near-term vulnerability to default than other speculative
grade debt, they face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The lowest rated
security that the Trust will invest in is one rated B by either Moody's or S&P.


     Lower grade securities, though high yielding, are characterized by high
risk. They may be subject to certain risks with respect to the issuing entity
and to greater market fluctuations than certain lower yielding, higher rated
securities. The retail secondary market for lower grade securities may be less
liquid than that of higher rated securities; adverse conditions could make it
difficult at times for the Trust to sell certain securities or could result in
lower prices than those used in calculating the Trust's net asset value.

     The prices of debt securities generally are inversely related to interest
rate changes; however, the price volatility caused by fluctuating interest
rates of securities also is inversely related to the coupons of such
securities. Accordingly, below investment grade securities may be relatively
less sensitive to interest rate changes than higher quality securities of
comparable maturity because of their higher coupon. This higher coupon is what
the investor receives in return for bearing greater credit risk. The higher
credit risk associated with below investment grade securities potentially can
have a greater effect on the value of such securities than may be the case with
higher quality issues of comparable maturity.

     Lower grade securities may be particularly susceptible to economic
downturns. It is likely that an economic recession could severely disrupt the
market for such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principle and pay interest thereon and increase the incidence of default for
such securities.

     The ratings of Moody's, S&P and other rating agencies represent their
opinions as to the quality of the obligations which they undertake to rate.
Ratings are relative and subjective and, although


                                      B-13
<PAGE>

ratings may be useful in evaluating the safety of interest and principle
payments, they do not evaluate the market value risk of such obligations.
Although these ratings may be an initial criterion for selection of portfolio
investments, BlackRock also will independently evaluate these securities and
the ability for the issuers of such securities to pay interest and principal.
To the extent that the Trust invests in lower grade securities that have not
been rated by a rating agency, the Trust's ability to achieve its investment
objectives will be more dependent on BlackRock's credit analysis than would be
the case when the Trust invests in rated securities.


RESIDUAL INTEREST MUNICIPAL BONDS

     The Trust currently does not intend to invest in residual interest
municipal bonds. Residual interest municipal bonds pay interest at rates that
bear an inverse relationship to the interest rate on another security or the
value of an index ("inverse floaters"). An investment in inverse floaters may
involve greater risk than an investment in a fixed-rate bond. Because changes
in the interest rate on the other security or index inversely affect the
residual interest paid on the inverse floater, the value of an inverse floater
is generally more volatile than that of a fixed-rate bond. Inverse floaters
have interest rate adjustment formulas which generally reduce or, in the
extreme, eliminate the interest paid to the Trust when short-term interest
rates rise, and increase the interest paid to the Trust when short-term
interest rates fall. Inverse floaters have varying degrees of liquidity, and
the market for these securities is relatively volatile. These securities tend
to underperform the market for fixed-rate bonds in a rising interest rate
environment, but tend to outperform the market for fixed-rate bonds when
interest rates decline. Shifts in long-term interest rates may, however, alter
this tendency. Although volatile, inverse floaters typically offer the
potential for yields exceeding the yields available on fixed-rate bonds with
comparable credit quality, coupon, call provisions and maturity. These
securities usually permit the investor to convert the floating rate to a fixed
rate (normally adjusted downward), and this optional conversion feature may
provide a partial hedge against rising rates if exercised at an opportune time.
Investment in inverse floaters may amplify the effects of the Trust's use of
leverage. Should short-term interest rates rise, the combination of the Trust's
investment in inverse floaters and the use of leverage likely will adversely
affect the Trust's income and distributions to common shareholders. Although
the Trust does not intend initially to invest in inverse floaters, the Trust
may do so at some point in the future. The Trust will provide shareholders 30
days' written notice prior to any change in its policy of not investing in
inverse floaters.


                            MANAGEMENT OF THE TRUST


INVESTMENT MANAGEMENT AGREEMENT

     Although BlackRock Advisors intends to devote such time and effort to the
business of the Trust as is reasonably necessary to perform its duties to the
Trust, the services of BlackRock Advisors are not exclusive and BlackRock
Advisors provides similar services to other investment companies and other
clients and may engage in other activities.

     The investment management agreement also provides that in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, BlackRock Advisors is not liable to the Trust or any of
the Trust's shareholders for any act or omission by BlackRock Advisors in the
supervision or management of its respective investment activities or for any
loss sustained by the Trust or the Trust's shareholders and provides for
indemnification by the Trust of BlackRock Advisors, its directors, officers,
employees, agents and control persons for liabilities incurred by them in
connection with their services to the Trust, subject to certain limitations and
conditions.


     The investment management agreement was approved by Trust's board of
trustees at an in-person meeting of the board of trustees held on July 12,
2002, including a majority of the trustees who are not parties to the agreement
or interested persons of any such party (as such term is defined in the
Investment Company Act). This agreement provides for the Trust to pay a
management fee at an annual rate equal to 0.55% of the average weekly value of
the Trust's Managed Assets. A related



                                      B-14
<PAGE>

waiver letter from BlackRock Advisors provided for temporary fee waiver of
0.15% the average weekly value of the Trust's Managed Assets in each of the
first five years of the Trust's operations (through July 31, 2007) and for a
declining amount for an additional five years (through July 31, 2012). In
approving this agreement the board of trustees considered, among other things,
the nature and quality of services to be provided by BlackRock Advisors, the
profitability to BlackRock Advisors of its relationship with the Trust,
economies of scale and comparative fees and expense ratios.


     The investment management agreement and the waivers of the management fees
were approved by the sole common shareholder of the Trust as of July 16, 2002.
The investment management agreement will continue in effect for a period of two
years from its effective date, and if not sooner terminated, will continue in
effect for successive periods of 12 months thereafter, provided that each
continuance is specifically approved at least annually by both (1) the vote of
a majority of the Trust's board of trustees or the vote of a majority of the
outstanding voting securities of the Trust at the time outstanding and entitled
to vote (as such term is defined in the Investment Company Act) and (2) by the
vote of a majority of the trustees who are not parties to the investment
management agreement or interested persons (as such term is defined in the
Investment Company Act) of any such party, cast in person at a meeting called
for the purpose of voting on such approval. The investment management agreement
may be terminated as a whole at any time by the Trust, without the payment of
any penalty, upon the vote of a majority of the Trust's board of trustees or a
majority of the outstanding voting securities of the Trust or by BlackRock
Advisors, on 60 days' written notice by either party to the other (which can be
waived by the non-terminating party). The investment management agreement will
terminate automatically in the event of its assignment (as such term is defined
in the Investment Company Act and the rules thereunder).



SUB-INVESTMENT ADVISORY AGREEMENT

     BlackRock Financial Management, the Sub-Advisor, is a wholly owned
subsidiary of BlackRock, Inc. Pursuant to the sub-investment advisory agreement,
BlackRock Advisors has appointed BlackRock Financial Management, one of its
affiliates, to perform certain of the day-to-day investment management of the
Trust. BlackRock Financial Management will receive a portion of the management
fee paid by the Trust to BlackRock Advisors. From the management fees, BlackRock
Advisors will pay BlackRock Financial Management, for serving as Sub-Advisor, a
fee equal to: (i) prior to July 31, 2003, 38% of the monthly management fees
received by BlackRock Advisors, (ii) from August 1, 2003 to July 31, 2004, 19%
of the monthly management fees received by BlackRock Advisors; and (iii) after
July 31, 2004, 0% of the management fees received by BlackRock Advisors;
provided thereafter that the Sub-Advisor may be compensated at cost for any
services rendered to the Trust at the request of BlackRock Advisors and approved
of by the board of trustees.

     The sub-investment advisory agreement also provides that, in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations thereunder, the Trust will indemnify BlackRock Financial
Management, its directors, officers, employees, agents, associates and control
persons for liabilities incurred by them in connection with their services to
the Trust, subject to certain limitations.

     Although BlackRock Financial Management intends to devote such time and
effort to the business of the Trust as is reasonably necessary to perform its
duties to the Trust, the services of BlackRock Financial Management are not
exclusive and BlackRock Financial Management provides similar services to other
investment companies and other clients and may engage in other activities.


     The sub-investment advisory agreement was approved by the Trust's board of
trustees at an in-person meeting held on July 12, 2002, including a majority of
the trustees who are not parties to the agreement or interested persons of any
such party (as such term is defined in the Investment Company Act). In
approving this agreement the board of trustees considered, among other things,
the nature and quality of services to be provided by BlackRock Financial
Management, the profitability to BlackRock Financial Management of its
relationship with the Trust, economies of scale and comparative fees and
expense ratios.



                                      B-15
<PAGE>


     The sub-investment advisory agreement was approved by the sole common
shareholder of the Trust as of July 16, 2002. The sub-investment advisory
agreement will continue in effect for a period of two years from its effective
date, and if not sooner terminated, will continue in effect for successive
periods of 12 months thereafter, provided that each continuance is specifically
approved at least annually by both (1) the vote of a majority of the Trust's
board of trustees or the vote of a majority of the outstanding voting
securities of the Trust at the time outstanding and entitled to vote (as
defined in the Investment Company Act) and (2) by the vote of a majority of the
trustees who are not parties to such agreement or interested persons (as such
term is defined in the Investment Company Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval. The
sub-investment advisory agreement may be terminated as a whole at any time by
the Trust or by BlackRock Advisors, without the payment of any penalty, upon
the vote of a majority of the Trust's board of trustees or a majority of the
outstanding voting securities of the Trust, or BlackRock Financial Management,
on 60 days' written notice by any party to the others (which may be waived by
the non-terminating party). The sub-investment advisory agreement will also
terminate automatically in the event of its assignment (as such term is defined
in the Investment Company Act and the rules thereunder).



TRUSTEES AND OFFICERS


     The officers of the Trust manage its day-to-day operations. The officers
are directly responsible to the Trust's board of trustees which sets broad
policies for the Trust and chooses its officers. The following is a list of the
trustees and officers of the Trust and their present positions and principal
occupations during the past five years. Trustees who are interested persons of
the Trust (as defined in the Investment Company Act) are denoted by an
asterisk(*). Trustees who are independent trustees (as defined in the
Investment Company Act) (the "Independent Trustees") are denoted without an
asterisk. The business address of the Trust, BlackRock Advisors and their board
members and officers is 100 Bellevue Parkway, Wilmington, Delaware 19809,
unless specified otherwise below. The trustees listed below are either trustees
or directors of other closed-end funds in which BlackRock Advisors acts as
investment advisor.


                                      B-16
<PAGE>


<TABLE>
<CAPTION>
                                                                             NUMBER OF
                                                                           PORTFOLIOS IN
                                                                           FUND COMPLEX
                           TERM OF                                          OVERSEEN BY
NAME, ADDRESS, AGE        OFFICE AND     PRINCIPAL OCCUPATION DURING THE    TRUSTEE OR
AND POSITION(S)           LENGTH OF         PAST FIVE YEARS AND OTHER       NOMINEE FOR           OTHER DIRECTORSHIPS
HELD WITH REGISTRANT     TIME SERVED              AFFILIATIONS                TRUSTEE               HELD BY TRUSTEE
- ---------------------- --------------- ---------------------------------- -------------- -------------------------------------
<S>                    <C>             <C>                                <C>            <C>
INDEPENDENT
TRUSTEES:
Andrew F. Brimmer      3 years(1)(2)   President of Brimmer &             37             Director CarrAmerica Realty
P.O. Box 4546                          Company, Inc. A Washington,                       Corporation and Borg-Warner
New York, NY 10163                     D.C.-based economic and                           Automotive. Formerly member of
Age: 75                                financial consulting firm. Lead                   the Board of Governors of the
Trustee                                Director and Chairman of the                      Federal Reserve System. Formerly
                                       Audit Committee of each of the                    Director of AirBorne Express,
                                       closed-end Trusts in which                        BankAmerica Corporation (Bank of
                                       BlackRock Advisors Inc. acts as                   America), Bell South Corporation,
                                       investment advisor.                               College Retirement Equities Fund
                                                                                         (Trustee), Commodity Exchange,
                                                                                         Inc. (Public Governor), Connecticut
                                                                                         Mutual Life Insurance Company,
                                                                                         E.I. Dupont de Nemours &
                                                                                         Company, Equitable Life Assurance
                                                                                         Society of the United States,
                                                                                         Gannett Company, Mercedes-Benz
                                                                                         of North America, MNC Financial
                                                                                         Corporation (American Security
                                                                                         Bank), NMC Capital Management,
                                                                                         Navistar International Corporation,
                                                                                         PHH Corp. and UAL Corporation
                                                                                         (United Airlines).

Richard E. Cavanagh    3 years(1)(2)   President and Chief Executive      37             Trustee Emeritus, Wesleyan
P.O. Box 4546                          Officer of The Conference                         University, Trustee: Drucker
New York, NY 10163                     Board, Inc., a leading global                     Foundation, Airplanes Group,
Age: 56                                business membership                               Aircraft Finance Trust (AFT) and
Trustee                                organization, from 1995-present.                  Education Testing Service (ETS),
                                       Former Executive Dean of the                      Director, Arch Chemicals, Fremont
                                       John F. Kennedy School of                         Group and The Guardian Life
                                       Government at Harvard                             Insurance Company of America.
                                       University from 1988-1995.
                                       Acting Director, Harvard Center
                                       for Business and Government
                                       (1991-1993). Formerly Partner
                                       (principal) of McKinsey &
                                       Company, Inc. (1980-1988).
                                       Former Executive Director of
                                       Federal Cash Management,
                                       White House Office of
                                       Management and Budget
                                       (1977-1979). Co-author, THE
                                       WINNING PERFORMANCE
                                       (best selling management book
                                       published in 13 national
                                       editions).

Kent Dixon             3 years(1)(2)   Consultant/Investor. Former        37             Former Director of ISFA (the owner
P.O. Box 4546                          President and Chief Executive                     of INVEST, a national securities
New York, NY 10163                     Officer of Empire Federal                         brokerage service designed for banks
Age: 64                                Savings Bank of America and                       and thrift institutions).
Trustee                                Banc PLUS Savings Association,
                                       former Chairman of the Board,
                                       President and Chief Executive
                                       Officer of Northeast Savings.
</TABLE>

                                      B-17
<PAGE>


<TABLE>
<CAPTION>
                                                                              NUMBER OF
                                                                            PORTFOLIOS IN
                                                                            FUND COMPLEX
                           TERM OF                                           OVERSEEN BY
NAME, ADDRESS, AGE        OFFICE AND     PRINCIPAL OCCUPATION DURING THE     TRUSTEE OR
AND POSITION(S)           LENGTH OF         PAST FIVE YEARS AND OTHER        NOMINEE FOR           OTHER DIRECTORSHIPS
HELD WITH REGISTRANT     TIME SERVED               AFFILIATIONS                TRUSTEE               HELD BY TRUSTEE
- ---------------------- --------------- ----------------------------------- -------------- -------------------------------------
<S>                    <C>             <C>                                 <C>            <C>
Frank J. Fabozzi       3 years(1)(2)   Consultant. Editor of THE           37             Director, Guardian Mutual Funds
P.O. Box 4546                          JOURNAL OF PORTFOLIO                               Group.
New York, NY 10163                     MANAGEMENT and Adjunct
Age: 53                                Professor of Finance at the
Trustee                                School of Management at Yale
                                       University. Author and editor of
                                       several books on fixed income
                                       portfolio management. Visiting
                                       Professor of Finance and
                                       Accounting at the Sloan School
                                       of Management, Massachusetts
                                       Institute of Technology from
                                       1986 to August 1992.

James Clayburn         3 years(1)(2)   Dean Emeritus of The John E.        37             Director, Jacobs Engineering Group,
LaForce, Jr.                           Anderson Graduate School of                        Inc., Payden & Rygel Investment
P.O. Box 4546                          Management, University of                          Trust, Provident Investment Counsel
New York, NY 10163                     California since July 1, 1993.                     Funds, Tinken Company and Trust
Age: 73                                Acting Dean of The School of                       for Investment Managers.
Trustee                                Business, Hong Kong University
                                       of Science and Technology
                                       1990-1993. From 1978 to
                                       September 1993, Dean of The
                                       John E. Anderson Graduate
                                       School of Management,
                                       University of California.

Walter F. Mondale      3 years(1)(2)   Partner, Dorsey & Whitney, a law    37             Director, Northwest Airlines Corp.,
P.O. Box 4546                          firm (December 1996-present,                       UnitedHealth Group, Formerly,
New York, NY 10163                     September 1987-August 1993).                       Director, RBC Dain Rauscher, Inc.
Age: 74                                Formerly U.S. Ambassador to
Trustee                                Japan (1993-1996). Formerly,
                                       Vice President of the United
                                       States, U.S. Senator and
                                       Attorney General of the State of
                                       Minnesota. 1984 Democratic
                                       Nominee for President of the
                                       United States.

INTERESTED
TRUSTEES

Laurence D. Fink*      3 years(1)(2)   Chairman and Chief Executive        37             Director, President and Treasurer of
Age: 49                                Officer of BlackRock, Inc. since                   BlackRock Funds, Director of
Chairman                               its formation in 1998 and of                       BlackRock's offshore funds,
                                       BlackRock, Inc.'s predecessor                      Chairman of the Board of several of
                                       entities since 1988. Chairman of                   BlackRock's alternative investment
                                       the Management Committee.                          vehicles and of Nomura BlackRock
                                       Formerly, Managing Director of                     Asset Management Co., Ltd.
                                       the First Boston Corporation.                      Currently, a member of the Board of
                                       Member of its Management                           Directors of the New York Stock
                                       Committee, Co-head of its                          Exchange, member of the Board of
                                       Taxable Fixed Income Division                      Trustees of New York University,
                                       and Head of its Mortgage and                       Co-Chairman and a member of the
                                       Real Estate Products Group.                        Executive Committee of the Mount
                                       Currently, Chairman of the                         Sinai NYU Health Board of
                                       Board of each of the closed-end                    Trustees, Co-Chairman of the NYU
                                       Trusts in which BlackRock                          Hospitals Center Board of Trustees
                                       Advisors, Inc. acts as investment                  and a member of the Board of
                                       advisor.                                           Directors of Phoenix House.
</TABLE>

                                      B-18
<PAGE>


<TABLE>
<CAPTION>
                                                                             NUMBER OF
                                                                           PORTFOLIOS IN
                                                                           FUND COMPLEX
                           TERM OF                                          OVERSEEN BY
NAME, ADDRESS, AGE        OFFICE AND    PRINCIPAL OCCUPATION DURING THE     TRUSTEE OR
AND POSITION(S)           LENGTH OF        PAST FIVE YEARS AND OTHER        NOMINEE FOR            OTHER DIRECTORSHIPS
HELD WITH REGISTRANT     TIME SERVED              AFFILIATIONS                TRUSTEE                HELD BY TRUSTEE
- ----------------------- ------------- ----------------------------------- -------------- --------------------------------------
<S>                     <C>           <C>                                 <C>            <C>
Ralph L. Schlosstein*   3 years       Director since 1999 and President   37             Chairman and President of the
Age: 51                               of BlackRock, Inc. since its                       BlackRock Provident Institutional
Trustee and President                 formation in 1998 and of                           Funds. Director of several of
                                      BlackRock, Inc.'s predecessor                      BlackRock's alternative investment
                                      entities since 1988. Member of                     vehicles. Currently, a Member of the
                                      the Management Committee and                       Visiting Board of Overseers of the
                                      Investment Strategy Group of                       John F. Kennedy School of
                                      BlackRock, Inc. Formerly,                          Government at Harvard University,
                                      Managing Director of Lehman                        the Financial Institutions Center
                                      Brothers, Inc. and Co-head of its                  Board of the Wharton School of the
                                      Mortgage and Savings                               University of Pennsylvania, a trustee
                                      Institutions Group. Currently,                     of Trinity School in New York City
                                      President and Director of each of                  and a Trustee of New Visions for
                                      the closed-end Trusts in which                     Public Education in New York
                                      BlackRock Advisors, Inc. acts as                   Council. Formerly, a Director of
                                      investment advisor.                                Pulte Corporation and a Member of
                                                                                         Fannie Mae's Advisory.
</TABLE>

- ----------
(1)   After a Trustee's initial term, each Trustee is expected to serve a three
      year term concurrent with the class of trustees for which he serves:

      --Messrs. Cavanagh and La Force, as Class I trustees, are expected to
        stand for re-election at the Trust's 2003 annual meeting of shareholders

      --Messrs. Schlosstein, Fabozzi and Mondale, as Class II trustees, are
        expected to stand for re-election at the Trust's 2004 annual meeting of
        shareholders

      --Messrs. Fink, Brimmer and Dixon, as Class III Trustees, are expected to
        stand for re-election at the Trust's 2005 annual meeting of shareholders

(2)   Each trustee has served in such capacity since the Trust's inception.




<TABLE>
<CAPTION>
                                                         PRINCIPAL OCCUPATION DURING THE PAST
NAME AND AGE                        TITLE                  FIVE YEARS AND OTHER AFFILIATIONS
- -------------------------   ---------------------   ----------------------------------------------
<S>                         <C>                     <C>
     OFFICERS:
     Anne F. Ackerley            Secretary          Managing Director of BlackRock, Inc. since
     Age: 40                                        2000. Formerly First Vice President and Chief
                                                    Operating Officer, Mergers and Acquisition
                                                    Group at Merrill Lynch & Co. from 1997 to
                                                    2000; First Vice President and Chief
                                                    Operating Officer, Public Finance Group at
                                                    Merrill Lynch & Co. from 1995 to 1997; First
                                                    Vice President, Emerging Markets Fixed
                                                    Income Research at Merrill Lynch & Co.
                                                    prior thereto.

     Henry Gabbay                Treasurer          Managing Director of BlackRock, Inc. and
     Age: 54                                        its predecessor entities.

     Robert S. Kapito         Vice President        Vice Chairman of BlackRock, Inc. and its
     Age: 45                                        predecessor entities.

     Kevin Klingert           Vice President        Managing Director of BlackRock, Inc. and
     Age: 39                                        its predecessor entities.

     James Kong             Assistant Treasurer     Managing Director of BlackRock, Inc. and
     Age: 41                                        its predecessor entities.

     Richard Shea, Esq.      Vice President/Tax     Managing Director of BlackRock, Inc. since
     Age: 42                                        2000; Chief Operating Officer and Chief
                                                    Financial Officer of Anthracite Capital, Inc.
                                                    since 1998. Formerly, Director of BlackRock,
                                                    Inc. and its predecessor entities.
</TABLE>

                                      B-19
<PAGE>

     Prior to this offering, all of the outstanding shares of the Trust were
owned by BlackRock Advisors.




<TABLE>
<CAPTION>
                                                                    AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES
                                           DOLLAR RANGE OF EQUITY     IN ALL REGISTERED INVESTMENT COMPANIES
                                              SECURITIES IN THE         OVERSEEN BY DIRECTORS IN THE FAMILY
NAME OF DIRECTOR                                  TRUST (*)                   INVESTMENT COMPANIES(*)
- ----------------------------------------- ------------------------ --------------------------------------------
<S>                                       <C>                      <C>
   Andrew F. Brimmer ....................            $0                             $1-$10,000
   Richard E. Cavanagh ..................            $0                          $50,001-$100,000
   Kent Dixon ...........................            $0                           over $100,000
   Frank J. Fabozzi .....................            $0                             $1-$10,000
   James Clayburn La Force, Jr. .........            $0                          $50,001-$100,000
   Laurance D. Fink .....................            $0                           over $100,000
   Walter F. Mondale ....................            $0                          $50,001-$100,000
   Ralph L. Schlosstein .................            $0                          $50,001-$100,000
</TABLE>

- ----------

(*) As of December 31, 2001. The Trustees do not own shares in the Trust as it
    is a newly formed closed-end investment company.


     The fees and expenses of the Independent Trustees of the Trust are paid by
the Trust. The trustees who are members of the BlackRock organization receive
no compensation from the Trust. During the year ended December 31, 2001, the
Independent Trustees/Directors earned the compensation set forth below in their
capacities as trustees/directors of the funds in the BlackRock Family of Funds.
It is estimated that the Independent Trustees will receive from the Trust the
amounts set forth below for the Trust's calendar year ending December 31, 2002,
assuming the Trust had been in existence for the full calendar year.




<TABLE>
<CAPTION>
                                                                            TOTAL COMPENSATION FROM THE
                                               ESTIMATED COMPENSATION       TRUST AND FUND COMPLEX PAID
NAME OF BOARD MEMBER                                 FROM TRUST                  TO BOARD MEMBER(1)
- -------------------------------------------   ------------------------   ---------------------------------
<S>                                           <C>                        <C>
     Andrew F. Brimmer ....................           $2,000(2)                     $195,000(3),(4),(5)
     Richard E. Cavanagh ..................           $2,000(2)                     $160,000(4)
     Kent Dixon ...........................           $2,000(2)                     $160,000(4)
     Frank J. Fabozzi .....................           $2,000(2)                     $160,000(4)
     James Clayburn La Force, Jr. .........           $2,000(2)                     $160,000(4)
     Walter F. Mondale ....................           $2,000(2)                     $160,000(4)
</TABLE>

- ----------
(1)   Represents the total compensation earned by such person during the
      calendar year ended December 31, 2001 from the thirty closed-end funds
      advised by a the Advisor (the "Fund Complex"). One of these funds, the
      BlackRock 2001 Term Trust, was terminated on June 30, 2001. On February
      28, 2002, one additional fund was added to the Fund Complex.

(2)   Of these amounts it is anticipated that Messrs. Brimmer, Cavanagh, Dixon,
      Fabozzi, La Force and Mondale may defer $0, $0, $0, $0, $2,000 and
      $1,000, respectively, pursuant to the Fund Complex's deferred
      compensation plan.

(3)   Andrew F. Brimmer serves as "lead director" for each board of
      trustees/directors in the Fund Complex. For his services as lead
      trustee/director, Andrew F. Brimmer will be compensated in the amount of
      $40,000 per annum by the Fund Complex to be allocated among the funds in
      the Fund Complex based on each fund's relative net assets.

(4)   Of this amount, Messrs. Brimmer, Cavanagh, La Force and Mondale deferred
      $24,000, $24,000, $139,000 and $68,000, respectively, pursuant to the
      Fund Complex's deferred compensation plan.

(5)   In 2002, it is anticipated that Dr. Brimmer's compensation will be
      $200,000.


                                      B-20
<PAGE>

     Each Independent Trustee/Director receives an annual fee calculated as
follows: (i) $6,000 from each fund/trust in the Fund Complex and (ii) $1,500
for each meeting of each board in the Fund Complex attended by such Independent
Trustee/Director. The total annual aggregate compensation for each Independent
Trustee/Director is capped at $160,000 per annum, except that Dr. Brimmer
receives an additional $40,000 from the Fund Complex for acting as the lead
trustee/director for each board of trustees/directors in the Fund Complex. In
the event that the $160,000 cap is met with respect to an Independent
Trustee/Director, the amount of the Independent Trustee/Director's fee borne by
each fund in the Fund Complex is reduced by reference to the net assets of the
Trust relative to the other funds in the Fund Complex. In addition, the
attendance fees of each Independent Trustee/Director of the funds/trusts are
reduced proportionately, based on each respective fund's/trust's net assets, so
that the aggregate per meeting fee for all meetings of the boards of
trustees/directors of the funds/trusts held on a single day does not exceed
$20,000 for any Independent Trustee/Director.

     The Board of Trustees of the Trust currently has three committees: an
Executive Committee, an Audit Committee and a Governance Committee.

     The Executive Committee consists of Ralph L. Schlosstein and Laurence D.
Fink and       and acts in accordance with the powers permitted to such a
committee under the Agreement and Declaration of Trust and By-Laws of the
Trust. The Executive Committee, subject to the Trust's Agreement and
Declaration of Trust, By-Laws and applicable law, acts on behalf of the full
Board of Trustees in the intervals between meetings of the Board.

     The Audit Committee consists of Richard E. Cavanagh, Walter F. Mondale,
Dr. Andrew F. Brimmer, Kent Dixon, Frank J. Fabozzi and James Clayburn La
Force, Jr. The Audit Committee acts according to the Audit Committee charter.
Dr. Andrew F. Brimmer has been appointed as Chairman of the Audit Committee.
The Audit Committee is responsible for reviewing and evaluating issues related
to the accounting and financial reporting policies of the Trust, overseeing the
quality and objectivity of the Trust's financial statements and the audit
thereof and to act as a liaison between the Board of Trustees and the Trust's
independent accountants.

     The Governance Committee consists of Dr. Andrew F. Brimmer, Richard E.
Cavanagh, Kent Dixon, Frank J. Fabozzi, James Clayburn La Force, Jr. and Walter
F. Mondale. The Governance committee acts in accordance with the Governance
Committee charter. Dr. Andrew F. Brimmer has been appointed as Chairman of the
Governance Committee. The Governance Committee consists of the independent
Trustees and performs those functions enumerated in the Governance Committee
Charter including, but not limited to, making nominations for the appointment
or election of independent Trustees, reviewing independent Trustee
compensation, retirement policies and personnel training policies and
administrating the provisions of the Code of Ethics applicable to the
independent Trustees.

     As the Trust is a newly organized closed-end investment company, no
meetings of the above committees have been held in the current fiscal year.

     No Trustee who is not an interested person of the Trust owns beneficially
or of record, any security of BlackRock Advisors or any person (other than a
registered investment company) directly or indirectly controlling, controlled
by or under common control with BlackRock Advisors.


CODES OF ETHICS

     The Trust, the Advisor, the Sub-Advisor and the Trust's principal
underwriters have adopted codes of ethics under Rule 17j-1 of the Investment
Company Act. These codes permit personnel subject to the codes to invest in
securities, including securities that may be purchased or held by the Trust.
These codes can be reviewed and copied at the Security and Exchange
Commission's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling the Security
and Exchange Commission at 1-202-942-8090. The code of ethics are available on
the EDGAR Database on the Security and Exchange Commission's web site
(http://www.sec.gov), and copies of these codes may be obtained, after paying a
duplicating fee, by


                                      B-21
<PAGE>

electronic request at the following e-mail address: publicinfo@sec.gov, or by
writing the Security and Exchange Commission's Public Reference Section,
Washington, D.C. 20549-0102.


INVESTMENT ADVISOR AND SUB-ADVISOR


     BlackRock Advisors acts as the Trust's investment advisor. BlackRock
Financial Management acts as the Trust's sub-advisor. BlackRock Advisors,
located at 100 Bellevue Parkway, Wilmington, Delaware, 19809, and BlackRock
Financial Management, located at 40 East 52nd Street, New York, New York 10022,
are wholly owned subsidiaries of BlackRock, Inc., which is one of the largest
publicly traded investment management firms in the United States with
approximately $250 billion of assets under management as of June 30, 2002.
BlackRock manages assets on behalf of institutional and individual investors
worldwide through a variety of equity, fixed income, liquidity and alternative
investment products, including the BlackRock Funds and BlackRock Provident
Institutional Funds. In addition, BlackRock provides risk management and
investment system services to institutional investors under the BlackRock
Solutions name.

     The BlackRock organization has over 13 years of experience managing
closed-end products and currently advises a closed-end family of 37 funds with
approximately $9.4 billion in assets. BlackRock has 28 leveraged municipal
closed-end funds and six open-end municipal funds under management. As of June
30, 2002, BlackRock managed approximately $17.5 billion in municipal assets
firm-wide. Clients are served from the company's headquarters in New York City,
as well as offices in Wilmington, San Francisco, Boston, Edinburgh, Tokyo and
Hong Kong. BlackRock, Inc. is a member of The PNC Financial Services Group,
Inc. ("PNC"), one of the largest diversified financial services organizations
in the United States, and is majority-owned by PNC and by BlackRock employees.



                     PORTFOLIO TRANSACTIONS AND BROKERAGE

     The Advisor and the Sub-Advisor are responsible for decisions to buy and
sell securities for the Trust, the selection of brokers and dealers to effect
the transactions and the negotiation of prices and any brokerage commissions.
The securities in which the Trust invests are traded principally in the
over-the-counter market. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their
own accounts without a stated commission, although the price of such securities
usually includes a mark-up to the dealer. Securities purchased in underwritten
offerings generally include, in the price, a fixed amount of compensation for
the manager(s), underwriter(s) and dealer(s). The Trust may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid. Purchases and sales of bonds on a stock
exchange are effected through brokers who charge a commission for their
services.

     The Advisor and the Sub-Advisor are responsible for effecting securities
transactions of the Trust and will do so in a manner deemed fair and reasonable
to shareholders of the Trust and not according to any formula. The Advisor's
and the Sub-Advisor's primary considerations in selecting the manner of
executing securities transactions for the Trust will be prompt execution of
orders, the size and breadth of the market for the security, the reliability,
integrity and financial condition and execution capability of the firm, the
difficulty in executing the order, and the best net price. There are many
instances when, in the judgment of the Advisor or the Sub-Advisor, more than
one firm can offer comparable execution services. In selecting among such
firms, consideration is given to those firms which supply research and other
services in addition to execution services. Consideration may also be given to
the sale of shares of the Trust. However, it is not the policy of BlackRock,
absent special circumstances, to pay higher commissions to a firm because it
has supplied such research or other services.

     The Advisor and the Sub-Advisor are able to fulfill their obligation to
furnish a continuous investment program to the Trust without receiving research
or other information from brokers; however, each considers access to such
information to be an important element of financial management. Although such
information is considered useful, its value is not determinable, as it must be
reviewed and assimilated by the Advisor and/or the Sub-Advisor, and does not
reduce the


                                      B-22
<PAGE>

Advisor's and/or the Sub-Advisor's normal research activities in rendering
investment advice under the investment management agreement or the
sub-investment advisory agreement. It is possible that the Advisor's and/or the
Sub-Advisor's expenses could be materially increased if it attempted to
purchase this type of information or generate it through its own staff.

     One or more of the other investment companies or accounts which the
Advisor and/or the Sub-Advisor manages may own from time to time some of the
same investments as the Trust. Investment decisions for the Trust are made
independently from those of such other investment companies or accounts;
however, from time to time, the same investment decision may be made for more
than one company or account. When two or more companies or accounts seek to
purchase or sell the same securities, the securities actually purchased or sold
will be allocated among the companies and accounts on a good faith equitable
basis by the Advisor and/or the Sub-Advisor in their discretion in accordance
with the accounts' various investment objectives. In some cases, this system
may adversely affect the price or size of the position obtainable for the
Trust. In other cases, however, the ability of the Trust to participate in
volume transactions may produce better execution for the Trust. It is the
opinion of the Trust's board of trustees that this advantage, when combined
with the other benefits available due to the Advisor's or the Sub-Advisor's
organization, outweighs any disadvantages that may be said to exist from
exposure to simultaneous transactions.

     It is not the Trust's policy to engage in transactions with the objective
of seeking profits from short-term trading. It is expected that the annual
portfolio turnover rate of the Trust will be approximately 100% excluding
securities having a maturity of one year or less. Because it is difficult to
predict accurately portfolio turnover rates, actual turnover may be higher or
lower. Higher portfolio turnover results in increased Trust costs, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of securities and on the reinvestment in other securities.


                             DESCRIPTION OF SHARES


COMMON SHARES

     The Trust intends to hold annual meetings of shareholders so long as the
common shares are listed on a national securities exchange and such meetings
are required as a condition to such listing.


PREFERRED SHARES

     Although the terms of any Preferred Share issued by the Trust, including
their dividend rate, voting rights, liquidation preference and redemption
provisions, will be determined by the board of trustees (subject to applicable
law and the Trust's Agreement and Declaration of Trust) when it authorizes a
Preferred Shares offering, the Trust currently expects that the preference on
distributions, liquidation preference, voting rights and redemption provisions
of any such Preferred Shares will likely be as stated in the prospectus.

     If the board of trustees determines to proceed with an offering of
Preferred Shares, the terms of the Preferred Shares may be the same as, or
different from, the terms described in the prospectus, subject to applicable
law and the Trust's Agreement and Declaration of Trust. The board of trustees,
without the approval of the holders of common shares, may authorize an offering
of Preferred Shares or may determine not to authorize such an offering, and may
fix the terms of the Preferred Shares to be offered.


OTHER SHARES

     The board of trustees (subject to applicable law and the Trust's Agreement
and Declaration of Trust) may authorize an offering, without the approval of
the holders of either common shares or Preferred Shares, of other classes of
shares, or other classes or series of shares, as they determine to be
necessary, desirable or appropriate, having such terms, rights, preferences,
privileges, limitations and restrictions as the board of trustees see fit. The
Trust currently does not expect to issue any other classes of shares, or series
of shares, except for the common shares and the Preferred Shares.


                                      B-23
<PAGE>

                          REPURCHASE OF COMMON SHARES

     The Trust is a closed-end management investment company and as such its
shareholders will not have the right to cause the Trust to redeem their shares.
Instead, the Trust's common shares will trade in the open-market at a price
that will be a function of several factors, including dividend levels (which
are in turn affected by expenses), net asset value, call protection, dividend
stability, relative demand for and supply of such shares in the market, general
market and economic conditions and other factors. Because shares of a
closed-end investment company may frequently trade at prices lower than net
asset value, the Trust's board of trustees may consider action that might be
taken to reduce or eliminate any material discount from net asset value in
respect of common shares, which may include the repurchase of such shares in
the open-market or in private transactions, the making of a tender offer for
such shares, or the conversion of the Trust to an open-end investment company.
The board of trustees may decide not to take any of these actions. In addition,
there can be no assurance that share repurchases or tender offers, if
undertaken, will reduce market discount.

     Notwithstanding the foregoing, at any time when the Trust's Preferred
Shares are outstanding, the Trust may not purchase, redeem or otherwise acquire
any of its common shares unless (1) all accrued Preferred Shares dividends have
been paid and (2) at the time of such purchase, redemption or acquisition, the
net asset value of the Trust's portfolio (determined after deducting the
acquisition price of the common shares) is at least 200% of the liquidation
value of the outstanding Preferred Shares (expected to equal the original
purchase price per share plus any accrued and unpaid dividends thereon). Any
service fees incurred in connection with any tender offer made by the Trust
will be borne by the Trust and will not reduce the stated consideration to be
paid to tendering shareholders.

     Subject to its investment restrictions, the Trust may borrow to finance
the repurchase of shares or to make a tender offer. Interest on any borrowings
to finance share repurchase transactions or the accumulation of cash by the
Trust in anticipation of share repurchases or tenders will reduce the Trust's
net income. Any share repurchase, tender offer or borrowing that might be
approved by the Trust's board of trustees would have to comply with the
Securities Exchange Act of 1934, as amended, the Investment Company Act and the
rules and regulations thereunder.

     Although the decision to take action in response to a discount from net
asset value will be made by the board of trustees at the time it considers such
issue, it is the board's present policy, which may be changed by the board of
trustees, not to authorize repurchases of common shares or a tender offer for
such shares if: (1) such transactions, if consummated, would (a) result in the
delisting of the common shares from the American Stock Exchange, or (b) impair
the Trust's status as a regulated investment company under the Code, (which
would make the Trust a taxable entity, causing the Trust's income to be taxed
at the corporate level in addition to the taxation of shareholders who receive
dividends from the Trust) or as a registered closed-end investment company
under the Investment Company Act; (2) the Trust would not be able to liquidate
portfolio securities in an orderly manner and consistent with the Trust's
investment objective and policies in order to repurchase shares; or (3) there
is, in the board's judgment, any (a) material legal action or proceeding
instituted or threatened challenging such transactions or otherwise materially
adversely affecting the Trust, (b) general suspension of or limitation on
prices for trading securities on the American Stock Exchange, (c) declaration
of a banking moratorium by Federal or state authorities or any suspension of
payment by United States or New York banks, (d) material limitation affecting
the Trust or the issuers of its portfolio securities by Federal or state
authorities on the extension of credit by lending institutions or on the
exchange of foreign currency, (e) commencement of war, armed hostilities or
other international or national calamity directly or indirectly involving the
United States, or (f) other event or condition which would have a material
adverse effect (including any adverse tax effect) on the Trust or its
shareholders if shares were repurchased. The board of trustees may in the
future modify these conditions in light of experience.

     The repurchase by the Trust of its shares at prices below net asset value
will result in an increase in the net asset value of those shares that remain
outstanding. However, there can be no assurance that share repurchases or
tender offers at or below net asset value will result in the Trust's shares


                                      B-24
<PAGE>

trading at a price equal to their net asset value. Nevertheless, the fact that
the Trust's shares may be the subject of repurchase or tender offers from time
to time, or that the Trust may be converted to an open-end investment company,
may reduce any spread between market price and net asset value that might
otherwise exist.

     In addition, a purchase by the Trust of its common shares will decrease
the Trust's Managed Assets which would likely have the effect of increasing the
Trust's expense ratio. Any purchase by the Trust of its common shares at a time
when Preferred Shares are outstanding will increase the leverage applicable to
the outstanding common shares then remaining.

     Before deciding whether to take any action if the common shares trade
below net asset value, the Trust's board of trustees would likely consider all
relevant factors, including the extent and duration of the discount, the
liquidity of the Trust's portfolio, the impact of any action that might be
taken on the Trust or its shareholders and market considerations. Based on
these considerations, even if the Trust's shares should trade at a discount,
the board of trustees may determine that, in the interest of the Trust and its
shareholders, no action should be taken.


                                  TAX MATTERS

     The following is a description of certain Federal income tax consequences
to a shareholder of acquiring, holding and disposing of common stock of the
Trust. The discussion reflects applicable tax laws of the United States as of
the date of this prospectus, which tax laws may be changed or subject to new
interpretations by the courts or the Internal Revenue Service retroactively or
prospectively.

     The Trust intends to elect to be treated and to qualify to be taxed as a
regulated investment company under Subchapter M of the Code, and to satisfy
conditions which will enable dividends on common shares or Preferred Shares
which are attributable to interest on tax-exempt municipal securities to be
exempt from Federal income tax in the hands of its shareholders, subject to the
possible application of the Federal alternative minimum tax.

     In order to qualify as a regulated investment company, the Trust must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to its
shareholders. First, the Trust must derive at least 90% of its annual gross
income (including tax-exempt interest) from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies, or other income (including but not limited
to gains from options, futures and forward contracts) derived with respect to
its business of investing in such stock, securities or currencies (the "90%
gross income test"). Second, the Trust must diversify its holdings so that, at
the close of each quarter of its taxable year, (i) at least 50% of the value of
its total assets is comprised of cash, cash items, United States government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the Trust's total assets and to not more than 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of the total assets is invested in the securities of any one
issuer (other than United States government securities and securities of other
regulated investment companies) or two or more issuers controlled by the Trust
and engaged in the same, similar or related trades or businesses.

     As a regulated investment company, the Trust will not be subject to
Federal income tax on income and gains that it distributes each taxable year to
its shareholders, provided that in such taxable year it distributes at least
90% of the sum of (i) its "investment company taxable income" (which includes,
among other items, dividends, taxable interest, taxable original issue discount
and market discount income, income from securities lending, net short-term
capital gain in excess of net long-term capital loss, and any other taxable
income other than "net capital gain" (as defined below) and is reduced by
deductible expenses) determined without regard to the deduction for dividends
paid and (ii) its net tax-exempt interest (the excess of its gross tax-exempt
interest income over certain disallowed deductions). The Trust may retain for
investment its net capital gain (which consists of the excess of its net
long-term capital gain over its net short-term capital loss). However, if the
Trust retains any net capital gain or any investment company taxable income, it
will be subject to tax at


                                      B-25
<PAGE>

regular corporate rates on the amount retained. If the Trust retains any net
capital gain, it may designate the retained amount as undistributed capital
gains in a notice to its shareholders who, if subject to Federal income tax on
long-term capital gains, (i) will be required to include in income for Federal
income tax purposes, as long-term capital gain, their share of such
undistributed amount and (ii) will be entitled to credit their proportionate
shares of the tax paid by the Trust against their Federal income tax
liabilities, if any, and to claim refunds to the extent the credit exceeds such
liabilities. For Federal income tax purposes, the tax basis of shares owned by
a shareholder of the Trust will be increased by the amount of undistributed
capital gains included in the gross income of the shareholder less the tax
deemed paid by the shareholder under clause (ii) of the preceding sentence. The
Trust intends to distribute at least annually to its shareholders all or
substantially all of its net tax-exempt interest and any investment company
taxable income and net capital gain.

     Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, to elect (unless it
has made a taxable year election for excise tax purposes as discussed below) to
treat all or part of any net capital loss, any net long-term capital loss or
any net foreign currency loss incurred after October 31 as if it had been
incurred in the succeeding year.

     Distributions by the Trust of investment company taxable income, if any,
whether received in cash or additional shares, will be taxable to shareholders
as ordinary income (to the extent of the current or accumulated earning and
profits of the Trust) and generally will not qualify for the dividends received
deduction in the case of corporate shareholders. Net long-term capital gains
realized by the Trust and distributed to shareholders in cash or additional
shares will be taxable to shareholders as long-term capital gains regardless of
the length of time investors have owned shares of the Trust. Distributions by
the Trust that do not constitute ordinary income dividends, capital gain
distributions or exempt-interest dividends (as defined below) will be treated
as a return of capital to the extent of (and in reduction of) the shareholder's
tax basis in his or her shares. Any excess will be treated as gain from the
sale of his or her shares, as discussed below.

     If the Trust engages in hedging transactions involving financial futures
and options, these transactions will be subject to special tax rules, the
effect of which may be to accelerate income to the Trust, defer the Trust's
losses, cause adjustments in the holding periods of the Trust's securities,
convert long-term capital gains into short-term capital gains and convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to holders
of common shares.

     Prior to purchasing shares in the Trust, an investor should carefully
consider the impact of dividends which are expected to be or have been
declared, but not paid. Any dividend declared shortly after a purchase of such
shares prior to the record date will have the effect of reducing the per share
net asset value by the per share amount of the dividend.

     Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to holders of
common shares of record on a specified date in one of those months and paid
during the following January, will be treated as having been distributed by the
Trust (and received by the holder of common shares) on December 31.

     Federal income tax law imposes an alternative minimum tax with respect to
both corporations and individuals based on certain items of tax preference. To
the extent the Trust receives income treated as tax preference items for
purposes of the alternative minimum tax, a portion of the dividends paid by it,
although otherwise exempt from Federal income tax, will be taxable to holders
of common shares to the extent that their tax liability is determined under the
alternative minimum tax. The Trust will annually supply holders of common
shares with reports indicating the amount and nature of all income distributed
to them as well as the percentage of Trust income attributable to tax
preference items subject to the alternative minimum tax.

     The Trust intends to invest in sufficient tax-exempt municipal bonds to
permit payment of "exempt-interest dividends" (as defined in the Code). Except
as provided below, exempt-interest dividends paid to holders of common shares
are not includable in the holder's gross income for Federal income tax
purposes.


                                      B-26
<PAGE>

     The Internal Revenue Service's position in a published revenue ruling
indicates that the Trust is required to designate distributions paid with
respect to its common shares and its Preferred Shares as consisting of a
portion of each type of income distributed by the Trust. The portion of each
type of income deemed received by the holders of each class of shares will be
equal to the portion of total Trust dividends received by such class. Thus, the
Trust will designate dividends paid as exempt-interest dividends in a manner
that allocates such dividends between the holders of the common shares and the
holders of Preferred Shares in proportion to the total dividends paid to each
such class during or with respect to the taxable year, or otherwise as required
by applicable law. Capital gain dividends and ordinary income dividends will
similarly be allocated between the two classes.

     Interest on certain "private activity bonds" is an item of tax preference
subject to the alternative minimum tax on individuals and corporations. The
Trust may invest a portion of its assets in municipal bonds subject to this
provision so that a portion of its exempt-interest dividends is an item of tax
preference to the extent such dividends represent interest received from these
private activity bonds. Accordingly, investment in the Trust could cause a
holder of common shares to be subject to, or result in an increased liability
under, the alternative minimum tax.

     Exempt-interest dividends are included in determining what portion, if
any, of a person's Social Security and railroad retirement benefits will be
includable in gross income subject to Federal income tax.

     Although exempt-interest dividends generally may be treated by holders of
common shares as items of interest excluded from their gross income, each
holder is advised to consult his tax advisor with respect to whether
exempt-interest dividends retain their exclusion if the shareholder would be
treated as a "substantial user," or a "related person" of a substantial user,
of the facilities financed with respect to any of the tax-exempt obligations
held by the Trust.

     For corporations, alternative minimum taxable income is increased by 75%
of the difference between an alternative measure of income ("adjusted current
earnings") and the amount otherwise determined to be the alternative minimum
taxable income. Interest on municipal bonds, and therefore all exempt-interest
dividends received from the Trust, are included in calculating adjusted current
earnings.

     The redemption, sale or exchange of common shares normally will result in
capital gain or loss to the holders of common shares who hold their shares as
capital assets. Generally, a shareholder's gain or loss will be long-term
capital gain or loss if the shares have been held for more than one year even
though the increase in value in such common shares is attributable to
tax-exempt interest income. In addition, gain realized by the Trust from the
disposition of a tax-exempt municipal obligation that is attributable to
accrued market discount will be treated as ordinary income rather than capital
gain, and thus may increase the amount of ordinary income dividends received by
holders of common shares. Present law taxes both long- and short-term capital
gains of corporations at the rates applicable to ordinary income. For
non-corporate taxpayers, however, long-term capital gains will be taxed at a
maximum rate of 20% (or 18% for capital assets that have been held for more
than five years and whose holding periods began after December 31, 2000), while
short-term capital gains and other ordinary income will currently be taxed at a
maximum rate of 38.6%. (1) Because of the limitations on itemized deductions and
the deduction for personal exemptions applicable to higher income taxpayers,
the effective tax rate may be higher in certain circumstances.

     All or a portion of a sales charge paid in purchasing common shares cannot
be taken into account for purposes of determining gain or loss on the
redemption, sale or exchange of such shares within 90 days after their purchase
to the extent common shares or shares of another fund are subsequently acquired
without payment of a sales charge pursuant to the reinvestment or exchange
privilege. Any


- ----------
     (1)The Economic Growth and Tax Relief Reconciliation Act of 2001, effective
for taxable years beginning after December 31, 2000, creates a new 10 percent
income tax bracket and reduces the tax rates applicable to ordinary income over
a six year phase-in period. Beginning in the taxable year 2006, ordinary income
will be subject to a 35% maximum rate, with approximately proportionate
reductions in the other ordinary rates.


                                      B-27
<PAGE>

disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. In addition, no
loss will be allowed on the redemption, sale or exchange of common shares if
the shareholder purchases other common shares of the Trust (whether through
reinvestment of distributions or otherwise) or the shareholder acquires or
enters into a contract or option to acquire shares that are substantially
identical to common shares of the Trust within a period of 61 days beginning 30
days before and ending 30 days after such redemption, sale or exchange. If
disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired. Further, any losses realized on the redemption, sale or
exchange of common shares held for six months or less will be disallowed to the
extent of any exempt-interest dividends received with respect to such common
shares and, if not disallowed, such losses will be treated as long-term capital
losses to the extent of any capital gain dividends received (or amounts
credited as undistributed capital gains) with respect to such common shares.

     In order to avoid a 4% Federal excise tax, the Trust must distribute or be
deemed to have distributed by December 31 of each calendar year the sum of 98%
of its taxable ordinary income for such year, at least 98% of its capital gain
net income (the excess of its realized capital gains over its realized capital
losses, generally computed on the basis of the one-year period ending on
October 31 of such year) and 100% of any taxable ordinary income and capital
gain net income for the prior year that was not distributed during such year
and on which the Trust paid no Federal income tax. For purposes of the excise
tax, a regulated investment company may reduce its capital gain net income (but
not below its net capital gain) by the amount of any net ordinary loss for the
calendar year. The Trust intends to make timely distributions in compliance
with these requirements and consequently it is anticipated that it generally
will not be required to pay the excise tax.

     If in any year the Trust should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Trust would incur a regular
corporate Federal income tax upon its taxable income for that year, and
distributions to its shareholders would be taxable to shareholders as ordinary
dividend income for Federal income tax purposes to the extent of the Trust's
earnings and profits.

     The Trust is required to withhold tax at a rate equal to the fourth lowest
rate applicable (30%) to unmarried individuals on taxable dividends and certain
other payments paid to non-corporate shareholders who have not furnished to the
Trust their correct taxpayer identification number (in the case of individuals,
their Social Security number) and certain certifications, or who are otherwise
subject to backup withholding. Backup withholding is not an additional tax and
any amount withheld may be refunded or credited against the shareholder's
Federal income tax liability, provided the required information is furnished to
the Internal Revenue Service.

     The foregoing is a general and abbreviated summary of the provisions of
the Code and the Treasury Regulations presently in effect as they directly
govern the taxation of the Trust and its shareholders. For complete provisions,
reference should be made to the pertinent Code sections and Treasury
Regulations. The Code and the Treasury Regulations are subject to change by
legislative or administrative action, and any such change may be retroactive
with respect to Trust transactions. Holders of common shares are advised to
consult their own tax advisors for more detailed information concerning the
Federal income taxation of the Trust and the income tax consequences to its
holders of common shares.


                PERFORMANCE RELATED AND COMPARATIVE INFORMATION

     Municipal bonds can provide tax-free income. Because the Trust expects
that a portion of its investments will pay interest that is taxable under the
Federal alternative minimum tax, the Trust may not be a suitable investment for
shareholders that are subject to the Federal alternative minimum tax.

     The Trust may quote certain performance-related information and may
compare certain aspects of its portfolio and structure to other substantially
similar closed-end funds as categorized by Lipper, Inc. ("Lipper"), Morningstar
Inc. or other independent services. Comparison of the Trust to an alternative
investment should be made with consideration of differences in features and
expected


                                      B-28
<PAGE>

performance. The Trust may obtain data from sources or reporting services, such
as Bloomberg Financial and Lipper, that the Trust believes to be generally
accurate. In our sales materials, we may quote company rankings from Fortune
Magazine and other national publications.


     Past performance is not indicative of future results. At the time common
shareholders sell their shares, they may be worth more or less than their
original investment.

     Municipal bonds have had an annualized total return for the 10 years ended
May 31, 2002 of 6.75%. This figure, when adjusted for taxes, assuming a 39.6%
tax bracket and the highest average national state tax bracket, increases to
10.94% which is better than the after tax return of other major fixed income
categories.

                       Tax Adjusted Municipals vs. Other
                         Fixed Income Category Returns
                         Last 10 Years Ending 5/31/02



     10 Year Municipal Bond Taxable-Equivalent Annualized Returns and Standard
Deviation vs. Alternatives.(1)




<TABLE>
<CAPTION>
                          TAX
10 YEAR PERIOD            ADJ.
5/31/92 - 5/31/02        MUNIS     AGGREGATE(2)   TREASURY(3)   AGENCY(4)
- --------------------- ----------- -------------- ------------- -----------
<S>                   <C>         <C>            <C>           <C>
Annualized Return ...     10.94%        7.40%         7.47%        7.40%
Standard Deviation ..      4.40         3.76          4.31         3.91



<CAPTION>
10 YEAR PERIOD                                          ASSET       HIGH        S&P
5/31/92 - 5/31/02      CORPORATES(5)   MORTGAGES(6)   BACKED(7)   YIELD(8)     500(9)    NASDAQ(10)
- --------------------- --------------- -------------- ----------- ---------- ----------- -----------
<S>                   <C>             <C>            <C>         <C>        <C>         <C>
Annualized Return ...       7.73%           7.28%        7.13%       6.91%      12.06%      10.68%
Standard Deviation ..       4.72            3.00         2.59        6.10       14.14       27.33
</TABLE>



- ----------
     (1) Source: Lehman Brothers. Past performance is no guarantee of future
results. The taxable-equivalent return for municipal bonds in the above table
reflects an adjustment of the highest federal tax bracket in each year and the
highest current average national state tax bracket to the portion of the Lehman
Brothers Municipal Index attributable to coupon payment and no adjustment to
the portion of the Index attributable to principal appreciation. Treasury Bond
income returns reflect an adjustment of the highest current average national
state tax bracket to the portion of the Lehman Brothers Treasury Index
attributable to coupon payment and no adjustment to the portion of the Index
attributable to principal appreciation. Standard Deviation measures performance
fluctuation; generally the higher the Standard Deviation, the greater the
expected volatility of returns. Standard deviation is not a complete measure of
risk and cannot predict future performance. For the five year period from
5/31/97 - 5/31/02 the Lehman Brothers Municipal Index, S&P 500 and NASDAQ
produced an annualized return of 10.29%, 8.06% and 7.71%, respectively, with
standard deviation of 3.66%, 17.2% and 34.05% respectively. Referenced Indices:
S&P Index and NASDAQ Composite. Other referenced Lehman Indices: Asset Backed,
Mortgage Backed, Credit Bond (Corporate), U.S. Agency, Treasury Bond, Aggregate
Bond and High Yield.

     (2) The Lehman Brothers Aggregate Bond Index consists of intermediate-term
government bonds, investment-grade corporate debt securities and mortgage
backed securities.

     (3) The Lehman Brothers U.S. Treasury Index consists of public obligations
of the U.S. Treasury with a remaining maturity of one year or more. Securities
in the Index are rated investment grade.

     (4) The Lehman Brothers U.S. Agency Index consists of publicly issued debt
of U.S. Government agencies, quasi-federal corporations, and corporate or
foreign debt guaranteed by the U.S. Government agencies, quasi-federal
corporations, and corporate or foreign debt guaranteed by the U.S. Government.
Securities in the Index are rated investment grade.

     (5) The Lehman Brothers U.S. Corporate Investment Grade Index consists of
publicly issued U.S. corporate and specified foreign debentures and secured
notes. To qualify, bonds must be registered with the Securities and Exchange
Commission and be of investment grade credit quality.

     (6) The Lehman Brothers Mortgage Backed Securities Index consists of fixed
rate mortgage-backed pass-through securities issued by Ginnie Mae (GNMA),
Fannie Mae (FNMA), and Freddie Mac (FHLMC).



                                      B-29
<PAGE>


     (7) The Lehman Brothers Asset-Backed Securities Index consists of asset
backed securities in five subsectors: (1) credit and charge cards (2) autos (3)
home equity loans (4) utilities and (5) manufactured housing. To be included in
the Index, a security must be fixed-rate and be rated investment grade.


     (8) The Lahman Brothers High Yield Index consists of publicly issued fixed
rate, non-investment grade debt.


     (9) Standard & Poor's 500 Index


     (10) NASDAQ Composite Index




Chart B




     Municipal Bonds May Be Attractively Valued Relative To Treasuries.(1)






<TABLE>
<CAPTION>
         YIELD OF MUNIS            BOND BUYER   30-YEAR
    (AS A % OF TREASURIES)(2)       40 INDEX    TREASURY
- --------------------------------- ------------ ---------
<S>                   <C>         <C>          <C>
  9/30/1992 .........     89.01%       6.57       7.381
  3/31/1993 .........     87.93%       6.09       6.926
  3/31/1994 .........     99.27%       7.04       7.092
  3/31/1995 .........     86.13%       6.40       7.431
  3/29/1996 .........     96.60%       6.44       6.667
  3/31/1997 .........     88.22%       6.26       7.096
  3/31/1998 .........     92.03%       5.46       5.933
  3/31/1999 .........     95.82%       5.39       5.625
  3/31/2000 .........    104.50%       6.09       5.828
  3/30/2001 .........     99.01%       5.39       5.444
  3/29/2002 .........     98.53%       5.71       5.795
  5/31/2002 .........     98.47%       5.53       5.616
</TABLE>


- ----------

     (1) Source: Bloomberg/BlackRock Advisors Inc. Past performance is no
guarantee of future results. Chart shows the relationship between the Bond
Buyer 40 Municipal Index and the U.S. 30 Year Treasury Index. The yields quoted
above are a simple unweighted average of the estimated yields of the bonds in
the index if those bonds were sold at par value. It is not possible to invest
directly in an index.


     (2) As of 5/31/02 the ten year average yield (measured quarterly) of
municipal bonds as a percentage of Treasuries is 94%.



