<DOCUMENT>
<TYPE>N-2
<SEQUENCE>1
<FILENAME>s448098.txt
<TEXT>
   As filed with the Securities and Exchange Commission on August , 2002
                                           Securities Act Registration No. 333-
                                  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 :
                      Pre-Effective Amendment No. [ ]
                      Post-Effective Amendment No. [ ]
                                   and/or
                        REGISTRATION STATEMENT UNDER
                    THE INVESTMENT COMPANY ACT OF 1940 :
                             AMENDMENT NO. 3 :

                    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 IncomeTrust II
                            40 East 52nd Street
                          New York, New York 10022
                  (Name and Address of Agent for Service)

                                  Copy to:

                          Michael K. Hoffman, Esq.
                  Skadden, Arps, Slate, Meagher & Flom LLP
                             Four Times Square
                          New York, New York 10036



         Approximate Date of Proposed Public Offering: As soon as
practicable after the effective date of this Registration Statement.

          CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<TABLE>
<CAPTION>
                                        Amount       Proposed          Proposed
                                        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>
       AMPS, $.001 par value               40          $25,000        $1,000,000(1)          $92


(1)    Estimated solely for the purpose of calculating the registration fee.

</TABLE>

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 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 may determine.

                    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.        Cover Pages;  Other Offering Information      Cover page
Item 3.        Fee Table and Synopsis                        Prospectus Summary
Item 4.        Financial Highlights                          Financial Highlights (unaudited)
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 Preferred Shares; Certain
                                                             Provisions in the Agreement and Declaration of
                                                             Trust
Item 9.        Management                                    Management of the Trust; Custodian, Transfer
                                                             Agent and Auction Agent
Item 10.       Capital Stock, Long-Term Debt,                Description of Preferred Shares; Description of
               and Other Securities                          Common Shares; 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         Table of Contents for the Statement of Additional
               Additional Information                        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                                    Management of the Trust
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
Item 23.       Financial Statements                          Report of Independent Auditors; Financial
                                                             Highlights (unaudited)

</TABLE>

                         Part C--Other Information

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


<PAGE>

PROSPECTUS
                                                                           LOGO
                                    [     ]
                    BlackRock Municipal Income Trust II
                Auction Market Preferred Shares ("AMPS")(R)
                            ("Preferred Shares")
                           [ ] Shares, Series [ ]
                           [ ] Shares, Series [ ]
                           [ ] Shares, Series [ ]

                  Liquidation Preference $25,000 per share

         Investment Objective. BlackRock Municipal Income Trust II (the
"Trust") is a recently 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
Investors 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 and/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 and/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.

         Investing in the AMPS involves certain risks. See "Risks"
beginning on page   . The minimum purchase amount of the AMPS is $25,000.

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

                                                    Per Share (2)        Total
Public Offering Price                               $25,000.00           $
Sales Load                                          $                    $
Estimated Offering Expenses                         $                    $
Proceeds, after expenses, to the Trust(1)           $                    $


         (1) The Trust, its investment advisor, BlackRock Advisors, Inc.,
and its investment sub-advisor, BlackRock Financial Management, Inc., have
agreed to indemnify the several Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended.

         (2) Rounded to the nearest penny.

         The Underwriters are offering the AMPS subject to various
conditions. The Underwriters expect to deliver the AMPS to purchasers, in
book-entry form, through the facilities of The Depository Trust Company on
or about       , 2002.


          , 2002

<PAGE>



         You should read the prospectus, which contains important
information about the Trust, before deciding whether to invest in the AMPS
and retain it for future reference. A Statement of Additional Information,
dated     , 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 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 web site (http://www.sec.gov).

         The AMPS 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.

         The Trust is offering shares of Series Auction Market Preferred
Shares, shares of Series Auction Market Preferred Shares and shares of
Series Auction Market Preferred Shares. The shares are referred to in this
prospectus as "AMPS." The AMPS have a liquidation preference of $25,000 per
share, plus any accumulated, unpaid dividends. The AMPS also have priority
over the Trust's common shares as to distribution of assets as described in
this prospectus. It is a condition of closing this offering that the AMPS
be offered with a rating of "Aaa" from Moody's and "AAA" from S&P.

         The dividend rate for the initial dividend rate period will be for
Series   , for Series    and for Series   . The initial rate period is from
the date of issuance through , 2002 for Series   ,      , 2002 for Series
and     , 2002 for Series For subsequent rate periods, AMPS pay dividends based
on a rate set at auction, usually held weekly. Prospective purchasers should
carefully review the auction procedures described in this prospectus and
should note: (1) a buy order (called a "bid order") or sell order is a
commitment to buy or sell AMPS based on the results of an auction; (2)
auctions will be conducted by telephone; and (3) purchases and sales will
be settled on the next business day after the auction.

         The AMPS are redeemable, in whole or in part, at the option of the
Trust on any dividend payment date for the AMPS, and will be subject to
mandatory redemption in certain circumstances at a redemption price of
$25,000 per share, plus accumulated but unpaid dividends to date of the
redemption, plus a premium in certain circumstances.

         AMPS are not listed on an exchange. You may only buy or sell AMPS
through an order placed at an auction with or through a broker-dealer that
has entered into an agreement with the auction agent and the Trust or in a
secondary market maintained by certain broker-dealers. These broker-dealers
are not required to maintain this market, and it may not provide you with
liquidity.

         Dividends on AMPS, to the extent payable from tax-exempt income
earned on the Trust's investments, will be exempt from regular Federal
income tax in the hands of owners of such shares. All or a portion of the
Trust's dividends may be subject to the Federal alternative minimum tax.
The Trust is required to allocate net capital gains and other taxable
income, if any, proportionately between common and preferred shares,
including the AMPS, based on the percentage of total dividends distributed
to each class for that year. The Trust may at its election give notice of
the amount of any income subject to Federal income tax to be included in a
dividend on a share of AMPS in advance of the related auction. If the Trust
does not give such advance notice, whether or not by reason of the fact
that a taxable allocation was made retroactively as a result of a
redemption of all or part of the AMPS or the liquidation of the Trust, it
generally will be required to pay additional amounts to holders of AMPS in
order to adjust for their receipt of income subject to regular Federal
income tax.

<PAGE>


                             TABLE OF CONTENTS

PROSPECTUS SUMMARY............................................................4
FINANCIAL HIGHLIGHTS (Unaudited)..............................................9
THE TRUST....................................................................10
USE OF PROCEEDS..............................................................10
CAPITALIZATION (Unaudited)...................................................10
PORTFOLIO COMPOSITION........................................................11
THE TRUST'S INVESTMENTS......................................................11
RISKS........................................................................14
MANAGEMENT OF THE TRUST......................................................17
DESCRIPTION OF AMPS..........................................................20
THE AUCTION..................................................................27
DESCRIPTION OF COMMON SHARES.................................................31
CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST.................31
REPURCHASE OF COMMON SHARES..................................................33
TAX MATTERS..................................................................33
UNDERWRITING.................................................................35
CUSTODIAN, TRANSFER AGENT AND AUCTION AGENT..................................35
LEGAL OPINIONS...............................................................36
AVAILABLE INFORMATION........................................................36
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.....................37
APPENDIX A TAXABLE EQUIVALENT YIELD TABLE...................................A-1

         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.


                      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.

<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 AMPS. You
should read the more detailed information contained in this prospectus, the
Statement of Additional Information and the Trust's Statement of
Preferences of Auction Market Preferred Shares (the "Statement") attached
as Appendix A to the Statement of Additional Information. Capitalized terms
used but not defined in this prospectus shall have the meanings given to
such terms in the Statement.

<TABLE>
<CAPTION>

<S>                                                  <C>
The Trust .........................................  BlackRock Municipal Income Trust II is a recently 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 Trust's common shares are traded
                                                     on the American Stock Exchange under the symbol "BLE". See
                                                     "Description of Common Shares." As of        , 2002, the
                                                     Trust had          common shares outstanding and net assets
                                                     of  $            .

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/or 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. "Managed Assets"
                                                     means the total assets of the Trust (including any assets
                                                     attributable to any AMPS that may be outstanding) minus the
                                                     sum of accrued liabilities (other than debt representing
                                                     financial leverage). 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 and/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 Moody's, S&P or Fitch or bonds that are
                                                     unrated but judged to be of comparable quality by the Advisor
                                                     and/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."

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. See
                                                     "Management of the Trust."

The Offering ......................................  The Trust is offering       shares of  Series     AMPS,
                                                     shares of  Series     AMPS   and     shares of Series
                                                     AMPS each at a purchase price of $25,000 per share. AMPS are
                                                     being offered by the underwriters listed under
                                                     "Underwriting."

Risk Factors Summary ..............................  Risk is inherent in all investing. Therefore, before
                                                     investing in the AMPS you should consider certain risks
                                                     carefully. The primary risks of investing in the AMPS are:

                                                     o    if an auction fails you may not be able to sell some or
                                                          all of your shares;

                                                     o    because of the nature of the market for AMPS, you may
                                                          receive less than the price you paid for your shares if
                                                          you sell them outside of the auction, especially when
                                                          market interest rates are rising;

                                                     o    a rating agency could downgrade the rating assigned to
                                                          the AMPS, which could affect liquidity;

                                                     o    the Trust may be forced to redeem your shares to meet
                                                          regulatory or rating agency requirements or may
                                                          voluntarily redeem your shares in certain circumstances;

                                                     o    in extraordinary circumstances, the Trust may not earn
                                                          sufficient income from its investments to pay dividends;

                                                     o    if interest rates rise, the value of the Trust's
                                                          investment portfolio will decline, reducing the asset
                                                          coverage for the AMPS;

                                                     o    if an issuer of a municipal bond in which the Trust
                                                          invests experiences financial difficulty or defaults,
                                                          there may be a negative impact on the income and net
                                                          asset value of the Trust's portfolio; and

                                                     o    the Trust may invest up to 20% of its Managed Assets in
                                                          securities that are below investment grade quality,
                                                          which are regarded as having predominately speculative
                                                          characteristics with respect to the issuer's capacity to
                                                          pay interest and principal.

                                                     For  additional risks of investing in the Trust, see "Risks"
                                                     below.

Trading Market.....................................  AMPS are not listed on an exchange. Instead, you may buy or
                                                     sell the AMPS at an auction that normally is held weekly, by
                                                     submitting orders to a broker-dealer that has entered into an
                                                     agreement with the auction agent and the Trust (a
                                                     "Broker-Dealer"), or to a broker-dealer that has entered into
                                                     a separate agreement with a Broker-Dealer. In addition to the
                                                     auctions, Broker-Dealers and other broker-dealers may
                                                     maintain a secondary trading market in AMPS outside of
                                                     auctions, but may discontinue this activity at any time.
                                                     There is no assurance that a secondary market will provide
                                                     shareholders with liquidity. You may transfer shares outside
                                                     of auctions only to or through a Broker-Dealer or a
                                                     broker-dealer that has entered into a separate agreement with
                                                     a Broker-Dealer.

                                                     The table below shows the first auction date for each series
                                                     of AMPS and the day on which each subsequent auction will
                                                     normally be held for each series of AMPS. The first auction
                                                     date for each series of AMPS will be the business day before
                                                     the dividend payment date for the initial rate period for
                                                     each series of AMPS. The start date for subsequent rate
                                                     periods will normally be the business day following the
                                                     auction dates unless the then-current rate period is a
                                                     special rate period or the first day of the subsequent rate
                                                     period is not a business day.

                                                                            First Auction      Subsequent Auction
                                                          Series                Date*                  Date
                                                          ------                -----                  ----




                                                     * All Dates are 2002.

Dividends and Rate Periods ........................  The table below shows the dividend rate for the initial rate
                                                     period on the AMPS offered in this prospectus. For subsequent
                                                     rate periods, AMPS will pay dividends based on a rate set at
                                                     auctions, normally held weekly. In most instances, dividends
                                                     are also paid weekly, on the day following the end of the
                                                     rate period. The rate set at auction will not exceed the
                                                     maximum applicable rate. See "Description of AMPS--Dividends
                                                     and Dividend Periods."

                                                     The table below also shows the date from which dividends on
                                                     the AMPS will accumulate at the initial rate, the dividend
                                                     payment date for the initial rate period and the day on which
                                                     dividends will normally be paid. If the day on which
                                                     dividends otherwise would be paid is not a business day, then
                                                     your dividends will be paid on the first business day that
                                                     falls after that day.

                                                     Finally, the table below shows the number of days of the
                                                     initial rate period for the AMPS. Subsequent rate periods
                                                     generally will be seven days. The dividend payment date for
                                                     special rate periods of more than seven days will be set out
                                                     in the notice designating a special rate period. See
                                                     "Description of AMPS--Dividends and Dividend
                                                     Periods--Designation of Special Rate Periods."

                                                                                      Dividend                 Number
                                                                          Date of     Payment     Subsequent  of Days
                                                              Initial   ccumulation   Date for    Dividend   of Initial
                                                              Dividend  at Initial   Initial Rate  Payment     Rate
                                                     Series    Rate       Rate*       Period*       Day       Period
                                                     ------    ----       -----       -------       ---       ------


                                                     * All Dates are 2002.

