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<SEC-DOCUMENT>0000912057-02-035790.txt : 20020917
<SEC-HEADER>0000912057-02-035790.hdr.sgml : 20020917
<ACCEPTANCE-DATETIME>20020917163320
ACCESSION NUMBER:		0000912057-02-035790
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		8
FILED AS OF DATE:		20020917

FILER:

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

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-97607
		FILM NUMBER:		02766139

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

FILER:

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

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-21126
		FILM NUMBER:		02766140

	BUSINESS ADDRESS:	
		STREET 1:		40 EAST 52ND STREET
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
		BUSINESS PHONE:		2127545300
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>a2088584zn-2a.txt
<DESCRIPTION>N-2/A
<TEXT>
<Page>

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 2002


                                       SECURITIES ACT REGISTRATION NO. 333-97607
                                   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. 2 /X/

                        POST-EFFECTIVE AMENDMENT NO. / /
                                     AND/OR
                          REGISTRATION STATEMENT UNDER

                    THE INVESTMENT COMPANY ACT OF 1940: /X/


                              AMENDMENT NO. 4: /X/

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

                      BLACKROCK MUNICIPAL INCOME TRUST II
        (Exact Name of Registrant as Specified In Declaration of Trust)

                              100 BELLEVUE PARKWAY
                           WILMINGTON, DELAWARE 19809
                    (Address of Principal Executive Offices)
                                 (888) 825-2257
              (Registrant's Telephone Number, including Area Code)

                          ROBERT S. KAPITO, PRESIDENT
                      BLACKROCK MUNICIPAL INCOME TRUST II
                              40 EAST 52ND STREET
                            NEW YORK, NEW YORK 10022
                    (Name and Address of Agent for Service)
                            ------------------------

                                   COPIES TO:

<Table>
<S>                                            <C>
          MICHAEL K. HOFFMAN, ESQ.                     LEONARD B. MACKEY, JR., ESQ.
  Skadden, Arps, Slate, Meagher & Flom LLP                Clifford Chance US LLP
              Four Times Square                               200 Park Avenue
          New York, New York 10036                       New York, New York 10166
</Table>

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

                 APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
                            ------------------------

        CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<Table>
<Caption>
                                                            PROPOSED MAXIMUM     PROPOSED MAXIMUM
                                         AMOUNT BEING      OFFERING PRICE PER   AGGREGATE OFFERING        AMOUNT OF
TITLE OF SECURITIES BEING REGISTERED      REGISTERED              UNIT                 PRICE          REGISTRATION FEE
<S>                                   <C>                  <C>                  <C>                  <C>
AMPS, $.001 par value                       8,222.               $25,000           $205,550,000          $18,911(1)
</Table>


(1)  Previously paid.

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

    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 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.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                             CROSS REFERENCE SHEET
                               PART A--PROSPECTUS

<Table>
<Caption>
ITEMS IN PART A OF FORM N-2                                  LOCATION IN PROSPECTUS
- ---------------------------                         ----------------------------------------
<S>       <C>                                       <C>
Item 1.   Outside Front Cover.....................  Cover page
Item 2.   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, and Other
            Securities............................  Description of Preferred Shares;
                                                    Description of 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
            Additional Information................  Table of Contents for the Statement of
                                                      Additional Information

                        PART B--STATEMENT OF ADDITIONAL INFORMATION
Item 14.  Cover Page..............................  Cover Page
Item 15.  Table of Contents.......................  Cover Page
Item 16.  General Information and History.........  Not Applicable
Item 17.  Investment Objective and Policies.......  Investment Objective and Policies;
                                                      Investment Policies and Techniques;
                                                      other Investment Policies and
                                                      Techniques; Portfolio Transactions
Item 18.  Management..............................  Management of the Trust; Portfolio
                                                      Transactions and Brokerage
Item 19.  Control Persons and Principal Holders of
            Securities............................  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>


<Table>
<S>                                            <C>
PROSPECTUS                                                                  [BLACKROCK LOGO]
</Table>


                                  $205,550,000
                      BLACKROCK MUNICIPAL INCOME TRUST II
         AUCTION MARKET PREFERRED SHARES ("AMPS")-REGISTERED TRADEMARK-
                            2,055 SHARES, SERIES M7
                            2,056 SHARES, SERIES T7
                            2,055 SHARES, SERIES W7
                            2,056 SHARES, SERIES R7

                    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 16. THE MINIMUM PURCHASE AMOUNT OF THE AMPS IS $25,000.
                                ----------------

<Table>
<Caption>
                                                                    PER SHARE            TOTAL
                                                                    ---------         -----------
      <S>                                                           <C>               <C>
      Public Offering Price.......................................   $25,000          $
      Sales Load..................................................   $                $
      Estimated Offering Expenses.................................   $                $
      Proceeds, after expenses, to the Trust(1)...................   $                $
</Table>

(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.

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

    The 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.

<Table>
<S>                                            <C>
- ---------------------------------------------------------------------------------------------
MERRILL LYNCH & CO.                                                               UBS WARBURG
- ---------------------------------------------------------------------------------------------
PRUDENTIAL SECURITIES                                                    SALOMON SMITH BARNEY
- ---------------------------------------------------------------------------------------------
</Table>

               The date of this prospectus is             , 2002.

"AMPS" is a registered service mark of Merrill Lynch & Co., Inc.
<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 September 13,
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 42 of this
prospectus, by calling (888) 825-2257 or by writing to the Trust, or obtain a
copy (and other information regarding the Trust) from the Securities and
Exchange Commission's web site (http://www.sec.gov).

    The 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 2,055 shares of Series M7 Auction Market Preferred
Shares, 2056 shares of Series T7 Auction Market Preferred Shares, 2,055 shares
of Series W7 Auction Market Preferred Shares and 2,056 shares of Series R7
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 M7,         for Series T7,       for Series W7 and         for
Series R7. The initial rate period is from the date of issuance through       ,
2002 for Series M7,       , 2002 for Series T7,       , 2002 for Series W7 and
      , 2002 for Series R7. 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 the 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.

                                       2
<Page>
                               TABLE OF CONTENTS

<Table>
<Caption>
                                                    PAGE
                                                    ----
<S>                                                 <C>
Prospectus Summary................................    4
Financial Highlights (Unaudited)..................    9
The Trust.........................................   10
Use of Proceeds...................................   10
Capitalization (Unaudited)........................   11
Portfolio Composition.............................   12
The Trust's Investments...........................   12
Risks.............................................   16
Management of the Trust...........................   19
Description of AMPS...............................   22
The Auction.......................................   30
Description of Common Shares......................   35
Certain Provisions in the Agreement and
  Declaration of Trust............................   36
Repurchase of Common Shares.......................   37
Tax Matters.......................................   38
Underwriting......................................   40
Custodian, Transfer Agent and Auction Agent.......   41
Legal Opinions....................................   41
Available Information.............................   41
Table of Contents of Statement of Additional
  Information.....................................   42
APPENDIX A Taxable Equivalent Yield Table.........  A-1
</Table>

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

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

    Through and including             , 2002, all dealers effecting transactions
in these securities, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with respect to their
unsold allotment or subscriptions.

                        PRIVACY PRINCIPLES OF THE TRUST

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

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

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

                                       3
<Page>
                               PROSPECTUS SUMMARY

    THIS IS ONLY A SUMMARY. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION
THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR 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>
<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 September 10, 2002, the Trust had 22,758,028
                                                    common shares outstanding and net assets of
                                                    $331,560,747.

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
</Table>

                                       4
<Page>

<Table>
<S>                                                 <C>
                                                    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 2,055 shares of Series M7
                                                    AMPS, 2,056 shares of Series T7 AMPS, 2,055 shares
                                                    of Series W7 AMPS and 2,056 shares of Series R7
                                                    AMPS, each at a purchase price of $25,000 per
                                                    share. The 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:

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

                                                    -  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;

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

                                                    -  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;

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

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

                                                    -  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

                                                    -  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.
</Table>

                                       5
<Page>

<Table>
<S>                                                 <C>
TRADING MARKET....................................  The 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.
</Table>

<Table>
<Caption>
                                       SERIES      FIRST AUCTION DATE    SUBSEQUENT AUCTION DAY
                                     ----------  ----------------------  ----------------------
<S>                                  <C>         <C>                     <C>
                                     M7
                                     T7
                                     W7
                                     R7
</Table>

<Table>
<S>                                                 <C>
DIVIDENDS AND RATE PERIODS........................  The table below shows the dividend rate for the
                                                    initial rate periods on each series of AMPS
                                                    offered in this prospectus. For subsequent rate
                                                    periods, each series of AMPS will pay dividends
                                                    based on a rate set at auctions, normally held
                                                    weekly. In most instances, dividends are also paid
                                                    weekly, on the first business 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 Rate Periods."
</Table>

                                       6
<Page>

<Table>
<S>                                                 <C>
                                                    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. A requested special rate period will not be
                                                    effective unless sufficient clearing bids were
                                                    made in the auction immediately preceding the
                                                    special rate period. In addition, full cumulative
                                                    dividends, any amounts due with respect to
                                                    mandatory redemptions and any additional dividends
                                                    payable prior to such date must be paid in full.
                                                    The Trust must also have received confirmation
                                                    from Moody's and S&P or any substitute rating
                                                    agency that the proposed special rate period will
                                                    not adversely affect such rating agency's
                                                    then-current rating on the AMPS, and the lead
                                                    Broker-Dealers designated by the Trust, Merrill
                                                    Lynch, Pierce, Fenner & Smith Incorporated and UBS
                                                    Warburg LLC, must not have objected to
                                                    declaration of a special rate period. 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 Rate
                                                    Periods--Designation of Special Rate Periods."
</Table>
<Table>
<Caption>
                                                                                                              DIVIDEND
                                                                                    DATE OF                   PAYMENT
                                                                  INITIAL         ACCUMULATION                DATE FOR
                                                                  DIVIDEND         AT INITIAL               INITIAL RATE
                                       SERIES                       RATE             RATE*                    PERIOD*
                                       ------                     --------  ------------------------  ------------------------
                                       <S>                        <C>       <C>                       <C>
                                       M7
                                       T7
                                       W7
                                       R7

<Caption>

                                                                  SUBSEQUENT    NUMBER
                                                                   DIVIDEND     OF DAYS
                                                                   PAYMENT    OF INITIAL
                                       SERIES                        DAY      RATE PERIOD
                                       ------                     ----------  -----------
                                       <S>                        <C>         <C>
                                       M7
                                       T7
                                       W7
                                       R7
</Table>

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

  *  All dates are 2002.

<Table>
<S>                                                 <C>
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
</Table>

                                       7
<Page>

<Table>
<S>                                                 <C>
                                                    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 Rate 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>

                                       8
<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 July 30, 2002 through August 23, 2002. Since the Trust was
recently organized and commenced investment operations on July 30, 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
                                                     JULY 30, 2002(1)
                                                         THROUGH
                                                     AUGUST 23, 2002
                                                    ------------------
<S>                                                 <C>
PER COMMON SHARE OPERATING PERFORMANCE:
  Net asset value, beginning of period(2).........       $  14.33
                                                         --------
  Investment operations:
    Net investment income(3)......................           0.02
    Net realized and unrealized loss on
      investments(3)..............................          (0.01)
                                                         --------
  Net increase from investment operations.........           0.01
                                                         --------
  Capital charges with respect to issuance of:
    Common shares.................................          (0.03)
                                                         --------
  Net asset value, end of period(2)...............       $  14.31
                                                         ========
  Market value, end of period(2)..................       $  15.01
                                                         ========
  TOTAL INVESTMENT RETURN(3)......................           0.07%
                                                         ========
RATIOS TO AVERAGE NET ASSETS OF COMMON
  SHAREHOLDERS:(4)
  Expenses after fee waiver.......................           0.04%
  Expenses before fee waiver......................           0.05%
  Net investment income after fee waiver..........           0.18%
SUPPLEMENTAL DATA:
  Average net assets of common shareholders
    (000).........................................       $307,193
  Portfolio turnover..............................              0%
  Net assets of common shareholders, end of period
    (000).........................................       $307,076
</Table>

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

(1)  Commencement of investment operations. This information includes the intial
     investment by BlackRock Advisors, Inc. Net asset value immediately after
     the closing of the public offering was $14.30. (Note 1).
(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 invesment return does not reflect brokerage commissions. The total
     investment return, which is for less than a full year, is not annualized.
     Past performance is not a guarantee of future results.
(4)  Not annualized.

    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.

                                       9
<Page>
                                   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, in an initial public offering
and commenced its investment operations. On August 27, 2002, the Trust issued an
additional 1,000,000 common shares, and on September 10, 2002, the Trust issued
an additional 300,000 common shares, each pursuant to an overallotment provision
in connection with the initial public offering. 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 September 10, 2002:

<Table>
<Caption>
                                                  AMOUNT HELD BY
                                       AMOUNT    THE TRUST OR FOR      AMOUNT
          TITLE OF CLASS             AUTHORIZED    ITS ACCOUNT      OUTSTANDING
          --------------             ----------  ----------------  --------------
<S>                                  <C>         <C>               <C>
           Common Shares             Unlimited          0            22,758,028
               AMPS                  Unlimited          0                     0
             Series M7                    3316          0                     0
             Series T7                    3316          0                     0
             Series W7                    3316          0                     0
             Series R7                    3316          0                     0
</Table>

                                USE OF PROCEEDS

    The net proceeds of this offering will be approximately $203,177,546 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.

                                       10
<Page>
                           CAPITALIZATION (UNAUDITED)

    The following table sets forth the capitalization of the Trust as of
September 10, 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; 8222 shares issued, as
        adjusted).......................  $    --        205,550,000
      Common shares, $.001 par value per
        share; unlimited shares
        authorized, 22,758,028 shares
        outstanding*....................        22,758        22,758
  Paid-in surplus.......................   325,318,493   322,946,039
  Balance of undistributed net
    investment income...................     1,175,277     1,175,277
        Accumulated net realized
          gain/loss from investment
          transactions..................       --            --
        Net unrealized
          appreciation/depreciation of
          investments...................     5,044,219     5,044,219
        Net assets......................   331,560,747   534,738,293
</Table>

- ---------

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

                                       11
<Page>
                             PORTFOLIO COMPOSITION

    As of September 10, 2002, approximately 100% of the market value of the
Trust's portfolio was invested in long-term municipal securities and
approximately 0% 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 September 10, 2002, based on the highest rating assigned.

<Table>
<Caption>
                                           VALUE
CREDIT RATING                              (000)   PERCENT
- -------------                             -------  -------
<S>                                       <C>      <C>
AAA/Aaa*................................  126,017   38.51%
AA/Aa...................................   31,676    9.68%
A/A.....................................  109,884   33.58%
BBB/Baa.................................   32,331    9.88%
BB/Ba...................................   10,766    3.29%
B/B.....................................   16,558    5.06%
Unrated+................................        0    0.00%
Short-Term..............................        0    0.00%
TOTAL...................................  327,232     100%
</Table>

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

  *  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

                                       12
<Page>
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"

                                       13
<Page>
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.

                                       14
<Page>
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.

                                       15
<Page>
                                     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 dividends
on AMPS, however dividend rates on AMPS would need to greatly exceed the yield
on the Trust's portfolio before the Trust's ability to pay dividends on AMPS
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.

                                       16
<Page>
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,

                                       17
<Page>
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.

                                       18
<Page>
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 names and business addresses 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,

                                       19
<Page>
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.