                                      B-30
<PAGE>

                        TAXABLE EQUIVALENT YIELD TABLES
                   FOR BLACKROCK MUNICIPAL INCOME TRUSTS II


     The taxable equivalent yield is the current yield you would need to earn
on a taxable investment in order to equal a stated tax-free yield on a
municipal investment. To assist you to more easily compare municipal
investments with taxable alternative investments, the table below presents the
taxable equivalent yields for a range of hypothetical tax-free yields and tax
rates:




<TABLE>
<CAPTION>
                                                       YOUR COMBINED            TAXABLE EQUIVALENT YIELD
                                                       FEDERAL/STATE TAX  -------------------------------------
                SINGLE RETURN ($)     JOINT RETURN ($)   BRACKET IS (%):   5.0(%)(1)   5.5 (%)(1)   6.0 (%)(1)   7.0 (%)(1)
               -------------------   ----------------- ------------------ ----------- ------------ ------------ -----------
<S>            <C>                   <C>               <C>                <C>         <C>          <C>          <C>
National         27,951-67,700        46,701-112,850           27.0            6.85        7.53         8.22         9.59
(BLE)            67,701-141,250       112,851-171,950          30.0            7.14        7.86         8.57        10.00
                141,251-307,050       171,951-307,050          35.0            7.69        8.46         9.23        10.77
                  Over 307,050         Over 307,050            38.6            8.14        8.96         9.77        11.40

California       37,726-67,700        75,451-112,850           33.8            7.55        8.31         9.06        10.57
(BCL)            67,701-141,250       112,851-171,950          36.5            7.88        8.66         9.45        11.03
                141,251-307,050       171,951-307,050          41.1            8.48        9.33        10.18        11.87
                  Over 307,050         Over 307,050            44.3            8.98        9.88        10.77        12.57

New York         27,951-67,700        46,701-112,850           32.0            7.35        8.09         8.82        10.29
(BFY)            67,701-141,250       112,851-171,950          34.8            7.67        8.43         9.20        10.74
                141,251-307,050       171,951-307,050          39.5            8.26        9.08         9.91        11.56
                  Over 307,050         Over 307,050            42.8            8.74        9.62        10.49        12.24
</TABLE>

     Keep in mind that on June 14, 2002, the Lehman Brothers Aggregate Bond
Index, a common measure of the taxable bond market, yielded 5.23%.


- ----------
(1)   This tax-free yield is equivalent to the taxable yields listed below in
      the chart.


                                      B-31
<PAGE>

                                    EXPERTS



     The Statement of Net Assets of the Trust as of July 16, 2002 appearing in
this Statement of Additional Information has been audited by Deloitte & Touche
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and is included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing. Deloitte & Touche
LLP, located at 200 Berkeley Street, Boston, Massachusetts 02116, provides
accounting and auditing services to the Trust.



                            ADDITIONAL INFORMATION


     A Registration Statement on Form N-2, including amendments thereto,
relating to the shares offered hereby, has been filed by the Trust with the
Securities and Exchange Commission (the "Commission"), Washington, D.C. The
prospectus and this Statement of Additional Information do not contain all of
the information set forth in the Registration Statement, including any exhibits
and schedules thereto. For further information with respect to the Trust and
the shares offered hereby, reference is made to the Registration Statement.
Statements contained in the prospectus and this Statement of Additional
Information as to the contents of any contract or other document referred to
are not necessarily complete and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement may be inspected without charge
at the Commission's principal office in Washington, D.C., and copies of all or
any part thereof may be obtained from the Commission upon the payment of
certain fees prescribed by the Commission.


                                      B-32
<PAGE>

                         INDEPENDENT AUDITORS' REPORT



The Board of Trustees and Shareholder of
BlackRock Municipal Income Trust II


     We have audited the accompanying statement of assets and liabilities of
BlackRock Municipal Income Trust II (the "Trust") as of July 16, 2002 and the
related statements of operations and changes in net assets for the period from
June 21, 2002 (date of inception) to July 16, 2002. These financial statements
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements based on our audit.


     We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. 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, such financial statements present fairly, in all material
respects, the financial position of the Trust at July 16, 2002 and the results
of its operations and changes in its net assets for the period then ended, in
conformity with accounting principles generally accepted in the United States
of America.




/s/ Deloitte & Touche LLP
Boston, Massachusetts
July 17, 2002


                                      F-1
<PAGE>

                      BLACKROCK MUNICIPAL INCOME TRUST II

                      STATEMENT OF ASSETS AND LIABILITIES


                                 JULY 16, 2002




<TABLE>
<S>                                                                                    <C>
ASSETS:
Cash ...............................................................................     $ 115,001

LIABILITIES:
Payable for organization costs .....................................................        15,000
                                                                                         ---------
Net Assets .........................................................................     $ 100,001
                                                                                         =========

NET ASSETS WERE COMPRISED OF:
 Common stock at par (Note 1) ......................................................     $       8
 Paid-in capital in excess of par ..................................................       114,993
                                                                                         ---------
                                                                                           115,001
 Undistributed net investment loss .................................................       (15,000)
                                                                                         ---------
Net assets, July 16, 2002 ..........................................................     $ 100,001
                                                                                         =========

NET ASSET VALUE PER SHARE:
Equivalent to 8,028 shares of common stock issued and outstanding, par value $0.001,
 unlimited shares authorized .......................................................     $   12.46
                                                                                         =========

                              BLACKROCK MUNICIPAL INCOME TRUST II
                                 STATEMENT OF OPERATIONS
             FOR THE PERIOD JUNE 21, 2002 (DATE OF INCEPTION) TO JULY 16, 2002

Investment Income ..................................................................     $      --
Expenses
 Organization expenses .............................................................        15,000
                                                                                         ---------
Net investment loss ................................................................     $ (15,000)
                                                                                         =========

                              BLACKROCK MUNICIPAL INCOME TRUST II
                               STATEMENT OF CHANGES IN NET ASSETS
             FOR THE PERIOD JUNE 21, 2002 (DATE OF INCEPTION) TO JULY 16, 2002

INCREASE (DECREASE) IN NET ASSETS
Operations:
 Net Investment loss ...............................................................     $ (15,000)
                                                                                         ---------
 Net decrease in net assets resulting from operations ..............................       (15,000)
                                                                                         ---------
Capital Stock Transactions
 Net proceeds from the issuance of common shares ...................................       115,001
                                                                                         ---------
   Total increase ..................................................................       100,001
                                                                                         ---------

NET ASSETS
Beginning of period ................................................................            --
                                                                                         ---------
End of period ......................................................................     $ 100,001
                                                                                         =========
</TABLE>



                                      F-2
<PAGE>


                         NOTES TO FINANCIAL STATEMENTS


Note 1. Organization


     BlackRock Municipal Income Trust II (the "Trust") was organized as a
Delaware business trust on June 21, 2002, and is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940. The Trust had no operations other than a sale to Blackrock Advisors, Inc.
of 8,028 shares of common stock for $115,001 ($14.325 per share).


Note 2. Agreements


     The Trust has entered into an Investment Advisory Agreement with BlackRock
Advisors, Inc. The Trust will pay BlackRock Advisors, Inc. a monthly fee (the
"Investment Management Fee") at an annual rate of 0.55% of the average weekly
value of the Trust's Managed Assets. BlackRock Advisors, Inc. has voluntarily
agreed to waive receipt of a portion of its management fee in the amount of
0.15% of the average weekly value of the Trust's managed assets for the first
five years of the Trust's operations (through July 31, 2007), and for a
declining amount for an additional five years (through July 31, 2012).


Note 3. Organization Expenses and Offering Costs


     Organization expenses of $15,000 have been expensed. Offering costs,
estimated to be approximately $424,000 will be charged to paid-in capital at
the time shares of beneficial interest are sold.


Note 4. Cash & Cash Equivalents


     The Trust considers all highly liquid debt instruments with a maturity of
three months or less at time of purchase to be cash equivalents.



                                      F-3
<PAGE>

                                  APPENDIX A


RATINGS OF INVESTMENTS

     Standard & Poor's Corporation--A brief description of the applicable
Standard & Poor's Corporation ("S&P") rating symbols and their meanings (as
published by S&P) follows:

     Long-Term Debt

     An S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers or
lessees.

     The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.

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

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

   1. Likelihood of default--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;

   2.  Nature of and provisions of the obligation; and

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

     Investment Grade

AAA   Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
      interest and repay principal is extremely strong.

AA    Debt rated "AA" has a very strong capacity to pay interest and repay
      principal and differs from the highest rated issues only in small degree.


A     Debt rated "A" has a strong capacity to pay interest and repay principal
      although it is somewhat more susceptible to the adverse effects of
      changes in circumstances and economic conditions than debt in higher
      rated categories.

BBB   Debt rated "BBB" is regarded as having an adequate capacity to pay
      interest and repay principal. Whereas it normally exhibits adequate
      protection parameters, adverse economic conditions or changing
      circumstances are more likely to lead to a weakened capacity to pay
      interest and repay principal for debt in this category than in higher
      rated categories.

     Speculative Grade Rating

     Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation
and "C" the highest. While such debt will likely have some quality and
protective characteristics these are outweighed by major uncertainties or major
exposures to adverse conditions.

BB    Debt rated "BB" has less near-term vulnerability to default than other
      speculative issues. However, it faces major ongoing uncertainties or
      exposure to adverse business, financial, or economic conditions which
      could lead to inadequate capacity to meet timely interest and principal
      payments. The "BB" rating category is also used for debt subordinated to
      senior debt that is assigned an actual or implied "BBB" rating.


                                      A-1
<PAGE>

B     Debt rated "B" has a greater vulnerability to default but currently has
      the capacity to meet interest payments and principal repayments. Adverse
      business, financial, or economic conditions will likely impair capacity
      or willingness to pay interest and repay principal. The "B" rating
      category is also used for debt subordinated to senior debt that is
      assigned an actual or implied "BB" or "BB" rating.

CCC   Debt rated "CCC" has a currently identifiable vulnerability to default,
      and is dependent upon favorable business, financial, and economic
      conditions to meet timely payment of interest and repayment of principal.
      In the event of adverse business, financial, or economic conditions, it
      is not likely to have the capacity to pay interest and repay principal.

      The "CCC" rating category is also used for debt subordinated to senior
      debt that is assigned an actual or implied "B" or "B" rating.

CC    The rating "CC" typically is applied to debt subordinated to senior debt
      that is assigned an actual or implied "CCC" debt rating.

C     The rating "C" typically is applied to debt subordinated to senior debt
      which is assigned an actual or implied "CCC" debt rating. The "C" rating
      may be used to cover a situation where a bankruptcy petition has been
      filed, but debt service payments are continued.

CI    The rating "CI" is reserved for income bonds on which no interest is
      being paid.

D     Debt rated "D" is in payment default. The "D" rating category is used
      when interest payments or principal payments are not made on the date due
      even if the applicable grace period has not expired, unless S&P believes
      that such payments will be made during such grace period. The "D" rating
      also will be used upon the filing of a bankruptcy petition if debt
      service payments are jeopardized.

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

     Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful and
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 judgment with respect to such likelihood and risk.

L     The letter "L" indicates that the rating pertains to the principal amount
      of those bonds to the extent that the underlying deposit collateral is
      Federally insured by the Federal Savings & Loan Insurance Corporation or
      the Federal Deposit Insurance Corporation* and interest is adequately
      collateralized. In the case of certificates of deposit the letter "L"
      indicates that the deposit, combined with other deposits being held in
      the same right and capacity will be honored for principal and accrued
      pre-default interest up to the Federal insurance limits within 30 days
      after closing of the insured institution or, in the event that the
      deposit is assumed by a successor insured institution, upon maturity.

*     Continuance of the rating is contingent upon S&P's receipt of an executed
      copy of the escrow agreement or closing documentation confirming
      investments and cash flow.

NR    Indicates no rating has been requested, that there is insufficient
      information on which to base a rating, or that S&P does not rate a
      particular type of obligation as a matter of policy.

      Municipal Notes

     An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:

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


                                      A-2
<PAGE>

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

     Note rating symbols are as follows:

SP-1  Very strong or strong capacity to pay principal and interest. Those
      issues determined to possess overwhelming safety characteristics will be
      given a plus (+) designation.

SP-2  Satisfactory capacity to pay principal and interest.

SP-3  Speculative capacity to pay principal and interest.

     A note rating is not a recommendation to purchase, sell or hold a security
inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.

     Commercial Paper

     An S&P 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 "A-1" for the
highest quality obligations to "D" for the lowest. These categories are as
follows:

A-1    This highest category 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.

A-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 "A-1."

A-3    Issues carrying this designation have adequate capacity for timely
       payment. They are, however, somewhat more vulnerable to the adverse
       effects of changes in circumstances than obligations carrying the higher
       designations.

B      Issues rated "B" are regarded as having only speculative capacity for
       timely payment.

C      This rating is as signed to short-term debt obligations with a doubtful
       capacity for payment.

D      Debt rated "D" is in payment default. The "D" rating category is used
       when interest payments or principal Payments are not made on the date
       due, even if the applicable grace period has not expired, unless S&P
       believes that such payments will be made during such grace period.

     A commercial rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished
to S&P by the issuer or obtained by S&P from other sources it considers
reliable. S&P does not perform an audit in connection with any rating and may,
on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in or unavailability of
such information or based on other circumstances.

     Moody's Investors Service, Inc.--A brief description of the applicable
Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings
(as published by Moody's) follows:

     Municipal Bonds

Aaa    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 "gilt edge." 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.


                                      A-3
<PAGE>

Aa     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.

A      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.

Baa    Bonds which are rated Baa are considered as medium grade obligations,
       i.e., 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.

Ba     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.

B      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.

Caa    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.

Ca     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.

C      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.

Con(...) Bonds for which the security depends upon the completion of some act
         or the fulfillment of some condition are rated conditionally. These are
         bonds secured by (a) earnings of projects under construction, (b)
         earnings of projects unseasoned in operation experience, (c) rentals
         which begin when facilities are completed, or (d) payments to which
         some other limiting condition attaches. Parenthetical rating denotes
         probable credit stature upon completion of construction or elimination
         of basis of condition.

Note:  Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
       category from Aa to B in the public finance sectors. The modifier
       1indicates that the issuer is in the higher end of its letter rating
       category; the modifier 2 indicates a mid-range ranking; the modifier 3
       indicates that the issuer is in the lower end of the letter ranking
       category.

       Short-Term Loans

MIG 1/VMIG 1    This designation denotes best quality. There is present strong
                protection by established cash flows, superior liquidity
                support or demonstrated broadbased access to the market for
                refinancing.

MIG 2/VMIG 2    This designation denotes high quality. Margins of protection
                are ample although not so large as in the preceding group.

MIG 3/VMIG 3    This designation denotes favorable quality. All security
                elements are accounted for but there is lacking the undeniable
                strength of the preceding grades. Liquidity and cash flow
                protection may be narrow and market access for refinancing is
                likely to be less well-established.


                                      A-4
<PAGE>

MIG 4/VMIG 4    This designation denotes adequate quality. Protection commonly
                regarded as required of an investment security is present and
                although not distinctly or predominantly speculative, there is
                specific risk.

S.G.    This designation denotes speculative quality. Debt instruments in this
        category lack margins of protection.

     Commercial Paper

     Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by 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 earnings coverage of fixed financial charges and high
     internal cash generation.

     --Well-established access to a range of financial markets and assured
     sources of alternate liquidity.

     Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity 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, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

     Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.

     Issuers rated Not Prime do not fall within any of the Prime rating
categories.

     Fitch IBCA, Inc.--A brief description of the applicable Fitch IBCA, Inc.
("Fitch") ratings symbols and meanings (as published by Fitch) follows:

     Long-Term Credit Ratings

     Investment Grade

AAA   Highest credit quality. "AAA" ratings denote the lowest expectation of
      credit risk. They are assigned only in case of exception ally strong
      capacity for timely payment of financial commitments. This capacity is
      highly unlikely to be adversely affected by foreseeable events.

AA    Very high credit quality. "AA" ratings denote a very low expectation of
      credit risk. They indicate very strong capacity for timely payment of
      financial commitments. This capacity is not significantly vulnerable to
      foreseeable events.

A     High credit quality. "A" ratings denote a low expectation of credit risk.
      The capacity for timely payment of financial commitments is considered
      strong. This capacity may, nevertheless, be more vulnerable to changes in
      circumstances or in economic conditions than is the case for higher
      ratings.

BBB   Good credit quality. "BBB" ratings indicate that there is currently a low
      expectation of credit risk. The capacity for timely payment of financial
      commitments is considered adequate, but adverse changes in circumstances
      and in economic conditions are more likely to impair this capacity. This
      is the lowest investment-grade category.


                                      A-5
<PAGE>

     Speculative Grade

BB              Speculative. "BB" ratings indicate that there is a possibility
                of credit risk developing, particularly as the result of
                adverse economic change over time; however, business or
                financial alternatives may be available to allow financial
                commitments to be met. Securities rated in this category are
                not investment grade.

B               Highly speculative. "B" ratings indicate that significant
                credit risk is present, but a limited margin of safety remains.
                Financial commitments are currently being met; however,
                capacity for continued payment is contingent upon a sustained,
                favorable business and economic environment.

CCC, CC, C      High default risk. Default is a real possibility. Capacity for
                meeting financial commitments is solely reliant upon sustained,
                favorable business or economic developments. A "CC" rating
                indicates that default of some kind appears probable. "C"
                ratings signal imminent default.

DDD, DD, and D  Default. The ratings of obligations in this category are based
                on their prospects for achieving partial or full recovery in a
                reorganization or liquidation of the obligor. While expected
                recovery values are highly speculative and cannot be estimated
                with any precision, the following serve as general guidelines.
                "DDD" obligations have the highest potential for recovery,
                around 90%-100% of outstanding amounts and accrued interest.
                "DD" indicates potential recoveries in the range of 50%-90%,
                and "D" the lowest recovery potential, i.e., below 50%.

                Entities rated in this category have defaulted on some or all
                of their obligations. Entities rated "DDD" have the highest
                prospect for resumption of performance or continued operation
                with or without a formal reorganization process. Entities rated
                "DD" and "D" are generally undergoing a formal reorganization
                or liquidation process; those rated "DD" are likely to satisfy
                a higher portion of their outstanding obligations, while
                entities rated "D" have a poor prospect for repaying all
                obligations.

     Short-Term Credit Ratings

     A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.

F1    Highest credit quality. Indicates the strongest capacity for timely
      payment of financial commitments; may have an added "+" to denote any
      exceptionally strong credit feature.

F2    Good credit quality. A satisfactory capacity for timely payment of
      financial commitments, but the margin of safety is not as great as in the
      case of the higher ratings.

F3    Fair credit quality. The capacity for timely payment of financial
      commitments is adequate; however, near-term adverse changes could result
      in a reduction to non-investment grade.

B     Speculative. Minimal capacity for timely payment of financial
      commitments, plus vulnerability to near-term adverse changes in financial
      and economic conditions.

C     High default risk. Default is a real possibility. Capacity for meeting
      financial commitments is solely reliant upon a sustained, favorable
      business and economic environment.

D     Default. Denotes actual or imminent payment default.

Notes:
"+" or "--" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the "AAA" long-term rating
category, to categories below "CCC", or to short-term ratings other than "F1".


                                      A-6
<PAGE>

'NR' indicates that Fitch does not rate the issuer or issue in question.


'Withdrawn': A rating is withdrawn when Fitch deems the amount of information
available to be inadequate for rating purposes, or when an obligation matures,
is called, or refinanced.


Rating alert: Ratings are placed on Rating alert to notify investors that there
is a reasonable probability of a rating change and the likely direction of such
change. These are designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings may be raised,
lowered or maintained. Rating alert is typically resolved over a relatively
short period.

                                      A-7
<PAGE>

                                   APPENDIX B


                        TAXABLE EQUIVALENT YIELD TABLE


     The taxable equivalent yield is the current yield you would need to earn
on a taxable investment in order to equal a stated tax-free yield on a
municipal investment. To assist you to more easily compare municipal
investments like the Trust with taxable alternative investments, the table
below presents the taxable equivalent yields for a range of hypothetical
tax-free yields and tax rates:


                 2002-2003 FEDERAL TAXABLE VS. TAX-FREE YIELDS




<TABLE>
<CAPTION>
                                          FEDERAL
                     JOINT RETURN         TAX                       TAXABLE EQUIVALENT ESTIMATE CURRENT RETURN
SINGLE RETURN        BRACKET              RATE        4.00%      4.50%      5.00%      5.50%      6.00%      6.50%      7.00%
- -------------------- -------------------- -------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S>                  <C>                  <C>      <C>        <C>        <C>        <C>        <C>        <C>        <C>
$0 -         6,000   $0 -        12,000      10%      4.44%      5.00%      5.56%      6.11%      6.67%      7.22%      7.78%
$6,001 -    27,950   $12,001 -   46,700      15%      4.71%      5.29%      5.88%      6.47%      7.06%      7.65%      8.24%
$27,951 -   67,700   $46,701 -  112,850      27%      5.48%      6.16%      6.85%      7.53%      8.22%      8.90%      9.59%
$67,701 -  141,250   $112,851 - 171,950      30%      5.71%      6.43%      7.14%      7.86%      8.57%      9.29%     10.00%
$141,251 - 307,050   $171,951 - 307,050      35%      6.15%      6.92%      7.69%      8.46%      9.23%     10.00%     10.77%
     Over $307,050        Over $307,050     38.6%     6.51%      7.33%      8.14%      8.96%      9.77%     10.59%     11.40%
</TABLE>

                                      B-1
<PAGE>

                                  APPENDIX C

                       GENERAL CHARACTERISTICS AND RISKS
                            OF HEDGING TRANSACTIONS

     In order to manage the risk of its securities portfolio, or to enhance
income or gain as described in the prospectus, the Trust will engage in
Additional Investment Management Techniques. The Trust will engage in such
activities in the Advisor's or Sub-Advisor's discretion, and may not
necessarily be engaging in such activities when movements in interest rates
that could affect the value of the assets of the Trust occur. The Trust's
ability to pursue certain of these strategies may be limited by applicable
regulations of the CFTC. Certain Additional Investment Management Techniques
may give rise to taxable income.


PUT AND CALL OPTIONS ON SECURITIES AND INDICES

     The Trust may purchase and sell put and call options on securities and
indices. A put option gives the purchaser of the option the right to sell and
the writer the obligation to buy the underlying security at the exercise price
during the option period. The Trust may also purchase and sell options on bond
indices ("index options"). Index options are similar to options on securities
except that, rather than taking or making delivery of securities underlying the
option at a specified price upon exercise, an index option gives the holder the
right to receive cash upon exercise of the option if the level of the bond
index upon which the option is based is greater, in the case of a call, or
less, in the case of a put, than the exercise price of the option. The purchase
of a put option on a debt security could protect the Trust's holdings in a
security or a number of securities against a substantial decline in the market
value. A call option gives the purchaser of the option the right to buy and the
seller the obligation to sell the underlying security or index at the exercise
price during the option period or for a specified period prior to a fixed date.
The purchase of a call option on a security could protect the Trust against an
increase in the price of a security that it intended to purchase in the future.
In the case of either put or call options that it has purchased, if the option
expires without being sold or exercised, the Trust will experience a loss in
the amount of the option premium plus any related commissions. When the Trust
sells put and call options, it receives a premium as the seller of the option.
The premium that the Trust receives for selling the option will serve as a
partial hedge, in the amount of the option premium, against changes in the
value of the securities in its portfolio. During the term of the option,
however, a covered call seller has, in return for the premium on the option,
given up the opportunity for capital appreciation above the exercise price of
the option if the value of the underlying security increases, but has retained
the risk of loss should the price of the underlying security decline.
Conversely, a secured put seller retains the risk of loss should the market
value of the underlying security decline be low the exercise price of the
option, less the premium received on the sale of the option. The Trust is
authorized to purchase and sell exchange-listed options and over-the-counter
options ("OTC Options") which are privately negotiated with the counterparty.
Listed options are issued by the Options Clearing Corporation ("OCC") which
guarantees the performance of the obligations of the parties to such options.

     The Trust's ability to close out its position as a purchaser or seller of
an exchange-listed put or call option is dependent upon the existence of a
liquid secondary market on option exchanges. Among the possible reasons for the
absence of a liquid secondary market on an exchange are: (i) insufficient
trading interest in certain options; (ii) restrictions on transactions imposed
by an exchange; (iii) trading halts, suspensions or other restrictions imposed
with respect to particular classes or series of options or underlying
securities; (iv) interruption of the normal operations on an exchange; (v)
inadequacy of the facilities of an exchange or OCC to handle current trading
volume; or (vi) a decision by one or more exchanges to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options on that exchange that had been
listed by the OCC as a result of trades on that exchange would generally
continue to be exercisable in accordance with their terms. OTC Options are
purchased from or sold to dealers, financial institutions or other
counterparties which have entered into direct agreements with the Trust. With
OTC Options,


                                      C-1
<PAGE>

such variables as expiration date, exercise price and premium will be agreed
upon between the Trust and the counterparty, without the intermediation of a
third party such as the OCC. If the counterparty fails to make or take delivery
of the securities underlying an option it has written, or otherwise settle the
transaction in accordance with the terms of that option as written, the Trust
would lose the premium paid for the option as well as any anticipated benefit
of the transaction. As the Trust must rely on the credit quality of the
counterparty rather than the guarantee of the OCC, it will only enter into OTC
Options with counterparties with the highest long-term credit ratings, and with
primary United States government securities dealers recognized by the Federal
Reserve Bank of New York.

     The hours of trading for options on debt securities may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the option markets.


FUTURES CONTRACTS AND RELATED OPTIONS

     Characteristics. The Trust may sell financial futures contracts or
purchase put and call options on such futures as a hedge against anticipated
interest rate changes or other market movements. The sale of a futures contract
creates an obligation by the Trust, as seller, to deliver the specific type of
financial instrument called for in the contract at a specified future time for
a specified price. Options on futures contracts are similar to options on
securities except that an option on a futures contract gives the purchaser the
right in return for the premium paid to assume a position in a futures contract
(a long position if the option is a call and a short position if the option is
a put).

     Margin Requirements. At the time a futures contract is purchased or sold,
the Trust must allocate cash or securities as a deposit payment ("initial
margin"). It is expected that the initial margin that the Trust will pay may
range from approximately 1% to approximately 5% of the value of the securities
or commodities underlying the contract. In certain circumstances, however, such
as periods of high volatility, the Trust may be required by an exchange to
increase the level of its initial margin payment. Additionally, initial margin
requirements may be increased generally in the future by regulatory action. An
outstanding futures contract is valued daily and the payment in case of
"variation margin" may be required, a process known as "marking to the market."
Transactions in listed options and futures are usually settled by entering into
an offsetting transaction, and are subject to the risk that the position may
not be able to be closed if no offsetting transaction can be arranged.

     Limitations on Use of Futures and Options on Futures. The Trust's use of
futures and options on futures will in all cases be consistent with applicable
regulatory requirements and in particular the rules and regulations of the
CFTC. Under such regulations the Trust currently may enter into such
transactions without limit for bona fide hedging purposes, including risk
management and duration management and other portfolio strategies. The Trust
may also engage in transactions in futures contracts or related options for
non-hedging purposes to enhance income or gain provided that the Trust will not
enter into a futures contract or related option (except for closing
transactions) for purposes other than bona fide hedging, or risk management
including duration management if, immediately thereafter, the sum of the amount
of its initial deposits and premiums on open contracts and options would exceed
5% of the Trust's liquidation value, i.e., net assets (taken at current value);
provided, however, that in the case of an option that is in-the-money at the
time of the purchase, the in-the-money amount may be excluded in calculating
the 5% limitation. Also, when required, an account of cash equivalents
designated on the books and records will be maintained and marked to market on
a daily basis in an amount equal to the market value of the contract. The Trust
reserves the right to comply with such different standard as may be established
from time to time by CFTC rules and regulations with respect to the purchase or
sale of futures contracts or options thereon.

     Segregation and Cover Requirements. Futures contracts, interest rate
swaps, caps, floors and collars, short sales, reverse repurchase agreements and
dollar rolls, and listed or OTC options on securities, indices and futures
contracts sold by the Trust are generally subject to earmarking and coverage
requirements of either the CFTC or the SEC, with the result that, if the Trust
does not hold the security or futures contract underlying the instrument, the
Trust will be required to designate on


                                      C-2
<PAGE>

its books and records an ongoing basis, cash, U.S. government securities, or
other liquid high grade debt obligations in an amount at least equal to the
Trust's obligations with respect to such instruments. Such amounts fluctuate as
the obligations increase or decrease. The earmarking requirement can result in
the Trust maintaining securities positions it would otherwise liquidate,
segregating assets at a time when it might be disadvantageous to do so or
otherwise restrict portfolio management.


     Additional Investment Management Techniques present certain risks. With
respect to hedging and risk management, the variable degree of correlation
between price movements of hedging instruments and price movements in the
position being hedged create the possibility that losses on the hedge may be
greater than gains in the value of the Trust's position. The same is true for
such instruments entered into for income or gain. In addition, certain
instruments and markets may not be liquid in all circumstances. As a result, in
volatile markets, the Trust may not be able to close out a transaction without
incurring losses substantially greater than the initial deposit. Although the
contemplated use of these instruments predominantly for hedging should tend to
minimize the risk of loss due to a decline in the value of the position, at the
same time they tend to limit any potential gain which might result from an
increase in the value of such position. The ability of the Trust to
successfully utilize Additional Investment Management Techniques will depend on
the Advisor's and the Sub-Advisor's ability to predict pertinent market
movements and sufficient correlations, which cannot be assured. Finally, the
daily deposit requirements in futures contracts that the Trust has sold create
an on going greater potential financial risk than do options transactions,
where the exposure is limited to the cost of the initial premium. Losses due to
the use of Additional Investment Management Techniques will reduce net asset
value.


                                      C-3
<PAGE>

                                    PART C


                               OTHER INFORMATION


ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(1)   Financial Statements

      Part A--None.

      Part B--Statement of Assets and Liabilities.

(2)   Exhibits




<TABLE>
<S>             <C>
      (a)       Agreement and Declaration of Trust.(1)
      (b)       By-Laws.(1)
      (c)       Inapplicable.
      (d)       Form of Specimen Certificate.(2)
      (e)       Form of Dividend Reinvestment Plan.(2)
      (f)       Inapplicable.
      (g)(1)    Investment Management Agreement.(2)
      (g)(2)    Sub-Investment Advisory Agreement.(2)
      (g)(2)    Waiver Reliance Letter.(2)
      (h)       Form of Underwriting Agreement.(2)
      (i)       Form of Deferred Compensation Plan for Independent Trustees.(2)
      (j)       Custodian Agreement.(2)
      (k)       Transfer Agency Agreement.(2)
      (l)       Opinion and Consent of Counsel to the Trust.(2)
      (m)       Inapplicable.
      (n)       Consent of Independent Public Accountants.(2)
      (o)       Inapplicable.
      (p)       Initial Subscription Agreement.(2)
      (q)       Inapplicable.
      (r)(1)    Code of Ethics of Trust.(2)
      (r)(2)    Code of Ethics of Advisor and Sub-Advisor.(2)
      (R)(2)    Code of Ethics of J.J.B. Hilliard Lyons, Inc.(2)
      (s)       Powers of Attorney.(2)
</TABLE>


- ----------

(1) Previously filed with the Trust's initial Registration Statement on June 24,
    2002.

(2) Filed herewith.



ITEM 25. MARKETING ARRANGEMENTS

     Reference is made to the Form of Underwriting Agreement for the
Registrant's shares of beneficial interest to be filed by amendment to this
registration statement.
<PAGE>

ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

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




<TABLE>
<CAPTION>
<S>                                                 <C>
     Registration fees ...........................   $ 36,570
     AMEX listing fee ............................     65,000
     Printing (other than certificates) ..........    364,240
     Engraving and printing certificates .........     17,500
     Accounting fees and expenses ................      5,000
     Legal fees and expenses .....................    132,500
     NASD fee ....................................     40,250
     Miscellaneous ...............................     88,333
        Total ....................................    749,393
                                                     ========
</TABLE>


ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT

     None.


ITEM 28. NUMBER OF HOLDERS OF SHARES


     As of July 15, 2002.





<TABLE>
<CAPTION>
                                                NUMBER OF
TITLE OF CLASS                                RECORD HOLDERS
- --------------                               ---------------
<S>                                          <C>
   Shares of Beneficial Interest .........          0

</TABLE>

     ITEM 29. INDEMNIFICATION

     Article V of the Registrant's Agreement and Declaration of Trust provides
as follows:

     5.1 No Personal Liability of Shareholders, Trustees, etc. No Shareholder
of the Trust shall be subject in such capacity to any personal liability
whatsoever to any Person in connection with Trust Property or the acts,
obligations or affairs of the Trust. Shareholders shall have the same
limitation of personal liability as is extended to stockholders of a private
corporation for profit incorporated under the Delaware General Corporation Law.
No Trustee or officer of the Trust shall be subject in such capacity to any
personal liability whatsoever to any Person, save only liability to the Trust
or its Shareholders arising from bad faith, willful misfeasance, gross
negligence or reckless disregard for his duty to such Person; and, subject to
the foregoing exception, all such Persons shall look solely to the Trust
Property for satisfaction of claims of any nature arising in connection with
the affairs of the Trust. If any Shareholder, Trustee or officer, as such, of
the Trust, is made a party to any suit or proceeding to enforce any such
liability, subject to the foregoing exception, he shall not, on account
thereof, be held to any personal liability. Any repeal or modification of this
Section 5.1 shall not adversely affect any right or protection of a Trustee or
officer of the Trust existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or modification.

     5.2 Mandatory Indemnification. (a) The Trust hereby agrees to indemnify
each person who at any time serves as a Trustee or officer of the Trust (each
such person being an "indemnitee") against any liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and reasonable counsel fees reasonably incurred by such
indemnitee in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, before any court or administrative
or investigative body in which he may be or may have been involved as a party
or otherwise or with which he may be or may have been threatened, while acting
in any capacity set forth in this Article V by reason of his having acted in
any such capacity, except with respect to any matter as to which he shall not
have acted in good faith in the reasonable belief that his action was in the
best interest of the Trust or, in the case of any criminal proceeding, as to
which he shall have had reasonable cause to believe that the conduct was
unlawful, provided,


                                      C-2
<PAGE>

however, that no indemnitee shall be indemnified hereunder against any
liability to any person or any expense of such indemnitee arising by reason of
(i) willful misfeasance, (ii) bad faith, (iii) gross negligence, or (iv)
reckless disregard of the duties involved in the conduct of his position (the
conduct referred to in such clauses (i) through (iv) being sometimes referred
to herein as "disabling conduct"). Notwithstanding the foregoing, with respect
to any action, suit or other proceeding voluntarily prosecuted by any
indemnitee as plaintiff, indemnification shall be mandatory only if the
prosecution of such action, suit or other proceeding by such indemnitee (1) was
authorized by a majority of the Trustees or (2) was instituted by the
indemnitee to enforce his or her rights to indemnification hereunder in a case
in which the indemnitee is found to be entitled to such indemnification. The
rights to indemnification set forth in this Declaration shall continue as to a
person who has ceased to be a Trustee or officer of the Trust and shall inure
to the benefit of his or her heirs, executors and personal and legal
representatives. No amendment or restatement of this Declaration or repeal of
any of its provisions shall limit or eliminate any of the benefits provided to
any person who at any time is or was a Trustee or officer of the Trust or
otherwise entitled to indemnification hereunder in respect of any act or
omission that occurred prior to such amendment, restatement or repeal.

     (b) Notwithstanding the foregoing, no indemnification shall be made
hereunder unless there has been a determination (i) by a final decision on the
merits by a court or other body of competent jurisdiction before whom the issue
of entitlement to indemnification hereunder was brought that such indemnitee is
entitled to indemnification hereunder or, (ii) in the absence of such a
decision, by (1) a majority vote of a quorum of those Trustees who are neither
"interested persons" of the Trust (as defined in Section 2(a)(19) of the
Investment Company Act) nor parties to the proceeding ("Disinterested Non-Party
Trustees"), that the indemnitee is entitled to indemnification hereunder, or
(2) if such quorum is not obtainable or even if obtainable, if such majority so
directs, independent legal counsel in a written opinion concludes that the
indemnitee should be entitled to indemnification hereunder. All determinations
to make advance payments in connection with the expense of defending any
proceeding shall be authorized and made in accordance with the immediately
succeeding paragraph (c) below.

     (c) The Trust shall make advance payments in connection with the expenses
of defending any action with respect to which indemnification might be sought
hereunder if the Trust receives a written affirmation by the indemnitee of the
indemnitee's good faith belief that the standards of conduct necessary for
indemnification have been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that the indemnitee is entitled to such
indemnification and if a majority of the Trustees determine that the applicable
standards of conduct necessary for indemnification appear to have been met. In
addition, at least one of the following conditions must be met: (i) the
indemnitee shall provide adequate security for his undertaking, (ii) the Trust
shall be insured against losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the Disinterested Non-Party Trustees, or if a
majority vote of such quorum so direct, independent legal counsel in a written
opinion, shall conclude, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is substantial reason to
believe that the indemnitee ultimately will be found entitled to
indemnification.

     (d) The rights accruing to any indemnitee under these provisions shall not
exclude any other right which any person may have or hereafter acquire under
this Declaration, the By-Laws of the Trust, any statute, agreement, vote of
stockholders or Trustees who are "disinterested persons" (as defined in Section
2(a)(19) of the 1940 Act) or any other right to which he or she may be lawfully
entitled.

     (e) Subject to any limitations provided by the 1940 Act and this
Declaration, the Trust shall have the power and authority to indemnify and
provide for the advance payment of expenses to employees, agents and other
Persons providing services to the Trust or serving in any capacity at the
request of the Trust to the full extent corporations organized under the
Delaware General Corporation Law may indemnify or provide for the advance
payment of expenses for such Persons, provided that such indemnification has
been approved by a majority of the Trustees.

     5.3 No Bond Required of Trustees. No Trustee shall, as such, be obligated
to give any bond or other security for the performance of any of his duties
hereunder.


                                      C-3
<PAGE>

     5.4 No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, transfer agent or other person dealing with the Trustees or
with any officer, employee or agent of the Trust shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent or be liable for the application
of money or property paid, loaned, or delivered to or on the order of the
Trustees or of said officer, employee or agent. Every obligation, contract,
undertaking, instrument, certificate, Share, other security of the Trust, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. The Trustees may maintain
insurance for the protection of the Trust Property, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable or is required by the 1940
Act.

     5.5 Reliance on Experts, etc. Each Trustee and officer or employee of the
Trust shall, in the performance of its duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel, or upon reports made to the Trust by any of
the Trust's officers or employees or by any advisor, administrator, manager,
distributor, selected dealer, accountant, appraiser or other expert or
consultant selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.


     Insofar as indemnification for liabilities arising under the Act, may be
terminated to Trustees, officers and controlling persons of the Trust, pursuant
to the foregoing provisions or otherwise, the Trust has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities 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 Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, 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 Securities Act and will be governed
by the final adjudication of such issue. Reference is made to Article 6 of the
purchase agreement attached as Exhibit (h), which is incorporated herein by
reference.



ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR

     Not Applicable


ITEM 31. LOCATION OF ACCOUNTS AND RECORDS

     The Registrant's accounts, books and other documents are currently located
at the offices of the Registrant, c/o BlackRock Advisors, Inc., 100 Bellevue
Parkway, Wilmington, Delaware 19809 and at the offices of State Street Bank and
Trust Company, the Registrant's Custodian, and EquiServe Trust Company, N.A.,
the Registrant's Transfer Agent.


ITEM 32. MANAGEMENT SERVICES

     Not Applicable


ITEM 33. UNDERTAKINGS

     (1) The Registrant hereby undertakes to suspend the offering of its units
until it amends its prospectus if (a) subsequent to the effective date of its
registration statement, the net asset value declines more than 10 percent from
its net asset value as of the effective date of the Registration Statement or
(b) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.


                                      C-4
<PAGE>

     (2) Not applicable


     (3) Not applicable


     (4) Not applicable


     (5) (a) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant under Rule 497 (h) under the Securities Act
shall be deemed to be part of the Registration Statement as of the time it was
declared effective.


     (b) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering thereof.


     (6) The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery within two business days of receipt
of a written or oral request, any Statement of Additional Information.


                                      C-5
<PAGE>

                                  SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 25th
day of July, 2002.





                                        /s/ RALPH L. SCHLOSSTEIN
                                      ----------------------------------------
                                          Ralph L. Schlosstein
                                          President, Chief Executive Officer
                                          and Chief Financial Officer




     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities set forth below on the 25th day of July, 2002.






<TABLE>
<CAPTION>
                 NAME                                         TITLE
- -------------------------------------   ------------------------------------------------
<S>                                     <C>
                   *                    Trustee, President, Chief Executive Officer and
 ----------------------------------     Chief Financial Officer
         Ralph L. Schlosstein

                   *                    Treasurer
 ----------------------------------
             Henry Gabbay

                   *                    Trustee
 ----------------------------------
           Andrew F. Brimmer

                   *                    Trustee
 ----------------------------------
          Richard E. Cavanagh

                   *                    Trustee
 ----------------------------------
              Kent Dixon

                   *                    Trustee
 ----------------------------------
           Frank J. Fabozzi

                   *                    Trustee
 ----------------------------------
           Laurence D. Fink

                   *                    Trustee
 ----------------------------------
       James Clayburn La Force, Jr.

                   *                    Trustee
 ----------------------------------
           Walter F. Mondale

   * By: /s/ RALPH L. SCHLOSSTEIN
  --------------------------------
         Ralph L. Schlosstein
           Attorney-in-fact

</TABLE>


<PAGE>

INDEX TO EXHIBITS



..

<TABLE>
<S>           <C>
    (d)       Form of Specimen Certificate
    (e)       Form of Dividend Reinvestment Plan
    (g)(1)    Investment Management Agreement
    (g)(2)    Sub-Investment Advisory Agreement
    (g)(3)    Waiver Reliance Letter
    (h)       Form of Underwriting Agreement
    (i)       Form of Deferred Compensation Plan for Independent Trustees
    (j)       Custodian Agreement
    (k)       Transfer Agency Agreement
    (l)       Opinion and Consent of Counsel to the Trust
    (n)       Consent of Independent Public Accountants
    (p)       Initial Subscription Agreement
    (r)(1)    Code of Ethics of Trust
    (r)(2)    Code of Ethics of Advisor and Sub-Advisor
    (r)(3)    Code of Ethics of J.J.B. Hilliard, W.L. Lyons, Inc.
    (s)       Powers of Attorney
</TABLE>







</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(D)
<SEQUENCE>3
<FILENAME>file002.txt
<DESCRIPTION>FORM OF SPECIMEN CERTIFICATE
<TEXT>
<PAGE>

                                                                             (d)

<TABLE>
<CAPTION>
<S>               <C>
Shares            COMMON SHARES
                  OF BENEFICIAL INTEREST

Number            PAR VALUE $.001

                  ORGANIZED UNDER THE LAWS
                  OF THE STATE OF DELAWARE

                  The Shares represented by this certificate may not be owned or         THIS CERTIFICATE
                  transferred directly or indirectly, by or to (I) the United            IS TRANSFERABLE IN
                  States, or any state or political subdivision thereof, any             BOSTON OR IN NEW YORK CITY
                  foreign government, any international organization or any agency
                  or instrumentality of any of the foregoing, (II) any organization      CUSIP
                  (other than a farmer's cooperative described in ss. 521 of the         SEE REVERSE FOR CERTAIN DEFINITIONS
                  Internal Revenue Code of 1988, as amended (the "Code")) that is
                  exempt from the tax imposed by 28 U.S.C. ss.ss. 1-1399 and not
                  subject to the tax imposed by 28 U.S.C. ss. 511; or (III) any
                  rural electric or telephone cooperative described in ss. 1381
                  (A)(2)(C) of the Code.
</TABLE>

                       BLACKROCK MUNICIPAL INCOME TRUST II


         THIS CERTIFIES THAT




         IS THE OWNER OF




         FULLY PAID AND NONASSESSABLE COMMON SHARES OF BENEFICIAL INTEREST OF


         BlackRock [       ] Municipal Income Trust II, transferable on the
         books of the Trust by the holder hereof in person or by duly authorized
         attorney upon surrender of this Certificate properly endorsed. This
         Certificate and the shares represented hereby are issued and shall be
         subject to all of the provisions of the Trust, as amended from time to
         time, to all of which the holder by acceptance hereof assents. This
         Certificate is not valid until countersigned and registered by the
         Transfer Agent and Registrar.

         Witness the facsimile signatures of the duly authorized officers of the
         Trust.

         DATED:

         COUNTERSIGNED AND REGISTERED:
              EQUISERVE TRUST COMPANY N.A.
                         (BOSTON)
BY                TRANSFER AGENT AND REGISTRAR



     AUTHORIZED SIGNATURE             SECRETARY                    PRESIDENT



<PAGE>




         The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                <C>
         TEN COM  - as tenants in common           UNIF GIFT MIN ACT--.......Custodian........
         TEN ENT  - as tenants by the entireties                      (Cust)           (Minor)
         JT TEN   - as joint tenants with right
                    of survivorship and not as                        Act................
                    tenants in common                                       (State)
</TABLE>


                    Additional abbreviations may also be used though not in the
above list.



For Value Received _______________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE


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

- -------------------------------------------------------------------------------
        (NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)





____________________________________________________ Common Shares of Beneficial
Interest represented by the within Certificate and do hereby irrevocably
constitute and appoint

____________________________________________________ Attorney to transfer the
said shares on the books of the within-named Trust, with full power of
substitution in the premises.

Dated__________________


                                      X ________________________________________


                                      X ________________________________________
                              NOTICE:   THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
                                        CORRESPOND WITH THE NAME(S) AS WRITTEN
                                        UPON THE FACE OF THE CERTIFICATE IN
                                        EVERY PARTICULAR, WITHOUT ALTERATION OR
                                        ENLARGEMENT OR ANY CHANGE WHATEVER.


Signature(s) Guaranteed



By_____________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO
S.E.C. RULE 17Ad-15.



                                        2


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(E)
<SEQUENCE>4
<FILENAME>file003.txt
<DESCRIPTION>FORM OF DIVIDEND REINVESTMENT PLAN
<TEXT>
<PAGE>



                       BLACKROCK MUNICIPAL INCOME TRUST II

                      AUTOMATIC DIVIDEND REINVESTMENT PLAN


                              TERMS AND CONDITIONS

         Pursuant to this Automatic Dividend Reinvestment Plan (the "Plan") of
BlackRock Municipal Income Trust II (the "Trust"), unless a holder (each, a
"Shareholder") of the Trust's common shares of beneficial interest (the "Common
Shares") otherwise elects, all dividends and distributions on such Shareholder's
Common Shares will be automatically reinvested by Equiserve Trust Company, N.A.
("Equiserve"), as agent for Shareholders in administering the Plan (the "Plan
Agent"), in additional Common Shares of the Trust. Shareholders who elect not to
participate in the Plan will receive all dividends and other distributions in
cash paid by check mailed directly to the Shareholder of record (or, if the
Common Shares are held in street or other nominee name, then to such nominee) by
Equiserve as the Dividend Disbursing Agent. Participants may elect not to
participate in the Plan and to receive all dividends and distributions in cash
by sending written instructions to Equiserve, as the Dividend Disbursing Agent,
at the address set forth below. Participation in the Plan is completely
voluntary and may be terminated or resumed at any time without penalty by
written notice if received by the Plan Agent not less than ten days prior to any
dividend or distribution payment date; otherwise such termination or resumption
will be effective with respect to any subsequently declared dividend or
distribution.

         The Plan Agent will open an account for each Shareholder under the Plan
in the same name in which such Shareholder's Common Shares are registered.
Whenever the Trust declares a dividend or a distribution (collectively referred
to as "dividends") payable in cash, non-participants in the Plan will receive
cash and participants in the Plan will receive the equivalent in Common Shares.
The Common Shares will be acquired by the Plan Agent for the participants'
accounts, depending upon the circumstances described below, either (i) through
receipt of additional unissued but authorized Common Shares from the Trust
("newly issued Common Shares") or (ii) by purchase of outstanding Common Shares
on the open market



<PAGE>



("open-market purchases") on the American Stock Exchange, the primary national
securities exchange on which the common shares are traded, or elsewhere.

         If, on the payment date for any dividend, the market price per Common
Share plus estimated brokerage commissions is greater than the net asset value
per Common Share (such condition being referred to herein as "market premium"),
the Plan Agent will invest the dividend amount in newly issued Common Shares,
including fractions, on behalf of the participants. The number of newly issued
Common Shares to be credited to each participant's account will be determined by
dividing the dollar amount of the dividend by the net asset value per Common
Share on the payment date; provided that, if the net asset value per Common
Share is less than or equal to 95% of the market price per Common Share on the
payment date, the dollar amount of the dividend will be divided by 95% of the
market price per Common Share on the payment date.

         If, on the payment date for any dividend, the net asset value per
Common Share is greater than the market value per Common Share plus estimated
brokerage commissions (such condition being referred to herein as "market
discount"), the Plan Agent will invest the dividend amount in Common Shares
acquired on behalf of the participants in open-market purchases.

         In the event of a market discount on the payment date for any dividend,
the Plan Agent will have until the last business day before the next date on
which the Common Shares trade on an "ex-dividend" basis or 30 days after the
payment date for such dividend, whichever is sooner (the "last purchase date"),
to invest the dividend amount in Common Shares acquired in open-market
purchases. It is contemplated that the Trust will pay monthly dividends.
Therefore, the period during which open-market purchases can be made will exist
only from the payment date of each dividend through the date before the next
"ex-dividend" date which typically will be approximately ten days. If, before
the Plan Agent has completed its open-market purchases, the market price of a
Common Share exceeds the net asset value per Common Share, the average per
Common Share purchase price paid by the Plan Agent may exceed the net asset
value of the Common Shares, resulting in the acquisition of fewer Common Shares
than if the dividend had been paid in newly issued Common Shares on the dividend
payment date. Because of the foregoing difficulty with respect to open market
purchases, if the 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 Plan Agent may cease
making open-market purchases and may invest the uninvested portion of the
dividend amount in newly issued Common Shares at the net asset


                                        2

<PAGE>



value per Common Share at the close of business on the last purchase date;
provided that, if the net asset value per Common Share is less than 95% of the
market price per Common Share on the payment date, the dollar amount of the
dividend will be divided by 95% of the market price per Common Share on the
payment date.

         The Plan Agent will maintain all Shareholders' accounts in the Plan and
furnish written confirmation of all transactions in the accounts, including
information needed by Shareholders for tax records. Common Shares in the account
of each Plan participant will be held by the Plan Agent on behalf of the Plan
participant.

         In the case of Shareholders such as banks, brokers or nominees that
hold Common Shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of Common Shares certified from
time to time by the record Shareholder and held for the account of beneficial
owners who participate in the Plan.

         There will be no brokerage charges with respect to Common Shares issued
directly by the Trust as a result of dividends or capital gains distributions
payable either in Common Shares or in cash. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open-market purchases in connection with the reinvestment of dividends.

         For the avoidance of doubt, no Common Shares will be issued under the
Plan at a price less than net asset value or under any circumstance that may
violate the Investment Company Act of 1940, as amended, or any rules issued
thereunder.

VOTING

         Each Shareholder proxy will include those Common Shares purchased or
received pursuant to the Plan. The Plan Agent will forward all proxy
solicitation materials to participants and vote proxies for Common Shares held
pursuant to the Plan in accordance with the instructions of the participants.

TAXATION

         The automatic reinvestment of dividends will not relieve participants
of any federal, state or local income tax that may be payable (or required to be
withheld) on such dividends.


                                        3

<PAGE>


AMENDMENT OF THE PLAN

         The Plan may be amended or terminated by the Trust. There is no direct
service charge to participants in the Plan; however, the Trust reserves the
right to amend the Plan to include a service charge payable by the participants.
Notice will be sent to Plan participants of any amendments as soon as
practicable after such action by the Trust.

INQUIRIES REGARDING THE PLAN

         All correspondence concerning the Plan should be directed to the Plan
Agent at 150 Royall Street, Canton, MA 02021, 781-575-2149.

APPLICABLE LAW

         These terms and conditions shall be governed by the laws of the State
of New York without regard to its conflicts of laws provisions.

EXECUTION

         To record the adoption of the Plan as of June 26, 2002, the Trust has
caused this Plan to be executed in the name and on behalf of the Trust by a duly
authorized officer.


                               BLACKROCK MUNICIPAL
                               INCOME TRUST II,
                               a Delaware business trust


                              /s/ Anne F. Ackerley
                              ----------------------------
                              By: Anne F. Ackerley
                              Title: Secretary



                                        4


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(G)(1)
<SEQUENCE>5
<FILENAME>file004.txt
<DESCRIPTION>INVESTMENT MANAGEMENT AGREEMENT
<TEXT>
<PAGE>


                         INVESTMENT MANAGEMENT AGREEMENT


         AGREEMENT, dated July 16, 2002, between BlackRock Municipal Income
Trust II (the "Trust"), a Delaware business trust, and BlackRock Advisors, Inc.
(the "Advisor"), a Delaware corporation.

         WHEREAS, Advisor has agreed to furnish investment advisory services to
BlackRock Municipal Income Trust II (the "Trust"), a closed-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act");

         WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Advisor is willing to furnish such services
upon the terms and conditions herein set forth;

         NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is agreed by and between the parties hereto as
follows:

         1. In General. The Advisor agrees, all as more fully set forth herein,
to act as investment advisor to the Trust with respect to the investment of the
Trust's assets and to supervise and arrange for the day-to-day operations of the
Trust and the purchase of securities for and the sale of securities held in the
investment portfolio of the Trust.

         2. Duties and Obligations of the Advisor with Respect to Investment of
Assets of the Trust. Subject to the succeeding provisions of this section and
subject to the direction and control of the Trust's Board of Trustees, the
Advisor shall (i) act as investment advisor for and supervise and manage the
investment and reinvestment of the Trust's assets and in connection therewith
have complete discretion in purchasing and selling securities and other assets
for the Trust and in voting, exercising consents and ex ercising all other
rights appertaining to such securities and other assets on behalf of the Trust;
(ii) supervise continuously the investment program of the Trust and the composi
tion of its investment portfolio; (iii) arrange, subject to the provisions of
paragraph 4 hereof, for the purchase and sale of securities and other assets
held in the investment portfolio of the Trust; and (iv) provide investment
research to the Trust.

         3. Duties and Obligations of Advisor with Respect to the Administration
of the Trust. The Advisor also agrees to furnish office facilities and equipment
and clerical, bookkeeping and administrative services (other than such
services, if any, provided by the Trust's Custodian, Transfer Agent and Dividend
Disbursing Agent and other service providers) for the Trust. To the extent
requested by the Trust, the Advisor agrees to provide the following
administrative services:



                                                    1

<PAGE>



                  (a) Oversee the determination and publication of the Trust's
net asset value in accordance with the Trust's policy as adopted from time to
time by the Board of Trustees;

                  (b) Oversee the maintenance the Trust's Custodian and Transfer
Agent and Dividend Disbursing Agent of certain books and records of the Trust as
required under Rule 31a-1(b)(4) of the 1940 Act and maintain (or oversee
maintenance by such other persons as approved by the Board of Trustees) such
other books and records required by law or for the proper operation of the
Trust;

                  (c) Oversee the preparation and filing of the Trust's federal,
state and local income tax returns and any other required tax returns;

                  (d) Review the appropriateness of and arrange for payment of
the Trust's expenses;

                  (e) Prepare for review and approval by officers of the Trust
financial information for the Trust's semi-annual and annual reports, proxy
statements and other communications with shareholders required or otherwise to
be sent to Trust shareholders, and arrange for the printing and dissemination
of such reports and communications to shareholders;

                  (f) Prepare for review by an officer of the Trust the Trust's
periodic financial reports required to be filed with the Securities and
Exchange Commission ("SEC") on Form N-SAR and such other reports, forms and
filings, as may be mutually agreed upon;

                  (g) Prepare reports relating to the business and affairs of
the Trust as may be mutually agreed upon and not otherwise appropriately
prepared by the Trust's custodian, counsel or auditors;

                  (h) Prepare such information and reports as may be required by
any stock exchange or exchanges on which the Trust's shares are listed;

                  (i) Make such reports and recommendations to the Board of
Trustees concerning the performance of the independent accountants as the Board
of Trustees may reasonably request or deems appropriate;

                  (j) Make such reports and recommendations to the Board of
Trustees concerning the performance and fees of the Trust's Custodian and
Transfer and Dividend disbursing agent as the Board of Trustees may reasonably
request or deems appropriate;



                                        2

<PAGE>



                  (k) Oversee and review calculations of fees paid to the
Trust's service providers;

                  (l) Oversee the Trust's portfolio and perform necessary
calculations as required under Section 18 of the 1940 Act;

                  (m) Consult with the Trust's officers, independent
accountants, legal counsel, custodian, accounting agent and transfer and
dividend disbursing agent in establishing the accounting policies of the Trust
and monitor financial and shareholder accounting services;

                  (n) Review implementation of any share purchase programs
authorized by the Board of Trustees;

                  (o) Determine the amounts available for distribution as
dividends and distributions to be paid by the Trust to its shareholders; prepare
and arrange for the printing of dividend notices to shareholders; and provide
the Trust's dividend disbursing agent and custodian with such information as is
required for such parties to effect the payment of dividends and distributions
and to implement the Trust's dividend reinvestment plan;

                  (p) Prepare such information and reports as may be required by
any banks from which the Trust borrows funds;

                  (q) Provide such assistance to the Custodian and the Trust's
counsel and auditors as generally may be required to properly carry on the
business and operations of the Trust;

                  (r) Assist in the preparation and filing of Forms 3, 4, and 5
pursuant to Section 16 of the Securities Exchange Act of 1934, as amended, and
Section 30(f) of the 1940 Act for the officers and trustees of the Trust, such
filings to be based on information provided by those persons;

                  (s) Respond to or refer to the Trust's officers or transfer
agent, shareholder (including any potential shareholder) inquiries relating to
the Trust.

                  (t) Supervise any other aspects of the Trust's administration
as may be agreed to by the Trust and the Advisor.

         All services are to be furnished through the medium of any directors,
officers or employees of the Advisor or its affiliates as the Advisor deems
appropriate in order to fulfill its obligations hereunder.



                                        3

<PAGE>



         The Trust will reimburse the Advisor or its affiliates for all
out-of-pocket expenses incurred by them in connection with the performance of
the administrative services described in this paragraph 3.

         4. Covenants. In the performance of its duties under this Agreement,
the Advisor shall at all times conform to, and act in accordance with, any
requirements imposed by:

                  (a) (i) the provisions of the 1940 Act and the Investment
Advisers Act of 1940, as amended, and all applicable Rules and Regulations of
the Securities and Exchange Commission (the "SEC"); (ii) any other applicable
provision of law; (iii) the provisions of the Agreement and Declaration of
Trust, as amended and restated, and By-Laws of the Trust, as such documents are
amended from time to time; (iv) the investment objectives and policies of the
Trust as set forth in its Registration Statement on Form N-2; and (v) any
policies and determinations of the Board of Trustees of the Trust;

                  (b) will place orders either directly with the issuer or with
any broker or dealer. Subject to the other provisions of this paragraph, in
placing orders with brokers and dealers, the Advisor will attempt to obtain the
best price and the most favorable execution of its orders. In placing orders,
the Advisor will consider the experience and skill of the firm's securities
traders as well as the firm's financial responsibility and administrative
efficiency. Consistent with this obligation, the Advisor may select brokers on
the basis of the research, statistical and pricing services they provide to the
Trust and other clients of the Advisor. Information and research received from
such brokers will be in addition to, and not in lieu of, the services required
to be performed by the Advisor hereunder. A commission paid to such brokers may
be higher than that which another qualified broker would have charged for
effecting the same transaction, provided that the Advisor determines in good
faith that such commission is reasonable in terms either of the transaction or
the overall responsibility of the Advisor to the Trust and its other clients
and that the total commissions paid by the Trust will be reasonable in relation
to the benefits to the Trust over the long-term. In addition, the Advisor is
authorized to take into account the sale of shares of the Trust in allocating
purchase and sale orders for portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the Advisor), provided
that the Advisor believes that the quality of the transaction and the commission
are comparable to what they would be with other qualified firms. In no instance,
however, will the Trust's securities be purchased from or sold to the Advisor,
or any affiliated person thereof, except to the extent permitted by the SEC or
by applicable law;

                  (c) will maintain a policy and practice of conducting its
investment advisory services hereunder independently of the commercial banking
operations of its affiliates. When the Advisor makes investment recommendations
for the Trust, its investment advisory personnel will not inquire or take into
consideration whether the


                                        4

<PAGE>



issuer of securities proposed for purchase or sale for the Trust's account are
customers of the commercial department of its affiliates; and

                  (d) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Trust, and the
Trust's prior, current or potential shareholders, and will not use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Advisor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.

         5. Services Not Exclusive. Nothing in this Agreement shall prevent the
Advisor or any officer, employee or other affiliate thereof from acting as
investment advisor for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Advisor or any of its officers, employees or agents from buying, selling or
trading any securities for its or their own accounts or for the accounts of
others for whom it or they may be acting; provided, however, that the Advisor
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations under this Agreement.