Special Tax Considerations ........................  Because under normal circumstances the Trust will invest
                                                     substantially all of its assets in municipal bonds that pay
                                                     interest that is exempt from regular Federal income tax, the
                                                     income you receive will ordinarily be exempt from Federal
                                                     income tax. Your income may be subject to state and local
                                                     taxes. All or a portion of the income from these bonds may be
                                                     subject to the Federal alternative minimum tax, so AMPS may not
                                                     be a suitable investment if you are subject to this tax or
                                                     would become subject to such tax by investing in AMPS. Taxable
                                                     income or gain earned by the Trust will be allocated
                                                     proportionately to holders of AMPS and common shares, based on
                                                     the percentage of total dividends paid to each class for that
                                                     year. Accordingly, certain specified AMPS dividends may be
                                                     subject to income tax on income or gains attributed to the
                                                     Trust. The Trust may at its election give notice before any
                                                     applicable auction of the amount of any taxable income and gain
                                                     included in a dividend to be distributed for the period
                                                     relating to that auction. If the Trust does not give advance
                                                     notice, whether or not by reason of the fact that a taxable
                                                     allocation was made retroactively as a result of a redemption
                                                     of all or part of the AMPS or the liquidation of the Trust, the
                                                     Trust generally will be required to pay additional amounts to
                                                     holders of AMPS in order to offfset the Federal income tax
                                                     effect of the taxable income so allocated. See "Tax Matters"
                                                     and "Description of AMPS--Dividends and Dividend Periods."

Ratings ...........................................  The shares of each series of AMPS are expected to be issued
                                                     with a rating of "Aaa" from Moody's and "AAA" from S&P. In
                                                     order to maintain these ratings, the Trust must own portfolio
                                                     securities of a sufficient value and with adequate credit
                                                     quality to meet the rating agencies' guidelines. See
                                                     "Description of AMPS--Rating Agency Guidelines and Asset
                                                     Coverage."

Redemption ........................................  The Trust may be required to redeem AMPS if, for example, the
                                                     Trust does not meet an asset coverage ratio required by law or
                                                     to correct a failure to meet a rating agency guideline in a
                                                     timely manner. The Trust voluntarily may redeem AMPS under
                                                     certain conditions. See "Description of AMPS--Redemption" and
                                                     "Description of AMPS--Rating Agency Guidelines and Asset
                                                     Coverage."

Liquidation Preference ............................  The liquidation preference for shares of each series of AMPS
                                                     will be $25,000 per share plus accumulated but unpaid
                                                     dividends. See "Description of AMPS--Liquidation."

Voting Rights .....................................  The holders of preferred shares, including AMPS, voting as a
                                                     separate class, have the right to elect at least two trustees
                                                     of the Trust at all times. Such holders also have the right to
                                                     elect a majority of the trustees in the event that two years'
                                                     dividends on the preferred shares are unpaid. In each case, the
                                                     remaining trustees will be elected by holders of common shares
                                                     and preferred shares, including AMPS, voting together as a
                                                     single class. The holders of preferred shares, including AMPS,
                                                     will vote as a separate class or classes on certain other
                                                     matters as required under the Trust's Agreement and Declaration
                                                     of Trust, the Investment Company Act of 1940 (the "Investment
                                                     Company Act") and Delaware law. See "Description of AMPS--Voting
                                                     Rights," and "Certain Provisions in the Agreement and
                                                     Declaration of Trust."
</TABLE>

<PAGE>

                      FINANCIAL HIGHLIGHTS (Unaudited)

         Information contained in the table below shows the unaudited
operating performance of the Trust from the commencement of the Trust's
investment operations on , 2002 through , 2002. Since the Trust was
recently organized and commenced investment operations on , 2002, the table
covers less than three weeks of operations, during which a substantial
portion of the Trust's portfolio was held in temporary investments pending
investment in municipal securities that meet the Trust's investment
objective and policies. Accordingly, the information presented may not
provide a meaningful picture of the Trust's future operating performance.

<TABLE>
<CAPTION>
                                                                                                 For the period
                                                                                                     , 2002(1)
                                                                                                     through
                                                                                                           , 2002
                                                                                                -----------------
<S>                                                                                                <C>
Per Common Share Operating Performance:
     Net asset value, beginning of period(2)
     Investment operations:
     Net investment income(3)
     Net realized and unrealized loss on investments(3)
     Net decrease from investment operations
Capital charges with respect to issuance of common shares Net asset value,
end of period(2) Market value, end of period(2) Total Investment Return(3)
Ratios To Average Net Assets Of Common Shareholders:(4)
     Expenses after fee waiver
     Expenses before fee waiver
     Net investment income after fee waiver Supplemental Data:
     Average net assets of common shareholders (000) Portfolio turnover Net
     assets of common shareholders, end of period (000)
(1)  Commencement of investment operations. This information includes the initial investment by BlackRock
     Advisors, Inc. Net asset value immediately after the closing of the public offering was $       .
(2)  Net asset value and market value are published in Barron's on Saturday
     and The Wall Street Journal on Monday.
(3)  Total investment return is calculated assuming a purchase of common
     shares at the current market price on the first day and a sale at the
     current market price on the last day of the period reported. Dividends
     and Distributions, if any, are assumed for purposes of this
     calculation, to be reinvested at prices obtained under the Trust's
     dividend reinvestment plan. Total investment return does not reflect
     brokerage commissions. Past performance is not a guarantee of future
     results.
(4)  Annualized.
</TABLE>

         The information above represents the unaudited operating
performance for a common share outstanding, total investment return, ratios
to average net assets and other supplemental data for the period indicated.
This information has been determined based upon financial information
provided in the financial statements and market value data for the Trust's
common shares.


                                 THE TRUST

         The Trust is a recently organized, diversified, closed-end,
management investment company registered under 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. On Juy 25, 2002, the Trust issued an aggregate of
21,450,000 common shares of beneficial interest, par value $.001 per share,
pursuant to the initial public offering and commenced its investment
operations. On , 2002, the Trust issued an additional common shares,
pursuant to an over allotment provision. The Trust's common shares are
traded on the American Stock Exchange under the symbol "BLE". The Trust's
principal office is located at 100 Bellevue Parkway, Wilmington, Delaware
19809, and its telephone number is (888) 825-2257.

         The following provides information about the Trust's outstanding
shares as of , 2002:

                                              Amount held by
                             Amount          the Trust or for         Amount
    Title of Class         Authorized           its Account         Outstanding
    --------------         ----------           -----------         -----------
    Common Shares           Unlimited                0
         AMPS               Unlimited                0
        Series
        Series
        Series


                              USE OF PROCEEDS

         The net proceeds of this offering will be approximately $ after
payment of the sales load and estimated 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 six to
eight weeks 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.

                         CAPITALIZATION (Unaudited)

         The following table sets forth the capitalization of the Trust as
of , 2002, and as adjusted to give effect to the issuance of the AMPS
offered hereby.

<TABLE>
<CAPTION>
                                                                                 Actual           As Adjusted
<S>                                                                              <C>              <C>
Shareholder's Equity:
     AMPS, $.001 par value, $25,000 stated value per share, at liquidation
     value; unlimited shares authorized (no shares issued; shares issued,
     as adjusted) Common shares, $.001 par value per share; unlimited
     shares authorized, shares outstanding*
Paid-in surplus
Balance of undistributed net investment income Accumulated net realized
     gain/loss from investment transactions Net unrealized
     appreciation/depreciation of investments Net assets

* None of these outstanding shares are held by or for the account of the Trust.

</TABLE>


                           PORTFOLIO COMPOSITION

         As of , 2002, approximately % of the market value of the Trust's
portfolio was invested in long-term municipal securities and approximately
% of the market value of the Trust's portfolio was invested in short-term
municipal securities. The following table sets forth certain information
with respect to the composition of the Trust's investment portfolio as of ,
2002, based on the highest rating assigned.


                                                          Value
Credit Rating                                             (000)         Percent
AAA/Aaa*
AA/Aa
A/A
BBB/Baa
BB/Ba
Unrated +
Short-Term
TOTAL

*        Includes securities that are backed by an escrow or trust
         containing sufficient U.S. Government Securities to ensure the
         timely payment of principal and interest.

+        Refers to securities that have not been rated by Moody's, S&P or
         Fitch, but that have been assessed by BlackRock as being of
         comparable credit quality to rated securities in which the Trust
         may invest. See "The Trust's Investments--Investment Objective and
         Policies."


                          THE TRUST'S INVESTMENTS

         The following section describes the Trust's investment objectives,
significant investment policies and investment techniques. More complete
information describing the Trust's significant investment policies and
techniques, including the Trust's fundamental investment restrictions, can
be found in the Statement of Additional Information, which is herein
incorporated by reference.

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
B 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,"
and "--Tax-Exempt Preferred Shares."

         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, 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 net 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
the AMPS voting together as a single class, and of the holders of a
majority of the outstanding AMPS 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 AMPS--Voting Rights" for additional information with
respect to the voting rights of holders of AMPS.

Municipal Bonds

         General. 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 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
AMPS, 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 AMPS 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. 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 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 Shares

         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 risk 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.

                                   RISKS

         Risk is inherent in all investing. Investing in any investment
company security involves risk, including the risk that you may receive
little or no return on your investment or that you may lose part or all of
your investment. Therefore, before investing you should consider carefully
the following risks that you assume when you invest in AMPS.

Recently Organized

         The Trust is a recently organized, diversified, closed-end
management investment company and has a limited operating history.

Interest Rate Risk

         Interest rate risk is the risk that bonds, and the Trust's net
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. The Trust issues AMPS,
which pay dividends based on short-term interest rates. The Trust then uses
the proceeds from the sale of AMPS to buy municipal bonds, which pay
interest based on long-term rates. Both long-term and short-term interest
rates may fluctuate. If short term interest rates rise, the AMPS dividend
rates may rise so that the amount of dividends paid to holders of AMPS
exceeds the income from the portfolio securities purchased with the
proceeds from the sale of AMPS. Because income from the Trust's entire
investment portfolio (not just the portion of the portfolio purchased with
the proceeds of the AMPS offering) is available to pay Preferred Share
dividends, however, Preferred Share dividend rates would need to greatly
exceed the yield on the Trust's portfolio before the Trust's ability to pay
Preferred Share dividends would be impaired. If long-term rates rise, the
value of the Trust's investment portfolio will decline, reducing the amount
of assets serving as asset coverage for the AMPS.

Auction Risk

         The dividend rate for the AMPS normally is set through an auction
process. In the auction, holders of AMPS may indicate the dividend rate at
which they would be willing to hold or sell their AMPS or purchase
additional AMPS. The auction also provides liquidity for the sale of AMPS.
An auction fails if there are more AMPS offered for sale than there are
buyers. You may not be able to sell your AMPS at an auction if the auction
fails. Finally, if you buy shares or elect to retain shares without
specifying a dividend rate below which you would not wish to buy or
continue to hold those shares, you could receive a lower rate of return on
your shares than the market rate. See "Description of AMPS" and "The
Auction--Auction Procedures."

Secondary Market Risk

         If you try to sell your AMPS between auctions you may not be able
to sell any or all of your shares or you may not be able to sell them for
$25,000 per share or $25,000 per share plus accumulated dividends. If the
Trust has designated a special rate period (a rate period of more than
seven days), changes in interest rates could affect the price you would
receive if you sold your shares in the secondary market. Broker-dealers
that maintain a secondary trading market for AMPS are not required to
maintain this market, and the Trust is not required to redeem shares either
if an auction or an attempted secondary market sale fails because of a lack
of buyers. AMPS are not listed on a stock exchange or the NASDAQ stock
market. If you sell your AMPS to a broker-dealer between auctions, you may
receive less than the price you paid for them, especially if market
interest rates have risen since the last auction.

Ratings and Asset Coverage Risk

         It is expected that while Moody's will assign a rating of "Aaa" to
the AMPS and S&P will assign a rating of "AAA" to the AMPS, such ratings do
not eliminate or necessarily mitigate the risks of investing in AMPS.
Moody's or S&P could downgrade AMPS, which may make your shares less liquid
at an auction or in the secondary market. If Moody's or S&P downgrades
AMPS, the Trust may alter its portfolio or redeem AMPS in an effort to
improve the rating, although there is no assurance that it will be able to
do so to the extent necessary to restore the prior rating. The Trust may
voluntarily redeem AMPS under certain circumstances. See "Description of
AMPS--Rating Agency Guidelines and Asset Coverage" for a description of the
asset maintenance tests the Trust must meet.

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.

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 Trust's ability to pay dividends on the AMPS.

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 AMPS and
distributions on those shares can decline. In an inflationary period,
however, it is expected that, through the auction process, dividend rates
on the AMPS would increase, tending to offset this risk.

Economic Sector and Geographic Risk

         The Trust may invest 25% or more of its Managed Assets in
municipal obligations of issuers located 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 assets.

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.

                          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.

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
40 funds with approximately $9.9 billion in assets. BlackRock has 31
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 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 allocations within larger institutional mandates. In addition,
BlackRock managed 12 municipal liquidity accounts valued at approximately
$4.8 billion. The team currently manages 31 closed-end municipal funds with
over $7 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.

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 0.05% 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 AMPS, 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:

                                                             Percentage Waived
                                                            (as a percentage of
                Twelve Month                                  average weekly
            Period EndingJuly 31                             Managed Assets)*
            --------------------                             ---------------
                    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%

*        Including net assets attributable to AMPS.
**       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.

                            DESCRIPTION OF AMPS

         The following is a brief description of the terms of the AMPS. For
the complete terms of the AMPS, including the meanings of the defined terms
used herein but not otherwise defined, please refer to the detailed
description of the AMPS in the Statement of Preferences (the "Statement")
attached as Appendix A to the Statement of Additional Information.