                                       20
<Page>
    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 nominated for the
same award in several 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 0.55% of the average weekly value of the Trust's
Managed Assets (the "Management Fee"). BlackRock has voluntarily agreed to waive
receipt of a portion of its Management Fee in the amount of 0.15% of the average
weekly value of the Trust's Managed Assets for the first five years of the
Trust's operations (through July 31, 2007), and for a declining amount for an
additional five years (through July 31, 2012). The Trust will also reimburse
BlackRock Advisors for certain expenses BlackRock Advisors incurs in connection
with performing certain services for the Trust. In addition, with the approval
of the board of trustees, a pro rata portion of the salaries, bonuses, health
insurance, retirement benefits and similar employment costs for the time spent
on Trust operations (other than the provision of services required under the
investment management agreement) of all personnel employed by BlackRock Advisors
who devote substantial time to Trust operations may be reimbursed to BlackRock
Advisors. Managed Assets are the total assets of the Trust, which includes any
proceeds from the 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.

                                       21
<Page>
    For the first 10 years of the Trust's operation, BlackRock Advisors has
undertaken to waive its investment advisory fees and expenses payable by the
Trust in the amounts, and for the time periods, set forth below:

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

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

  *  Including net assets attributable to 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 2,055 AMPS, Series M7, 2,056 AMPS, Series T7, 2,055 AMPS, Series W7 and 2,056
AMPS, Series R7. 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 share of AMPS
carries one vote on matters on which AMPS can be voted. The AMPS, when issued,
will be fully paid and non-assessable and have no preemptive, conversion or
cumulative voting rights.

                                       22
<Page>
DIVIDENDS AND RATE 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:

<Table>
<Caption>
SERIES                                              INITIAL RATE PERIOD
- ------                                              -------------------
<S>                                                 <C>
M7                      ..........................
T7                      ..........................
W7                      ..........................
R7                      ..........................
</Table>

    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:

<Table>
<Caption>
                                                            SUBSEQUENT DIVIDEND
                                          INITIAL DIVIDEND     PAYMENT DATES
SERIES                                      PAYMENT DATE          ON EACH
- ------                                    ----------------  -------------------
<S>                                       <C>               <C>
M7                ......................
T7                 .....................
W7                ......................
R7                 .....................
</Table>

    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.

                                       23
<Page>
    The maximum applicable rate for any rate period for a series of AMPS will 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. 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 TABLE

<Table>
<Caption>
                                                                                   APPLICABLE PERCENTAGE TABLE
                             CREDIT RATINGS                               ----------------------------------------------
- ------------------------------------------------------------------------  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:

<Table>
<Caption>
                                     REFERENCE RATE TABLE
- ----------------------------------------------------------------------------------------------
              RATE PERIOD                                     REFERENCE RATE
- ----------------------------------------    --------------------------------------------------
<S>                                         <C>       <C>
28 days or less                                       Greater of:
                                                      -  AA Composite Commercial Paper Rate
                                                      -  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
</Table>

                                       24
<Page>
    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*
- -------------------  ----------------------------------------  ----------------------------------------
<C>                  <S>                                       <C>
  7 days or less     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
</Table>

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

  *  Rates stated on a discount basis

    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:

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

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

    -  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

                                       25
<Page>
       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:

    -  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);

    -  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

    -  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 in certain situations
declare a special rate period of shares of a particular series of AMPS. Prior to
declaring a special rate period, the Trust will give notice to the auction agent
and each Broker-Dealer. The notice will request that the next succeeding rate
period for the series of the 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. In addition, full cumulative dividends, any amounts due
with respect to mandatory redemptions

                                       26
<Page>
and any additional dividends payable prior to such date must be paid in full or
deposited with the auction agent. The Trust must also have received confirmation
from Moody's and S&P or any substitute rating agency that the proposed special
rate period will not adversely affect such rating agency's then-current rating
on the AMPS, and the lead Broker-Dealers designated by the Trust, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and UBS Warburg LLC, must not have objected
to declaration of a special rate period.

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:

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

                                       27
<Page>
    -  the merger or consolidation of the Trust into or with any other business
       trust or corporation; or

    -  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 September 10, 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 $2,372,454, would have been computed as follows:

<Table>
<S>                             <C><C>          <C><C>
  Value of Trust assets less
         liabilities
   not constituting senior
          securities            =  534,738,293  =  260%
- ------------------------------
Senior securities representing     205,550,000
         indebtedness
             plus
   liquidation value of the
       preferred shares
</Table>

    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.

                                       28
<Page>
    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

                                       29
<Page>
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
rate period after the initial rate period will be the rate

                                       30
<Page>
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, Deutsche Bank Trust Company
Americas) 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

                                       31
<Page>
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

                                       32
<Page>
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:

    -  (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

    -  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,

                                       33
<Page>
(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 M7 will normally be held every Monday, and each
subsequent dividend period will normally begin on the following Tuesday. The
auctions for Series T7 will normally be held every Tuesday, and each subsequent
dividend period will normally begin on the following Wednesday. The auctions for
Series W7 will normally be held every Wednesday, and each subsequent dividend
period will normally begin on the following Thursday. The auctions for
Series R7 will normally be held every Thursday, and each subsequent dividend
period will normally begin on the following Friday.

    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.

                                       34
<Page>
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 rate 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
rate 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 rate 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:

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

    -  to a Broker-Dealer; or

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

    -  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

    -  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".

                                       35
<Page>
          CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST

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

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

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

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

    -  the issuance of any securities of the Trust to any Principal Shareholder
       for cash, except pursuant to any automatic dividend reinvestment plan;

    -  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

    -  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

                                       36
<Page>
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.

                                       37
<Page>
                                  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).*

    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

- -------------------
*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.

                                       38
<Page>
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.

                                       39
<Page>
                                  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.

<Table>
<Caption>
                         NUMBER OF SHARES
             -----------------------------------------
              SERIES     SERIES     SERIES     SERIES
UNDERWRITER     M7         T7         W7         R7
- -----------  --------   --------   --------   --------
<S>          <C>        <C>        <C>        <C>
Merrill
Lynch,
Pierce,
Fenner &
Smith
          Incorporated
UBS Warburg
LLC
Prudential
Securities
Incorporated
Salomon
Smith
Barney,
Inc.
              ------     ------     ------     ------
           Total.....
              ======     ======     ======     ======
</Table>

    The purchase agreement provides that the obligations of the Underwriters to
purchase the shares included in this offering are subject to the approval of
certain legal matters by counsel and to certain other conditions, including,
without limitation, the receipt by the Underwriters of customary closing
certificates, opinions and other documents and the receipt by the Trust of Aaa
and AAA ratings on the AMPS by Moody's and S&P, respectively, as of the time of
the offering. 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, as amended, or to contribute payments the Underwriters may be
required to make for any of those liabilities.

    The Underwriters propose to initially offer some of the 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 of the
AMPS. 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 initial public offering on or before         , 2002.

    The Trust anticipates that the Underwriters may from time to time act as
brokers or dealers in connection with the execution of the Trust's portfolio
transactions and that the Underwriters, or their affiliates, may act as a
counterparty in connection with the interest rate transactions described above
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, and perform services for, the Trust.

    The Trust anticipates that the Underwriters or 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 Merrill Lynch, Pierce, Fenner & Smith
Incorporated is 4 World Financial Center, New York, New York, 10080. The
principal business address of UBS Warburg LLC is 299 Park Avenue, New York, New
York 10080.

    The settlement date for the purchase of the AMPS will be September 19, 2002,
as agreed upon by the Underwriters, the Trust and BlackRock Advisors pursuant to
Rule 15c6-1 under the Securities Exchange Act of 1934.

                                       40
<Page>
                  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.

    Deutsche Bank Trust Company Americas, 100 Plaza One, Jersey City, New Jersey
07311, 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 Clifford Chance US LLP. Clifford Chance US
LLP 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.

                                       41
<Page>
            TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

<Table>
<Caption>
                                                    PAGE
                                                    ----
<S>                                                 <C>
Use of Proceeds...................................   B-2
Investment Objective and Policies.................   B-2
Investment Policies and Techniques................   B-4
Other Investment Policies and Techniques..........  B-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-31
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
</Table>

                                       42
<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:

                 2002-2003 FEDERAL TAXABLE VS. TAX-FREE YIELDS

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

                                      A-1
<Page>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                  $205,550,000

                                   BLACKROCK
                           MUNICIPAL INCOME TRUST II

         AUCTION MARKET PREFERRED SHARES ("AMPS")-REGISTERED TRADEMARK-

<Table>
<S>                          <C>    <C>      <C>       <C>
                             2,055  SHARES,  SERIES M7
                             2,056  SHARES,  SERIES T7
                             2,055  SHARES,  SERIES W7
                             2,056  SHARES,  SERIES R7
</Table>

                    LIQUIDATION PREFERENCE $25,000 PER SHARE

                               ------------------
                                   PROSPECTUS
                               ------------------

                              MERRILL LYNCH & CO.
                                  UBS WARBURG
                             PRUDENTIAL SECURITIES
                              SALOMON SMITH BARNEY

                               SEPTEMBER 13, 2002

"AMPS" is a registered service mark of Merrill Lynch & Co., Inc.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Page>
                       BLACKROCK MUNICIPAL INCOMETRUST II

                      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

<Table>
<Caption>
                                                    PAGE
                                                    ----
<S>                                                 <C>
Use of Proceeds...................................   B-2
Investment Objective and Policies.................   B-2
Investment Policies and Techniques................   B-4
Other Investment Policies and Techniques..........  B-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-31
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
</Table>

        THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED           , 2002.

                                      B-1
<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;

                                      B-2
<Page>
        (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.

                                      B-3
<Page>
    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.

                                      B-4
<Page>
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

                                      B-5
<Page>
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

                                      B-6
<Page>
    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.

                                      B-7
<Page>
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.

                                      B-8
<Page>
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.

                                      B-9
<Page>
    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

                                      B-10
<Page>
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.

                                      B-11
<Page>
                    OTHER INVESTMENT POLICIES AND TECHNIQUES

RESTRICTED AND ILLIQUID SECURITIES

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

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES

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

BORROWING

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

                                      B-12
<Page>
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

                                      B-13
<Page>
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.

                                      B-14
<Page>
    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

                                      B-15
<Page>
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

                                      B-16
<Page>
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
                           TERM OF                                       OVERSEEN BY
NAME, ADDRESS, AGE       OFFICE AND    PRINCIPAL OCCUPATION DURING THE   TRUSTEE OR
AND POSITION(S)           LENGTH OF       PAST FIVE YEARS AND OTHER      NOMINEE FOR        OTHER DIRECTORSHIPS
HELD WITH REGISTRANT     TIME SERVED            AFFILIATIONS               TRUSTEE            HELD BY TRUSTEE
- --------------------    -------------  -------------------------------  -------------  ------------------------------
<S>                     <C>            <C>                              <C>            <C>
INDEPENDENT
TRUSTEES:
Andrew F. Brimmer       3 years(1)(2)  President of Brimmer &                40        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: 76                                financial consulting firm. Lead                 the Board of Governors of the
Trustee                                Director and Chairman of the                    Federal Reserve System.
                                       Audit Committee of each of the                  Formerly Director of AirBorne
                                       closed-end Trusts in which                      Express, BankAmerica
                                       BlackRock Advisors Inc. acts as                 Corporation (Bank of America),
                                       investment advisor.                             Bell South Corporation,
                                                                                       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).
</Table>

                                      B-17
<Page>
<Table>
<Caption>
                                                                          NUMBER OF
                                                                        PORTFOLIOS IN
                                                                        FUND COMPLEX
                           TERM OF                                       OVERSEEN BY
NAME, ADDRESS, AGE       OFFICE AND    PRINCIPAL OCCUPATION DURING THE   TRUSTEE OR
AND POSITION(S)           LENGTH OF       PAST FIVE YEARS AND OTHER      NOMINEE FOR        OTHER DIRECTORSHIPS
HELD WITH REGISTRANT     TIME SERVED            AFFILIATIONS               TRUSTEE            HELD BY TRUSTEE
- --------------------    -------------  -------------------------------  -------------  ------------------------------
<S>                     <C>            <C>                              <C>            <C>
Richard E. Cavanagh     3 years(1)(2)  President and Chief Executive         40        Trustee Emeritus, Wesleyan
P.O. Box 4546                          Officer of The Conference                       University, Trustee: Drucker
New York, NY 10163                     Board, Inc., a leading global                   Foundation, Airplanes Group,
Age: 56                                business membership                             Aircraft Finance Trust (AFT)
Trustee                                organization, from                              and Education Testing Service
                                       1995-present. Former Executive                  (ETS). Director, Arch
                                       Dean of the John F. Kennedy                     Chemicals, Fremont Group and
                                       School of Government at Harvard                 The Guardian Life Insurance
                                       University from 1988-1995.                      Company of America.
                                       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           40        Former Director of ISFA (the
P.O. Box 4546                          President and Chief Executive                   owner of INVEST, a national
New York, NY 10163                     Officer of Empire Federal                       securities brokerage service
Age: 65                                Savings Bank of America and                     designed for banks and thrift
Trustee                                Banc PLUS Savings Association,                  institutions).
                                       former Chairman of the Board,
                                       President and Chief Executive
                                       Officer of Northeast Savings.
Frank J. Fabozzi        3 years(1)(2)  Consultant. Editor of THE             40        Director, Guardian Mutual
P.O. Box 4546                          JOURNAL OF PORTFOLIO MANAGEMENT                 Funds Group.
New York, NY 10163                     and Adjunct Professor of
Age: 54                                Finance at the School of
Trustee                                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.          40        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.
Age: 73                                Acting Dean of The School of
Trustee                                Business, Hong Kong University
                                       of Science and Technology
                                       1990-1993. from 1978 to
                                       September 1993, Dean of The
                                       John E. Anderson Graduate
                                       School of Management,
                                       University of California.
</Table>

                                      B-18
<Page>
<Table>
<Caption>
                                                                          NUMBER OF
                                                                        PORTFOLIOS IN
                                                                        FUND COMPLEX
                           TERM OF                                       OVERSEEN BY
NAME, ADDRESS, AGE       OFFICE AND    PRINCIPAL OCCUPATION DURING THE   TRUSTEE OR
AND POSITION(S)           LENGTH OF       PAST FIVE YEARS AND OTHER      NOMINEE FOR        OTHER DIRECTORSHIPS
HELD WITH REGISTRANT     TIME SERVED            AFFILIATIONS               TRUSTEE            HELD BY TRUSTEE
- --------------------    -------------  -------------------------------  -------------  ------------------------------
<S>                     <C>            <C>                              <C>            <C>
Walter F. Mondale       3 years(1)(2)  Partner, Dorsey & Whitney, a          40        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
Robert S. Kapito                       Vice Chairman of                                Mr. Kapito currently serves as
Age: 45                                BlackRock, Inc., is Head of the                 President of the Board of
Trustee and President                  Portfolio Management Group, a                   Directors of Periwinkle
                                       member of the Management                        National Theatre, a national
                                       Committee, the Investment                       non-profit effort to help
                                       Strategy Group, the Fixed                       disadvantaged youth, and
                                       Income and Global Equity                        Chairman of the Hope &
                                       Operating Committees and the                    Heroes/Babies & Children's
                                       Equity Investment Strategy                      Cancer Fund.
                                       Group. Formerly, Vice President
                                       of the First Boston
                                       Corporation, head of its
                                       Mortgage Capital Markets Group.
                                       Currently, President and
                                       Director of each of the
                                       closed-end Trusts which
                                       BlackRock Advisors, Inc. acts
                                       as investment advisor.
Ralph L. Schlosstein*   3 years        Director since 1999 and               40        Chairman and President of the
Age: 51                                President of BlackRock, Inc.                    BlackRock Provident
Chairman                               since its formation in 1998 and                 Institutional Funds. Director
                                       of BlackRock, Inc.'s                            of several of BlackRock's
                                       predecessor entities since                      alternative investment
                                       1988. Member of the Management                  vehicles. Currently, a Member
                                       Committee and Investment                        of the Visiting Board of
                                       Strategy Group of                               Overseers of the John F.
                                       BlackRock, Inc. Formerly,                       Kennedy School of Government
                                       Managing Director of Lehman                     at Harvard University, the
                                       Brothers, Inc. and Co-head of                   Financial Institutions Center
                                       its Mortgage and Savings                        Board of the Wharton School of
                                       Institutions Group. Currently,                  the University of
                                       Chairman and Director of each                   Pennsylvania, a trustee of
                                       of the closed-end Trusts in                     Trinity School in New York
                                       which BlackRock Advisors, Inc.                  City and a Trustee of New
                                       acts as investment advisor.                     Visions for Public Education
                                                                                       in New York Council. Formerly,
                                                                                       a Director of Pulte
                                                                                       Corporation and a Member of
                                                                                       Fannie Mae's Advisory.
</Table>

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

(1)  After a Trustee's initial term, each Trustee is expected to serve a three
     year term concurrent with the class of trustees for which he serves:
     -- Messrs. Cavanagh and La Force, as Class I trustees, are expected to
     stand for re-election at the Trust's 2003 annual meeting of shareholders
     -- Messrs. Schlosstein, Fabozzi and Mondale, as Class II trustees, are
     expected to stand for re- election at the Trust's 2004 annual meeting of
       shareholders
     -- Messrs. Kapito, 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.