         6. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request. The
Advisor further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.

         7. Agency Cross Transactions. From time to time, the Advisor or brokers
or dealers affiliated with it may find themselves in a position to buy for
certain of their brokerage clients (each an "Account") securities which the
Advisor's investment advisory clients wish to sell, and to sell for certain of
their brokerage clients securities which advisory clients wish to buy. Where
one of the parties is an advisory client, the Advisor or the affiliated broker
or dealer cannot participate in this type of transaction (known as a cross
transaction) on behalf of an advisory client and retain commissions from one or
both parties to the transaction without the advisory client's consent. This is
because in a situation where the Advisor is making the investment decision (as
opposed to a brokerage client who makes his own investment decisions), and the
Advisor or an affiliate is receiving commissions from both sides of the
transaction, there is a potential conflicting division of loyalties and
responsibilities on the Advisor's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Investment
Advisers Act of 1940, as amended, which permits the Advisor or its affiliates to
participate on behalf of an Account in agency cross transactions if the advisory
client has given written


                                        5

<PAGE>



consent in advance. By execution of this Agreement, the Trust authorizes the
Advisor or its affiliates to participate in agency cross transactions involving
an Account. The Trust may revoke its consent at any time by written notice to
the Advisor.

         8. Expenses. During the term of this Agreement, the Advisor will bear
all costs and expenses of its employees and any overhead incurred in connection
with its duties hereunder and shall bear the costs of any salaries or trustees
fees of any officers or trustees of the Trust who are affiliated persons (as
defined in the 1940 Act) of the Advisor; provided that the Board of Trustees of
the Trust may approve reimbursement to the Advisor of the pro rata portion of
the salaries, bonuses, health insurance, retirement benefits and all similar
employment costs for the time spent on Trust operations (other than the
provision of investment advice and administrative services required to be
provided hereunder) of all personnel employed by the Advisor who devote
substantial time to Trust operations or the operations of other investment
companies advised by the Advisor.

         9. Compensation of the Advisor. (a) The Trust agrees to pay to the
Advisor and the Advisor agrees to accept as full compensation for all services
rendered by the Advisor as such, a monthly fee (the "Investment Advisory Fee")
in arrears at an annual rate equal to 0.55% of the average weekly value of the
Trust's Managed Assets. "Managed Assets" means the total assets of the Trust
minus the sum of the accrued liabilities (other than the aggregate indebtedness
constituting financial leverage). For any period less than a month during which
this Agreement is in effect, the fee shall be prorated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be.

                  (b) For purposes of this Agreement, the net assets of the
Trust shall be calculated pursuant to the procedures adopted by resolutions of
the Trustees of the Trust for calculating the value of the Trust's assets or
delegating such calculations to third parties.

         10. Indemnity. (a) The Trust hereby agrees to indemnify the Advisor,
and each of the Advisor's directors, officers, employees, agents, associates and
controlling persons and the directors, partners, members, officers, employees
and agents thereof (including any individual who serves at the Advisor's request
as director, officer, partner, member, trustee or the like of another entity)
(each such person being an "Indemnitee") against any liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees (all as provided in accordance with applicable
state law) reasonably incurred by such Indemnitee in connection with the defense
or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which such
Indemnitee may be or may have been involved as a party or otherwise or with
which such Indemnitee may be or may have been threatened, while acting in any
capacity set forth herein or thereafter by reason of such Indemnitee having
acted in any such capacity, except with respect to any


                                        6

<PAGE>



matter as to which such Indemnitee shall have been adjudicated not to have acted
in good faith in the reasonable belief that such Indemnitee's action was in the
best interest of the Trust and furthermore, in the case of any criminal
proceeding, so long as such Indemnitee had no reasonable cause to believe that
the conduct was unlawful; provided, however, that (1) no Indemnitee shall be
indemnified hereunder against any liability to the Trust or its shareholders or
any expense of such Indemnitee arising by reason of (i) willful misfeasance,
(ii) bad faith, (iii) gross negligence or (iv) reckless disregard of the duties
involved in the conduct of such Indemnitee's position (the conduct referred to
in such clauses (i) through (iv) being sometimes referred to herein as
"disabling conduct"), (2) as to any matter disposed of by settlement or a
compromise payment by such Indemnitee, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other expenses
shall be provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such Indemnitee
appears to have acted in good faith in the reasonable belief that such
Indemnitee's action was in the best interest of the Trust and did not involve
disabling conduct by such Indemnitee and (3) with respect to any action, suit or
other proceeding voluntarily prosecuted by any Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Indemnitee was authorized by a majority of the full
Board of Trustees of the Trust.

                  (b) The Trust shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Trust receives a written affirmation of the
Indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that such Indemnitee is entitled to such
indemnification and if the trustees of the Trust determine that the facts then
known to them would not preclude indemnification. In addition, at least one of
the following conditions must be met: (A) the Indemnitee shall provide a
security for such Indemnitee-undertaking, (B) the Trust shall be insured against
losses arising by reason of any lawful advance, or (C) a majority of a quorum
consisting of trustees of the Trust who are neither "interested persons" of the
Trust (as defined in Section 2(a)(19) of the 1940 Act) nor parties to the
proceeding ("Disinterested Non-Party Trustees") or an independent legal counsel
in a written opinion, shall determine, based on a review of readily available
facts (as opposed to a full trial-type inquiry), that there is reason to believe
that the Indemnitee ultimately will be found entitled to indemnification.

                  (c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such Indemnitee is not
liable or is not liable by reason of disabling conduct, or (2) in the absence of
such a decision, by (i) a majority vote of a quorum of the Disinterested
Non-Party Trustees of the Trust, or (ii) if such a quorum is not obtainable or,
even if obtainable, if a majority vote of such quorum so directs, independent
legal counsel in a written opinion. All determinations that advance payments in
connection with the expense of defending any proceeding shall be authorized
shall be made in accordance with the immediately preceding clause (2) above.


                                        7

<PAGE>




                  The rights accruing to any Indemnitee under these provisions
shall not exclude any other right to which such Indemnitee may be lawfully
entitled.

         11. Limitation on Liability. (a) The Advisor will not be liable for any
error of judgment or mistake of law or for any loss suffered by Advisor or by
the Trust in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its duties under this Agreement.

                  (b) Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that, as provided in Section
5.1 of Article V of the Declaration of Trust, as amended and restated, this
Agreement is executed by the Trustees and/or officers of the Trust, not
individually but as such Trustees and/or officers of the Trust, and the
obligations hereunder are not binding upon any of the Trustees or Shareholders
individually but bind only the estate of the Trust.

         12. Duration and Termination. This Agreement shall become effective as
of the date hereof and, unless sooner terminated with respect to the Trust as
provided herein, shall continue in effect for a period of two years. Thereafter,
if not terminated, this Agreement shall continue in effect with respect to the
Trust for successive periods of 12 months, provided such continuance is
specifically approved at least annually by both (a) the vote of a majority of
the Trust's Board of Trustees or the vote of a majority of the outstanding
voting securities of the Trust at the time outstanding and entitled to vote, and
(b) by the vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval. Notwithstanding
the foregoing, this Agreement may be terminated by the Trust at any time,
without the payment of any penalty, upon giving the Advisor 60 days' notice
(which notice may be waived by the Advisor), provided that such termination by
the Trust shall be directed or approved by the vote of a majority of the
Trustees of the Trust in office at the time or by the vote of the holders of a
majority of the voting securities of the Trust at the time outstanding and
entitled to vote, or by the Advisor on 60 days' written notice (which notice may
be waived by the Trust). This Agreement will also immediately terminate in the
event of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person" and "assignment" shall have
the same meanings of such terms in the 1940 Act.)

         13. Notices. Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.

         14. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing


                                        8

<PAGE>



signed by the party against which enforcement of the change, waiver, discharge
or termi nation is sought. Any amendment of this Agreement shall be subject to
the 1940 Act.

         15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York for contracts to be performed
entirely therein without reference to choice of law principles thereof and in
accordance with the applicable provisions of the 1940 Act.

         16. Use of the name BlackRock. The Advisor has consented to the use by
the Trust of the name or identifying word "BlackRock" in the name of the Trust.
Such consent is conditioned upon the employment of the Advisor as the investment
advisor to the Trust. The name or identifying word "BlackRock" may be used from
time to time in other connections and for other purposes by the Advisor and any
of its affiliates. The Advisor may require the Trust to cease using "BlackRock"
in the name of the Trust if the Trust ceases to employ, for any reason, the
Advisor, any successor thereto or any affiliate thereof as investment advisor of
the Trust.

         17. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.

         18. Counterparts. This Agreement may be executed in counterparts by the
parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.




                                        9

<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.

                                         BLACKROCK MUNICIPAL INCOME TRUST II



                                         By: /s/ Anne F. Ackerley
                                             -----------------------------
                                             Name:  Anne F. Ackerley
                                             Title:    Secretary


                                         BLACKROCK ADVISORS, INC.



                                         By: /s/ Anne F. Ackerley
                                             -----------------------------
                                             Name:  Anne F. Ackerley
                                             Title:    Managing Director
















                                       10



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(G)(2)
<SEQUENCE>6
<FILENAME>file005.txt
<DESCRIPTION>SUB-INVESTMENT ADVISORY AGREEMENT
<TEXT>
<PAGE>

                                                                            (g2)



                        SUB-INVESTMENT ADVISORY AGREEMENT


                  AGREEMENT dated as of July 16, 2002, between BlackRock
Municipal Income Trust II, a Delaware business trust (the "Trust"), BlackRock
Advisors, Inc. a Delaware corporation (the "Advisor"), and BlackRock Financial
Management, Inc., a Delaware corporation (the "Sub-Advisor").

                  WHEREAS, the Advisor has agreed to furnish investment advisory
services to the Trust, a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");

                  WHEREAS, the Advisor wishes to retain the Sub-Advisor to
provide it with certain sub-advisory services as described below in connection
with Advisor's advisory activities on behalf of the Trust;

                  WHEREAS, the advisory agreement between the Advisor and the
Trust dated July 16, 2002 (such Agreement or the most recent successor agreement
between such parties relating to advisory services to the Trust is referred to
herein as the "Advisory Agreement") contemplates that the Advisor may
sub-contract investment advisory services with respect to the Trust to a
sub-advisor pursuant to a sub-advisory agreement agreeable to the Trust and
approved in accordance with the provisions of the 1940 Act; and

                  WHEREAS, this Agreement has been approved in accordance with
the provisions of the 1940 Act, and the Sub-Advisor is willing to furnish such
services upon the terms and conditions herein set forth;

                  NOW, THEREFORE, in consideration of the mutual premises and
covenants herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed by and between the parties
hereto as follows:

                  1.       Appointment.  The Advisor hereby appoints the
Sub-Advisor to act as sub-advisor with respect to the Trust and the Sub-Advisor
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.



<PAGE>



                  2. Services of the Sub-Advisor. Subject to the succeeding
provisions of this section, the oversight and supervision of the Advisor and the
direction and control of the Trust's Board of Trustees, the Sub-Advisor will
perform certain of the day-to-day operations of the Trust which may include one
or more of the following services at the request of the Advisor: (a) acting as
investment advisor for and managing the investment and reinvestment of those
assets of the Trust as the Advisor may from time to time request and in
connection therewith have complete discretion in purchasing and selling such
securities and other assets for the Trust and in voting, exercising consents and
exercising all other rights appertaining to such securities and other assets on
behalf of the Trust; (b) arranging, subject to the provisions of paragraph 3
hereof, for the purchase and sale of securities and other assets held in the
investment portfolio of the Trust; (c) providing investment research and credit
analysis concerning the Trust's investments, (d) assist the Advisor in
determining what portion of the Trust's assets will be invested in cash, cash
equivalents and money market instruments, (e) placing orders for all purchases
and sales of such investments made for the Trust, and (f) maintaining the books
and records as are required to support Trust investment operations. At the
request of the Advisor, the Sub-Advisor will also, subject to the oversight and
supervision of the Advisor and the direction and control of the Trust's Board of
Trustees, provide to the Advisor or the Trust any of the facilities and
equipment and perform any of the services described in Section 3 of the Advisory
Agreement. In addition, the Sub-Advisor will keep the Trust and the Advisor
informed of developments materially affecting the Trust and shall, on its own
initiative, furnish to the Trust from time to time whatever information the
Sub-Advisor believes appropriate for this purpose. The Sub-Advisor will
periodically communicate to the Advisor, at such times as the Advisor may
direct, information concerning the purchase and sale of securities for the
Trust, including: (a) the name of the issuer, (b) the amount of the purchase or
sale, (c) the name of the broker or dealer, if any, through which the purchase
or sale is effected, (d) the CUSIP number of the instrument, if any, and (e)
such other information as the Advisor may reasonably require for purposes of
fulfilling its obligations to the Trust under the Advisory Agreement. The
Sub-Advisor will provide the services rendered by it under this Agreement in
accordance with the Trust's investment objectives, policies and restrictions (as
currently in effect and as they may be amended or supplemented from time to
time) as stated in the Trust's Prospectus and Statement of Additional
Information and the resolutions of the Trust's Board of Trustees.

                  3.       Covenants. In the performance of its duties under
this Agreement, the Sub-Advisor shall at all times conform to, and act in
accordance with, any requirements imposed by:





<PAGE>



                           (a) (i) the provisions of the 1940 Act and the
Investment Advisers Act of 1940, as amended (the "Advisers Act") and all
applicable Rules and Regulations of the Securities and Exchange Commission (the
"SEC"); (ii) any other applicable provision of law; (iii) the provisions of the
Agreement and Declaration of Trust, as amended and restated, and By-Laws of the
Trust, as such documents are amended from time to time; (iv) the investment
objectives and policies of the Trust as set forth in its Registration Statement
on Form N-2; and (v) any policies and determinations of the Board of Trustees
of the Trust;

                           (b) will place orders either directly with the issuer
or with any broker or dealer. Subject to the other provisions of this paragraph,
in placing orders with brokers and dealers, the Sub-Advisor will attempt to
obtain the best price and the most favorable execution of its orders. In placing
orders, the Sub-Advisor will consider the experience and skill of the firm's
securities traders as well as the firm's financial responsibility and
administrative efficiency. Consistent with this obligation, the Sub-Advisor may
select brokers on the basis of the research, statistical and pricing services
they provide to the Trust and other clients of the Advisor or the Sub-Advisor.
Information and research received from such brokers will be in addition to, and
not in lieu of, the services required to be performed by the Sub-Advisor
hereunder. A commission paid to such brokers may be higher than that which
another qualified broker would have charged for effecting the same transaction,
provided that the Sub-Advisor determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
the Advisor and the Sub-Advisor to the Trust's and their other clients and that
the total commissions paid by the Trust will be reasonable in relation to the
benefits to the Trust over the long-term. In addition, the Sub-Advisor is
authorized to take into account the sale of shares of the Trust in allocating
purchase and sale orders for portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the Advisor or the
Sub-Advisor), provided that the Sub-Advisor believes that the quality of the
transaction and the commission are comparable to what they would be with other
qualified firms. In no instance, however, will the Trust's securities be
purchased from or sold to the Advisor, the Sub-Advisor or any affiliated person
thereof, except to the extent permitted by the SEC or by applicable law;

                           (c) will maintain books and records with respect to
the Trust's securities transactions and will render to the Advisor and the
Trust's Board of Trustees such periodic and special reports as they may request;



                                        3

<PAGE>



                           (d) will maintain a policy and practice of conducting
its investment advisory services hereunder independently of the commercial
banking operations of its affiliates. When the Sub-Advisor makes investment
recommendations for the Trust, its investment advisory personnel will not
inquire or take into consideration whether the issuer of securities proposed for
purchase or sale for the Trust's account are customers of the commercial
department of its affiliates; and

                           (e) will treat confidentially and as proprietary
information of the Trust all records and other information relative to the
Trust, and the Trust's prior, current or potential shareholders, and will not
use such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Sub-Advisor may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Trust.

                  4. Services Not Exclusive. Nothing in this Agreement shall
prevent the Sub-Advisor or any officer, employee or other affiliate thereof from
acting as investment Advisor for any other person, firm or corporation, or from
engaging in any other lawful activity, and shall not in any way limit or
restrict the Sub-Advisor or any of its officers, employees or agents from
buying, selling or trading any securities for its or their own accounts or for
the accounts of others for whom it or they may be acting; provided, however,
that the Sub-Advisor will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations under this Agreement.

                  5. Books and Records. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all records
which it maintains for the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust any such records upon the Trust's
request. The Sub-Advisor further agrees to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act (to the extent such books and records are not
maintained by the Advisor).

                  6. Agency Cross Transactions.  From time to time, the
Sub-Advisor or brokers or dealers affiliated with it may find themselves in a
position to buy for certain of their brokerage clients (each an "Account")
securities which the Sub-Advisor's investment advisory clients wish to sell, and
to sell for certain of their brokerage clients securities which advisory clients
wish to buy.  Where one of the



                                        4

<PAGE>



parties is an advisory client, the Advisor or the affiliated broker or dealer
cannot participate in this type of transaction (known as a cross transaction) on
behalf of an advisory client and retain commissions from both parties to the
transaction without the advisory client's consent. This is because in a
situation where the Sub-Advisor is making the investment decision (as opposed to
a brokerage client who makes his own investment decisions), and the Sub-Advisor
or an affiliate is receiving commissions from one or both sides of the
transaction, there is a potential conflicting division of loyalties and
responsibilities on the Sub-Advisor's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Advisers Act
which permits the Sub-Advisor or its affiliates to participate on behalf of an
Account in agency cross transactions if the advisory client has given written
consent in advance. By execution of this Agreement, the Trust authorizes the
Sub-Advisor or its affiliates to participate in agency cross transactions
involving an Account. The Trust may revoke its consent at any time by written
notice to the Sub-Advisor.

                  7. Expenses. During the term of this Agreement, the Sub-
Advisor will bear all costs and expenses of its employees and any overhead
incurred by the Sub-Advisor in connection with its duties hereunder; provided
that the Board of Trustees of the Trust may approve reimbursement to the
Sub-Advisor of the pro-rata portion of the salaries, bonuses, health insurance,
retirement benefits and all similar employment costs for the time spent on Trust
operations (other than the provision of investment advice and administrative
services required to be provided hereunder) of all personnel employed by the
Sub-Advisor who devote substantial time to the Trust operations or the
operations of other investment companies advised or sub-advised by the
Sub-Advisor.

                  8. Compensation.

                           (a) The Advisor agrees to pay to the Sub-Advisor and
the Sub-Advisor agrees to accept as full compensation for all services rendered
by the Sub-Advisor as such, a monthly fee in arrears at an annual rate equal to
(i) prior to July 31, 2003, 38% of the monthly advisory fees received by the
Advisor, (ii) from August 1, 2003 to July 31, 2004, 19% of the monthly advisory
fee received by the Advisor; and (iii) after July 31, 2004, 0% of the advisory
fees received by the Advisor; provided that thereafter the Sub-Advisor may be
compensated at cost for any services rendered to the Trust at the request of the
Advisor and approved of by the Board of Trustees. For any period less than a
month during which this Agreement is in effect, the fee shall be prorated
according to the proportion which such period bears to a full month of 28, 29,
30 or 31 days, as the case may be.



                                        5

<PAGE>




                           (b) For purposes of this Agreement, the Managed
Assets of the Trust shall be calculated pursuant to the procedures adopted by
resolutions of the Trustees of the Trust for calculating the value of the
Trust's assets or delegating such calculations to third parties.

                  9. Indemnity.

                           (a) The Trust hereby agrees to indemnify the
Sub-Advisor and each of the Sub-Advisor's directors, officers, employees,
agents, associates and controlling persons and the directors, partners, members,
officers, employees and agents thereof (including any individual who serves at
the Sub-Advisor's request as director, officer, partner, member, trustee or the
like of another entity) (each such person being an "Indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable state law) reasonably incurred by such Indemnitee in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
investigative body in which such Indemnitee may be or may have been involved as
a party or otherwise or with which such Indemnitee may be or may have been
threatened, while acting in any capacity set forth herein or thereafter by
reason of such Indemnitee having acted in any such capacity, except with respect
to any matter as to which such Indemnitee shall have been adjudicated not to
have acted in good faith in the reasonable belief that such Indemnitee's action
was in the best interest of the Trust and furthermore, in the case of any
criminal proceeding, so long as such Indemnitee had no reasonable cause to
believe that the conduct was unlawful; provided, however, that (1) no
Indemnitee shall be indemnified hereunder against any liability to the Trust or
its shareholders or any expense of such Indemnitee arising by reason of (i)
willful misfeasance, (ii) bad faith, (iii) gross negligence or (iv) reckless
disregard of the duties involved in the conduct of such Indemnitee's position
(the conduct referred to in such clauses (i) through (iv) being sometimes
referred to herein as "disabling conduct"), (2) as to any matter disposed of by
settlement or a compromise payment by such Indemnitee, pursuant to a consent
decree or otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless there has been a determination that such
settlement or compromise is in the best interests of the Trust and that such
Indemnitee appears to have acted in good faith in the reasonable belief that
such Indemnitee's action was in the best interest of the Trust and did not
involve disabling conduct by such Indemnitee and (3) with respect to any action,
suit or other proceeding voluntarily prosecuted by any Indemnitee as plaintiff,
indemnification shall be mandatory only if



                                        6

<PAGE>



the prosecution of such action, suit or other proceeding by such Indemnitee was
authorized by a majority of the full Board of Trustees of the Trust.

                           (b) The Trust shall make advance payments in
connection with the expenses of defending any action with respect to which
indemnification might be sought hereunder if the Trust receives a written
affirmation of the Indemnitee's good faith belief that the standard of conduct
necessary for indemnification has been met and a written undertaking to
reimburse the Trust unless it is subsequently determined that such Indemnitee is
entitled to such indemnification and if the trustees of the Trust determine that
the facts then known to them would not preclude indemnification. In addition, at
least one of the following conditions must be met: (A) the Indemnitee shall
provide a security for such Indemnitee-undertaking, (B) the Trust shall be
insured against losses arising by reason of any lawful advance, or (C) a
majority of a quorum consisting of trustees of the Trust who are neither
"interested persons" of the Trust (as defined in Section 2(a)(19) of the 1940
Act) nor parties to the proceeding ("Disinterested Non-Party Trustees") or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Indemnitee ultimately will be found
entitled to indemnification.

                           (c) All determinations with respect to
indemnification hereunder shall be made (1) by a final decision on the merits by
a court or other body before whom the proceeding was brought that such
Indemnitee is not liable by reason of disabling conduct, or (2) in the absence
of such a decision, by (i) a majority vote of a quorum of the Disinterested
Non-Party Trustees of the Trust, or (ii) if such a quorum is not obtainable or
even, if obtainable, if a majority vote of such quorum so directs, independent
legal counsel in a written opinion. All determinations that advance payments in
connection with the expense of defending any proceeding shall be authorized
shall be made in accordance with the immediately preceding clause (2) above. The
rights accruing to any Indemnitee under these provisions shall not exclude any
other right to which such Indemnitee may be lawfully entitled.

                  10. Limitation on Liability.

                           (a) The Sub-Advisor will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Advisor or by the
Trust in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in



                                        7

<PAGE>



the performance of its duties or from reckless disregard by it of its duties
under this Agreement.

                           (b) Notwithstanding anything to the contrary
contained in this Agreement, the parties hereto acknowledge and agree that, as
provided in Section 5.1 of Article V of the Declaration of Trust, as amended and
restated, this Agreement is executed by the Trustees and/or officers of the
Trust, not individually but as such Trustees and/or officers of the Trust, and
the obligations hereunder are not binding upon any of the Trustees or
Shareholders individually but bind only the estate of the Trust.

                  11. Duration and Termination. This Agreement shall become
effective as of the date hereof and, unless sooner terminated with respect to
the Trust as provided herein, shall continue in effect for a period of two
years. Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Trust for successive periods of 12 months, provided such
continuance is specifically approved at least annually by both (a) the vote of a
majority of the Trust's Board of Trustees or a vote of a majority of the
outstanding voting securities of the Trust at the time outstanding and entitled
to vote and (b) by the vote of a majority of the Trustees, who are not parties
to this Agreement or interested persons (as such term is defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this Agreement may be
terminated by the Trust or the Advisor at any time, without the payment of any
penalty, upon giving the Sub-Advisor 60 days' notice (which notice may be waived
by the Sub-Advisor), provided that such termination by the Trust or the Advisor
shall be directed or approved by the vote of a majority of the Trustees of the
Trust in office at the time or by the vote of the holders of a majority of the
voting securities of the Trust at the time outstanding and entitled to vote, or
by the Sub-Advisor on 60 days' written notice (which notice may be waived by the
Trust and the Advisor), and will terminate automatically upon any termination of
the Advisory Agreement between the Trust and the Advisor. This Agreement will
also immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings of such terms
in the 1940 Act.)

                  12. Notices. Any notice under this Agreement shall be in
writing to the other party at such address as the other party may designate from
time to time for the receipt of such notice and shall be deemed to be received
on the earlier of the date actually received or on the fourth day after the
postmark if such notice is mailed first class postage prepaid.



                                        8

<PAGE>




                  13. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. Any amendment of this
Agreement shall be subject to the 1940 Act.

                  14. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.

                  15. Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York for contracts to
be performed entirely therein without reference to choice of law principles
thereof and in accordance with the applicable provisions of the 1940 Act.

                  16. Counterparts.  This Agreement may be executed in
counterparts by the parties hereto, each of which shall constitute an original
counterpart, and all of which, together, shall constitute one Agreement.



                                        9

<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers designated below as
of the day and year first above written.


                                    BLACKROCK ADVISORS, INC.


                                    By: /s/ Anne F. Ackerley
                                        ---------------------------------------
                                          Name:  Anne F. Ackerley
                                          Title: Managing Director


                                    BLACKROCK FINANCIAL MANAGEMENT, INC.


                                    By: /s/ Anne F. Ackerley
                                        ---------------------------------------
                                          Name:  Anne F. Ackerley
                                          Title: Managing Director


                                    BLACKROCK MUNICIPAL INCOME TRUST II


                                    By: /s/ Anne F. Ackerley
                                        ---------------------------------------
                                          Name:  Anne F. Ackerley
                                          Title: Secretary



                                       10

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(G)(3)
<SEQUENCE>7
<FILENAME>file006.txt
<DESCRIPTION>WAIVER RELIANCE LETTER
<TEXT>
<PAGE>


                                                                            (g3)


                            BLACKROCK ADVISORS, INC.
                             WAIVER RELIANCE LETTER


                                                                   July 16, 2002

BlackRock Municipal Income Trust II
100 Bellevue Parkway
Wilmington, Delaware  19809


Ladies and Gentlemen:

                  BlackRock Advisors, Inc. (the "Advisor") and BlackRock
Municipal Income Trust II (the "Trust"), a closed-end management investment
company registered under the Investment Company Act of 1940, as amended, have
entered into an Investment Management Agreement, dated as of July 16, 2002 (the
"Advisory Agreement"), pursuant to which the Advisor has agreed to furnish
investment advisory services to the Trust on the terms and subject to the
conditions of the Advisory Agreement.

                  The Advisory Agreement provides, among other things, that the
Trust will pay to the Advisor as full compensation for all investment advisory
services rendered by the Advisor to the Trust under the Advisory Agreement a
monthly fee in arrears at an annual rate equal to .55% of the average weekly
value of the Trust's Managed Assets (as defined in the Advisory Agreement) (such
fee being referred to herein as the "Investment Advisory Fee"). The Advisor has
covenanted to the underwriters of the Trust's common shares of beneficial
interest that the Advisor will waive receipt of certain payments that would be
expenses of the Trust, as set forth below. The Advisor understands that you
intend to disclose this undertaking in your Registration Statement on Form N-2
and the prospectus included therein. This letter confirms that you may rely on
such undertaking for purposes of making disclosure in your Registration
Statement and prospectus and authorizes you to offset the appropriate amount of
the waived payments described herein against the Investment Advisory Fee.

                  For the period from the commencement of the Trust's operations
through July 31, 2003, and for the twelve month periods ending July 31 in each
indicated year during the term of the Advisory Agreement (including any
continuation thereof in accordance with Section 15 of the Investment Company
Act of 1940,



<PAGE>



as amended), the Advisor will waive receipt of certain payments that would be
expenses of the Trust in the amount determined by applying the following annual
rates to the average weekly value of the Trust's Managed Assets:


Period Ending                            Period Ending
July 31                 Waiver           July 31                    Waiver
- ------------------      ------           -------------              ------
2003                    .15%             2008                       .10%
2004                    .15%             2009                       .10%
2005                    .15%             2010                       .05%
2006                    .15%             2011                       .05%
2007                    .15%             2012                       .05%

                  The Advisor intends to cease to so waive receipt of payments
upon the earlier of (a) July 31, 2012 or (b) termination of the Advisory
Agreement.

                  Please acknowledge the foregoing by signing the enclosed copy
of this letter in the space provided below and returning the executed copy to
the Advisor.


                                                 Sincerely,

                                                 BLACKROCK ADVISORS, INC.


                                                 By: /s/ Anne F. Ackerley
                                                     --------------------
                                                     Name:  Anne F. Ackerley
                                                     Title: Managing Director




                                        2

<PAGE>


CONFIRMED AND ACCEPTED:

BLACKROCK MUNICIPAL INCOME TRUST II


By: /s/ Anne F. Ackerley
    ------------------------------
      Name:  Anne F. Ackerley
      Title: Secretary



                                        3


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(H)
<SEQUENCE>8
<FILENAME>file007.txt
<DESCRIPTION>FORM OF UNDERWRITING AGREEMENT
<TEXT>
<PAGE>

                       BlackRock Municipal Income Trust II
                           (a Delaware business trust)


                     [ ]Common Shares of Beneficial Interest
                           (Par Value $.001 Per Share)


                               PURCHASE AGREEMENT


                                                                  July [ ], 2002

Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
     Incorporated
UBS Warburg
c/o Merrill Lynch, Pierce, Fenner & Smith
     Incorporated
North Tower
World Financial Center
New York, New York 10080

Ladies and Gentlemen:

     BlackRock Municipal Income Trust II, a Delaware business trust (the
"Trust"), the Trust's investment adviser, BlackRock Advisors, Inc., a Delaware
corporation ("BAI"), and its investment sub-adviser, BlackRock Financial
Management, Inc., a Delaware corporation ("BFM") (each, an "Adviser" and
together, the "Advisers"), each confirms its agreement with Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and UBS
Warburg ("UBS") and each of the other Underwriters named in Schedule A hereto
(collectively, the "Underwriters", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Merrill
Lynch and UBS are acting as representatives (in such capacity, the
"Representatives"), with respect to the issue and sale by the Trust and the
purchase by the Underwriters, acting severally and not jointly, of the
respective number of common shares of beneficial interest, par value $.001 per
share, of the Trust ("Common Shares") set forth in said Schedule A, and with
respect to the grant by the Trust to the Underwriters, acting severally and not
jointly, of the option described in Section 2(b) hereof to purchase all or any
part of [ ] additional Common Shares to cover over-allotments, if any. The
aforesaid [ ] Common Shares (the "Initial Securities") to be purchased by the
Underwriters and all or any part of the [ ] Common Shares subject to the option
described in Section 2(b) hereof (the "Option Securities") are hereinafter
called, collectively, the "Securities."

     The Trust understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered.

     The Trust has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (No. 333-91080 and No.
811-21126) covering the registration of the Securities under the Securities Act
of 1933, as amended (the "1933 Act"), including the related preliminary
prospectus or prospectuses, and a notification on Form N-8A of registration of
the Trust as an investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations of the Commission under
the 1933 Act and the 1940 Act (the "Rules and Regulations"). Promptly after
execution and delivery of this Agreement, the Trust will either (i) prepare and
file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A")
of the Rules and Regulations and paragraph (c) or (h) of Rule 497 ("Rule 497")
of the Rules and Regulations or (ii) if the

                                       1
<PAGE>

Trust has elected to rely upon Rule 434 ("Rule 434") of the Rules and
Regulations, prepare and file a term sheet (a "Term Sheet") in accordance with
the provisions of Rule 434 and Rule 497. The information included in any such
prospectus or in any such Term Sheet, as the case may be, that was omitted from
such registration statement at the time it became effective but that is deemed
to be part of such registration statement at the time it became effective, if
applicable, (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each prospectus used before such registration statement
became effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, including in each
case any statement of additional information incorporated therein by reference,
is herein called a "preliminary prospectus." Such registration statement,
including the exhibits thereto and schedules thereto at the time it became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the Rules and Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectus in the form first furnished to the Underwriters
for use in connection with the offering of the Securities, including the
statement of additional information incorporated therein by reference, is herein
called the "Prospectus." If Rule 434 is relied on, the term "Prospectus" shall
refer to the preliminary prospectus dated [ ], 2002 together with the Term Sheet
and all references in this Agreement to the date of the Prospectus shall mean
the date of the Term Sheet. For purposes of this Agreement, all references to
the Registration Statement, any preliminary prospectus, the Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").

     All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be.

     SECTION 1. Representations and Warranties.

     (a) Representations and Warranties by the Trust and the Advisers. The Trust
and the Advisers jointly and severally represent and warrant to each Underwriter
as of the date hereof, as of the Closing Time referred to in Section 2(c)
hereof, and as of each Date of Delivery (if any) referred to in Section 2(b)
hereof, and agree with each Underwriter, as follows:

         (i) Compliance with Registration Requirements. Each of the Registration
     Statement and any Rule 462(b) Registration Statement has become effective
     under the 1933 Act and no stop order suspending the effectiveness of the
     Registration Statement or any Rule 462(b) Registration Statement has been
     issued under the 1933 Act, or order of suspension or revocation of
     registration pursuant to Section 8(e) of the 1940 Act, and no proceedings
     for any such purpose have been instituted or are pending or, to the
     knowledge of the Trust or the Advisers, are contemplated by the Commission,
     and any request on the part of the Commission for additional information
     has been complied with.

         At the respective times the Registration Statement, any Rule 462(b)
     Registration Statement and any post-effective amendments thereto became
     effective and at the Closing Time (and, if any Option Securities are
     purchased, at the Date of Delivery), the Registration Statement, the Rule
     462(b) Registration Statement, the notification of Form N-8A and any
     amendments and supplements thereto complied and will comply in all material
     respects with the requirements of the 1933 Act, the 1940 Act and the Rules
     and Regulations and did not and will not contain

                                       2
<PAGE>

     an untrue statement of a material fact or omit to state a material fact
     required to be stated therein or necessary to make the statements therein
     not misleading. Neither the Prospectus nor any amendments or supplements
     thereto, at the time the Prospectus or any such amendment or supplement was
     issued and at the Closing Time (and, if any Option Securities are
     purchased, at the Date of Delivery), included or will include an untrue
     statement of a material fact or omitted or will omit to state a material
     fact necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading. If Rule 434 is
     used, the Trust will comply with the requirements of Rule 434 and the
     Prospectus shall not be "materially different", as such term is used in
     Rule 434, from the prospectus included in the Registration Statement at the
     time it became effective.

         Each preliminary prospectus and the prospectus filed as part of the
     Registration Statement as originally filed or as part of any amendment
     thereto, or filed pursuant to Rule 497 under the 1933 Act, complied when so
     filed in all material respects with the Rules and Regulations and each
     preliminary prospectus and the Prospectus delivered to the Underwriters for
     use in connection with this offering was identical to the electronically
     transmitted copies thereof filed with the Commission pursuant to EDGAR,
     except to the extent permitted by Regulation S-T.

         If a Rule 462(b) Registration Statement is required in connection with
     the offering and sale of the Securities, the Trust has complied or will
     comply with the requirements of Rule 111 under the 1933 Act Regulations
     relating to the payment of filing fees thereof.

         (ii) Independent Accountants. The accountants who certified the
     statement of assets and liabilities included in the Registration Statement
     are independent public accountants as required by the 1933 Act and the
     Rules and Regulations.

         (iii) Financial Statements. The statement of assets and liabilities
     included in the Registration Statement and the Prospectus, together with
     the related notes, presents fairly the financial position of the Trust at
     the date indicated; said statement has been prepared in conformity with
     generally accepted accounting principles ("GAAP").

         (iv) Expense Summary. The information set forth in the Prospectus in
     the Fee Table has been prepared in accordance with the requirements of Form
     N-2 and to the extent estimated or projected, such estimates or projections
     are reasonably believed to be attainable and reasonably based.

         (v) No Material Adverse Change. Since the respective dates as of which
     information is given in the Registration Statement and the Prospectus,
     except as otherwise stated therein, (A) there has been no material adverse
     change in the condition, financial or otherwise, or in the earnings,
     business affairs or business prospects of the Trust, whether or not arising
     in the ordinary course of business (a "Material Adverse Effect"), (B) there
     have been no transactions entered into by the Trust, other than those in
     the ordinary course of business, which are material with respect to the
     Trust, and (C) there has been no dividend or distribution of any kind
     declared, paid or made by the Trust on any class of its capital stock.

         (vi) Good Standing of the Trust. The Trust has been duly organized and
     is validly existing as a business trust in good standing under the laws of
     the State of Delaware and has business trust power and authority to own,
     lease and operate its properties and to conduct its business as described
     in the Prospectus and to enter into and perform its obligations under this
     Agreement; and the Trust is duly qualified as a foreign business trust to
     transact business and is in good standing in each other jurisdiction in
     which such qualification is required, whether by

                                       3
<PAGE>

     reason of the ownership or leasing of property or the conduct of business,
     except where the failure so to qualify or to be in good standing would not
     result in a Material Adverse Effect.

         (vii) No Subsidiaries. The Trust has no subsidiaries.

         (viii) Investment Company Status. The Trust is duly registered with the
     Commission under the 1940 Act as a closed-end diversified management
     investment company, and no order of suspension or revocation of such
     registration has been issued or proceedings therefor initiated or
     threatened by the Commission.

         (ix) Officers and Trustees. No person is serving or acting as an
     officer, trustee or investment adviser of the Trust except in accordance
     with the provisions of the 1940 Act and the Rules and Regulations and the
     Investment Advisers Act of 1940, as amended (the "Advisers Act"), and the
     rules and regulations of the Commission promulgated under the Advisers Act
     (the "Advisers Act Rules and Regulations"). Except as disclosed in the
     Registration Statement and the Prospectus (or any amendment or supplement
     to either of them), no trustee of the Trust is an "interested person" (as
     defined in the 1940 Act) of the Trust or an "affiliated person" (as defined
     in the 1940 Act) of any Underwriter.

         (x) Capitalization. The authorized, issued and outstanding shares of
     beneficial interest of the Trust is as set forth in the Prospectus as of
     the date thereof under the caption "Description of Shares." All issued and
     outstanding shares of beneficial interest of the Trust have been duly
     authorized and validly issued and are fully paid and non-assessable, except
     as provided for in the Trust's declaration of trust, and have been offered
     and sold or exchanged by the Trust in compliance with all applicable laws
     (including, without limitation, federal and state securities laws); none of
     the outstanding shares of beneficial interest of the Trust was issued in
     violation of the preemptive or other similar rights of any securityholder
     of the Trust.

         (xi) Authorization and Description of Securities. The Securities to be
     purchased by the Underwriters from the Trust have been duly authorized for
     issuance and sale to the Underwriters pursuant to this Agreement and, when
     issued and delivered by the Trust pursuant to this Agreement against
     payment of the consideration set forth herein, will be validly issued and
     fully paid and non-assessable, except as provided for in the Trust's
     declaration of trust. The Common Shares conform to all statements relating
     thereto contained in the Prospectus and such description conforms to the
     rights set forth in the instruments defining the same; no holder of the
     Securities will be subject to personal liability by reason of being such a
     holder; and the issuance of the Securities is not subject to the preemptive
     or other similar rights of any securityholder of the Trust.

         (xii) Absence of Defaults and Conflicts. The Trust is not in violation
     of its declaration of trust or by-laws, or in default in the performance or
     observance of any obligation, agreement, covenant or condition contained in
     any contract, indenture, mortgage, deed of trust, loan or credit agreement,
     note, lease or other agreement or instrument to which it is a party or by
     which it may be bound, or to which any of the property or assets of the
     Trust is subject (collectively, "Agreements and Instruments") except for
     such violations or defaults that would not result in a Material Adverse
     Effect; and the execution, delivery and performance of this Agreement, the
     Management Agreement, the Sub-Advisory Agreement, the Custodian Agreement
     and the Transfer Agent and Service Agreement referred to in the
     Registration Statement (as used herein, the "Management Agreement," the
     "Sub-Advisory Agreement", the "Custodian Agreement" and the "Transfer
     Agency Agreement," respectively) and the consummation of the transactions
     contemplated herein and in the Registration Statement (including the
     issuance and sale of the Securities and the use of the proceeds from the
     sale of the Securities as described in the Prospectus under the caption
     "Use of Proceeds") and compliance by the Trust with its obligations


                                       4
<PAGE>

     hereunder have been duly authorized by all necessary corporate action and
     do not and will not, whether with or without the giving of notice or
     passage of time or both, conflict with or constitute a breach of, or
     default or Repayment Event (as defined below) under, or result in the
     creation or imposition of any lien, charge or encumbrance upon any property
     or assets of the Trust pursuant to, the Agreements and Instruments (except
     for such conflicts, breaches or defaults or liens, charges or encumbrances
     that would not result in a Material Adverse Effect), nor will such action
     result in any violation of the provisions of the declaration of trust or
     by-laws of the Trust or any applicable law, statute, rule, regulation,
     judgment, order, writ or decree of any government, government
     instrumentality or court, domestic or foreign, having jurisdiction over the
     Trust or any of its assets, properties or operations. As used herein, a
     "Repayment Event" means any event or condition which gives the holder of
     any note, debenture or other evidence of indebtedness (or any person acting
     on such holder's behalf) the right to require the repurchase, redemption or
     repayment of all or a portion of such indebtedness by the Trust.

         (xiii) Absence of Proceedings. There is no action, suit, proceeding,
     inquiry or investigation before or brought by any court or governmental
     agency or body, domestic or foreign, now pending, or, to the knowledge of
     the Trust or the Advisers, threatened, against or affecting the Trust,
     which is required to be disclosed in the Registration Statement (other than
     as disclosed therein), or which might reasonably be expected to result in a
     Material Adverse Effect, or which might reasonably be expected to
     materially and adversely affect the properties or assets of the Trust or
     the consummation of the transactions contemplated in this Agreement or the
     performance by the Trust of its obligations hereunder. The aggregate of all
     pending legal or governmental proceedings to which the Trust is a party or
     of which any of its property or assets is the subject which are not
     described in the Registration Statement, including ordinary routine
     litigation incidental to the business, could not reasonably be expected to
     result in a Material Adverse Effect.

         (xiv) Accuracy of Exhibits. There are no contracts or documents which
     are required to be described in the Registration Statement or the
     Prospectus or to be filed as exhibits thereto by the 1933 Act, the 1940 Act
     or by the Rules and Regulations which have not been so described and filed
     as required.

         (xv) Possession of Intellectual Property. The Trust owns or possesses,
     or can acquire on reasonable terms, adequate patents, patent rights,
     licenses, inventions, copyrights, know-how (including trade secrets and
     other unpatented and/or unpatentable proprietary or confidential
     information, systems or procedures), trademarks, service marks, trade names
     or other intellectual property (collectively, "Intellectual Property")
     necessary to carry on the business now operated by the Trust, and the Trust
     has not received any notice or is not otherwise aware of any infringement
     of or conflict with asserted rights of others with respect to any
     Intellectual Property or of any facts or circumstances which would render
     any Intellectual Property invalid or inadequate to protect the interest of
     the Trust therein, and which infringement or conflict (if the subject of
     any unfavorable decision, ruling or finding) or invalidity or inadequacy,
     singly or in the aggregate, would result in a Material Adverse Effect;
     provided that the Trust's right to use the name "BlackRock" is limited as
     set forth in Section 16 of the Management Agreement.

         (xvi) Absence of Further Requirements. No filing with, or
     authorization, approval, consent, license, order, registration,
     qualification or decree of, any court or governmental authority or agency
     is necessary or required for the performance by the Trust of its
     obligations hereunder, in connection with the offering, issuance or sale of
     the Securities hereunder or the consummation of the transactions
     contemplated by this Agreement, except such as have been already obtained
     or as may be required under the 1933 Act, the 1940 Act, the Securities
     Exchange Act of 1934, as amended (the "1934 Act"), or state securities
     laws.

                                       5
<PAGE>

         (xvii) Possession of Licenses and Permits. The Trust possesses such
     permits, licenses, approvals, consents and other authorizations
     (collectively, "Governmental Licenses") issued by the appropriate federal,
     state, local or foreign regulatory agencies or bodies necessary to operate
     its properties and to conduct the business as contemplated in the
     Prospectus; the Trust is in compliance with the terms and conditions of all
     such Governmental Licenses, except where the failure so to comply would
     not, singly or in the aggregate, have a Material Adverse Effect; all of the
     Governmental Licenses are valid and in full force and effect, except when
     the invalidity of such Governmental Licenses or the failure of such
     Governmental Licenses to be in full force and effect would not have a
     Material Adverse Effect; and the Trust has not received any notice of
     proceedings relating to the revocation or modification of any such
     Governmental Licenses which, singly or in the aggregate, if the subject of
     an unfavorable decision, ruling or finding, would result in a Material
     Adverse Effect.

         (xviii) Advertisements. Any advertising, sales literature or other
     promotional material (including "prospectus wrappers", "broker kits," "road
     show slides," "road show scripts" and "electronic road show presentations")
     authorized in writing by or prepared by the Trust or the Advisers used in
     connection with the public offering of the Securities (collectively, "sales
     material") does not contain an untrue statement of a material fact or omit
     to state a material fact required to be stated therein or necessary to make
     the statements therein not misleading. Moreover, all sales material
     complied and will comply in all material respects with the applicable
     requirements of the 1933 Act, the 1940 Act, the Rules and Regulations and
     the rules and interpretations of the National Association of Securities
     Dealers, Inc. ("NASD").

         (xix) Subchapter M. The Trust intends to direct the investment of the
     proceeds of the offering described in the Registration Statement in such a
     manner as to comply with the requirements of Subchapter M of the Internal
     Revenue Code of 1986, as amended ("Subchapter M of the Code" and the
     "Code," respectively), and intends to qualify as a regulated investment
     company under Subchapter M of the Code.

         (xx) Material Agreements. This Agreement, the Management Agreement, the
     Sub-Advisory Agreement, the Custodian Agreement and the Transfer Agency
     Agreement have each been duly authorized by all requisite action on the
     part of the Trust, executed and delivered by the Trust, as of the dates
     noted therein and each complies with all applicable provisions of the 1940
     Act. Assuming due authorization, execution and delivery by the other
     parties thereto with respect to the Custodian Agreement and the Transfer
     Agency Agreement, each of the Management Agreement, the Sub-Advisory
     Agreement, the Custodian Agreement and the Transfer Agency Agreement
     constitutes a valid and binding agreement of the Trust, enforceable in
     accordance with its terms, except as affected by bankruptcy, insolvency,
     fraudulent conveyance, reorganization, moratorium and other similar laws
     relating to or affecting creditors' rights generally, general equitable
     principles (whether considered in a proceeding in equity or at law).

         (xxi) Registration Rights. There are no persons with registration
     rights or other similar rights to have any securities registered pursuant
     to the Registration Statement or otherwise registered by the Trust under
     the 1933 Act.

         (xxii) AMEX Listing. The Securities have been duly authorized for
     listing, upon notice of issuance, on the American Stock Exchange ("AMEX")
     and the Trust's registration statement on Form 8-A under the 1934 Act has
     become effective.

     (b) Representations and Warranties by the Advisers. The Advisers represent
and warrant to each Underwriter as of the date hereof, as of the Closing Time
referred to in Section 2(c) hereof, and as of each Date of Delivery (if any)
referred to in Section 2(b) hereof as follows:

                                       6
<PAGE>

         (i) Good Standing of the Advisers. Each of the Advisers has been duly
     organized and is validly existing and in good standing as corporations
     under the laws of the State of Delaware with full corporate power and
     authority to own, lease and operate its properties and to conduct its
     business as described in the Prospectus and each is duly qualified as a
     foreign corporation to transact business and is in good standing in each
     other jurisdiction in which such qualification is required.

         (ii) Investment Adviser Status. Each of Advisers is duly registered and
     in good standing with the Commission as an investment adviser under the
     Advisers Act, and is not prohibited by the Advisers Act or the 1940 Act, or
     the rules and regulations under such acts, from acting under the Management
     Agreement and the Sub-Advisory Agreement for the Trust as contemplated by
     the Prospectus.

         (iii) Description of Advisers. The description of each Adviser in the
     Registration Statement and the Prospectus (and any amendment or supplement
     to either of them) complied and comply in all material respects with the
     provisions of the 1933 Act, the 1940 Act, the Advisers Act, the Rules and
     Regulations and the Advisers Act Rules and Regulations and is true and
     correct and does not contain any untrue statement of a material fact or
     omit to state any material fact required to be stated therein or necessary
     in order to make the statements therein, in light of the circumstances
     under which they were made, not misleading.

         (iv) Capitalization. Each of the Advisers has the financial resources
     available to it necessary for the performance of its services and
     obligations as contemplated in the Prospectus, this Agreement and under the
     respective Management Agreement and the Sub-Advisory Agreement to which it
     is a party.

         (v) Authorization of Agreements; Absence of Defaults and Conflicts.
     This Agreement, the Management Agreement, the Additional Compensation
     Agreement between Merrill Lynch and BAI (the "Additional Compensation
     Agreement") and the Sub-Advisory Agreement have each been duly authorized,
     executed and delivered by each respective Adviser, and the Management
     Agreement, the Additional Compensation Agreement and the Sub-Advisory
     Agreement each constitute a valid and binding obligation of each respective
     Adviser, enforceable in accordance with its terms, except as affected by
     bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
     and other similar laws relating to or affecting creditors' rights generally
     and general equitable principles (whether considered in a proceeding in
     equity or at law); and neither the execution and delivery of this
     Agreement, the Management Agreement, the Additional Compensation Agreement
     or the Sub-Advisory Agreement nor the performance by either of the Advisers
     of its obligations hereunder or thereunder will conflict with, or result in
     a breach of any of the terms and provisions of, or constitute, with or
     without the giving of notice or lapse of time or both, a default under, any
     agreement or instrument to which either Adviser is a party or by which it
     is bound, the certificate of incorporation, the by-laws or other
     organizational documents of each of the Advisers, or to each Adviser's
     knowledge, by any law, order, decree, rule or regulation applicable to it
     of any jurisdiction, court, federal or state regulatory body,
     administrative agency or other governmental body, stock exchange or
     securities association having jurisdiction over the Advisers or their
     respective properties or operations; and no consent, approval,
     authorization or order of any court or governmental authority or agency is
     required for the consummation by the Advisers of the transactions
     contemplated by this Agreement, the Management Agreement, the Additional
     Compensation Agreement or the Sub-Advisory Agreement, except as have been
     obtained or may be required under the 1933 Act, the 1940 Act, the 1934 Act
     or state securities laws.

         (vi) No Material Adverse Change. Since the respective dates as of which
     information is given in the Registration Statement and the Prospectus,
     except as otherwise stated therein, there

                                       7
<PAGE>

     has not occurred any event which should reasonably be expected to have a
     material adverse effect on the ability of either Adviser to perform its
     respective obligations under this Agreement and the respective Management
     Agreement and Sub-Advisory Agreement to which it is a party.

         (vii) Absence of Proceedings. There is no action, suit, proceeding,
     inquiry or investigation before or brought by any court or governmental
     agency or body, domestic or foreign, now pending, or, to the knowledge of
     the Advisers, threatened against or affecting either of the Advisers or any
     "affiliated person" of either of the Advisers (as such term is defined in
     the 1940 Act) or any partners, directors, officers or employees of the
     foregoing, whether or not arising in the ordinary course of business, which
     might reasonably be expected to result in any material adverse change in
     the condition, financial or otherwise, or earnings, business affairs or
     business prospects of either of the Advisers, materially and adversely
     affect the properties or assets of either of the Advisers or materially
     impair or adversely affect the ability of either of the Advisers to
     function as an investment adviser or perform its obligations under the
     Management Agreement or the Sub-Advisory Agreement, or which is required to
     be disclosed in the Registration Statement and the Prospectus.

         (viii) Absence of Violation or Default. Each Adviser is not in
     violation of its certificate of incorporation, by-laws or other
     organizational documents or in default under any agreement, indenture or
     instrument except for such violations or defaults that would not result in
     a Material Adverse Effect on the respective Adviser or the Trust.

     (c) Officer's Certificates. Any certificate signed by any officer of the
Trust or the Advisers delivered to the Representatives or to counsel for the
Underwriters shall be deemed a representation and warranty by the Trust or the
Advisers, as the case may be, to each Underwriter as to the matters covered
thereby.

     SECTION 2. Sale and Delivery to Underwriters; Closing.

     (a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Trust agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Trust, at
the price per share set forth in Schedule B, the number of Initial Securities
set forth in Schedule A opposite the name of such Underwriter, plus any
additional number of Initial Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.

     (b) Option Securities. In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Trust hereby grants an option to the Underwriters, severally and not
jointly, to purchase up to an additional [ ] Common Shares in the aggregate at
the price per share set forth in Schedule B, less an amount per share equal to
any dividends or distributions declared by the Trust and payable on the Initial
Securities but not payable on the Option Securities. The option hereby granted
will expire 45 days after the date hereof and may be exercised in whole or in
part from time to time only for the purpose of covering over-allotments which
may be made in connection with the offering and distribution of the Initial
Securities upon notice by the Representatives to the Trust setting forth the
number of Option Securities as to which the several Underwriters are then
exercising the option and the time and date of payment and delivery for such
Option Securities. Any such time and date of delivery (a "Date of Delivery")
shall be determined by the Representatives, but shall not be later than seven
full business days after the exercise of said option, nor in any event prior to
the Closing Time, as hereinafter defined. If the option is exercised as to all
or any portion of the Option Securities, each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
Option Securities then being purchased which the number of Initial Securities
set forth in Schedule A opposite the name of such Underwriter bears to the total
number of

                                       8
<PAGE>

Initial Securities, subject in each case to such adjustments as Merrill Lynch in
its discretion shall make to eliminate any sales or purchases of a fractional
number of Option Securities.

     (c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York
10036, or at such other place as shall be agreed upon by the Representatives and
the Trust, at 10:00 A.M. (Eastern time) on the third (fourth, if the pricing
occurs after 4:30 P.M. (Eastern time) on any given day) business day after the
date hereof (unless postponed in accordance with the provisions of Section 10),
or such other time not later than ten business days after such date as shall be
agreed upon by the Representatives and the Trust (such time and date of payment
and delivery being herein called "Closing Time").

     In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Trust, on each Date of Delivery as specified in the notice from the
Representatives to the Trust.

     Payment shall be made to the Trust by wire transfer of immediately
available funds to a bank account designated by the Trust, against delivery to
the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.

     (d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Representatives may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in the City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.

     SECTION 3. Covenants.

     (a) The Trust and the Advisers, jointly and severally, covenant with each
Underwriter as follows:

         (i) Compliance with Securities Regulations and Commission Requests. The
     Trust, subject to Section 3(a)(ii), will comply with the requirements of
     Rule 430A or Rule 434, as applicable, and will notify the Representatives
     immediately, and confirm the notice in writing, (i) when any post-effective
     amendment to the Registration Statement shall become effective, or any
     supplement to the Prospectus or any amended Prospectus shall have been
     filed, (ii) of the receipt of any comments from the Commission, (iii) of
     any request by the Commission for any amendment to the Registration
     Statement or any amendment or supplement to the Prospectus or for
     additional information, and (iv) of the issuance by the Commission of any
     stop order suspending the effectiveness of the Registration Statement or of
     any order preventing or suspending the use of any preliminary prospectus,
     or of the suspension of the qualification of the Securities for offering or
     sale in any jurisdiction, or of the initiation or threatening of any
     proceedings for any of such purposes. The Trust will promptly effect the
     filings necessary

                                       9
<PAGE>

     pursuant to Rule 497 and will take such steps as it deems necessary to
     ascertain promptly whether the form of prospectus transmitted for filing
     under Rule 497 was received for filing by the Commission and, in the event
     that it was not, it will promptly file such prospectus. The Trust will make
     every reasonable effort to prevent the issuance of any stop order, or order
     of suspension or revocation of registration pursuant to Section 8(e) of the
     1940 Act, and, if any such stop order or order of suspension or revocation
     of registration is issued, to obtain the lifting thereof at the earliest
     possible moment.

         (ii) Filing of Amendments. The Trust will give the Representatives
     notice of its intention to file or prepare any amendment to the
     Registration Statement (including any filing under Rule 462(b)), any Term
     Sheet or any amendment, supplement or revision to either the prospectus
     included in the Registration Statement at the time it became effective or
     to the Prospectus, will furnish the Representatives with copies of any such
     documents a reasonable amount of time prior to such proposed filing or use,
     as the case may be, and will not file or use any such document to which the
     Representatives or counsel for the Underwriters shall object.

         (iii) Delivery of Registration Statements. The Trust has furnished or
     will deliver to the Representatives and counsel for the Underwriters,
     without charge, signed copies of the Registration Statement as originally
     filed and of each amendment thereto (including exhibits filed therewith or
     incorporated by reference therein) and signed copies of all consents and
     certificates of experts, and will also deliver to the Representatives,
     without charge, a conformed copy of the Registration Statement as
     originally filed and of each amendment thereto (without exhibits) for each
     of the Underwriters. The copies of the Registration Statement and each
     amendment thereto furnished to the Underwriters will be identical to the
     electronically transmitted copies thereof filed with the Commission
     pursuant to EDGAR, except to the extent permitted by Regulation S-T.

         (iv) Delivery of Prospectuses. The Trust has delivered to each
     Underwriter, without charge, as many copies of each preliminary prospectus
     as such Underwriter reasonably requested, and the Trust hereby consents to
     the use of such copies for purposes permitted by the 1933 Act. The Trust
     will furnish to each Underwriter, without charge, during the period when
     the Prospectus is required to be delivered under the 1933 Act or the 1934
     Act, such number of copies of the Prospectus (as amended or supplemented)
     as such Underwriter may reasonably request. The Prospectus and any
     amendments or supplements thereto furnished to the Underwriters will be
     identical to the electronically transmitted copies thereof filed with the
     Commission pursuant to EDGAR, except to the extent permitted by Regulation
     S-T.

         (v) Continued Compliance with Securities Laws. If at any time when a
     prospectus is required by the 1933 Act to be delivered in connection with
     sales of the Securities, any event shall occur or condition shall exist as
     a result of which it is necessary, in the opinion of counsel for the
     Underwriters or for the Trust, to amend the Registration Statement or amend
     or supplement the Prospectus in order that the Prospectus will not include
     any untrue statements of a material fact or omit to state a material fact
     necessary in order to make the statements therein not misleading in the
     light of the circumstances existing at the time it is delivered to a
     purchaser, or if it shall be necessary, in the opinion of such counsel, at
     any such time to amend the Registration Statement or amend or supplement
     the Prospectus in order to comply with the requirements of the 1933 Act or
     the Rules and Regulations, the Trust will promptly prepare and file with
     the Commission, subject to Section 3(a)(ii), such amendment or supplement
     as may be necessary to correct such statement or omission or to make the
     Registration Statement or the Prospectus comply with such requirements, and
     the Trust will furnish to the Underwriters such number of copies of such
     amendment or supplement as the Underwriters may reasonably request.

                                       10
<PAGE>

         (vi) Blue Sky Qualifications. The Trust will use its best efforts, in
     cooperation with the Underwriters, to qualify the Securities for offering
     and sale under the applicable securities laws of such states and other
     jurisdictions of the United States as the Representatives may designate and
     to maintain such qualifications in effect for a period of not less than one
     year from the later of the effective date of the Registration Statement and
     any Rule 462(b) Registration Statement; provided, however, that the Trust
     shall not be obligated to file any general consent to service of process or
     to qualify as a foreign corporation or as a dealer in securities in any
     jurisdiction in which it is not so qualified or to subject itself to
     taxation in respect of doing business in any jurisdiction in which it is
     not otherwise so subject. In each jurisdiction in which the Securities have
     been so qualified, the Trust will file such statements and reports as may
     be required by the laws of such jurisdiction to continue such qualification
     in effect for a period of not less than one year from the effective date of
     the Registration Statement and any Rule 462(b) Registration Statement.

         (vii) Rule 158. The Trust will timely file such reports pursuant to the
     1934 Act as are necessary in order to make generally available to its
     securityholders as soon as practicable an earnings statement for the
     purposes of, and to provide the benefits contemplated by, the last
     paragraph of Section 11(a) of the 1933 Act.