General

         The Trust's Agreement and Declaration of Trust authorizes the
issuance of an unlimited number of preferred shares, par value $.001 per
share, in one or more classes or series with rights as determined by the
board of trustees without the approval of common shareholders. The
Statement currently authorizes the issuance of AMPS, Series , AMPS, Series
, AMPS and AMPS, Series . All AMPS will have a liquidation preference of
$25,000 per share, plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared).

         The AMPS of each series will rank on parity with any other series
of AMPS and any other series of preferred shares of the Trust as to the
payment of dividends and the distribution of assets upon liquidation. Each
AMPS carries one vote on matters that AMPS can be voted. AMPS, when issued,
will be fully paid and non-assessable and have no preemptive, conversion or
cumulative voting rights.

Dividends and Dividend Periods

         The following is a general description of dividends and Rate
Periods.

         Rate Periods. The Initial Rate Period for each series is as set
forth below:

         Series                                            Initial Rate Period



         Any subsequent Rate Periods of shares of a series of AMPS will
generally be seven days. The Trust, subject to certain conditions, may
change the length of Subsequent Rate Periods designating them as Special
Rate Periods. See "Designation of Special Rate Periods" below.

         Dividend Payment Dates. Dividends on each series of AMPS will be
payable when, as and if declared by the board of trustees, out of legally
available funds in accordance with the Agreement and Declaration of Trust,
the Statement and applicable law. Dividends are scheduled to be paid for
each series of AMPS as follows:

                                                             Subsequent Dividend
                           Initial Dividend                     Payment Dates
         Series            Payment Date                           on Each



         If dividends are payable on a day that is not a Business Day, then
dividends will be payable on the next business day. In addition, the Trust
may specify different Dividend Payment Dates for any Special Rate Period of
more than 28 Rate Period Days.

         Dividends will be paid through the Securities Depository on each
Dividend Payment Date. The Securities Depository, in accordance with its
current procedures, is expected to distribute dividends received from the
Trust in next-day funds on each Dividend Payment Date to Agent Members.
These Agent Members are in turn expected to distribute such dividends to
the persons for whom they are acting as agents. However, each of the
current Broker-Dealers has indicated to the Trust that dividend payments
will be available in same-day funds on each Dividend Payment Date to
customers that use such Broker-Dealer or that Broker-Dealer's designee as
Agent Member.

         Calculation of Dividend Payment. The Trust computes the dividends
per share payable on shares of a series of AMPS by multiplying the
applicable rate for shares of such series in effect by a fraction. The
numerator of this fraction will normally be seven (i.e., the number of days
in the Dividend Period) and the denominator will normally be 365 if such
Dividend Period consists of seven days, 360 for all other Dividend Periods.
In either case, this rate is then multiplied by $25,000 to arrive at
dividends per share.

         Dividends on shares of each series of AMPS will accumulate from
the date of their original issue. For each dividend payment period after
the initial dividend period, the dividend rate will be the dividend rate
determined at auction, except that the dividend rate that results from an
auction will not be greater than the maximum applicable rate described
below.

         The maximum applicable rate for any rate period for a series of
AMPS will generally be the applicable percentage (set forth in the
Applicable Percentage Payment Table below) of the reference rate (set forth
in the Reference Rate Table below) for the applicable rate period based on
the prevailing rating of the AMPS in effect at the close of business on the
Business Day next preceding the auction date. If Moody's or S&P or both
shall not make such rating available, the rate shall be determined by
reference to equivalent ratings issued by a substitute rating agency. The
applicable percentage for a series of AMPS is determined on the day that a
notice of a special dividend period is delivered if the notice specifies a
maximum applicable rate for a special dividend period. If the Trust has
provided notification to the auction agent prior to an auction establishing
the applicable rate for a dividend period that net capital gains or other
taxable income will be included in the dividend determined at such auction,
the applicable percentage will be derived from the column captioned
"Applicable Percentage: Notification" in the Applicable Percentage Table
below:

                    Applicable Percentage Payment Table
<TABLE>
<CAPTION>

                  Credit Ratings                             Applicable Percentage Table
                                                   Applicable Percentage:       Applicable Percentage:
     Moody's                     S&P                  No Notification                Notification
<S>                         <C>                             <C>                          <C>
"Aa3" or higher             AA- or higher                   110%                         150%
"A3" to "A1"                   A- to A+                     125%                         160%
"Baa3" to "Baa1"             BBB- to BBB+                   150%                         250%
"Ba3" to "Ba1"                BB- to BB+                    200%                         275%
Below "Ba3"                   Below BB-                     250%                         300%

</TABLE>

         The reference rate used to determine the maximum applicable rate
generally varies depending on the length of the applicable rate period, as
set forth in the Reference Rate Table below:

                            Reference Rate Table

Rate Period                                 Reference Rate
28 days or less                             Greater of:
                                            o AA Composite Commercial Paper Rate
                                            o Taxable Equivalent of the
                                              Short-Term Municipal Bond Rate
29 days to 182 days                         AA Composite Commercial Paper Rate
183 days to 364 days                        Treasury Bill Rate
365 days or more                            Treasury Note Rate

         The "AA Composite Commercial Paper Rate" is as set forth in the
table set forth below:

                 AA Composite Commercial Paper Rate Table.
<TABLE>
<CAPTION>

Minimum Rate Period              Special Rate Period                 AA Composite Commercial Paper Rate*
<S>                              <C>                                            <C>
     7 days                      48 days or fewer                               30-day rate
                                 49 days to 69 days                              60-day rate
                                 70 days to 84 days                  Average of 60-day and 90-day rates
                                 85 days to 98 days                              90-day rate
                                 99 days to 119 days                 Average of 90-day and 120-day rates
                                120 days to 140 days                            120-day rate
                                141 days to 161 days                Average of 120-day and 180-day rates
                                162 days to 182 days                            180-day rate

* Rates stated on a discount basis

</TABLE>

         If the Federal Reserve Bank of New York does not make available
any such rate, the rate shall be the average rate quoted on a discount
basis by commercial paper dealers to the Auction Agent at the close of
business on the business day next preceding such date. If any commercial
paper dealer does not quote a rate, the rate shall be determined by quotes
provided by the remaining commercial paper dealers.

         "Taxable Equivalent of the Short-Term Municipal Bond Rate" means
90% of an amount equal to the per annum rate payable on taxable bonds in
order for such rate, on an after-tax basis, to equal the per annum rate
payable on tax-exempt bonds issued by "high grade" issuers as determined in
accordance with the procedures set forth in the Statement.

         Prior to each dividend payment date, the Trust is required to
deposit with the auction agent sufficient funds for the payment of declared
dividends. The failure to make such deposit will not result in the
cancellation of any auction. The Trust does not intend to establish any
reserves for the payment of dividends.

         If an auction for any series of AMPS is not held when scheduled
for any reason, other than by reason of force majeure, the dividend rate
for the corresponding rate period will be the maximum applicable rate on
the date the auction was scheduled to be held.

         Additional Dividends. If the Trust allocates any net capital gain
or other income taxable for Federal income tax purposes to a dividend paid
on AMPS without having provided advance notice (a "Taxable Allocation"),
whether or not such allocation is made retroactively as a result of the
redemption of all or a portion of the AMPS or a liquidation of the Trust,
the Trust shall pay an additional dividend. The additional dividend will be
in an amount approximately equal to the amount of taxes paid by a holder of
AMPS on the Taxable Allocation and the additional dividend, provided that
the additional dividend will be calculated:

o        without consideration being given to the time value of money;

o        assuming that no holder of AMPS is subject to the Federal
         alternative minimum tax with respect to dividends received from the
         Trust; and

o        assuming that each Taxable Allocation and such additional dividend
         (except to the extent such additional dividend is designated as an
         exempt-interest dividend under Section 852(b)(5) of the Code or
         successor provisions) would be taxable in the hands of each holder
         of AMPS at the maximum marginal regular Federal income tax rate
         applicable to ordinary income or net capital gain for individuals,
         as applicable, or the maximum marginal regular Federal corporate
         income tax rate applicable to ordinary income or net capital gain,
         as applicable whichever is greater, in effect during the fiscal
         year in question.

         The Trust will not pay Additional Dividends with respect to net
capital gains or other taxable income determined by the Internal Revenue
Service to be allocable in a manner different from that allocated by the
Trust.

         Although the Trust generally intends to designate any additional
dividend as an exempt-interest dividend to the extent permitted by
applicable law, it is possible that all or a portion of any additional
dividend will be taxable to the recipient thereof. See "Tax Matters." The
Trust will not pay a further additional dividend with respect to any
taxable portion of an additional dividend.

         The Trust will, within 90 days (and generally within 60 days)
after the end of its fiscal year for which a Taxable Allocation is made,
provide notice thereof to the auction agent. The Trust will pay, out of
legally available funds, any additional dividend due on all Taxable
Allocations made during the fiscal year in question, within 30 days after
such notice is given to the auction agent.

         Restrictions on Dividends and Other Distributions. While the AMPS
are outstanding, the Trust generally may not declare, pay or set apart for
payment any dividend or other distribution in respect of its common shares.
In addition, the Trust may not call for redemption or redeem any of its
common shares. However, the Trust is not confined by the above restrictions if:

o        immediately after such transaction, the Discounted Value of the
         Trust's portfolio would be equal to or greater than the Preferred
         Shares Basic Maintenance Amount and the Investment Company Act
         Preferred Shares Asset Coverage (see "Rating Agency Guidelines and
         Asset Coverage" below);

o        full cumulative dividends on each series of AMPS due on or prior
         to the date of the transaction have been declared and paid or
         shall have been declared and sufficient funds for the payment
         thereof deposited with the auction agent; and

o        the Trust has redeemed the full number of AMPS required to be
         redeemed by any provision for mandatory redemption contained in
         the Statement.

         The Trust generally will not declare, pay or set apart for payment
any dividend on any class or series of shares of the Trust ranking, as to
the payment of dividends, on a parity with AMPS unless the Trust has
declared and paid or contemporaneously declares and pays full cumulative
dividends on each series of the AMPS through its most recent dividend
payment date. However, when the Trust has not paid dividends in full upon
the shares of each series of AMPS through the most recent dividend payment
date or upon any other class or series of shares of the Trust ranking, as
to the payment of dividends, on a parity with AMPS through their most
recent respective dividend payment dates, the amount of dividends declared
per share on AMPS and such other class or series of shares will in all
cases bear to each other the same ratio that accumulated dividends per
share on the AMPS and such other class or series of shares bear to each
other.

         Designation of Special Rate Periods. The Trust may, at its sole
option, declare a special rate period of shares of a particular series of
AMPS. To declare a special rate period, the Trust will give notice to the
auction agent. The notice will request that the next succeeding rate period
for the series of AMPS be a number of days (other than seven) evenly
divisible by seven as specified in such notice and not more than 1,820 days
long; provided, however, that a special rate period may be a number of days
not evenly divisible by seven if all shares of the series of AMPS are to be
redeemed at the end of such special rate period. The Trust may not request
a special rate period unless sufficient clearing bids for shares of such
series were made in the most recent auction.

Redemption

         Mandatory Redemption. The Trust is required to maintain (a) a
Discounted Value of eligible portfolio securities equal to the Preferred
Shares Basic Maintenance Amount and (b) the Investment Company Act
Preferred Shares Asset Coverage. Eligible portfolio securities for these
purposes will be determined from time to time by the rating agencies then
rating the AMPS. If the Trust fails to maintain such asset coverage amounts
and does not timely cure such failure in accordance with the requirements
of the rating agency that rates the AMPS, the Trust must redeem all or a
portion of the AMPS. This mandatory redemption will take place on a date
that the board of trustees specifies out of legally available funds in
accordance with the Agreement and Declaration of Trust, as amended and
restated, the Statement and applicable law, at the redemption price of
$25,000 per share plus accumulated but unpaid dividends (whether or not
earned or declared) to the date fixed for redemption. The number of AMPS
that must be redeemed in order to cure such failure will be allocated pro
rata among the outstanding preferred shares of the Trust. The mandatory
redemption will be limited to the number of AMPS necessary to restore the
required Discounted Value or the Investment Company Act Preferred Shares
Asset Coverage, as the case may be.

         Optional Redemption. The Trust, at its option, may redeem the
shares of any series of AMPS, in whole or in part, out of funds legally
available therefor. Any optional redemption will occur on any dividend
payment date at the optional redemption price per share of $25,000 per
share plus an amount equal to accumulated but unpaid dividends to the date
fixed for redemption plus the premium, if any, specified in a special
redemption provision. No shares of a series of AMPS may be redeemed if the
redemption would cause the Trust to violate the Investment Company Act or
applicable law. In addition, holders of a series of AMPS may be entitled to
receive additional dividends if the redemption causes the Trust to make a
Taxable Allocation without having given advance notice to the auction
agent. Shares of a series of AMPS may not be redeemed in part if fewer than
300 Shares would remain outstanding after the redemption. The Trust has the
authority to redeem the series of AMPS for any reason.

Liquidation

         If the Trust is liquidated, the holders of any series of
outstanding AMPS will receive the liquidation preference on such series,
plus all accumulated but unpaid dividends, plus any applicable additional
dividends payable before any payment is made to the common shares. The
holders of AMPS will be entitled to receive these amounts from the assets
of the Trust available for distribution to its shareholders. In addition,
the rights of holders of AMPS to receive these amounts are subject to the
rights of holders of any series or class of shares, including other series
of preferred shares, ranking on a parity with the AMPS with respect to the
distribution of assets upon liquidation of the Trust. After the payment to
the holders of AMPS of the full preferential amounts as described, the
holders of AMPS will have no right or claim to any of the remaining assets
of the Trust.