                                      B-19
<Page>

<Table>
<Caption>
                                            PRINCIPAL OCCUPATION DURING THE PAST
NAME AND AGE                 TITLE           FIVE YEARS AND OTHER AFFILIATIONS
- ------------          --------------------  ------------------------------------
<S>                   <C>                   <C>
OFFICERS:
Anne F. Ackerley           Secretary        Managing Director of
Age: 40                                     BlackRock, Inc. since 2000. Formerly
                                            First Vice President and Chief
                                            Operating Officer, Mergers and
                                            Acquisition Group at Merrill
                                            Lynch & Co. from 1997 to 2000; First
                                            Vice President and Chief Operating
                                            Officer, Public Finance Group at
                                            Merrill Lynch & Co. from 1995 to
                                            1997; First Vice President, Emerging
                                            Markets Fixed Income Research at
                                            Merrill Lynch & Co. prior thereto.
Henry Gabbay               Treasurer        Managing Director of
Age: 54                                     BlackRock, Inc. and its predecessor
                                            entities.
Kevin Klingert           Vice President     Managing Director of
Age: 39                                     BlackRock, Inc. and its predecessor
                                            entities.
James Kong            Assistant Treasurer   Managing Director of
Age: 41                                     BlackRock, Inc. and its predecessor
                                            entities.
Richard Shea, Esq.     Vice President/Tax   Managing Director of
Age: 42                                     BlackRock, Inc. since 2000; Chief
                                            Operating 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
                                          DOLLAR RANGE OF EQUITY    IN ALL REGISTERED INVESTMENT COMPANIES
                                            SECURITIES IN THE         OVERSEEN BY DIRECTORS IN THE FAMILY
NAME OF DIRECTOR                                 TRUST(*)                   INVESTMENT COMPANIES(*)
- ----------------                          ----------------------  -------------------------------------------
<S>                                       <C>                     <C>
Andrew F. Brimmer.......................         $      0                         $1-$10,000
Richard E. Cavanagh.....................         $      0                      $50,001-$100,000
Kent Dixon..............................         $      0                        over $100,000
Frank J. Fabozzi........................         $      0                         $1-$10,000
James Clayburn La Force, Jr.............         $      0                      $50,001-$100,000
Robert S. Kapito........................         $      0                        over $100,000
Walter F. Mondale.......................         $      0                      $50,001-$100,000
Ralph L. Schlosstein....................         $      0                      $50,001-$100,000
</Table>

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

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

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

                                      B-20
<Page>
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
                                                                             TRUST AND FUND COMPLEX PAID
NAME OF BOARD MEMBER                      ESTIMATED COMPENSATION FROM TRUST      TO BOARD MEMBER(1)
- --------------------                      ---------------------------------  ---------------------------
<S>                                       <C>                                <C>
Andrew F. Brimmer.......................               $2,000(2)                      $195,000(3),(4),(5)
Richard E. Cavanagh.....................               $2,000(2)                      $160,000(4)
Kent Dixon..............................               $2,000(2)                      $160,000(4)
Frank J. Fabozzi........................               $2,000(2)                      $160,000(4)
James Clayburn La Force, Jr.............               $2,000(2)                      $160,000(4)
Walter F. Mondale.......................               $2,000(2)                      $160,000(4)
</Table>

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

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

                                      B-21
<Page>
    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

                                      B-22
<Page>
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

                                      B-23
<Page>
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 Deutsche Bank
Trust Company Americas, 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, Deutsche Bank Trust Company Americas 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

                                      B-24
<Page>
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

                                      B-25
<Page>
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

                                      B-26
<Page>
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

                                      B-27
<Page>
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

                                      B-28
<Page>
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

                                      B-29
<Page>
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

                                      B-30
<Page>
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).*

    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 July 16, 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

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

                                      B-31
<Page>
and auditing. Deloitte & Touche LLP, located at 200 Berkeley Street, Boston,
Massachusetts 02116, provides accounting and auditing services to the Trust.

                             ADDITIONAL INFORMATION

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

                                      B-32
<Page>
                         PAGE INTENTIONALLY LEFT BLANK.

                                      C-1
<Page>
                         PAGE INTENTIONALLY LEFT BLANK.

                                      D-1
<Page>
                         PAGE INTENTIONALLY LEFT BLANK.

                                      E-1
<Page>
                          INDEPENDENT AUDITORS' REPORT

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

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

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

    In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Trust at July 16, 2002 and the results
of its operations and changes in its net assets for the period then ended, in
conformity with accounting principles generally accepted in the United States of
America.

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

                                      F-1
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                      STATEMENT OF ASSETS AND LIABILITIES
                                 JULY 16, 2002

<Table>
<S>                                       <C>
ASSETS:
Cash....................................  $    115,001
LIABILITIES:
Payable for organization costs..........        15,000
                                          ------------
Net Assets..............................  $    100,001
                                          ============
NET ASSETS WERE COMPRISED OF:
  Common stock at par (Note 1)..........  $          8
  Paid-in capital in excess of par......       114,993
                                          ------------
                                               115,001
  Undistributed net investment loss.....       (15,000)
                                          ------------
Net assets, July 16, 2002...............  $    100,001
                                          ============
NET ASSET VALUE PER SHARE:
Equivalent to 8,028 shares of common
  stock issued and outstanding, par
  value $0.001, unlimited shares
  authorized............................  $      12.46
                                          ============
</Table>

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

<Table>
<S>                                       <C>
Investment Income.......................  $         --
Expenses
  Organization expenses.................        15,000
                                          ------------
Net investment loss.....................  $    (15,000)
                                          ============
</Table>

                                      F-2
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                       STATEMENT OF CHANGES IN NET ASSETS
       FOR THE PERIOD JUNE 21, 2002 (DATE OF INCEPTION) TO JULY 16, 2002

<Table>
<S>                                  <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
  Net Investment loss..............  $    (15,000)
                                     ------------
  Net decrease in net assets
    resulting from operations......       (15,000)
                                     ------------
Capital Stock Transactions
  Net proceeds from the issuance of
    common shares..................       115,001
                                     ------------
    Total increase.................       100,001
                                     ------------
NET ASSETS
Beginning of period................            --
                                     ------------
End of period......................  $    100,001
                                     ============
</Table>

                      BLACKROCK MUNICIPAL INCOME TRUST II
                         NOTES TO FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

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

NOTE 2. AGREEMENTS

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

NOTE 3. ORGANIZATION EXPENSES AND OFFERING COSTS

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

NOTE 4. CASH & CASH EQUIVALENTS

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

                                      F-3
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                      STATEMENT OF ASSETS AND LIABILITIES
                          AUGUST 23, 2002 (UNAUDITED)

<Table>
<S>                                  <C>
ASSETS

Investments, at value (cost
  $397,809,011) (Note 1)...........  $397,564,924
Cash...............................       375,285
Interest receivable................     2,735,259
                                     ------------
                                      400,675,468
                                     ------------
LIABILITIES
Payable for investments
  purchased........................    92,849,479
Investment advisory fee payable
  (Note 2).........................        77,439
Other accrued expenses.............       672,288
                                     ------------
                                       93,599,206
                                     ------------
NET ASSETS.........................  $307,076,262
                                     ============
Net assets were comprised of:
  Common shares of beneficial
    interest:
    Par value (Note 4).............  $     21,458
    Paid in capital in excess of
      par..........................   306,736,293
                                     ------------
                                      306,757,751
                                     ------------
Undistributed net investment income
  (Note 1).........................       562,598
Net unrealized depreciation (Note
  1)...............................      (244,087)
                                     ------------
Net assets, August 23, 2002........  $307,076,262
                                     ============
Net asset value per common share of
  beneficial interest:
  ($307,076,262/21,458,028) common
    shares of beneficial interest
    issued and outstanding)........        $14.31
                                     ============
</Table>

                       See Notes to Financial Statements

                                      F-4
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                            STATEMENT OF OPERATIONS
          FOR THE PERIOD JULY 30, 2002* TO AUGUST 23, 2002 (UNAUDITED)

<Table>
<S>                                  <C>
NET INVESTMENT INCOME

Income
  Interest (Note 1)................  $  690,549
                                     ----------
Expenses
  Investment advisory..............     115,724
  Organization Cost................      15,000
  Independent accountants..........       8,211
  Reports to shareholders..........       6,297
  Trustees.........................       2,778
  Transfer agent...................       2,500
  Registration.....................       2,157
  Legal............................       1,712
  Custodian........................         206
  Miscellaneous....................       4,927
                                     ----------
    Total expenses.................     159,512
Less fees waived by Advisor (Note
  2)...............................     (31,561)
                                     ----------
Net expenses.......................     127,951
                                     ----------
Net investment income..............     562,598
                                     ----------
Net Change in Unrealized
  Depreciation on Investments......    (244,087)
                                     ----------
NET INCREASE IN NET ASSETS
  RESULTING FROM OPERATIONS........  $  318,511
                                     ==========
</Table>

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

  *  Commencement of investment operations (Note 1).

                       See Notes to Financial Statements

                                      F-5
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                       STATEMENT OF CHANGES IN NET ASSETS
                                  (UNAUDITED)

<Table>
<Caption>
                                                      FOR THE PERIOD
                                                      JULY 30, 2002*
                                                         THROUGH
                                                     AUGUST 23, 2002
                                                    ------------------
<S>                                                 <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
  Net investment income...........................     $    562,598
  Net change in unrealized depreciation on
    investments...................................         (244,087)
                                                       ------------
    Net increase in net assets resulting from
      operations..................................          318,511
                                                       ------------
CAPITAL SHARE TRANSACTIONS:
  Net proceeds from the issuance of common
    shares........................................      306,757,751
                                                       ------------
    Total increase................................      307,076,262
                                                       ------------
NET ASSETS
Beginning of period...............................               --
                                                       ------------
End of period (including undistributed net
  investment income of $562,598)..................     $307,076,262
                                                       ============
</Table>

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

  *  Commencement of investment operations (Note 1).

                       See Notes to Financial Statements

                                      F-6
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                              FINANCIAL HIGHLIGHTS
                                  (UNAUDITED)

<Table>
<Caption>
                                                      FOR THE PERIOD
                                                     JULY 30, 2002(1)
                                                         THROUGH
                                                     AUGUST 23, 2002
                                                    ------------------
<S>                                                 <C>
PER COMMON SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(2)...........       $  14.33
                                                         --------
Investment operations:
  Net investment income(3)........................           0.02
  Net realized and unrealized loss on
    investments(3)................................          (0.01)
                                                         --------
Net decrease from investment operations...........           0.01
                                                         --------
Capital charges with respect to issuance of:
  Common shares...................................          (0.03)
                                                         --------
Net asset value, end of period(2).................       $  14.31
                                                         ========
Market value, end of period(2)....................       $  15.01
                                                         ========
TOTAL INVESTMENT RETURN(3)........................           0.07%
                                                         ========
RATIOS TO AVERAGE NET ASSETS OF COMMON
  SHAREHOLDERS:(4)
Expenses after fee waiver.........................           0.04%
Expenses before fee waiver........................           0.05%
Net investment income after fee waiver............           0.18%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (000)...       $307,193
Portfolio turnover................................              0%
Net assets of common shareholders, end of period
  (000)...........................................       $307,076
</Table>

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

(1)  Commencement of investment operations. This information includes the intial
     investment by BlackRock Advisors, Inc. Net asset value immediately after
     the closing of the public offering was $14.30. (Note 1)
(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 invesment return does not reflect brokerage commissions. The total
     investment return, which is for less than a full year, is not annualized.
     Past performance is not a guarantee of future results.
(4)  Not annualized.

    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 periods 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.

                       See Notes to Financial Statements

                                      F-7
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 1. ORGANIZATION & ACCOUNTING POLICIES

    The BlackRock Municipal Income Trust II (the "Trust") was organized as a
Delaware business trust on June 21, 2002, and is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940. The Trust had no other transactions other than when it sold 8,028 common
shares for $115,001 ($14.325 per share) to BlackRock Advisors, Inc., until
investment operations commenced on July 30, 2002. The Trust's investment
objective is to provide current income exempt from regular Federal income tax.
The ability of issuers of debt securities held by the Trust to meet their
obligations may be affected by economic developments in certain states, a
specific industry or region. No assurance can be given that the Trust's
investment objective will be achieved.

    The following is a summary of significant accounting policies followed by
the Trust.

SECURITIES VALUATION: Municipal securities (including commitments to purchase
such securities on a "when-issued" basis) are valued on the basis of prices
provided by dealers or pricing services selected under the supervision of the
Trust's Trustees. In determining the value of a particular security, pricing
services may use certain information with respect to transactions in such
securities, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities. Short-term investments
may be valued at amortized cost. Any securities or other assets for which such
current market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the general
supervision and responsibility of the Trust's Board of Trustees.

SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on trade date. Realized and unrealized gains and losses are calculated
on the identified cost basis. The Trust also records interest income on an
accrual basis and amortizes premium and accretes discount to interest income on
securities purchased using the interest method.

FEDERAL INCOME TAXES: It is the Trust's intention to elect to be treated as a
regulated investment company under the Internal Revenue Code and to distribute
sufficient net income to shareholders. For this reason and because substantially
all of the Trust's gross income consists of tax-exempt interest, no Federal
income tax provision is required.

DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and
distributions to common shareholders monthly from net investment income, net
realized short-term capital gains and other sources, if necessary. Net long-term
capital gains, if any, in excess of loss carryforwards may be distributed
annually. Dividends and distributions are recorded on the ex-dividend date.

ESTIMATES: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

DEFERRED COMPENSATION PLAN: Under a deferred compensation plan approved by the
Board of Trustees on July 12, 2002, non-interested Trustees may elect to defer
receipt of all or a portion of their annual compensation.

                                      F-8
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (UNAUDITED) (CONTINUED)

    Deferred amounts earn a return as though equivalent dollar amounts had been
invested in common shares of other BlackRock Trusts selected by the Trustees.
This has the same economic effect for the Trustees as if the Trustees had
invested the deferred amounts in such other BlackRock Trusts.

    The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Trust. The
Trust may, however, elect to invest in common shares of those Trusts selected by
the Trustees in order to match its deferred compensation obligations.