         (viii) Use of Proceeds. The Trust will use the net proceeds received by
     it from the sale of the Securities in the manner specified in the
     Prospectus under "Use of Proceeds".

         (ix) Listing. The Trust will use its reasonable best efforts to effect
     the listing of the Securities on the AMEX, subject to notice of issuance,
     concurrently with the effectiveness of the Registration Statement.

         (x) Restriction on Sale of Securities. During a period of 180 days from
     the date of the Prospectus, the Trust will not, without the prior written
     consent of Merrill Lynch, (A) directly or indirectly, offer, pledge, sell,
     contract to sell, sell any option or contract to purchase, purchase any
     option or contract to sell, grant any option, right or warrant to purchase
     or otherwise transfer or dispose of Common Shares or any securities
     convertible into or exercisable or exchangeable for Common Shares or file
     any registration statement under the 1933 Act with respect to any of the
     foregoing or (B) enter into any swap or any other agreement or any
     transaction that transfers, in whole or in part, directly or indirectly,
     the economic consequence of ownership of the Common Shares, whether any
     such swap or transaction described in clause (A) or (B) above is to be
     settled by delivery of Common Shares or such other securities, in cash or
     otherwise. The foregoing sentence shall not apply to (1) the Securities to
     be sold hereunder or (2) Common Shares issued pursuant to any dividend
     reinvestment plan.

         (xi) Reporting Requirements. The Trust, during the period when the
     Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
     will file all documents required to be filed with the Commission pursuant
     to the 1940 Act and the 1934 Act within the time periods required by the
     1940 Act and the Rules and Regulations and the 1934 Act and the rules and
     regulations of the Commission thereunder, respectively.

         (xii) Subchapter M. The Trust will comply with the requirements of
     Subchapter M of the Code to qualify as a regulated investment company under
     the Code.

         (xiii) No Manipulation of Market for Securities. The Trust will not (a)
     take, directly or indirectly, any action designed to cause or to result in,
     or that might reasonably be expected to constitute, the stabilization or
     manipulation of the price of any security of the Trust to facilitate the
     sale or resale of the Securities, and (b) until the Closing Date, or the
     Date of Delivery, if any, (i) sell, bid for or purchase the Securities or
     pay any person any compensation for soliciting

                                       11
<PAGE>

     purchases of the Securities or (ii) pay or agree to pay to any person any
     compensation for soliciting another to purchase any other securities of the
     Trust .

         (xiv) Rule 462(b) Registration Statement. If the Trust elects to rely
     upon Rule 462(b), the Trust shall file a Rule 462(b) Registration Statement
     with the Commission in compliance with Rule 462(b) by 10:00 P.M.,
     Washington, D.C. time, on the date of this Agreement, and the Trust shall
     at the time of filing either pay to the Commission the filing fee for the
     Rule 462(b) Registration Statement or give irrevocable instructions for the
     payment of such fee pursuant to Rule 111(b) under the 1933 Act.

     SECTION 4. Payment of Expenses.

     (a) Expenses. The Trust will pay all expenses incident to the performance
of its obligations under this Agreement, including (i) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters, including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the Underwriters, (iv) the fees and disbursements of the Trust's
counsel, accountants and other advisors, (v) the qualification of the Securities
under securities laws in accordance with the provisions of Section 3(a)(vi)
hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary prospectus,
Prospectus and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities, (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, (x) the
fees and expenses incurred in connection with the listing of the Securities on
the AMEX and (xi) the printing of any sales material. BAI has agreed to pay
organizational expenses and offering costs (other than sales load) of the Trust
that exceed $.03 per Common Share.

     (b) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section 9(a)
hereof, the Trust and the Advisers, jointly and severally, agree that they shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.

     SECTION 5. Conditions of Underwriters' Obligations.

     The obligations of the several Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Trust and the Advisers
contained in Section 1 hereof or in certificates of any officer of the Trust or
the Advisers delivered pursuant to the provisions hereof, to the performance by
the Trust and the Advisers of their respective covenants and other obligations
hereunder, and to the following further conditions:

     (a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act, no notice or order pursuant
to Section 8(e) of the 1940 Act shall have been issued, and no proceedings with
respect to either shall have been initiated or threatened by the Commission, and
any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. A prospectus containing the Rule 430A Information shall have been
filed

                                       12
<PAGE>

with the Commission in accordance with Rule 497 (or a post-effective amendment
providing such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Trust has elected to
rely upon Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 497.

     (b) Opinion of Counsel for Trust and the Advisers. At Closing Time, the
Representatives shall have received the favorable opinions, dated as of Closing
Time, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Trust, and
Dan Wachtler, counsel for the Advisers, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies of such
letters for each of the other Underwriters substantially to the effect set forth
in Exhibit A hereto and to such further effect as counsel to the Underwriters
may reasonably request.

     (c) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Clifford Chance Rogers & Wells LLP, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the other
Underwriters with respect to the matters set forth in clauses (A) (i), (ii),
(vi), (vii) (solely as to preemptive or other similar rights arising by
operation of law or under the charter or by-laws of the Trust), (viii) through
(x), inclusive, (xii), (xiv) (solely as to the information in the Prospectus
under "Description of Shares") and the last paragraph of Exhibit A hereto. In
giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York and the
federal law of the United States, upon the opinions of counsel satisfactory to
the Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Trust and certificates of public officials.

     (d) Officers' Certificates. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Trust, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of a duly authorized officer
of the Trust and of the chief financial or chief accounting officer of the Trust
and of the President or a Vice President or Managing Director of each of the
Advisers, dated as of Closing Time, to the effect that (i) there has been no
such material adverse change, (ii) the representations and warranties in
Sections 1(a) and (b) hereof are true and correct with the same force and effect
as though expressly made at and as of Closing Time, (iii) each of the Trust and
the Advisers, respectively, has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to Closing Time,
and (iv) no stop order suspending the effectiveness of the Registration
Statement, or order of suspension or revocation of registration pursuant to
Section 8(e) of the 1940 Act, has been issued and no proceedings for any such
purpose have been instituted or are pending or are contemplated by the
Commission.

     (e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from Deloitte & Touche LLP a
letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.

     (f) Bring-down Comfort Letter. At Closing Time, the Representatives shall
have received from Deloitte & Touche LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.

                                       13
<PAGE>

     (g) Approval of Listing. At Closing Time, the Securities shall have been
approved for listing on the AMEX, subject only to official notice of issuance.

     (h) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.

     (i) Execution of Additional Compensation Agreement. At Closing Time,
Merrill Lynch shall have received the Additional Compensation Agreement, dated
as of the Closing Date, as executed by BAI.

     (j) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Trust contained herein and the statements in any certificates furnished
by the Trust hereunder shall be true and correct as of each Date of Delivery
and, at the relevant Date of Delivery, the Representatives shall have received:

         (i) Officers' Certificates. Certificates, dated such Date of Delivery,
     of a duly authorized officer of the Trust and of the chief financial or
     chief accounting officer of the Trust and of the President or a Vice
     President or Managing Director of each of the Advisers confirming that the
     information contained in the certificate delivered by each of them at the
     Closing Time pursuant to Section 5(d) hereof remains true and correct as of
     such Date of Delivery.

         (ii) Opinions of Counsel for the Trust and the Advisers. The favorable
     opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Trust,
     and Dan Wachtler, counsel for the Advisers, in form and substance
     satisfactory to counsel for the Underwriters, dated such Date of Delivery,
     relating to the Option Securities to be purchased on such Date of Delivery
     and otherwise to the same effect as the opinion required by Section 5(b)
     hereof.

         (iii) Opinion of Counsel for the Underwriters. The favorable opinion of
     Clifford Chance Rogers & Wells LLP, counsel for the Underwriters, dated
     such Date of Delivery, relating to the Option Securities to be purchased on
     such Date of Delivery and otherwise to the same effect as the opinion
     required by Section 5(c) hereof.

         (iv) Bring-down Comfort Letter. A letter from Deloitte & Touche LLP, in
     form and substance satisfactory to the Representatives and dated such Date
     of Delivery, substantially in the same form and substance as the letter
     furnished to the Representatives pursuant to Section 5(f) hereof, except
     that the "specified date" in the letter furnished pursuant to this
     paragraph shall be a date not more than five days prior to such Date of
     Delivery.

     (k) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Trust and the Advisers in connection with the organization and
registration of the Trust under the 1940 Act and the issuance and sale of the
Securities as herein contemplated shall be satisfactory in form and substance to
the Representatives and counsel for the Underwriters.

     (l) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the Trust at
any time at or prior to Closing Time or such Date of Delivery, as the case may
be, and such termination shall be without liability of any party to any other
party except as

                                       14
<PAGE>

provided in Section 4 and except that Sections 1, 6, 7, 8 and 13 shall survive
any such termination and remain in full force and effect.

SECTION 6. Indemnification.

     (a) Indemnification of Underwriters. The Trust and the Advisers, jointly
and severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, as follows:

         (i) against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, arising out of any untrue statement or alleged
     untrue statement of a material fact contained in the Registration Statement
     (or any amendment thereto), including the Rule 430A Information and the
     Rule 434 Information, if applicable, or the omission or alleged omission
     therefrom of a material fact required to be stated therein or necessary to
     make the statements therein not misleading or arising out of any untrue
     statement or alleged untrue statement of a material fact included in any
     preliminary prospectus or the Prospectus (or any amendment or supplement
     thereto), or the omission or alleged omission therefrom of a material fact
     necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading;

         (ii) against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, to the extent of the aggregate amount paid in
     settlement of any litigation, or any investigation or proceeding by any
     governmental agency or body, commenced or threatened, or of any claim
     whatsoever based upon any such untrue statement or omission, or any such
     alleged untrue statement or omission; provided that (subject to Section
     6(e) below) any such settlement is effected with the written consent of the
     Trust; and

         (iii) against any and all expense whatsoever, as incurred (including
     the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
     incurred in investigating, preparing or defending against any litigation,
     or any investigation or proceeding by any governmental agency or body,
     commenced or threatened, or any claim whatsoever based upon any such untrue
     statement or omission, or any such alleged untrue statement or omission, to
     the extent that any such expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Trust or the
Advisers by any Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).

     (b) Indemnification of Trust, Advisers, Trustees, Directors and Officers.
Each Underwriter severally agrees to indemnify and hold harmless the Trust and
the Advisers, their respective trustees and directors, each of the Trust's
officers who signed the Registration Statement, and each person, if any, who
controls the Trust or the Advisers within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act against any and all loss, liability, claim,
damage and expense described in the indemnity contained in subsection (a) of
this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Trust or the Advisers by
such Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).

                                       15
<PAGE>

     (c) Indemnification for Marketing Materials. In addition to the foregoing
indemnification, the Trust and the Advisers also, jointly and severally, agree
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss, liability, claim, damage
and expense described in the indemnity contained in Section 6(a), as limited by
the proviso set forth therein, with respect to any sales material.

     (d) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Trust and the Advisers. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.

     (e) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.

     SECTION 7. Contribution.

     If the indemnification provided for in Section 6 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Trust and the Advisers on the one hand and the
Underwriters on the other hand from the offering of the Securities pursuant to
this Agreement or (ii) if the allocation provided by clause (i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Trust and the Advisers on the one hand and of the Underwriters on

                                       16
<PAGE>

the other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.

     The relative benefits received by the Trust and the Advisers on the one
hand and the Underwriters on the other hand in connection with the offering of
the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Trust and the total underwriting discount received by the Underwriters
(whether from the Trust or otherwise), in each case as set forth on the cover of
the Prospectus, or, if Rule 434 is used, the corresponding location on the Term
Sheet, bear to the aggregate initial public offering price of the Securities as
set forth on such cover.

     The relative fault of the Trust and the Advisers on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Trust or the Advisers or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.

     The Trust, the Advisers and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.

     Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.

     No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

     For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each trustee of the Trust and each director of the Advisers, respectively, each
officer of the Trust who signed the Registration Statement, and each person, if
any, who controls the Trust or the Advisers, within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Trust and the Advisers, respectively. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.

     SECTION 8. Representations, Warranties and Agreements to Survive Delivery.

     All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Trust or the Advisers submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Trust or the Advisers, and shall survive delivery of the
Securities to the Underwriters.

                                       17
<PAGE>

     SECTION 9. Termination of Agreement.

     (a) Termination; General. The Representatives may terminate this Agreement,
by notice to the Trust, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus (exclusive of any
supplement thereto), any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Trust or the Advisers, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States or the international financial markets,
any outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable or inadvisable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in the Common Shares of the
Trust has been suspended or materially limited by the Commission or the AMEX, or
if trading generally on the New York Stock Exchange or the AMEX or in the Nasdaq
National Market has been suspended or materially limited, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices have been
required, by any of said exchanges or by such system or by order of the
Commission, the NASD or any other governmental authority, or a material
disruption has occurred in commercial banking or securities settlement or
clearance services in the United States, or (iv) if a banking moratorium has
been declared by either Federal or New York authorities.

     (b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7, 8 and 13 shall survive such termination and remain in full force and effect.

     SECTION 10. Default by One or More of the Underwriters.

     If one or more of the Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the Representatives shall
have the right, within 24 hours thereafter, to make arrangements for one or more
of the non-defaulting Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:

     (a) if the number of Defaulted Securities does not exceed 10% of the number
of Securities to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or

     (b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to any
Date of Delivery which occurs after the Closing Time, the obligation of the
Underwriters to purchase and of the Trust to sell the Option Securities to be
purchased and sold on such Date of Delivery shall terminate without liability on
the part of any non-defaulting Underwriter.

     No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.

     In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Trust to sell the relevant Option Securities,
as the case may be, either the Representatives or the Trust shall have the right
to postpone Closing Time or the relevant Date of Delivery, as the case may be,
for a period not exceeding seven days in order to effect any

                                       18
<PAGE>

required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 10.

     SECTION 11. Notices.

     All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to the
Representatives, c/o Merrill Lynch & Co., North Tower, World Financial Center,
New York, New York 10080, attention of Equity Capital Markets; and notices to
the Trust or the Advisers shall be directed, as appropriate, to the office of
BlackRock Financial Management, Inc. at 345 Park Avenue, New York, New York
10154, Attention: Ralph L. Schlosstein.

     SECTION 12. Parties.

     This Agreement shall each inure to the benefit of and be binding upon the
Underwriters, the Trust, the Advisers and their respective partners and
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters, the Trust, the Advisers and their respective successors and the
controlling persons and officers, trustees and directors referred to in Sections
6 and 7 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriters, the Trust, the
Advisers and their respective partners and successors, and said controlling
persons and officers, trustees and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.

     SECTION 13. GOVERNING LAW AND TIME.

     THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SAID STATE. UNLESS OTHERWISE EXPLICITLY PROVIDED, SPECIFIED TIMES OF DAY
REFER TO NEW YORK CITY TIME.

     SECTION 14. Effect of Headings.

     The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.





                                       19
<PAGE>

     If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among the
Underwriters, the Trust and the Advisers in accordance with its terms.

                                          Very truly yours,


                                          BlackRock Municipal Income Trust II

                                          By:
                                             --------------------------------
                                             Name:
                                             Title:


                                          BlackRock Advisors, Inc.

                                          By:
                                             --------------------------------
                                             Name:
                                             Title:


                                          BlackRock Financial Management, Inc.

                                          By:
                                             --------------------------------
                                             Name:
                                             Title:

CONFIRMED AND ACCEPTED,
     as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
          INCORPORATED
UBS WARBURG

By: MERRILL LYNCH, PIERCE, FENNER & SMITH
               INCORPORATED

By:
   ---------------------------------
   Authorized Signatory


For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.



                                       20
<PAGE>

                                   SCHEDULE A

                                                                 Number of
                  Name of Underwriter                        Initial Securities
                  -------------------                        ------------------

Merrill Lynch, Pierce, Fenner & Smith
          Incorporated.....................................       [ ]
UBS Warburg, LLC...........................................       [ ]
                                                                  ---
     Total.................................................       [ ]
                                                                  ===



                                     Sch A-1
<PAGE>

                                   SCHEDULE B

                       BLACKROCK MUNICIPAL INCOME TRUST II
                    [ ] Common Shares of Beneficial Interest
                           (Par Value $.001 Per Share)

     1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $15.00.

     2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $14.325, being an amount equal to the initial
public offering price set forth above less $0.675 per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the over-allotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the Trust
and payable on the Initial Securities but not payable on the Option Securities.









                                     Sch B-1


<PAGE>

                                                                       Exhibit A

                    FORM OF OPINION OF TRUST'S AND ADVISERS'
                       COUNSEL TO BE DELIVERED PURSUANT TO
                                  SECTION 5(b)

(A)  With respect to the Trust:

         (i) The Trust has been duly organized and is validly existing as a
     business trust in good standing under the laws of the State of Delaware.

         (ii) The Trust has business trust power and authority to own, lease and
     operate its properties and to conduct its business as described in the
     Prospectus and to enter into and perform its obligations under the Purchase
     Agreement.

         (iii) The Trust is duly qualified as a foreign business trust to
     transact business and is in good standing in each other jurisdiction in
     which such qualification is required, whether by reason of the ownership or
     leasing of property or the conduct of business, except where the failure so
     to qualify or to be in good standing would not result in a Material Adverse
     Effect.

         (iv) To the best of our knowledge, the Trust does not have any
     subsidiaries.

         (v) The authorized, issued and outstanding shares of beneficial
     interest of the Trust is as set forth in the Prospectus under the caption
     "Description of Shares -- Common Shares" (except for subsequent issuances,
     if any, pursuant to the Purchase Agreement); all issued and outstanding
     shares of beneficial interest of the Trust have been duly authorized and
     validly issued and are fully paid and non-assessable, except as provided
     for in the Trust's declaration of trust, and have been offered and sold or
     exchanged by the Trust in compliance with all applicable laws (including,
     without limitation, federal and state securities laws); the Common Shares
     conform as to legal matters to all statements relating thereto contained in
     the Prospectus and such description conforms to the rights set forth in the
     instruments defining the same; and none of the outstanding shares of
     beneficial interest of the Trust was issued in violation of the preemptive
     or other similar rights of any securityholder of the Trust.

         (vi) The Securities to be purchased by the Underwriters from the Trust
     have been duly authorized for issuance and sale to the Underwriters
     pursuant to the Purchase Agreement and, when issued and delivered by the
     Trust pursuant to the Purchase Agreement against payment of the
     consideration set forth in the Purchase Agreement, will be validly issued
     and fully paid and non-assessable, except as provided for in the Trust's
     declaration of trust, and no holder of the Securities is or will be subject
     to personal liability by reason of being such a holder.

         (vii) The issuance of the Securities is not subject to preemptive or
     other similar rights of any securityholder of the Trust.

         (viii) The Purchase Agreement has been duly authorized, executed and
     delivered by the Trust.

         (ix) The Registration Statement, including any Rule 462(b) Registration
     Statement, has been declared effective under the 1933 Act; any required
     filing of the Prospectus pursuant to Rule 497(c) or Rule 497(h) has been
     made in the manner and within the time period required by Rule 497; and, to
     the best of our knowledge, no stop order suspending the effectiveness of
     the Registration Statement or any Rule 462(b) Registration Statement has
     been issued under the 1933 Act, and, to the best of our knowledge, no order
     of suspension or revocation of registration

<PAGE>

     pursuant to Section 8(e) of the 1940 Act has been issued, and no
     proceedings for any such purpose have been instituted or are pending or
     threatened by the Commission.

         (x) The Registration Statement, including any Rule 462(b) Registration
     Statement, the Rule 430A Information and the Rule 434 Information, as
     applicable, the Prospectus and each amendment or supplement to the
     Registration Statement and Prospectus as of their respective effective or
     issue dates (other than the financial statements and supporting schedules
     included therein or omitted therefrom, as to which we need express no
     opinion), and the notification on Form N-8A complied as to form in all
     material respects with the requirements of the 1933 Act, the 1940 Act and
     the Rules and Regulations.

         (xi) If Rule 434 has been relied upon, the Prospectus was not
     "materially different," as such term is used in Rule 434, from the
     prospectus included in the Registration Statement at the time it became
     effective.

         (xii) The form of certificate used to evidence the Common Shares
     complies in all material respects with all applicable statutory
     requirements, with any applicable requirements of the declaration of trust
     and by-laws of the Trust and the requirements of the American Stock
     Exchange.

         (xiii) To the best of our knowledge, there is not pending or threatened
     any action, suit, proceeding, inquiry or investigation, to which the Trust
     is a party, or to which the property of the Trust is subject, before or
     brought by any court or governmental agency or body, domestic or foreign,
     which might reasonably be expected to result in a Material Adverse Effect,
     or which might reasonably be expected to materially and adversely affect
     the properties or assets of the Trust or the consummation of the
     transactions contemplated in the Purchase Agreement or the performance by
     the Trust of its obligations thereunder.

         (xiv) The information in the Prospectus under "Description of Shares"
     and "Tax Matters" and in the Registration Statement under Item 29
     (Indemnification), to the extent that it constitutes matters of law,
     summaries of legal matters, the Trust's declaration of trust and by-laws or
     legal proceedings, or legal conclusions, has been reviewed by us and is
     correct in all material respects.

         (xv) Each of the Management Agreement, the Sub-Advisory Agreement, the
     Custodian Agreement, the Transfer Agency Agreement and the Purchase
     Agreement comply in all material respects with all applicable provisions of
     the 1940 Act, Advisers Act, the Rules and Regulations and the Advisers Act
     Rules and Regulations.

         (xvi) The Trust is duly registered with the Commission under the 1940
     Act as a closed-end diversified management investment company; and, to the
     best of our knowledge, no order of suspension or revocation of such
     registration has been issued or proceedings therefor initiated or
     threatened by the Commission.

         (xvii) To the best of our knowledge, no person is serving as an
     officer, trustee or investment adviser of the Trust except in accordance
     with the 1940 Act and the Rules and Regulations and the Investment Advisers
     Act and the Advisers Act Rules and Regulations. Except as disclosed in the
     Registration Statement and Prospectus (or any amendment or supplement to
     either of them), to the best of our knowledge, no trustee of the Trust is
     an "interested person" (as defined in the 1940 Act) of the Trust or an
     "affiliated person" (as defined in the 1940 Act) of an Underwriter.

         (xviii) There are no statutes or regulations that are required to be
     described in the Prospectus that are not described as required.

                                      A-2
<PAGE>

         (xix) All descriptions in the Registration Statement of contracts and
     other documents to which the Trust is a party are accurate in all material
     respects. To the best of our knowledge, there are no franchises, contracts,
     indentures, mortgages, loan agreements, notes, leases or other instruments
     required to be described or referred to in the Registration Statement or to
     be filed as exhibits thereto other than those described or referred to
     therein or filed or incorporated by reference as exhibits thereto, and the
     descriptions thereof or references thereto are correct in all material
     respects.

         (xx) To the best of our knowledge, the Trust is not in violation of its
     declaration of trust or by-laws and no default by the Trust exists in the
     due performance or observance of any material obligation, agreement,
     covenant or condition contained in any contract, indenture, mortgage, loan
     agreement, note, lease or other agreement or instrument that is described
     or referred to in the Registration Statement or the Prospectus or filed or
     incorporated by reference as an exhibit to the Registration Statement.

         (xxi) No filing with, or authorization, approval, consent, license,
     order, registration, qualification or decree of, any court or governmental
     authority or agency (other than under the 1933 Act, the 1934 Act, the 1940
     Act and the Rules and Regulations, which have been obtained, or as may be
     required under the securities or blue sky laws of the various states, as to
     which we need express no opinion) is necessary or required in connection
     with the due authorization, execution and delivery of the Purchase
     Agreement or for the offering, issuance or sale of the Securities or the
     consummation of the transactions contemplated by this Agreement.

         (xxii) The execution, delivery and performance of the Purchase
     Agreement and the consummation of the transactions contemplated in the
     Purchase Agreement and in the Registration Statement (including the
     issuance and sale of the Securities and the use of the proceeds from the
     sale of the Securities as described in the Prospectus under the caption
     "Use of Proceeds") and compliance by the Trust with its obligations under
     the Purchase Agreement do not and will not, whether with or without the
     giving of notice or lapse of time or both, conflict with or constitute a
     breach of, or default or Repayment Event (as defined in Section 1(a)(xii)
     of the Purchase Agreement) under or result in the creation or imposition of
     any lien, charge or encumbrance upon any property or assets of the Trust
     pursuant to any contract, indenture, mortgage, deed of trust, loan or
     credit agreement, note, lease or any other agreement or instrument, known
     to us, to which the Trust is a party or by which it or any of them may be
     bound, or to which any of the property or assets of the Trust is subject,
     nor will such action result in any violation of the provisions of the
     charter or by-laws of the Trust, or any applicable law, statute, rule,
     regulation, judgment, order, writ or decree, known to us, of any
     government, government instrumentality or court, domestic or foreign,
     having jurisdiction over the Trust or any of its properties, assets or
     operations.

         (xxiii) The Purchase Agreement, the Management Agreement, the
     Sub-Advisory Agreement, the Custodian Agreement and the Transfer Agency
     Agreement have each been duly authorized by all requisite action on the
     part of the Trust, executed and delivered by the Trust, as of the dates
     noted therein. Assuming due authorization, execution and delivery by the
     other parties thereto with respect to the Custodian Agreement and the
     Transfer Agency Agreement, each of the Management Agreement, the
     Sub-Advisory Agreement, the Custodian Agreement and the Transfer Agency
     Agreement constitutes a valid and binding agreement of the Trust,
     enforceable in accordance with its terms, except as affected by bankruptcy,
     insolvency, fraudulent conveyance, reorganization, moratorium and other
     similar laws relating to or affecting creditors' rights generally, general
     equitable principles (whether considered in a proceeding in equity or at
     law) and an implied covenant of good faith and fair dealing.

(B)  With respect to the Advisers:

                                      A-3
<PAGE>


         (i) Each Adviser has been duly organized and is validly existing as a
     corporation in good standing under the laws of the State of Delaware.

         (ii) Each Adviser has full corporate power and authority to own, lease
     and operate its properties and to conduct its business as described in the
     Prospectus and to enter into and perform its obligations under the Purchase
     Agreement.

         (iii) Each Adviser is duly qualified as a foreign corporation to
     transact business and is in good standing in each other jurisdiction in
     which such qualification is required, whether by reason of the ownership or
     leasing of property or the conduct of business, except where the failure to
     so qualify would not result in a Material Adverse Effect.

         (iv) Each Adviser is duly registered with the Commission as an
     investment adviser under the Advisers Act and is not prohibited by the
     Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the
     Rules and Regulations from acting under the Management Agreement for the
     Trust as contemplated by the Prospectus.

         (v) The Purchase Agreement, the Management Agreement, the Additional
     Compensation Agreement, and the Sub-Advisory Agreement have been duly
     authorized, executed and delivered by the respective Adviser, and the
     Management Agreement, the Additional Compensation Agreement and the
     Sub-Advisory Agreement each constitutes a valid and binding obligation of
     the respective Adviser, enforceable in accordance with its terms, except as
     affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
     moratorium and other similar laws relating to or affecting creditors'
     rights generally and general equitable principles (whether considered in a
     proceeding in equity or at law).

         (vi) To the best of our knowledge, there is not pending or threatened
     any action, suit, proceeding, inquiry or investigation, to which the
     Advisers are a party, or to which the property of the Advisers is subject,
     before or brought by any court or governmental agency or body, domestic or
     foreign, which might reasonably be expected to result in any material
     adverse change in the condition, financial or otherwise, in the earnings,
     business affairs or business prospects of the Advisers, materially and
     adversely affect the properties or assets of the Advisers or materially
     impair or adversely affect the ability of the Advisers to function as an
     investment adviser or perform its obligations under the Management
     Agreement or the Sub-Advisory Agreement, or which is required to be
     disclosed in the Registration Statement or the Prospectus.

         (vii) To the best of our knowledge, there are no franchises, contracts,
     indentures, mortgages, loan agreements, notes, leases or other instruments
     required to be described or referred to in the Registration Statement or to
     be filed as exhibits thereto other than those described or referred to
     therein or filed or incorporated by reference as exhibits thereto, and the
     descriptions thereof or references thereto are correct in all material
     respects.

         (viii) To the best of our knowledge, each Adviser is not in violation
     of its certificate of incorporation, by-laws or other organizational
     documents and no default by the Advisers exists in the due performance or
     observance of any material obligation, agreement, covenant or condition
     contained in any contract, indenture, mortgage, loan agreement, note, lease
     or other agreement or instrument that is described or referred to in the
     Registration Statement or the Prospectus or filed or incorporated by
     reference as an exhibit to the Registration Statement.

         (ix) No filing with, or authorization, approval, consent, license,
     order, registration, qualification or decree of, any court or governmental
     authority or agency, domestic or foreign (other than under the 1933 Act,
     the 1940 Act and the Rules and Regulations, which have been obtained, or as
     may be required under the securities or blue sky laws of the various
     states, as to

                                      A-4
<PAGE>

     which we need express no opinion) is necessary or required in connection
     with the due authorization, execution and delivery of the Purchase
     Agreement.

         (x) The execution, delivery and performance of the Purchase Agreement
     and the consummation of the transactions contemplated in the Purchase
     Agreement and in the Registration Statement and compliance by the Advisers
     with their obligations under the Purchase Agreement do not and will not,
     whether with or without the giving of notice or lapse of time or both,
     conflict with or constitute a breach of, or default or Repayment Event (as
     defined in Section 1(a)(xii) of the Purchase Agreement) under or result in
     the creation or imposition of any lien, charge or encumbrance upon any
     property or assets of the Advisers pursuant to any contract, indenture,
     mortgage, deed of trust, loan or credit agreement, note, lease or any other
     agreement or instrument, known to us, to which the Advisers is a party or
     by which it or any of them may be bound, or to which any of the property or
     assets of the Advisers is subject (except for such conflicts, breaches or
     defaults or liens, charges or encumbrances that would not have a Material
     Adverse Effect), nor will such action result in any violation of the
     provisions of the charter or by-laws of the Advisers, or any applicable
     law, statute, rule, regulation, judgment, order, writ or decree, known to
     us, of any government, government instrumentality or court, domestic or
     foreign, having jurisdiction over the Advisers or any of its properties,
     assets or operations.

     In addition, we have participated in the preparation of the Registration
Statement and the Prospectus and participated in discussions with certain
officers, trustees and employees of the Trust, representatives of Deloitte &
Touche LLP, the independent accountants who examined the statement of assets and
liabilities of the Trust included or incorporated by reference in the
Registration Statement and the Prospectus, and you and your representatives and
we have reviewed certain Trust records and documents. While we have not
independently verified and are not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the information
contained in the Registration Statement and the Prospectus, except to the extent
necessary to enable us to give the opinions with respect to the Trust in
paragraphs (A)(v), (xiv) and (xix), on the basis of such participation and
review, nothing has come to our attention that would lead us to believe that the
Registration Statement (except for financial statements, supporting schedules
and other financial data included therein or omitted therefrom and for
statistical information derived from such financial statements, supporting
schedules or other financial data, as to which we do not express any belief), at
the time such Registration Statement became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus (except for financial statements, supporting schedules and
other financial data included therein or omitted therefrom and for statistical
information derived from such financial statements, supporting schedules or
other financial data, as to which we do not express any belief), at the time the
Prospectus was issued, or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

                                       A-5

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(I)
<SEQUENCE>9
<FILENAME>file008.txt
<DESCRIPTION>FORM OF DEFERRED COMPENSATION PLAN
<TEXT>
<PAGE>


                                                                ANNEX A

                                                         ATTORNEY WORK PRODUCT
                                                     PRIVILEGED AND CONFIDENTIAL


                                 BLACKROCK FUNDS
                           DEFERRED COMPENSATION PLAN

     The Board of Trustees of each of the participating management investment
companies listed on Schedule A (as such schedule may be amended from time to
time) attached hereto and made a part hereof (each a "Participating Fund" and
collectively, the "Participating Funds"), hereby establishes this BlackRock
Funds Deferred Compensation Plan, effective as of February 24, 2000 (the
"Plan"). The purpose of the Plan is to provide eligible trustees of
Participating Funds, the opportunity to defer the receipt of all or a portion of
the amounts payable to them as compensation for services rendered as members of
the Board of Trustees of the respective funds.

1.   DEFINITIONS

     1.1 Definitions. Unless a different meaning is plainly implied by the
context, the following terms as used in the Plan shall have the following
meanings:

     The term "Advisor" shall mean BlackRock Advisors, Inc. and its affiliates.

     The term "Board" shall mean the Board of Trustees of each respective
Participating Fund.

     The term "Deferral Account" shall mean a book entry account maintained to
reflect an Eligible Trustee's compensation deferred as provided in Section 2.4
of the Plan.

     The term "Eligible Investment" shall mean a fund managed by the Advisor and
designated by the Participating Funds from time to time as an investment medium
that may be chosen by an Eligible Trustee in which such Trustee's Deferral
Account may be deemed to be invested, provided that any Eligible Investment that
is a term trust and also the Participating Fund from which an Eligible Trustee's
deferred compensation is paid, is not an Eligible Investment that may be chosen
by such Trustee as an investment medium for such deferred compensation.


<PAGE>



     The term "Eligible Trustee" shall mean a member of the Board who is not an
"interested person" of a Participating Fund or of BlackRock, as such term is
defined under Section 2(a)(1) of the Investment Company Act of 1940, as amended
(the "1940 Act").

     The term "Exchange" shall mean the principal stock exchange on which common
shares of an Eligible Investment trade.

     The term "Fair Market Value" shall mean, with respect to a date, on a per
share basis, the closing price of an Eligible Investment, as reported on the
consolidated tape of the Exchange on such date or, if the Exchange is closed on
such date, the next succeeding date on which it is open.

     The term "Participating Funds" shall mean those registered investment
management companies for which the Advisor serves or will serve in the future as
investment manager, whether existing at the time of adoption of the Plan or
established at a later date, designated by each respective Board as a fund from
which compensation may be deferred by an Eligible Trustee. Participating Funds
shall be listed on Schedule A to the Plan, provided that failure to list a
Participating Fund on Schedule A shall not affect its status as a Participating
Fund.

     The term "Valuation Date" shall mean the last business day of each calendar
quarter and any other day upon which the Participating Fund makes valuations of
the Deferral Accounts.

     1.2 Trustees and Directors. Where appearing in the Plan, "Trustee" shall
also refer to "Director" and "Board of Trustees" shall also refer to "Board of
Directors."

     1.3 Separate Plan for each Participating Fund. The Plan is drafted, and
shall be construed, as a separate Plan between each Eligible Trustee and each
Participating Fund.

2.   DEFERRALS

     2.1 Deferral Elections.

     (a) An Eligible Trustee participating in the Plan (a "Participant") may
elect to defer receipt of all, or a specified dollar amount or percentage of the
compensation (including fees for attending meetings) earned by


                                       2
<PAGE>

such Eligible Trustee for serving as a member of the Board or as a member of any
committee (or subcommittee of such committee) of the Board of which such
Eligible Trustee from time to time may be a member (the "Deferred
Compensation"). Expenses of attending meetings of the Board, committees of the
Board or subcommittees of such committees or other reimbursable expenses may not
be deferred.

     (b) Deferrals shall be withheld from each payment of compensation by the
Participating Fund to the Participant based upon the percentage or dollar amount
elected by the Participant under Section 2.3 hereof.

     (c) The Participant may cancel or modify the amount of such Participant's
Deferred Compensation on a prospective basis by submitting to the Participating
Fund a revised election to defer form. Such change will be effective as of the
first day of the calendar year following the date such revision is submitted.

     2.2 Manner of Election.

     (a) An Eligible Trustee shall elect to participate in the Plan and defer
compensation by completing, signing and filing with the Participating Fund an
election to defer in such written form as may be prescribed (the "Election").
The Election shall include:

               (i)  The amount or percentage of compensation to be deferred;

               (ii) The method of payment of Deferred Compensation (i.e., in a
                    lump sum or the number of installments);

              (iii) The time or times of payment of the Deferred Compensation;

               (iv) The Eligible Investments selected by the Trustee for the
                    Deferred Compensation; and


                                       3
<PAGE>


               (v)  Any beneficiary(ies) designated by the Eligible Trustee
                    pursuant to Section 3.2 of the Plan.

          (b)  Each Eligible Trustee's receipt of compensation shall be deferred
               until the first to occur of any of the following events:

               (i)  The date which such Eligible Trustee ceases to be a Trustee
                    of the Participating Fund;

               (ii) A date selected by such Eligible Trustee as specified on the
                    Trustee's Election;

              (iii) A date on which some future event occurs which is not
                    within the Eligible Trustee's control, as specified on the
                    Trustee's Election;

               (iv) Upon the death of the Eligible Trustee;

               (v)  In the sole discretion of the Participating Fund, upon
                    disability or financial hardship of the Eligible Trustee;

               (vi) The effective date of the sale or liquidation of the
                    Participating Fund or to comply with applicable law; or

              (vii) Upon termination of the Plan in accordance with Section 4.5
                    hereof.

     2.3 Period of Deferrals.

     (a) Any Election by an Eligible Trustee pursuant to the Plan shall be
irrevocable from and after the date on which such Election is filed with the
Participating Fund and shall be effective to defer compensation of an Eligible
Trustee as follows:

                                       4
<PAGE>



               (i)  As to any Eligible Trustee in office on the effective date
                    of the Plan who files an Election no later than thirty (30)
                    days after such effective date, such Election shall be
                    effective to defer any compensation which is earned by the
                    Eligible Trustee after the date of the filing of the
                    Election, or the effective date of the Plan, if later;

               (ii) As to any individual who becomes an Eligible Trustee after
                    the effective date of the Plan and who files an Election
                    within thirty (30) days of becoming an Eligible Trustee,
                    such Election shall be effective to defer any compensation
                    which is earned by the Eligible Trustee after the date of
                    the filing of the Election, or the effective date of the
                    Plan, if later; and

               (iii) As to any other Eligible Trustee, the Election shall be
                    effective to defer any compensation that is earned from and
                    after the first day of the calendar year next succeeding the
                    calendar year in which the Election is filed.

     (b) A Participant may revoke such Participant's Election at any time by
filing a written notice of termination with the Participating Fund. Any
compensation earned by the Participant after receipt of the notice by the
Participating Fund shall be paid currently and no longer deferred as provided in
the Plan.

     (c) A Participant who has filed a notice to terminate deferral of
compensation may thereafter again file a new Election pursuant to Section 2.2(a)
hereof effective for any calendar year subsequent to the calendar year in which
the new Election is filed.




                                       5
<PAGE>


     2.4 Valuation of Deferral Account.

     (a) Each Participating Fund shall establish a Deferral Account to which
will be credited in an amount equal to the Participant's Deferred Compensation
under the Plan. Any compensation earned by the Participant which the Participant
has elected to defer will be credited to the Deferral Account on the date such
amounts otherwise would have been payable to such Participant. On each Valuation
Date, each Deferral Account will be credited or debited (as described in
subsection (b) below) with the amount that would have been realized had the
Deferral Account been invested in the Eligible Investments designated by the
Participant. The Deferral Account shall be debited to reflect any distributions
as of the date such distributions are made in accordance with Section 3 of the
Plan.

     (b) Each Participating Fund shall adjust the Participant's Deferral Account
to reflect a value which would have been earned as if the amount of Deferred
Compensation represented by such Deferral Account had been invested and
reinvested in shares of the Eligible Investments designated by the Participant
as follows:

          The value of each account will be determined by reference to the
          number of the shares of the Eligible Investment that the Deferred
          Compensation would have purchased (or sold) at the then Fair Market
          Value per share on the date such amounts are credited to (or debited
          from) the Deferral Account (less any brokerage fees payable upon the
          acquisition of shares of such in the open market) as well as the Fair
          Market Value of shares that would have been acquired through
          reinvestment of dividends and capital gains distributed.

     (c) As of each Valuation Date, income, gain and loss equivalents
(determined as if the Deferral Accounts are invested in the manner set forth in
Section 2.2(a) hereof) attributable to the period following the next preceding
Valuation Date shall be credited to and/or debited from the Participant's
Deferral Account.


                                       6
<PAGE>


     2.5  Investment of Deferral Account Balance.

     (a) The Participating Funds shall from time to time designate one or more
funds eligible for investment. A Participant, at the time of Election, shall
have the right to select from the then-current list of Eligible Investments one
or more Eligible Investments in which amounts deferred shall be deemed invested
as set forth in Section 3. The Participant may select from the Eligible
Investments to which all or part of the amounts in the Deferral Account shall be
deemed to be invested.

     (b) The Participant shall make investment designations at the time such
Participant files the Election with the Participating Fund which shall remain
effective until another valid direction has been made by the Participant as
herein provided. The Participant may amend the investment designations only once
each calendar year by giving written notice at least thirty (30) days prior to
the end of such calendar year. A timely change to a Participant's investment
designation shall become effective as soon as practicable following receipt of
notice by the Participating Fund.

     (c) The Eligible Investments deemed to be made available to the
Participant, and any restrictions or limitation on the maximum or minimum
percentages of the Participant's Deferral Account that may be invested in any
Eligible Investment, shall be the same as from time-to-time communicated to the
Participant.

     (d) A Participant may elect to transfer Deferred Compensation from one
Eligible Investment to a different Eligible Investment, provided that in no
event may any such election become effective sooner than six (6) months
following the last date on which Deferred Compensation was allocated to the
former Eligible Investment, and the Participant shall not be permitted to defer
any compensation earned after such date to such former Eligible Investment for a
period of six (6) months from the date of such transfer. A transfer election
shall be made by written notice signed by the Participant and filed with the
Participating Fund.

     (e) Notwithstanding the foregoing, the Participating Funds may, from time
to time, remove any fund from or add any fund to the list of Eligible
Investments. If the Participating Funds discontinue an Eligible Investment, the
Participant shall complete and file an election to transfer the amounts deferred
in the discontinued Eligible Investment to such other then-


                                       7
<PAGE>

current Eligible Investment. In the event that the Participant shall fail to
timely elect a new Eligible Investment, such amounts shall be transferred to an
Eligible Investment that the Participating Fund deems appropriate.

     (f) Except as provided below, the Participant's Deferral Account shall be
deemed to be invested in accordance with the Participant's Election, provided
such Election conforms to the provisions of this Section. If -

               (i)  the Participant does not furnish complete, written
                    investment instructions; or

               (ii) the written investment instructions from the Participant are
                    unclear,

the Participant's Deferral Account shall be deemed to be invested in such other
then-current Eligible Investments as the Participating Funds shall select, until
such time as the Participant shall provide complete investment instructions.

3.   DISTRIBUTIONS FROM DEFERRAL ACCOUNT

     3.1  Distribution Election.

     The aggregate value of a Participant's Deferral Account will be paid in a
lump sum or in ten (10) or fewer annual installments, as specified in the
Participant's Election (or Elections). Distributions will be made as of the
first business day of January of the calendar year following the calendar year
in which the Participant ceases being a Trustee or on such other dates as the
Participant may specify in such Election (or Elections), which shall not be
earlier than six (6) months following the Election.

     (a) If a Participant elects installment payments, the unpaid balance in the
Participant's Deferral Account shall continue to accrue earnings and dividend
equivalents, computed in accordance with the provisions of Section 2.4(b), and
shall be prorated and paid over the installment period. The amount of the first
payment shall be a fraction of the then Fair Market Value of such Participant's
Deferral Account, the numerator of which is one, and the denominator of which is
the total number of installments. The amount of each subsequent payment shall be
a fraction of the then Fair Market Value of the Participant's Deferral Account
remaining after the prior payment, the numerator of


                                       8
<PAGE>

which is one and the denominator of which is the total number of installments
elected minus the number of installments previously paid.

     (b) All payments shall be in cash; provided, however if a lump sum payment
is elected, the Participant may elect to receive payment in full and fractional
shares of the Eligible Investments selected by such Participant at Fair Market
Value at the time of payment of the amounts credited to the Participant's
Deferral Account. Any such election shall be filed in writing by the Participant
with the Participating Fund at least ten (10) business days prior to the date
which such payment is to be made.

     (c) A Participant may at any time, and from time to time, change any
distribution election applicable to such Participant's Deferral Account,
provided that no election to change the timing of any distribution shall be
effective unless it is made in writing and received by the Participating Fund at
least six (6) months prior to the earlier of (i) the time at which the
Participant ceases to be a Trustee or (ii) the time such distribution shall
commence.

     3.2 Death Prior to Complete Distribution. In the event of a Participant's
death prior to distribution of all amounts in such Participant's Deferral
Account, notwithstanding any Election made by the Participant and
notwithstanding any other provision set forth herein, the value of such Deferral
Account shall be paid in a lump sum in accordance with the provisions of the
Plan as soon as reasonably possible to the Participant's designated
beneficiary(ies) (the "Beneficiary") or, if such Beneficiary(ies) does not
survive the Participant or no beneficiary is designated, to such Participant's
estate. Any Beneficiary(ies) so designated by a Participant may be changed at
any time by notice in writing from such Participant to the Participating Fund.
All payments under this subsection shall otherwise be paid in accordance with
Section 3.1 hereof.

     3.3 Payment in Discretion of Participating Funds.

     Amounts deferred hereunder, based on the then adjusted value of the
Participant's Deferral Account as of the Valuation Date next following, may
become payable to the Participant in the discretion of the Participating Fund:

     (a) Disability. If the Participating Fund finds on the basis of medical
evidence satisfactory to it that the Participant is prevented from engaging in
any suitable gainful employment or occupation and that such disability will be
permanent and continuous during the remainder of such Participant's life, the


                                       9
<PAGE>

Participating Fund shall distribute the amounts in the Participant's Deferral
Account in a lump sum or in the number of installments previously selected by
the Participant.

     (b) Financial Hardship. If the Participant requests and if the Participant
provides evidence of financial hardship, the Participating Fund may, in its sole
and absolute discretion, permit a distribution of all or a portion of the
Participant's Deferral Account prior to the date on which payments would have
commenced under Section 3.1.

     3.4  Acceleration of Payments.

     (a) In the event of the liquidation, dissolution or winding up of a
Participating Fund or the distribution of all or substantially all of a
Participating Fund's assets and property to its shareholders (for this purpose a
sale, conveyance or transfer of a Participating Fund's assets to a trust,
partnership, association or another corporation in exchange for cash, shares or
other securities with the transfer being made subject to, or with the assumption
by the transferee of, the liabilities of such Participating Fund shall not be
deemed a termination of such Participating Fund or such a distribution), the
entire unpaid balance of the Participant's Deferral Account of such
Participating Fund shall be paid in a lump sum as of the effective date thereof.

     (b) The Participating Funds are empowered to accelerate the payment of
deferred amounts to all Participants and Beneficiaries in the event that there
is a change in law which would have the effect of adversely affecting such
persons rights and benefits under the Plan if acceleration did not occur.

4.   MISCELLANEOUS

     4.1  Statements of Account.

     The Participating Funds will furnish each Participant with a statement
setting forth the value of such Participant's Deferral Account as of the end of
each calendar year and all credits and debits of such Deferral Account during
such year. Such statements will be furnished no later than sixty (60) days after
the end of each calendar year.



                                       10
<PAGE>


     4.2  Rights in Deferral Account.

     Credits to the Deferral Accounts shall (i) remain part of the general
assets of the Participating Funds, (ii) at all times be the sole and absolute
property of the Participating Funds and (iii) in no event be deemed to
constitute a fund, trust or collateral security for the payment of the Deferred
Compensation to which Participants are entitled from such Deferral Accounts. The
right of the Participant or any Beneficiary or estate to receive future payment
of Deferred Compensation under the provisions of the Plan shall be an unsecured
claim against the general assets of the Participating Funds, if any, available
at the time of payment. A Participating Fund shall not reserve or set aside
funds for the payment of its obligations hereunder by any form of trust, escrow,
or similar arrangement. The arrangement described in this Plan shall be
"unfunded" for U.S. federal income tax purposes and for purposes of the Employee
Retirement Security Income Act of 1974, as amended.

     4.3  Non-Assignability.

     The rights and benefits of Participants under the Plan and any other person
or persons to whom payments may be made pursuant to the Plan shall not be
subject to alienation, assignment, pledge, transfer or other disposition, except
as otherwise provided by law.

     4.4  Interpretation and Administration.

     (a) The Participating Funds shall have the general authority to interpret,
construe and implement provisions of the Plan and to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as shall
be from time to time, deemed advisable. Any determination by the Participating
Funds shall be final and conclusive.

     4.5  Amendment and Termination.

     The Participating Funds may in their sole discretion amend or terminate the
Plan at any time. No amendment or termination shall adversely affect any then
existing deferred amounts or rights under the Plan. Upon termination of the
Plan, the remaining balance of the Participant's Deferral Account shall be paid
to the Participant (or to a beneficiary, as the case may be), in a lump sum as
soon as practicable but no more than thirty (30) days following termination of
the Plan.



                                       11
<PAGE>


     4.6  Incapacity.

     If the Participating Funds shall receive satisfactory evidence that the
Participant or any Beneficiary entitled to receive any benefit under the Plan
is, at the time when such benefit becomes payable, a minor, or is physically or
mentally incompetent to receive such benefit and to give a valid release
therefor, and that another person or an institution is then maintaining or has
custody of the Participant or Beneficiary and that no guardian, committee or
other representative of the estate of the Participant or Beneficiary shall have
been duly appointed, the Participating Funds may make payment of such benefit
otherwise payable to the Participant or Beneficiary to such other person or
institution and the release of such other person or institution shall be a valid
and complete discharge for the payment of such benefit.

     4.7  Payments Due Missing Persons.

     The Participating Funds shall make a reasonable effort to locate all
persons entitled to benefits under the Plan. However, notwithstanding any
provisions of the Plan to the contrary, if, after a period of five (5) years
from the date such benefit shall be due, any such persons entitled to benefits
have not been located, their rights under the Plan shall stand suspended. Before
this provision becomes operative, the Participating Funds shall send a certified
letter to all such persons to their last known address advising them that their
benefits under the Plan shall be suspended. Any such suspended amounts shall be
held by the Participating Funds for a period of three (3) additional years (or a
total of eight (8) years from the time the benefits first become payable) and
thereafter, if unclaimed, such amounts shall be forfeited, subject to applicable
laws in the jurisdiction in which the respective Participating Fund is
organized.

     4.8  Agents.

     The Participating Funds may employ agents and provide for such clerical,
legal, actuarial, accounting, advisory or other services as they deem necessary
to perform their duties under the Plan. The Participating Funds shall bear the
cost of such services and all other expenses incurred in connection with the
administration of the Plan.



                                       12
<PAGE>


     4.9  Governing Law.

     All matters concerning the validity, construction and administration of the
Plan shall be governed by the laws of the state in which the respective
Participating Fund is organized.

     4.10 Non-Guarantee of Status.

     Nothing contained in the Plan shall be construed as a contract or guarantee
of the right of the Participant to be, or remain as, a Trustee of any of the
Participating Funds or to receive any, or any particular rate of, compensation
from any of the Participating Funds.

     4.11 Counsel.

     The Participating Funds may consult with legal counsel with respect to the
meaning or construction of the Plan, their obligations or duties hereunder or
with respect to any action or proceeding or any question of law, and they shall
be fully protected with respect to any action taken or omitted by them in good
faith pursuant to the advice of legal counsel.

     4.12 Entire Plan.

     The Plan contains the entire understanding between the Participating Funds
and the Participant with respect to the payment of non-qualified elective
deferred compensation by the Participating Funds to the Participant.



                                       13
<PAGE>


     4.13 Non-liability of Participating Funds.

     Interpretations of, and determinations (including factual determinations)
related to, the Plan made by the Participating Funds in good faith, including
any determinations of the amounts of the Deferral Accounts, shall be conclusive
and binding upon all parties; and the Participating Funds and their officers and
Trustees shall not incur any liability to the Participant for any such
interpretation or determination so made or for any other action taken by it in
connection with the Plan in good faith.

     4.14 Successors and Assigns.

     The Plan shall be binding upon, and shall inure to the benefit of, the
Participating Funds and their successors and assigns and to the Participants and
their heirs, executors, administrators and personal representatives.

     4.15 Severability.

     In the event any one or more provisions of the Plan are held to be invalid
or unenforceable, such illegality or unenforceability shall not affect the
validity or enforceability of the other provisions hereof and such other
provisions shall remain in full force and effect unaffected by such invalidity
or unenforceability.

     4.16 Rule 16b-3 Compliance.

     It is the intention of the Participating Fund that all transactions under
the Plan be exempt from liability imposed by Section 16(b) of the Securities
Exchange Act of 1934, as amended. Therefore, if any transaction under the Plan
is found not to be in compliance with Section 16(b), the provision of the Plan
governing such transaction shall be deemed amended so that the transaction does
so comply and is so exempt, to the extent permitted by law and deemed advisable
by the Participating Fund, and in all events the Plan shall be construed in
favor of its meeting the requirements of an exemption.



                                       14
<PAGE>


     IN WITNESS WHEREOF, each Participating Fund has caused this Plan to be
executed by one of its duly authorized officers, this 24th day of February,
2000.






By:________________________________
Name:
Title:




Witness:__________________________
Name:
Title:



                                       15
<PAGE>




                                                                      SCHEDULE A


                                 BLACKROCK FUNDS
                           DEFERRED COMPENSATION PLAN

                               PARTICIPATING FUNDS


BlackRock Advantage Term Trust
BlackRock Broad Investment Grade 2009 Term Trust
BlackRock California Insured Municipal 2008 Term Trust
BlackRock California Investment Quality Municipal Trust
BlackRock California Municipal Bond Trust
BlackRock California Municipal Income Trust
BlackRock Florida Insured Municipal 2008 Term Trust
BlackRock Florida Investment Quality Municipal Trust
BlackRock Florida Municipal Bond Trust
BlackRock Florida Municipal Income Trust
BlackRock High Yield Trust
BlackRock Income Trust
BlackRock Insured Municipal 2008 Term Trust Inc,
BlackRock Insured Municipal Term Trust
BlackRock Investment Quality Municipal Trust
BlackRock Investment Quality Term Trust
BlackRock Maryland Municipal Bond Trust
BlackRock Municipal Bond Trust
BlackRock Municipal Income Trust
BlackRock Municipal Target Term Trust
BlackRock New Jersey Investment Quality Municipal Trust
BlackRock New Jersey Municipal Bond Trust
BlackRock New Jersey Municipal Income Trust
BlackRock New York Insured Municipal 2008 Term Trust
BlackRock New York Investment Quality Municipal Trust
BlackRock New York Municipal Bond Trust
BlackRock New York Municipal Income Trust
BlackRock North American Government Income Trust
BlackRock Pennsylvania Strategic Municipal Trust
BlackRock Strategic Municipal Trust
BlackRock Virginia Municipal Bond Trust


<PAGE>




                                                                      SCHEDULE B

                              ELIGIBLE INVESTMENTS

You may choose from the following eligible investments:


BlackRock Advantage Term Trust
BlackRock Broad Investment Grade 2009 Term Trust
BlackRock High Yield Trust
BlackRock Income Trust
BlackRock Investment Quality Term Trust
BlackRock North American Government Income Trust




<PAGE>





                                 BLACKROCK FUNDS
                           DEFERRED COMPENSATION PLAN

                             Deferral Election Form

         The undersigned hereby elects to participate in the Deferred
Compensation Plan ("Plan") in accordance with the elections made in this
Deferral Election Form.

1.       Amount Deferred

         I hereby elect to defer compensation earned as a Trustee which are
earned subsequent to the date of this election, as follows:

         [ ] All fees; or

         [ ]               %  of fees.
             -------------

         [ ] $               of fees.
              -----------


2.       Investment Choice

         I hereby elect to have the deferred compensation valued by an
investment in the Eligible Investments as set forth on the attachment to this
Deferral Election Form. I understand that I may change this election by giving
written notice at least thirty (30) days prior to the end of each calendar year.


<PAGE>




3.       Time of Payment

         I hereby elect to be paid as follows:

         [ ] On the first business day in January of the calendar year following
the calendar year in which I cease to be a Trustee; or

         [ ] On the following other date or event:

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

4.       Number of Payments

         I hereby elect to receive payment as follows:

         [ ] Entire amount in a lump sum; or

         [ ] In ______ annual installments (not to exceed 10).

         I hereby relinquish and release any and all rights to receive payment
of the deferred amounts except in accordance with the Plan.


Executed this            day of            , _____



                                           ------------------------------
                                           Trustee's Signature


Received and accepted by the Participating Funds:

By:
   ------------------------

Date:
     ----------------------

<PAGE>




                                 BLACKROCK FUNDS
                           DEFERRED COMPENSATION PLAN

                           Designation of Beneficiary

The undersigned hereby designates the person or persons named below as the
beneficiary(ies) of any benefits which may become due according to the terms and
conditions of the BlackRock Funds Deferred Compensation Plan (the "Plan") in the
event of my death.

         [ ] To my Estate: or

         [ ] To the following beneficiaries:

         Primary:
                   -------------------------------------------------------------

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

                   -------------------------------------------------------------
                   (Name, address and relationship) if living, or if not living
                   at my death, to

         Secondary:
                   -------------------------------------------------------------

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

                   -------------------------------------------------------------
                   (Name, address and relationship) or if not living at my
                   death or is not designated, to my Estate.


I hereby revoke all prior beneficiary designation(s) made under the terms of the
Plan by execution of this form.

Executed this            day of            , ______



                                     -----------------------------------
                                     Trustee's Signature




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(J)
<SEQUENCE>10
<FILENAME>file009.txt
<DESCRIPTION>CUSTODIAN AGREEMENT
<TEXT>
<PAGE>





                               CUSTODIAN CONTRACT


         This Contract is made as of July 16, 2002 between BlackRock Municipal
Income Trust II, a business trust organized and existing under the laws of the
State of Delaware, having its principal place of business at 100 Bellevue
Parkway, Wilmington, Delaware 19809 hereinafter called the "Fund", and State
Street Bank and Trust Company, a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian",

         WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:


1.       Employment of Custodian and Property to be Held by It

         The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Fund's agreement and declaration of trust (the
"Declaration of Trust"). The Fund agrees to deliver to the Custodian all
securities and cash owned by it, and all payments of income, payments of
principal or capital distributions received by it with respect to all securities
owned by the Fund from time to time, and the cash consideration received by it
for such new or treasury shares of beneficial interest ("Shares") of the Fund as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of the Fund held or received by the Fund and not delivered to
the Custodian.

         Upon receipt of "Proper Instructions" (within the meaning of Article
4), the Custodian shall from time to time employ one or more sub-custodians, but
only in accordance with an applicable vote by the board of trustees of the Fund
(the "Board of Trustees"), and provided that the Custodian shall have no more or
less responsibility or liability to the Fund on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian.


2.       Duties of the Custodian with Respect to Property of the Fund Held By
         the Custodian

2.1      Holding Securities. The Custodian shall hold and physically segregate
         for the account of the Fund all non-cash property, including all
         securities owned by the Fund, other than (a) securities which are
         maintained pursuant to Section 2.8 in a clearing agency registered with
         the Securities and Exchange Commission (the "SEC") under Section 17A of
         the Securities Exchange Act of 1934 (the "Exchange Act"), which acts as
         a securities depository, or in the book-entry system authorized by the
         U.S. Department of the Treasury and certain federal agencies (each, a
         "Securities System") and (b) commercial paper of an issuer for which
         State Street Bank and Trust Company acts as issuing and paying agent
         ("Direct Paper") which is deposited and/or maintained in the Direct
         Paper System of the Custodian (the "Direct Paper System") pursuant to
         Section 2.9.