         For purpose of the foregoing paragraph, a voluntary or involuntary
liquidation of the Trust does not include:

o        the sale of all or substantially all the property or business of
         the Trust;

o        the merger or consolidation of the Trust into or with any other
         business trust or corporation; or

o        the merger or consolidation of any other business trust or
         corporation into or with the Trust.

Rating Agency Guidelines and Asset Coverage

         The Trust is required under guidelines of Moody's and S&P to
maintain assets having in the aggregate a Discounted Value at least equal
to the Preferred Shares Basic Maintenance Amount. Moody's and S&P have each
established separate guidelines for calculating Discounted Value. To the
extent any particular portfolio holding does not satisfy a rating agency's
guidelines, all or a portion of the holding's value will not be included in
the rating agency's calculation of Discounted Value. The Moody's and S&P
guidelines do not impose any limitations on the percentage of the Trust's
assets that may be invested in holdings not eligible for inclusion in the
calculation of the Discounted Value of the Trust's portfolio. The amount of
ineligible assets included in the Trust's portfolio at any time may vary
depending upon the rating, diversification and other characteristics of the
eligible assets included in the portfolio. The Preferred Shares Basic
Maintenance Amount includes the sum of (a) the aggregate liquidation
preference of the AMPS then outstanding and (b) certain accrued and
projected payment obligations of the Trust.

         The Trust is also required under the Investment Company Act to
maintain asset coverage of at least 200% with respect to senior securities
which are equity shares, including the AMPS ("Investment Company Act
Preferred Shares Asset Coverage"). The Trust's Investment Company Act
Preferred Shares Asset Coverage is tested as of the last business day of
each month in which any senior equity securities are outstanding. The
minimum required Investment Company Act Preferred Shares Asset Coverage
amount of 200% may be increased or decreased if the Investment Company Act
is amended. Based on the composition of the portfolio of the Trust and
market conditions as of , 2002, the Investment Company Act Preferred Shares
Asset Coverage with respect to all of the Trust's preferred shares,
assuming the issuance on that date of all AMPS offered hereby and giving
effect to the deduction of related sales load and related offering costs
estimated at $ , would have been computed as follows:

         Value of Trust assets less liabilities
         not constituting senior securities
         ----------------------------------                     =
         Senior securities representing indebtedness
         plus
         liquidation value of the preferred shares

         In the event the Trust does not timely cure a failure to maintain
(a) a Discounted Value of its portfolio equal to the Preferred Shares Basic
Maintenance Amount or (b) the Investment Company Act Preferred Shares Asset
Coverage, in each case in accordance with the requirements of the rating
agency or agencies then rating the AMPS, the Trust will be required to
redeem AMPS as described under "Redemption--Mandatory Redemption" above.

         The Trust may, but is not required to, adopt any modifications to
the guidelines that may be established by Moody's or S&P. Failure to adopt
any such modifications, however, may result in a change in the ratings
described above or a withdrawal of ratings altogether. In addition, any
rating agency providing a rating for the AMPS may, at any time, change or
withdraw any such rating. The board of trustees may, without shareholder
approval, amend, alter or repeal any or all of the definitions and related
provisions which have been adopted by the Trust pursuant to the rating
agency guidelines in the event the Trust receives written confirmation from
Moody's or S&P, as the case may be, that any such amendment, alteration or
repeal would not impair the rating then assigned to the AMPS.

         As recently described by Moody's and S&P, a preferred stock rating
is an assessment of the capacity and willingness of an issuer to pay
preferred stock obligations. The rating on the AMPS is not a recommendation
to purchase, hold or sell those shares, inasmuch as the rating does not
comment as to market price or suitability for a particular investor. The
rating agency guidelines described above also do not address the likelihood
that an owner of AMPS will be able to sell such shares in an auction or
otherwise. The rating is based on current information furnished to Moody's
and S&P by the Trust and the Advisor and information obtained from other
sources. The rating may be changed, suspended or withdrawn as a result of
changes in, or the unavailability of, such information. The common shares
have not been rated by a nationally recognized statistical rating
organization.

         The rating agency's guidelines will apply to the AMPS only so long
as the rating agency is rating the shares. The Trust will pay certain fees
to Moody's and S&P for rating the AMPS.

Voting Rights

         Except as otherwise provided in this prospectus and in the
Statement of Additional Information or as otherwise required by law,
holders of AMPS will have equal voting rights with holders of common shares
and any other preferred shares (one vote per share) and will vote together
with holders of common shares and any preferred shares as a single class.

         Holders of outstanding preferred shares, including AMPS, voting as
a separate class, are entitled to elect two of the Trust's trustees. The
remaining trustees are elected by holders of common shares and preferred
shares, including AMPS, voting together as a single class. In addition, if
at any time dividends (whether or not earned or declared) on outstanding
preferred shares, including AMPS, are due and unpaid in an amount equal to
two full years of dividends, and sufficient cash or specified securities
have not been deposited with the auction agent for the payment of such
dividends, then, the sole remedy of holders of outstanding preferred
shares, including AMPS, is that the number of trustees constituting the
Board will be automatically increased by the smallest number that, when
added to the two trustees elected exclusively by the holders of preferred
shares including AMPS as described above, would constitute a majority of
the Board. The holders of preferred shares, including AMPS, will be
entitled to elect that smallest number of additional trustees at a special
meeting of shareholders held as soon as possible and at all subsequent
meetings at which trustees are to be elected. The terms of office of the
persons who are trustees at the time of that election will continue. If the
Trust thereafter shall pay, or declare and set apart for payment, in full,
all dividends payable on all outstanding preferred shares, including AMPS,
the special voting rights stated above will cease, and the terms of office
of the additional trustees elected by the holders of preferred shares,
including AMPS, will automatically terminate.

         As long as any AMPS are outstanding, the Trust will not, without
the affirmative vote or consent of the holders of at least a majority of
the AMPS outstanding at the time (voting together as a separate class):

         (a) authorize, create or issue, or increase the authorized or
issued amount of, any class or series of stock ranking prior to or on a
parity with the AMPS with respect to payment of dividends or the
distribution of assets on liquidation, authorize, create or issue
additional shares of or increase the authorized amount of the AMPS or any
other preferred shares, unless, in the case of shares of preferred stock on
parity with the AMPS, the Trust obtains written confirmation from Moody's
(if Moody's is then rating preferred shares), S&P (if S&P is then rating
preferred shares) or any substitute rating agency (if any such substitute
rating agency is then rating preferred shares) that the issuance of a class
or series would not impair the rating then assigned by such rating agency
to the AMPS and the Trust continues to comply with Section 13 of the
Investment Company Act, the Investment Company Act Preferred Shares Asset
Coverage requirements and the Preferred Shares Basic Maintenance Amount
requirements, in which case the vote or consent of the holders of the AMPS
is not required;

         (b) amend, alter or repeal the provisions of the Agreement and
Declaration of Trust or the Statement, by merger, consolidation or
otherwise, so as to adversely affect any preference, right or power of the
AMPS or holders of AMPS; provided, however, that (i) none of the actions
permitted by the exception to (a) above will be deemed to affect such
preferences, rights or powers, (ii) a division of AMPS will be deemed to
affect such preferences, rights or powers only if the terms of such
division adversely affect the holders of AMPS and (iii) the authorization,
creation and issuance of classes or series of shares ranking junior to the
AMPS with respect to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up of the affairs of the
Trust, will be deemed to affect such preferences, rights or powers only if
Moody's or S&P is then rating the AMPS and such issuance would, at the time
thereof, cause the Trust not to satisfy the Investment Company Act
Preferred Shares Asset Coverage or the Preferred Shares Basic Maintenance
Amount;

         (c) authorize the Trust's conversion from a closed-end to an
open-end investment company;

         (d) amend the provisions of the Agreement and Declaration of Trust
or the Statement, which provide for the classification of the board of
directors of the Trust into three classes, each with a term of office of
three years with only one class of directors standing for election in any
year; or

         (e) approve any reorganization (as such term is used in the
Investment Company Act) adversely affecting the AMPS.

         So long as any shares of the AMPS are outstanding, the Trust shall
not, without the affirmative vote or consent of the Holders of at least 66
2/3% of the AMPS outstanding at the time, in person or by proxy, either in
writing or at a meeting, voting as a separate class, file a voluntary
application for relief under Federal bankruptcy law or any similar
application under state law for so long as the Trust is solvent and does
not foresee becoming insolvent.

         To the extent permitted under the Investment Company Act, the
Trust will not approve any of the actions set forth in (a) or (b) above
which adversely affects the rights expressly set forth in the Agreement and
Declaration of Trust or the Statement, of a holder of shares of a series of
preferred shares differently than those of a holder of shares of any other
series of preferred shares without the affirmative vote or consent of the
holders of at least a majority of the shares of each series adversely
affected. However, to the extent permitted by the Agreement and Declaration
of Trust or the Statement, no vote of holders of common shares, either
separately or together with holders of preferred shares as a single class,
is necessary to take the actions contemplated by (a) and (b) above. The
holders of common shares will not be entitled to vote in respect of such
matters, unless, in the case of the actions contemplated by (b) above, the
action would adversely affect the contract rights of the holders of common
shares expressly set forth in the Trust's charter.

         The foregoing voting provisions will not apply with respect to
AMPS if, at or prior to the time when a vote is required, such shares have
been (i) redeemed or (ii) called for redemption and sufficient funds have
been deposited in trust to effect such redemption.

                                THE AUCTION

General

         The Statement provides that, except as otherwise described in this
prospectus, the applicable rate for the shares of each series of AMPS for
each dividend period after the initial dividend period will be the rate
that results from an auction conducted as set forth in the Statement and
summarized below. In such an auction, persons determine to hold or offer to
sell or, based on dividend rates bid by them, offer to purchase or sell
shares of a series of AMPS. See the Statement included in the Statement of
Additional Information for a more complete description of the auction
process.

         Auction Agency Agreement. The Trust will enter into an auction
agency agreement with the auction agent (currently, Bankers Trust) which
provides, among other things, that the auction agent will follow the
auction procedures to determine the applicable rate for shares of each
series of AMPS, so long as the applicable rate for shares of such series of
AMPS is to be based on the results of an auction.

         The auction agent may terminate the auction agency agreement upon
45 days notice to the Trust. If the auction agent should resign, the Trust
will use its best efforts to enter into an agreement with a successor
auction agent containing substantially the same terms and conditions as the
auction agency agreement. The Trust may remove the auction agent provided
that, prior to removal, the Trust has entered into a replacement agreement
with a successor auction agent.

         Broker-Dealer Agreements. Each auction requires the participation
of one or more Broker-Dealers. The auction agent will enter into agreements
with several Broker-Dealers selected by the Trust, which provide for the
participation of those Broker-Dealers in auctions for AMPS.

         The auction agent will pay to each Broker-Dealer after each
auction, from funds provided by the Trust, a service charge at the annual
rate of 1/4 of 1% in the case of any auction before a dividend period of
364 days or less, or a percentage agreed to by the Trust and the
Broker-Dealers, in the case of any auction before a dividend period of 365
days or longer, of the purchase price of AMPS placed by a Broker-Dealer at
the auction.

         The Trust may request the auction agent to terminate one or more
Broker-Dealer Agreements at any time upon five days' notice, provided that
at least one Broker-Dealer Agreement is in effect after termination of the
agreements.

Auction Procedures

         Prior to the submission deadline on each auction date for shares
of a series of AMPS, each customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer (or, if applicable, the auction agent) as a
beneficial owner of such series of AMPS may submit the following types of
orders with respect to shares of such series of AMPS to that Broker-Dealer.

         1. Hold order--indicating its desire to hold shares of such series
without regard to the applicable rate for the next dividend period.

         2. Bid--indicating its desire to sell shares of such series at
$25,000 per share if the applicable rate for shares of such series for the
next dividend period is less than the rate or spread specified in the bid.

         3. Sell order--indicating its desire to sell shares of such series
at $25,000 per share without regard to the applicable rate for shares of
such series for the next dividend period.

         A beneficial owner may submit different types of orders to its
Broker-Dealer with respect to shares of a series of AMPS then held by the
beneficial owner. A beneficial owner for shares of such series that submits
its bid with respect to shares of such series to its Broker-Dealer having a
rate higher than the maximum applicable rate for shares of such series on
the auction date will be treated as having submitted a sell order to its
Broker-Dealer. A beneficial owner of shares of such series that fails to
submit an order to its Broker-Dealer with respect to such shares will
ordinarily be deemed to have submitted a hold order with respect to such
shares of such series to its Broker-Dealer. However, if a beneficial owner
of shares of such series fails to submit an order with respect to such
shares of such series to its Broker-Dealer for an auction relating to a
dividend period of more than 28 days such beneficial owner will be deemed
to have submitted a sell order to its Broker-Dealer. A sell order
constitutes an irrevocable offer to sell the AMPS subject to the sell
order. A beneficial owner that offers to become the beneficial owner of
additional AMPS is, for purposes of such offer, a potential holder as
discussed below.

         A potential holder is either a customer of a Broker-Dealer that is
not a beneficial owner of a series of AMPS but that wishes to purchase AMPS
of such series or that is a beneficial owner of AMPS of such series that
wishes to purchase additional AMPS of such series. A potential holder may
submit bids to its Broker-Dealer in which it offers to purchase shares of
such series at $25,000 per share if the applicable rate for shares of such
series for the next dividend period is not less than the specified rate in
such bid. A bid placed by a potential holder of shares of such series
specifying a rate higher than the maximum applicable rate for shares of
such series on the auction date will not be accepted.