NOTE 2. AGREEMENTS

    The Trust has an Investment Advisory Agreement with BlackRock Advisors, Inc.
(the "Advisor"), a wholly owned subsidiary of BlackRock, Inc. BlackRock
Financial Management, Inc., a wholly owned subsidiary of BlackRock Inc., serves
as sub-advisor to the Trust. BlackRock, Inc. is an indirect majority owned
subsidiary of PNC Financial Services Group, Inc. The investment management
agreement covers both investment advisory and administration services.

    The investment advisory fee paid to the Advisor is computed weekly and
payable monthly at an annual rate of 0.55% of the Trust's average weekly managed
assets. "Managed assets" means the total assets of the Trust (including any
assets attributable to any preferred shares that may be outstanding) minus the
sum of accrued liabilites (other than debt representing financial leverage). The
Advisor has voluntarily agreed to waive receipt of a portion of the investment
advisory fee or other expenses of the Trust in the amount of 0.15% of average
weekly managed assets for the first 5 years of the Trust's operations, 0.10% in
year 6, 0.10% in year 7, 0.05% in year 8, 0.05% in year 9 and 0.05% in year 10.

    Pursuant to the agreements, the Advisor provides continuous supervision of
the investment portfolio, pays the compensation of officers of the Trust who are
affiliated persons of the Advisor, occupancy and certain clerical and accounting
costs of the Trust. The Trust bears all other costs and expenses, which include
reimbursements to the Advisor for certain operational support services provided
to the Trust.

NOTE 3. PORTFOLIO SECURITIES

    Purchases and sales of investment securities, other than short-term
investments, for the period ended August 23, 2002, aggregated $276,844,012 and
$0, respectively.

    The Federal income tax basis of the Trust's investments at August 23, 2002,
was $397,809,011 and accordingly, net unrealized depreciation was $244,087
(gross unrealized appreciation -- $1,757,441 gross unrealized depreciation --
$2,001,528).

NOTE 4. CAPITAL

    There are an unlimited number of $.001 par value common shares of beneficial
interest authorized. Of the 21,458,028 common shares outstanding at August 23,
2002, the Advisor owned 8,028 shares.

                                      F-9
<Page>
    Transactions in common shares of beneficial interest for the period
July 30, 2002 (commencement of investment operations) to August 23, 2002, were
as follows:

<Table>
<S>                                                 <C>
Shares Issued in connection with initial public
  offering........................................  21,458,028
                                                    ----------
Net increase in shares outstanding................  21,458,028
                                                    ==========
</Table>

    Offering costs of $628,500 incurred in connection with the Trust's offering
of common shares have been charged to paid-in capital in excess of par of the
common shares.

                                      F-10
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                            PORTFOLIO OF INVESTMENTS
                          AUGUST 23, 2002 (UNAUDITED)

<Table>
<Caption>
             PRINCIPAL                                   OPTION CALL
  RATING*     AMOUNT                                     PROVISIONS+       VALUE
(UNAUDITED)    (000)             DESCRIPTION             (UNAUDITED)      (NOTE 1)
<S>          <C>        <C>                             <C>             <C>

- ------------------------------------------------------------------------------------
                        LONG-TERM INVESTMENTS -- 90.1%
                        CALIFORNIA -- 3.7%
BB            $13,500   Los Angeles Regl. Arpt. Impvt.
                          Corp. Lease Rev., Amer.
                          Airlines Inc., Ser. C,
                          7.50%, 12/01/24.............     12/12 @ 102  $ 11,250,630
                                                                        ------------
                        COLORADO -- 1.3%
AAA             4,000   Northwest Pkwy. Pub. Hwy.
                          Auth. Rev., Ser. A, 5.25%,
                          6/15/41, FSA................     06/11 @ 102     4,014,320
                                                                        ------------
                        DISTRICT OF COLUMBIA -- 5.0%
A1             15,000   Dist. Columbia Tobacco
                          Settlement Fin. Corp.,
                          6.75%, 5/15/40..............     05/11 @ 101    15,333,000
                                                                        ------------
                        FLORIDA -- 2.5%
AA              5,000   Jacksonville Econ. Dev. Comm.
                          Hlth. Facs. Rev., Mayo
                          Clinic, Ser. C, 5.50%,
                          11/15/36....................     11/11 @ 101     5,116,750
A               2,650   Leesburg Hosp. Rev., Leesburg
                          Regl. Med Ctr. Proj., 5.50%,
                          7/01/32.....................     07/12 @ 100     2,627,766
                                                                        ------------
                                                                           7,744,516
                                                                        ------------
                        ILLINOIS -- 13.7%
AAA             4,000   Bolingbrook, GO, Ser. A,
                          5.375%, 1/01/38, FGIC.......     01/12 @ 100     4,063,760
A-              5,000   Illinois Dev. Fin. Auth. Hosp.
                          Rev., Adventist Hlth. Sys./
                          Sunbelt Obl., 5.65%,
                          11/15/24....................     11/09 @ 101     4,974,450
AAA            15,000   Illinois Sports Facs. Auth.,
                          St. Tax Supported Rev., Zero
                          Coupon, 6/15/30, AMBAC......     06/15 @ 101     9,888,000
                        Met. Pier and Exposition Auth., Dedicated St. Tax Rev.,
                          Ser. A, MBIA,
AAA            45,190   Mccormick Place Expansion
                          Proj., Zero Coupon,
                          6/15/33.....................    No Opt. Call     7,995,919
AAA             5,000   Mccormick Place Expansion
                          Proj., Zero Coupon,
                          6/15/40.....................    No Opt. Call       569,750
AAA            14,500   Mccormick Place Expansion
                          Proj., 5.25%, 6/15/42.......     06/12 @ 101    14,563,800
                                                                        ------------
                                                                          42,055,679
                                                                        ------------
                        INDIANA -- 8.1%
AA              5,000   Indiana Hlth. Fac. Fin. Auth.
                          Rev., Ascension Hlth., Ser.
                          F, 5.375%, 11/15/25.........     11/12 @ 101     4,951,000
AAA            19,735   Indianapolis Local Pub. Impvt.
                          Bond Bank, Waterwks. Proj.,
                          Ser. A, 5.25%, 7/01/33,
                          MBIA........................     07/12 @ 100    20,042,669
                                                                        ------------
                                                                          24,993,669
                                                                        ------------
                        LOUISIANA -- 7.5%
A3             24,000   Lousiana Pub. Facs. Auth.
                          Rev., Ochsner Clinic Fndtn.
                          Proj., Ser. B, 5.50%,
                          5/15/32, (WI)...............     05/12 @ 101    22,956,000
                                                                        ------------
                        MICHIGAN -- 3.2%
AA             10,000   Michigan St. Hosp. Fin. Auth.
                          Rev., Ascension Hlth., Ser.
                          B, 5.25%, 11/15/26..........    No Opt. Call     9,812,600
                                                                        ------------
                        NEW JERSEY -- 7.2%
                        New Jersey Econ. Dev. Auth.,
Baa3            7,475   Econ. Dev. Rev., Kapkowski
                          Road Landfill Proj., 6.50%,
                          4/01/28.....................    No Opt. Call     8,170,324
</Table>

                                      F-11
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                            PORTFOLIO OF INVESTMENTS
                    AUGUST 23, 2002 (UNAUDITED) (CONTINUED)

<Table>
<Caption>
             PRINCIPAL                                  OPTION CALL
RATING*      AMOUNT                                     PROVISIONS+       VALUE
(UNAUDITED)  (000)              DESCRIPTION             (UNAUDITED)     (NOTE 1)
<S>          <C>        <C>                             <C>             <C>

- ------------------------------------------------------------------------------------
Baa3          $ 5,000   Econ. Dev. Rev., Kapkowski
                          Road Landfill-1998B Mb
                          Subject To Amt, 6.50%,
                          4/01/31.....................     04/22 @ 100  $  5,426,300
B+             10,100   Spl. Fac. Rev., Continental
                          Airlines Inc. Proj., 7.20%,
                          11/15/30....................     11/10 @ 101     8,443,398
                                                                        ------------
                                                                          22,040,022
                                                                        ------------
                        NEW YORK -- 2.9%
B3              8,800   Port Auth. New York & New
                          Jersey Spec. Oblig. Rev.,
                          Contl/ Eastrn Proj.
                          Laguardia, 9.00%,
                          12/01/10....................     09/02 @ 101     8,820,328
                                                                        ------------
                        NORTH CAROLINA -- 1.4%
AA+             4,250   No. Carolina Cap. Facs. Fin.
                          Agcy. Rev., Duke Univ.
                          Proj., Ser. A, 5.125%,
                          7/01/42.....................     10/12 @ 100     4,219,358
                                                                        ------------
                        RHODE ISLAND -- 4.6%
A1             14,620   Tobacco Settlement Fin. Corp.,
                          Tobacco Settlement Rev.,
                          Ser. A, 6.25%, 6/01/42......     06/12 @ 100    14,162,540
                                                                        ------------
                        SOUTH CAROLINA -- 7.7%
                        Greenwood Cnty. Hosp. Rev., Self Mem. Hosp. Facs.,
A+              3,280   5.50%, 10/01/26...............     10/11 @ 100     3,294,957
A+              3,250   5.50%, 10/01/31...............     10/11 @ 100     3,250,910
AA              3,750   So. Carolina Jobs Econ. Dev.
                          Auth. Hosp. Facs. Rev.,
                          Georgetown Mem. Hosp.,
                          5.375%, 2/01/30, RADIAN.....     08/11 @ 100     3,751,725
A1             13,445   So. Carolina Tobacco
                          Settlement Auth. Rev., Ser.
                          B, 6.375%, 5/15/30..........    No Opt. Call    13,470,142
                                                                        ------------
                                                                          23,767,734
                                                                        ------------
                        TEXAS -- 13.4%
BBB            20,000   Gulf Coast Wst. Disp. Auth.,
                          Environ. Impvt. Rev., Ser.
                          A, 6.10%, 8/01/24...........     08/12 @ 100    20,096,800
                                                                        ------------
                        Texas St. Tpke. Auth., Central Texas Tpke. Sys. Rev.,
                          AMBAC, (WI),
AAA            73,370   Zero Coupon, 8/15/36..........  08/12 @ 24.171     9,662,829
AAA            65,000   Zero Coupon, 8/15/37..........  08/12 @ 22.708     8,029,450
AAA            27,600   Zero Coupon, 8/15/38..........  08/12 @ 21.384     3,201,324
                                                                        ------------
                                                                          40,990,403
                                                                        ------------
                        VIRGINIA -- 1.6%
A2              5,000   Arlington Cnty. Ind. Dev.
                          Auth., Hosp. Fac. Rev.,
                          Virginia Hosp. Ctr.
                          Arlington Hlth. Sys., 5.25%,
                          7/01/25.....................     07/11 @ 101     5,049,000
                                                                        ------------
                        WISCONSIN -- 6.3%
A1             14,500   Badger Tobacco Asset Sec.
                          Corp. Rev., 6.375%,
                          6/01/32.....................     06/12 @ 100    14,280,325
A               5,000   Wisconsin St. Hlth. & Edl.
                          Facs. Auth. Rev., Wheaton
                          Franciscan Svcs., 5.75%,
                          8/15/25.....................     02/12 @ 101     5,109,800
                                                                        ------------
                                                                          19,390,125
                                                                        ------------
                        TOTAL LONG-TERM INVESTMENTS (COST
                          $276,844,012)...............................   276,599,924
                                                                        ------------
                        SHORT-TERM INVESTMENTS** -- 39.4%
                        CALIFORNIA -- 2.9%
VMIG1              75   California Hlth. Facs. Fin.
                          Auth. Rev., Insured Scripps
                          Hlth., Ser. B, 1.14%,
                          8/28/02.....................             N/A        75,000
</Table>

                                      F-12
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II
                            PORTFOLIO OF INVESTMENTS
                    AUGUST 23, 2002 (UNAUDITED) (CONTINUED)

<Table>
<Caption>
             PRINCIPAL                                  OPTION CALL
RATING*      AMOUNT                                     PROVISIONS+       VALUE
(UNAUDITED)  (000)              DESCRIPTION             (UNAUDITED)     (NOTE 1)
<S>          <C>        <C>                             <C>             <C>

- ------------------------------------------------------------------------------------
A1+           $ 9,000   Orange Cnty. Sanitation
                          Dists., COP, Ser. B, 1.35%,
                          8/26/02, FRDD...............             N/A  $  9,000,000
                                                                        ------------
                                                                           9,075,000
                                                                        ------------
                        GEORGIA -- 4.9%
A1+            15,000   Mun. Elec. Auth. Rev., Proj.
                          One, Ser. C, 1.20%, 8/28/02,
                          MBIA, FRWD..................             N/A    15,000,000
                                                                        ------------
                        MARYLAND -- 3.3%
A1+            10,000   Maryland St. Hlth. & Higher
                          Edl. Facs. Auth. Rev.,
                          Pooled Ln. Prog., Ser. D,
                          1.25%, 8/29/02, FRWD........             N/A    10,000,000
                                                                        ------------
                        MASSACHUSETTS -- 3.3%
VMIG1          10,000   Massachusetts St. Hlth. Edl.
                          Facs. Auth. Rev., Boston
                          Univ., Ser. Q-1, 1.25%,
                          8/29/02, XLCA, FRWD.........             N/A    10,000,000
                                                                        ------------
                        MICHIGAN -- 4.2%
A1+            13,000   Michigan St. Univ. Rev., Ser.
                          A-2, 1.25%, 8/28/02, FRWD...             N/A    13,000,000
                                                                        ------------
                        NEW JERSEY -- 5.6%
NR              6,650   New Jersey Econ. Dev. Auth.,
                          Econ. Dev. Rev., Airis
                          Newark LLC Proj., 1.25%,
                          8/29/02, FRWD...............             N/A     6,650,000
VMIG1          10,700   New Jersey St. Edl. Facs.
                          Auth. Rev., Princeton Univ.,
                          Ser. B, 1.20%, 8/26/02,
                          FRDD........................             N/A    10,700,000
                                                                        ------------
                                                                          17,350,000
                                                                        ------------
                        NEW YORK -- 3.3%
VMIG1          10,000   New York City, GO, Ser. H,
                          1.35%, 8/26/02, MBIA,
                          FRDD........................             N/A    10,000,000
                                                                        ------------
                        NORTH CAROLINA -- 1.8%
F1+             5,540   No. Carolina Edl. Facs. Fin.
                          Agcy. Rev., Edl. Facs.
                          Gaston Day Sch., 1.30%,
                          8/29/02, BOA, FRWD..........             N/A     5,540,000
                                                                        ------------
                        OREGON -- 4.2%
A1+            13,000   Oregon St., GO, Ser. 73E,
                          1.20%, 8/28/02, FRWD........             N/A    13,000,000
                                                                        ------------
                        MONEY MARKET FUNDS -- 5.9%
NR              5,000   AIM Tax Free Investment
                          Company, Cash Reserve
                          Portfolio...................             N/A     5,000,000
NR             13,000   SSgA Tax Free Money Market
                          Fund........................             N/A    13,000,000
                                                                        ------------
                                                                          18,000,000
                                                                        ------------
                        TOTAL SHORT-TERM INVESTMENTS (COST
                          $120,965,000)...............................   120,965,000
                                                                        ------------
                        TOTAL INVESTMENTS -- 129.5% (COST
                          $397,809,011)...............................  $397,564,924
                        Liabilities in excess of other assets --
                        (29.5%).......................................   (90,488,662)
                                                                        ------------
                        NET ASSETS APPLICABLE TO COMMON
                        SHAREHOLDERS -- 100%..........................  $307,076,262
                                                                        ============
</Table>

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

  *  Using the higher of Standard & Poor's, Moody's or Fitch's rating.
 **  For purposes of amortized cost valuation, the maturity date of these
     instruments is considered to be the earlier of the next date on which the
     security can be redeemed at par, or the next date on which the rate of
     interest is adjusted.
  +  Date (month/year) and prices of the earliest optional call or redemption.
     There may be other call provisions at varying prices at later dates.