<PAGE>

2.2      Delivery of Securities. The Custodian shall release and deliver
         securities owned by the Fund held by the Custodian or in a Securities
         System account of the Custodian ("Securities System Account") or in the
         Custodian's Direct Paper book entry system account ("Direct Paper
         System Account") only upon receipt of Proper Instructions, which may be
         continuing instructions when deemed appropriate by the parties, and
         only in the following cases:

         1)        Upon sale of such securities for the account of the Fund and
                   receipt of payment therefor;

         2)        Upon the receipt of payment in connection with any repurchase
                   agreement related to such securities entered into by the
                   Fund;

         3)        In the case of a sale effected through a Securities System,
                   in accordance with the provisions of Section 2.8 hereof;

         4)        To the depository agent in connection with tender or other
                   similar offers for securities of the Fund;

         5)        To the issuer thereof or its agent when such securities are
                   called, redeemed, retired or otherwise become payable;
                   provided that, in any such case, the cash or other
                   consideration is to be delivered to the Custodian;

         6)        To the issuer thereof, or its agent, for transfer into the
                   name of the Fund or into the name of any nominee or nominees
                   of the Custodian or into the name or nominee name of any
                   agent appointed pursuant to Section 2.7 or into the name or
                   nominee name of any sub-custodian appointed pursuant to
                   Article 1; or for exchange for a different number of bonds,
                   certificates or other evidence representing the same
                   aggregate face amount or number of units; provided that, in
                   any such case, the new securities are to be delivered to the
                   Custodian;

         7)        Upon the sale of such securities for the account of the Fund,
                   to the broker or its clearing agent, against a receipt, for
                   examination in accordance with "street delivery" custom;
                   provided that in any such case, the Custodian shall have no
                   responsibility or liability for any loss arising from the
                   delivery of such securities prior to receiving payment for
                   such securities except as may arise from the Custodian's own
                   negligence or willful misconduct;

         8)        For exchange or conversion pursuant to any plan of merger,
                   consolidation, recapitalization, reorganization or
                   readjustment of the securities of the issuer of such
                   securities, or pursuant to provisions for conversion
                   contained in such securities, or pursuant to any deposit
                   agreement; provided that, in any such case, the new
                   securities and cash, if any, are to be delivered to the
                   Custodian;

         9)        In the case of warrants, rights or similar securities, the
                   surrender thereof in the exercise of such warrants, rights or
                   similar securities or the surrender of interim


                                       2
<PAGE>

                   receipts or temporary securities for definitive securities;
                   provided that, in any such case, the new securities and cash,
                   if any, are to be delivered to the Custodian;

         10)       For delivery in connection with any loans of securities made
                   by the Fund, but only against receipt of adequate collateral
                   as agreed upon from time to time by the Custodian and the
                   Fund, which may be in the form of cash or obligations issued
                   by the United States government, its agencies or
                   instrumentalities, except that in connection with any loans
                   for which collateral is to be credited to the Custodian's
                   account in the book-entry system authorized by the U.S.
                   Department of the Treasury, the Custodian will not be held
                   liable or responsible for the delivery of securities owned by
                   the Fund prior to the receipt of such collateral;

         11)       For delivery as security in connection with any borrowings by
                   the Fund requiring a pledge of assets by the Fund, but only
                   against receipt of amounts borrowed;

         12)       For delivery in accordance with the provisions of any
                   agreement among the Fund, the Custodian and a broker-dealer
                   registered under the Exchange Act and a member of The
                   National Association of Securities Dealers, Inc. ("NASD"),
                   relating to compliance with the rules of The Options Clearing
                   Corporation and of any registered national securities
                   exchange, or of any similar organization or organizations,
                   regarding escrow or other arrangements in connection with
                   transactions by the Fund;

         13)       For delivery in accordance with the provisions of any
                   agreement among the Fund, the Custodian, and a Futures
                   Commission Merchant registered under the Commodity Exchange
                   Act, relating to compliance with the rules of the Commodity
                   Futures Trading Commission (the "CFTC") and/or any Contract
                   Market, or any similar organization or organizations,
                   regarding account deposits in connection with transactions by
                   the Fund;

         14)       For any other proper purpose, but only upon receipt of Proper
                   Instructions specifying the securities of the Fund to be
                   delivered, setting forth the purpose for which such delivery
                   is to be made, declaring such purpose to be a proper purpose,
                   and naming the person or persons to whom delivery of such
                   securities shall be made.

2.3      Registration of Securities. Securities held by the Custodian (other
         than bearer securities) shall be registered in the name of the Fund or
         in the name of any nominee of the Fund or of any nominee of the
         Custodian which nominee shall be assigned exclusively to the Fund,
         unless the Fund has authorized in writing the appointment of a nominee
         to be used in common with other registered investment companies having
         the same investment adviser as the Fund, or in the name or nominee name
         of any agent appointed pursuant to Section 2.7 or in the name or
         nominee name of any sub-custodian appointed pursuant to Article 1. All
         securities accepted by the Custodian on behalf of the Fund under the
         terms of this Contract shall be in "street name" or other good delivery
         form. If, however, the Fund directs the


                                       3
<PAGE>

         Custodian to maintain securities in "street name", the Custodian shall
         utilize its best efforts only to timely collect income due the Fund on
         such securities and to notify the Fund on a best efforts basis only of
         relevant corporate actions including, without limitation, pendency of
         calls, maturities, tender or exchange offers.

2.4      Bank Accounts. The Custodian shall open and maintain a separate bank
         account or accounts in the name of the Fund, subject only to draft or
         order by the Custodian acting pursuant to the terms of this Contract,
         and shall hold in such account or accounts, subject to the provisions
         hereof, all cash received by it from or for the account of the Fund,
         other than cash maintained by the Fund in a bank account established
         and used in accordance with Rule 17f-3 under the Investment Company Act
         of 1940, as amended (the "1940 Act"). Funds held by the Custodian for
         the Fund may be deposited by it to its credit as Custodian in the
         banking department of the Custodian or in such other banks or trust
         companies as it may in its discretion deem necessary or desirable;
         provided, however, that every such bank or trust company shall be
         qualified to act as a custodian under the 1940 Act and that each such
         bank or trust company and the funds to be deposited with each such bank
         or trust company shall be approved by vote of a majority of the Board
         of Trustees of the Fund. Such funds shall be deposited by the Custodian
         in its capacity as Custodian and shall be withdrawable by the Custodian
         only in that capacity.

2.5      Collection of Income. Subject to the provisions of Section 2.3, the
         Custodian shall collect on a timely basis all income and other payments
         with respect to registered securities held hereunder to which the Fund
         shall be entitled either by law or pursuant to custom in the securities
         business, and shall collect on a timely basis all income and other
         payments with respect to bearer securities if, on the date of payment
         by the issuer, such securities are held by the Custodian or its agent
         thereof and shall credit such income, as collected, to the Fund's
         custodian account. Without limiting the generality of the foregoing,
         the Custodian shall detach and present for payment all coupons and
         other income items requiring presentation as and when they become due
         and shall collect interest when due on securities held hereunder.
         Income due the Fund on securities loaned pursuant to the provisions of
         Section 2.2 (10) shall be the responsibility of the Fund. The Custodian
         will have no duty or responsibility in connection therewith, other than
         to provide the Fund with such information or data as may be necessary
         to assist the Fund in arranging for the timely delivery to the
         Custodian of the income to which the Fund is properly entitled.

2.6      Payment of Fund Monies. Upon receipt of Proper Instructions, which may
         be continuing instructions when deemed appropriate by the parties, the
         Custodian shall pay out monies of the Fund in the following cases only:

         1)        Upon the purchase of securities, options, futures contracts
                   or options on futures contracts for the account of the Fund
                   but only (a) against the delivery of such securities or
                   evidence of title to such options, futures contracts or
                   options on futures contracts to the Custodian (or any bank,
                   banking firm or trust company doing business in the United
                   States or abroad which is qualified under the 1940 Act to act
                   as a custodian and has been designated by the Custodian as
                   its agent for this


                                       4
<PAGE>

                   purpose) registered in the name of the Fund or in the name of
                   a nominee of the Custodian referred to in Section 2.3 hereof
                   or in proper form for transfer; (b) in the case of a purchase
                   effected through a Securities System, in accordance with the
                   conditions set forth in Section 2.8 hereof; (c) in the case
                   of a purchase involving the Direct Paper System, in
                   accordance with the conditions set forth in Section 2.11; (d)
                   in the case of repurchase agreements entered into between the
                   Fund and the Custodian, or another bank, or a broker-dealer
                   which is a member of NASD, (i) against delivery of the
                   securities either in certificate form or through an entry
                   crediting the Custodian's account at the Federal Reserve Bank
                   with such securities or (ii) against delivery of the receipt
                   evidencing purchase by the Fund of securities owned by the
                   Custodian along with written evidence of the agreement by the
                   Custodian to repurchase such securities from the Fund or (e)
                   for transfer to a time deposit account of the Fund in any
                   bank; such transfer may be effected prior to receipt of a
                   confirmation from a broker and/or the applicable bank
                   pursuant to Proper Instructions as defined in Article 4;

         2)        In connection with conversion, exchange or surrender of
                   securities owned by the Fund as set forth in Section 2.2
                   hereof;

         3)        For the payment of any expense or liability incurred by the
                   Fund, including but not limited to the following payments for
                   the account of the Fund: interest, taxes, management fees,
                   accounting fees, transfer agent and legal fees, and operating
                   expenses of the Fund whether or not such expenses are to be
                   in whole or part capitalized or treated as deferred expenses;

         4)        For the payment of any dividends declared pursuant to the
                   governing documents of the Fund;

         5)        For payment of the amount of dividends received in respect of
                   securities sold short;

         6)        For any other proper purpose, but only upon receipt of Proper
                   Instructions specifying the amount of such payment, setting
                   forth the purpose for which such payment is to be made,
                   declaring such purpose to be a proper purpose, and naming the
                   person or persons to whom such payment is to be made.

2.7      Appointment of Agents. The Custodian may at any time or times in its
         discretion appoint (and may at any time remove) any other bank or trust
         company which is itself qualified under the 1940 Act to act as a
         custodian, as its agent to carry out such of the provisions of this
         Article 2 as the Custodian may from time to time direct; provided,
         however, that the appointment of any agent shall not relieve the
         Custodian of its responsibilities or liabilities hereunder.

2.8      Deposit of Securities in Securities Systems. The Custodian may deposit
         and/or maintain securities owned by the Fund in a Securities System in
         accordance with applicable Federal


                                       5
<PAGE>

         Reserve Board and SEC rules and regulations, if any, and subject to the
         following provisions:

         1)        The Custodian may keep securities of the Fund in a Securities
                   System provided that such securities are represented in a
                   Securities System Account which shall not include any assets
                   of the Custodian other than assets held as a fiduciary,
                   custodian or otherwise for customers;

         2)        The records of the Custodian with respect to securities of
                   the Fund which are maintained in a Securities System shall
                   identify by book-entry those securities belonging to the
                   Fund;

         3)        The Custodian shall pay for securities purchased for the
                   account of the Fund upon (i) receipt of advice from the
                   Securities System that such securities have been transferred
                   to the Securities System Account, and (ii) the making of an
                   entry on the records of the Custodian to reflect such payment
                   and transfer for the account of the Fund. The Custodian shall
                   transfer securities sold for the account of the Fund upon (i)
                   receipt of advice from the Securities System that payment for
                   such securities has been transferred to the Securities System
                   Account, and (ii) the making of an entry on the records of
                   the Custodian to reflect such transfer and payment for the
                   account of the Fund. Copies of all advices from the
                   Securities System of transfers of securities for the account
                   of the Fund shall identify the Fund, be maintained for the
                   Fund by the Custodian and be provided to the Fund at its
                   request. Upon request, the Custodian shall furnish the Fund
                   confirmation of each transfer to or from the account of the
                   Fund in the form of a written advice or notice and shall
                   furnish to the Fund copies of daily transaction sheets
                   reflecting each day's transactions in the Securities System
                   for the account of the Fund;

         4)        The Custodian shall provide the Fund with any report obtained
                   by the Custodian on the Securities System's accounting
                   system, internal accounting control and procedures for
                   safeguarding securities deposited in the Securities System;

         5)        Anything to the contrary in this Contract notwithstanding,
                   the Custodian shall be liable to the Fund for any loss or
                   damage to the Fund resulting from use of the Securities
                   System by reason of any negligence, misfeasance or misconduct
                   of the Custodian or any of its agents or of any of its or
                   their employees or from failure of the Custodian or any such
                   agent to enforce effectively such rights as it may have
                   against the Securities System; at the election of the Fund,
                   it shall be entitled to be subrogated to the rights of the
                   Custodian with respect to any claim against the Securities
                   System or any other person which the Custodian may have as a
                   consequence of any such loss or damage if and to the extent
                   that the Fund has not been made whole for any such loss or
                   damage.



                                       6
<PAGE>

2.9      Fund Assets Held in the Custodian's Direct Paper System. The Custodian
         may deposit and/or maintain securities owned by the Fund in the Direct
         Paper System of the Custodian subject to the following provisions:

         1)        No transaction relating to securities in the Direct Paper
                   System will be effected in the absence of Proper
                   Instructions;

         2)        The Custodian may keep securities of the Fund in the Direct
                   Paper System only if such securities are represented in
                   Direct Paper System Account which shall not include any
                   assets of the Custodian other than assets held as a
                   fiduciary, custodian or otherwise for customers;

         3)        The records of the Custodian with respect to securities of
                   the Fund which are maintained in the Direct Paper System
                   shall identify by book-entry those securities belonging to
                   the Fund;

         4)        The Custodian shall pay for securities purchased for the
                   account of the Fund upon the making of an entry on the
                   records of the Custodian to reflect such payment and transfer
                   of securities to the account of the Fund. The Custodian shall
                   transfer securities sold for the account of the Fund upon the
                   making of an entry on the records of the Custodian to reflect
                   such transfer and receipt of payment for the account of the
                   Fund;

         5)        The Custodian shall furnish the Fund confirmation of each
                   transfer to or from the account of the Fund, in the form of a
                   written advice or notice, of Direct Paper on the next
                   business day following such transfer and shall furnish to the
                   Fund copies of daily transaction sheets reflecting each day's
                   transaction in the Securities System for the account of the
                   Fund;

         6)        The Custodian shall provide the Fund with any report on its
                   system of internal accounting control as the Fund may
                   reasonably request from time to time.

2.10     Segregated Account. The Custodian shall upon receipt of Proper
         Instructions from the Fund establish and maintain a segregated account
         or accounts for and on behalf of the Fund, into which account or
         accounts may be transferred cash and/or securities, including
         securities maintained in an account by the Custodian pursuant to
         Section 2.8 hereof, (i) in accordance with the provisions of any
         agreement among the Fund, the Custodian and a broker-dealer registered
         under the Exchange Act and a member of the NASD (or any futures
         commission merchant registered under the Commodity Exchange Act),
         relating to compliance with the rules of The Options Clearing
         Corporation and of any registered national securities exchange (or the
         CFTC or any registered contract market), or of any similar organization
         or organizations, regarding escrow or other arrangements in connection
         with transactions by the Fund, (ii) for purposes of segregating cash or
         government securities in connection with options purchased, sold or
         written by the Fund or commodity futures contracts or options thereon
         purchased or sold by the Fund, (iii) for the purposes of compliance by
         the Fund with


                                       7
<PAGE>

         the procedures required by Investment Company Act Release No. 10666, or
         any subsequent release or releases of the SEC relating to the
         maintenance of segregated accounts by registered investment companies
         and (iv) for other proper purposes, but only, in the case of clause
         (iv), upon receipt of Proper Instructions from the Fund setting forth
         the purpose or purposes of such segregated account and declaring such
         purposes to be proper purposes.

2.11     Ownership Certificates for Tax Purposes. The Custodian shall execute
         ownership and other certificates and affidavits for all federal and
         state tax purposes in connection with receipt of income or other
         payments with respect to securities of the Fund held by it and in
         connection with transfers of such securities.

2.12     Proxies. The Custodian shall, with respect to the securities held
         hereunder, cause to be promptly executed by the registered holder of
         such securities, if the securities are registered otherwise than in the
         name of the Fund or a nominee of the Fund, all proxies, without
         indication of the manner in which such proxies are to be voted, and
         shall promptly deliver to the Fund such proxies, all proxy soliciting
         materials and all notices relating to such securities.

2.13     Communications Relating to Fund Securities. Subject to the provisions
         of Section 2.3, the Custodian shall transmit promptly to the Fund all
         written information (including, without limitation, pendency of calls
         and maturities of securities and expirations of rights in connection
         therewith and notices of exercise of call and put options written by
         the Fund and the maturity of futures contracts purchased or sold by the
         Fund) received by the Custodian from issuers of the securities being
         held for the Fund. With respect to tender or exchange offers, the
         Custodian shall transmit promptly to the Fund all written information
         received by the Custodian from issuers of the securities whose tender
         or exchange is sought and from the party (or his agents) making the
         tender or exchange offer. If the Fund desires to take action with
         respect to any tender offer, exchange offer or any other similar
         transaction, the Fund shall notify the Custodian at least three
         business days prior to the date on which the Custodian is to take such
         action.

2.14     Reports to Fund by Independent Public Accountants The Custodian shall
         provide the Fund, at such times as the Fund may reasonably require,
         with reports by independent public accountants on the accounting
         system, internal accounting control and procedures for safeguarding
         securities, futures contracts and options on futures contracts,
         including securities deposited and/or maintained in a Securities
         System, relating to the services provided by the Custodian under this
         Contract; such reports, shall be of sufficient scope and in sufficient
         detail, as may reasonably be required by the Fund, to provide
         reasonable assurance that any material inadequacies would be disclosed
         by such examination, and, if there are no such inadequacies, the
         reports shall so state.



                                       8
<PAGE>

3.       Payments for Sales or Repurchases or Redemptions of Shares

         The Custodian shall receive from the distributor of the Shares or from
the Fund's Transfer Agent (the "Transfer Agent") and deposit into the account of
the Fund such payments as are received for Shares thereof issued or sold from
time to time by the Fund. The Custodian will provide timely notification to the
Fund and the Transfer Agent of any receipt by it of payments for Shares of the
Fund.

         From such funds as may be available for the purpose, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In connection with
the redemption or repurchase of Shares, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Fund and the Custodian.


4.       Proper Instructions

         Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
instructions are consistent with the security procedures agreed to by the Fund
and the Custodian including, but not limited to, the security procedures
selected by the Fund on the Funds Transfer Addendum to this Contract. For
purposes of this Article, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.10.


5.       Actions Permitted without Express Authority

         The Custodian may in its discretion, without express authority from the
Fund:

         1)        make payments to itself or others for minor expenses of
                   handling securities or other similar items relating to its
                   duties under this Contract, provided that all such payments
                   shall be accounted for to the Fund;



                                       9
<PAGE>

         2)        surrender securities in temporary form for securities in
                   definitive form;

         3)        endorse for collection, in the name of the Fund, checks,
                   drafts and other negotiable instruments; and

         4)        in general, attend to all non-discretionary details in
                   connection with the sale, exchange, substitution, purchase,
                   transfer and other dealings with the securities and property
                   of the Fund except as otherwise directed by the Board of
                   Trustees.


6.       Evidence of Authority

         The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Trustees as conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action by the
Board of Trustees pursuant to the Declaration of Trust as described in such
vote, and such vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.

7.       Duties of Custodian with Respect to the Books of Account and
         Calculation of Net Asset Value and Net Income

         The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees to keep the books of
account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate weekly the net income
of the Fund as described in the Fund's registration statement on Form N-2 under
the 1940 Act as filed with the SEC (the "Registration Statement") and shall
advise the Fund and the Transfer Agent weekly of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to do so, shall
advise the Transfer Agent periodically of the division of such net income among
its various components. The calculations of the net asset value per share and
the weekly income of the Fund shall be made at the time or times described from
time to time in the Fund's currently effective Registration Statement.


8.       Records

         The Custodian shall with respect to the Fund create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the



                                       10
<PAGE>

Fund's request, supply the Fund with a tabulation of securities owned by the
Fund and held by the Custodian and shall, when requested to do so by the Fund
and for such compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.


9.       Opinion of Fund's Independent Accountants

         The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Registration Statement, and Form
N-SAR or other annual reports to the SEC and with respect to any other
requirements of the SEC.


10.      Compensation of Custodian

         The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.


11.      Responsibility of Custodian

         So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.

         If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.

         If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements and assumed settlement) or in the event that the
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure


                                       11
<PAGE>

to act or willful misconduct, any property at any time held for the account of
the Fund shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize available cash
and to dispose of the Fund's assets to the extent necessary to obtain
reimbursement.

         In no event shall the Custodian be liable for indirect, special or
consequential damages.


12.      Effective Period, Termination and Amendment

         This Contract shall become effective as of the date of its execution,
shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties hereto
and may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or mailing;
provided, however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Fund may at any time
by action of its Board of Trustees (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.

         Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.


13.      Successor Custodian

         If a successor custodian shall be appointed by the Board of Trustees,
the Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an account of the
successor custodian all of the Fund's securities held in a Securities System.

         If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees, deliver at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.

         In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other


                                       12
<PAGE>

properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.

         In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.


14.      Interpretive and Additional Provisions

         In connection with the operation of this Contract, the Custodian and
the Fund, may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Contract.


15.      Massachusetts Law to Apply

         This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.


16.      Prior Contracts

         This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.


17.      Reproduction of Documents

         This Contract and all schedules, exhibits, attachments, addenda and
amendments hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a



                                       13
<PAGE>

party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.


18.      Notices

         Any notice, instruction or other instrument required to be given
hereunder may be delivered in person to the offices of the parties as set forth
herein during normal business hours or delivered prepaid registered mail or by
telex, cable or facsimile to the parties at the following addresses or such
other addresses as may be notified by any party from time to time.

             To the Fund:      BlackRock Municipal Income Trust II
                               c/o BlackRock, Inc.
                               100 Bellevue Parkway
                               Wilmington, Delaware 19809
                               Attention:  Jeff Wing, Vice President
                               Telephone: 302-797-2134
                               Facsimile: 302-797-2459

             To the Custodian: State Street Bank and Trust Company
                               One Heritage Drive/JPB 2S
                               North Quincy, Massachusetts  02171
                               Attention: William M. Marvin, Vice President
                               Telephone: 617-985-6829
                               Facsimile: 617-985-5271

         Such notice, instruction or other instrument shall be deemed to have
been served in the case of a registered letter at the expiration of five
business days after posting, in the case of cable twenty-four hours after
dispatch and, in the case of telex, immediately on dispatch and if delivered
outside normal business hours it shall be deemed to have been received at the
next time after delivery when normal business hours commence and in the case of
cable, telex or facsimile on the business day after the receipt thereof.
Evidence that the notice was properly addressed, stamped and put into the post
shall be conclusive evidence of posting.


19.      Remote Access Services Addendum

         The Custodian and the Fund each agree to abide by the terms of the
Remote Access Services Addendum attached hereto.


20.      Shareholder Communications Election

         SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial



                                       14
<PAGE>

owners of securities of that issuer held by the bank unless the beneficial owner
has expressly objected to disclosure of this information. In order to comply
with the rule, the Custodian needs the Fund to indicate whether it authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose securities the Fund owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either "yes"
or "no" below, the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all securities owned by the
Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the alternatives
below.


         YES [ ]   The Custodian is authorized to release the Fund's name,
                   address, and share positions.

         NO [X]    The Custodian is not authorized to release the Fund's name,
                   address, and share positions.




                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK



                                       15
<PAGE>



                                 SIGNATURE PAGE


         IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the date first above-written.


ATTEST:                                     BLACKROCK MUNICIPAL INCOME TRUST II



                                            By:
- ----------------------------------              --------------------------------
Name:                                           Anne F. Ackerley, Secretary



ATTEST:                                     STATE STREET BANK AND TRUST COMPANY



                                            By:
- ----------------------------------              --------------------------------
Stephanie L. Poster, Vice President             Joseph L. Hooley,
                                                Executive Vice President




                                       16
<PAGE>



                                                             [STATE STREET LOGO]


                             FUNDS TRANSFER ADDENDUM



SECURITY PROCEDURE(S) SELECTION FORM

Please select one or more of the funds transfer security procedures indicated
below.

[ ] SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is limited
to securities brokers and dealers, clearing and depository institutions,
recognized exchanges for securities, and investment management institutions.
SWIFT provides a number of security features through encryption and
authentication to protect against unauthorized access, loss or wrong delivery of
messages, transmission errors, loss of confidentiality and fraudulent changes to
messages. SWIFT is considered to be one of the most secure and efficient
networks for the delivery of funds transfer instructions. Selection of this
security procedure would be most appropriate for existing SWIFT members.

[ ] STANDING INSTRUCTIONS
Standing Instructions may be used where funds are transferred to a broker on the
Client's established list of brokers with which it engages in foreign exchange
transactions. Only the date, the currency and the currency amount are variable.
In order to establish this procedure, State Street will send to the Client a
list of the brokers that State Street has determined are used by the Client. The
Client will confirm the list in writing, and State Street will verify the
written confirmation by telephone. Standing Instructions will be subject to a
mutually agreed upon limit. If the payment order exceeds the established limit,
the Standing Instruction will be confirmed by telephone prior to execution.

[ ] REMOTE BATCH TRANSMISSION
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data
communications between the Client and State Street. Security procedures include
encryption and or the use of a test key by those individuals authorized as
Automated Batch Verifiers.
Clients selecting this option should have an existing facility for completing
CPU-CPU transmissions. This delivery mechanism is typically used for high-volume
business.

[ ] GLOBAL HORIZON INTERCHANGE(SM) FUNDS TRANSFER SERVICE
Global Horizon Interchange Funds Transfer Service (FTS) is a State Street
proprietary microcomputer-based wire initiation system. FTS enables Clients to
electronically transmit authenticated Fedwire, CHIPS or internal book transfer
instructions to State Street.
This delivery mechanism is most appropriate for Clients with a low-to-medium
number of transactions (5-75 per day), allowing Clients to enter, batch, and
review wire transfer instructions on their PC prior to release to State Street.

[ ] TELEPHONE CONFIRMATION (CALLBACK)
Telephone confirmation will be used to verify all non-repetitive funds transfer
instructions received via untested facsimile or phone. This procedure requires
Clients to designate individuals as authorized initiators and authorized
verifiers. State Street will verify that the instruction contains the signature
of an authorized person and prior to execution, will contact someone other than
the originator at the Client's location to authenticate the instruction.
Selection of this alternative is appropriate for Clients who do not have the
capability to use other security procedures.

[ ] REPETITIVE WIRES
For situations where funds are transferred periodically (minimum of one
instruction per calendar quarter) from an existing authorized account to the
same payee (destination bank and account number) and only the date and currency
amount are variable, a repetitive wire may be implemented. Repetitive wires will
be subject to a mutually agreed upon limit. If the payment order exceeds the
established limit, the instruction will be confirmed by telephone prior to
execution. Telephone confirmation is used to establish this process. Repetitive
wire instructions must be reconfirmed annually.
This alternative is recommended whenever funds are frequently transferred
between the same two accounts.

[ ] TRANSFERS INITIATED BY FACSIMILE
The Client faxes wire transfer instructions directly to State Street Mutual Fund
Services. Standard security procedure requires the use of a random number test
key for all transfers. Every six months the Client receives test key logs from
State Street. The test key contains alpha-numeric characters, which the Client
puts on each document faxed to State Street. This procedure ensures all wire
instructions received via fax are authorized by the Client.
We provide this option for Clients who wish to batch wire instructions and
transmit these as a group to State Street Mutual Fund Services once or several
times a day.




<PAGE>
                                                             [STATE STREET LOGO]


                             FUNDS TRANSFER ADDENDUM


[ ] AUTOMATED CLEARING HOUSE (ACH)
State Street receives an automated transmission or a magnetic tape from a Client
for the initiation of payment (credit) or collection (debit) transactions
through the ACH network. The transactions contained on each transmission or tape
must be authenticated by the Client. Clients using ACH must select one or more
of the following delivery options:

[ ] GLOBAL HORIZON INTERCHANGE AUTOMATED CLEARING HOUSE SERVICE
Transactions are created on a microcomputer, assembled into batches and
delivered to State Street via fully authenticated electronic transmissions in
standard NACHA formats.

[ ] Transmission from Client PC to State Street Mainframe with Telephone
    Callback

[ ] Transmission from Client Mainframe to State Street Mainframe with Telephone
    Callback

[ ] Transmission from DST Systems to State Street Mainframe with Encryption

[ ] Magnetic Tape Delivered to State Street with Telephone Callback



State Street is hereby instructed to accept funds transfer instructions only via
the delivery methods and security procedures indicated. The selected delivery
methods and security procedure(s) will be effective ___________________________
for payment orders initiated by our organization.



KEY CONTACT INFORMATION

Whom shall we contact to implement your selection(s)?

CLIENT OPERATIONS CONTACT                                     ALTERNATE CONTACT


- ------------------------------------        ------------------------------------
              Name                                         Name

- ------------------------------------        ------------------------------------
              Address                                      Address

- ------------------------------------        ------------------------------------
              City/State/Zip Code                          City/State/Zip Code

- ------------------------------------        ------------------------------------
              Telephone Number                             Telephone Number

- ------------------------------------        ------------------------------------
              Facsimile Number                             Facsimile Number

- ------------------------------------
              SWIFT Number

- ------------------------------------
              Telex Number


<PAGE>
                                                             [STATE STREET LOGO]


                             FUNDS TRANSFER ADDENDUM

INSTRUCTION(S)

TELEPHONE CONFIRMATION

FUND: BLACKROCK MUNICIPAL INCOME TRUST II

INVESTMENT ADVISOR: BLACKROCK ADVISORS, INC.

SUB-ADVISOR: BLACKROCK FINANCIAL MANAGEMENT, INC.

AUTHORIZED INITIATORS
    Please Type or Print

Please provide a listing of Fund officers or other individuals who are currently
authorized to INITIATE wire transfer instructions to State Street:

<TABLE>
<CAPTION>
NAME                                        TITLE (Specify whether position             SPECIMEN SIGNATURE
                                            is with Fund or Investment
                                            Adviser)
<S>                                         <C>                                         <C>

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

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

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

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

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

AUTHORIZED VERIFIERS
    Please Type or Print

Please provide a listing of Fund officers or other individuals who will be
CALLED BACK to verify the initiation of repetitive wires of $10 million or more
and all non-repetitive wire instructions:

NAME                                        CALLBACK PHONE NUMBER                       DOLLAR LIMITATION (IF ANY)

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

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

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

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

- ------------------------------------        ------------------------------------        ------------------------------------
</TABLE>


<PAGE>


             REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT


         ADDENDUM to that certain Custodian Contract dated as of July __, 2002
(the "Custodian Agreement") between BlackRock Municipal Income Trust II (the
"Customer") and State Street Bank and Trust Company, including its subsidiaries
and affiliates ("State Street").

         State Street has developed and utilizes proprietary accounting and
other systems in conjunction with the custodian services which State Street
provides to the Customer. In this regard, State Street maintains certain
information in databases under its control and ownership which it makes
available to its customers (the "Remote Access Services").


The Services

State Street agrees to provide the Customer, and its designated investment
advisors, consultants or other third parties authorized by State Street
("Authorized Designees") with access to In~SightSM as described in Exhibit A or
such other systems as may be offered from time to time (the "System") on a
remote basis.


Security Procedures

The Customer agrees to comply, and to cause its Authorized Designees to comply,
with remote access operating standards and procedures and with user
identification or other password control requirements and other security
procedures as may be issued from time to time by State Street for use of the
System and access to the Remote Access Services. The Customer agrees to advise
State Street immediately in the event that it learns or has reason to believe
that any person to whom it has given access to the System or the Remote Access
Services has violated or intends to violate the terms of this Addendum and the
Customer will cooperate with State Street in seeking injunctive or other
equitable relief. The Customer agrees to discontinue use of the System and
Remote Access Services, if requested, for any security reasons cited by State
Street.


Fees

Fees and charges for the use of the System and the Remote Access Services and
related payment terms shall be as set forth in the custody fee schedule in
effect from time to time between the parties. The Customer shall be responsible
for any tariffs, duties or taxes imposed or levied by any government or
governmental agency by reason of the transactions contemplated by this Addendum,
including, without limitation, federal, state and local taxes, use, value added
and personal property taxes (other than income, franchise or similar taxes which
may be imposed or assessed against State Street). Any claimed exemption from
such tariffs, duties or taxes shall be supported by proper documentary evidence
delivered to State Street.


Proprietary Information/Injunctive Relief

The System and Remote Access Services described herein and the databases,
computer programs, screen formats, report formats, interactive design
techniques, formulae, processes, systems, software, know- how, algorithms,
programs, training aids, printed materials, methods, books, records, files,
documentation and other information made available to the Customer by State
Street as part of the Remote Access Services and through the use of the System
and all copyrights, patents, trade secrets and other proprietary rights of State
Street related thereto are the exclusive, valuable and confidential property of
State Street and its relevant licensors (the "Proprietary Information"). The
Customer agrees


                                       i

<PAGE>


on behalf of itself and its Authorized Designees to keep the
Proprietary Information confidential and to limit access to its employees and
Authorized Designees (under a similar duty of confidentiality) who require
access to the System for the purposes intended. The foregoing shall not apply to
Proprietary Information in the public domain or required by law to be made
public.

The Customer agrees to use the Remote Access Services only in connection with
the proper purposes of this Addendum. The Customer will not, and will cause its
employees and Authorized Designees not to, (i) permit any third party to use the
System or the Remote Access Services, (ii) sell, rent, license or otherwise use
the System or the Remote Access Services in the operation of a service bureau or
for any purpose other than as expressly authorized under this Addendum, (iii)
use the System or the Remote Access Services for any fund, trust or other
investment vehicle without the prior written consent of State Street, or (iv)
allow or cause any information transmitted from State Street's databases,
including data from third party sources, available through use of the System or
the Remote Access Services, to be published, redistributed or retransmitted for
other than use for or on behalf of the Customer, as State Street's customer.

The Customer agrees that neither it nor its Authorized Designees will modify the
System in any way; enhance or otherwise create derivative works based upon the
System, nor will your or your Authorized Designees reverse engineer, decompile
or otherwise attempt to secure the source code for all or any part of the
System.

The Customer acknowledges that the disclosure of any Proprietary Information, or
of any information which at law or equity ought to remain confidential, will
immediately give rise to continuing irreparable injury to State Street
inadequately compensable in damages at law and that State Street shall be
entitled to obtain immediate injunctive relief against the breach or threatened
breach of any of the foregoing undertakings, in addition to any other legal
remedies which may be available.


Limited Warranties

State Street represents and warrants that it is the owner of and has the right
to grant access to the System and to provide the Remote Access Services
contemplated herein. Because of the nature of computer information technology
including, but not limited to, the use of the Internet, and the necessity of
relying upon third party sources, and data and pricing information obtained from
third parties, the System and Remote Access Services are provided "AS IS", and
the Customer and its Authorized Designees shall be solely responsible for the
investment decisions, results obtained, regulatory reports and statements
produced using the Remote Access Services. State Street and its relevant
licensors will not be liable to the Customer or its Authorized Designees for any
direct or indirect, special, incidental, punitive or consequential damages
arising out of or in any way connected with the System or the Remote Access
Services, nor shall either party be responsible for delays or nonperformance
under this Addendum arising out of any cause or event beyond such party's
control.

State Street will take reasonable steps to ensure that its products (and those
of its third-party suppliers) reflect the available state of the art technology
to offer products that are Year 2000 compliant, including, but not limited to,
century recognition of dates, calculations that correctly compute same century
and multi century formulas and date values, and interface values that reflect
the date issues arising between now and December 31, 2099, and if any changes
are required, State Street will make the changes to its products at no cost to
you and in a commercially reasonable time frame and will require third-party
suppliers to do likewise. The Customer will do likewise for its systems.
EXCEPT AS EXPRESSLY SET FORTH IN THIS ADDENDUM, STATE STREET, FOR ITSELF AND ITS
RELEVANT LICENSORS, EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES


                                       ii

<PAGE>


CONCERNING THE SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS
OR IMPLIED INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTIBILITY OR
FITNESS FOR A PARTICULAR PURPOSE.


Infringement

State Street will defend or, at our option, settle any claim or action brought
against the Customer to the extent that it is based upon an assertion that
access to the System or use of the Remote Access Services by the Customer under
this Addendum constitutes direct infringement of any patent or copyright or
misappropriation of a trade secret, provided that the Customer notifies State
Street promptly in writing of any such claim or proceeding and cooperates with
State Street in the defense of such claim or proceeding. Should the System or
the Remote Access Services or any part thereof become, or in State Street's
opinion be likely to become, the subject of a claim of infringement or the like
under any applicable patent or copyright or trade secret laws, State Street
shall have the right, at State Street's sole option, to (i) procure for the
Customer the right to continue using the System or the Remote Access Services,
(ii) replace or modify the System or the Remote Access Services so that the
System or the Remote Access Services becomes noninfringing, or (iii) terminate
this Addendum without further obligation.


Termination

Either party to the Custodian Agreement may terminate this Addendum (i) for any
reason by giving the other party at least one-hundred and eighty (180) days
prior written notice in the case of notice of termination by State Street to the
Customer or thirty (30) days notice in the case of notice from the Customer to
State Street of termination, or (ii) immediately for failure of the other party
to comply with any material term and condition of the Addendum by giving the
other party written notice of termination. This Addendum shall in any event
terminate within ninety (90) days after the termination of the Custodian
Agreement. In the event of termination, the Customer will return to State Street
all copies of documentation and other confidential information in its possession
or in the possession of its Authorized Designees. The foregoing provisions with
respect to confidentiality and infringement will survive termination for a
period of three (3) years.


Miscellaneous

This Addendum and the exhibit hereto constitute the entire understanding of the
parties to the Custodian Agreement with respect to access to the System and the
Remote Access Services. This Addendum cannot be modified or altered except in a
writing duly executed by each of State Street and the Customer and shall be
governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts.

By its execution of the Custodian Agreement, the Customer (a) confirms to the
Custodian that it informs all Authorized Designees of the terms of this
Addendum; (b) accepts responsibility for its and its Authorized Designees'
compliance with the terms of this Addendum; and (c) indemnifies and holds the
Custodian harmless from and against any and all costs, expenses, losses,
damages, charges, counsel fees, payments and liabilities arising from any
failure of the Customer or any of its Authorized Designees to abide by the terms
of this Addendum.


                                      iii

<PAGE>


                                   EXHIBIT A
                                       TO
             REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT


                                  IN~SIGHT(SM)
                           System Product Description

In~Sight(SM) provides bilateral information delivery, interoperability, and
on-line access to State Street. In~Sight(SM) allows users a single point of
entry into State Street's diverse systems and applications. Reports and data
from systems such as Investment Policy Monitor(SM), Multicurrency Horizon(SM),
Securities Lending, Performance & Analytics and Electronic Trade Delivery can be
accessed through In~Sight(SM). This Internet-enabled application is designed to
run from a Web browser and perform across low-speed data lines or corporate
high-speed backbones. In~Sight(SM) also offers users a flexible toolset,
including an ad-hoc query function, a custom graphics package, a report
designer, and a scheduling capability. Data and reports offered through
In~Sight(SM) will continue to increase in direct proportion with the customer
roll out, as it is viewed as the information delivery system will grow with
State Street's customers.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(K)
<SEQUENCE>11
<FILENAME>file010.txt
<DESCRIPTION>TRANSFER AGENCY AGREEMENT
<TEXT>
<PAGE>

[EQUISERVE LOGO]


                                    FORM OF

                                   REGISTRAR,

                      TRANSFER AGENCY AND SERVICE AGREEMENT

                                     between

                       BLACKROCK MUNICIPAL INCOME TRUST II

                                       and

                          EQUISERVE TRUST COMPANY, N.A.



Innovative Leadership in Shareholder Services.

150 Royall Street
Canton, MA 02021


<PAGE>

                                TABLE OF CONTENTS
                                -----------------


Article 1         Terms of Appointment; Duties of the Bank....................1

Article 2         Fees and Expenses...........................................3

Article 3         Representations and Warranties of the Bank..................4

Article 4         Representations and Warranties of the Fund..................4

Article 5         Data Access and Proprietary Information.....................5

Article 6         Indemnification.............................................6

Article 7         Standard of Care............................................8

Article 8         Covenants of the Fund and the Bank..........................8

Article 9         Termination of Agreement...................................10

Article 10        Assignment.................................................10

Article 11        Amendment..................................................11

Article 12        Massachusetts Law to Apply.................................11

Article 13        Force Majeure..............................................11

Article 14        Consequential Damages......................................11

Article 15        Merger of Agreement........................................11




<PAGE>

                                     FORM OF
                REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT

     AGREEMENT made as of the [ ] day of [      ] 2002, by and between BlackRock
Municipal Income Trust II, a Delaware business trust, having its principal
office and place of business at 100 Bellevue Avenue, Wilmington, Delaware 19809
(the "Trust"), and EQUISERVE TRUST COMPANY, N.A., a national banking association
having its principal office and place of business at 150 Royall Street Canton,
MA 02021 (the "Bank").

     WHEREAS, the Trust desires to appoint the Bank as its registrar, transfer
agent, dividend disbursing agent and agent in connection with certain other
activities and the Bank desires to accept such appointment;

     NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:

ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK

     1.01 Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs and appoints the Bank to act as, and the Bank agrees to act
as registrar, transfer agent for the Trust's authorized and issued shares of its
beneficial interest ("Shares"), dividend disbursing agent and agent in
connection with any dividend reinvestment plan as set out in the prospectus of
the Trust, corresponding to the date of this Agreement.

     1.02 The Bank agrees that it will perform the following services:

     (a) In accordance with procedures established from time to time by
agreement between the Trust and the Bank, the Bank shall:

                                       1
<PAGE>

     (i) Issue and record the appropriate number of Shares as authorized and
     hold such Shares in the appropriate Shareholder account;

     (ii) Effect transfers of Shares by the registered owners thereof upon
     receipt of appropriate documentation;

     (iii) Prepare and transmit payments for dividends and distributions
     declared by the Trust;

     (iv) Act as agent for Shareholders pursuant to the dividend reinvestment
     and cash purchase plan as amended from time to time in accordance with the
     terms of the agreement to be entered into between the Shareholders and the
     Bank in substantially the form attached as Exhibit A hereto;

     (v) Issue replacement certificates for those certificates alleged to have
     been lost, stolen or destroyed upon receipt by the Bank of indemnification
     satisfactory to the Bank and protecting the Bank and the Trust, and the
     Bank at its option, may issue replacement certificates in place of
     mutilated stock certificates upon presentation thereof and without such
     indemnity.

     (b) In addition to and neither in lieu nor in contravention of the services
set forth in the above paragraph (a), the Bank shall: (i) perform all of the
customary services of a registrar, transfer agent, dividend disbursing agent and
agent of

                                       2
<PAGE>

the dividend reinvestment and cash purchase plan as described in Article 1
consistent with those requirements in effect as of the date of this Agreement.
The detailed definition, frequency, limitations and associated costs (if any)
set out in the attached fee schedule, include but are not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies, and mailing Shareholder reports to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts where
applicable, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all registered Shareholders.

     (c) The Bank shall provide additional services on behalf of the Trust
(i.e., escheatment services) which may be agreed upon in writing between the
Trust and the Bank.

ARTICLE 2 FEES AND EXPENSES

     2.01 For the performance by the Bank pursuant to this Agreement, the Trust
agrees to pay the Bank an annual maintenance fee as set out in the initial fee
schedule attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.02 below may be changed from time to time subject to
mutual written agreement between the Trust and the Bank.

     2.02 In addition to the fee paid under Section 2.01 above, the Trust agrees
to reimburse the Bank for out-of-pocket expenses, including but not limited to
confirmation production, postage, forms, telephone, microfilm, microfiche,
tabulating proxies, records storage, or advances incurred by the Bank for the
items set out in the fee schedule attached hereto. In addition, any other
expenses incurred by the Bank at the request or with the consent of the Trust,
will be reimbursed by the Trust.


                                       3
<PAGE>

     2.03 The Trust agrees to pay all fees and reimbursable expenses within five
days following the receipt of the respective billing notice. Postage and the
cost of materials for mailing of dividends, proxies, Trust reports and other
mailings to all Shareholder accounts shall be advanced to the Bank by the Trust
at least seven (7) days prior to the mailing date of such materials.

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BANK

     The Bank represents and warrants to the Trust that:

     3.01 It is a trust company and national banking association existing and in
good standing under the laws of the United States.

     3.02 It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.

     3.03 It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement.

     3.04 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.

     3.05 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE TRUST

     The Trust represents and warrants to the Bank that:

     4.01 It is a business trust duly organized and existing and in good
standing under the laws of Delaware.

     4.02 It is empowered under applicable laws and by its Agreement and
Declaration of Trust and By-Laws to enter into and perform this Agreement.


                                       4
<PAGE>

     4.03 All corporate proceedings required by said Agreement and Declaration
of Trust and By-Laws have been taken to authorize it to enter into and perform
this Agreement.

     4.04 It is a closed-end, diversified investment company registered under
the Investment Company Act of 1940, as amended.

     4.05 To the extent required by federal securities laws a registration
statement under the Securities Act of 1933, as amended is currently effective
and appropriate state securities law filings have been made with respect to all
Shares of the Trust being offered for sale; information to the contrary will
result in immediate notification to the Bank.

     4.06 It shall make all required filings under federal and state securities
laws.

ARTICLE 5 DATA ACCESS AND PROPRIETARY INFORMATION

     5.01 The Trust acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and other information
furnished to the Trust by the Bank are provided solely in connection with the
services rendered under this Agreement and constitute copyrighted trade secrets
or proprietary information of substantial value to the Bank. Such databases,
programs, formats, designs, techniques and other information are collectively
referred to below as "Proprietary Information." The Trust agrees that it shall
treat all Proprietary Information as proprietary to the Bank and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as expressly permitted hereunder. The Trust agrees for
itself and its employees and agents:

                                       5
<PAGE>

     (a) to use such programs and databases (i) solely on the Trust computers,
or (ii) solely from equipment at the locations agreed to between the Trust and
the Bank and (iii) in accordance with the Bank's applicable user documentation;

     (b) to refrain from copying or duplicating in any way (other than in the
normal course of performing processing on the Trusts' computers) any part of any
Proprietary Information;

     (c) to refrain from obtaining unauthorized access to any programs, data or
other information not owned by the Trust, and if such access is accidentally
obtained, to respect and safeguard the same Proprietary Information;

     (d) to refrain from causing or allowing information transmitted from the
Bank's computer to the Trusts' terminal to be retransmitted to any other
computer terminal or other device except as expressly permitted by the Bank
(such permission not to be unreasonably withheld);

     (e) that the Trust shall have access only to those authorized transactions
as agreed to between the Trust and the Bank; and

     (f) to honor reasonable written requests made by the Bank to protect at the
Bank's expense the rights of the Bank in Proprietary Information at common law
and under applicable statues.

     5.02 If the transactions available to the Trust include the ability to
originate electronic instructions to the Bank in order to (i) effect the
transfer or movement of cash or Shares or (ii) transmit Shareholder information
or other information, then in such event the Bank shall be entitled to rely on
the validity and authenticity of such instruction without undertaking any
further inquiry as long as such instruction is

                                       6
<PAGE>

undertaken in conformity with security procedures established by the Bank from
time to time.

ARTICLE 6 INDEMNIFICATION

     6.01 The Bank shall not be responsible for, and the Trust shall indemnify
and hold the Bank harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:

     (a) All actions of the Bank or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in good
faith and without negligence or willful misconduct.

     (b) The Trust's lack of good faith, negligence or willful misconduct which
arise out of the breach of any representation or warranty of the Trust
hereunder.

     (c) The reliance on or use by the Bank or its agents or subcontractors of
information, records, documents or services which (i) are received by the Bank
or its agents or subcontractors, and (ii) have been prepared, maintained or
performed by the Trust or any other person or firm on behalf of the Trust
including but not limited to any previous transfer agent registrar.

     (d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Trust.

     (e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.

                                       7
<PAGE>

     6.02 At any time the Bank may apply to any officer of the Trust for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Trust for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The Bank,
its agents and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of the Trust, reasonably
believed to be genuine and to have been signed by the proper person or persons,
or upon any instruction, information, data, records or documents provided the
Bank or its agents or subcontractors by telephone, in person, machine readable
input, telex, CRT data entry or other similar means authorized by the Trust, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Trust. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Trust, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.

     6.03 In order that the indemnification provisions contained in this Article
6 shall apply, upon the assertion of a claim for which the Trust may be required
to indemnify the Bank, the Bank shall promptly notify the Trust in writing of
such assertion, and shall keep the Trust advised with respect to all
developments concerning such claim. The Trust shall have the option to
participate with the Bank in the defense of such claim or to defend against said
claim in its own name or in the name of the Bank. The Bank

                                       8
<PAGE>

shall in no case confess any claim or make any compromise in any case in which
the Trust may be required to indemnify the Bank except with the Trust's prior
written consent.

ARTICLE 7 STANDARD OF CARE

     7.01 The Bank shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall not be
liable for loss or damage due to errors unless said errors are caused by its
negligence, bad faith, or willful misconduct or that of its employees.

ARTICLE 8 COVENANTS OF THE TRUST AND THE BANK

     8.01 The Trust shall promptly furnish to the Bank the following:

     (a) A certified copy of the resolution of the Board of Trustees of the
Trust authorizing the appointment of the Bank and the execution and delivery of
this Agreement.

     (b) A copy of the Agreement and Declaration of Trust and By-Laws of the
Trust and all amendments thereto.

     8.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.

     8.03 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the

                                       9
<PAGE>

Bank relating to the services to be performed by the Bank hereunder are the
property of the Trust and will be preserved, maintained and made available in
accordance with such Section and Rules, and will be surrendered promptly to the
Trust on and in accordance with its request.

     8.04 The Bank and the Trust agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be requested by a governmental entity or as may be required by
law.

     8.05 In cases of any requests or demands for the inspection of the
Shareholder records of the Trust, the Bank will endeavor to notify the Trust and
to secure instructions from an authorized officer of the Trust as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.


ARTICLE 9 TERMINATION OF AGREEMENT

     9.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days' written notice to the other.

     9.02 Should the Trust exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Trust. In the event that in connection with termination of this Agreement, a
successor to any of the Bank's duties or responsibilities under this Agreement
is designated by the Trust by written notice to the Bank, the Bank shall,
promptly upon such termination and at the expense of the Trust, transfer all
records and shall cooperate in the transfer of such

                                       10
<PAGE>

duties and responsibilities. Additionally, the Bank reserves the right to charge
for any other reasonable expenses associated with such termination and/or a
charge equivalent to the average of three (3) month's fees.

ARTICLE 10 ASSIGNMENT

     10.01 Except as provided in Section 10.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.

     10.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.

     10.03 The Bank may, without further consent on the part of the Trust,
subcontract for the performance hereof with (i) EquiServe Limited Partnership, a
Delaware limited partnership ("EquiServe"), which is duly registered as a
transfer agent pursuant to Section l7A(c)(2) of the Securities Exchange Act of
1934 ("Section l7A(c)(2)"), or (ii) an EquiServe affiliate duly registered as a
transfer agent pursuant to Section 17A(c)(2), provided, however, that the Bank
shall be as fully responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.

ARTICLE 11 ARTICLE 11 AMENDMENT

     11.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Trustees of the Trust.


                                       11
<PAGE>

ARTICLE 12 MASSACHUSETTS LAW TO APPLY

     12.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.

ARTICLE 13 FORCE MAJEURE

     13.01 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.

ARTICLE 14 CONSEQUENTIAL DAMAGES

     14.01 Neither party to this Agreement shall be liable to the other party
for damages under any provision of this Agreement or for any consequential
damages arising out of any act or failure to act hereunder.

ARTICLE 15 MERGER OF AGREEMENT

     15.01 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written.


                                       12
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.

                                    BLACKROCK MUNICIPAL INCOME TRUST II

                                    BY:
                                       -----------------------------------
                                    Name:  Anne Ackerley
                                    Title: Secretary



                                    EQUISERVE TRUST COMPANY, N.A.

                                    BY:
                                       -----------------------------------
                                    Name: Margaret Prentice
                                    Title: Managing Director



                                       13

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(L)
<SEQUENCE>12
<FILENAME>file011.txt
<DESCRIPTION>OPINION AND CONSENT OF COUNSEL TO THE TRUST
<TEXT>
<PAGE>

                    SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
                                FOUR TIMES SQUARE
                             NEW YORK, NY 10036-6522

                                 (212) 735-3000

                                            July 25, 2002


BlackRock Municipal Income Trust II
100 Bellevue Parkway
Wilmington, Delaware 19809

                           Re:      BlackRock Municipal Income Trust II
                                    Registration Statement on Form N-2
                                    --------------------------------------------

Ladies and Gentlemen:

                  We have acted as special counsel to BlackRock Municipal Income
Trust II, a business trust created under the Delaware Business Trust Act (the
"Trust"), in connection with the initial public offering by the Trust of up to
26,500,000 shares (including shares subject to an over-allotment option) of the
Trust's common shares (the "Shares") of beneficial interest, par value $0.001
per share (the "Common Shares").

                  This opinion is being furnished in accordance with the
requirements of Item 24 of the Form N-2 Registration Statement under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company
Act of 1940, as amended (the "1940 Act").

                  In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Notification of

<PAGE>

BlackRock Municipal Income Trust II
July 25, 2002
Page 2



Registration of the Trust as an investment company under the 1940 Act, on Form
N-8A, dated June 24, 2002, as filed with the Securities and Exchange Commission
(the "Commission") on June 24, 2002, (ii) the Registration Statement of the
Trust on Form N-2 (File Nos. 333-91080 and 811-21124), as filed with the
Commission on June 24, 2002, and as amended by Pre-Effective Amendment No. 1,
filed with the Commission on June 28, 2002, and Pre-Effective Amendment No. 2 to
be filed with the Commission on July 25, 2002, under the 1933 Act (such
Registration Statement, as so amended and proposed to be amended, being
hereinafter referred to as the "Registration Statement"); (iii) the form of the
Purchase Agreement (the "Purchase Agreement") proposed to be entered into
between the Trust, as issuer, BlackRock Advisors, Inc., as investment adviser to
the Trust, BlackRock Financial Management, Inc., as investment sub-adviser to
the Trust, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
representative of the several underwriters named therein (the "Underwriters"),
filed as an exhibit to the Registration Statement; (iv) a specimen certificate
representing the Common Shares; (v) the Certificate of Trust, as filed with the
Secretary of State of Delaware, and the Agreement and Declaration of Trust of
the Trust, as currently in effect; (vi) the By-Laws of the Trust, as currently
in effect; (vii) certain resolutions of the Board of Trustees of the Trust
relating to the issuance and sale of the Shares and related matters and (ix)
certain resolutions of the shareholders of the Trust adopted on July 16, 2002.
We also have examined originals or copies, certified or otherwise identified to
our satisfaction, of such records of the Trust and such agreements, certificates
of public officials, certificates of officers or other representatives of the
Trust and others, and such other documents, certificates and records as we have
deemed necessary or appropriate as a basis for the opinions set forth herein.

                  In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such copies. In making our examination of
documents, we have assumed that the parties thereto, other than the Trust, had
or will have the power, corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due authorization by all
requisite action, corporate or other, and execution and


<PAGE>


BlackRock Municipal Income Trust II
July 25, 2002
Page 3




delivery by such parties of such documents and the validity and binding effect
thereof on such parties. In rendering the opinion set forth below, we have
assumed that the share certificates representing the Shares will conform to the
specimen examined by us and will have been manually signed by an authorized
officer of the transfer agent and registrar for the Common Shares and registered
by such transfer agent and registrar. As to any facts material to the opinions
expressed herein which we have not independently established or verified, we
have relied upon statements and representations of officers and other
representatives of the Trust and others.

                  Members of our firm are admitted to the bar in the State of
Delaware and we do not express any opinion as to the laws of any jurisdiction
other than the Delaware Business Trust Act.

                  Based upon and subject to the foregoing, we are of the opinion
that when (i) the Registration Statement becomes effective; (ii) the Purchase
Agreement has been duly executed and delivered; (iii) certificates representing
the Shares in the form of the specimen certificate examined by us have been
manually signed by an authorized officer of the transfer agent and registrar for
the Common Shares and registered by such transfer agent and registrar; and (iv)
the Shares have been delivered to and paid for by the Underwriters at a price
per share not less than the per share par value of the Common Shares as
contemplated by the Purchase Agreement, the issuance and sale of the Shares will
have been duly authorized, and the Shares will be validly issued, fully paid and
nonassessable (except as provided in the last sentence of Section 3.8 of the
Agreement and Declaration of Trust).


<PAGE>


BlackRock Municipal Income Trust II
July 25, 2002
Page 4




                  We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also consent to the
reference to our firm under the caption "Legal Opinions" in the Registration
Statement. In giving this consent, we do not thereby admit that we are included
in the category of persons whose consent is required under Section 7 of the 1933
Act or the rules and regulations of the Commission.

                                    Very truly yours,


                                        /s/ Skadden, Arps, Slate, Meagher & Flom




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(N)
<SEQUENCE>13
<FILENAME>file012.txt
<DESCRIPTION>CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<TEXT>
<PAGE>

INDEPENDENT AUDITORS' CONSENT


We consent to the use in this Pre-Effective Amendment No. 2 to the Registration
Statement of BlackRock Municipal Income Trust II (Securities Act Registration
No. 333-91080) of our report dated July 17, 2002, relating to the financial
statements of BlackRock Municipal Income Trust II as of July 16, 2002 and for
the period then ended in the Statement of Additional Information which is part
of such registration statement.

We also consent to the reference to our Firm under the heading "Experts" in the
Registration Statement.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Boston, Massachusetts
July 25, 2002


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(P)
<SEQUENCE>14
<FILENAME>file013.txt
<DESCRIPTION>INITIAL SUBSCRIPTION AGREEMENT
<TEXT>
<PAGE>


                                                                             (p)


                             SUBSCRIPTION AGREEMENT

                  THIS SUBSCRIPTION AGREEMENT is entered into as of the 16th day
of July, 2002, between BlackRock Municipal Income Trust II, a business trust
organized and existing under the laws of Delaware (the "Trust"), and BlackRock
Advisors, Inc. or one of its affiliates (the "Purchaser").

                  THE PARTIES HEREBY AGREE AS FOLLOWS:

                  1.       PURCHASE AND SALE OF THE SHARES

                  1.1      SALE AND ISSUANCE OF SHARES. Subject to the terms and
conditions of this Agreement, the Trustees agree to sell to the Purchaser, and
the Purchaser agrees to purchase from the Trustees 8,028 common shares of
beneficial interest, par value $0.001, representing undivided beneficial
interests in the Trust (the "Shares") at a price per Share of $14.325 for an
aggregate purchase price of $115,001.

                  2.       REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE PURCHASER. The Purchaser hereby represents and warrants to, and
covenants for the benefit of, the Trust that:

                  2.1      PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is
made by the Trustees with the Purchaser in reliance upon the Purchaser's
representation to the Trustees, which by the Purchaser's execution of this
Agreement the Purchaser hereby confirms, that the Shares are being acquired for
investment for the Purchaser's own account, and not as a nominee or agent and
not with a view to the resale or distribution by the Purchaser of any of the
Shares, and that the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the Shares, in either case in
violation of any securities registration requirement under applicable law, but
subject nevertheless, to any requirement of law that the disposition of its
property shall at all times by within its control. By executing this Agreement,
the Purchaser further represents that the Purchaser does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Shares.



<PAGE>



                  2.2      INVESTMENT EXPERIENCE. The Purchaser acknowledges
that it can bear the economic risk of the investment for an indefinite period of
time and has such knowledge and experience in financial and business matters
(and particularly in the business in which the Trust operates) as to be capable
of evaluating the merits and risks of the investment in the Shares. The
Purchaser is an "accredited investor" as defined in Rule 501(a) of Regulation D
under the Securities Act of 1933 (the "1933 Act").

                  2.3      RESTRICTED SECURITIES. The Purchaser understands that
the Shares are characterized as "restricted securities" under the United States
securities laws inasmuch as they are being acquired from the Trustees in a
transaction not involving a public offering and that under such laws and
applicable regulations such Shares may be resold without registration under the
1933 Act only in certain circumstances. In this connection, the Purchaser
represents that it understands the resale limitations imposed by the 1933 Act
and is generally familiar with the existing resale limitations imposed by Rule
144.

                  2.4      FURTHER LIMITATIONS ON DISPOSITION.  The Purchaser
further agrees not to make any disposition directly or indirectly of all or any
portion of the Shares unless and until:

                  (a)      There is then in effect a registration statement
under the 1933 Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or

                  (b)      The Purchaser shall have furnished the Trustees with
an opinion of counsel, reasonably satisfactory to the Trustees, that such
disposition will not require registration of such Shares under the 1933 Act.

                  (c)      Notwithstanding the provisions of subsections (a) and
(b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by the Purchaser to any affiliate of the Purchaser, if
the transferee agrees in writing to be subject to the terms hereof to the same
extent as if it were the original Purchaser hereunder.

                  2.5      LEGENDS.  It is understood that the certificate
evidencing the Shares may bear either or both of the following legends:

                  (a)      "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the


                                        2

<PAGE>



absence of a registration statement in effect with respect to the Shares under
such Act or an opinion of counsel reasonably satisfactory to the Trustees of
BlackRock Municipal Income Trust II that such registration is not required."

                  (b)      Any legend required by the laws of any other
applicable jurisdiction.