         The Broker-Dealers in turn will submit the orders of their
respective customers who are beneficial owners and potential holders to the
auction agent. They will designate themselves (unless otherwise permitted
by the Trust) as existing holders of shares subject to orders submitted or
deemed submitted to them by beneficial owners. They will designate
themselves as potential holders of shares subject to orders submitted to
them by potential holders. However, neither the Trust nor the auction agent
will be responsible for a Broker-Dealer's failure to comply with these
procedures. Any order placed with the auction agent by a Broker-Dealer as
or on behalf of an existing holder or a potential holder will be treated
the same way as an order placed with a Broker-Dealer by a beneficial owner
or potential holder. Similarly, any failure by a Broker-Dealer to submit to
the auction agent an order for any AMPS held by it or customers who are
beneficial owners will be treated as a beneficial owner's failure to submit
to its Broker-Dealer an order in respect of AMPS held by it. A
Broker-Dealer may also submit orders to the auction agent for its own
account as an existing holder or potential holder, provided it is not an
affiliate of the Trust.

         There are sufficient clearing bids for shares of a series in an
auction if the number of shares of such series subject to bids submitted or
deemed submitted to the auction agent by Broker-Dealers for potential
holders with rates or spreads equal to or lower than the maximum applicable
rate for such series is at least equal to or exceeds the sum of the number
of shares of such series subject to sell orders and the number of shares of
such series subject to bids specifying rates or spreads higher than the
maximum applicable rate for such series submitted or deemed submitted to
the auction agent by Broker-Dealers for existing holders of such series. If
there are sufficient clearing bids for shares of a series, the applicable
rate for shares of such series for the next succeeding dividend period
thereof will be the lowest rate specified in the submitted bids which,
taking into account such rate and all lower rates bid by Broker-Dealers as
or on behalf of existing holders and potential holders, would result in
existing holders and potential holders owning the shares of such series
available for purchase in the auction.

         If there are not sufficient clearing bids for shares of such
series, the applicable rate for the next dividend period will be the
maximum applicable rate for shares of such series on the auction date. If
this happens, beneficial owners of shares of such series that have
submitted or are deemed to have submitted sell orders may not be able to
sell in the auction all shares of such series subject to such sell orders.
If all of the outstanding shares of such series are the subject of
submitted hold orders, the applicable rate for the next dividend period
will then be:

o        (i) if the applicable rate period is less than 183 days, the "AA"
         Composite Commercial Paper Rate, (ii) if the applicable rate
         period is more than 182 days but fewer than 365 days, the Treasury
         Bill Rate, and (iii) if the applicable rate period is more than
         364 days, the Treasury Note Rate (the applicable rate being
         referred to as the "Benchmark Rate"); multiplied by

o        1 minus the maximum marginal regular individual Federal income tax
         rate applicable to ordinary income or the maximum marginal regular
         corporate Federal income tax rate applicable to ordinary income,
         whichever is greater.

         If the applicable rate period is less than 183 days and the Kenny
Index is less than the amount determined above for a rate period of less
than 183 days, then the applicable rate for an all hold period will be the
rate equal to the Kenny Index.

         The "Kenny Index" is the Kenny S&P 30 day High Grade Index or any
successor index.

         The "Treasury Bill Rate" is either (i) the bond equivalent yield,
calculated in accordance with prevailing industry convention, of the rate
on the most recently auctioned Treasury bill with a remaining maturity
closest to the length of such Rate Period, as quoted in The Wall Street
Journal on such date for the business day next preceding such date or, if
the length of the Rate Period exceeds the remaining maturity of any
recently auctioned Treasury Bill, the weighted average rate of the most
recently auctioned Treasury Bill and Treasury Note with maturities closest
to the length of the Rate Period; or (ii) in the event that any such rate
is not published in The Wall Street Journal, then the bond equivalent
yield, calculated in accordance with prevailing industry convention, as
calculated by reference to the arithmetic average of the bid price
quotations of the most recently auctioned Treasury bill with a remaining
maturity closest to the length of such Rate Period, as determined by bid
price quotations as of the close of business on the business day
immediately preceding such date obtained by the Auction Agent.

         The "Treasury Note Rate" on any date for any Rate Period, shall
mean (i) the yield on the most recently auctioned Treasury note with a
remaining maturity closest to the length of such Rate Period, as quoted in
The Wall Street Journal on such date for the business day next preceding
such date; or (ii) in the event that any such rate is not published in The
Wall Street Journal, then the yield as calculated by reference to the
arithmetic average of the bid price quotations of the most recently
auctioned Treasury note with a remaining maturity closest to the length of
such Rate Period, as determined by bid price quotations as of the close of
business on the business day immediately preceding such date obtained by
the Auction Agent.

         If all the shares of a series are subject to hold orders and the
Trust has notified the Auction Agent of its intent to allocate to a series
of AMPS any net capital gains or other income taxable for Federal income
tax purposes ("Taxable Income"), the applicable rate for the series of AMPS
for the applicable rate period will be (i) if the Taxable Yield Rate is
greater than the Benchmark Rate, then the Benchmark Rate, or (ii) if the
Taxable Yield Rate is less than or equal to the Benchmark Rate, then the
rate equal to the sum of (x) the amount determined pursuant to the two
bullet points above, and (y) the product of the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or the
maximum marginal regular Federal corporate income tax rate applicable to
ordinary income, whichever is greater, multiplied by the Taxable Yield Rate.

         The "Taxable Yield Rate" is the rate determined by (i) dividing
the amount of Taxable Income available for distribution on each Preferred
Share in the affected series by the number of days in the Dividend Period
in respect of which the Taxable Income is contemplated to be distributed,
(ii) multiplying the amount determined in (i) by 365 (in the case of a
Dividend Period of 7 days) or 360 (in the case of any other Dividend
Period), and (iii) dividing the amount determined in (ii) by $25,000.

         The auction procedure includes a pro rata allocation of shares for
purchase and sale, which may result in an existing holder continuing to
hold or selling, or a potential holder purchasing, a number of shares of a
series of AMPS that is different than the number of shares of such series
specified in its order. To the extent the allocation procedures have that
result, Broker-Dealers that have designated themselves as existing holders
or potential holders in respect of customer orders will be required to make
appropriate pro rata allocations among their respective customers.

         Settlement of purchases and sales will be made on the next
business day (which is also a dividend payment date) after the auction date
through DTC. Purchasers will make payment through their Agent Members in
same-day funds to DTC against delivery to their respective Agent Members.
DTC will make payment to the sellers' Agent Members in accordance with
DTC's normal procedures, which now provide for payment against delivery by
their Agent Members in same-day funds.

         The auctions for Series will normally be held every , and each
subsequent dividend period will normally begin on the following . The
auctions for Series will normally be held every , and each subsequent
dividend period will normally begin on the following . The auctions for
Series will normally be held every , and each subsequent dividend period
will normally begin on the following .

         If an Auction Date is not a business day because the New York
Stock Exchange is closed for business due to an act of God, natural
disaster, act of war, civil or military disturbance, act of terrorism,
sabotage, riots or a loss or malfunction of utilities or communications
services, or the auction agent is not able to conduct an Auction in
accordance with the Auction Procedures for any such reason, then the
Applicable Rate for the next Dividend Period will be the Applicable Rate
determined on the previous Auction Date.

         If a Dividend Payment Date is not a business day because the New
York Stock Exchange is closed for business due to an act of God, natural
disaster, act of war, civil or military disturbance, act of terrorism,
sabotage, riots or a loss or malfunction of utilities or communications
services, or the dividend payable on such date can not be paid for any such
reason, then:

         The Dividend Payment Date for the affected Dividend Period will be
the next Business Day on which the Trust and its paying agent, if any, can
pay the dividend;

         The affected Dividend Period will end on the day it otherwise would
have ended; and

         The next Dividend Period will begin and end on the dates on which
it otherwise would have begun and ended.

         Whenever the Trust intends to include any net capital gains or
other income taxable for Federal income tax purposes in any dividend on
AMPS, the Trust may notify the auction agent of the amount to be so
included not later than the dividend payment date before the auction date.
Whenever the auction agent receives such notice from the Trust, it will be
required in turn to notify each Broker-Dealer, who, on or prior to such
auction date, will be required to notify its customers who are beneficial
owners and potential holders believed by it to be interested in submitting
an order in the auction to be held on such auction date. In the event of
such notice, the Trust will not be required to pay an Additional Dividend
with respect to such dividend.

Secondary Market Trading and Transfers of AMPS

         The Broker-Dealers are expected to maintain a secondary trading
market in AMPS outside of auctions, but are not obligated to do so, and may
discontinue such activity at any time. There can be no assurance that any
secondary trading market in AMPS will provide owners with liquidity of
investment. The AMPS will not be registered on any stock exchange or on the
Nasdaq Stock Market. Investors who purchase shares in an auction for a
special dividend period in which the Bid Requirements, if any, do not
require a bid to specify a spread, should note that because the dividend
rate on such shares will be fixed for the length of such dividend period,
the value of the shares may fluctuate in response to changes in interest
rates and may be more or less than their original cost if sold on the open
market in advance of the next auction. Investors who purchase shares in an
auction for a special dividend period in which the Bid Requirements require
a bid to specify a spread should be aware that the value of their shares
may also fluctuate and may be more or less than their original cost if sold
in the open market in advance of the next auction, particularly if market
spreads narrow or widen in a manner unfavorable to such purchaser's
position.

         A beneficial owner or an existing holder may sell, transfer or
otherwise dispose of AMPS only in whole shares and only:

o        pursuant to a bid or sell order placed with the auction agent in
         accordance with the auction procedures;

o        to a Broker-Dealer; or

o        to such other persons as may be permitted by the Trust; provided,
         however, that

o        a sale, transfer or other disposition of AMPS from a customer of a
         Broker-Dealer who is listed on the records of that Broker-Dealer as
         the holder of such shares to that Broker-Dealer or another customer
         of that Broker-Dealer shall not be deemed to be a sale, transfer or
         other disposition if such Broker-Dealer remains the existing holder
         of the shares; and

o        in the case of all transfers other than pursuant to auctions, the
         Broker-Dealer (or other person, if permitted by the Trust) to whom
         such transfer is made will advise the auction agent of such
         transfer.

                        DESCRIPTION OF COMMON SHARES

         In addition to the AMPS, the Agreement and Declaration of Trust
dated as of June 21, 2002, authorizes the issuance of an unlimited number
of common shares of beneficial interest, par value $.001 per share. Each
common share has one vote and is 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 common shareholders from declared
but unpaid dividends or distributions owed by the common shareholders
and/or by reducing the number of common shares owned by each respective
common shareholder. So long as any AMPS are outstanding, the holders of
common shares will not be entitled to receive any distributions from the
Trust unless all accrued dividends on AMPS have been paid, unless asset
coverage (as defined in the Investment Company Act) with respect to AMPS
would be at least 200% after giving effect to the distributions and unless
certain other requirements imposed by any rating agencies rating the AMPS
have been met. All common shares are equal as to dividends, assets and
voting privileges and have no conversion, preemptive or other subscription
rights.

         The Trust's common shares are traded on the American Stock
Exchange under the symbol "BLE".

        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, except 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 AMPS, 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 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 new 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 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 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 class 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.

                        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. 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. 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 at their net asset value. This may have the effect of
reducing any market discount from net asset value. Any such repurchase may
cause the Trust to repurchase AMPS to maintain asset coverage requirements
imposed by the Investment Company Act or any rating agency rating the AMPS
at that time.

                                TAX MATTERS

         The following is a description of certain U.S. federal income tax
consequences to a investor of acquiring, holding and disposing of AMPS 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 (the
"IRS") retroactively or prospectively. No attempt is made to present a
detailed explanation of all U.S. federal, state, local and foreign tax
concerns affecting the Trust and its shareholders, and the discussion set
forth herein does not constitute tax advice. Investors are urged to consult
their own tax advisers to determine the tax consequences to them of
investing in the Trust.

         The Trust intends to elect to be treated and to qualify to be
taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and intends to distribute
substantially all of its net income and gains to its shareholders.
Therefore, it is not expected that the Trust will be subject to any U.S.
federal income tax. The Trust expects that substantially all of the
dividends it distributes to its common shareholders and holders of the AMPS
will qualify as "exempt-interest dividends." A shareholder treats an
exempt-interest dividend as interest on state and local bonds which is
exempt from regular U.S. federal income tax. Some or all of an
exempt-interest dividend, however, may be subject to U.S. federal
alternative minimum tax imposed on the shareholder. Different U.S. federal
alternative minimum tax rules apply to individuals and to corporations. In
addition to exempt-interest dividends, the Trust also may distribute to its
shareholders amounts that are treated as long-term capital gain or ordinary
income. The Trust will allocate tax-exempt interest income, long-term
capital gain and other taxable income, if any, among the common shares and
the AMPS in proportion to total dividends paid to each class for the year.
The Trust intends to notify holders of AMPS in advance if it will allocate
income to them that is not exempt from regular U.S. federal income tax. In
certain circumstances, the Trust will make payments to holders of AMPS to
offset the tax effects of the taxable distribution. See "Description of
AMPS--Dividends and Dividend Periods--Additional Dividends." The sale or
other disposition of common shares or AMPS of the Trust will normally
result in capital gain or loss to shareholders. Both long-term and
short-term capital gains of corporations are taxed at the rates applicable
to ordinary income. For non-corporate taxpayers, short-term capital gains
and ordinary income are taxed currently at a maximum rate of 38.6%, while
long-term capital gains are generally taxed at a maximum rate of 20% (or
18% for capital assets that have been held for more than five years and the
holding period of which began after December 31, 2000).*

_________________

*    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. You should consult a tax advisor concerning the
     tax consequences of your investment in the Trust. The foregoing
     discussion is subject to and qualified in its entirety by the
     discussion in "Tax Matters" in the Statement of Additional Information
     below.