                                      F-13
<Page>
                                   APPENDIX A

                      BLACKROCK MUNICIPAL INCOME TRUST II
                          STATEMENT OF PREFERENCES OF
                        AUCTION MARKET PREFERRED SHARES
                                    ("AMPS")
<Page>
                               TABLE OF CONTENTS

<Table>
<Caption>
                                               PAGE
                                               ----
<C>  <S>                                       <C>
DEFINITIONS..................................   A-2
PART I.......................................  A-14
 1.  Number of Authorized Shares.............  A-14
 2.  Dividends...............................  A-14
 3.  Gross-Up Payments.......................  A-18
 4.  Designation of Special Rate Periods.....  A-18
 5.  Voting Rights...........................  A-21
 6.  Investment Company Act Preferred Shares
     Asset Coverage..........................  A-24
 7.  Preferred Shares Basic Maintenance
     Amount..................................  A-24
 8.  Reserved................................  A-26
 9.  Restrictions on Dividends and Other
     Distributions...........................  A-26
10.  Rating Agency Restrictions..............  A-27
11.  Redemption..............................  A-28
12.  Liquidation Rights......................  A-32
13.  Miscellaneous...........................  A-33
PART II......................................  A-33
 1.  Orders..................................  A-33
 2.  Submission of Orders by Broker-Dealers
     to Auction Agent........................  A-35
 3.  Determination of Sufficient Clearing
     Bids, Winning Bids Rate and Applicable
     Rate....................................  A-37
 4.  Acceptance and Rejection of Submitted
     Bids and Submitted Sell Orders and
     Allocation of Shares....................  A-38
 5.  Notification of Allocations.............  A-40
 6.  Auction Agent...........................  A-41
 7.  Transfer of AMPS........................  A-41
 8.  Global Certificate......................  A-41
 9.  Force Majeure...........................  A-41
APPENDIX A...................................  AA-1
APPENDIX B...................................   B-1
</Table>

                                      A-1
<Page>
    BLACKROCK MUNICIPAL INCOME TRUST II, a Delaware business trust (the
"Trust"), certifies that:

    First: Pursuant to authority expressly vested in the Board of Trustees of
the Trust by Article VI of the Trust's Agreement and Declaration of Trust,
(which, as hereafter restated or amended from time to time is, together with
this Statement, herein called the "Declaration"), the Board of Trustees has, by
resolution, authorized the issuance of shares of the Trust's authorized AMPS,
liquidation preference $25,000 per share, having such designation or
designations as to series as is set forth in Section 1 of Appendix A hereto and
such number of shares per such series as is set forth in Section 2 of
Appendix A hereto.

    Second: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the shares
of each series of AMPS now or hereafter described in Section 1 of Appendix A
hereto are as follows (each such series being referred to herein as a series of
AMPS, and shares of all such series being referred to collectively as AMPS).

                                  DEFINITIONS

    Except as otherwise specifically provided in Section 3 of Appendix A hereto,
as used in Parts I and II of this Statement, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:

      (1) "AA" COMPOSITE COMMERCIAL PAPER RATE, on any date for any Rate Period
of shares of a series of AMPS, shall mean (i) (A) in the case of any Minimum
Rate Period or any Special Rate Period of fewer than 49 Rate Period Days, the
interest equivalent of the 30-day rate; provided, however, that if such Rate
Period is a Minimum Rate Period and the "AA" Composite Commercial Paper Rate is
being used to determine the Applicable Rate for shares of such series when all
of the Outstanding shares of such series are subject to Submitted Hold Orders,
then the interest equivalent of the seven-day rate, and (B) in the case of any
Special Rate Period of (1) 49 or more but fewer than 70 Rate Period Days, the
interest equivalent of the 60-day rate; (2) 70 or more but fewer than 85 Rate
Period Days, the arithmetic average of the interest equivalent of the 60-day and
90-day rates; (3) 85 or more but fewer than 99 Rate Period Days, the interest
equivalent of the 90-day rate; (4) 99 or more but fewer than 120 Rate Period
Days, the arithmetic average of the interest equivalent of the 90-day and
120-day rates; (5) 120 or more but fewer than 141 Rate Period Days, the interest
equivalent of the 120-day rate; (6) 141 or more but fewer than 162 Rate Period
Days, the arithmetic average of the 120-day and 180-day rates; and (7) 162 or
more but fewer than 183 Rate Period Days, the interest equivalent of the 180-day
rate, in each case on commercial paper placed on behalf of issuers whose
corporate bonds are rated "AA" by S&P or the equivalent of such rating by S&P or
another rating agency, as made available on a discount basis or otherwise by the
Federal Reserve Bank of New York for the Business Day next preceding such date;
or (ii) in the event that the Federal Reserve Bank of New York does not make
available any such rate, then the arithmetic average of such rates, as quoted on
a discount basis or otherwise, by the Commercial Paper Dealers to the Auction
Agent for the close of business on the Business Day next preceding such date. If
any Commercial Paper Dealer does not quote a rate required to determine the "AA"
Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall
be determined on the basis of the quotation or quotations furnished by the
remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the
Trust to provide such rate or rates not being supplied by any Commercial Paper
Dealer or Commercial Paper Dealers, as the case may be, or, if the Trust does
not select any such Substitute Commercial Paper Dealer or Substitute Commercial
Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper
Dealers.

                                      A-2
<Page>
For purposes of this definition, the "interest equivalent" of a rate stated on a
discount basis (a "discount rate") for commercial paper of a given days'
maturity shall be equal to the quotient (rounded upwards to the next higher
one-thousandth (.001) of 1%) of (A) the discount rate divided by (B) the
difference between (x) 1.00 and (y) a fraction, the numerator of which shall be
the product of the discount rate times the number of days in which such
commercial paper matures and the denominator of which shall be 360.

      (2) "ACCOUNTANT'S CONFIRMATION" shall have the meaning specified in
paragraph (c) of Section 7 of Part I of this Statement.

      (3) "AFFILIATE" shall mean, for purposes of the definition of
"Outstanding," any Person known to the Auction Agent to be controlled by, in
control of or under common control with the Trust; provided, however, that no
Broker-Dealer controlled by, in control of or under common control with the
Trust shall be deemed to be an Affiliate nor shall any corporation or any Person
controlled by, in control of or under common control with such corporation, one
of the trustees, directors or executive officers of which is a trustee of the
Trust, be deemed to be an Affiliate solely because such trustee, director or
executive officer is also a trustee of the Trust.

      (4) "AGENT MEMBER" shall mean a member of or participant in the Securities
Depository that will act on behalf of a Bidder.

      (5) "ANTICIPATION NOTES" shall mean Tax Anticipation Notes (TANs), Revenue
Anticipation Notes (RANs), Tax and Revenue Anticipation Notes (TRANs), Grant
Anticipation Notes (GANs) that are rated by S&P and Bond Anticipation Notes
(BANs) that are rated by S&P.

      (6) "APPLICABLE RATE" shall have the meaning specified in subparagraph
(e) (i) of Section 2 of Part I of this Statement.

      (7) "AUCTION" shall mean each periodic implementation of the Auction
Procedures.

      (8) "AUCTION AGENCY AGREEMENT" shall mean the agreement between the Trust
and the Auction Agent which provides, among other things, that the Auction Agent
will follow the Auction Procedures for purposes of determining the Applicable
Rate for shares of a series of AMPS so long as the Applicable Rate for shares of
such series is to be based on the results of an Auction.

      (9) "AUCTION AGENT" shall mean the entity appointed as such by a
resolution of the Board of Trustees or the Executive Committee of the Board of
Trustees in accordance with Section 6 of Part II of this Statement.

     (10) "AUCTION DATE," with respect to any Rate Period, shall mean the
Business Day next preceding the first day of such Rate Period.

     (11) "AUCTION PROCEDURES" shall mean the procedures for conducting Auctions
set forth in Part II of this Statement.

     (12) "AVAILABLE PREFERRED SHARES" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.

     (13) "BENCHMARK RATE" shall have the meaning specified in Section 12 of
Appendix A hereto.

                                      A-3
<Page>
     (14) "BENEFICIAL OWNER," with respect to shares of a series of AMPS, means
a customer of a Broker-Dealer who is listed on the records of that Broker-Dealer
(or, if applicable, the Auction Agent) as a holder of shares of such series.

     (15) "BID" and "BIDS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.

     (16) "BIDDER" and "BIDDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement; provided, however, that
neither the Trust nor any affiliate thereof shall be permitted to be a Bidder in
an Auction, except that any Broker-Dealer that is an affiliate of the Trust may
be a Bidder in an Auction, but only if the Orders placed by such Broker-Dealer
are not for its own account.

     (17) "BOARD OF TRUSTEES" shall mean the Board of Trustees of the Trust or
any duly authorized committee thereof.

     (18) "BROKER-DEALER" shall mean any broker-dealer, commercial bank or other
entity permitted by law to perform the functions required of a Broker-Dealer in
Part II of this Statement, that is a member of, or a participant in, the
Securities Depository or is an affiliate of such member or participant, has been
selected by the Trust and has entered into a Broker-Dealer Agreement that
remains effective.

     (19) "BROKER-DEALER AGREEMENT" shall mean an agreement among the Trust, the
Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to
follow the procedures specified in Part II of this Statement.

     (20) "BUSINESS DAY" shall mean a day on which the New York Stock Exchange
is open for trading and which is neither a Saturday, Sunday nor any other day on
which banks in The City of New York, New York, are authorized by law to close.

     (21) "CODE" means the Internal Revenue Code of 1986, as amended.

     (22) "COMMERCIAL PAPER DEALERS" shall mean Lehman Commercial Paper
Incorporated, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and any other commercial paper dealer selected by the Trust as to
which Moody's, S&P or any substitute rating agency then rating the AMPS shall
not have objected or, in lieu of any thereof, their respective affiliates or
successors, if such entity is a commercial paper dealer.

     (23) "COMMON SHARES" shall mean the common shares of beneficial interest,
par value $.001 per share, of the Trust.

     (24) "CURE DATE" shall mean the Preferred Shares Basic Maintenance Cure
Date or the Investment Company Act Cure Date, as the case may be.

     (25) "DATE OF ORIGINAL ISSUE," with respect to shares of a series of AMPS,
shall mean the date on which the Trust initially issued such shares.

     (26) "DECLARATION" shall have the meaning specified in the First paragraph
of this Statement

     (27) "DEPOSIT SECURITIES" shall mean cash and Municipal Obligations rated
at least P-1, MIG-1 or VMIG-1 by Moody's, or A-1+ or SP-1+ by S&P.

                                      A-4
<Page>
     (28) "DISCOUNTED VALUE," as of any Valuation Date, shall mean, (i)(a) with
respect to a Moody's Eligible Asset that is not currently callable as of such
Valuation Date at the option of the issuer thereof, the quotient of the Market
Value thereof divided by the applicable Moody's Discount Factor, or (b) with
respect to a Moody's Eligible Asset that is currently callable as of such
Valuation Date at the option of the issuer thereof, the quotient of (1) the
lesser of the Market Value or call price thereof, including any call premium,
divided by (2) the applicable Moody's Discount Factor, and (ii) with respect to
a S&P Eligible Asset, the quotient of the Market Value thereof divided by the
applicable S&P Discount Factor.

     (29) "DIVIDEND PAYMENT DATE," with respect to shares of a series of AMPS,
shall mean any date on which dividends are payable on shares of such series
pursuant to the provisions of paragraph (d) of Section 2 of Part I of this
Statement.

     (30) "DIVIDEND PERIOD," with respect to shares of a series of AMPS, shall
mean the period from and including the Date of Original Issue of shares of such
series to, but excluding, the initial Dividend Payment Date for shares of such
series and any period thereafter from, and including, one Dividend Payment Date
for shares of such series to, but excluding, the next succeeding Dividend
Payment Date for shares of such series.

     (31) "EXISTING HOLDER," with respect to shares of a series of AMPS, shall
mean a Broker-Dealer (or any such other Person as may be permitted by the Trust)
that is listed on the records of the Auction Agent as a holder of shares of such
series.

     (32) "FAILURE TO DEPOSIT," with respect to shares of a series of AMPS,
shall mean a failure by the Trust to pay to the Auction Agent, not later than
12:00 noon, New York City time, (A) on any Dividend Payment Date for shares of
such series, in funds available on such Dividend Payment Date in The City of New
York, New York, the full amount of any dividend (whether or not earned or
declared) to be paid on such Dividend Payment Date on any share of such series
or (B) on the Business Day next preceding any redemption date in funds available
on such redemption date for shares of such series in The City of New York, New
York, the Redemption Price to be paid on such redemption date for any share of
such series after notice of redemption is mailed pursuant to paragraph (c) of
Section 11 of Part I of this Statement; provided, however, that the foregoing
clause (B) shall not apply to the Trust's failure to pay the Redemption Price in
respect of AMPS when the related Notice of Redemption provides that redemption
of such shares is subject to one or more conditions precedent and any such
condition precedent shall not have been satisfied at the time or times and in
the manner specified in such Notice of Redemption.

     (33) "FEDERAL TAX RATE INCREASE" shall have the meaning specified in the
definition of "Moody's Volatility Factor."

     (34) "GROSS-UP PAYMENT" shall have the meaning specified in Section 4 of
Appendix A hereto.

     (35) "HOLDER," with respect to shares of a series of AMPS, shall mean the
registered holder of such shares as the same appears on the record books of the
Trust.

     (36) "HOLD ORDER" and "HOLD ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.

     (37) "INDEPENDENT ACCOUNTANT" shall mean a nationally recognized
accountant, or firm of accountants, that is, with respect to the Trust, an
independent public accountant or firm of independent public accountants under
the Securities Act of 1933, as amended from time to time.

                                      A-5
<Page>
     (38) "INITIAL RATE PERIOD," with respect to shares of a series of AMPS,
shall have the meaning specified with respect to shares of such series in
Section 5 of Appendix A hereto.

     (39) "INTEREST EQUIVALENT" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.

     (40) "INVESTMENT COMPANY ACT" shall mean the Investment Company Act of
1940, as amended from time to time.

     (41) "INVESTMENT COMPANY ACT CURE DATE," with respect to the failure by the
Trust to maintain the Investment Company Act Preferred Shares Asset Coverage (as
required by Section 6 of Part I of this Statement) as of the last Business Day
of each month, shall mean the last Business Day of the following month.

     (42) "INVESTMENT COMPANY ACT PREFERRED SHARES ASSET COVERAGE" shall mean
asset coverage, as defined in Section 18(h) of the Investment Company Act, of at
least 200% with respect to all outstanding senior securities of the Trust which
are shares of beneficial interest including all outstanding AMPS (or such other
asset coverage as may in the future be specified in or under the Investment
Company Act as the minimum asset coverage for senior securities which are shares
or stock of a closed-end investment company as a condition of declaring
dividends on its common shares or stock).

     (43) "KENNY INDEX" shall have the meaning specified in the definition of
"Taxable Equivalent of the Short-Term Municipal Bond Rate."

     (44) "LATE CHARGE" shall have the meaning specified in subparagraph
(e) (i) (B) of Section 2 of Part I of this Statement.

     (45) "LIQUIDATION PREFERENCE," with respect to a given number of Preferred
shares, means $25,000 times that number.