                  The Purchaser and the Trustees agree that the legend contained
in the paragraph (a) above shall be removed at a holder's request when they are
no longer necessary to ensure compliance with federal securities laws.

                  2.6      COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.



                                        3

<PAGE>


                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.

                                            BLACKROCK MUNICIPAL INCOME TRUST II



                                            By: /s/ Anne F. Ackerley
                                                -------------------------------
                                                   Name:  Anne F. Ackerley
                                                   Title: Secretary




                                            BLACKROCK ADVISORS, Inc.



                                            By: /s/ Anne F. Ackerley
                                                -------------------------------
                                                    Name:   Anne F. Ackerley
                                                    Title:  Managing Director



                                        4


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(R)(1)
<SEQUENCE>15
<FILENAME>file014.txt
<DESCRIPTION>CODE OF ETHICS OF TRUST
<TEXT>
<PAGE>

                                                                   EX-99.(r)(1)

                         THE BLACKROCK CLOSED END TRUSTS

                                 CODE OF ETHICS

I.       Introduction.
         ------------

         The purpose of this Code of Ethics is to prevent Access Persons (as
defined below) of The BlackRock Closed End Trusts (the "Trusts") from engaging
in any act, practice or course of business prohibited by paragraph (b) of Rule
17j-l (the "Rule") under the Investment Company Act of 1940, as amended (the
"Act"). This Code of Ethics is required by paragraph (c) of the Rule. A copy of
the Rule is attached to this Code of Ethics as Appendix 1.

         Access Persons of the Trusts, in conducting their personal securities
transac tions, owe a fiduciary duty to the shareholders of the Trusts. The
fundamental standard to be followed in personal securities transactions is that
Access Persons may not take inappropriate advantage of their positions. All
personal securities transac tions by Access Persons must be conducted in such a
manner as to avoid any actual or potential conflict of interest between the
Access Person's interest and the interests of the Trusts, or any abuse of an
Access Person's position of trust and responsibility. Potential conflicts
arising from personal investment activities could include buying or selling
securities based on knowledge of the Trust's trading position or plans
(sometimes referred to as front-running), and acceptance of personal favors that
could influence trading judgments on behalf of the Trusts. While this Code of
Ethics is designed to address identified conflicts and potential conflicts, it
cannot possibly be written broadly enough to cover all potential situations and,
in this regard, Access Persons are expected to adhere not only to the letter,
but also the spirit, of the policies contained herein.

II.      Definitions.
         -----------

         In order to understand how this Code of Ethics applies to particular
persons and transactions, familiarity with the key terms and concepts used in
this Code of Ethics is necessary. Those key terms and concepts are:


<PAGE>



         1. "Access Person" means any trustee, officer or "advisory person" of
the Trusts. A list of the Trust's Access Persons is attached as Appendix 2 to
this Code of Ethics and will be updated from time to time.

         2. "Advisory person" means (a) any employee of the Trusts or of any
company in a control relationship to the Trusts, who, in connection with his
regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a "Covered Security" by the Trusts, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales; and (b) any natural person in a control relationship to the
Trusts who obtains information concerning recommendations made to the Trusts
with regard to the purchase or sale of "Covered Securities".

         3. "Beneficial ownership" has the meaning set forth in Rule 16a-1(a)(2)
of the Securities Exchange Act of 1934, as amended, a copy of which is included
as Appendix 3. The determination of direct or indirect beneficial ownership
shall apply to all securities which an Access Person has or acquires.

         4. "BlackRock" means BlackRock Advisors, Inc. the investment advisor of
the Trusts.

         5. "BlackRock Code" means the Employee Investment Transaction Policy
adopted by BlackRock and approved by the Board.

         6. "Control" has the meaning set forth in Section 2(a)(9) of the Act.

         7. "Covered Security" has the meaning set forth in Section 2(a)(36) of
the Act, except that it shall not include: direct obligations of the Government
of the United States; bankers' acceptances, bank certificates of deposit,
commercial paper, and high-quality short-term debt instruments, including
repurchase agreements; and shares issued by registered open-end investment
companies. A high-quality short- term debt instrument is one with a maturity at
issuance of less than 366 days and that is rated in one of the two highest
rating categories by a nationally recognized statistical rating organization.

         8. "Independent trustee" means a trustee of the Trusts who is not an
"interested person" of the Trusts within the meaning of Section 2(a)(19) of the
Act.

         9. "Investment Personnel" of the Trusts means (a) any employee of the
Trusts (or of any company in a control relationship to the Trusts) who, in
connection with his or her regular functions or duties, makes or participates in
making recom-



<PAGE>



mendations regarding the purchase or sale of securities by the Trusts and (b)
any natural person who controls the Trusts and who obtains information
concerning recommendations made to the Trusts regarding the purchase or sale of
securities by the Trusts.

         10. "IPO" means an offering of securities registered under the
Securities Act of 1933, the issuer or which, immediately before the
registration, was not subject to the reporting requirements of Sections 13 or
15(d) of the Securities Exchange Act.

         11. "Limited Offering" means an offering exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2), 4(6) or Rule 504, 505 or
506 under the Securities Act of 1933.

         12. "Purchase or sale of a Covered Security" includes, among other
things, the writing of an option to purchase or sell a Covered Security.


III.     Restrictions Applicable to Directors, Officers and Employees of
         BlackRock.
         ---------------------------------------------------------------

         1. All Directors, officers and employees of BlackRock's investment
advisory companies shall be subject to the restrictions, limitations and
reporting responsibilities set forth in the BlackRock Code, respectively, as if
fully set forth herein.

         2. Persons subject to this Section III shall not be subject to the
restric tions, limitations and reporting responsibilities set forth in Sections
IV. and V. below.


IV.      Prohibitions; Exemptions.
         ------------------------

         1. Prohibited Purchases and Sales.
            ------------------------------

         A. No Access Person may purchase or sell, directly or indirectly, any
Covered Security in which that Access Person has, or by reason of the
transaction would acquire, any direct or indirect beneficial ownership and which
to the actual knowledge of that Access Person at the time of such purchase or
sale:

         (1) is being considered for purchase or sale by the Trusts; or


<PAGE>




         (2) is being purchased or sold by the Trusts.

         2. Exemptions From Certain Prohibitions.
            ------------------------------------

         A. The prohibited purchase and sale transactions described in paragraph
IV.1 above do not apply to the following personal securities transactions:

         (1) purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control;

         (2) purchases or sales which are non-volitional on the part of either
the Access Person or the Trusts;

         (3) purchases which are part of an automatic dividend reinvestment plan
(other than pursuant to a cash purchase plan option);

         (4) purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent the rights
were acquired from that issuer, and sales of the rights so acquired;

         (5) any purchase or sale, or series of related transactions, involving
500 shares or less in the aggregate, if the issuer has a market capitalization
(outstanding shares multiplied by the current price per share) greater than $1
billion;

         (6) any purchase or sale which the Compliance Officer of BlackRock (as
defined in the BlackRock Code) approves on the grounds that its potential harm
to the Trusts is remote.

         3. Prohibited Recommendations.
            --------------------------

         An Access Person may not recommend the purchase or sale of any Covered
Security to or for the Trusts without having disclosed his or her interest, if
any, in such security or the issuer thereof, including without limitation:

         A. any direct or indirect beneficial ownership of any Covered Security
of such issuer, including any Covered Security received in a private securities
transac tion;

         B. any contemplated purchase or sale by such person of a Covered
Security;


<PAGE>


         C. any position with such issuer or its affiliates; or

         D. any present or proposed business relationship between such issuer or
its affiliates and such person or any party in which such person has a
significant interest.

         4. Pre-approval of Investments in Initial
            Public Offerings or Limited Offerings.
            -------------------------------------

         A. No Investment Personnel shall purchase any security (including, but
not limited to, any Covered Security) issued in an initial public offering
("IPO") or a Limited Offering unless an officer of the Trusts approves the
transaction in advance. The Secretary shall maintain a written record of any
decisions to permit these transactions, along with the reasons supporting the
decision.

V.       Reporting.
         ---------

         1. Initial Holdings Reports.
            ------------------------

         No later than ten (10) days after a person becomes an Access Person, he
or she must report to the Trusts the following information:

                  (i) the title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct or indirect benefi
cial ownership when the person became an Access Person;

                  (ii) the name of any broker, dealer or bank with whom the
Access Person maintained an account in which any securities were held for the
direct or indirect benefit of the Access Person as of the date the person became
an Access Person; and

                  (iii) the date that the report is submitted by the Access
Person.

         2. Quarterly Reporting.
            -------------------

         A. Every Access Person shall either report to the Trusts the
information described in paragraphs B and C below with respect to transactions
in any Covered


<PAGE>



Security in which the Access Person has, or by reason of the transaction
acquires, any direct or indirect beneficial ownership in the security or, in the
alternative, make the representation in paragraph D below.

         B. Every report shall be made not later than 10 days after the end of
the calendar quarter in which the transaction to which the report relates was
effected and shall contain the following information:

         (1) the date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the principal amount of
each Covered Security involved;

         (2) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);

         (3) the price at which the transaction was effected;

         (4) the name of the broker, dealer or bank with or through whom the
transaction was effected;

         (5) the date that the report is submitted by the Access Person; and

         (6) a description of any factors potentially relevant to an analysis of
whether the Access Person may have a conflict of interest with respect to the
transaction, including the existence of any substantial economic relationship
between the transaction and securities held or to be acquired by the Trusts.

         C. With respect to any account established by the Access Person in
which any securities were held during the quarter for the direct or indirect
benefit of the Access Person, no later than 10 days after the end of a calendar
quarter, an Access Person shall provide a report to the Trusts containing the
following informa tion:

         (1) the name of the broker, dealer or bank with whom the Access Person
established the account;

         (2) the date the account was established; and

         (3) the date that the report is submitted by the Access Person.


<PAGE>



         D. If no transactions were conducted by an Access Person during a
calendar quarter that are subject to the reporting requirements described above,
such Access Person shall, not later than 10 days after the end of that calendar
quarter, provide a written representation to that effect to the Trusts.

         3. Annual Reporting.
            ----------------

         A. Every Access Person shall report to the Trusts the information
described in paragraph B below with respect to transactions in any Covered
Security in which the Access Person has, or by reason of the transaction
acquires, any direct or indirect beneficial ownership in the security.

         B. Annually, within 30 days of the end of each calendar year, the
following information (which information must be current as of a date no more
than 30 days before the report is submitted):

         (1) The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect beneficial
ownership;

         (2) The name of any broker, dealer or bank with whom the Access Person
maintains an account in which any securities are held for the direct or indirect
benefit of the Access Person; and

         (3) The date that the report is submitted by the Access Person.

         4. Exceptions to Reporting Requirements.
            ------------------------------------

         A. An Access Person is not required to make a report otherwise required
under paragraphs 1, 2 or 3 above with respect to any transaction effected for
any account over which the Access Person does not have any direct or indirect
influence or control; provided, (however, that if the Access Person is relying
upon the provi sions of this paragraph 4(A) to avoid making such a report, the
Access Person shall, not later than 10 days after the end of each calendar
quarter, identify any such account in writing and certify in writing that he or
she had no direct or indirect influence over any such account.

         B. An independent trustee of the Trusts who would be required to make a
report pursuant to paragraphs 1, 2 or 3 above solely by reason of being a
trustee of the Trusts is not required to make an initial holdings report under
paragraph 1 above and an annual report under paragraph 3 above, and is only
required to make a


<PAGE>


quarterly report under paragraph 2 above if the independent trustee, at the time
of the transaction, knew or, in the ordinary course of fulfilling the
independent trustee's official duties as a trustee of the Trusts, should have
known that (a) the Trusts has engaged in a transaction in the same security
within the last 15 days or is engaging or going to engage in a transaction in
the same security within the next 15 days, or (b) the Trusts or BlackRock has
within the last 15 days considered a transaction in the same security or is
considering a transaction in the same security or within the next 15 days is
going to consider a transaction in the same security.

         5. Annual Certification.
            --------------------

         A. All Access Persons are required to certify that they have read and
understand this Code of Ethics and recognize that they are subject to the
provisions hereof and will comply with the policy and procedures stated herein.
Further, all Access Persons are required to certify annually that they have
complied with the requirements of this Code of Ethics and that they have
reported all personal securities transactions required to be disclosed or
reported pursuant to the requirements of such policies. A copy of the
certification form to be used in complying with this paragraph A is attached to
this Code of Ethics as Appendix 4.

         B. The Trusts and BlackRock shall prepare an annual report to the Board
of Trustees of the Trusts to be presented at the first regular meeting of the
Board after March 31 of each year and which shall:

         (1) Summarize existing procedures concerning personal investing,
including pre-clearance policies and the monitoring of personal investment
activity after pre-clearance has been granted, and any changes in the procedures
during the past year;

         (2) describe any issues arising under the Code of Ethics or procedures
since the last report to the Board including, but not limited to, information
about any material violations of the Code of Ethics or procedures and the
sanctions imposed during the past year;

         (3) identify any recommended changes in existing restrictions or proce
dures based upon experience under this Code of Ethics, evolving industry
practice or developments in applicable laws and regulations;

         (4) contain such other information, observations and recommendations as
deemed relevant by the Trusts or BlackRock; and


<PAGE>


         (5) certify that the Trusts, BlackRock have adopted Codes of Ethics
with procedures reasonably necessary to prevent Access Persons from violating
the provisions of Rule 17j-1(b) or this Code.

         6. Notification of Reporting Obligation and Review of Reports.
            ----------------------------------------------------------

         Each Access Person shall receive a copy of this Code of Ethics and be
notified of his or her reporting obligations. All reports shall be promptly
submitted upon completion to the Trust's Secretary who shall review such
reports.

         7. Miscellaneous.
            -------------

         A. Any report under this Code of Ethics may contain a statement that
the report shall not be construed as an admission by the person making the
report that the person has any direct or indirect beneficial ownership in the
securities to which the report relates.

VI.      Confidentiality.
         ---------------

         No Access Person shall reveal to any other person (except in the normal
course of his or her duties on behalf of the Trusts) any information regarding
securities transactions by the Trusts or consideration by the Trusts or
BlackRock of any such securities transaction.

         All information obtained from any Access Person hereunder shall be kept
in strict confidence, except that reports of securities transactions hereunder
will be made available to the Securities and Exchange Commission or any other
regulatory or self-regulatory organization to the extent required by law or
regulation.

VII.     Sanctions.
         ---------

         Upon discovering a violation of this Code of Ethics, the Board of
Trustees of the Trusts may impose any sanctions it deems appropriate, including
a letter of censure, the suspension or termination of any trustee, officer or
employee of the Trusts, or the recommendation to the employer of the violator of
the suspension or termination of the employment of the violator.



Dated:   May 18, 2000



<PAGE>



                                   Appendix 1
                                   ----------

               Rule 17j-l under the Investment Company Act of 1940
               ---------------------------------------------------






















<PAGE>



                                   Appendix 2
                                   ----------


         The following are "Access Persons" for purposes of the foregoing Code
of Ethics:


NAME                                        TITLE
- ----                                        -----
DIRECTORS

Laurence D. Fink                            Chairman/Director
Andrew F. Brimmer                           Director
Richard E. Cavanagh                         Director
Kent Dixon                                  Director
Frank J. Fabozzi                            Director
James Clayburn La Force, Jr.                Director
Walter F. Mondale                           Director
Ralph L. Schlosstein                        Director


OFFICERS

Ralph L. Schlosstein                        President
Robert S. Kapito                            Vice President
Kevin Klingert                              Vice President (Municipals Only)
Dennis Schaney                              Vice President (BHY Only)
Richard M. Shea                             Vice President/Tax
Henry Gabbay                                Treasurer
James Kong                                  Assistant Treasurer
Anne Ackerley                               Secretary




<PAGE>



                                   Appendix 3
                                   ----------

           Rule 16a-l(a)(2) under the Securities Exchange Act of 1934
           ----------------------------------------------------------




















<PAGE>


                                   Appendix 4
                                   ----------

                               CERTIFICATION FORM


         This is to certify that I have read and understand the Code of Ethics
of the BlackRock Closed End Trusts dated May 18, 2000, and that I recognize that
I am subject to the provisions thereof and will comply with the policy and
procedures stated therein.

         This is to further certify that I have complied with the requirements
of such Code of Ethics and that I have reported all personal securities
transactions required to be disclosed or reported pursuant to the requirements
of such Code of Ethics.



         Please sign your name here: --------------------------



         Please print your name here:--------------------------



         Please date here:           --------------------------





         Please sign two copies of this Certification Form, return one copy to
Mr. Bart Battista, Chief Compliance Officer, BlackRock Advisors, Inc., 345 Park
Avenue, New York, NY 10154, and retain the other copy, together with a copy of
the Code of Ethics, for your records.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(R)(2)
<SEQUENCE>16
<FILENAME>file015.txt
<DESCRIPTION>CODE OF ETHICS OF ADVISOR AND SUB-ADVISOR
<TEXT>
<PAGE>










                     EMPLOYEE INVESTMENT TRANSACTION POLICY
                     --------------------------------------

                                       FOR

                     BLACKROCK INVESTMENT ADVISER COMPANIES













                                                         EFFECTIVE MARCH 1, 2000



<PAGE>




                     EMPLOYEE INVESTMENT TRANSACTION POLICY
                     --------------------------------------

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>


                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
TABLE OF CONTENTS...............................................................................................-i-

I.       PREAMBLE.................................................................................................1

         A.       General Principles..............................................................................1

         B.       The General Scope Of The Policy's Application To Personal
                  Investment Transactions.........................................................................3

         C.       The Organization Of This Policy.................................................................4

         D.       Questions.......................................................................................4

II.      PERSONAL INVESTMENT TRANSACTIONS.........................................................................5

         A.       In General......................................................................................5

         B.       Reporting Obligations...........................................................................5

                  1.       Use Of Broker-Dealers And Futures Commission Merchants.................................5

                  2.       Initial Report.........................................................................5

                  3.       New Accounts...........................................................................7

                  4.       Timely Reporting Of Investment Transactions............................................7

                  5.       Related Accounts.......................................................................7

                  6.       Exemptions From Reporting..............................................................7

         C.       Prohibited Or Restricted Investment Transactions................................................8

                  1.       Initial Public Offerings...............................................................8

                  2.       Private Placements.....................................................................9

</TABLE>

                                                        -i-

<PAGE>


<TABLE>
<CAPTION>


                                                                                                             Page
                                                                                                             ----
<S>                                                                                                            <C>
         D.       Investment Transactions Requiring Prior Notification............................................9

                  1.       Prior Notification Procedure...........................................................9

                  2.       Exemptions From Prior Notification....................................................10
                           (a)      Transactions Exempt From Prior Notification..................................10
                           (b)      Securities Exempt From Prior Notification....................................11
                           (c)      Futures Contracts Exempt From Prior Notification.............................11

         E.       Ban On Short-Term Trading Profits..............................................................12

         F.       Blackout Periods...............................................................................12

                  1.       Specific Blackout Periods.............................................................12

                  2.       Exemptions From Blackout Restrictions.................................................13

III.     INSIDE INFORMATION AND SERVICE AS A DIRECTOR............................................................14

         A.       Inside Information.............................................................................14

         B.       Service As A Director..........................................................................14

IV.     EXEMPTIONS..............................................................................................15

V.      COMPLIANCE..............................................................................................15

         A.      Certifications.................................................................................15

                  1.       Upon Receipt Of This Policy..........................................................15

                  2.       Annual Certificate Of Compliance.....................................................16

         B.       Supervisory Procedures........................................................................16

                  1.       The Compliance Committee.............................................................16

                  2.       The Compliance Officer...............................................................17

                  3.       Post-Trade Monitoring And Investigations.............................................17

</TABLE>

                                                       -ii-

<PAGE>

<TABLE>
<CAPTION>


                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
                  4.       Remedial Actions......................................................................18

                  5.       Reports Of Violations Requiring Significant Remedial Action...........................18

                  6.       Annual Reports........................................................................19

VI.      EFFECTIVE DATE..........................................................................................19
</TABLE>


APPENDICES
- ----------

I.       Definitions Of Capitalized Terms

II.      Acknowledgment Of Receipt Of The Policy

III.     Annual Certification Of Compliance With The Policy

IV.      Initial Report of Accounts

V.       Request For Duplicate Broker Reports

VI.      Investment Transaction Prior Notification Form

VII.     Fully Discretionary Account Form










                                      -iii-

<PAGE>



                     EMPLOYEE INVESTMENT TRANSACTION POLICY
                     --------------------------------------

                   FOR BLACKROCK, INVESTMENT ADVISER COMPANIES


I.       PREAMBLE

         A.       GENERAL PRINCIPLES

         This Employee Investment Transaction Policy (the "Policy") is based on
the principle that you, as an officer, director or other Advisory Employee of an
Advisor affiliated with BlackRock, Inc. ("BlackRock"), owe a fiduciary duty of
undivided loyalty to the registered investment companies, institutional
investment clients, personal trusts and estates, guardianships, employee benefit
trusts, and other Advisory Clients which that Advisor serves.1 Accordingly, you
must avoid transactions, activities, and relationships that might interfere or
appear to interfere with making decisions in the best interests of those
Advisory Clients.

         At all times, you must observe the following GENERAL PRINCIPLES:

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

(1)      This Policy uses a number of capitalized terms, e.g., Advisor,
         Advisory Client, Advisory Employee, Beneficial Ownership, Exempt
         Security, Fixed Income Security, Fully Discretionary Account, Futures
         Contract, Immediate Family, Investment Transaction, Personal Account,
         Portfolio Employee, Portfolio Manager, Related Account, and Security.
         The first time a capitalized term is used, a definition is stated in
         the text or in a footnote. The full definitions of these capitalized
         terms are set forth in Appendix L TO UNDERSTAND YOUR RESPONSIBILITIES
         UNDER THE POLICY, IT IS IMPORTANT THAT YOU REVIEW AND UNDERSTAND ALL OF
         THE DEFINITIONS OF CAPITALIZED TERMS IN APPENDIX I. AS INDICATED IN
         APPENDIX I:
                  The term "ADVISOR" means any entity affiliated with BlackRock,
                  whether now in existence or formed after the date hereof, that
                  is registered as (i) an investment advisor under the
                  Investment Advisers Act of 1940, as amended, or (ii) a
                  broker-dealer under the Securities Exchange Act of 1934, as
                  amended, other than any such investment advisor or
                  broker-dealer that has adopted its own employee investment
                  transaction policy.

                  The term "ADVISORY CLIENT" means a registered investment
                  company, an institutional investment client, a personal trust
                  or estate, a guardianship, an employee benefit trust, or
                  another client with which the Advisor by which you are
                  employed or with which you are associated has an invest ment
                  management, advisory or sub-advisory contract or relationship.

                  The term "ADVISORY EMPLOYEE" means an officer, director, or
                  employee of an Advisor, or any other person identified as a
                  "control person" on the Form ADV or the Form BD filed by the
                  Advisor with the U.S. Securities and Exchange Commission, (1)
                  who, in connection with his or her regular functions or
                  duties, generates, participates in, or obtains information
                  regarding that Advisor's purchase or sale of a Security by or
                  on behalf of an Advisory Client; (2) whose regular functions
                  or duties relate to the making of any recommendations with
                  respect to such purchases or sales; (3) who obtains
                  information or exercises influence concerning investment
                  recommendations made to an Advisory Client of that Advisor; or
                  (4) who has line oversight or management responsibilities over
                  employees described in (1), (2) or (3), above.




<PAGE>



                  1.       YOU MUST PLACE THE INTERESTS OF ADVISORY CLIENTS
                           FIRST. As a fiduciary you must scrupulously avoid
                           serving your own personal interests ahead of the
                           interests of Advisory Clients. You must adhere to
                           this general fidu ciary principle as well as comply
                           with the Policy's specific provisions. Technical
                           compliance with the Policy will not automatically
                           insulate from scrutiny any Investment Transaction(2)
                           that indicates an abuse of your fiduciary duties or
                           that creates an appearance of such abuse.

                           Your fiduciary obligation applies not only to your
                           personal Investment Transactions but also to actions
                           taken on behalf of Advisory Clients. In particular,
                           you may not cause an Advisory Client to take action,
                           or not to take action, for your personal benefit
                           rather than for the benefit of the Advisory Client.
                           For example, you would violate this Policy if you
                           caused an Advisory Client to purchase a Security you
                           owned for the purpose of

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

(2)      For purposes of this Policy, the term "INVESTMENT TRANSACTION" means
         any transaction in a Security or Futures Contract in which you have, or
         by reason of the transaction will acquire, a Beneficial Ownership
         interest.

                  As a GENERAL MATTER, the term "SECURITY" means any stock,
         note, bond, debenture or other evidence of indebtedness (including any
         loan participation or assignment), limited partnership interest or
         investment contract OTHER THAN AN EXEMPT SECURITY (as defined above).
         The term "Security" includes an OPTION on a Security, an index of
         Securities, a currency or a basket of currencies, including such an
         option traded on the Chicago Board of Options Exchange or on the New
         York, American, Pacific or Philadelphia Stock Exchanges as well as such
         an option traded in the over-the-counter market. The term "Security"
         does NOT include a physical commodity or a Futures Contract.

                  The term "FUTURES CONTRACT" includes (a) a futures contract
         and an option on a futures contract traded on a U.S. or foreign board
         of trade, such as the Chicago Board of Trade, the Chicago Mercantile
         Exchange, the New York Mercantile Exchange, or the London International
         Financial Futures Exchange (a "Publicly-Traded Futures Contract"), as
         well as (b) a forward contract, a "swap", a "cap", a "collar", a
         "floor" and an over-the-counter option (other than an option on a
         foreign currency, an option on a basket of currencies, an option on a
         Security or an option on an index of Securities) (a "Privately-Traded
         Futures Contract").

                  As a GENERAL MATTER, you are considered to have a "BENEFICIAL
         OWNERSHIP" interest in a Security or Futures Contract if you have the
         opportunity, directly or indirectly, to profit or share in any profit
         derived from a transaction in that Security or Futures Contract. YOU
         ARE PRESUMED TO HAVE A BENEFICIAL OWNERSHIP INTEREST IN ANY SECURITY OR
         FUTURES CONTRACT HELD, INDIVIDUALLY OR JOINTLY, BY YOU AND/OR BY A
         MEMBER OF YOUR IMMEDIATE FAMILY (AS DEFINED BELOW). In addition, unless
         specifically excepted by the Compliance Officer based on a showing that
         your interest or control is sufficiently attenuated to avoid the
         possibility of a conflict, you will be considered to have a Beneficial
         Ownership interest in a Security held by: (1) a JOINT ACCOUNT to which
         you are a party, (2) a PARTNERSHIP in which you are a general partner,
         (3) a LIMITED LIABILITY COMPANY in which you are a manager-member, (4)
         a TRUST in which you or a member of your Immediate Family has an
         interest or(5) an INVESTMENT CLUB in which you are a member.

                  See Appendix I for more complete definitions of the terms
         "Beneficial Ownership," "Futures Contract," and "Security."

                                        2


<PAGE>



                           increasing the value of that Security. If you are a
                           Portfolio Employee,(3) you would also violate this
                           Policy if you made a personal investment in a
                           Security that might be an appropriate investment for
                           an Advisory Client without first considering the
                           Security as an investment for the Advisory Client.

                  2.       YOU MUST CONDUCT ALL OF YOUR PERSONAL INVESTMENT
                           TRANSACTIONS IN FULL COMPLIANCE WITH THIS POLICY, THE
                           BLACKROCK, INC. INSIDER TRADING POLICY, THE PNC CODE
                           OF ETHICS, AND THE OTHER POLICIES OF PNC BANK CORP.
                           ("PNC") AND BLACKROCK (including the policies that
                           prohibit insider trading or that restrict trading in
                           PNC Securities). BlackRock encourages you and your
                           family to develop personal investment programs.
                           However, those investment programs must remain within
                           boundaries reasonably necessary to insure that
                           appropriate safeguards exist to protect the interests
                           of our Advisory Clients and to avoid even the
                           APPEARANCE of unfairness or impropriety. Doubtful
                           situations should be resolved in favor of our
                           Advisory Clients and against your personal Investment
                           Transactions.

                  3.       YOU MUST NOT TAKE INAPPROPRIATE ADVANTAGE OF YOUR
                           POSITION. The receipt of investment opportunities,
                           perquisites, gifts or gratuities from persons seeking
                           to do business, directly or indirectly, with
                           BlackRock, an affiliate, or an Advisory Client could
                           call into question the independence of your business
                           judgment. Doubtful situations should be resolved
                           against your personal interests.

         B.       THE GENERAL SCOPE OF THE POLICY'S APPLICATION TO PERSONAL
                  INVESTMENT TRANSACTIONS

         Rule 17j-l under the Investment Company Act of 1940, as amended,
requires REPORTING of all personal Investment Transactions in Securities (other
than certain "Exempt Securities") by Advisory Employees, whether or not they are
Securities that might be purchased or sold by or on behalf of an Advisory
Client. This Policy implements that reporting requirement.

         However, since a primary purpose of the Policy is to avoid conflicts of
interest arising from personal Investment Transactions in Securities and other
instruments that are held or might be acquired on behalf of Advisory Clients,
this Policy only places RESTRICTIONS on personal

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

(3)      The term "PORTFOLIO EMPLOYEE" means a Portfolio Manager or an Advisory
         Employee who provides information or advice to a Portfolio Manager, who
         helps execute a Portfolio Manager's decisions, or who directly
         supervises a Portfolio Manager. The term "PORTFOLIO MANAGER" means any
         employee of an Advisor who has the authority, whether sole or shared or
         only from time to time, to make investment decisions or to direct
         trades affecting an Advisory Client

                                        3


<PAGE>



         Investment Transactions in such investments. This Policy also requires
         reporting and restricts personal Investment Transactions in certain
         Futures Contracts which, although they are not Securities, are
         instruments that Advisors buy and sell for Advisory Clients.

         Although this Policy applies to all officers, directors and other
Advisory Employees of BlackRock, the Policy recognizes that Portfolio Managers,
and the other Portfolio Employees who provide them with advice and who execute
their decisions, occupy more sensitive positions than other Advisory Employees,
and that it is appropriate to subject their personal Investment Transactions to
greater restrictions.

         C.       THE ORGANIZATION OF THIS POLICY

         The remainder of this Policy is divided into four main topics. Section
II concerns PERSONAL INVESTMENT TRANSACTIONS. Section III describes restrictions
that apply to Advisory Employees who receive INSIDE INFORMATION or seek to serve
on a BOARD OF DIRECTORS OR SIMILAR GOVERNING BODY. Section IV outlines the
procedure for seeking case-by-case EXEMPTIONS from the Policy's requirements.
Section V summarizes the methods for ensuring COMPLIANCE under this Policy. In
addition, the following APPENDICES are also a part of this Policy:

I.       Definitions Of Capitalized Terms

II.      Acknowledgment Of Receipt Of The Policy

III.     Annual Certification Of Compliance With The Policy

IV.      Initial Report Of Accounts

V.       Request For Duplicate Broker Reports

VI.      Investment Transaction Prior Notification Form

VII.     Fully Discretionary Account Form

         D.       QUESTIONS

         Questions regarding this Policy should be addressed to the Compliance
Officer. If you have any question regarding the interpretation of this Policy or
its application to a potential Investment Transaction, you should consult the
Compliance Officer BEFORE you execute that transaction.

                                        4


<PAGE>



II.      PERSONAL INVESTMENT TRANSACTIONS

         A.       IN GENERAL

         Subject to the limited exceptions described below, you are required to
REPORT all Investment Transactions in Securities and Futures Contracts made by
you, a member of your Immediate Family, a trust or an investment club in which
you have an interest, or on behalf of any account in which you have an interest
or which you direct.(4) In addition, you must provide PRIOR NOTIFICATION of
certain Investment Transactions in Securities and Futures Contracts that an
Advisor holds or may acquire on behalf of an Advisory Client. (The exercise of
an option is an Investment Transaction for purposes of these requirements.) The
details of these reporting and prior notification requirements are described
below.

         B.       REPORTING OBLIGATIONS

                  1.       USE OF BROKER-DEALERS AND FUTURES COMMISSION
                           MERCHANTS

         YOU MUST USE A REGISTERED BROKER-DEALER OR FUTURES COMMISSION MERCHANT
to engage in any purchase or sale of a publicly traded Security or Futures
Contract. This requirement also applies to any purchase or sale of a Security or
Futures Contract in which you have, or by reason of the Investment Transaction
will acquire, a Beneficial Ownership interest. Thus, as a general matter, any
Securities or Futures Contract transactions by members of your Immediate Family
will need to be made through a registered broker-dealer or futures commission
merchant.

                  2.       INITIAL REPORT

         Within 10 days of commencing employment or within 10 days of any event
that causes you to become subject to this Policy, you must supply to the
Compliance Officer copies of the most recent statements for each and every
Personal Account and Related Account that holds or is likely to hold a Security
or Futures Contract in which you have a Beneficial Ownership interest, as well
as copies of confirmations for any and all transactions subsequent to the
effective dates of



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

(4)      The term "IMMEDIATE FAMILY" means any of the following persons who
         RESIDE IN YOUR HOUSEHOLD OR WHO DEPEND ON YOU FOR BASIC LIVING SUPPORT:
         your spouse, any child, stepchild, grandchild, parent, stepparent,
         grandparent, sibling, mother-in-law, father-in-law, son-in-law,
         daughter-in-law, brother- in-law, or sister-in-law, including any
         adoptive relationships.

                                        5


<PAGE>



those statements.(5) These documents should be supplied to the Compliance
Officer by attaching them to the form attached hereto as Appendix IV.

         On that same form you should supply the name of any registered
broker-dealer and/or futures commission merchant and the number for any Personal
Account and Related Account that holds or is likely to hold a Security or
Futures Contract in which you have a Beneficial Ownership interest for which you
CANNOT supply the most recent account statement. You must also certify, where
indicated on the form, that the contents of the form and the documents attached
thereto disclose all such Personal Accounts and Related Accounts.

         In addition, you must also supply, where indicated on the form, the
following information for each Security or Futures Contract in which you have a
Beneficial Ownership interest, to the extent that this information is not
available from the statements attached to the form:

                  1.       A description of the Security or Futures Contract,
                           including its name or title;

                  2.       The quantity (e.g., in terms of numbers of shares,
                           units or contracts) and value (in dollars) of the
                           Security or Futures Contract; and

                  3.       The custodian of the Security or Futures Contract.

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

(5)      The term "PERSONAL ACCOUNT" means the following accounts that hold or
         are likely to hold a Security or Futures Contract in which you have a
         Beneficial Ownership interest;

         o        any account in your individual name;

         o        any joint or tenant-in-common account in which you have an
                  interest or are a participant;

         o        any account for which you act as trustee, executor, or
                  custodian; and

         o        any account over which you have investment discretion or have
                  the power (whether or not exercised) to direct the acquisition
                  or disposition of Securities or Futures Contracts (other than
                  an Advisory Client's account that you manage or over which you
                  have investment discretion), including the accounts of any
                  individual or entity that is managed or controlled directly or
                  indirectly by or through you, such as the account of an
                  investment club to which you belong. There is a presumption
                  that you can control accounts held by members of your
                  Immediate Family sharing the same household. This presumption
                  may be rebutted only by convincing evidence.

                  The term "RELATED ACCOUNT" means any account, other than a
         Personal Account, that holds a Security or Futures Contract in which
         you have a direct or indirect Beneficial Ownership interest (other than
         an account over which you have no investment discretion and cannot
         otherwise exercise control) and any account (other than an Advisory
         Client's account) of any individual or entity to whom you give advice
         or make recommendations with regard to the acquisition or disposition
         of Securities or Futures Contracts (whether or not such advice is acted
         upon).

                                        6


<PAGE>



                  3.       NEW ACCOUNTS

         Upon the opening of a new Personal Account or a Related Account that
holds or is likely to hold a Security or a Futures Contract in which you have a
Beneficial Ownership interest, you must give written notice to the Compliance
Officer of the name of the registered broker-dealer or futures commission
merchant for that account, the identifying number for that Personal Account or
Related Account and the date that the account was established.

                  4.       TIMELY REPORTING OF INVESTMENT TRANSACTIONS

         You must cause each broker-dealer or futures commission merchant that
maintains a Personal Account or a Related Account that holds a Security or a
Futures Contract in which you have a Beneficial Ownership interest to provide to
the Compliance Officer, on a timely basis, duplicate copies of confirmations of
all transactions in that account and of periodic statements for that account
("Duplicate Broker Reports"). A form for that purpose is attached hereto as
Appendix V.

         In addition, you must report to the Compliance Officer, on a timely
basis, any transaction in a Security or Futures Contract in which you have or
acquired a Beneficial Ownership interest that was made without the use of a
registered broker-dealer or futures commission merchant.

                  5.       RELATED ACCOUNTS

         The reporting obligations described above also apply to any Related
Account (as defined in Appendix I) and to any Investment Transaction in a
Related Account.

         It is important that you recognize that the definitions of 'Personal
Account," "Related Account" and "Beneficial Ownership" in Appendix I probably
will require you to provide, or to arrange for the broker-dealer or futures
commission merchant to furnish, copies of reports for any account used by or for
a member of your Immediate Family or a trust in which you or a member of your
Immediate Family has an interest, as well as for any other accounts in which you
may have the opportunity, directly or indirectly, to profit or share in the
profit derived from any Investment Transaction in that account, including the
account of any investment club to which you belong.

                  6.       EXEMPTIONS FROM REPORTING

         You need not report Investment Transactions in any account, including a
Fully Discre tionary Account,(6) over which neither you nor an Immediate Family
Member has or had any direct


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

(6)      The term "FULLY DISCRETIONARY ACCOUNT" means a Personal Account or
         Related Account managed or held by a broker-dealer, futures commission
         merchant, investment advisor or trustee as to which neither you nor

                                                                 (continued....)

                                       7


<PAGE>



or indirect influence or control. For example, Investment Transactions in the
account of your spouse in an employee benefit plan would not have to be reported
if neither you nor your spouse has any influence or control over those
Investment Transactions.

         You also need not report Investment Transactions in Exempt Securities
nor need you furnish, or require a broker-dealer or futures commission merchant
to furnish, copies of confir mations or periodic statements for accounts that
hold ONLY Exempt Securities.(7) This includes accounts that only hold U.S.
Government securities, money market interests, or shares in registered open-end
investment companies (i.e., mutual funds). This exemption from reporting will
end immediately, however, at such time as there is an Investment Transaction in
that account in a Security that is not an Exempt Security.

         C.       PROHIBITED OR RESTRICTED INVESTMENT TRANSACTIONS

                  1.       INITIAL PUBLIC OFFERINGS

         As an Advisory Employee, you may not acquire Beneficial Ownership of
any Security in an initial public offering, except that, with the approval of
the Compliance Committee and the General Counsel of BlackRock, you may acquire
Beneficial Ownership of a Security in an initial public offering directed or
sponsored by BlackRock. For purposes of this Policy, an initial public offering
shall not include the purchase of a Security in an initial public offering by
(i) a savings bank to its depositors, (ii) a mutual insurance company to its
policyholders, (iii) an issuer of debt securities (other than debt securities
convertible into common or preferred stock) or (iv) with

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

(6)      (......continuesd)
         an Immediate Family Member: (a) exercises any investment discretion;
         (b) suggests or receives notice of transactions prior to their
         execution; and (c) you do not otherwise have any direct or indirect
         influence or control. In addition, to qualify as a Fully Discretionary
         Account, the individual broker, registered representative or merchant
         responsible for that account must not be responsible for nor receive
         advance notice of any purchase or sale of a Security or Futures
         Contract on behalf of an Advisory Client. To qualify an account as a
         Fully Discretionary Account, the Compliance Officer must receive and
         approve a written notice, in the form attached hereto as Appendix
         VIII, that the account meets the foregoing qualifications as a Fully
         Discretionary Account.

(7)      The term "EXEMPT SECURITY" means any Security (as defined in Appendix
         I) not included within the definition of Security in SEC Rule
         17j-l(e)(5) under the Investment Company Act of 1940, as amended,
         including:

         1.       A direct obligation of the Government of the United States;

         2.       Shares of registered open-end investment companies (i.e.,
                  mutual funds); and

         3.       High quality short-term debt instruments, including, but not
                  limited to, bankers' acceptances, bank certificates of
                  deposit, commercial paper and repurchase agreements.

         See Appendix I for a more complete definition of "Exempt Security".

                                        8


<PAGE>



respect to an Advisory Employee employed by BlackRock International, Ltd. a
building society to its depositors.

                  2.       PRIVATE PLACEMENTS

         If you are a Portfolio Employee, you may not acquire Beneficial
Ownership of any Security in a private placement, or subsequently sell that
interest, unless you have received the prior written approval of the Compliance
Officer and of any supervisor designated by the Compliance Officer. Approval
will not be given unless a determination is made that the investment opportunity
should not be reserved for one or more Advisory Clients, and that the
opportunity to invest has not been offered to you by virtue of your position
with an Advisor.

         If you have acquired Beneficial Ownership of Securities in a private
placement, you must disclose that investment to your supervisor when you play a
part in any consideration of any investment by an Advisory Client in the issuer
of the Securities, and any decision to make such an investment must be
independently reviewed by a Portfolio Manager who does not have a Beneficial
Ownership interest in any Securities of the issuer.

         D.       INVESTMENT TRANSACTIONS REQUIRING PRIOR NOTIFICATION

         You must give prior notification to the Compliance Officer of ANY
Investment Transac tion in Securities or Futures Contracts in a Personal Account
or Related Account, or in which you otherwise have or will acquire a Beneficial
Ownership interest, UNLESS that Investment Transaction, Security or Futures
Contract falls into one of the following categories that are identified as
"exempt from prior notification." The purpose of prior notification is to permit
the Compliance Officer and the Compliance Committee to take reasonable steps to
investigate whether that Investment Transaction is in accordance with this
Policy. Satisfaction of the prior notification requirement does not, however,
constitute approval or authorization of any Invest ment Transaction for which
you have given prior notification. As a result, the primary responsi bility for
compliance with this Policy rests with you.

                  1.       PRIOR NOTIFICATION PROCEDURE

         Prior notification must be given by completing and submitting to the
Compliance Officer a copy of the prior notification form attached hereto as
Appendix VII. No Investment Transac tion requiring prior notification may be
executed prior to notice by the Compliance Officer that the prior notification
process has been completed. The time and date of that notice will be reflected
on the prior notification form. Unless otherwise specified, an Investment
Transaction requiring prior notification must be placed and executed by the end
of trading in New York City or, in the case of Advisory Employees employed by
BlackRock International, Ltd., by the end of trading in the United Kingdom on
the day of notice from the Compliance Officer that the prior notification
process has been completed. If a proposed Investment Transaction is not executed
(with the exception of a limit order) within the time specified, you must repeat
the prior
                                        9


<PAGE>



notification process before executing the transaction. A notice from a
Compliance Officer that the prior notification process has been completed is no
longer effective if you discover, prior to executing your Investment
Transaction, that the information on your prior notification form is no longer
accurate, or if the Compliance Officer revokes his or her notice for any other
reason.

         The Compliance Officer may undertake such investigation as he or she
considers necessary to investigate whether an Investment Transaction for which
prior notification has been sought complies with the terms of this Policy and is
consistent with the general principles described at the beginning of this
Policy.

         As part of that investigation, the Compliance Officer or a designee of
the Compliance Officer will determine whether there is a pending buy or sell
order in the same equity Security or Futures Contract, or a Related Security, on
behalf of an Advisory Client.(8) If such an order exists, the Compliance Officer
will not provide notice that the prior notification process has been completed
UNTIL the Advisory Client's order is executed or withdrawn.

                  2.       EXEMPTIONS FROM PRIOR NOTIFICATION

         Prior notification will not be required for the following Investment
Transactions, Securities and Futures Contracts. They are exempt only from the
Policy's prior notification requirement, and, unless otherwise indicated, remain
subject to the Policy's other requirements, including its reporting
requirements.

                           (A)      TRANSACTIONS EXEMPT FROM PRIOR NOTIFICATION

                  Prior notification is not required for any of the following
Investment Transactions:

                  1.       Any Investment Transaction in a Fully Discretionary
                           Account that has been approved as such by the
                           Compliance Officer.

                  2.       Purchases of Securities under dividend reinvestment
                           plans.

                  3.       Purchases of Securities by an exercise of rights
                           issued to the holders of a class of Securities pro
                           rata, to the extent those rights are issued with
                           respect to Securities of which you have Beneficial
                           Ownership.

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

(8)      The term "RELATED SECURITY" means, as to any Security, any instrument
         related in value to that Security, including, but not limited to, any
         option or warrant to purchase or sell that Security, and any Security
         convertible into or exchangeable for that Security.

                                       10


<PAGE>



                  4.       Acquisitions or dispositions of Securities as the
                           result of a stock dividend, stock split, reverse
                           stock split, merger, consolidation, spin-off or other
                           similar corporate distribution or reorganization
                           applicable to all holders of a class of Securities of
                           which you have Beneficial Ownership.

                  5.       Purchases of common stock of PNC Bank Corp. under the
                           Employee Stock Purchase Plan.

                  6.       With respect to Advisory Employees who are employed
                           by BlackRock International, Inc., automatic
                           investments by direct debit into a personal equity
                           plan (PEP), or similar type of plan in Exempt
                           Securities if the pre- notification process was
                           completed for the first such investment.

                  7.       Investment Transactions made by a person who serves
                           on the Board of Directors of an Advisor and is not
                           involved with the Advisory operations of such Advisor
                           nor engages in the type of activities described under
                           (1) (2) or (3) under the term Advisory Employee as
                           defined in Appendix I.

                  (B)      SECURITIES EXEMPT FROM PRIOR NOTIFICATION

                  Prior notification is not required for an Investment
Transaction in an Exempt Security, as defined in Appendix I, e.g., U.S.
Government securities, shares in registered open- end investment companies
(i.e., mutual funds) and "high quality short-term debt instruments" (as defined
in Appendix I).

                  (C)      FUTURES CONTRACTS EXEMPT FROM PRIOR NOTIFICATION

                  Prior notification is not required for an Investment
Transaction in the following Futures Contracts:

                  1.       Currency futures.

                  2.       U.S. Treasury futures.

                  3.       Eurodollar futures.

                  4.       Physical commodity futures (e.g., contracts for
                           future delivery of grain, livestock, fiber or
                           metals).

                  5.       Futures contracts to acquire Fixed Income Securities
                           issued by a U.S. Government agency, a foreign
                           government, or an international or supranational
                           agency.

                                       11


<PAGE>



                  6.       Futures contracts on the Standard and Poor's 500 (S&P
                           500) or the Dow Jones Industrial Average or NASDAQ
                           100 stock indexes.

                  7.       For Advisory Employees who are employed by BlackRock
                           International, Ltd., futures contracts on the
                           Financial Times Stock Exchange 100 (FTSE) Index.

         E.       BAN ON SHORT-TERM TRADING PROFITS

         You may not profit from the purchase and sale, or the sale and
purchase, within 60 calendar days, of the same Securities and/or Related
Security. Any such short-term trade must be reversed or unwound, or if that is
not practical, the profits must be disgorged and distributed in a manner
determined by the Compliance Committee.

         This short-term trading ban does NOT apply to Investment Transactions
in Exempt Securities (as defined in Appendix I) or in Futures Contracts. This
ban also does NOT apply to a purchase or sale in connection with a Transaction
Exempt From Prior Notification (as described above in Section II.D.2.(a)), a
transaction in a Fully Discretionary Account or a transaction exempt from the
"blackout" periods pursuant to Section II.F.2 below.

         You are considered to profit from a short-term trade if Securities of
which you have Beneficial Ownership (including Securities held by Immediate
Family members) are sold for more than their purchase price, even though the
Securities purchased and the Securities sold are held of record or beneficially
by different persons or entities.

         F.       BLACKOUT PERIODS

         Your ability to engage in certain Investment Transactions may be
prohibited or restricted during the "blackout" periods described below:

                  1.       SPECIFIC BLACKOUT PERIODS

                           a.       You may not purchase or sell a Security, a
                                    Related Security, or Futures Contract at a
                                    time when you intend or know of another's
                                    intention to purchase or sell that same
                                    Security, a Related Security, or Futures
                                    Contract, on behalf of an Advisory Client of
                                    ANY Advi sor (the "Specific Knowledge
                                    Blackout Period").

                           b.       In addition, if you are a PORTFOLIO
                                    EMPLOYEE, you may not pur chase or sell a
                                    Security, a Related Security or a Futures
                                    Contract which you are actively considering
                                    or which you have actively considered and
                                    rejected for purchase or sale for an
                                    Advisory Client within the previous 15
                                    CALENDAR DAYS (the "15-Day Blackout

                                       12


<PAGE>



                                    Period") unless the Compliance Officer,
                                    after consultation with your supervisor, has
                                    approved your Investment Transaction.(9)

                           c.       Finally, if you are a PORTFOLIO MANAGER, you
                                    may not purchase or sell a Security, a
                                    Related Security, or Futures Contract within
                                    7 CALENDAR DAYS before or after a
                                    transaction in that Security, a Related
                                    Security, or Futures Contract, by an
                                    Advisory Client for which you are
                                    responsible (the "7-Day Blackout Period").

         For Portfolio Employees or Portfolio Managers, the Compliance Officer
will not give such notice until any applicable 15-Day Blackout Period or 7-Day
Blackout Period has expired or any required approvals or exemptions have been
obtained. An Investment Transaction that violates one of these Blackout
restrictions must be reversed or unwound, or if that is not practical, the
profits must be disgorged and distributed in a manner determined by the Compli
ance Committee.

                  2.       EXEMPTIONS FROM BLACKOUT RESTRICTIONS

         The foregoing blackout period restrictions do NOT apply to Investment
Transactions in:

                           a.       Exempt Securities, as defined in Appendix I.

                           b.       Securities of a company listed on the
                                    Standard & Poor's 100 (S & P 100) Index.

                           c.       A Futures Contract Exempt From Prior
                                    Notification under this Policy (as described
                                    above).

                           d.       A Fully Discretionary Account.

                           e.       With respect to Advisory Employees who are
                                    employed by BlackRock International, Ltd.,
                                    securities of a company listed on the
                                    Financial Times Stock Exchange 100 (FTSE
                                    100).

- ------------------
(9)      SEC Rule 17j-l places restrictions on the purchase or sale of any
         "security held or to be acquired" by a registered investment company.
         Rule 17j-l(e)(6) defines a "security held or to be acquired" by a
         registered investment company as including any security which, within
         the most recent 15 days, "is being or has been considered by such
         company or its investment advisor for purchase by such company."

                                       13


<PAGE>



III.     INSIDE INFORMATION AND SERVICE AS A DIRECTOR

         A.       INSIDE INFORMATION

         As an employee of a subsidiary of PNC and BlackRock, Inc., you must
comply with the PNC Insider Trading Policy and the BlackRock, Inc. Insider
Trading Policy. A copy of the PNC Insider Trading Policy is included in Section
E of the PNC Code of Ethics. A copy of the BlackRock, Inc. Insider Trading
Policy was furnished to all employees at the time of its adoption and is
furnished to all new employees at the commencement of their employment. In
addition, as an Advisory Employee, you must notify the General Counsel of
BlackRock if you receive or expect to receive material non-public information
about an entity that issues securities. The General Counsel will determine the
restrictions, if any, that will apply to your communications and activities
while in possession of that information. In general, those restrictions will
include:

                  1.       An undertaking not to trade, either on your own
                           behalf or on behalf of an Advisory Client, in the
                           securities of the entity about which you have
                           material non-public information.

                  2.       An undertaking not to disclose material non-public
                           information to other Advisory Employees.

                  3.       An undertaking not to participate in discussions with
                           or decisions by other Advisory Employees relating to
                           the entity about which you have material non-public
                           information.

The General Counsel, in cooperation with the Compliance Officer, will maintain a
"restricted list" of entities about which Advisory Employees may have material
non-public information. This "restricted list" will be available to the
Compliance Officer when he or she conducts investigations or reviews related to
the Prior Notification Procedure described previously in Section II(D)(1) or the
Post-Trade Monitoring process described below in Section V(B)(3).

         B.       SERVICE AS A DIRECTOR

         You may not serve on the board of directors or other governing board of
any entity unless you have received the prior written approval of the General
Counsel of PNC, to the extent such approval is required under the terms of the
PNC Code of Ethics, and the General Counsel of BlackRock. If permitted to serve
on a governing board, an Advisory Employee will be isolated from those Advisory
Employees who make investment decisions regarding the securities of that entity,
through a "Chinese wall" or other procedures determined by the General Counsel
of BlackRock. In general, the "Chinese wall" or other procedures will include:

                  1.       An undertaking not to trade or to cause a trade on
                           behalf of an Advisory Client in the securities of the
                           entity on whose board you serve.


                                       14


<PAGE>




                  2.       An undertaking not to disclose material non-public
                           information about that entity to other Advisory
                           Employees.

                  3.       An undertaking not to participate in discussions with
                           or decisions by other Advisory Employees relating to
                           the entity on whose board you serve.

Any entity on whose board an Advisory Employee serves will be included on the
"restricted list" referenced in subsection A, above.

IV.      EXEMPTIONS

         The Compliance Committee, in its discretion, may grant case-by-case
exceptions to any of the foregoing requirements, restrictions or prohibitions,
except that the Compliance Commit tee may not exempt any Investment Transaction
in a Security (other than an Exempt Security) or a Futures Contract from the
Policy's reporting requirements. Exemptions from the Policy's prior notification
requirements and from the Policy's restrictions on acquisitions in initial
public offerings, short-term trading and trading during blackout periods will
require a determination by the Compliance Committee that the exempted
transaction does not involve a realistic possibility of violating the general
principles described at the beginning of this Policy. An application for a
case-by-case exemption, in accordance with this paragraph, should be made in
WRITING to the Compliance Officer, who will promptly forward that written
request to the members of the Compliance Committee.

V.       COMPLIANCE

         A.       CERTIFICATIONS

                  1.       UPON RECEIPT OF THIS POLICY

         Upon commencement of your employment or the effective date of this
Policy, whichever occurs later, you will be required to acknowledge receipt of
your copy of this Policy by complet ing and returning to the Compliance Officer
a copy of the form attached hereto as Appendix II. By that acknowledgment, you
will also agree:

                  1.       To read the Policy, to make a reasonable effort to
                           understand its provi sions, and to ask the Compliance
                           Officer questions about those provisions you find
                           confusing or difficult to understand.

                  2.       To comply with the Policy, including its general
                           principles, its reporting requirements, its
                           prohibitions, its prior notification requirements,
                           its short- term trading and blackout restrictions.

                                       15


<PAGE>



                  3.       To advise the members of your Immediate Family about
                           the existence of the Policy, its applicability to
                           their personal Investment Transactions, and your
                           responsibility to assure that their personal
                           Investment Transactions comply with the Policy.

                  4.       To cooperate fully with any investigation or inquiry
                           by or on behalf of the Compliance Officer or the
                           Compliance Committee to determine your compliance
                           with the provisions of the Policy.

In addition, your acknowledgment will recognize that any failure to comply with
the Policy and to honor the commitments made by your acknowledgment may result
in disciplinary action, including dismissal

                  2.       ANNUAL CERTIFICATE OF COMPLIANCE

         You are required to certify on an annual basis, on a copy of the form
attached hereto as Appendix III, that you have complied with each provision of
your initial acknowledgment (see above). In particular, your annual
certification will require that you certify that you have read and that you
understand the Policy, that you recognize that you are subject to its
provisions, that you complied with the requirements of the Policy during the
year just ended, and that you have disclosed, reported, or caused to be reported
all Investment Transactions required to be disclosed or reported pursuant to the
requirements of the Policy and that you have disclosed, reported or caused to be
reported all Personal Accounts and Related Accounts that hold or are likely to
hold a Security or Futures Contract in which you have a Beneficial Ownership
interest. In addition, you will be required to confirm the accuracy of the
record of information on file with the Advisor with respect to such Personal
Accounts and Related Accounts.

         B.       SUPERVISORY PROCEDURES

                  1.       THE COMPLIANCE COMMITTEE

         The policy will be implemented, monitored and reviewed by the
Compliance Committee. The initial members of the Compliance Committee will be
appointed by the management committee of BlackRock. The Compliance Committee, by
a simple majority of its members, may appoint new members of the Committee, may
replace existing members of the Committee, and may fill vacancies on the
Committee. Among other responsibilities, the Compliance Committee will consider
requests for case-by-case exemptions (described above) and will conduct
investigations (described below) of any actual or suspected violations of the
Policy. The Compliance Committee will determine what remedial actions, if any,
should be taken by an Advisor in response to a violation of the Policy. The
Compliance Committee will also provide reports (described below) regarding
significant violations of the Policy and the procedures to implement the Policy.
The Compliance Committee may recommend changes to those procedures


                                       16

<PAGE>


or to the Policy to the management of the Advisors. Finally, the Compliance
Committee will designate one person to act as Compliance Officer for all
Advisors.

                  2.       THE COMPLIANCE OFFICER

         The Compliance Officer designated by the Compliance Committee will be
responsible for the day-to-day administration of the Policy for all Advisors,
subject to the direction and control of the Compliance Committee. Based on
information supplied by the management of each Advisor, the Compliance Officer
will forward a copy of the policy to each Advisory Employee subject to the
policy and will notify each such person of his or her designation as an Advisory
Employee, Portfolio Employee or Portfolio manager. The Compliance Officer will
also be responsible for administration of the reporting and prior notification
functions described in the Policy, and will maintain the reports required by
those functions. In addition, the Compliance Officer will attempt to answer any
questions from an Advisory Employee regarding the interpre tation or
administration of the Policy. When necessary or desirable, the Compliance
Officer will consult with the Compliance Committee about such questions. The
Compliance officer may designate one or more Assistant Compliance Officers to
whom the Compliance Officer may delegate any of the duties described in this
paragraph or in the succeeding paragraph, and who shall be empowered to act on
the Compliance Officer's behalf when the Compliance Officer is absent or
unavailable.

                  3.       POST-TRADE MONITORING AND INVESTIGATIONS

         The Compliance Officer will review the Duplicate Broker Reports and
other information supplied for each Advisory Employee so that the Compliance
Officer can detect and prevent potential violations of the Policy. This
information may also be disclosed to the Advisor's auditors, attorneys and
regulators. If, based on his or her review of information supplied for an
Advisory Employee, or based on other information, the Compliance Officer
suspects that the Policy may have been violated, the Compliance Officer will
perform such investigations and make such inquiries as he or she considers
necessary. You should expect that, as a matter of course, the Compliance Officer
will make inquiries regarding any personal Investment Transac tion in a Security
or Futures Contract that occurs on the same day as a transaction in the same
Security or Futures Contract on behalf of an Advisory Client. If the Compliance
Officer reaches a preliminary conclusion that an Advisory Employee may have
violated this Policy, the Compli ance Officer will report that preliminary
conclusion in a timely manner to the Compliance Committee and will furnish to
the Committee all information that relates to the Compliance Officer's
preliminary conclusion. The Compliance Officer may also report his or her
preliminary conclusions and the information relating to that preliminary
conclusion to the Advisor's auditors, attorneys and regulators.

         Promptly after receiving the Compliance Officer's report of a possible
violation of the Policy, the Compliance Committee, with the aid and assistance
of the Compliance Officer, will conduct an appropriate investigation to
determine whether the policy has been violated and will

                                       17


<PAGE>



determine what remedial action should be taken by the Advisor in response to any
such viola tion(s). For purposes of these determinations, a majority of the
Compliance Committee will constitute a quorum and action taken by a simple
majority of that quorum constitute action by the Committee.

                  4.       REMEDIAL ACTIONS

         The remedial actions that may be recommended by the Compliance
Committee may include, but are not limited to, disgorgement of profits,
imposition of a fine, censure, demotion, suspension or dismissal. As part of any
sanction e.g., for violation of the Policy's restrictions on short-term trading
or trading during blackout periods, you may be required to reverse or unwind a
transaction and to forfeit any profit or to absorb any loss from the
transaction. If an Investment Transaction may not be reversed or unwound, you
may be required to disgorge any profits associated with the transaction, which
profits will be distributed in a manner prescribed by the Compliance Committee
in the exercise of its discretion. Profits derived from Investment Transactions
in violation of this policy may not be offset by any losses from Investment
Transactions in violation of this Policy. Finally, evidence suggesting
violations of criminal laws will be reported to the appropriate authorities, as
required by applicable law.