         Because of certain limitations on itemized deductions and the
deduction for personal exemptions applicable to higher income taxpayers,
the effective rate of tax may be higher in certain circumstances. Losses
realized by a shareholder on the sale or exchange of shares of the Trust
held for six months or less are disallowed to the extent of any
exempt-interest dividends received with respect to such shares, and, if not
disallowed, such losses are treated as long-term capital losses to the
extent of any capital gain dividends received (or amounts credited as an
undistributed capital gain) with respect to such shares. Any loss realized
on a sale or exchange of shares of the Trust will be disallowed to the
extent those shares of the Trust are replaced by other substantially
identical shares within a period of 61 days beginning 30 days before and
ending 30 days after the date of disposition of the original shares. In
that event, the basis of the replacement shares of the Trust will be
adjusted to reflect the disallowed loss. This summary of tax consequences
is intended for general information.

State and Local Tax Matters

         While exempt-interest dividends are exempt from regular Federal
income tax, they may not be exempt from state or local income or other
taxes. Some states exempt from state income tax that portion of any
exempt-interest dividend that is derived from interest that a regulated
investment company receives on its holdings of securities of that state and
its political subdivisions and instrumentalities. Therefore, the Trust will
report annually to its shareholders the percentage of interest income the
Trust earned during the preceding year on tax-exempt obligations and the
Trust will indicate, on a state-by-state basis, the source of this income.
You should consult with your tax adviser about state and local tax matters.

                                UNDERWRITING

         Subject to the terms and conditions of the purchase agreement
dated the date hereof, each Underwriter named below has severally agreed to
purchase, and the Trust has agreed to sell to such Underwriter, the number
of AMPS set forth opposite the name of such Underwriter.


                                                  Number of Shares
                                      -----------------------------------------
Name                                  Series            Series           Series
----                                  ------            ------           ------




         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 to certain other
conditions. The Underwriters are obligated to purchase all the AMPS if they
purchase any shares. In the purchase agreement, the Trust, BlackRock
Advisors and BlackRock Financial Management have agreed to indemnify the
Underwriters against certain liabilities, including liabilities arising
under the Securities Act of 1933, 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 AMPS
directly to the public at the public offering price set forth on the cover
page of this prospectus and some of the AMPS 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 $ per share is equal to 1% of the initial
offering price. After the initial public offering, the Underwriters may
change the public offering price and the concession. Investors must pay for
any AMPS purchased in the public offering on or before , 2002.

         The Trust anticipates that from time to time the representatives
of the Underwriters and certain other underwriters may act as brokers or
dealers in connection with the execution of 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 a number of such securities, and therefore can be expected to
engage in portfolio transactions with the Trust.

         The Trust anticipates that the Underwriters or one of their
respective affiliates may, from time to time, act in auctions as
Broker-Dealers and receive fees as set forth under "The Auction."

         The principal business address of

         The settlement date for the purchase of the AMPS will be , 2002,
as agreed upon by the Underwriters, the Trust and BlackRock Advisors
pursuant to Rule 15c6-1 under the Securities Exchange Act of 1934.

                CUSTODIAN, TRANSFER AGENT AND AUCTION 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, acts as the Trust's Transfer Agent with respect to the
common shares.

         Bankers Trust Company, 4 Albany Street, New York, New York, 10006,
a banking corporation organized under the laws of New York, is the auction
agent with respect to the AMPS and acts as transfer agent, registrar,
dividend disbursing agent, and redemption agent with respect to such shares.

                               LEGAL OPINIONS

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

                           AVAILABLE INFORMATION

         The Trust is subject to the informational requirements of the
Securities Exchange Act of 1934 and the Investment Company Act and is
required to file reports, proxy statements and other information with the
SEC. These documents can be inspected and copied for a fee at the SEC's
public reference room, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the SEC's Chicago Regional Office, Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Reports,
proxy statements, and other information about the Trust can be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.

         This prospectus does not contain all of the information in the
Trust's registration statement, including amendments, exhibits, and
schedules. Statements in this prospectus about the contents of any contact
or other document are not necessarily complete and in each instance
reference is made to the copy of the contact or other document filed as an
exhibit to the registration statement, each such statement being qualified
in all respects by this reference.

         Additional information about the Trust and AMPS can be found in
the Trust's registration statement (including amendments, exhibits, and
schedules) on Form N-2 filed with the SEC. The SEC maintains a web site
(http://www.sec.gov) that contains the Trust's registration statement,
other documents incorporated by reference, and other information the Trust
has filed electronically with the SEC, including proxy statements and
reports filed under the Securities Exchange Act of 1934.

<PAGE>


                            TABLE OF CONTENTS OF
                    STATEMENT OF ADDITIONAL INFORMATION

                                                                            Page
USE OF PROCEEDS ............................................................ B-2
INVESTMENT OBJECTIVE AND POLICIES .......................................... B-2
INVESTMENT POLICIES AND TECHNIQUES ......................................... B-4
OTHER INVESTMENT POLICIES AND TECHNIQUES ...................................B-12
MANAGEMENT OF THE TRUST ....................................................B-15
PORTFOLIO TRANSACTIONS AND BROKERAGE .......................................B-23
ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR AMPS ....................B-24
DESCRIPTION OF COMMON SHARES ...............................................B-25
OTHER SHARES ...............................................................B-25
REPURCHASE OF COMMON SHARES ................................................B-25
TAX MATTERS ................................................................B-27
EXPERTS ....................................................................B-32
ADDITIONAL INFORMATION .....................................................B-32
INDEPENDENT AUDITORS' REPORT ............................................... F-1
FINANCIAL STATEMENTS ....................................................... F-2
APPENDIX A Statement of Preferences of Auction Market Preferred Shares ..... A-1
APPENDIX B Ratings of Investments .......................................... B-1
APPENDIX C General Characteristics and Risks of Hedging Transactions ....... C-1

<PAGE>

                                 APPENDIX A

                       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 assuming the stated marginal federal tax rates listed below:

<TABLE>
<CAPTION>
                      2002-2003 FEDERAL TAXABLE VS. TAX-FREE YIELDS


                     JOINT RETURN        FEDERAL                            TAXABLE EQUIVALENT
SINGLE RETURN        BRACKET             TAX RATE                         ESTIMATE CURRENT RETURN
--------------       -------             --------

                                                       4.00%    4.50%     5.00%    5.50%    6.00%    6.50%     7.00%
                                                       -----    -----     -----    -----    -----    -----     -----
<C>  <C>             <C>  <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>

<PAGE>

                                 $__________

                                 BlackRock

                         Municipal Income Trust II

                      Auction Market Preferred Shares
                               Shares, Series
                               Shares, Series
                               Shares, Series

                                 PROSPECTUS

                                     , 2002



<PAGE>

                    STATEMENT OF ADDITIONAL INFORMATION

         BlackRock Municipal Income Trust II (the "Trust") is a recently
organized, diversified, closed-end, management investment company. This
Statement of Additional Information relating to AMPS does not constitute a
prospectus, but should be read in conjunction with the prospectus relating
hereto dated , 2002. This Statement of Additional Information, which is not
a prospectus, does not include all information that a prospective investor
should consider before purchasing AMPS, 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 or the Statement attached as Appendix A.

                             TABLE OF CONTENTS


                                                                            Page
USE OF PROCEEDS ...........................................................  B-2
INVESTMENT OBJECTIVE AND POLICIES .........................................  B-2
INVESTMENT POLICIES AND TECHNIQUES ........................................  B-4
OTHER INVESTMENT POLICIES AND TECHNIQUES .................................. B-12
MANAGEMENT OF THE TRUST ................................................... B-15
PORTFOLIO TRANSACTIONS AND BROKERAGE ...................................... B-23
ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR AMPS ................... B-24
DESCRIPTION OF COMMON SHARES .............................................. B-25
OTHER SHARES .............................................................. B-25
REPURCHASE OF COMMON SHARES ............................................... B-25
TAX MATTERS ............................................................... B-27
EXPERTS ................................................................... B-32
ADDITIONAL INFORMATION .................................................... B-32
INDEPENDENT AUDITORS' REPORT ..............................................  F-1
FINANCIAL STATEMENTS ......................................................  F-2
APPENDIX A Statement of Preferences of Auction Market Preferred Shares.....  A-1
APPENDIX B Ratings of Investments .........................................  B-1
APPENDIX C General Characteristics and Risks of Hedging Transactions ......  C-1

          This Statement of Additional Information is dated , 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. AMPS 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 AMPS. The suitability of an investment in AMPS 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 AMPS, voting together as a single class, and of the
holders of a majority of the outstanding AMPS 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.

         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.

         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.

         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;

                  (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.

         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 AMPS 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 AMPS
that it intends to issue would be initially given the highest ratings by
Moody's (Aaa) and/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
AMPS 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 objectives, 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 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 B 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.

         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 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.

         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.

         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, 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 D 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 municipal 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.

                  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 AMPS.

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 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 (U.S. government securities or municipal bonds) 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. Income generated from transactions
in repurchase agreements will be taxable. See "Tax Matters" for information
relating to the allocation of taxable income between common shares and
AMPS. 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
the requirements of the Investment Company Act, which currently require
that (a) the borrower pledge and maintain with the Trust collateral
consisting of cash, a letter of credit issued by a 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 securities loaned, (b) 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), (c) the
loan be made subject to termination by the Trust at any time and (d) 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 value 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 of 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 risk 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.

         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 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. 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. 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 and certain scheduled waivers
of investment advisory fees were approved by the 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 0.05% of the average weekly value
of the Trust's Managed Assets. A related 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 of 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 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 (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. 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.

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.

<TABLE>
<CAPTION>
                                                                       Number of
                                                                     Portfolios in
                                                                     Fund Complex
Name, Address, Age     Term of      Principal Occupation During      Overseen by
and Position(s)       Office and      The Past Five Years             Trustee or
Held with             Length of       and Other Affiliations              Nominee for         Other Directorships
Registrant           Time Served                                        Trustee             held by Trustee

INDEPENDENT
TRUSTEES:
<S>                 <C>             <C>                                    <C>
Andrew F. Brimmer   3 years(1)(2)   President of Brimmer &                 37       Director of 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.                      the Board of Governors of the
Trustee                             Lead Director and Chairman of                   Federal Reserve System. Formerly
                                    the Audit Committee of each of                  Director of AirBorne Express,
                                    the closed-end Trusts in which                  BankAmerica Corporation (Bank of
                                    BlackRock Advisors Inc. acts                    America), Bell South Corporation,
                                    as 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: 55                             business membership                             Aircraft Finance Trust (AFT) and
Trustee                             organization, from                              Education Testing Service (ETS).
                                    1995-present. Former Executive                  Director, Arch Chemicals, Fremont
                                    Dean of the John F. Kennedy                     Group and The Guardian Life
                                    School of Government at                         Insurance Company of America.
                                    Harvard 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
P.O. Box 4546                       owner of INVEST, a national                     securities brokerage service
New York, NY 10163                  President and Chief Executive                   designed for banks and thrift
Age: 64                             Officer of Empire Federal                       institutions).
Trustee                             Savings Bank of America and
                                    Banc PLUS Savings Association, former
                                    Chairman of the Board, President and
                                    Chief Executive Officer of Northeast
                                    Savings.

Frank J. Fabozzi
P.O. Box 4546       3 years(1)(2)   Consultant. Editor of THE              37       Director, Guardian Mutual Funds
New York, NY 10163                  JOURNAL OF PORTFOLIO                            Group.
Age: 53                             MANAGEMENT and Adjunct
Trustee                             Professor of Finance at the 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
LaForce, Jr.                        Anderson Graduate School of                     Group, Inc., Payden & Rygel
P.O. Box 4546                       Management, University of                       Investment Trust, Provident
New York, NY 10163                  California since July 1, 1993.                  Investment Counsel Funds, Timken
Age: 73                             Acting Dean of The School of                    Company and Trust for Investment
Trustee                             Business, Hong Kong University                  Managers.
                                    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           37       Director, Northwest Airlines
P.O. Box 4546                       law firm (December                              Corp., UnitedHealth Group,
New York, NY 10163                  1996-present, September                         Formerly, Director, RBC Dain
Age: 74                             1987-August 1993). Formerly                     Rauscher, Inc.
Trustee                             U.S. Ambassador to 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
Age: 49                             Officer of BlackRock, Inc.                      Treasurer  of the BlackRock
Chairman                            since its formation in 1998                     Funds, Director of BlackRock's
                                    and of BlackRock, Inc.'s                        offshore funds.  Chairman of the
                                    predecessor entities since                      Board of several of  BlackRock's
                                    1988. Chairman of the                           alternative investment vehicles
                                    Management Committee.                           and of Nomura BlackRock Asset
                                    Formerly, Managing Director of                  Management Co., Ltd. Currently, a
                                    the First Boston Corporation,                   member of the Board of Directors
                                    Member of its Management                        of the New York Stock Exchange,
                                    Committee, Co-head of its                       member of the Board of Trustees
                                    Taxable Fixed Income Division                   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                            Trustees, Co-Chairman of the NYU
                                    closed-end Trusts in which                      Hospitals Center Board of
                                    BlackRock Advisors, Inc. acts                   Trustees and a member of the
                                    as investment advisor.                          Board of Directors of Phoenix
                                                                                    House

Ralph L.               3 years      Director since 1999 and                37       Chairman and President of the
Schlosstein*                        President of BlackRock, Inc.                    BlackRock Provident Institutional
Age: 51                             since its formation in 1998                     Funds. Director of several of
Trustee and                         and of BlackRock, Inc.'s                        BlackRock's alternative
President                           predecessor entities since                      investment vehicles. Currently, a
                                    1988. Member of the Management                  Member of the Visiting Board of
                                    Committee and Investment                        Overseers of the John F. Kennedy
                                    Strategy Group of BlackRock,                    School of Government at Harvard
                                    Inc. Formerly, Managing                         University, the Financial
                                    Director of Lehman Brothers,                    Institutions Center Board of the
                                    Inc. and Co-head of its                         Wharton School of the University
                                    Mortgage and Savings                            of Pennsylvania, a trustee of
                                    Institutions Group. Currently,                  Trinity School in New York City
                                    President and Director of each                  and a Trustee of New Visions for
                                    of the closed-end Trusts in                     Public Education in New York
                                    which BlackRock Advisors, Inc.                  Council. Formerly, a Director of
                                    acts as investment advisor.                     Pulte Corporation and a Member of
                                                                                    Fannie Mae's Advisory.