     (46) "MARKET VALUE" of any asset of the Trust shall be the market value
thereof determined by FT Interactive Data Corporation Evaluation services or any
other pricing service or services designated by the Board of Trustees of the
Trust, provided that the Trust obtains written assurance from Moody's and S&P,
if Moody's and S&P are then rating the AMPS, and from any substitute rating
agency then rating the AMPS that such designation will not impair the rating
then assigned by Moody's, S&P or such substitute rating agency to the AMPS (the
"Pricing Service"). Market Value of any asset shall include any interest accrued
thereon. The Pricing Service shall value portfolio securities at the lower of
the quoted bid price or the mean between the quoted bid and ask price or the
yield equivalent when quotations are not readily available. Securities for which
quotations are not readily available shall be valued at fair value as determined
by the Pricing Service using methods which include consideration of: yields or
prices of municipal obligations of comparable quality, type of issue, coupon,
maturity and rating; indications as to value from dealers; and general market
conditions. The Pricing Service may employ electronic data processing techniques
and/or a matrix system to determine valuations. If the Pricing Service fails to
provide the Market Value of any Municipal Obligation, such Municipal Obligation
shall be valued at the lower of two bid quotations (one of which shall be in
writing) obtained by the Trust from two dealers who are members of the National
Association of Securities Dealers, Inc. and are making a market in such
Municipal Obligations. Futures contracts and options are valued at closing
prices for such instruments established by the exchange or board of trade on
which they are traded, or if market quotations are not readily available, are
valued at fair value as determined by the Pricing Service or if the Pricing
Service is not able to value such instruments they

                                      A-6
<Page>
shall be valued at fair value on a consistent basis using methods determined in
good faith by the Board of Trustees.

     (47) "MAXIMUM POTENTIAL GROSS-UP PAYMENT LIABILITY," as of any Valuation
Date, shall mean the aggregate amount of Gross-up Payments that would be due if
the Trust were to make Taxable Allocations, with respect to any taxable year,
estimated based upon dividends paid and the amount of undistributed realized net
capital gains and other taxable income earned by the Trust, as of the end of the
calendar month immediately preceding such Valuation Date, and assuming such
Gross-up Payments are fully taxable.

     (48) "MAXIMUM RATE," for shares of a series of AMPS on any Auction Date for
shares of such series, shall mean:

          (1) in the case of any Auction Date which is not the Auction Date
    immediately prior to the first day of any proposed Special Rate Period
    designated by the Trust pursuant to Section 4 of Part I of this Statement,
    the product of (A) the Reference Rate on such Auction Date for the next Rate
    Period of shares of such series and (B) the Rate Multiple on such Auction
    Date, unless shares of such series have or had a Special Rate Period (other
    than a Special Rate Period of 28 Rate Period Days or fewer) and an Auction
    at which Sufficient Clearing Bids existed has not yet occurred for a Minimum
    Rate Period of shares of such series after such Special Rate Period, in
    which case the higher of:

             (1) the dividend rate on shares of such series for the then-ending
       Rate Period; and

             (2) the product of (1) the higher of (x) the Reference Rate on such
       Auction Date for a Rate Period equal in length to the then-ending Rate
       Period of shares of such series, if such then-ending Rate Period was 364
       Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date
       for a Rate Period equal in length to the then-ending Rate Period of
       shares of such series, if such then-ending Rate Period was more than 364
       Rate Period Days, and (y) the Reference Rate on such Auction Date for a
       Rate Period equal in length to such Special Rate Period of shares of such
       series, if such Special Rate Period was 364 Rate Period Days or fewer, or
       the Treasury Note Rate on such Auction Date for a Rate Period equal in
       length to such Special Rate Period, if such Special Rate Period was more
       than 364 Rate Period Days and (2) the Rate Multiple on such Auction Date;
       or

          (2) in the case of any Auction Date which is the Auction Date
    immediately prior to the first day of any proposed Special Rate Period
    designated by the Trust pursuant to Section 4 of Part I of this Statement,
    the product of (A) the highest of (1) the Reference Rate on such Auction
    Date for a Rate Period equal in length to the then-ending Rate Period of
    shares of such series, if such then-ending Rate Period was 364 Rate Period
    Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate
    Period equal in length to the then-ending Rate Period of shares of such
    series, if such then-ending Rate Period was more than 364 Rate Period Days,
    (2) the Reference Rate on such Auction Date for the Special Rate Period for
    which the Auction is being held if such Special Rate Period is 364 Rate
    Period Days or fewer or the Treasury Note Rate on such Auction Date for the
    Special Rate Period for which the Auction is being held if such Special Rate
    Period is more than 364 Rate Period Days, and (3) the Reference Rate on such
    Auction Date for Minimum Rate Periods and (B) the Rate Multiple on such
    Auction Date.

     (49) "MINIMUM RATE PERIOD" shall mean any Rate Period consisting of 7 Rate
Period Days.

                                      A-7
<Page>
     (50) "MOODY'S" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.

     (51) "MOODY'S DISCOUNT FACTOR" shall have the meaning specified in
Section 4 of Appendix A hereto.

     (52) "MOODY'S ELIGIBLE ASSET" shall have the meaning specified in
Section 4 of Appendix A hereto.

     (53) "MOODY'S EXPOSURE PERIOD" shall mean the period commencing on a given
Valuation Date and ending 56 days thereafter.

     (54) "MOODY'S VOLATILITY FACTOR" shall mean, as of any Valuation Date,
(i) in the case of any Minimum Rate Period, any Special Rate Period of 28 Rate
Period Days or fewer, or any Special Rate Period of 57 Rate Period Days or more,
a multiplicative factor equal to 275%, except as otherwise provided in the last
sentence of this definition; (ii) in the case of any Special Rate Period of more
than 28 but fewer than 36 Rate Period Days, a multiplicative factor equal to
203%; (iii) in the case of any Special Rate Period of more than 35 but fewer
than 43 Rate Period Days, a multiplicative factor equal to 217%; (iv) in the
case of any Special Rate Period of more than 42 but fewer than 50 Rate Period
Days, a multiplicative factor equal to 226%; and (v) in the case of any Special
Rate Period of more than 49 but fewer than 57 Rate Period Days, a multiplicative
factor equal to 235%. If, as a result of the enactment of changes to the Code,
the greater of the maximum marginal Federal individual income tax rate
applicable to ordinary income and the maximum marginal Federal corporate income
tax rate applicable to ordinary income will increase, such increase being
rounded up to the next five percentage points (the "Federal Tax Rate Increase"),
until the effective date of such increase, the Moody's Volatility Factor in the
case of any Rate Period described in (i) above in this definition instead shall
be determined by reference to the following table:

<Table>
<Caption>
                                                    VOLATILITY
FEDERAL TAX RATE INCREASE                             FACTOR
- -------------------------                           ----------
<S>                                                 <C>
5%................................................    295%
10%...............................................    317%
15%...............................................    341%
20%...............................................    369%
25%...............................................    400%
30%...............................................    436%
35%...............................................    477%
40%...............................................    525%
</Table>

     (55) "MUNICIPAL OBLIGATIONS" shall mean any and all instruments that pay
interest or make other distributions that are exempt from regular Federal income
tax and in which the Trust may invest consistent with the investment policies
and restrictions contained in its registration statement on Form N-2
(333-      ), ( "Registration Statement"), as the same may be amended from time
to time.

     (56) "NOTICE OF REDEMPTION" shall mean any notice with respect to the
redemption of AMPS pursuant to paragraph (c) of Section 11 of Part I of this
Statement.

     (57) "NOTICE OF SPECIAL RATE PERIOD" shall mean any notice with respect to
a Special Rate Period of AMPS pursuant to subparagraph (d)(i) of Section 4 of
Part I of this Statement.

     (58) "ORDER" and "ORDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.

                                      A-8
<Page>
     (59) "OUTSTANDING" shall mean, as of any Auction Date with respect to
shares of a series of AMPS, the number of shares of such series theretofore
issued by the Trust except, without duplication, (i) any shares of such series
theretofore cancelled or delivered to the Auction Agent for cancellation or
redeemed by the Trust, (ii) any shares of such series as to which the Trust or
any Affiliate thereof shall be an Existing Holder and (iii) any shares of such
series represented by any certificate in lieu of which a new certificate has
been executed and delivered by the Trust.

     (60) "PERSON" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.

     (61) "POTENTIAL BENEFICIAL OWNER," with respect to shares of a series of
AMPS, shall mean a customer of a Broker-Dealer that is not a Beneficial Owner of
shares of such series but that wishes to purchase shares of such series, or that
is a Beneficial Owner of shares of such series that wishes to purchase
additional shares of such series.

     (62) "POTENTIAL HOLDER," with respect to shares of a series of AMPS, shall
mean a Broker-Dealer (or any such other person as may be permitted by the Trust)
that is not an Existing Holder of shares of such series or that is an Existing
Holder of shares of such series that wishes to become the Existing Holder of
additional shares of such series.

     (63) "PREFERRED SHARES" shall have the meaning set forth on the first
page of this Statement.

     (64) "PREFERRED SHARES BASIC MAINTENANCE AMOUNT," as of any Valuation Date,
shall mean the dollar amount equal to the sum of (i)(A) the product of the
number of AMPS outstanding on such date multiplied by $25,000 (plus the product
of the number of shares of any other series of preferred shares outstanding on
such date multiplied by the liquidation preference of such shares), plus any
redemption premium applicable to the AMPS (or other preferred shares) then
subject to redemption; (B) the aggregate amount of dividends that will have
accumulated at the respective Applicable Rates (whether or not earned or
declared) to (but not including) the first respective Dividend Payment Date for
the AMPS outstanding that follows such Valuation Date (plus the aggregate amount
of dividends, whether or not earned or declared, that will have accumulated in
respect of other outstanding preferred shares to, but not including, the first
respective dividend payment date for such other shares that follows such
Valuation Date); (C) the aggregate amount of dividends that would accumulate on
shares of each series of the AMPS outstanding from such first respective
Dividend Payment Date therefor through the 56th day after such Valuation Date,
at the Maximum Rate (calculated as if such Valuation Date were the Auction Date
for the Rate Period commencing on such Dividend Payment Date) for a Minimum Rate
Period of shares of such series to commence on such Dividend Payment Date,
assuming, solely for purposes of the foregoing, that if on such Valuation Date
the Trust shall have delivered a Notice of Special Rate Period to the Auction
Agent pursuant to Section 4(d)(i) of this Part I with respect to shares of such
series, such Maximum Rate shall be the higher of (a) the Maximum Rate for the
Special Rate Period of shares of such series to commence on such Dividend
Payment Date and (b) the Maximum Rate for a Minimum Rate Period of shares of
such series to commence on such Dividend Payment Date, multiplied by the
Volatility Factor applicable to a Minimum Rate Period, or, in the event the
Trust shall have delivered a Notice of Special Rate Period to the Auction Agent
pursuant to section 4(d)(i) of this Part I with respect to shares of such series
designating a Special Rate Period consisting of 56 Rate Period Days or more, the
Volatility Factor applicable to a special Rate Period of that length (plus the
aggregate amount of dividends that would accumulate at the maximum dividend rate
or rates on any other preferred shares outstanding from such respective dividend
payment dates through the 56th day after such Valuation Date, as established by
or pursuant to the respective statements establishing and fixing the rights and
preferences of such other

                                      A-9
<Page>
preferred shares) (except that (1) if such Valuation Date occurs at a time when
a Failure to Deposit (or, in the case of preferred shares other than the AMPS, a
failure similar to a Failure to Deposit) has occurred that has not been cured,
the dividend for purposes of calculation would accumulate at the current
dividend rate then applicable to the shares in respect of which such failure has
occurred and (2) for those days during the period described in this subparagraph
(C) in respect of which the Applicable Rate in effect immediately prior to such
Dividend Payment Date will remain in effect (or, in the case of preferred shares
other than the AMPS, in respect of which the dividend rate or rates in effect
immediately prior to such respective dividend payment dates will remain in
effect), the dividend for purposes of calculation would accumulate at such
Applicable Rate (or other rate or rates, as the case may be) in respect of those
days); (D) the amount of anticipated expenses of the Trust for the 90 days
subsequent to such Valuation Date; (E) the amount of the Trust's Maximum
Potential Gross-up Payment Liability in respect of AMPS (and similar amounts
payable in respect of other preferred shares pursuant to provisions similar to
those contained in Section 3 of Part I of this Statement) as of such Valuation
Date; (F) the amount of any indebtedness or obligations of the Trust senior in
right of payment to the AMPS; and (G) any current liabilities as of such
Valuation Date to the extent not reflected in any of (i)(A) through
(i)(F) (including, without limitation, any payables for Municipal Obligations
purchased as of such Valuation Date and any liabilities incurred for the purpose
of clearing securities transactions) less (ii) the value (i.e., for purposes of
current Moody's guidelines, the face value of cash, short-term Municipal
Obligations rated MIG-1, VMIG-1 or P-1, and short-term securities that are the
direct obligation of the U.S. government, provided in each case that such
securities mature on or prior to the date upon which any of (i) (A) through
(i) (G) become payable, otherwise the Moody's Discounted Value) (i.e., for the
purposes of the current S&P guidelines, the face value of cash, short-term
Municipal Obligations rate SP-1 or A-1 or Municipal Obligations rated A,
provided in each case that such securities mature on or prior to the date upon
which any of (i)(A) through (i)(G) becomes payable, otherwise the S&P Discounted
Value) of any of the Trust's assets irrevocably deposited by the Trust for the
payment of any of (i)(A) through (i)(G).

     (65) "PREFERRED SHARES BASIC MAINTENANCE CURE DATE," with respect to the
failure by the Trust to satisfy the Preferred Shares Basic Maintenance Amount
(as required by paragraph (a) of Section 7 of Part I of this Statement) as of a
given Valuation Date, shall mean the seventh Business Day following such
Valuation Date.

     (66) "PREFERRED SHARES BASIC MAINTENANCE REPORT" shall mean a report signed
by the President, Treasurer or any Senior Vice President or Vice President of
the Trust which sets forth, as of the related Valuation Date, the assets of the
Trust, the Market Value and the Discounted Value thereof (seriatim and in
aggregate), and the Preferred Shares Basic Maintenance Amount.

     (67) "QUARTERLY VALUATION DATE" shall mean the last Business Day of each
January, April, July and October of each year, commencing on the date set forth
in Section 6 of Appendix A hereto.

     (68) "RATE MULTIPLE" shall have the meaning specified in Section 4 of
Appendix A hereto.

     (69) "RATE PERIOD," with respect to shares of a series of AMPS, shall mean
the Initial Rate Period of shares of such series and any Subsequent Rate Period,
including any Special Rate Period, of shares of such series.

     (70) "RATE PERIOD DAYS," for any Rate Period or Dividend Period, means the
number of days that would constitute such Rate Period or Dividend Period but for
the application of paragraph (d) of Section 2 of Part I of this Statement or
paragraph (b) of Section 4 of Part I of this Statement.

                                      A-10
<Page>
     (71) "RECEIVABLES FOR MUNICIPAL OBLIGATIONS SOLD" shall mean (A) for
purposes of calculation of Moody's Eligible Assets as of any Valuation Date, no
more than the aggregate of the following: (i) the book value of receivables for
Municipal Obligations sold as of or prior to such Valuation Date if such
receivables are due within five business days of such Valuation Date and if the
trades which generated such receivables are (x) settled through clearing house
firms with respect to which the Trust has received prior written authorization
from Moody's or (y) with counterparties having a Moody's long-term debt rating
of at least Baa3; and (ii) the Moody's Discounted Value of Municipal Obligations
sold as of or prior to such Valuation Date which generated receivables, if such
receivables are due within five business days of such Valuation Date but do not
comply with either of the conditions specified in (i) above, and (B) for
purposes of calculation of S&P Eligible Assets as of any Valuation Date, the
book value of receivables for Municipal Obligations sold as of or prior to such
Valuation Date if such receivables are due within five business days of such
Valuation Date.

     (72) "REDEMPTION PRICE" shall mean the applicable redemption price
specified in paragraph (a) or (b) of Section 11 of Part I of this Statement.