         In determining what, if any, remedial action is appropriate in response
to a violation of the Policy, the Compliance Committee will consider, among
other factors, the gravity of your violation, the frequency of your violations,
whether any violation caused harm or the potential of harm to any Advisory
Client, whether you knew or should have known that your Investment Transaction
violated the Policy, whether you engaged in an Investment Transaction with a
view to making a profit on the anticipated market action of a transaction by an
Advisory Client, your efforts to cooperate with the Compliance Officer's
investigation, and your efforts to correct any conduct that led to a violation.
In rare instances, the Compliance Committee may find that, for equitable
reasons, no remedial action should be taken.

                  5.       REPORTS OF VIOLATIONS REQUIRING SIGNIFICANT REMEDIAL
                           ACTION

         In a timely manner, and not less frequently than annually, the
Compliance Committee will report to the management committee of BlackRock, and
to the directors or trustees of each investment company that is an Advisory
Client, any known Policy violation requiring significant remedial action (as
defined below) and the disposition of that violation. For this purpose, a
significant remedial action means any action that has a significant financial
effect on the violator. Evidence suggesting violations of criminal laws will be
reported to the appropriate authorities, as required by applicable law.

                                       18


<PAGE>



                  6.       ANNUAL REPORTS

         The Compliance Committee will furnish an annual report to the
management committee of BlackRock, and to the directors or trustees of each
investment company that is an Advisory Client, that, at a minimum, will:

                  1.       Summarize existing procedures and restrictions
                           concerning personal investing by Advisory Employees
                           and any changes in those procedures and restrictions
                           that were made during the previous year;

                  2.       Summarize any violations of the Policy that resulted
                           in significant reme dial action during the previous
                           year; and

                  3.       Describe any changes in existing procedures or
                           restrictions that the Com pliance Committee
                           recommends based upon its experience under the
                           Policy, evolving industry practices, or developments
                           in applicable laws or regulations.

VI.      EFFECTIVE DATE

         The provisions of this Policy will take effect on October 1, 1998.
Amendments to this Policy will take effect at the time such amendments are
promulgated and distributed to the Advisory Employees governed by this Policy.

                                       19


<PAGE>


                                   APPENDIX I

                        DEFINITIONS OF CAPITALIZED TERMS

         The following definitions apply to the capitalized terms used in the
Policy:

ADVISOR

         The term "Advisor" means any entity affiliated with BlackRock, whether
now in existence or formed after the date hereof, that is registered as (i) an
investment advisor under the Investment Advisers Act of 1940, as amended, or
(ii) a broker-dealer under the Securities Exchange Act of 1934, as amended,
other than any such investment advisor or broker-dealer that has adopted its own
employee investment transaction policy.

ADVISORY CLIENT

         The term "Advisory Client" means a registered investment company, an
institutional investment client, a personal trust or estate, a guardianship, an
employee benefit trust, or another client with which the Advisor by which you
are employed or with which you are associated has an investment management,
advisory or sub-advisory contract or relationship.

ADVISORY EMPLOYEE

         The term "Advisory Employee" means an officer, director, or employee of
an Advisor, or any other person identified as a "control person" on the Form ADV
or the Form BD filed by the Advisor with the U.S. Securities and Exchange
Commission, (1) who, in connection with his or her regular functions or duties,
generates, participates in, or obtains information regarding that Advisor's
purchase or sale of a Security by or on behalf of an Advisory Client; (2) whose
regular functions or duties relate to the making of any recommendations with
respect to such purchases or sales; or (3) who obtains information or exercises
influence concerning investment recommen dations made to an Advisory Client of
that Advisor or who has line oversight or management responsibilities over
employees who obtain such information or who exercise such influence.

BENEFICIAL OWNERSHIP

         As a GENERAL MATTER, you are considered to have a "Beneficial
Ownership" interest in a Security or Futures Contract if you have the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in that Security. YOU ARE PRESUMED TO HAVE A BENEFI CIAL
OWNERSHIP INTEREST IN ANY SECURITY OR FUTURES CONTRACT HELD, INDIVIDUALLY OR
JOINTLY, BY YOU AND/OR BY A MEMBER OF YOUR IMMEDIATE FAMILY (AS DEFINED BELOW).
In addition, unless specifically excepted by the Compliance Officer based on a
showing that your interest or control is sufficiently attenuated to avoid the
possibility of a conflict, you will be


                                       A-1

<PAGE>




considered to have a Beneficial Ownership interest in a Security or Futures
Contract held by: (1) a JOINT ACCOUNT to which you are a party, (2) a
PARTNERSHIP in which you are a general partner, (3) a LIMITED LIABILITY COMPANY
in which you are a manager-member, or (4) a TRUST in which you or a member of
your Immediate Family has a vested interest. Although you may have a Beneficial
Ownership interest in a Security or Futures Contract held in a Fully
Discretionary Account (as defined below), the application of this Policy to such
a Security or Futures Contract may be modified by the special exemptions
provided for Fully Discretionary Accounts.

         As a TECHNICAL MATTER, the term "Beneficial Ownership" for purposes of
this Policy will be interpreted in the same manner as it would be under SEC Rule
16a-1(a)(2) in determining whether a person has beneficial ownership of a
security for purposes of Section 16 of the Securities Exchange Act of 1934 and
the rules and regulations thereunder.

BLACKROCK

         The term "BlackRock" means BlackRock, Inc.

COMPLIANCE COMMITTEE

         The term "Compliance Committee" means the committee of persons who have
responsi bility for implementing, monitoring and reviewing the Policy, in
accordance with Section V(B)(1) of the Policy.

COMPLIANCE OFFICER

         The term "Compliance Officer" means the person designated by the
Compliance Committee as responsible for the day-to-day administration of the
Policy in accordance with Section V(B)(2) of the Policy.

DUPLICATE BROKER REPORTS

         The term "Duplicate Broker Reports" means duplicate copies of
confirmations of transactions in your Personal or Related Accounts and of
periodic statements for those accounts.

EXEMPT SECURITY

         The term "Exempt Security" means any Security (as defined below) not
included within the definition of Security in SEC Rule l7j-1(e)(5) under the
Investment Company Act of 1940, as amended, including:

                  1.       A direct obligation of the Government of the United
                           States;

                  2.       Shares of registered open-end investment companies;
                           and


                                       A-2

<PAGE>



                  3.       High quality short-term debt instruments, including,
                           but not limited to, bankers' acceptances, bank
                           certificates of deposit, commercial paper and
                           repurchase agreements. For these purposes, a "high
                           quality short-term debt instrument" means any
                           instrument having a maturity at issuance of less than
                           366 days and which is rated in one of the highest two
                           rating categories by a Nationally Recognized
                           Statistical Rating Organization, or which is unrated
                           but is of comparable quality.

                  4.       For Advisory Employees employed by BlackRock
                           International, Ltd., shares of authorized unit
                           trusts, open-ended investment companies (OEIC's) and
                           direct obligations of the Government of the United
                           King dom.

FIXED INCOME SECURITIES

         For purposes of this Policy, the term "Fixed Income Securities" means
fixed income Securities issued by agencies or instrumentalities of, or
unconditionally guaranteed by, the Government of the United States, corporate
debt Securities, mortgage-backed and other asset- backed Securities, fixed
income Securities issued by state or local governments or the political
subdivisions thereof, structured notes and loan participations, foreign
government debt Securi ties, and debt Securities of international agencies or
supranational agencies. For purposes of this Policy, the term "Fixed Income
Securities" will not be interpreted to include U.S. Government Securities or any
other Exempt Security (as defined above).

FULLY DISCRETIONARY ACCOUNT

         The term "Fully Discretionary Account" means a Personal Account or
Related Account (as defined below) managed or held by a broker-dealer, futures
commission merchant, invest ment advisor or trustee as to which neither you nor
an Immediate Family Member (as defined below): (a) exercises any investment
discretion; (b) suggests or receives notice of transactions prior to their
execution; and (c) otherwise has any direct or indirect influence or control. In
addition, to qualify as a Fully Discretionary Account, the individual broker,
registered represen tative or merchant responsible for that account must not be
responsible for nor receive advance notice of any purchase or sale of a Security
or Futures Contract on behalf of an Advisory Client. To qualify an account as a
Fully Discretionary Account, the Compliance Officer must receive and approve a
written notice, in the form attached hereto as Appendix VIII, that the account
meets the foregoing qualifications as a Fully Discretionary Account.

FUTURES CONTRACT

         The term "Futures Contract" includes (a) a futures contract and an
option on a futures contract traded on a U.S. or foreign board of trade, such as
the Chicago Board of Trade, the

                                       A-3

<PAGE>



Chicago Mercantile Exchange, the New York Mercantile Exchange, or the London
International Financial Futures Exchange (a "Publicly-Traded Futures Contract"),
as well as (b) a forward contract, a "swap", a "cap", a "collar", a "floor" and
an over-the-counter option (other than an option on a foreign currency, an
option on a basket of currencies, an option on a Security or an option on an
index of Securities, which fall within the definition of "Security") (a
"Privately- Traded Futures Contract"). You should consult with the Compliance
Officer if you have any doubt about whether a particular Investment Transaction
you contemplate involves a Futures Contract. For purposes of this definition, a
Publicly-Traded Futures Contract is defined by its expiration month, i.e., a
Publicly-Traded Futures Contract on a U.S. Treasury Bond that expires in June is
treated as a separate Publicly-Traded Futures Contract, when compared to a
Publicly- Traded Futures Contract on a U.S. Treasury Bond that expires in July.

IMMEDIATE FAMILY

         The term "Immediate Family" means any of the following persons who
RESIDE IN YOUR HOUSEHOLD OR WHO DEPEND ON YOU FOR BASIC LIVING SUPPORT: your
spouse, any child, stepchild, grandchild, parent, stepparent, grandparent,
sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including any adoptive relationships.

INVESTMENT TRANSACTION

         For purposes of this Policy, the term "Investment Transaction" means
any transaction in a Security or Futures Contract in which you have, or by
reason of the transaction will acquire, a Beneficial Ownership interest. The
exercise of an option to acquire a Security or Futures Contract is an Investment
Transaction in that Security or Futures Contract

PERSONAL ACCOUNT

         The term "Personal Account" means the following accounts that hold or
are likely to hold a Security or Futures Contract in which you have a Beneficial
Ownership interest:

        o         any account in your individual name;

        o         any joint or tenant-in-common account in which you have an
                  interest or are a participant;.

        o         any account for which you act as trustee, executor, or
                  custodian; and

         o        any account over which you have investment discretion or have
                  the power (whether or not exercised) to direct the acquisition
                  or disposition of Securities or Futures Contracts (other than
                  an Advisory Client's account that you manage or over which you
                  have investment discretion), including the accounts of any
                  individual or entity that is managed or controlled directly or
                  indirectly by or

                                       A-4

<PAGE>



                  through you. There is a presumption that you can control
                  accounts held by members of your Immediate Family sharing the
                  same household. This presump tion may be rebutted only by
                  convincing evidence.

POLICY

         The term 'Policy" means this Employee Investment Transaction Policy.

PORTFOLIO EMPLOYEE

         The term "Portfolio Employee" means a Portfolio Manager or an Advisory
Employee who provides information or advice to a Portfolio Manager, who helps
execute a Portfolio Manager's decisions, or who directly supervises a Portfolio
Manager.

PORTFOLIO MANAGER

         The term "Portfolio Manager" means any employee of an Advisor who has
the authority, whether sole or shared or only from time to time, to make
investment decisions or to direct trades affecting an Advisory Client.

RELATED ACCOUNT

         The term "Related Account" means any account, other than a Personal
Account, that holds a Security or Futures Contract in which you have a direct or
indirect Beneficial Ownership interest (other than an account over which you
have no investment discretion and cannot otherwise exercise control) and any
account (other than an Advisory Client's account) of any individual or entity to
whom you give advice or make recommendations with regard to the acquisition or
disposition of Securities or Futures Contracts (whether or not such advice is
acted upon).

RELATED SECURITY

         The term "Related Security" means, as to any Security, any instrument
related in value to that Security, including, but not limited to, any option or
warrant to purchase or sell that Security, and any Security convertible into or
exchangeable for that Security. For example, the purchase and exercise of an
option to acquire a Security is subject to the same restrictions that would
apply to the purchase of the Security itself.

SECURITY

         As a GENERAL MATTER, the term "Security" means any stock, note, bond,
debenture or other evidence of indebtedness (including any loan participation or
assignment), limited partnership interest, or investment contract, OTHER THAN AN
EXEMPT SECURITY (as defined above). The term

                                       A-5

<PAGE>


"Security" includes an OPTION on a Security, an index of Securities, a currency
or a basket of currencies, including such an option traded on the Chicago Board
of Options Exchange or on the New York, American, Pacific or Philadelphia Stock
Exchanges as well as such an option traded in the over-the-counter market. The
term "Security" does NOT include a physical commodity or a Futures Contract. The
term "Security" may include an interest in a limited liability company (LLC) or
in a private investment fund.

         As a TECHNICAL MATTER, the term "Security" has the meaning set forth in
Section 2(a)(36) of the Investment Company Act of 1940, which defines a Security
to mean:

         Any note, stock, treasury stock, bond debenture, evidence of
         indebtedness, certificate of interest or participation in any
         profit-sharing agreement, collateral-trust certificate, preorganization
         certificate or subscription, transferable share, investment contract,
         voting- trust certificate, certificate of deposit for a security,
         fractional undivided interest in oil, gas, or other mineral rights, any
         put, call, straddle, option, or privilege on any security (including a
         certificate of deposit) or on any group or index of securities
         (including any interest therein or based on the value thereof), or any
         put, call, straddle, option, or privilege entered into on a national
         securities exchange relating to foreign currency, or, in general, any
         interest or instrument commonly known as a "security", or any
         certificate of interest or instrument commonly known as a "security",
         or any certificate of interest or participation in, temporary or
         interim certificate for, receipt for, guarantee of, warrant or right to
         subscribe to or purchase any of the foregoing,

EXCEPT THAT the term "Security" does not include any Security that is an Exempt
Security (as defined above), a Futures Contract (as defined above), or a
physical commodity (such as foreign exchange or a precious metal).

310801.01-New York S5A

                                       A-6



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(R)(3)
<SEQUENCE>17
<FILENAME>file016.txt
<DESCRIPTION>CODE OF ETHICS OF J.J.B. HILLIARD
<TEXT>
<PAGE>



       J.J.B. Hilliard, W.L. Lyons, Inc is an afilliate of PNC Bank Corp. It has
       adopted PNC Bank Corp's Code of Ethics.

       PNC CODE OF ETHICS

       INTRODUCTION

       The PNC Bank Code of Ethics ("Code") conveys key information to assist
       you in discharging your responsibilities on behalf of PNC Bank Corp. and
       its subsidiaries ("PNC Bank" or "PNC") in an ethical and legally proper
       manner.

       The PNC Code of Ethics (formerly known as the Guidelines for Corporate
       Conduct at PNC Bank) is based on the principles that PNC Bank believes
       in:

         o   We conduct business with the highest ethical standards;

         o   We obey the law;

         o   We follow the policies and procedures of PNC Bank;

         o   We maintain confidentiality;

         o   We have a work environment that is fair and bias-free; and

         o   We are honest and trustworthy.

       The Code applies to all employees and directors as well as to agents when
       acting on behalf of PNC. Certain provisions of the Code also apply to
       others (such as family members).

       Supervisors and managers should help their staff understand and apply the
       above principles and comply with the standards in the Code.

       The conduct of each of us reflects on our organization and affects how we
       are perceived. Whether inside or outside of work, your personal conduct
       should be an asset to PNC Bank.

       Use your good judgment, follow the standards set forth in the Code, and
       report your concerns as provided in the Code. By doing so, we can ensure
       that PNC Bank continues to stand for honesty, integrity and fairness.

       RESPONSIBILITIES AND STANDARDS OF CONDUCT

       1.00  RESPONSIBILITIES

       As part of your responsibilities, you must:

         o   understand and comply with the Code, other PNC policies and
             procedures, and applicable laws and regulations;

<PAGE>

         o   provide the required notifications and obtain the necessary
             approvals in accordance with the Code; and

         o   report any possible violations of the Code of which you are aware.

       You are not permitted to act in a way that violates the Code. Lines of
       business or departments may have supplemental policies or procedures with
       which employees also must comply.

       1.01  ADMINISTRATION

       The PNC Code of Ethics is administered by PNC's Director of Compliance or
       a designee (referred to in the Code as "Director of Compliance"). A PNC
       Code of Ethics Policy Committee ("Ethics Policy Committee") has been
       established to determine policy issues relating to the Code, oversee
       resolution of major ethical issues, and receive and review reports
       relating to the Code's administration.

       1.02  NOTIFICATIONS/APPROVALS

       You should become familiar with the following situations in the Code that
       require you to provide notification or obtain prior approval:

                                                             CODE
       SITUATION                                             SECTION
         Insider Trading                                     2.02
         Corporate Property                                  2.04
         Inventions                                          2.04
         Conflicts of Interest                               2.05
         Gifts and Entertainment                             2.05.1
         Gifts to Public Officials                           2.05.2
         Inheritances; Fiduciary Compensation
           and Fees for Personal Services                    2.05.7
         Outside Activities                                  2.05.9
         Other Employment                                    2.05.9a
         Officer or Directorships                            2.05.9b/
                                                             Exhibit 7
         Public Office                                       2.05.10
         Expert Witnesses                                    2.05.11
         Antitrust                                           2.07
         Fair Competition                                    2.08
         Political Contributions                             2.10

     You can provide notification or obtain approval either (i) by contacting
     the Director of Compliance or (ii) through submission of the Code of Ethics
     Notification/Approval Form ("Notification/Approval Form")to your supervisor
     and market Human Resources ("HR") representative, as designated in the
     Code. A sample of the Notification/Approval Form is attached as Exhibit 1;
     the form is available from your Human Resources Department. If employees
     have any questions regarding how to provide notification or obtain
     approval, they should contact their market HR representative. Directors and
     agents should contact the Director of Compliance regarding notifications or
     approvals, questions or any other matters under the Code.

                                       2
<PAGE>


       1.03  REPORTING PROCEDURES

       Reports of any possible violations of the Code, including dishonest or
       fraudulent acts, or questions or concerns regarding matters covered by
       the Code, should be made immediately to any of the following people:

         o   your supervisor;

         o   your market HR representative;

         o   the Security Services representative;

         o   the Director of Compliance; or

         o   the General Counsel.

       You have been provided with several alternative people to whom you can
       report a possible violation so that you can choose a person with whom you
       feel comfortable. You may make an anonymous report if you wish.

       Note: Any supervisor who receives a report of a possible violation should
       refer it immediately to the market HR representative, the Security
       Services representative, the Director of Compliance, or the General
       Counsel.

       When you report a possible violation, you will be protected from any
       employment discrimination, retaliation, or retribution for good faith
       reporting.

       1.04  KEY CONTACTS

       Market HR representatives, the Security Services representative, the
       Director of Compliance, the General Counsel and others referenced in the
       Code are Key Contacts to assist you on Code matters for PNC Bank. Their
       telephone numbers can be found in the Key Contacts and Reference Guide
       attached as an Addendum to the Code or on the PNC intranet.

       1.05  EXCEPTIONS/QUESTIONS

       Exceptions to the Code and certain approvals will need to be made by the
       Ethics Policy Committee. If you would like to ask for an exception or
       have a question about any part of the Code, you should first discuss it
       with your supervisor and your market HR representative who will process
       your request, or you may contact the Director of Compliance. The Director
       of Compliance, as appropriate, will present requests for exceptions or
       approvals to the Ethics Policy Committee.

       1.06  ENFORCEMENT

       If an employee violates the Code, PNC policies and procedures or any
       applicable laws or regulations, the employee may be subject to
       disciplinary action, which may include termination of employment.
       Violation of laws could also result in legal proceedings and penalties,
       including, in some circumstances, criminal penalties.

                                       3
<PAGE>


       You are required to cooperate fully with investigations, audits,
       monitoring procedures, and other inquiries regarding Code matters,
       including requests to provide documentation. Refusal to comply may result
       in disciplinary action, which may include termination of employment.

       1.07  WRITTEN ACKNOWLEDGEMENT

       When you are hired, and at certain times during your employment, you will
       be required to sign a written acknowledgment certifying that you have
       received, have read, understand, and will comply with the Code. Refusal
       to complete the acknowledgment may result in disciplinary action, which
       may include termination of employment.

2.00   STANDARDS OF CONDUCT

       The following are standards of conduct for some specific issues that may
       arise in our business. We may amend or change these standards from time
       to time.

2.01   CONFIDENTIALITY

       FUNDAMENTAL PRINCIPLE

       Confidentiality is a fundamental principle in PNC Bank's business. You
       may deal with confidential, non-public information concerning PNC Bank,
       its clients, shareholders, employees and suppliers. You must protect all
       confidential information from unauthorized disclosure.

       DEFINITIONS

       The term "confidential information" includes, but is not limited to:

         o   PNC's business information, records, activities and plans;

         o   The identity, business information, records, activities and plans
             of clients and prospective clients;

         o   the identity of, or information relating to, merger and acquisition
             candidates;

         o   PNC's sources of supply, sales methods and sales proposals;

         o   PNC's computer programs, system documentation, special hardware,
             product hardware, software and technology developments;

         o   manuals, formulae, processes, methods, machines, compositions,
             ideas, improvements, inventions, or other confidential or
             proprietary information belonging to PNC or related to PNC's
             affairs;

         o   security information such as passwords, personal identification
             numbers (PIN's), and electronic keys;

         o   reports written to and by regulatory agencies; and

                                       4
<PAGE>


         o   any additional confidential information described in PNC's Insider
             Trading Policy (attached as Exhibit 2).

       YOUR RESPONSIBILITIES

       Your responsibilities with regard to confidential information are:

         o   You must not disclose confidential information to any person within
             PNC, unless that person has a need to know such information in
             connection with his or her employment responsibilities.

         o   You must not disclose confidential information to anyone outside of
             PNC, unless:

             o   such person is employed by an outside firm (i.e., a law,
                 accounting or other firm) retained by PNC and that person needs
                 to know the information in connection with the service to be
                 provided by the firm to PNC;

             o   pursuant to proper legal process or regulation. (PNC's Legal
                 Department has written guidelines for handling legal process.
                 If you receive a request for confidential information, or
                 subpoena or other legal process, you must immediately inform
                 your supervisor who will contact the Legal Department.); or

             o   the individual or organization to which the information relates
                 gives written consent, and release of the information is
                 approved by the Legal Department.

         o   You must never use confidential information for personal financial
             gain or to compete with PNC.

         o   You must keep in a secure way all files, records, or inquiries
             regarding clients and employees, and other records that contain
             confidential information.

         o   You must keep all identification and access codes, security
             equipment, security programs, and security procedures confidential.

         o   You must avoid discussing confidential information in public places
             (for example, elevators, restaurants or at social events).

         o   You must avoid discussing confidential information on cellular or
             car phones.

         o   You must be sensitive to whether information is confidential when
             using E-mail, or facsimile machines.

         o   You must not disclose confidential information, whether it is in
             written form or in your memory, even after you leave your
             employment or position with PNC.

       In addition, you must comply with all other PNC policies and procedures
       relating to confidentiality, including those that have been adopted for
       your line of business or department. All employees should also become
       familiar with and follow the standards relating to confidentiality of
       information set forth in the Information Security Policy Manual,
       available on the PNC Intranet and from Information Security.

2.02   INSIDER TRADING

       PNC has adopted an Insider Trading Policy which is attached as Exhibit 2
       to this Code. You should become familiar with the requirements of the
       Policy and must comply with its rules and standards.

                                       5
<PAGE>

2.03   CLIENTS' PROPERTY

       FUNDAMENTAL PRINCIPLE

       You must maintain the highest standards of honesty and integrity in
       handling clients' money and other property. You are not permitted to make
       unauthorized use of any client's money or property.

2.04   CORPORATE PROPERTY

       FUNDAMENTAL PRINCIPLE

       Corporate property may be used and removed from PNC premises only for
       business purposes, UNLESS APPROVED BY YOUR SUPERVISOR, or in accordance
       with policies adopted by the Board of Directors of PNC or a committee of
       the Board.

       Corporate property includes, but is not limited to:

              information;

              files;

              products;

              office supplies and furnishings;

              services;

              automobiles;

              technologies;

              concepts;

              client lists;

              policies and procedures manuals;

              computer and other equipment, such as facsimile machines;

              computer data bases, programs and software;

              data processing systems;

              voice mail;

              E-Mail; and

              any other electronic messaging systems or information about
              PNC's business.

                                       6
<PAGE>


       INSPECTIONS

       Corporate property and personal possessions that you may bring onto PNC
       premises are subject to inspection.

       INVENTIONS

       If you invent something, make a discovery, improve something or write
       something during your employment which is related to PNC's business or
       activities, you are required to:

         o   DISCLOSE YOUR WORK TO YOUR SUPERVISOR;

         o   assign any rights to the work to PNC, if appropriate; and

         o   assist PNC, either during or after your employment, in getting the
             use and benefits of the work, including anything necessary for PNC
             to get a patent or copyright or obtain other protection for the
             work.

2.05   CONFLICTS OF INTEREST

       FUNDAMENTAL PRINCIPLE

       You owe PNC Bank and its clients undivided loyalty. You should not have
       an interest that conflicts with, or may reasonably appear to conflict
       with PNC Bank or its clients, unless approved as set forth in this Code.

       DEFINITION

       A conflict of interest exists when:

         o   you engage in a personal activity or have a personal interest that
             may influence your decisions when acting for PNC or that may be at
             odds with PNC's interests; or

         o   you use your position with PNC or use PNC's confidential
             information to benefit yourself rather than PNC.

       A conflict of interest may be based on your financial, business, family
       or other personal relationships with clients, suppliers, competitors or
       others, or on some other factor.

       APPEARANCE OF CONFLICT

       The appearance of a conflict can be as damaging as an actual conflict and
       can erode trust and confidence in PNC. When faced with a situation
       involving a potential conflict of interest, you should ask yourself
       whether public disclosure of the matter would embarrass PNC or lead an
       outside observer to believe a conflict exists.

       DISCLOSURE REQUIREMENTS

       YOU MUST DISCLOSE IN WRITING TO YOUR SUPERVISOR AND YOUR MARKET HR
       REPRESENTATIVE ALL KNOWN OR POTENTIAL CONFLICTS OF INTEREST BY SUBMITTING
       A NOTIFICATION/APPROVAL FORM. The Director of Compliance should be
       contacted on how to handle a situation, if necessary.

       ILLUSTRATIONS

       Some illustrations of areas where potential conflicts of interests could
       occur and PNC's policies are:

                                       7
<PAGE>


       2.05.1   GIFTS AND ENTERTAINMENT

       FUNDAMENTAL PRINCIPLE

       You may not ask for or accept a gift or anything of value from anyone
       (before or after a transaction is discussed or concluded or a business
       decision is made) if you intend to be influenced or rewarded, or you
       believe the giver intends to exert influence, in connection with any
       business decision or transaction involving PNC. Where this is not the
       case, under certain circumstances, you may accept gifts or something of
       value from someone doing or seeking to do business with PNC. Examples of
       such circumstances are:

       PERMISSIBLE GIFTS

         o   accepting a gift that is based on obvious family or personal
             relationships (such as between you and your parents, children,
             spouse or close friend) and it is clear that the gift is being
             accepted because of the relationship rather than any PNC business;

         o   letting someone else occasionally pay for meals, refreshments,
             travel arrangements, accommodations, or entertainment to discuss
             business or foster business relationships if the expense is of
             reasonable value. In general, such items are of "reasonable value"
             if they involve a level of expense that customarily would be
             reimbursed by PNC as a reasonable business expense if not paid for
             by the other party;

         o   accepting loans from other banks or financial institutions on
             normal terms to finance usual activities, such as home mortgage
             loans, except where prohibited by law;

         o   occasionally accepting advertising or promotional material having a
             value not in excess of $100, such as pens, pencils, note pads, key
             chains, calendars and similar items;

         o   accepting discounts or rebates on merchandise or services that is
             not more than those available to other clients;

         o   accepting gifts having a value not in excess of $100 that are
             related to commonly recognized events or occasions, such as a
             promotion, new job, wedding, retirement, holiday, birthday, or bar
             or bat mitzvah; and

         o   accepting civic, charitable, educational or religious
             organizational awards for recognition of service and
             accomplishment.

       DISCLOSURE REQUIREMENTS

       You must make every effort to refuse or return a gift or something of
       value that goes beyond those permissible circumstances listed above. IN
       THE FOLLOWING CIRCUMSTANCES, YOU MUST PROMPTLY NOTIFY YOUR SUPERVISOR AND
       MARKET HR REPRESENTATIVE, OR THE DIRECTOR OF COMPLIANCE, TO DISCUSS HOW
       TO HANDLE THE SITUATION:

         o   if you are offered a gift or something of value that goes beyond
             those permissible circumstances above and you cannot refuse or
             return it; or

         o   you have any doubts about whether it is permissible to accept a
             gift or something of value.

       Only the Ethics Policy Committee can give approval to accept a gift or
       something of value outside of the permissible circumstances listed above.

       YOU CAN PROVIDE NOTIFICATION OR OBTAIN APPROVAL BY SUBMITTING THE
       NOTIFICATION/ APPROVAL FORM TO YOUR SUPERVISOR AND MARKET HR
       REPRESENTATIVE, OR YOU MAY CONTACT THE DIRECTOR OF COMPLIANCE.

                                       8
<PAGE>


       GIVING GIFTS

       The above standards for accepting gifts also apply to giving gifts,
       except that giving gifts to public officials is addressed separately in
       the next section.

       2.05.2   GIFTS TO PUBLIC OFFICIALS

       MONETARY GIFTS PROHIBITED

       You may not give a gift of money to a public official, except for
       legitimate personal campaign contributions to candidates for public
       office. (Certain employees must obtain prior written approval before
       making political contributions. See Section 2.10)

       GIFTS OF VALUE TO INFLUENCE PARTICULAR ACTS PROHIBITED

       You may not give anything of value (including, for example, gifts, meals,
       recreation, entertainment, flowers, transportation, lodging or sporting
       event tickets, which will be referred to in this section as "gifts") to a
       public official for the purpose of influencing a particular act by the
       official or his or her agency.

       LIMITATIONS ON OTHER TYPES OF GIFTS

       Limitations on giving items of value are discussed below with respect to
       different types of public officials with whom PNC employees are likely to
       have contact. These limitations, which should be interpreted as applying
       also to the spouse or family members of the public official, do not apply
       to gifts based on obvious family or close personal relationships.

       LIMITATIONS FOR DIFFERENT TYPES OF PUBLIC OFFICIALS

         o   FEDERAL OFFICIALS -- Gifts of over $20 in value may not be offered
             to officials in the executive branch of the federal government
             ("executive branch official"). For example, the value of an
             executive branch official's meal paid for by PNC may not be greater
             than $20. If all of the gifts to an executive branch official are
             added together in any calendar year, they may not be greater than
             $50. ANY GIFT TO AN EXECUTIVE BRANCH OFFICIAL MUST RECEIVE ADVANCE
             WRITTEN APPROVAL FROM THE DIRECTOR OF COMPLIANCE SO THAT THE $50
             LIMIT CAN BE MONITORED. ADVANCE APPROVAL OF EACH GIFT, REGARDLESS
             OF AMOUNT, IS IMPORTANT BECAUSE ---- GIFTS GIVEN BY ALL PNC
             OFFICERS TO ONE EXECUTIVE BRANCH OFFICIAL WILL BE AGGREGATED.

             Members of Congress and Congressional staff are subject to
             restrictions on gifts they may accept. ANY GIFT TO A MEMBER OF
             CONGRESS OR TO CONGRESSIONAL STAFF MEMBERS MUST RECEIVE ADVANCE
             WRITTEN APPROVAL FROM THE DIRECTOR OF COMPLIANCE.

         o   PENNSYLVANIA STATE OFFICIALS -- Gifts of more than nominal value
             may not be offered to officials in the executive branch of
             Pennsylvania government. Although nominal value does not have a
             specific dollar limit, you should be guided by the principles set
             forth in Section 2.05.1 above concerning PNC employees' receipt of
             gifts. ANY GIFT TO A PENNSYLVANIA STATE OFFICIAL MUST RECEIVE
             ADVANCE WRITTEN APPROVAL FROM THE DIRECTOR OF COMPLIANCE SO THAT
             REPORTING REQUIREMENTS IMPOSED BY THE LOBBYING DISCLOSURE ACT MAY
             BE SATISFIED.

         o   PENNSYLVANIA COUNTY OFFICIALS -- In counties in which PNC employees
             are likely to have significant activity, the rules for Pennsylvania
             state officials apply, except as follows. In Erie County, all gifts
             -D even of nominal value -D are prohibited. In Philadelphia County,
             the aggregate value of gifts may not exceed $100 annually. However,
             in Philadelphia County, gifts of food and beverage consumed at an
             event or meeting at which the official is attending are not
             restricted as to dollar amount and do not count against the
             aggregate annual limit.

                                       9
<PAGE>


         o   KENTUCKY STATE AND JEFFERSON COUNTY OFFICIALS -- Gifts, even of
             nominal value, may not be given to Kentucky state officials. Gifts
             to Jefferson County officials are prohibited if they are based on
             an understanding that they are given for the purpose of influencing
             the officer, directly or indirectly, in the discharge of his/her
             official duties.

         o   OHIO STATE AND COUNTY OFFICIALS -- Gifts of more than $20 in value
             may not be offered to Ohio state or county officials. Gifts of $20
             or less in value (for example, business lunches) may not be offered
             on a regular basis.

         o   DELAWARE STATE AND NEW CASTLE COUNTY OFFICIALS -- Gifts of more
             than nominal value may not be offered to officials in the executive
             branch of Delaware government. Although nominal value does not have
             a specific dollar limit, you should be guided by the principles set
             forth in Section 2.05.1 above concerning PNC employees' receipt of
             gifts.

         o   MASSACHUSETTS STATE AND COUNTY OFFICIALS -- Gifts of $50 or more
             may not be offered to Massachusetts state, county or municipal
             officials. Gifts of less than $50 in value (for example, business
             lunches) may not be offered on a regular basis or in a pattern.

         o   NEW JERSEY STATE OFFICIALS -- Gifts, even of nominal value, may not
             be given to officials in the executive branch of New Jersey
             government.

         o   INDIANA STATE OFFICIALS -- Gifts of more than $25 in value may not
             be offered to officials in the executive branch of Indiana
             government; in certain cases, the official may be required to
             obtain written approval from a designated state official before
             accepting the gift.

       In preparing this section, the laws and regulations of only the states
       and counties which are referred to above were reviewed. Check with the
       Director of Compliance before offering gifts to other public officials.

       The restrictions discussed above apply to gifts given to public officials
       directly or indirectly (for example, through another person).

       QUESTIONS

       IF YOU HAVE DOUBTS ABOUT WHETHER A GIFT TO A PUBLIC OFFICIAL IS ALLOWED
       UNDER THE CODE, YOU SHOULD EITHER NOT GIVE THE GIFT OR YOU SHOULD CONTACT
       THE DIRECTOR OF COMPLIANCE FOR AN INTERPRETATION OR TO OBTAIN APPROVAL
       FROM THE ETHICS POLICY COMMITTEE.

       2.05.3   BORROWING FROM CLIENTS OR SUPPLIERS/LENDING

       FUNDAMENTAL PRINCIPLE

       Employees cannot accept a loan from clients, suppliers or any other
       business contact of PNC unless the client, supplier or business contact
       is an immediate family member, or:

         o   the loan is given by those who lend money in the usual course of
             their business; and

         o   then only in accordance with the law and on terms offered to others
             who have similar credit standing, without special arrangements on
             interest rates, security, repayment terms and other conditions.

                                       10
<PAGE>


       ADDITIONAL RESTRICTIONS

       Employees must not lend personal funds to, or cosign, endorse, or
       guarantee, or otherwise assume responsibility for the borrowing of any
       client, supplier or any other business contact of PNC unless the client,
       supplier or business contact is an immediate family member.

       2.05.4   SELF-DEALING

       Self-dealing means using your employment or position for personal gain.
       Whether you are acting individually, through a business, or in a
       fiduciary capacity (a position of trust for another person), you are
       prohibited from self-dealing.

       PROHIBITIONS

         o   You may not accept from someone either doing business or trying to
             do business with PNC a business opportunity that is not available
             to other people on similar terms, or that is made available to you
             because of your position with PNC.

         o   You may not take for yourself a business opportunity that belongs
             to PNC Bank. An opportunity belongs to PNC when the company has
             pursued the opportunity, it has been offered to PNC, it is the kind
             of business PNC competes in, PNC has funded it, or PNC has devoted
             time, facilities, personnel, or other corporate resources to
             develop it.

       2.05.5   SALES/PURCHASES OF PROPERTY SERVICES TO/FROM EMPLOYEES

       You may not purchase property or services from PNC other than products or
       services offered:

         o   to the general public; and

         o   on terms that are available to all employees or similarly situated
             clients.

       Further, you may not sell any property or services to PNC.

       2.05.6   DEALING WITH SUPPLIERS

       MERIT BASED AWARDS

       Awards of orders, contracts and commitments for goods and services should
       always be made in the best interests of PNC. In your dealings with
       suppliers, you may not request or accept any kick-backs or other
       inducements.

                                       11
<PAGE>


       2.05.7   INHERITANCES; FIDUCIARY COMPENSATION AND FEES FOR PERSONAL
                SERVICES

       FUNDAMENTAL PRINCIPLE

       Neither you nor any member of your immediate family may accept any
       inheritance from any PNC client or the immediate family of any PNC
       client, unless the person giving you the inheritance is your relative or
       a relative of someone in your immediate family (through blood, marriage
       or adoption).

       APPLICATION OF RULE

       This rule applies only if the relationship between the client and you or
       your immediate family was established through your employment or position
       with PNC.

       PROHIBITED APPOINTMENTS

       Also, neither you nor any member of your immediate family may accept
       appointment as:

         o   executor;

         o   administrator;

         o   personal representative;

         o   attorney-in-fact;

         o   guardian;

         o   custodian under any Uniform Transfer or Gifts to Minors Act; or

         o   Trustee

       for any PNC client or the immediate family of any PNC client if the
       relationship between that person and you or your immediate family was
       established through your employment or position with PNC and you are to
       be compensated for the appointment through payment of fees or otherwise.

       IF THE APPOINTMENT IS TO BE UNCOMPENSATED, YOU MUST RECEIVE PRIOR
       APPROVAL FROM THE ETHICS POLICY COMMITTEE. YOU SHOULD CONTACT THE
       DIRECTOR OF COMPLIANCE TO OBTAIN APPROVAL.

       CLIENT RELATIONS

       If you have advance knowledge of any inheritance or appointment that may
       violate this rule, you must try to discourage the client from making the
       gift or appointment. YOU MUST ALSO NOTIFY THE DIRECTOR OF COMPLIANCE.

       2.05.8   USE OF POSITION OR AUTHORITY

       FUNDAMENTAL PRINCIPLES

       You may not act on behalf of PNC in any transaction involving a member of
       your immediate family or in any situation where you or a member of your
       immediate family has a personal or financial interest. You also may not
       act on behalf of PNC in connection with an organization with which you or
       a member of your immediate family is associated or has a personal or
       financial interest.

       NOTE: THIS SECTION DOES NOT APPLY TO YOUR ACTIONS RELATED TO PUBLICLY
       HELD PNC SUBSIDIARIES IN WHICH YOU OWN STOCK WHERE YOUR ACQUISITION OF
       THE STOCK WAS APPROVED BY THE ETHICS POLICY COMMITTEE OR PNC'S BOARD OF
       DIRECTORS AND YOU COMPLY WITH THE STOCK OWNERSHIP POLICY ADOPTED BY THE
       ETHICS POLICY COMMITTEE WHICH IS ATTACHED TO THIS POLICY AS EXHIBIT #6.

                                       12
<PAGE>


       2.05.9   OUTSIDE ACTIVITIES

       LIMITS ON OUTSIDE ACTIVITIES

       PNC encourages employees to participate in charitable or community
       activities outside of the company. These activities must not interfere
       with your ability to meet your employment responsibilities nor cause harm
       to PNC's reputation in the community or business interests.

       Some typical examples of outside activities are described below:

       A.       OTHER EMPLOYMENT

                RESTRICTIONS ON OUTSIDE EMPLOYMENT/POSITIONS

                You may not have any outside employment with a competitor or
                hold a position with a competitor while an employee of PNC.
                Nor may you be self-employed in competition with PNC.

                In addition, you may not engage in any outside employment
                (including self-employment) or hold any position which PNC
                determines may interfere with your PNC employment
                responsibilities. PNC may also determine that you are legally
                prohibited from or restricted in such outside employment while
                an employee of PNC, such as in the securities industry. You
                should be aware of your department's supplemental policies and
                procedures in this regard, if any.

                NOTIFICATION/APPROVAL

                ALL OUTSIDE EMPLOYMENT (INCLUDING SELF-EMPLOYMENT) FOR PNC
                EMPLOYEES MUST BE APPROVED IN ADVANCE AND IN WRITING BY
                SUBMITTING THE NOTIFICATION/APPROVAL FORM TO YOUR SUPERVISOR
                AND YOUR MARKET HR REPRESENTATIVE.

                In some instances where approval to engage in outside
                employment has been given, it may be necessary to revisit the
                issue. In particular, where PNC determines that the outside
                activity is interfering with your PNC responsibilities, or
                where PNC determines that the outside activity or position is
                in competition with PNC, authorization to continue such
                outside employment or in such position may be withdrawn.

       B.       OFFICER OR DIRECTORSHIPS
                IMPORTANCE TO PNC

                PNC has adopted a Policy for Employees Holding Director and
                Officer Positions in Outside Profit and Non-Profit
                Organizations which is attached as Exhibit #7 to the Code. You
                must become familiar and comply with this Policy.

       2.05.10 PUBLIC OFFICE

       GUIDELINES

       PNC has adopted a Public Office Policy which is attached as Exhibit #8 to
       this Code. You must become familiar and comply with this Policy.

                                       13
<PAGE>


       Except for lobbyists and other officers authorized to act on behalf of
       PNC, employees participating in political activities do so as individuals
       and not AT THE REQUEST OF or as representatives of PNC.

       2.05.11   EXPERT WITNESSES

       HANDLING REQUEST TO SERVE

       You may be asked to serve as an expert witness or to provide technical
       assistance in litigation or other proceedings not involving PNC. These
       activities generally take a lot of time and may be in conflict with PNC's
       policies and practices or with positions PNC has taken in other lawsuits.
       FOR THESE REASONS, IF YOU ARE ASKED TO SERVE AS AN EXPERT WITNESS OR
       PROVIDE TECHNICAL ASSISTANCE FOR A PARTY OTHER THAN PNC, YOU MUST RECEIVE
       ADVANCE WRITTEN APPROVAL. YOU SHOULD SUBMIT THE NOTIFICATION/APPROVAL
       FORM TO YOUR SUPERVISOR AND MARKET HR REPRESENTATIVE TO REQUEST SUCH
       APPROVAL.

       2.05.12  INSIDER LENDING

       REGULATORY REQUIREMENTS

       No PNC bank, under the requirements of Regulation O, may extend credit on
       preferential terms to:

         o   any of PNC's directors or executive officers; or

         o   any related interest of these individuals.

       REVIEWING REGULATION O POLICY

       PNC has adopted a Regulation O Policy to implement the provisions of the
       regulation in all PNC markets. You should contact your Compliance
       Department representative to obtain a copy of the policy if applicable to
       your line of business or department.

       2.05.13  INTEREST ON DEPOSITS OF DIRECTORS, OFFICERS, ATTORNEYS AND
                EMPLOYEES

       FUNDAMENTAL PRINCIPLE

       PNC Banks are not permitted to pay any of their directors, officers,
       attorneys or employees a greater rate of interest on their deposits than
       that paid to other depositors on similar deposits with such bank.

       2.05.14  SALES/PURCHASES OF PROPERTY AND SERVICES TO/FROM NON-OFFICER
                DIRECTORS

       Unless pre-approved by a majority of disinterested members of the Board
       of Directors of PNC Bank Corp. or the appropriate subsidiary PNC Bank,
       non-officer directors and their firms may not:

                                       14
<PAGE>

         o   purchase property or services from PNC unless such property or
             services are offered in the regular course of PNC's business, and
             on terms not more favorable to the director or his or her firm than
             those offered to other similarly situated clients who are not
             directors; or

         o   sell any property or services to PNC other than property or
             services that are sold in the regular course of the director's (or
             firm's) business and are sold upon terms not less favorable to PNC
             than those offered to similarly situated clients of the director
             (or firm).

2.06   DISCRIMINATION, BIAS AND HARASSMENT

       2.06.1   EQUAL EMPLOYMENT OPPORTUNITY POLICY

       It is the policy of PNC affirmatively to implement equal opportunity for
       all qualified applicants and existing employees without regard to race,
       religion, color, national origin, sex, age (over 40), disability, status
       as a Vietnam-era veteran or any other basis which would be in violation
       of any applicable ordinance or law. All personnel actions, including
       recruitment, selection, hiring, training, transfer, promotion,
       termination, compensation and benefits conform to this policy.

       A copy of the full Equal Employment Opportunity (EEO) policy may be
       obtained from your market HR representative.

       WHAT TO DO

       If you believe you have been denied equal employment opportunity because
       of discrimination, bias or harassment, you should report it to your
       supervisor or market HR representative or you may contact the Director of
       Compliance or the General Counsel. You will be protected from any
       employment discrimination, retaliation or retribution for good faith
       reporting.

       2.06.2   BIAS AND HARASSMENT

       You are entitled to a work environment free of racial, sexual, ethnic,
       and religious bias and harassment. Racial, sexual, ethnic or religious
       jokes or comments are subject to individual interpretation and may be
       offensive to some employees. Intimidation, coercion and threats, or
       actions leading to bodily harm are also unacceptable.

       2.06.3   SEXUAL HARASSMENT

       DEFINITION

       Sexual harassment is any unwelcome conduct of a sexual nature that is
       sufficiently severe or pervasive so as to unreasonably interfere with an
       individual's work performance or create an intimidating, hostile or
       offensive working environment.

                                       15
<PAGE>


       FORMS OF SEXUAL HARASSMENT

       Sexual harassment can take various forms, including:

         o   verbal (for example, sexual innuendo, sexual propositions, threats,
             suggestive or insulting comments or sounds and jokes of a sexual
             nature);

         o   non-verbal (sexually suggestive pictures or objects, graphic
             commentaries and obscene gestures); and

         o   physical (unwelcome physical contact).

       CRITERIA OF SEXUAL HARASSMENT

       Any one or a combination of three basic criteria determines whether
       conduct is sexual harassment:

         o   If you are required to submit to the conduct as either an express
             or implied qualification for a job or a requirement of your
             employment relationship;

         o   If submission to, or rejection of, the conduct is used as a basis
             for employment decisions affecting you; or

         o   If the conduct has the purpose or effect of unreasonably
             interfering with your work performance, or creating an
             intimidating, hostile or offensive working environment.

       COMPLIANCE REQUIREMENT

       Sexual harassment by a manager/supervisor, or other employee, or client,
       supplier or visitor will not be tolerated within PNC. All employees must
       comply with this policy and take appropriate measures to ensure that
       sexual harassment does not occur.

       WHAT TO DO

       If you are confronted with actions that may be sexual harassment, you
       should report it to your supervisor or your market HR representative, or
       you may contact the Director of Compliance or the General Counsel.

       2.07     ANTITRUST

       WHAT ARE THE ANTITRUST LAWS?

       You must obey the antitrust laws. The antitrust laws, which contain
       criminal and civil penalties, prohibit unfair methods of competition and
       agreements that restrain the way companies compete. The antitrust laws
       are most often enforced against agreements between separate businesses
       (for example, agreements between PNC and other companies) that limit
       competition. These agreements need not be in writing to raise a concern.

       As a general matter, all of PNC strategies and other decisions should be
       made independently, without consultation with PNC's competitors. You may
       not enter into any of the following three types of arrangements or
       agreements:

                                       16
<PAGE>


       TYPES OF ARRANGEMENTS

         o   PRICE-FIXING AGREEMENTS are agreements with competitors about the
             prices, terms, or conditions to be charged clients. To avoid even
             an allegation of price fixing, you should not discuss our prices,
             terms or conditions with a competitor, except as noted below.

             NOTE: WHERE WE ARE OPENLY WORKING JOINTLY WITH OUR COMPETITORS TO
             PROVIDE A LOAN OR OTHER PRODUCT OR SERVICE TO A CLIENT (FOR
             EXAMPLE, LOAN SYNDICATIONS), AGREEMENTS WITH SUCH COMPETITORS ON
             THE PRICE TO BE CHARGED TO THE CLIENT GENERALLY DO NOT CONSTITUTE
             PRICE FIXING. YOU SHOULD ONLY ENTER INTO SUCH AGREEMENTS IF WE HAVE
             LEGITIMATE BUSINESS REASONS FOR WORKING JOINTLY WITH OUR
             COMPETITORS RATHER THAN PROVIDING THE PRODUCT OR SERVICE ON OUR OWN
             (FOR EXAMPLE, IN LOAN SYNDICATIONS, BECAUSE OF UNDUE CREDIT RISK TO
             PNC).

         o   GROUP BOYCOTT AGREEMENTS are agreements among two or more companies
             to "boycott" or otherwise not do business with another company.

         o   MARKET, CLIENT, TERRITORY OR LOCATION ALLOCATION AGREEMENTS AMONG
             COMPETITORS are agreements with competitors not to compete in a
             particular line of business or product, not to "poach" competitors'
             clients, or not to compete in a particular geographic area.

       Because the following arrangements may raise antitrust concerns under
       certain circumstances, you should consult with the General Counsel before
       entering into any of them:

         o    TYING ARRANGEMENTS arise when a seller has a product or service
              buyers need, and requires buyers of that product or service to
              purchase a second product or service from the seller.

              o   Banking laws also prohibit certain ties. PNC Bank has adopted
                  a Policy Statement on Product Tying Restrictions that you can
                  obtain from your Compliance Department representative.

                  NOTE: MOST TYING ARRANGEMENTS THAT ARE LONG ESTABLISHED IN
                  BANKING (SUCH AS COMPENSATING BALANCES) THAT FACILITATE
                  REASONABLE ARRANGEMENTS INTENDED TO ASSURE THE SOUNDNESS OF
                  CREDIT DO NOT POSE A PROBLEM UNDER EITHER THE BANKING OR
                  ANTITRUST LAWS.

              o   PREDATORY PRICING is pricing at an unfairly low price for the
                  purpose of driving all competitors out of the marketplace to
                  reap the benefits of higher prices after the competitors are
                  gone.

              o   EXCLUSIVE DEALING involves agreements to do business with one
                  supplier or client that preclude PNC from doing business with
                  other suppliers or clients. You should consult with the
                  Director of Compliance if PNC's purchases or sales account for
                  a substantial portion of the market for the product or service
                  being purchased or sold.

              o   RECIPROCITY involves a company conditioning the purchase of
                  products or services from suppliers on those suppliers'
                  purchases of services from the company.

       OTHER INSTANCES IN WHICH YOU SHOULD CONSULT WITH THE GENERAL COUNSEL

       You should always consult the General Counsel:

              o   before a PNC unit that you manage merges with or acquires
                  another company (including a division of another company or
                  substantial assets of another company outside of the ordinary
                  course of business); or

              o   if you believe that any activity that may be undertaken by PNC
                  could be viewed as restraining fair or open competition, or if
                  you have any questions about whether any such activities may
                  fall within any of the categories of conduct described above.

                                       17
<PAGE>


       2.08     FAIR COMPETITION

       FUNDAMENTAL PRINCIPLE

       PNC Bank expects you to engage in vigorous, but fair competition with our
       competitors. Unfair ways to compete are not permitted. For example, you
       must never direct or encourage any applicant or new employee to violate
       any contractual or legal obligations to a former employer, such as a
       responsibility to protect confidential business information, technical
       information or trade secrets.

       REQUIREMENTS

       ALSO, YOU ARE REQUIRED TO NOTIFY YOUR SUPERVISOR AND MARKET HR
       REPRESENTATIVE BY SUBMITTING A NOTIFICATION/APPROVAL FORM IF YOU HAVE ANY
       OBLIGATIONS THAT MAY INTERFERE WITH YOUR ABILITY TO PERFORM YOUR JOB
       DUTIES AT PNC BANK. THESE OBLIGATIONS MAY INCLUDE AN AGREEMENT WITH A
       FORMER EMPLOYER, BUSINESS PARTNER OR OTHER PERSON OR ENTITY THAT SAYS:

              o   you may not compete with them for a certain time or in a
                  specific location;

              o   you may not ask their employees if they are interested in
                  working for PNC;

              o   you may not ask their clients to do business with PNC;

              o   you may not take work-related inventions, developments, or
                  writings to use at another business or place of employment;

              o   you may be limited in your use of trade secrets, business
                  information, materials, training or techniques that you
                  learned there; or

              o   you may have to notify them of any new employment or business
                  venture.

2.09   PERSONAL RESPONSIBILITIES OF EMPLOYEES

       2.09.1   DRUG ABUSE

       DRUG-FREE WORKPLACE

       PNC Bank is committed to promoting and maintaining a drug-free workplace.
       The illegal use of drugs interferes with effective and safe job
       performance. For this reason, PNC Bank has adopted a Drug Abuse Policy to
       prohibit employees from illegally using, possessing, distributing, or
       manufacturing drugs, or being under the illegal influence of drugs, while
       working or while on PNC property.

       CONSEQUENCE OF VIOLATION

       Employees who violate the Drug Abuse Policy (including the refusal to
       take a drug screening test) will be subject to disciplinary action.

       A summary of the Drug Abuse Policy is attached as Exhibit 3. PNC's Drug
       Abuse Policy is available from your market HR representative.


                                       18
<PAGE>


       2.09.2   ALCOHOL ABUSE

       FUNDAMENTAL PRINCIPLE

       The use of alcohol can have wide-ranging effects in the workplace,
       including declining job performance and diminished safety of co-workers
       and clients. For this reason, PNC prohibits any use of alcohol that may
       affect your fitness for work, the safety of co-workers or the public,
       your job performance or any operation of PNC.

       2.09.3   PERSONAL FINANCES

       EMPLOYEE RESPONSIBILITIES

       Because one of the primary functions of PNC Bank is the efficient and
       effective management of money, you must demonstrate trustworthiness and
       financial responsibility. You are expected to maintain your personal
       account relationships and financial affairs in the same responsible
       manner that is expected of clients and to manage debts in relation to
       income and net worth. Abuse of employee checking accounts, credit cards
       or loans obtained through PNC Bank is not in the best interest of PNC
       Bank and may result in revocation of these privileges.

       In addition, you must use your expense account in accordance with the
       guidelines set forth in the Employee Expense Reimbursement Guide,
       available from your market HR representative, as well as the standards
       set forth in the Code.

       2.09.4   SOLICITATION

       FUNDAMENTAL PRINCIPLE

       You are prohibited from soliciting other employees on behalf of any cause
       or organization during working time (that is, when the soliciting
       employee or the receiving employee is required to be performing work
       duties) or in client areas. Examples of prohibited solicitation include
       raffles, lotteries or memberships. You are also prohibited from
       distributing advertising materials, handbills, literature or other
       materials which are not prepared, supplied or approved by PNC, on PNC
       premises during working time or in any work area or any area where
       clients are routinely present to transact any business with PNC.

       It will not be a violation of this policy, however, if the solicitation
       or distribution is part of a campaign officially approved or sponsored by
       PNC, such as United Way.

       Non-employees of PNC are prohibited from soliciting or distributing
       literature on behalf of any cause or organization at any time on any of
       PNC's premises.

       2.10     POLITICAL CONTRIBUTIONS

       PROHIBITIONS

       PNC cannot make direct or indirect contributions to political candidates
       or office holders.

                                       19
<PAGE>


       You should abide by the following:

         o   no payment or thing of value may be made or given by or on behalf
             of PNC to any political party, candidate for public office in
             relation to his or her candidacy, or to any committee or group
             formed to support a party or candidate.

         o   PNC will not reimburse you for personal political contributions.

         o   you may not use PNC facilities or equipment in connection with any
             federal, state, or local election.

         o   you may not participate in political activities during your working
             hours or on PNC property. For example, branch offices may not be
             used by candidates running for election for fund raisers or other
             activities related to running for office.

         o   if you are a foreign national, you may not make a contribution in
             connection with any election (federal, state or local) or make a
             contribution to a PNC-affiliated political action committee. This
             prohibition does not apply to U.S. citizens living outside the
             United States. If you are not a U.S. citizen and if you have not
             been lawfully admitted for permanent residence in the United
             States, you should not make any political contributions, directly
             or indirectly, without first checking with the Director of
             Compliance.

       PERMITTED ACTIVITIES

       Except as prohibited by Rule G-37 of the Municipal Securities Rulemaking
       Board ("MSRB") and other related policies of PNC discussed below, the
       following activities are permissible:

         o   you may use your own funds to make contributions to political
             parties, candidates, or political action committees;

         o   you may participate in volunteer political activities during
             non-working time and away from PNC premises, as long as you do not
             use any PNC resources in connection with your activities; and

         o   PNC may make its facilities available to an affiliated political
             action committee ("PAC") for PAC-related functions, including
             speeches by political candidates. In addition, PNC may absorb
             administrative or other expenses incurred by an affiliated PAC.

       ADDITIONAL RULES FOR CERTAIN EMPLOYEES

       Employees of PNC Securities Corp, PNC Brokerage Corp, and certain other
       PNC employees associated with municipal securities or municipal finance,
       are subject to the following rules by MSRB Rule G-37 and PNC policies:

         o   you may not make contributions to PACs affiliated with PNC or PACs
             controlled by any municipal finance professional.

         o   you may not participate in the management of any PACs affiliated
             with PNC.

         o   YOU MUST OBTAIN PRIOR WRITTEN APPROVAL FOR ANY POLITICAL
             CONTRIBUTIONS TO CANDIDATES OR PACS. CONTACT YOUR COMPLIANCE
             DEPARTMENT OR CONSULT THE PNC POLICY IMPLEMENTING RULE G-37 FOR
             MORE INFORMATION ON OBTAINING APPROVAL.

         o   you must limit any contributions to $250 per election and per
             candidate, and you may only make contributions to candidates for
             whom you are eligible to vote.

                                       20
<PAGE>


         o   you may not make any direct or indirect political contribution for
             the purpose of influencing the award of municipal securities
             business to PNC.

       A copy of the PNC policy implementing MSRB Rule G-37 is located in the
       PNC Securities Corp and PNC Brokerage Corp Compliance Manuals.

       2.11     LOBBYING

       Specific laws apply to lobbying activities undertaken on behalf of PNC.
       You may obtain a summary of these laws and a copy of PNC's lobbying
       policy from the Director of Compliance.

       2.12     OTHER MATTERS

       CRIMES, SUSPECTED CRIMES, AND DISHONEST ACTS REPORTING REQUIREMENTS

       PNC Bank must file information with law enforcement agencies under
       certain circumstances when criminal acts involving PNC Bank have occurred
       or are suspected. If you have knowledge of a mysterious disappearance or
       loss or an unexplained shortage, or know or suspect that any criminal,
       dishonest, or fraudulent act has occurred that may affect PNC, its
       employees, officers or clients, you should immediately use any of the
       Reporting Procedures set forth in Section 1.03 of the Code.

       FIDELITY BOND COVERAGE

       PNC holds a fidelity bond that covers all employees of PNC. The bond
       coverage for any employee may end as soon as PNC learns of any dishonest
       or fraudulent act that was or may have been committed by the employee at
       any time, whether or not the act was committed while in PNC's employment.

       BONDING REQUIREMENT

       If an employee does not meet the standard for bonding, employment usually
       must be terminated. To comply with the bonding requirements and other
       requirements imposed by law, PNC reserves the right to investigate the
       personal history of any applicant or employee, including any law
       enforcement records.

       CONVICTIONS INVOLVING DISHONESTY OR BREACH OF TRUST

       Any person who at any time:

         o   has been convicted of or plead guilty to any criminal offense
             involving dishonesty or breach of trust or money laundering; or

         o   has agreed to enter into a pretrial diversion or similar program in
             connection with a prosecution for such an offense is prohibited
             from participating, directly or indirectly, in any manner in the
             conduct of the affairs of any PNC bank without prior written
             consent from the appropriate regulatory agency.

       CONSEQUENCES OF VIOLATION

       If any employee or officer of a PNC Bank is convicted of or pleads guilty
       to such an offense or enters into a pretrial diversion or similar program
       to avoid such a conviction, employment will be terminated in the absence
       of consent from the appropriate regulatory agency.