(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>

<TABLE>
<CAPTION>
                                                                Principal Occupation During the Past
Name and Age                       Title                          Five Years and Other Affiliations


OFFICERS:
<S>                       <C>                     <C>
Anne F. Ackerley          Secretary               Managing Director of BlackRock, Inc. since 2000. Formerly First
Age: 40                                           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 its predecessor
Age: 54                                           entities.

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

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

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

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


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
                                                                     in all Registered Investment Companies
                                    Dollar Range of Equity             Overseen by Directors in the Family
Name of Director                  Securities in the 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
Laurence D. Fink                              $0                                  over $100,000
Walter F. Mondale                             $0                                $50,001-$100,000
Ralph L. Schlosstein                          $0                                $50,001-$100,000

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

</TABLE>

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 From       Trust and Fund Complex Paid
Name of Board Member                            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, on April 30, 2002
         seven additional funds and on July 30 three additional funds were
         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.

         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 Laurence D. Fink and Ralph L.
Schlosstein 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.

         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 affiliate
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 electronic request at the following
e-mail address: publicinfo@sec.gov, or by writing the Security and Exchange
Commission's Public Reference Section, 1100 L Street NW, 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 40 funds
with approximately $9.9 billion in assets. BlackRock has 31 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 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 debt securities 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 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.

                     ADDITIONAL INFORMATION CONCERNING
                     THE AUCTIONS FOR PREFERRED SHARES

General

         Securities Depository. The Depository Trust Company ("DTC") will
act as the Securities Depository with respect to each series of AMPS. One
certificate for all of the shares of each series will be registered in the
name of The Bank of New York, as nominee of the Securities Depository. Such
certificate will bear a legend to the effect that such certificate is
issued subject to the provisions restricting transfers of shares of AMPS
contained in the Statement. The Trust will also issue stop-transfer
instructions to the transfer agent for AMPS. Prior to the commencement of
the right of holders of AMPS to elect a majority of the Trust's trustees,
as described under "Description of AMPSVoting Rights" in the prospectus,
The Bank of New York will be the holder of record of each series of AMPS
and owners of such shares will not be entitled to receive certificates
representing their ownership interest in such shares.

         DTC, a New York-chartered limited purpose trust company, performs
services for its participants, some of whom (and/or their representatives)
own DTC. DTC maintains lists of its participants and will maintain the
positions (ownership interests) held by each such participant in shares of
AMPS, whether for its own account or as a nominee for another person.
Additional information concerning DTC and the DTC depository system is
included as an Exhibit to the Registration Statement of which this
Statement of Additional Information forms a part.

Concerning the Auction Agent

         The auction agent will act as agent for the Trust in connection
with Auctions. In the absence of bad faith or negligence on its part, the
auction agent will not be liable for any action taken, suffered, or omitted
or for any error of judgment made by it in the performance of its duties
under the auction agency agreement between the Trust and the auction agent
and will not be liable for any error of judgment made in good faith unless
the auction agent will have been negligent in ascertaining the pertinent
facts.

         The auction agent may rely upon, as evidence of the identities of
the holders of AMPS, the auction agent's registry of holders, the results
of auctions and notices from any Broker-Dealer (or other person, if
permitted by the Trust) with respect to transfers described under "The
Auction--Secondary Market Trading and Transfers of AMPS" in the prospectus
and notices from the Trust. The auction agent is not required to accept any
such notice for an auction unless it is received by the auction agent by
3:00 p.m., New York City time, on the business day preceding such auction.

         The auction agent may terminate its auction agency agreement with
the Trust upon notice to the Trust on a date no earlier than 45 days after
such notice. If the auction agent should resign, the Trust will use its
best efforts to enter into an agreement with a successor auction agent
containing substantially the same terms and conditions as the auction
agency agreement. The Trust may remove the auction agent provided that
prior to such removal the Trust shall have entered into such an agreement
with a successor auction agent.
Broker-Dealers

         The auction agent after each auction for shares of each series of
AMPS will pay to each Broker-Dealer, from funds provided by the Trust, a
service charge at the annual rate of 1/4 of 1% in the case of any auction
immediately preceding a dividend period of less than one year, or a
percentage agreed to by the Trust and the Broker-Dealers in the case of any
auction immediately preceding a dividend period of one year or longer, of
the purchase price of the series of AMPS placed by such Broker-Dealer at
such auction. For the purposes of the preceding sentence, AMPS will be
placed by a Broker-Dealer if such shares were (a) the subject of hold
orders deemed to have been submitted to the auction agent by the
Broker-Dealer and were acquired by such Broker-Dealer for its own account
or were acquired by such Broker-Dealer for its customers who are beneficial
owners or (b) the subject of an order submitted by such Broker-Dealer that
is (i) a submitted bid of an existing holder that resulted in the existing
holder continuing to hold such shares as a result of the auction or (ii) a
submitted bid of a potential holder that resulted in the potential holder
purchasing such shares as a result of the auction or (iii) a valid hold
order.

         The Trust may request the auction agent to terminate one or more
Broker-Dealer agreements at any time, provided that at least one
Broker-Dealer agreement is in effect after such termination.

         The Broker-Dealer agreement provides that a Broker-Dealer (other
than an affiliate of the Trust) may submit orders in auctions for its own
account, unless the Trust notifies all Broker-Dealers that they may no
longer do so, in which case Broker-Dealers may continue to submit hold
orders and sell orders for their own accounts. Any Broker-Dealer that is an
affiliate of the Trust may submit orders in auctions, but only if such
orders are not for its own account. If a Broker-Dealer submits an order for
its own account in any auction, it might have an advantage over other
bidders because it would have knowledge of all orders submitted by it in
that auction; such Broker-Dealer, however, would not have knowledge of
orders submitted by other Broker-Dealers in that auction.

                        DESCRIPTION OF COMMON SHARES

         A description of common shares is contained in the prospectus. 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.

                                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 AMPS, 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 AMPS.

                        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 AMPS
are outstanding, the Trust may not purchase, redeem or otherwise acquire
any of its common shares unless (1) all accrued AMPS 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 AMPS (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 common 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 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 common shares trading at a price equal to their net asset
value. Nevertheless, the fact that the Trust's common 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 AMPS 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 AMPS
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 (the "IRS") 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 AMPS
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 to be taxed 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 among other things: (a) derive at
least 90% of its annual gross income (including tax-exempt interest) from
dividends, interest, payments with respect to certain 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"), and (b) diversify its holdings so that, at the end of
each quarter of its taxable year (i) at least 50% of the market value of
its total assets is represented by cash, cash items, U.S. government
securities, securities of other regulated investment companies, and other
securities, with these other securities limited, with respect to any one
issuer, to an amount not greater in value than 5% 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 market value of the total
assets is invested in the securities of any one issuer (other than U.S.
government securities or 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. In meeting these
requirements of Subchapter M of the Code, the Trust may be restricted in
the utilization of certain of the investment techniques described above and
in the prospectus.

         As a regulated investment company, the Trust generally is not
subject to U.S. 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 its (i) "investment company
taxable income" (which includes, among other items, dividends, taxable
interest, taxable original issue discount and market discount income,
income from securities lending, any 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 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 regular corporate rates on the amount retained. If the
Trust retains any net capital gain, it may designate the retained amount as
an undistributed capital gains dividend 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 their share of such undistributed
long-term capital gain and (ii) will be entitled to credit their
proportionate share of the tax paid by the Trust against their Federal tax
liability, if any, and to claim refunds to the extent the credit exceeds
such liability. 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 gain included in the gross income of such shareholder
less the tax deemed paid by such 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.

         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 federal corporate income tax upon its taxable income for that
year, and distributions to its shareholders would be taxable to such
holders as ordinary income to the extent of the earnings and profits of the
Trust. In addition, a regulated investment company that fails to
distribute, by the close of each calendar year, at least an amount equal to
the sum of (i) 98% of its ordinary taxable income for such year, (ii) 98%
of its capital gain net income (adjusted for certain ordinary losses) for a
one year period generally ending October 31 of such year, and (iii) 100% of
all ordinary income and capital gains for previous years that were not
distributed and on which the Trust paid no federal income tax, is liable
for a nondeductible 4% excise tax on the portion of the undistributed
amount of such income that is less than the required amount for such
distributions. To avoid the imposition of this excise tax, the Trust
intends, to the extent possible, to make the required distributions of its
ordinary taxable income, if any, and its capital gain net income, by the
close of each calendar year.

         Certain of the Trust's investment practices are subject to special
provisions of the Code that, among other things, may defer the use of
certain deductions or losses of the Trust and affect the holding period of
securities held by the Trust and the character of the gains or losses
realized by the Trust. These provisions may also require the Trust to
recognize income or gain without receiving cash with which to make
distributions in the amounts necessary to satisfy the requirements for
maintaining regulated investment company status and for avoiding income and
excise taxes. The Trust will monitor its transactions and may make certain
tax elections in order to mitigate the effect of these rules and prevent
disqualification of the Trust as a regulated investment company.

         The Trust intends to invest a sufficient amount of its assets in
tax-exempt municipal bonds to permit payment of "exempt-interest"
dividends, as defined in the Code, on its common shares and AMPS. Under the
Code, if at the close of each quarter of its taxable year, at least 50% of
the value of the total assets of the Trust consists of municipal bonds, the
Trust will be qualified to pay exempt-interest dividends to its
shareholders. Exempt-interest dividends are dividends or any part thereof
(other than a capital gain dividend) paid by the Trust which are
attributable to interest on municipal bonds and are so designated by the
Trust. Exempt-interest dividends will be exempt from federal income tax,
subject to the possible application of the U.S. federal alternative minimum
tax. Insurance proceeds received by the Trust under any insurance policies
in respect of scheduled interest payments on defaulted municipal bonds, as
described herein, will generally be excludable from gross income under
Section 103(a) of the Code. See "Investment Policies and Techniques" above.
Gains of the Trust that are attributable to accrued market discount on
certain municipal obligations are treated as ordinary income. Distributions
by the Trust of investment company taxable income, if any, will be taxable
to its shareholders as ordinary income whether received in cash or
additional shares. Distributions by the Trust of net capital gain, if any,
are taxable as long-term capital gain, regardless of the length of time the
shareholder has owned common shares or AMPS and whether such distributions
are made in cash or additional shares. The amount of taxable income
allocable to the Trust's AMPS will depend upon the amount of such income
realized by the Trust, but is not generally expected to be significant.
Except for dividends paid on AMPS which include an allocable portion of any
net capital gain or other taxable income, the Trust anticipates that all
other dividends paid on its AMPS will constitute exempt-interest dividends
for U.S. federal income tax purposes. Distributions, if any, in excess of
the Trust's earnings and profits will first reduce the adjusted tax basis
of a shareholder's shares, and after the basis has been reduced to zero,
will constitute capital gains to the shareholder (assuming the shares are
held as a capital asset). As long as the Trust qualifies as a regulated
investment company under the Code, no part of its distributions to
shareholders will qualify for the dividends received deduction for
corporations. The interest on private activity bonds in most instances is
not tax-exempt to a person who is a "substantial user" of a facility
financed by such bonds or a "related person" of such "substantial user." As
a result, the Trust may not be an appropriate investment for shareholders
who are considered either a "substantial user" or a "related person" within
the meaning of the Code. In general, a "substantial user" includes a
non-exempt person who regularly uses a part of such facility in his trade
or business. "Related persons" include certain natural persons, affiliated
corporations, a partnership and its partners and an S corporation and its
shareholders. The foregoing is not a complete description of all of the
provisions of the Code covering the definitions of "substantial user" and
"related person."

         U.S. Federal tax law imposes an alternative minimum tax with
respect to both corporations and individuals. Interest on certain municipal
obligations, such as bonds issued to make loans for housing purposes or to
private entities (but not to certain tax-exempt organizations such as
universities and non-profit hospitals) is included as an item of tax
preference in determining the amount of a taxpayer's alternative minimum
taxable income. To the extent that the Trust receives income from municipal
obligations subject to the U.S. federal alternative minimum tax, a portion
of the dividends paid by it, although otherwise exempt from U.S. federal
income tax, will be taxable to its shareholders to the extent that their
tax liability is determined under the alternative minimum tax. The Trust
will annually supply a report indicating the percentage of the Trust's
income attributable to municipal obligations subject to the alternative
minimum tax. In addition, for certain 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 obligations, and therefore all exempt-interest dividends received
from the Trust, are included in calculating a corporation's adjusted
current earnings. Certain small corporations are not subject to the
alternative minimum tax.