     (73) "REFERENCE RATE" shall mean (i) the higher of the Taxable Equivalent
of the Short-Term Municipal Bond Rate and the "AA" Composite Commercial Paper
Rate in the case of Minimum Rate Periods and Special Rate Periods of 28 Rate
Period Days or fewer; (ii) the "AA" Composite Commercial Paper Rate in the case
of Special Rate Periods of more than 28 Rate Period Days but fewer than 183 Rate
Period Days; and (iii) the Treasury Bill Rate in the case of Special Rate
Periods of more than 182 Rate Period Days but fewer than 365 Rate Period Days.

     (74) "REGISTRATION STATEMENT" has the meaning specified in the definition
of "Municipal Obligations."

     (75) "S&P" shall mean Standard & Poor's Corporation, a New York
corporation, and its successors.

     (76) "S&P DISCOUNT FACTOR" shall have the meaning specified in Section 4 of
Appendix A hereto.

     (77) "S&P ELIGIBLE ASSET" shall have the meaning specified in Section 4 of
Appendix A hereto.

     (78) "S&P EXPOSURE PERIOD" shall mean the maximum period of time following
a Valuation Date that the Trust has under this Statement to cure any failure to
maintain, as of such Valuation Date, the Discounted Value for its portfolio at
least equal to the AMPS Basic Maintenance Amount (as described in paragraph
(a) of Section 7 of Part I of this Statement).

     (79) "S&P VOLATILITY FACTOR" shall mean, as of any Valuation Date, a
multiplicative factor equal to (i) 305% in the case of any Minimum Rate Period
or any Special Rate Period of 28 Rate Period Days or fewer, (ii) 268% in the
case of any Special Rate Period of more than 28 Rate Period Days but fewer than
183 Rate Period Days; and (iii) 204% in the case of any Special Rate Period of
more than 182 Rate Period Days.

     (80) "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
its successors and assigns or any other securities depository selected by the
Trust which agrees to follow the procedures required to be followed by such
securities depository in connection with the AMPS.

     (81) "SELL ORDER" and "SELL ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.

                                      A-11
<Page>
     (82) "SPECIAL RATE PERIOD," with respect to shares of a series of AMPS,
shall have the meaning specified in paragraph (a) of Section 4 of Part I of this
Statement.

     (83) "SPECIAL REDEMPTION PROVISIONS" shall have the meaning specified in
subparagraph (a)(i) of Section 11 of Part I of this Statement.

     (84) "SUBMISSION DEADLINE" shall mean 1:30 P.M., New York city time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers are
required to submit Orders to the Auction Agent as specified by the Auction Agent
from time to time.

     (85) "SUBMITTED BID" and "SUBMITTED BIDS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this Statement.

     (86) "SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.

     (87) "SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this Statement.

     (88) "SUBMITTED SELL ORDER" and "SUBMITTED SELL ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.

     (89) "SUBSEQUENT RATE PERIOD," with respect to shares of a series of AMPS,
shall mean the period from and including the first day following the Initial
Rate Period of shares of such series to but excluding the next Dividend Payment
Date for shares of such series and any period thereafter from and including one
Dividend Payment Date for shares of such series to but excluding the next
succeeding Dividend Payment Date for shares of such series; provided, however,
that if any Subsequent Rate Period is also a Special Rate Period, such term
shall mean the period commencing on the first day of such Special Rate Period
and ending on the last day of the last Dividend Period thereof.

     (90) "SUBSTITUTE COMMERCIAL PAPER DEALER" shall mean any commercial paper
dealer selected by the Trust as to which Moody's, S&P or any substitute rating
agency then rating the AMPS shall not have objected; provided, however, that
none of such entities shall be a Commercial Paper Dealer.

     (91) "SUBSTITUTE U.S. GOVERNMENT SECURITIES DEALER" any U.S. Government
securities dealer selected by the Trust as to which Moody's, S&P or any
substitute rating agency then rating the AMPS shall not have objected; provided,
however, that none of such entities shall be a U.S. Government Securities
Dealer.

     (92) "SUFFICIENT CLEARING BIDS" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.

     (93) "TAXABLE ALLOCATION" shall have the meaning specified in Section 3 of
Part I of this Statement.

     (94) "TAXABLE INCOME" shall have the meaning specified in Section 12 of
Appendix A hereto.

     (95) "TAXABLE EQUIVALENT OF THE SHORT-TERM MUNICIPAL BOND RATE," on any
date for any Minimum Rate Period or Special Rate Period of 28 Rate Period Days
or fewer, shall mean 90% of the quotient of (A) the per annum rate expressed on
an interest equivalent basis equal to

                                      A-12
<Page>
the Kenny S&P 30 day High Grade Index or any successor index (the "Kenny Index")
(provided, however, that any such successor index must be approved by Moody's
(if Moody's is then rating the AMPS)), made available for the Business Day
immediately preceding such date but in any event not later than 8:30 A.M., New
York City time, on such date by Kenny S&P Evaluation Services or any successor
thereto, based upon 30-day yield evaluations at par of short-term bonds the
interest on which is excludable for regular Federal income tax purposes under
the Code of "high grade" component issuers selected by Kenny S&P Evaluation
Services or any such successor from time to time in its discretion, which
component issuers shall include, without limitation, issuers of general
obligation bonds, but shall exclude any bonds the interest on which constitutes
an item of tax preference under Section 57 (a)(5) of the Code, or successor
provisions, for purposes of the "alternative minimum tax," divided by (B) 1.00
minus the 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 (in each case expressed as a decimal),
whichever is greater; provided, however, that if the Kenny Index is not made so
available by 8:30 A.M., New York City time, on such date by Kenny S&P Evaluation
Services or any successor, the Taxable Equivalent of the Short-Term Municipal
Bond Rate shall mean the quotient of (A) the per annum rate expressed on an
interest equivalent basis equal to the most recent Kenny Index so made available
for any preceding Business Day, divided by (B) 1.00 minus the 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 (in each case expressed as a decimal), whichever is greater.

     (96) "TREASURY BILL" shall mean a direct obligation of the U.S. Government
having a maturity at the time of issuance of 364 days or less.

     (97) "TREASURY BILL RATE," on any date for any Rate Period, shall mean
(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 from the U.S.
Government Securities Dealers to the Auction Agent. If any U.S. Government
Securities Dealer does not quote a rate required to determine the Treasury Bill
Rate, the Treasury Bill Rate shall be determined on the basis of the quotation
or quotations furnished by the remaining U.S. Government Securities Dealer or
U.S. Government Securities Dealers and any substitute U.S. Government Securities
Dealers selected by the Trust to provide such rate or rates not being supplied
by any U.S. Government Securities Dealer or U.S. Government Securities Dealers,
as the case may be, or, if the Trust does not select any such Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers,
by the remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers.

     (98) "TREASURY NOTE" shall mean a direct obligation of the U.S. Government
having a maturity at the time of issuance of five years or less but more than
364 days.

     (99) "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

                                      A-13
<Page>
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 from the U.S. Government Securities Dealers to the Auction Agent. If
any U.S. Government Securities Dealer does not quote a rate required to
determine the Treasury Note Rate, the Treasury Note Rate shall be determined on
the basis of the quotation or quotations furnished by the remaining U.S.
Government Securities Dealer or U.S. Government Securities Dealers and any
substitute U.S. Government Securities Dealers selected by the Trust to provide
such rate or rates not being supplied by any U.S. Governmental Securities Dealer
or U.S. Government Securities Dealers, as the case may be, or, if the Trust does
not select any such Substitute U.S. Government Securities Dealer or Substitute
U.S. Government Securities Dealers, by the remaining U.S. Government Securities
Dealer or U.S. Government Securities Dealers.

    (100) "TRUST" shall mean the entity named on the first page of this
statement, which is the issuer of the AMPS.

    (101) "U.S. GOVERNMENT SECURITIES DEALER" shall mean Lehman Government
Securities Incorporated, Goldman, Sachs & Co., Salomon Brothers Inc., Morgan
Guaranty Trust Company of New York and any other U.S. Government Securities
dealer selected by the Trust as to which Moody's (if Moody's is then rating the
AMPS) and S&P (if S&P is then rating the AMPS) shall not have objected or their
respective affiliates or successors, if such entity is a U.S. Government
securities dealer.

    (102) "VALUATION DATE" shall mean, for purposes of determining whether the
Trust is maintaining the Preferred Shares Basic Maintenance Amount, each
Business Day.

    (103) "VOLATILITY FACTOR" shall mean, as of any Valuation Date, the Moody's
Volatility Factor and the S&P Volatility Factor.

    (104) "VOTING PERIOD" shall have the meaning specified in paragraph (b) of
Section 5 of Part I of this Statement.

    (105) "WINNING BID RATE" shall have the meaning specified in paragraph
(a) of Section 3 of Part II of this Statement.

    Any additional definitions specifically set forth in Section 8 of Appendix A
hereto shall be incorporated herein and made part hereof by reference thereto.

                                    PART I.

1. NUMBER OF AUTHORIZED SHARES.

    The number of authorized shares constituting a series of the AMPS shall be
as set forth with respect to such series in Section 2 of Appendix A hereto.

2. DIVIDENDS.

      (a) RANKING. The shares of a series of the AMPS shall rank on a parity
with each other, with shares of any other series of the AMPS and with shares of
any other series of preferred shares as to the payment of dividends by the
Trust.

                                      A-14
<Page>
     (b) CUMULATIVE CASH DIVIDENDS. The Holders of any series of AMPS shall be
entitled to receive, when, as and if declared by the Board of Trustees, out of
funds legally available therefor in accordance with the Declaration and
applicable law, cumulative cash dividends at the Applicable Rate for shares of
such series, determined as set forth in paragraph (e) of this Section 2, and no
more (except to the extent set forth in Section 3 of this Part I), payable on
the Dividend Payment Dates with respect to shares of such series determined
pursuant to paragraph (d) of this Section 2. Holders of AMPS shall not be
entitled to any dividend, whether payable in cash, property or shares, in excess
of full cumulative dividends, as herein provided, on AMPS. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on AMPS which may be in arrears, and, except to the extent
set forth in subparagraph (e)(i) of this Section 2, no additional sum of money
shall be payable in respect of any such arrearage.

      (c) DIVIDENDS CUMULATIVE FROM DATE OF ORIGINAL ISSUE Dividends on any
series of AMPS shall accumulate at the Applicable Rate for shares of such series
from the Date of Original Issue thereof.

     (d) DIVIDEND PAYMENT DATES AND ADJUSTMENT THEREOF. The Dividend Payment
Dates with respect to shares of a series of AMPS shall be as set forth with
respect to shares of such series in Section 9 of Appendix A hereto; provided,
however, that:

          (i) if the day on which dividends would otherwise be payable on shares
    of such series is not a Business Day, then such dividends shall be payable
    on such shares on the first Business Day that falls after such day; and

         (ii) notwithstanding Section 9 of Appendix A hereto, the Trust in its
    discretion may establish the Dividend Payment Dates in respect of any
    Special Rate Period of shares of a series of AMPS consisting of more than 28
    Rate Period Days; provided, however, that such dates shall be set forth in
    the Notice of Special Rate Period relating to such Special Rate Period, as
    delivered to the Auction Agent, which Notice of Special Rate Period shall be
    filed with the Secretary of the Trust; and further provided that (1) any
    such Dividend Payment Date shall be a Business Day and (2) the last Dividend
    Payment in respect of such Special Rate Period shall be the Business Day
    immediately following the last day thereof, as such last day is determined
    in accordance with paragraph (b) of Section 4 of this Part I.

      (e) DIVIDEND RATES AND CALCULATION OF DIVIDENDS.

          (i) DIVIDEND RATES. The dividend rate on AMPS of any series during the
    period from and after the Date of Original Issue of shares of such series to
    and including the last day of the Initial Rate Period of shares of such
    series shall be equal to the rate per annum set forth with respect to shares
    of such series under "Designation as to Series" in Section 1 of Appendix A
    hereto. For each Subsequent Rate Period of shares of such series thereafter,
    the dividend rate on shares of such series shall be equal to the rate per
    annum that results from an Auction for shares of such series on the Auction
    Date next preceding such Subsequent Rate Period; provided, however, that if:

            (A) an Auction for any such Subsequent Rate Period is not held for
       any reason other than as described below, the dividend rate on shares of
       such series for such Subsequent Rate Period will be the Maximum Rate for
       shares of such series on the Auction Date therefor;

            (B) any Failure to Deposit shall have occurred with respect to
       shares of such series during any Rate Period thereof (other than any
       Special Rate Period consisting of more than 364 Rate Period Days or any
       Rate Period succeeding any Special Rate Period consisting of more than
       364 Rate Period Days during which a Failure to Deposit occurred that has
       not

                                      A-15
<Page>
       been cured), but, prior to 12:00 Noon, New York City time, on the third
       Business Day next succeeding the date on which such Failure to Deposit
       occurred, such Failure to Deposit shall have been cured in accordance
       with paragraph (f) of this Section 2 and the Trust shall have paid to the
       Auction Agent a late charge ( "Late Charge") equal to the sum of (1) if
       such Failure to Deposit consisted of the failure timely to pay to the
       Auction Agent the full amount of dividends with respect to any Dividend
       Period of the shares of such series, an amount computed by multiplying
       (x) 200% of the Reference Rate for the Rate Period during which such
       Failure to Deposit occurs on the Dividend Payment Date for such Dividend
       Period by (y) a fraction, the numerator of which shall be the number of
       days for which such Failure to Deposit has not been cured in accordance
       with paragraph (f) of this Section 2 (including the day such Failure to
       Deposit occurs and excluding the day such Failure to Deposit is cured)
       and the denominator of which shall be 360, and applying the rate obtained
       against the aggregate Liquidation Preference of the outstanding shares of
       such series and (2) if such Failure to Deposit consisted of the failure
       timely to pay to the Auction Agent the Redemption Price of the shares, if
       any, of such series for which Notice of Redemption has been mailed by the
       Trust pursuant to paragraph (c) of Section 11 of this Part I, an amount
       computed by multiplying (x) 200% of the Reference Rate for the Rate
       Period during which such Failure to Deposit occurs on the redemption date
       by (y) a fraction, the numerator of which shall be the number of days for
       which such Failure to Deposit is not cured in accordance with paragraph
       (f) of this Section 2 (including the day such Failure to Deposit occurs
       and excluding the day such Failure to Deposit is cured) and the
       denominator of which shall be 360, and applying the rate obtained against
       the aggregate Liquidation Preference of the outstanding shares of such
       series to be redeemed, no Auction will be held in respect of shares of
       such series for the Subsequent Rate Period thereof and the dividend rate
       for shares of such series for such Subsequent Rate Period will be the
       Maximum Rate for shares of such series on the Auction Date for such
       Subsequent Rate Period;

            (C) any Failure to Deposit shall have occurred with respect to
       shares of such series during any Rate Period thereof (other than any
       Special Rate Period consisting of more than 364 Rate Period Days or any
       Rate Period succeeding any Special Rate Period consisting of more than
       364 Rate Period Days during which a Failure to Deposit occurred that has
       not been cured), and, prior to 12:00 Noon, New York City time, on the
       third Business Day next succeeding the date on which such Failure to
       Deposit occurred, such Failure to Deposit shall not have been cured in
       accordance with paragraph (f) of this Section 2 or the Trust shall not
       have paid the applicable Late Charge to the Auction Agent, no Auction
       will be held in respect of shares of such series for the first Subsequent
       Rate Period thereof thereafter (or for any Rate Period thereof thereafter
       to and including the Rate Period during which (1) such Failure to Deposit
       is cured in accordance with paragraph (f) of this Section 2 and (2) the
       Trust pays the applicable Late Charge to the Auction Agent (the condition
       set forth in this clause (2) to apply only in the event Moody's is rating
       such shares at the time the Trust cures such Failure to Deposit), in each
       case no later than 12:00 Noon, New York City time, on the fourth Business
       Day prior to the end of such Rate Period), and the dividend rate for
       shares of such series for each such Subsequent Rate Period shall be a
       rate per annum equal to the Maximum Rate for shares of such series on the
       Auction Date for such Subsequent Rate Period (but with the prevailing
       rating for shares of such series, for purposes of determining such
       Maximum Rate, being deemed to be below "Ba3"/BB); or