                                       21
<PAGE>


       2.13     MEDIA INQUIRIES

       MEDIA INQUIRIES

       You may be contacted by the media for information concerning PNC's
       position on various matters. You must always direct these inquiries to
       the Public Relations Department.

       PROHIBITIONS

       You also may not give information to the media about PNC activities, the
       activities of other employees, PNC clients or suppliers without the
       consent of the Public Relations Department. PNC (through the Public
       Relations Department) will speak out on issues of importance to PNC when
       appropriate. PNC will not, nor should you, without the consent of the
       Public Relations Department, identify clients or provide client
       information or do the following:

         o   comment on actions of any other company, entity or person;

         o   comment on issues that are in litigation or under governmental
             review;

         o   discuss financial projections;

         o   discuss plans, programs, products, or operations that have not been
             announced publicly;

         o   provide testimonials or endorsements; or

         o   describe the content of regulatory examination reports.

       2.14     RECORDKEEPING POLICY

       PNC maintains a record retention policy in accordance with legal,
       regulatory, and appropriate business requirements.

       PROHIBITIONS

       You may not dispose of or destroy any records that document or record the
       business of PNC, except in accordance with PNC's record retention policy.

       If there is threatened or pending litigation, an administrative charge, a
       subpoena or other legal process, or if a government audit or review is in
       process, you must not dispose of or destroy any relevant records.

       Intentional destruction of records to avoid disclosure is prohibited.

       QUESTIONS

       If you have questions about record retention, ask your supervisor.
       Supervisors may direct their questions to the Corporate Records Retention
       Coordinator.

                                       22
<PAGE>


       2.15     ACCOUNTING PRACTICES/FOREIGN CORRUPT PRACTICES ACT

       REQUIREMENTS

       PNC has established internal accounting controls and recordkeeping
       policies to meet legal and business requirements, including the
       following:

         o   all business transactions and payments will be recorded accurately
             in supporting records;

         o   no unrecorded fund or asset of PNC will be established or
             maintained for any reason;

         o   the use or transfer of PNC funds for any purpose that would be in
             violation of any law or regulation or that would be improper is
             prohibited; and

         o   the accounting records of PNC, and any public record, must be
             complete, accurate, and in reasonable detail, and no false,
             artificial, or misleading entries will be made for any reason.

       FOREIGN CORRUPT PRACTICES ACT OF 1977

       Any dealings that you may have with an official of a foreign government,
       a foreign political party or party official, or candidate for foreign
       political office, must comply with the requirements of the Foreign
       Corrupt Practices Act of 1977, as amended. The Act also applies to
       officials of public international organizations.

         o   This law requires the use of proper accounting procedures.

         o   You are prohibited from giving or promising anything of value to
             such foreign officials for the purpose of influencing any act or
             decision of the official in his/her official capacity, or to obtain
             or retain business, or direct business to, any person. Violations
             may result in criminal penalties.

       All laws of the applicable foreign country must be obeyed.

       2.16     BANK SECRECY/MONEY LAUNDERING CONTROL ACT

       POLICY

       It is the policy of PNC Bank to have an effective Bank Secrecy Act (BSA)
       and anti-money laundering program. You are responsible for knowing and
       carrying out your responsibilities under the company's BSA polices and
       procedures. In particular, you must be aware of your responsibility
       regarding:

         o   requirements to report cash transactions on Currency Transaction
             Reports (CTRs);

         o   the company's systems and procedures to avoid being used by persons
             who are laundering money through the bank from drug activities and
             other illegal activities;

         o   "Know Your Customer" procedures; and

         o   the procedures to identify a client's suspicious activities and
             transactions and to report such matters to Security Services.

       Your market's BSA Compliance Officer should be contacted regarding any
       BSA questions or concerns.

       2.17     COMMUNITY REINVESTMENT ACT/FAIR LENDING

       POLICY

       It is the policy of PNC to respond to the credit needs of the communities
       in which it has facilities, including those of low and moderate income
       neighbor-hoods. In addition, each PNC Bank is expected to devote


                                       23
<PAGE>


       human and financial resources, consistent with safe and sound banking
       practices, to the solution of community problems.

       It is the policy of PNC Bank to conduct its business in accordance with
       fair lending laws. It is your responsibility to treat all clients fairly.

       A copy of the Corporate Community Reinvestment Act (CRA) and Fair Lending
       Compliance Statements may be obtained from your Compliance Department
       representative or market CRA Officer.

       2.18     SAFETY, HEALTH AND ENVIRONMENT

       COMPLIANCE REQUIREMENT

       You must comply with safety and health requirements governed by federal,
       state, and local laws. You have a responsibility:

         o   to follow safe operating procedures;

         o   to promote your own and your co-workers' health; and

         o   to encourage regard for the environment among fellow employees and
             in the community.

       FIREARMS PROHIBITION

       You are not permitted to possess firearms or other dangerous weapons on
       PNC premises, in PNC-owned vehicles or on work time, unless this is
       required as part of your job.

       HOW TO REPORT

       Reports of any actual or potential safety, health, or environmental
       problems should be reported using the Reporting Procedures set forth in
       Section 1.03 of the Code.

                                   ----------

       This Code reflects principles PNC intends to abide by. It is not
       necessarily a statement of the law and in many instances may go beyond
       what the law and industry practice require. This Code is not intended to
       result in the imposition of legal liability on PNC, or on any employee or
       any person who becomes subject to provisions of the Code, if such
       liability would not exist under law or regulations in the absence of the
       Code.

       You are responsible for complying with the Code. This Code, however, does
       not, nor should it be construed to, imply an employment contract between
       you and PNC.

       EXHIBIT 1: FORMS

       Copy of the Notification/Approval Form

       EXHIBIT 2: INSIDER TRADING

       SUMMARY OF REQUIREMENTS

                                       24
<PAGE>


       This chart summarizes certain rules described in PNC Financial Services
       Group, Inc.'s Insider Trading Policy (the "Policy"). It is intended to be
       used as a reference to help you in your compliance with the Policy.
       However, you should not use this summary in place of the Policy because,
       in addition to containing more detailed information on the rules
       summarized below, the Policy contains other rules and standards on topics
       that are not included in the summary. THE POLICY ALSO APPLIES TO THE
       FOLLOWING MEMBERS OF YOUR IMMEDIATE FAMILY: YOUR SPOUSE, MINOR CHILDREN,
       OLDER CHILDREN WHO LIVE IN YOUR HOUSEHOLD OR WHO RELY PRIMARILY ON YOU
       FOR FINANCIAL SUPPORT, AND ANY OTHER RELATIVES (BY BLOOD, MARRIAGE, OR
       OTHERWISE) LIVING IN YOUR HOUSEHOLD. YOU ARE RESPONSIBLE FOR THESE FAMILY
       MEMBERS' COMPLIANCE WITH THE POLICY, AND YOU MUST SEEK APPROVAL OF AND
       REPORT THEIR PERSONAL SECURITIES TRANSACTIONS IN ACCORDANCE WITH THIS
       POLICY AS IF SUCH TRANSACTIONS WERE FOR YOUR OWN ACCOUNT.

       -----------------------------------------------------------------------
       SECURITIES TRANSACTIONS RESTRICTIONS FOR ALL EMPLOYEES, DIRECTORS AND
       FAMILY MEMBERS:
       -----------------------------------------------------------------------
       o  If you are aware of material, non-public information concerning any
          issuer or its securities, including but not limited to PNC, you are
          prohibited from buying, selling, or recommending securities of that
          issuer. Nor may you disclose such information to others except as
          set forth in this Policy.
       -----------------------------------------------------------------------
       o  You are prohibited from conducting the following activities
          regarding PNC securities:

          o  transactions in any derivative of a PNC security, including but
             not limited to puts, calls, and options (other than stock options
             granted by PNC), subject to certain exceptions for employees who
             received PNC securities in connection with an acquisition day
             trading (buying and selling the same security during one calendar
             day)

          o  short selling (selling the securities at a specified price and on
             a specified date without owning the securities on the trade date)
       -----------------------------------------------------------------------

       -----------------------------------------------------------------------
       PRE-CLEARANCE APPROVAL/REPORTING REQUIREMENTS FOR RESTRICTED EMPLOYEES
       AND THEIR FAMILY MEMBERS:
       -----------------------------------------------------------------------
       o  Restricted Employees include members of the senior officer committee
          (as of the date of this Policy, the Marketing Committee), Section 16
          officers, designated employees of Mergers and Acquisitions, and
          other employees designated by the Director of Corporate Compliance.
       -----------------------------------------------------------------------
       o  If you are a Restricted Employee, you must obtain the approval of
          the Corporate Secretary or designate before buying or selling PNC
          securities (including securities issued by PNC affiliates that are
          publicly traded), changing elections or making intra-plan transfers
          involving PNC securities or phantom shares, using PNC securities to
          secure a loan (including a margin account), or making a gift of PNC
          securities. Subject to certain exceptions, before buying or selling
          any publicly traded security other than securities issued by PNC or
          a PNC affiliate you must pre-clear through the Insider Transaction
          Authorization System. You also must provide to Corporate Compliance
          periodic statements at least quarterly of purchases or sales of any
          publicly traded securities.
       -----------------------------------------------------------------------
       PRE-CLEARANCE APPROVAL/REPORTING REQUIREMENTS FOR OUTSIDE DIRECTORS AND
       THEIR FAMILY MEMBERS:
       -----------------------------------------------------------------------
       o  Members of the Boards of Directors of PNC and PNC Bank, National
          Association must obtain the approval of the Corporate Secretary or
          designate before buying or selling PNC securities (including
          securities issued by PNC affiliates that are publicly traded), using
          PNC securities to secure a loan (including a margin account), making
          a gift of PNC securities, or reallocating investments within the
          Directors Deferred Compensation Plan. You must also have your
          broker(s) send duplicate copies of confirmations of all your
          purchases and sales of PNC securities (including securities issued
          by PNC affiliates) to the Corporate Secretary, and report to the
          Corporate Secretary within 7 calendar days any trade in PNC
          securities that was made other than through a broker.
       -----------------------------------------------------------------------

                                       25
<PAGE>

       -----------------------------------------------------------------------
       OTHER PRE-CLEARANCE APPROVAL/REPORTING REQUIREMENTS:
       -----------------------------------------------------------------------
       o  As a supplement to this Policy, there are special policies and
          procedures on personal securities transactions that are applicable
          to certain business units within PNC. Employees of these business
          units are subject to additional requirements as set forth in the
          special policies for their business unit, which may include
          pre-clearance and/or reporting requirements. You will be informed if
          you are in a business unit that has special policies applicable to
          you.
       -----------------------------------------------------------------------

       -----------------------------------------------------------------------
       SECURITIES OF CLIENTS
       -----------------------------------------------------------------------
       o  Employees of "Designated Units" are prohibited from purchasing or
          selling client securities. You will be informed if you are in a
          Designated Unit.
       -----------------------------------------------------------------------

       -----------------------------------------------------------------------
       SECURITIES OF AFFILIATES:
       -----------------------------------------------------------------------
       o  Certain PNC employees may be subject to different or additional
          restrictions with respect to their transactions in securities issued
          by PNC affiliates that are publicly traded companies. You will be
          informed of any such restrictions if they are applicable to you.
       -----------------------------------------------------------------------

       PNC INSIDER TRADING POLICY

       INTRODUCTION

       The purpose of this Insider Trading Policy ("Policy") is to further
       compliance by PNC Financial Services Group, Inc. ("PNC") and its
       subsidiaries, employees, and directors with the federal securities laws
       and regulations. The Policy is designed not only to protect us from
       civil or criminal liability under these laws, but also to protect our
       reputation for integrity.

       The Code of Ethics contains additional standards with respect to
       confidential information, and should be read in conjunction with this
       Policy. Further, your business unit may impose additional requirements.
       You may also be subject to Office of the Comptroller of the Currency
       requirements for fiduciary activities, Securities and Exchange
       Commission requirements, and other requirements of various
       self-regulatory organizations.

       Certain of the following standards and rules are, of necessity, general
       in nature. In practice, there may be situations that warrant exceptions
       or interpretations that must be approved by the General Counsel's
       office of PNC ("General Counsel").

       If you have questions regarding the Policy, you should contact the
       Director of Corporate Compliance or the General Counsel. Further, if
       you suspect a violation of this Policy, you should contact the Director
       of Corporate Compliance or the General Counsel, or use any of the
       reporting procedures set forth in the PNC Code of Ethics.

       You are required to be familiar with and abide by this Policy. You must
       read it carefully and retain it. New employees will be required to
       certify in writing that they understand and will comply with the
       Policy. From time to time employees may also be asked to re-certify in
       writing that they have followed the Policy.

       References to "PNC" apply to PNC Financial Services Group, Inc. and all
       organizations directly or indirectly under its control. References to
       an "affiliate" apply to the organization under the control of PNC with
       which an employee or director is associated.

                                       26
<PAGE>


         WHAT IS "INSIDER TRADING"?

         "Insider trading" generally involves the purchase or sale of securities
         while aware of material, non-public information ("inside information").
         A person who communicates inside information (a "tipper") to another
         person (a "tippee") may also be liable if the tippee purchases or sells
         a security while aware of such information.

         Penalties for insider trading violations are substantial. Civil
         penalties may be as high as three times the profit gained or loss
         avoided as a result of an unlawful purchase or sale of a security. For
         controlling persons who knowingly or recklessly fail to take
         appropriate measures designed to prevent the occurrence of insider
         trading violations, civil penalties of up to the greater of three times
         the profit gained or loss avoided or $1,000,000 may be imposed. In
         addition, criminal fines and jail terms may be imposed.

         WHAT IS "MATERIAL INFORMATION"?

         Material information generally means information relating to a company
         that issues securities (an "issuer"), such as information about its
         business operations or securities, the public dissemination of which
         would likely affect the market price of any of its securities, or which
         would likely be considered important by a reasonable investor in
         determining whether to buy, sell, or hold such securities.

         WHAT IS "NON-PUBLIC INFORMATION"?

         Information that has not been disclosed to the public is generally
         non-public. To show that information is public, there must be evidence
         that it is widely disseminated. Information would generally be
         considered widely disseminated if it has been disclosed, for example on
         the Dow Jones broad tape, news wire services such as AP or Reuters,
         radio or television; or in newspapers or magazines, or public
         disclosure documents filed with the Securities and Exchange Commission,
         such as prospectuses, proxy statements, and periodic reports.

         EXAMPLES OF INSIDE INFORMATION

         It is impossible to provide a complete list of information that may
         constitute inside information, but it may include:

         o  Unpublished financial reports or projections;

         o  Information about current, proposed, or contemplated transactions,
            business plans, financial restructurings, or acquisition targets;

         o  Dividend increases or decreases;

         o  Extraordinary borrowings or liquidity problems;

         o  Material defaults under agreements or actions by creditors, clients,
            or suppliers relating to a company's credit standing;

         o  Proposed or contemplated issuance, redemption, or repurchase of
            securities or stock splits;

         o  Significant expansions or contractions of operations, including
            acquisitions, mergers, divestitures, and joint ventures, and
            purchases or sales of substantial assets;

                                       27
<PAGE>


         o  Major new product developments;

         o  Significant increase or decrease in business or information about
            major contracts;

         o  Institution of, or developments in, major litigation,
            investigations, or regulatory actions or proceedings; and

         o  Developments regarding a company's senior management.

         STATEMENT OF GENERAL POLICY APPLICABLE TO ALL EMPLOYEES AND DIRECTORS

         The following rules relate to your personal securities transactions.
         For purposes of these rules, your personal securities transactions
         include the securities transactions of your immediate family members,
         and the securities transactions of accounts in which you or your
         immediate family members have a beneficial interest or over which you
         or your immediate family members exercise investment discretion or
         control. If you or an immediate family member exercises investment
         discretion or control over non-related customer accounts in the normal
         course of employment responsibilities, those accounts are not subject
         to the pre-clearance and reporting requirements described below.
         However, transactions in such accounts may be subject to review by
         audit or compliance personnel.

         Immediate family members consist of your spouse, any minor children,
         older children living in your household, older children who rely
         primarily on you for financial support, and any other relatives (by
         blood, marriage, or otherwise) living in your household. THE PERSONAL
         SECURITIES TRANSACTIONS OF YOUR IMMEDIATE FAMILY MEMBERS ARE SUBJECT TO
         THIS POLICY. YOU ARE RESPONSIBLE FOR THEIR TRANSACTIONS BEING IN
         COMPLIANCE WITH THESE RULES, AND YOU MUST PRE-CLEAR AND REPORT THEIR
         PERSONAL SECURITIES TRANSACTIONS AS IF SUCH TRANSACTIONS WERE FOR YOUR
         OWN ACCOUNT.

         1. GENERAL PROHIBITION ON INSIDER TRADING:

            o  If you are aware of inside information concerning an issuer or
               its securities, including but not limited to PNC, you are
               prohibited from buying, selling, or recommending securities of
               that issuer. You also may not disclose such information to any
               other person, unless:

                  o  that person is employed by PNC and has a need to know such
                     information in connection with his or her employment or
                     supervisory responsibilities;

                  o  that person is employed by an outside firm (such as a law,
                     accounting, or investment banking firm) retained by PNC and
                     needs to know the information in connection with the
                     service to be provided by the firm to PNC; or

                  o  disclosure is otherwise authorized by the General Counsel.

            o  Once the inside information is released to the public and has
               been widely disseminated, then you may buy, sell, or recommend
               securities of that issuer unless otherwise restricted in this
               Policy.

            o  Unless you are sure that information is not inside information,
               you should presume that it is or consult with the General
               Counsel.

         2. SPECIAL RULES REGARDING PNC FINANCIAL SERVICES GROUP, INC.
            SECURITIES:

            o  You are prohibited from purchasing or selling PNC securities
               beginning 15 days before the end of a calendar quarter until the
               second business day after PNC releases its earnings results for
               that

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               quarter (the "Blackout Period"). This prohibition does not
               include exercising with cash or already-owned PNC securities an
               option on PNC securities granted by PNC and holding the
               underlying securities received as a result of the option
               exercise. All pending purchase and sale orders regarding PNC
               securities that could be executed during a Blackout Period must
               be canceled before the beginning of the Blackout Period.

            o  You are prohibited from engaging in transactions in any
               derivative of PNC securities, including but not limited to puts,
               calls, and options. You are also prohibited from day trading
               (buying and selling the same securities during one calendar day)
               and short selling (selling the securities at a specified price on
               a specified date without owning the securities on the trade date)
               PNC securities. The receipt or exercise of an option grant or
               other derivative security pursuant to a PNC compensation plan is
               not a violation of the Policy.

               NOTE: THERE IS A LIMITED EXCEPTION TO THE PROHIBITION ON
               DERIVATIVE TRANSACTIONS FOR EMPLOYEES WHO HAVE RECEIVED PNC
               SECURITIES IN CONNECTION WITH AN ACQUISITION. THIS EXCEPTION IS
               NOT AVAILABLE TO PNC EXECUTIVE OFFICERS WHO ARE SUBJECT TO
               SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934. YOU WILL BE
               INFORMED IF THIS EXCEPTION APPLIES TO YOU. IF THIS EXCEPTION
               APPLIES:

               o  YOU MAY SELL OR "WRITE" COVERED CALL OPTIONS, OR PURCHASE
                  PROTECTIVE PUTS (EITHER ALONE OR IN COMBINATION, AS, FOR
                  EXAMPLE, IN ESTABLISHING A COLLAR), PROVIDED THAT SUCH
                  DERIVATIVE INSTRUMENTS RELATE ONLY TO THE NUMBER OF PNC SHARES
                  YOU ORIGINALLY ACQUIRED IN CONNECTION WITH THE ACQUISITION.

               o  YOU MAY NOT ENTER INTO THESE TRANSACTIONS DURING A BLACKOUT
                  PERIOD OR AT ANY TIME WHEN YOU ARE AWARE OF INSIDE INFORMATION
                  REGARDING PNC.

               o  YOU MUST REMAIN "COVERED" (THAT IS, YOU MUST NOT SELL THE
                  UNDERLYING PNC SHARES WITH RESPECT TO WHICH YOU HAVE ENTERED
                  INTO THE DERIVATIVE TRANSACTION) AT ALL TIMES DURING THE TERM
                  OF THE DERIVATIVE INSTRUMENT.

               o  YOU MAY NOT EXERCISE ANY SUCH INSTRUMENT DURING A BLACKOUT
                  PERIOD OR AT ANY TIME WHEN YOU ARE AWARE OF INSIDE INFORMATION
                  REGARDING PNC. (THE EXERCISE BY A COUNTERPARTY TO SUCH A
                  DERIVATIVE TRANSACTION WOULD NOT BE DEEMED TO VIOLATE THIS
                  RESTRICTION.)

            o  If you fail to meet a margin call or otherwise default on a loan
               secured by PNC securities, and the PNC securities are liquidated
               during a Blackout Period or while you are aware of inside
               information, you may be deemed to be in violation of this Policy.

         PRE-CLEARANCE AND REPORTING REQUIREMENTS

         Restricted Employees and Directors (each as defined below) are subject
         to additional pre-clearance and reporting requirements. If you are
         subject to these requirements, under no circumstance may you effect a
         transaction in any securities while you are aware of inside
         information, even if you have received pre-clearance. The ultimate
         responsibility for determining whether you have inside information
         rests with you. Pre-clearance of any particular transaction under this
         Policy will not necessarily protect you from liability under the laws
         prohibiting insider trading.

         RESTRICTED EMPLOYEES

         Restricted Employees include members of PNC's senior officer committee
         (the Marketing Committee, as of the effective date of this Policy),
         executive officers who are subject to the reporting requirements of
         Section 16 of the Securities Exchange Act of 1934, designated employees
         of Mergers and Acquisitions,


                                       29
<PAGE>


         and other employees designated by the Director of Corporate Compliance.
         You will be informed if you have been designated a Restricted Employee.

         If you are a Restricted Employee, you must obtain the approval of the
         Corporate Secretary or designate before:

            o  buying or selling PNC securities and securities issued by PNC
               affiliates that are publicly traded companies,

            o  making changes in elections or intra-plan transfers involving PNC
               securities or phantom shares under any PNC compensation or
               benefit plan,

            o  using PNC securities to secure a loan (including a margin
               account), or

            o  making a gift of PNC securities.

         You must also pre-clear through the Insider Transaction Authorization
         System before buying or selling any publicly traded security other than
         securities issued by PNC or a PNC affiliate.

         If you are a Restricted Employee, you must have your broker(s) send
         periodic statements at least quarterly of all of your purchases and
         sales of publicly traded securities to Corporate Compliance at the same
         time the broker sends such statements to you. In addition, you must
         provide periodic statements at least quarterly to Corporate Compliance
         of all of your purchases and sales of publicly traded securities other
         than through a broker-dealer.

         The pre-clearance and reporting requirements do not apply to security
         transactions involving open-end mutual funds (such as money market
         funds), unit investment trusts, and U.S. government or federal agency
         obligations; reinvestment of dividends pursuant to an issuer's dividend
         reinvestment plan (but do apply to additional voluntary purchases or
         sales effected through such a plan); purchases of PNC securities under
         the Employee Stock Purchase Plan; or other situations where the
         Director of Corporate Compliance determines that pre-clearance or
         reporting is not necessary.

         OUTSIDE DIRECTORS

         Members of the Boards of Directors of PNC and PNC Bank, National
         Association must obtain the approval of the Corporate Secretary before:

            o  buying or selling PNC securities and securities issued by PNC
               affiliates that are publicly traded companies,

            o  using PNC securities to secure a loan (including a margin
               account),

            o  making a gift of PNC securities, or

            o  reallocating investments within the Directors Deferred
               Compensation Plan.

         If you are a director, you must have your broker(s) send duplicate
         copies of trade confirmations of all of your purchases and sales of PNC
         securities (and PNC affiliates' publicly traded securities) to the
         Corporate Secretary at the same time the broker sends confirmations to
         you. In addition, you must report to the Corporate Secretary any
         transaction in PNC securities other than through a broker-dealer not
         later than 7 calendar days after such transaction.

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<PAGE>


         The pre-clearance and reporting requirements do not apply to the
         reinvestment of dividends pursuant to PNC's dividend reinvestment plan
         (but do apply to additional voluntary purchases or sales effected
         through the plan).

         OTHER PRE-CLEARANCE AND REPORTING REQUIREMENTS

         A business unit may have or adopt policies governing the personal
         securities transactions of some or all of the employees of that
         business unit. For example, certain fiduciary, investment advisory,
         securities brokerage, and similar business units have supplemental
         policies governing the personal securities transactions of their
         employees. Such additional restrictions may include the pre-clearance
         of securities transactions or reporting requirements. You will be
         informed if you are in a business unit that has special policies
         applicable to you, and you will be required to be familiar with and
         abide by these policies.

         SECURITIES OF CLIENTS

         Employees of certain business units ("Designated Units") are prohibited
         from purchasing or selling securities of their clients. Employees will
         be informed if they are in a Designated Unit to which this restriction
         applies.

         If you are in a designated unit and acquired securities of a client in
         a transaction permitted by the Insider Trading Policy in effect before
         this Policy, or before commencing employment in your business unit, you
         may continue to hold such securities, but may not acquire any
         additional securities of that client. You must disclose this investment
         to your business unit manager and Corporate Compliance, and must obtain
         clearance from your business unit manager and Corporate Compliance
         before selling any such client securities.

         SECURITIES OF AFFILIATES

         Certain PNC employees may be subject to different or additional
         restrictions with respect to their transactions in securities issued by
         PNC affiliates that are publicly-traded companies. You will be informed
         of any such restrictions if they are applicable to you.

         INFORMATION BARRIERS

         Because PNC is a diversified financial institution, one business unit
         may have inside information about an issuer while another business unit
         that does not have such information may wish to buy or sell that
         issuer's securities or recommend a purchase or sale of such securities.
         Information Barriers are policies and procedures designed to separate
         business units that are likely to receive inside information from
         business units that purchase, sell, or recommend the purchase or sale
         of securities. Information Barrier policies and procedures will be
         implemented for each applicable business unit.

         POLICY PRESENTATION

         A video tape that includes a summary of insider trading laws and review
         of this Policy will be shown to each new employee of PNC. All new
         employees will be required to certify in writing that they have seen or
         listened to the video tape, understand this Policy, and will comply
         with the rules and standards set forth in this Policy. Existing
         employees may from time to time also be required to provide a written
         certification


                                       31
<PAGE>


         that they have followed this Policy. Periodically, the rules set forth
         in this Policy will be reviewed with all employees through meetings,
         internal communications and publications, or other means.

         AUDIT

         The General Auditor of PNC has the authority to audit compliance with
         this Policy and the policies of the business units. Each employee must
         cooperate with such an audit, including requests to provide
         documentation.

         NONCOMPLIANCE

         If you fail to comply with this Policy (including the refusal to
         re-certify compliance with it upon request or cooperate with an audit),
         you will be subject to disciplinary action, which could include
         termination of employment. In addition, apparent or suspected
         violations of laws applicable to PNC's business may be reported to
         appropriate authorities.

         This Policy is not intended to result in the imposition of legal
         liability that would not exist in the absence of the Policy.

         EXHIBIT 3: DRUG ABUSE POLICY SUMMARY

         SUMMARY

         We are committed to promoting and maintaining a drug-free workplace. An
         employee's illegal use of drugs interferes with effective and safe job
         performance, which is a matter of company concern. For this reason, it
         is our policy to prohibit employees from illegally using, possessing,
         distributing, selling or manufacturing, or being under the illegal
         influence of drugs while working or while on company property.

         "Drugs" refer to, but are not limited to, controlled substances and any
         potentially mind-altering chemicals. This includes, but is not limited
         to, depressants (barbiturates); stimulants (amphetamines); cocaine;
         narcotics (opiates, such as heroin, morphine and codeine);
         hallucinogens (PCP, LSD); methadone, marijuana and other cannabinoids;
         legally obtainable drugs, with prescriptions (Darvon, Valium, Librium);
         and over-the-counter drugs.

         According to the PNC Bank Drug Abuse Policy, a job applicant who is
         offered employment must successfully pass a drug screening test as a
         condition of employment. Failure to pass the test will render the offer
         null and void. In addition, an employee may be asked to submit to a
         drug screening test where there is reason to believe that he or she may
         have violated the Drug Abuse Policy. Further, in the future, drug
         screening tests may be conducted on those employees whose jobs are of a
         sensitive nature and whose use of drugs, therefore, would pose a risk
         to the company or the security or safety of co-workers and the public.

         We have developed procedures and guidelines for determining whether to
         require an employee to take a drug test. The procedures include
         possible consultation with designated legal and Human Resources
         personnel and/or a medical evaluation. Because employees will only be
         required to take a test when there is reasonable cause to believe that
         the employee may have violated the Drug Abuse Policy, and after
         specified procedures have been followed, the employment of an employee
         who refuses to take a drug test will be terminated.

         All drug screening tests will be conducted by an independent, certified
         toxicology laboratory, and all test results will be reviewed by an
         independent Medical Review Officer.

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<PAGE>


         We have the right to search all company property assigned to employees
         and personal possessions brought onto company property or premises. The
         privacy of employees will be preserved to the extent possible.

         Employees who violate the Drug Abuse Policy will be subject to
         disciplinary action up to and including employment termination.

         Employees are encouraged to seek help with any drug abuse problem and
         are reminded of the availability of the various corporate benefit
         programs. Any eligible employee may voluntarily participate in a
         recognized drug rehabilitation and/or other appropriate counseling
         program to treat an existing drug use problem provided that he or she
         has not previously violated the Drug Abuse Policy. In that event,
         admitting to drug use and participating in a drug rehabilitation and/or
         other appropriate counseling program will not be considered a violation
         of the Drug Abuse Policy as long as the employee successfully completes
         the program and agrees to be subject to random drug screening tests for
         a period of two years and one month following initiation of the
         program.

         Any employee who participates in a drug rehabilitation and/or
         counseling program, whether voluntarily or as a result of disciplinary
         action, will be subject to random drug screening tests for a period of
         two years and one month following initiation of the program.

         Employees who are convicted in a court of law or plead guilty to the
         use, possession, manufacture, distribution and/or sale of drugs
         occurring on company premises are required to notify us in writing
         within five days of such conviction or plea.

         Notwithstanding the foregoing, management has the right to take
         whatever disciplinary action it deems advisable, and deny any or all
         benefits under the Drug Abuse Policy, if such employee has violated any
         other PNC Bank and/or company policy or procedure.

         Any employee who wishes to review the PNC Bank Drug Abuse Policy should
         contact his or her market Human Resources representative.

         EXHIBIT 4: PNC BANK ELECTRONIC MEDIA POLICY

         INTRODUCTION

         PNC Bank ("PNC") employees have access to and use one or more forms of
         electronic media, for example, e-mail products such as OfficeVision and
         Lotus Notes, online services, the Internet, the World Wide Web, PNC
         Intranet, and electronic devices such as cellular phones and facsimile
         machines. PNC encourages proper use of these media because they make
         communication more efficient and effective and because they are
         valuable sources of information.

         The purpose of this Electronic Media Policy ("Policy") is to summarize
         key elements of what constitutes the proper use of electronic media by
         PNC employees. The Policy applies to your use of all electronic media
         and services when:

            o  accessed on, or from, company premises;

            o  accessed using company computers, facsimile machines or other
               equipment;

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<PAGE>


            o  using PNC's leased or purchased services (E.G., the PNC corporate
               network, the company's Internet connection or external service
               providers); or

            o  the media is used in a manner that identifies the employee with
               PNC Bank (E.G., you join a chat room or publish a comment on the
               Internet referencing PNC).

         You should be aware that the Policy applies even when using your own
         personal computer, cellular phone or other resources, if one of the
         above factors applies.

         This Policy is part of the PNC Bank Code of Ethics. Other PNC policies
         and procedures may also be applicable and should be considered.

         ELECTRONIC MEDIA: COMPANY PROPERTY AND BUSINESS USE

         Electronic media and services are resources provided by the company to
         facilitate company-related business. Employees need to demonstrate a
         sense of responsibility and good judgment, just as with any company
         resource.

            o  You may not create, scan, fax, download, copy, or send articles,
               jokes, stories, chain letters and other similar items of personal
               interest to another employee, person or entity.

            o  You may not use e-mail products for any purpose unrelated to
               performance of your job duties, such as to sell raffle tickets or
               tickets to personal dinner events, UNLESS DIRECTED BY YOUR
               SUPERVISOR OR MANAGER. Solicitations are governed by PNC's
               solicitation policy (ss.2.09.4, CODE OF ETHICS)

            o  You may never use electronic (or any other) media to communicate
               offensive, harassing, pornographic or other inappropriate
               material.

         Should you have questions on what is appropriate business use of
         electronic media, please contact your supervisor, your Human Resources
         representative or any other Key Contact as set forth in the Addendum to
         PNC's Code of Ethics.

         SOFTWARE AND COPYRIGHTS

         Only software developed, owned or licensed by PNC Bank may be installed
         on PNC computing resources and used for the purpose of promoting PNC's
         business. All employees are required to comply with software copyright
         laws and licensing agreements. UNAUTHORIZED DUPLICATION OF LICENSED
         SOFTWARE AND DOCUMENTATION IS STRICTLY PROHIBITED.

         ELECTRONIC MEDIA PRIVACY

         PNC Bank does not guarantee the privacy of communications transmitted
         over company established electronic media links. You should assume such
         communications are not private, and you should observe the
         CONFIDENTIALITY section of the PNC Bank Code of Ethics (ss. 2.01).
         Especially with cellular phones, you should assume that a third party
         may have the opportunity to overhear your conversation. Your use of
         electronic media, and the content of your communications, is subject to
         monitoring by PNC for operational, maintenance, security, business,
         legal or regulatory reasons.

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<PAGE>


         SYSTEM SECURITY

         PNC policies regarding system security are set forth in PNC'S
         INFORMATION SECURITY POLICY MANUAL; detailed Internet security controls
         and design requirements are provided at ss. 1100, No. 1104. Important
         considerations you should be aware of:

            o  Any business requirement resulting in file transfers over the
               Internet must be approved by your cost center manager. ALL FILES
               DOWNLOADED FROM THE INTERNET MUST BE FROM "KNOWN" RELIABLE
               SOURCES AND MUST BE SCANNED WITH PNC BANK STANDARD ANTI-VIRUS
               SOFTWARE.

            o  You may not use the Internet to communicate sensitive or
               confidential information unless management approved encryption
               standards are implemented. The CONFIDENTIALITY section of the
               Code of Ethics (ss.2.01) should be observed in any communications
               using electronic media.

            o  Access to the Internet from company resources (I.E., from PNC
               equipment or through PNC employees) must be approved through
               secured corporate gateways, approved and configured in accordance
               with PNC Information Technology Services standards. PASSWORDS
               MAINTAINED ON INTERNET-BASED SYSTEMS MUST BE DIFFERENT FROM
               PASSWORDS USED ON PNC BANK SYSTEMS.

            o  Certain Internet browsers and other similar technologies which
               are used to access World Wide Web-based resources and services,
               include the ability to store information locally in files that
               can be retained for an indefinite period. Browsers must be
               configured to ensure that any "temporary" information used during
               online sessions is not permanently stored on local user
               computers.

         You should be aware that the network services and World Wide Web sites
         can identify individuals and companies accessing their services, and
         can and do monitor access and usage.

         PNC PRODUCTS AND SERVICES: PUBLIC RELATIONS AND CUSTOMER INTERACTION

         Products and services provided by PNC, regardless of the media used,
         are subject to a variety of legal and regulatory restrictions
         applicable to such matters as advertising, product and service
         availability, costs and fees, and disclosures and descriptions.
         Existing guidelines regarding product functions and features need to be
         complied with by all employees. THE POLICIES AND PROCEDURES THAT GOVERN
         EMPLOYEE BEHAVIOR REGARDING CUSTOMER CONTACT ARE APPLICABLE TO ALL
         INTERACTIONS VIA ELECTRONIC MEDIA.

            o  Employees should not use their status as PNC employees to set
               forth opinions, comments or information that may be contrary to
               PNC's interests. THEREFORE, PARTICIPATION IN ONLINE CHAT ROOMS
               AND PUBLICATION OF INFORMATION INVOLVING PNC MUST BE CONDUCTED
               WITH CARE. YOU MAY NOT USE COMPANY RESOURCES TO CREATE YOUR OWN
               PESONAL WEB SITE.

            o  Any negative or misleading information found on electronic media
               concerning PNC Bank should be referred to Public Relations
               immediately. Individual employees should not respond to such
               items.

            o  The standards for the Internet apply the same basic, corporate
               identity standards as those used in print which meet the
               objectives of visual clarity and consistency.

            o  Lines of business creating a PNC Intranet must observe corporate
               standards, including those defined for the PNC logo.

         The Public Relations Department should be consulted if you have any
         questions.

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<PAGE>


         ENFORCEMENT

         In today's business environment, electronically distributed information
         can be transmitted much more quickly than in the past, so it is
         important to use caution and abide by the above principles in all
         stages of the use of electronic media.

         Any employee found to be abusing the privilege of company-facilitated
         access to electronic media or devices is subject to disciplinary
         action, which may include termination of employment. Please speak to
         your supervisor or manager if you have any questions or contact the
         resources identified above. You may also use your KEY CONTACTS AND
         REFERENCE GUIDE in your CODE OF ETHICS ADDENDUM to help you reach the
         appropriate person at PNC to assist you.

         (Note - there is no Exhibit 5)

         EXHIBIT 6: PNC STOCK OWNERSHIP POLICY

           (POLICY REGARDING OWNERSHIP OF STOCK IN PUBLICLY HELD SUBSIDIARIES)

         PURPOSE

         This is the stock ownership policy contemplated by Section 2.05.8 of
         the PNC Code of Ethics. The purpose of this policy is to avoid
         conflicts of interest or the appearance of conflicts of interest on the
         part of PNC personnel who are responsible for the relationship or
         transactions between PNC and its publicly held subsidiaries, while
         promoting ownership of stock in PNC and its publicly held subsidiaries.

         SCOPE

         This policy applies to PNC personnel who act, and exercise
         decision-making authority, on behalf of PNC with respect to the
         relationship or transactions between PNC and its publicly held
         subsidiaries. This policy does not apply to directors, officers and
         employees of a publicly held subsidiary whose principal employment or
         relationship is with that subsidiary.

         DEFINITIONS

         1. For purposes of this policy, PNC includes PNC Financial Services
            Group, Inc. and its subsidiaries other than the publicly held
            subsidiary in question.

         2. PNC personnel includes directors, officers and employees of PNC
            Financial Services Group, Inc. and any of its subsidiaries other
            than persons whose principal employment or relationship is with the
            publicly held subsidiary in question.

         3. Publicly held subsidiary means any entity in which PNC Financial
            Services Group, Inc. directly or indirectly owns at least 25% of the
            outstanding capital stock or other equity interest and that is
            subject to periodic reporting requirements under the federal
            securities laws.

         RELATIVE OWNERSHIP REQUIREMENT

         PNC personnel within the scope of this policy shall not acquire or hold
         an equity interest in a publicly held subsidiary of PNC that materially
         exceeds in value such person's equity interest in PNC Financial
         Services Group, Inc.

                                       36
<PAGE>


         Your equity interest will be based for this purpose on the fair market
         value of securities (including phantom stock units) owned directly or
         indirectly through employee benefit or deferred compensation plans,
         owned beneficially through trusts or other vehicles, or that may be
         acquired upon exercise of stock options, whether exercisable or not.

         Your equity interest includes securities owned by your spouse, any
         minor children, older children living in your household, older children
         who rely primarily on you for financial support, and other relatives
         (by marriage or otherwise) living in your household.

         MONITORING REQUIREMENTS

         PNC personnel within the scope of this policy should monitor their
         compliance with this Policy.

         PNC personnel subject to this policy have 90 days from discovering an
         instance of noncompliance to reestablish compliance with this policy,
         unless an exception is granted or, under applicable insider trading
         policy or law, securities transactions to reestablish compliance are
         restricted in this time frame. In the latter event, compliance must be
         reestablished promptly after such restriction lapses.

         QUESTIONS

         Questions regarding this policy should be directed to PNC's General
         Counsel or Corporate Secretary.

         EXHIBIT 7: PNC POLICY FOR EMPLOYEES HOLDING DIRECTOR AND OFFICER
                    POSITIONS IN OUTSIDE PROFIT AND NON-PROFIT ORGANIZATIONS

         INTRODUCTION

         The purpose of the PNC Policy for Employees Holding Director and
         Officer Positions in Outside Profit and Non-Profit Organizations
         ("Policy") is to establish certain rules and procedures for employees
         who hold or are considering taking a position as a director, trustee,
         officer or other similar position in a for-profit or non-profit
         corporation or other organization outside of PNC ("director/officer
         positions"). This Policy applies to all outside director/officer
         positions you currently hold as well as to any future positions and
         should be read together with the entire PNC Code of Ethics. It is your
         responsibility to understand and comply with this Policy and the PNC
         Code of Ethics.

         If you have any questions regarding this Policy, you should contact
         your manager, your Human Resources (HR) representative, the Corporate
         Ethics Office, or any of the Key Contacts identified in the Addendum to
         the PNC Code of Ethics. References to "PNC" apply to The PNC Financial
         Services Group, Inc. and/or its subsidiaries.

         SERVING AT THE REQUEST OF PNC

         Employees will be deemed to be serving in a director/officer position
         in an organization outside of PNC AT THE REQUEST OF PNC only if they
         obtain written approval from the CEO or the Vice Chairman of The PNC
         Financial Services Group, Inc. (or in the case of the CEO or the Vice
         Chairman, from the Board of Directors or its Corporate Governance
         Committee).

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<PAGE>


         NOTE: "AT THE REQUEST OF PNC" MEANS AT THE REQUEST OF THE PNC ENTITY BY
         WHICH THE EMPLOYEE IS EMPLOYED UNLESS OTHERWISE SPECIFIED ON THE
         WRITTEN APPROVAL FORM.

         APPROVAL REQUIREMENTS IF YOU ARE SERVING AT THE REQUEST OF PNC

         Employees who are asked to serve in a director/officer position in an
         outside organization AT THE REQUEST OF PNC must submit the "Form for
         Approval to Serve AT THE REQUEST OF PNC" to the Corporate Ethics
         Office. Prior to submission for final approval by the CEO or the Vice
         Chairman, the request must first be approved by the employee's Manager,
         Business CEO or Director of Staff Function, and Business HR Manager (as
         applicable). You can obtain a copy of this Form from PNC's internal
         website, from your HR representative, or from the Corporate Ethics
         Office.

         The CEO or the Vice Chairman will be deemed to be serving AT THE
         REQUEST OF PNC if the outside director/officer position is approved by
         The PNC Financial Services Group, Inc. Board of Directors or its
         Corporate Governance Committee.

         Approvals for all such requests will be based on the best interest of
         PNC. Approvals will be reviewed annually by the CEO or Vice Chairman
         or, in the case of the CEO or the Vice Chairman, by the Corporate
         Governance Committee, and may be modified or withdrawn at any time.

         Employees will be considered for possible coverage in their capacity as
         outside directors/officers under PNC's directors and officers liability
         insurance policy and for possible indemnification by the applicable PNC
         entity only with respect to outside director/officer positions approved
         as being AT THE REQUEST OF PNC in accordance with this Policy, subject
         in each case to applicable law and governing documents. Any exceptions
         must be approved by the CEO or the Vice Chairman of The PNC Financial
         Services Group, Inc. (or, in the case of the CEO or the Vice Chairman,
         by the Board of Directors or its Corporate Governance Committee).

         PUBLIC OFFICE DIRECTORS/OFFICERS

         Employees considering or accepting a director/officer position that is
         also a public office position (such as school board director) must
         comply with the PNC Public Office Policy, which is Exhibit 8 to the PNC
         Code of Ethics.

         ALL OTHER OUTSIDE DIRECTOR/OFFICER POSITIONS

         Employees otherwise wishing to serve in a director/officer position in
         an outside organization are not required to provide notification or to
         obtain approval from PNC. However, the fOLLOWING RULES APPLY:

         1. You may not serve if the outside organization is a PNC competitor.

         NOTE: FOR PURPOSES OF THIS POLICY, A COMPETITOR MEANS ANY ORGANIZATION,
         WHEREVER LOCATED, THAT ENGAGES IN ANY OF THE SAME BUSINESSES AS PNC.
         FURTHER, IF AN OUTSIDE ORGANIZATION IS OR HAS A BANK, THRIFT OR OTHER
         DEPOSITORY ORGANIZATION ANYWHERE WITHIN ITS GROUP OF AFFILIATES, ALL
         MEMBERS OF THAT GROUP ARE CONSIDERED COMPETITORS.

         2. You may not serve if your involvement with the outside organization
         would interfere with or impede your ability to perform your job duties
         and responsibilities at PNC.

         3. You may not serve if your involvement with the outside organization
         would create a conflict with, or be reasonably perceived as conflicting
         with, the interests of PNC. If you accept a director/officer position
         in

                                       38
<PAGE>


         an outside organization and a conflict of interest (actual or
         perceived) develops, you may be required to leave the outside
         organization or to resign your position with PNC.

         4. Under certain circumstances, you may not serve if PNC holds an
         equity interest in the outside organization. It is your responsibility
         to ask the outside organization if PNC holds such an interest. If so,
         you must contact the Corporate Ethics Office to determine whether or
         not you may accept the director/officer position.

         NOTE: EQUITY HELD BY PNC INCLUDES EQUITY HELD FOR PNC'S OWN ACCOUNT AND
         EQUITY PNC HOLDS AS A TRUSTEE OR OTHER FIDUCIARY. EQUITY INTERESTS MAY
         ALSO INCLUDE OPTIONS, CONVERTIBLE DEBT AND OTHER INSTRUMENTS.

         CERTAIN ADDITIONAL RESPONSIBILITIES

         By serving as a director/officer in an outside organization, you will
         also have certain responsibilities to that organization. You should be
         sure that you understand and comply with those responsibilities.

         There may be occasions where contracts or transactions involving PNC
         are discussed or decided by that outside organization (E.G., the
         outside organization is interested in obtaining a loan from PNC or in
         engaging PNC as a trustee of a plan, program or fund, such as a pension
         plan or an endowment fund). In these instances, after disclosing your
         relationship with PNC, you should not participate in such discussions
         or in the decision-making process. If you are a director of the outside
         organization, you should ask the Board secretary to reflect in the
         meeting minutes that you did not participate in the discussions and did
         not vote on that matter because of your relationship with PNC.

         DATA COLLECTION

         PNC may collect information related to director/officer positions held
         by PNC employees in outside organizations from you for marketing or
         other business purposes. Neither a request for information related to
         outside director/officer positions nor an employee response to such a
         request will mean or imply that the employee is serving in such
         position(s) AT THE REQUEST OF PNC.

         EXCEPTIONS

         Any exceptions or amendments to this Policy must be approved by the PNC
         Ethics Policy Committee or the Director of Compliance or as otherwise
         provided in this Policy.

         EXHIBIT 8: PNC PUBLIC OFFICE POLICY

         INTRODUCTION

         The purpose of the PNC Public Office Policy ("Policy") is to establish
         certain rules for employees who campaign for or seek appointment to a
         public office, who serve as public officials, or who serve as members
         of another candidate's political campaign committee ("public office
         positions"). This Policy applies to all public office positions you
         currently hold as well as to any future positions and should be read
         together with the entire PNC Code of Ethics. It is your responsibility
         to understand and comply with this Policy and the PNC Code of Ethics.

         If you have any questions regarding this Policy, you should contact
         your manager, your Human Resources (HR) representative, the Corporate
         Ethics Office, or any of the Key Contacts identified in the Addendum to
         the PNC Code of Ethics. References to "PNC" apply to The PNC Financial
         Services Group, Inc. and/or its subsidiaries.

                                       39
<PAGE>


         GENERAL RULES

         SERVICE IN A PUBLIC OFFICE POSITION IS NOT AT THE REQUEST OF PNC.
         EMPLOYEES WISHING TO SERVE IN A PUBLIC OFFICE POSITION ARE NOT REQUIRED
         TO PROVIDE NOTIFICATION TO OR OBTAIN APPROVAL FROM PNC. HOWEVER, THE
         FOLLOWING RULES APPLY.

         o  GENERAL

            o  You may not serve if your involvement would interfere with or
               impede your ability to perform your job duties and
               responsibilities at PNC.

            o  You may not serve if your involvement would create a conflict
               with, or be reasonably perceived as conflicting with, the
               interests of PNC. If you accept a public office position and a
               conflict of interest (actual or perceived) develops, you may be
               required to leave your public office position or to resign your
               position with PNC.

            o  You may not represent or act on behalf of PNC in connection with
               any matter or transaction between PNC and your campaign, the
               governmental entity you serve, or the campaign of any other
               political candidate for which you are a member of the political
               campaign committee.

         o  WHILE YOU ARE CAMPAIGNING FOR OR SEEKING APPOINTMENT TO A PUBLIC
            OFFICE OR SERVING AS A MEMBER OF ANOTHER CANDIDATE'S POLITICAL
            CAMPAIGN COMMITTEE

            Before beginning a campaign for public office or accepting such
            position, you must receive confirmation from the solicitor or other
            counsel for the governmental entity that your service as a public
            official would not prevent PNC from doing business with that
            governmental entity. All correspondence concerning campaign
            business, including but not limited to, campaign fundraising, must
            be on campaign letterhead exclusively and may not contain any
            reference to your status as a PNC employee other than to factually
            state your employment history.

            o  You may not engage in campaign business during working hours. To
               avoid any appearance of sponsorship or endorsement, PNC's name
               may not be used in any campaign material or in any fundraising
               activities, other than to factually state your employment
               history.

            o  You may not take a paid leave of absence to work on your or
               another candidate's campaign, except earned vacation time. If you
               take an unpaid leave of absence, either you or the campaign must
               promptly reimburse PNC for any benefits (E.G., insurance)
               provided by PNC to you during that leave of absence.

            o  You may not solicit contributions from any employee of PNC
               Capital Markets or any other PNC employee without first obtaining
               preclearance from the PNC Legal Department.

            o  Your campaign (or the campaign you are serving) may not use PNC's
               facilities, equipment, supplies or personnel in connection with
               the campaign effort. Volunteer efforts conducted after working
               hours off PNC premises are permitted, but PNC equipment and
               supplies may not be used in such efforts.

            o  You may not direct or coerce any PNC employee to provide services
               to a campaign, or make the provision of such services a condition
               of employment. You may not ask PNC employees to work on your or
               another candidate's campaign, even on a volunteer basis, unless
               you have obtained preclearance from the PNC Legal Department.

                                       40
<PAGE>


            o  PNC does not make political contributions to any candidate or
               campaign committee. You must therefore avoid any circumstance
               involving the use of PNC facilities or personnel that could be
               interpreted as an in-kind corporate contribution to the campaign.

         o  WHILE SERVING AS A PUBLIC OFFICIAL

            o  You may not solicit business between PNC and any governmental
               entity of which you are a public official.

            o  If at any time you are contemplating a change in your PNC duties
               that would involve the municipal securities business undertaken
               by a PNC affiliate, you must have your situation reviewed by the
               PNC Legal Department before accepting any such position.

         CERTAIN ADDITIONAL RESPONSIBILITIES

         By serving as a public official, you will also have certain
         responsibilities to the governmental entity you serve. You should be
         sure that you understand and comply with those responsibilities.

         There may be occasions where contracts or transactions involving PNC
         are discussed or decided by the governmental entity you serve. In these
         instances, after disclosing your relationship with PNC, you should not
         participate in such discussions or in the decision making process.

         DATA COLLECTION

         PNC may collect information related to public office positions held by
         PNC employees from you for various business purposes. Neither a request
         for information related to public office positions nor an employee
         response to such a request will mean or imply that the employee is
         serving in such position(s) AT THE REQUEST OF PNC.

         EXCEPTIONS

         Any exceptions or amendments to this Policy must be approved by the PNC
         Ethics Policy Committee or the Director of Compliance.

         KEY CONTACTS AND REFERENCE GUIDE

         Under the PNC Bank Code of Ethics, the Reporting Procedures outlined in
         the Code provide a number of individuals to contact to assist you
         regarding notifications, prior approvals, report a potential Code
         violation or a concern, or any questions regarding the Code. The Key
         Contacts and Reference Guide lists those persons you will be dealing
         with most frequently regarding Code matters and how to contact them, as
         well as resource materials and how to obtain them. You are encouraged
         to call anyone with whom you feel comfortable.

         KEY CONTACTS

                                       41
<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
 BUSINESS                         NAME                 PHONE                 FAX                MAILSTOP
- ---------------------------------------------------------------------------------------------------------------
<S>                       <C>                      <C>                  <C>                   <C>
HUMAN RESOURCES/ EMPLOYEE RELATIONS REPRESENTATIVES
EMPLOYEES WORKING IN:
- ---------------------------------------------------------------------------------------------------------------
 BlackRock                 Robert P. Connolly      (212) 409-3743       (212) 409-3744        XX-R345-30-1
- ---------------------------------------------------------------------------------------------------------------
 Corporate
 Bank/Treasury
 Management                     Jim Popp           (412) 768-2378       (412) 762-3985        P2-PTPP-02-1
- ---------------------------------------------------------------------------------------------------------------
 Employees in Other
 Areas                     Linda K. Williamson     (412) 762-5413       (412) 762-2256        P2-PTPP-02-1
- ---------------------------------------------------------------------------------------------------------------
 Regional Community Bank     Theresa Kiwior         570-961-6174         570-961-6340         N1-NADM-04-A
- ---------------------------------------------------------------------------------------------------------------
 PNC Advisors                  Vic Orriola          412-768-5983         412-762-3142         P1-POPP-29-1
- ---------------------------------------------------------------------------------------------------------------
 TPS
- ---------------------------------------------------------------------------------------------------------------
 Staff Services               Marilyn Crump        (412) 762-2193       (412) 762-2256        P2-PTPP-02-1
- ---------------------------------------------------------------------------------------------------------------
SECURITY SERVICES
- ---------------------------------------------------------------------------------------------------------------
 PNC Bank Helpline:       1-800-937-4445 When calling, select option #2 (Security Services), then
                          select #4 (Incident Reporting)
- ---------------------------------------------------------------------------------------------------------------
 Director of Corporate       John P.Ericksen       (412) 762-7761       (412) 762-0726        P2-PTPP-06-1
 Security Services
- ---------------------------------------------------------------------------------------------------------------
CORPORATE COMPLIANCE:  For Any Matter Under the Code
- ---------------------------------------------------------------------------------------------------------------
 Director, Corporate
 Compliance/Risk
 Management &
 Administrator
 of the Code                   Eva T. Blum         (412) 762-2748       (412) 705-0829        P1-POPP-22-2
- ---------------------------------------------------------------------------------------------------------------
 Senior Compliance
 Manager                   Michelle O. Manning     (412) 762-8234       (412) 705-0829        P1-POPP-22-2
- ---------------------------------------------------------------------------------------------------------------
 Code of Ethics Manager        Peg Holmes          (412) 762-8205       (412) 705-0829        P1-POPP-22-2
- ---------------------------------------------------------------------------------------------------------------
  GENERAL COUNSEL: For Any Matter Under the Code
- ---------------------------------------------------------------------------------------------------------------
     General Counsel         Helen P. Pudlin       (412) 762-7987       (412) 762-5920        P1-POPP-21-1
                                                   (215) 585-5174       (215) 585-8564        F5-F012-02-7
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

REFERENCE GUIDE

PNC BANK CODE OF ETHICS FORMS

All Code Forms are available on PNC's Intraweb, Lotus Notes, or from your Human
Resources Department. Sample copies of the Forms are attached as Exhibit 1 to
the Code.

- --------------------------------------------------------------------------------
 FORM                                           DESCRIPTION
- --------------------------------------------------------------------------------
 Notification/Approval      Form This Form is used to provide notification or
 (Exhibit 1A)               obtain approval under the Code. You should follow
                            the instructions on the reverse side. MATTERS WHICH
                            REQUIRE NOTIFICATION OR PRIOR APPROVAL ARE
                            SUMMARIZED IN SECTION 1.02 OF THE CODE.
- --------------------------------------------------------------------------------
Form for Approval           This Form is used to obtain all necessary approvals
to Serve at the Request     in accordance with the PNC Policy for Employees
of PNC (Exhibit 1-B)        Holding Director and Officer Positions in Outside
                            Profit and Non-Profit Organizations (attached as
                            Exhibit 7 to the Code).
- --------------------------------------------------------------------------------

                                       42

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(S)
<SEQUENCE>18
<FILENAME>file017.txt
<DESCRIPTION>POWER OF ATTORNEY
<TEXT>
<PAGE>

                                POWER OF ATTORNEY

         That each of the undersigned officers and trustees of BlackRock
Municipal Income Trust II, a business trust formed under the laws of the State
of Delaware (the "Trust"), do constitute and appoint Ralph L. Schlosstein,
Laurence D. Fink and Anne F. Ackerley, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of each of the
undersigned as such officer or trustee, a Registration Statement on Form N-2,
including any pre-effective amendments and/or any post-effective amendments
thereto and any subsequent Registration Statement of the Trust pursuant to Rule
462(b) of the Securities Act of 1933, as amended (the "1933 Act") and any other
filings in connection therewith, and to file the same under the 1933 Act or the
Investment Company Act of 1940, as amended, or otherwise, with respect to the
registration of the Trust, the registration or offering of the Trust's common
shares of beneficial interest, par value $.001 per share, or the registration or
offering of the Trust's preferred shares, par value $.001 per share; granting to
such attorneys and agents and each of them, full power of substitution and
revocation in the premises; and ratifying and confirming all that such attorneys
and agents, or any of them, may do or cause to be done by virtue of these
presents.

         This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.




<PAGE>

         IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney this 26th day of June, 2002.



                                      ---------------------------------
                                            Dr. Andrew F. Brimmer
                                            Trustee


                                      /s/  Richard E. Cavanagh
                                      ---------------------------------
                                            Richard E. Cavanagh
                                            Trustee



                                      ---------------------------------
                                            Kent Dixon
                                            Trustee



                                      ---------------------------------
                                            Frank J. Fabozzi
                                            Trustee



                                      ---------------------------------
                                            James Clayburn La Force, Jr.
                                            Trustee



                                      ---------------------------------
                                            Walter F. Mondale
                                            Trustee



                                      ---------------------------------
                                            Ralph L. Schlosstein
                                            Trustee and President


                                        2

<PAGE>





                                      ---------------------------------
                                            Laurence D. Fink
                                            Trustee



                                      ---------------------------------
                                            Henry Gabbay
                                            Treasurer
















445616.01-New York S1A                  3
<PAGE>



                                POWER OF ATTORNEY

         That each of the undersigned officers and trustees of BlackRock
Municipal Income Trust II, a business trust formed under the laws of the State
of Delaware (the "Trust"), do constitute and appoint Ralph L. Schlosstein,
Laurence D. Fink and Anne F. Ackerley, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of each of the
undersigned as such officer or trustee, a Registration Statement on Form N-2,
including any pre-effective amendments and/or any post-effective amendments
thereto and any subsequent Registration Statement of the Trust pursuant to Rule
462(b) of the Securities Act of 1933, as amended (the "1933 Act") and any other
filings in connection therewith, and to file the same under the 1933 Act or the
Investment Company Act of 1940, as amended, or otherwise, with respect to the
registration of the Trust, the registration or offering of the Trust's common
shares of beneficial interest, par value $.001 per share, or the registration or
offering of the Trust's preferred shares, par value $.001 per share; granting to
such attorneys and agents and each of them, full power of substitution and
revocation in the premises; and ratifying and confirming all that such attorneys
and agents, or any of them, may do or cause to be done by virtue of these
presents.

         This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.

<PAGE>

         IN WITNESS WHEREOF, each of the undersigned has executed this Power
of Attorney this 26th day of June, 2002.


                                       /s/ Dr. Andrew F. Brimmer
                                       Dr. Andrew F. Brimmer
                                       Trustee



                                       Richard E. Cavanagh
                                       Trustee


                                       /s/ Kent Dixon
                                       Kent Dixon
                                       Trustee


                                       /s/ Frank J. Fabozzi
                                       Frank J. Fabozzi
                                       Trustee


                                       /s/ James Clayburn La Force, Jr.
                                       James Clayburn La Force, Jr.
                                       Trustee


                                       /s/ Walter F. Mondale
                                       Walter F. Mondale
                                       Trustee


                                       /s/ Ralph L. Schlosstein
                                       Ralph L. Schlosstein
                                       Trustee and President

                                        2
<PAGE>



                                       /s/ Laurence D. Fink
                                       Laurence D. Fink
                                       Trustee


                                       /s/ Henry Gabbay
                                       Henry Gabbay
                                       Treasurer


                                        3



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