         Tax-exempt income, including exempt-interest dividends paid by the
Trust, is taken into account in calculating the amount of Social Security
and railroad retirement benefits that may be subject to federal income tax.

         The IRS requires that a regulated investment company that has two
or more classes of shares designate to each such class proportionate
amounts of each type of its income for each tax year based upon the
percentage of total dividends distributed to each class for such year. The
Trust intends each year to allocate, to the fullest extent practicable, net
tax-exempt interest, net capital gain and other taxable income, if any,
between its common shares and preferred shares, including the AMPS, in
proportion to the total dividends paid to each class with respect to such
year. To the extent permitted under applicable law, the Trust reserves the
right to make special allocations of income within a class, consistent with
the objectives of the Trust. The Trust may, at its election, notify the
Auction Agent of the amount of any net capital gain or other income taxable
for federal income tax purposes to be included in any dividend on shares of
its AMPS prior to the Auction establishing the Applicable Rate for such
dividend. If the Trust allocates any net capital gain or other taxable
income for U.S. federal income tax purposes to its AMPS without having
given advance notice thereof as described above, the Trust generally will
be required to make payments to owners of its AMPS to which such allocation
was made in order to offset the U.S. federal income tax effect of the
taxable income so allocated as described under "Description of
AMPS--Additional Dividends" in the prospectus.

         If at any time when the Trust's AMPS are outstanding, the Trust
fails to meet the Preferred Shares Basic Maintenance Amount or the
Investment Company Act Preferred Shares Asset Coverage, the Trust will be
required to suspend distributions to holders of its common shares until
such maintenance amount or asset coverage, as the case may be, is restored.
See "Description of AMPS--Dividend and Dividend Periods--Restrictions on
Dividends and Other Distributions" in the prospectus. This may prevent the
Trust from distributing at least an amount equal to the sum of 90% of its
investment company taxable income (determined without regard to the
deduction for dividends paid) and 90% of its net tax-exempt income, and may
therefore jeopardize the Trust's qualification for taxation as a regulated
investment company or cause the Trust to incur a tax liability or a
non-deductible 4% excise tax on the undistributed taxable income (including
net capital gain), or both. Upon failure to meet the Preferred Shares Basic
Maintenance Amount or the Investment Company Act Preferred Shares Asset
Coverage, the Trust will be required to redeem AMPS in order to maintain or
restore such maintenance amount or asset coverage and avoid the adverse
consequences to the Trust and its shareholders of failing to qualify as a
regulated investment company. There can be no assurance, however, that any
such redemption would achieve such objectives.

         The Trust may, at its option, redeem AMPS in whole or in part, and
is required to redeem AMPS to the extent required to maintain the Preferred
Shares Basic Maintenance Amount and the Investment Company Act Preferred
Shares Asset Coverage. Gain or loss, if any, resulting from a redemption of
AMPS will be taxed as gain or loss from the sale or exchange of AMPS under
Section 302 of the Code rather than as a dividend, but only if the
redemption distribution (a) is deemed not to be essentially equivalent to a
dividend, (b) is in complete redemption of an shareholder's interest in the
Trust, (c) is substantially disproportionate with respect to the
shareholder, or (d) with respect to a non-corporate shareholder, is in
partial liquidation of the shareholder's interest in the Trust. For
purposes of (a), (b) and (c) above, the common shares owned by a holder of
AMPS will be taken into account.

         The Code provides that interest on indebtedness incurred or
continued to purchase or carry the Trust's shares to which exempt-interest
dividends are allocated is not deductible. Under rules used by the IRS for
determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase or ownership of
shares may be considered to have been made with borrowed funds even though
such funds are not directly used for the purchase or ownership of such shares.

         Nonresident alien individuals and certain foreign corporations and
other entities ("foreign investors") generally are subject to U.S.
withholding tax at the rate of 30% (or possibly a lower rate provided by an
applicable tax treaty) on distributions of investment company taxable
income (determined without regard to the deduction for dividends paid). To
the extent received or deemed received by foreign investors,
exempt-interest dividends, distributions of net capital gain and gain from
the sale or other disposition of AMPS generally are exempt from federal
income taxation. Different tax consequences may result if the shareholder
is engaged in a trade or business in the United States or, in the case of
an individual, is present in the United States for 183 or more days during
a taxable year and certain other conditions are met.

         Although dividends generally will be treated as distributed when
paid, dividends declared in October, November or December, payable to
shareholders 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 shareholders) on December 31 of the year
declared.

         The sale or other disposition of common shares or AMPS of the
Trust will result in capital gain or loss to shareholders who hold their
shares as capital assets. Generally, a shareholder gain or loss will be
long-term gain or loss if the shares have been held for more than one year.
Present law taxes both long-term and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, short-term capital gains and ordinary income will
currently be taxed at a maximum rate of 38.6% while long-term capital gains
generally will be taxed at a maximum rate of 20% (or 18% for capital assets
that have been held for more than five years and the holding period of
which began after December 31, 2000).*


____________________

*     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.



         However, because of the limitations on itemized deductions and the
deduction for personal exemptions applicable to higher income taxpayers,
the effective rate of tax may be higher in certain circumstances. Losses
realized by a shareholder on the sale or exchange of shares of the Trust
held for six months or less are disallowed to the extent of any
distribution of exempt-interest dividends received with respect to such
shares, and, if not disallowed, such losses are treated as long-term
capital losses to the extent of any distribution of net capital gain
received (or amounts credited as undistributed capital gain) with respect
to such shares. Any loss realized on a sale or exchange of shares of the
Trust will be disallowed to the extent those shares of the Trust are
replaced by other substantially identical shares within a period of 61 days
beginning 30 days before and ending 30 days after the date of disposition
of the original shares. In that event, the basis of the replacement shares
of the Trust will be adjusted to reflect the disallowed loss.

         The Trust is required in certain circumstances to backup
withholding on taxable dividends and certain other payments paid to
non-corporate holders of the Trust's shares who do not furnish the Trust
with 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. Any amounts withheld from payments made to a shareholder
may be refunded or credited against such shareholder's U.S. federal income
tax liability, if any, provided that the required information is furnished
to the IRS.

         The foregoing is a general summary of the provisions of the Code
and the Treasury Regulations in effect as they directly govern the taxation
of the Trust and its shareholders. These provisions are subject to change
by legislative or administrative action, and any such change may be
retroactive. Moreover, the foregoing does not address many of the factors
that may be determinative of whether an investor will be liable for the
alternative minimum tax. Shareholders are advised to consult their own tax
advisers for more detailed information concerning the U.S. federal, state,
local, foreign and other income tax consequences to them of purchasing,
holding and disposing of Trust shares.

                                  EXPERTS

         The Statement of Assets and Liabilities of the Trust as of      , 2002
and statement of operations for the period then ended appearing in this
Statement of Additional Information has been audited by 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.              , located at
             , 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.

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                        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 ,
2002 and the related statements of operations and changes in net assets for
the period from June 24, 2002 (date of inception) to , 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 , 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.


             , 2002


<PAGE>


                    BLACKROCK MUNICIPAL INCOME TRUST II

                    STATEMENT OF ASSETS AND LIABILITIES

                                      , 2002

                              [TO BE INSERTED]


<PAGE>



                     BLACKROCK MUNICIPAL INCOME TRUST II

                           STATEMENT OF OPERATIONS

         For the period June 24, 2002 (date of inception) to     , 2002

                              [TO BE INSERTED]


<PAGE>



                     BLACKROCK MUNICIPAL INCOME TRUST II

                     STATEMENT OF CHANGES IN NET ASSETS

         For the period June 24, 2002 (date of inception) to      , 2002

                              [TO BE INSERTED]



<PAGE>



                    BLACKROCK MUNICIPAL INCOME TRUST II

                       NOTES TO FINANCIAL STATEMENTS

                              [TO BE INSERTED]



<PAGE>



                     BLACKROCK MUNICIPAL INCOME TRUST II

                     STATEMENT OF ASSETS AND LIABILITIES

                                            , 2002

                                 (Unaudited)

                              [TO BE INSERTED]



<PAGE>



                     BLACKROCK MUNICIPAL INCOME TRUST II

                           STATEMENT OF OPERATIONS

        For the period June 24, 2002 (date of inception) to     , 2002

                              [TO BE INSERTED]




<PAGE>



                    BLACKROCK MUNICIPAL INCOME TRUST II

                     STATEMENT OF CHANGES IN NET ASSETS

                                (Unaudited)

                              [TO BE INSERTED]



<PAGE>



                    BLACKROCK MUNICIPAL INCOME TRUST II

                            FINANCIAL HIGHLIGHTS

                                (Unaudited)

                              [TO BE INSERTED]




<PAGE>


                    BLACKROCK MUNICIPAL INCOME TRUST II

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                (Unaudited)

                              [TO BE INSERTED]




<PAGE>



                    BLACKROCK MUNICIPAL INCOME TRUST II

                          PORTFOLIO OF INVESTMENTS

                                                             , 2002

                                (Unaudited)

                              [TO BE INSERTED]



<PAGE>

                                 APPENDIX A

                    BLACKROCK MUNICIPAL INCOME TRUST II
                        STATEMENT OF PREFERENCES OF
                      AUCTION MARKET PREFERRED SHARES
                                  ("AMPS")

                              [TO BE INSERTED]



<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,
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 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
ongoing 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.

<PAGE>

                                   PART C

                             OTHER INFORMATION

Item 24. Financial Statements and Exhibits


(1)   Financial Statements
      Part A--Financial Highlights (unaudited).
      Part B--Report of Independent Accountants.
      Statement of Assets and Liabilities.
      Statement of Operations.
      Financial Statements (Unaudited)
(2)   Exhibits
      (a)        Agreement and Declaration of Trust.(1)
      (b)        By-Laws.(1)
      (c)        Inapplicable.
      (d)(1)     Statement of Preferences of Auction Market Preferred Shares.(3)
      (d)(2)     Form of Specimen Stock Certificate.(3)
      (e)        Dividend Reinvestment Plan.(2)
      (f)        Inapplicable.
      (g)(1)     Investment Management Agreement.(2)
      (g)(2)     Waiver Reliance Letter.(2)
      (g)(3)     Sub-Investment Advisory Agreement.(2)
      (h)        Form of Underwriting Agreement.(3)
      (i)        Deferred Compensation Plan for Independent Trustees.(2)
      (j)        Custodian Agreement.(2)
      (k)(1)     Transfer Agency Agreement.(2)
      (k)(2)     Auction Agency Agreement.(3)
      (k)(3)     Broker-Dealer Agreement.(3)
      (k)(4)     Form of DTC Agreement.(3)
      (l)        Opinion and Consent of Counsel to the Trust.(3)
      (m)        Inapplicable.
      (n)        Consent of Independent Public Accountants.(3)
      (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)(3)     Code of Ethics of J.J.B. Hilliard, W.L. Lyons, Inc.(2)
      (s)        Powers of Attorney(1)


(1)  Previously filed in the initial filing of the Trust's Registration
     Statement on June 24, 2002

(2)  Previously filed with Pre-Effective Amendment No. 2 to the Registration
     Statement of the Common Shares on July 25, 2001.

(3)  To be filed by Amendment.


Item 25. Marketing Arrangements

Reference is made to the Form of Underwriting Agreement for the
Registrant's shares of beneficial interest filed herewith.

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:

Registration fees
Rating fees
Printing (other than certificates) Accounting fees and expenses Legal fees
and expenses Miscellaneous Total


Item 27. Persons Controlled by or under Common Control with the Registrant

None.

Item 28. Number of Holders of Shares

As of July 16, 2002

                                                                     Number of
Title of Class                                                    Record Holders
Common Shares of Beneficial Interest                                     1
AMPS                                                                     0


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, 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 (negligence in the case of Affiliated Indemnitees),
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.

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. Every written obligation, contract, undertaking, instrument,
certificate, Share, other security of the Trust made or issued by the
Trustees or by any officers, employees or agents of the Trust in their
capacity as such, shall contain an appropriate recital to the effect that
the Shareholders, Trustees, officers, employees or agents of the Trust
shall not personally be bound by or liable thereunder, nor shall resort be
had to their private property for the satisfaction of any obligation or
claim thereunder, and appropriate references shall be made therein to this
Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, Shareholders, 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.

5.6 Indemnification of Shareholders. If any Shareholder or former
Shareholder shall be held personally liable solely by reason of its being
or having been a Shareholder and not because of its acts or omissions or
for some other reason, the Shareholder or former Shareholder (or its heirs,
executors, administrators or other legal representatives or in the case of
any entity, its general successor) shall be entitled out of the assets
belonging to the Trust to be held harmless from and indemnified to the
maximum extent permitted by law against all loss and expense arising from
such liability. The Trust shall, upon request by such Shareholder, assume
the defense of any claim made against such Shareholder for any act or
obligation of the Trust and satisfy any judgment thereon from the assets of
the Trust.

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 of the
underwriting agreement to be attached as Exhibit (h).
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 and Dividend
Disbursing 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.

(2) Not applicable

(3) Not applicable

(4) Not applicable

(5) (a) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted form 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 of 1933 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
of 1933, 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.

<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 day of August, 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 day of August, 2002.

        Name                                          Title
*                                    Trustee, President, Chief Executive Officer
Ralph L. Schlosstein                 and Chief Financial Officer
*
Henry Gabbay                         Treasurer
*
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                    Trustee


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


<PAGE>


                             INDEX TO EXHIBITS

NONE


</TEXT>
</DOCUMENT>