            (D) any Failure to Deposit shall have occurred with respect to
       shares of such series during a Special Rate Period thereof consisting of
       more than 364 Rate Period Days, or during any Rate Period thereof
       succeeding any Special Rate Period consisting of more than 364 Rate
       Period Days during which a Failure to Deposit occurred that has not been
       cured, and, prior to 12:00 Noon, New York City time, on the fourth
       Business Day preceding the Auction Date for

                                      A-16
<Page>
       the Rate Period subsequent to such Rate Period, such Failure to Deposit
       shall not have been cured in accordance with paragraph (f) of this
       Section 2 or, in the event Moody's is then rating such shares, the Trust
       shall not have paid the applicable Late Charge to the Auction Agent (such
       Late Charge, for purposes of this subparagraph (D), to be calculated by
       using, as the Reference Rate, the Reference Rate applicable to a Rate
       Period (x) consisting of more than 182 Rate Period Days but fewer than
       365 Rate Period Days and (y) commencing on the date on which the Rate
       Period during which Failure to Deposit occurs commenced), no Auction will
       be held in respect of shares of such series for such Subsequent Rate
       Period (or for any Rate Period thereof thereafter to and including the
       Rate Period during which (1) such Failure to Deposit is cured in
       accordance with paragraph (f) of this Section 2 and (2) the Trust pays
       the applicable Late Charge to the Auction Agent (the condition set forth
       in this clause (2) to apply only in the event Moody's is rating such
       shares at the time the Trust cures such Failure to Deposit), in each case
       no later than 12:00 Noon, New York City time, on the fourth Business Day
       prior to the end of such Rate Period), and the dividend rate for shares
       of such series for each such Subsequent Rate Period shall be a rate per
       annum equal to the Maximum Rate for shares of such series on the Auction
       Date for such Subsequent Rate Period (but with the prevailing rating for
       shares of such series, for purposes of determining such Maximum Rate,
       being deemed to be below "Ba3"/BB) (the rate per annum at which dividends
       are payable on shares of a series of AMPS for any Rate Period thereof
       being herein referred to as the "Applicable Rate" for shares of such
       series).

         (ii) CALCULATION OF DIVIDENDS. The amount of dividends per share
    payable on shares of a series of AMPS on any date on which dividends shall
    be payable on shares of such series shall be computed by multiplying the
    Applicable Rate for shares of such series in effect for such Dividend Period
    or Dividend Periods or part thereof for which dividends have not been paid
    by a fraction, the numerator of which shall be the number of days in such
    Dividend Period or Dividend Periods or part thereof and the denominator of
    which shall be 365 if such Dividend Period consists of 7 Rate Period Days
    and 360 for all other Dividend Periods, and applying the rate obtained
    against $25,000.

      (f) CURING A FAILURE TO DEPOSIT. A Failure to Deposit with respect to
shares of a series of AMPS shall have been cured (if such Failure to Deposit is
not solely due to the willful failure of the Trust to make the required payment
to the Auction Agent) with respect to any Rate Period of shares of such series
if, within the respective time periods described in subparagraph (e)(i) of this
Section 2, the Trust shall have paid to the Auction Agent (A) all accumulated
and unpaid dividends on shares of such series and (B) without duplication, the
Redemption Price for shares, if any, of such series for which Notice of
Redemption has been mailed by the Trust pursuant to paragraph (c) of Section 11
of Part I of this Statement; provided, however, that the foregoing clause
(B) shall not apply to the Trust's failure to pay the Redemption Price in
respect of AMPS when the related Redemption Notice provides that redemption of
such shares is subject to one or more conditions precedent and any such
condition precedent shall not have been satisfied at the time or times and in
the manner specified in such Notice of Redemption.

      (g) DIVIDEND PAYMENTS BY TRUST TO AUCTION AGENT. The Trust shall pay to
the Auction Agent, not later than 12:00 Noon, New York City time, on each
Dividend Payment Date for shares of a series of AMPS, an aggregate amount of
funds available on the next Business Day in The City of New York, New York,
equal to the dividends to be paid to all Holders of shares of such series on
such Dividend Payment Date.

     (h) AUCTION AGENT AS TRUSTEE OF DIVIDEND PAYMENTS BY TRUST. All moneys paid
to the Auction Agent for the payment of dividends (or for the payment of any
Late Charge) shall be held in trust for the payment of such dividends (and any
such Late Charge) by the Auction Agent for the benefit of the

                                      A-17
<Page>
Holders specified in paragraph (i) of this Section 2. Any moneys paid to the
Auction Agent in accordance with the foregoing but not applied by the Auction
Agent to the payment of dividends (and any such Late Charge) will, to the extent
permitted by law, be repaid to the Trust at the end of 90 days from the date on
which such moneys were so to have been applied.

      (i) DIVIDENDS PAID TO HOLDERS. Each dividend on AMPS shall be paid on the
Dividend Payment Date therefor to the Holders thereof as their names appear on
the record books of the Trust on the Business Day next preceding such Dividend
Payment Date.

      (j) DIVIDENDS CREDITED AGAINST EARLIEST ACCUMULATED BUT UNPAID DIVIDENDS.
Any dividend payment made on AMPS shall first be credited against the earliest
accumulated but unpaid dividends due with respect to such shares. Dividends in
arrears for any past Dividend Period may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to the Holders as their
names appear on the record books of the Trust on such date, not exceeding 15
days preceding the payment date thereof, as may be fixed by the Board of
Trustees.

     (k) DIVIDENDS DESIGNATED AS EXEMPT-INTEREST DIVIDENDS. Dividends on AMPS
shall be designated as exempt-interest dividends up to the amount of tax-exempt
income of the Trust, to the extent permitted by, and for purposes of, section
852 of the Code.

3. GROSS-UP PAYMENTS.

    Holders of AMPS shall be entitled to receive, when, as and if declared by
the Board of Trustees, out of funds legally available therefor in accordance
with the Declaration and applicable law, dividends in an amount equal to the
aggregate Gross-up Payments as follows:

          (a) TAXABLE ALLOCATION WITHOUT NOTICE. If, but only 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 given advance notice
    thereof to the Auction Agent as provided in Section 5 of Part II of this
    Statement (such allocation being referred to herein as a "Taxable
    Allocation"), whether or not by reason of the fact that such allocation is
    made retroactively as a result of the redemption of all or a portion of the
    outstanding AMPS or the liquidation of the Trust, the Trust shall, during
    the Trust's fiscal year in which the Taxable Allocation was made or within
    90 days after the end of such fiscal year, provide notice thereof to the
    Auction Agent and direct the Trust's dividend disbursing agent to send such
    notice and a Gross-up Payment to each Holder of such shares that was
    entitled to such dividend payment during such fiscal year at such Holder's
    address as the same appears or last appeared on the record books of the
    Trust.

         (b) RESERVED.

          (c) NO GROSS-UP PAYMENTS IN THE EVENT OF A REALLOCATION.
    Notwithstanding paragraph (a) above, the Trust shall not be required to make
    Gross-up Payments with respect to any 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.

4. DESIGNATION OF SPECIAL RATE PERIODS.

      (a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The Trust, at its
option, may designate any succeeding Subsequent Rate Period of shares of a
series of AMPS as a Special Rate Period consisting of a specified number of Rate
Period Days evenly divisible by seven and not more than 1,820, subject to
adjustment as provided in paragraph (b) of this Section 4 (a "Special Rate
Period"). A designation of a Special Rate Period shall be effective only if
(A) notice thereof shall have been given

                                      A-18
<Page>
in accordance with paragraph (c) and subparagraph (d)(i) of this Section 4,
(B) an Auction for shares of such series shall have been held on the Auction
Date immediately preceding the first day of such proposed Special Rate Period
and Sufficient Clearing Bids for shares of such series shall have existed in
such Auction, and (C) if any Notice of Redemption shall have been mailed by the
Trust pursuant to paragraph (c) of Section 11 of this Part I with respect to any
shares of such series, the Redemption Price with respect to such shares shall
have been deposited with the Auction Agent. In the event the Trust wishes to
designate any succeeding Subsequent Rate Period for shares of a series of AMPS
as a Special Rate Period consisting of more than 28 Rate Period Days, the Trust
shall notify Moody's (if Moody's is then rating such series) and S&P (if S&P is
then rating such series) in advance of the commencement of such Subsequent Rate
Period that the Trust wishes to designate such Subsequent Rate Period as a
Special Rate Period and shall provide Moody's (if Moody's is then rating such
series) and S&P (if S&P is then rating such series) with such documents as it
may request.

     (b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. If the Trust wishes to
designate a Subsequent Rate Period as a Special Rate Period, but the day
following what would otherwise be the last day of such Special Rate Period is
not a [      ] that is a Business Day in the case of a series of AMPS designated
as "Series [      ] AMPS" in Section 1 of Appendix A hereto, then the Trust
shall designate such Subsequent Rate Period as a Special Rate Period consisting
of the period commencing on the first day following the end of the immediately
preceding Rate Period and ending on the first [      ] that is followed by a
[      ] that is a Business Day preceding what would otherwise be such last day.

    If the Trust wishes to designate a Subsequent Rate Period as a Special Rate
Period, but the day following what would otherwise be the last day of such
Special Rate Period is not a [      ] that is a Business Day in the case of a
series of AMPS designated as "Series [      ] AMPS" in Section 1 of Appendix A
hereto, then the Trust shall designate such Subsequent Rate Period as a Special
Rate Period consisting of the period commencing on the first day following the
end of the immediately preceding Rate Period and ending on the first [      ]
that is followed by a [      ] that is a Business Day preceding what would
otherwise be such last day.

    If the Trust wishes to designate a Subsequent Rate Period as a Special Rate
Period, but the day following what would otherwise be the last day of such
Special Rate Period is not a [      ] that is a Business Day in the case of a
series of AMPS designated as "Series [      ] AMPS" in Section 1 of Appendix A
hereto, then the Trust shall designate such Subsequent Rate Period as a Special
Rate Period consisting of the period commencing on the first day following the
end of the immediately preceding Rate Period and ending on the first [      ]
that is followed by a [      ] that is a Business Day preceding what would
otherwise be such last day.

    If the Trust wishes to designate a Subsequent Rate Period as a Special Rate
Period, but the day following what would otherwise be the last day of such
Special Rate Period is not a [      ] that is a Business Day in the case of a
series of AMPS designated as "Series [      ] AMPS" in Section 1 of Appendix A
hereto, then the Trust shall designate such Subsequent Rate Period as a Special
Rate Period consisting of the period commencing on the first day following the
end of the immediately preceding Rate Period and ending on the first [      ]
that is followed by a [      ] that is a Business Day preceding what would
otherwise be such last day.

      (a) NOTICE OF PROPOSED SPECIAL RATE PERIOD. If the Trust proposes to
designate any succeeding Subsequent Rate Period of shares of a series of AMPS as
a Special Rate Period pursuant to paragraph (a) of this Section 4, not less than
20 (or such lesser number of days as may be agreed to from time to time by the
Auction Agent) nor more than 30 days prior to the date the Trust proposes to
designate as the first day of such Special Rate Period (which shall be such day
that would otherwise be the first day of a Minimum Rate Period), notice shall be
(i) published or caused to be published by the

                                      A-19
<Page>
Trust in a newspaper of general circulation to the financial community in The
City of New York, New York, which carries financial news, and (ii) mailed by the
Trust by first-class mail, postage prepaid, to the Holders of shares of such
series. Each such notice shall state (A) that the Trust may exercise its option
to designate a succeeding Subsequent Rate Period of shares of such series as a
Special Rate Period, specifying the first day thereof and (B) that the Trust
will, by 11:00 A.M., New York City time, on the second Business Day next
preceding such date (or by such later time or date, or both, as may be agreed to
by the Auction Agent) notify the Auction Agent of either (x) its determination,
subject to certain conditions, to exercise such option, in which case the Trust
shall specify the Special Rate Period designated, or (y) its determination not
to exercise such option.

     (b) NOTICE OF SPECIAL RATE PERIOD. No later than 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of any proposed
Special Rate Period of shares of a series of AMPS as to which notice has been
given as set forth in paragraph (c) of this Section 4 (or such later time or
date, or both, as may be agreed to by the Auction Agent), the Trust shall
deliver to the Auction Agent either:

          (i) a notice ("Notice of Special Rate Period") stating (A) that the
    Trust has determined to designate the next succeeding Rate Period of shares
    of such series as a Special Rate Period, specifying the same and the first
    day thereof, (B) the Auction Date immediately prior to the first day of such
    Special Rate Period, (C) that such Special Rate Period shall not commence if
    (1) an Auction for shares of such series shall not be held on such Auction
    Date for any reason or (2) an Auction for shares of such series shall be
    held on such Auction Date but Sufficient Clearing Bids for shares of such
    series shall not exist in such Auction, (D) the scheduled Dividend Payment
    Dates for shares of such series during such Special Rate Period and (E) the
    Special Redemption Provisions, if any, applicable to shares of such series
    in respect of such Special Rate Period, such notice to be accompanied by a
    Preferred Shares Basic Maintenance Report showing that, as of the third
    Business Day next preceding such proposed Special Rate Period, Moody's
    Eligible Assets (if Moody's is then rating such series) and S&P Eligible
    Assets (if S&P is then rating such series) each have an aggregate Discounted
    Value at least equal to the Preferred Shares Basic Maintenance Amount as of
    such Business Day (assuming for purposes of the foregoing calculation that
    (a) the Maximum Rate is the Maximum Rate on such Business Day as if such
    Business Day were the Auction Date for the proposed Special Rate Period, and
    (b) the Moody's Discount Factors applicable to Moody's Eligible Assets are
    determined by reference to the first Exposure Period longer than the
    Exposure Period then applicable to the Trust, as described in the definition
    of Moody's Discount Factor herein); or

         (ii) a notice stating that the Trust has determined not to exercise its
    option to designate a Special Rate Period of shares of such series and that
    the next succeeding Rate Period of shares of such series shall be a Minimum
    Rate Period.

      (c) FAILURE TO DELIVER NOTICE OF SPECIAL RATE PERIOD. If the Trust fails
to deliver either of the notices described in subparagraphs (d)(i) or
(d)(ii) of this Section 4 (and, in the case of the notice described in
subparagraph (d)(i) of this Section 4, a Preferred Shares Basic Maintenance
Report to the effect set forth in such subparagraph (if either Moody's or S&P is
then rating the series in question)) with respect to any designation of any
proposed Special Rate Period to the Auction Agent by 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of such proposed
Special Rate Period (or by such later time or date, or both, as may be agreed to
by the Auction Agent), the Trust shall be deemed to have delivered a notice to
the Auction Agent with respect to such Special Rate Period to the effect set
forth in subparagraph (d)(ii) of this Section 4. In the event the Trust delivers
to the Auction Agent a notice described in subparagraph (d)(i) of this
Section 4, it shall file a copy of such notice with the Secretary of the Trust,
and the contents of such notice shall be binding on the Trust. In the event the
Trust delivers to the Auction Agent a notice

                                      A-20
<Page>
described in subparagraph (d)(ii) of this Section 4, the Trust will provide
Moody's (if Moody's is then rating the series in question) and S&P (if S&P is
then rating the series in question) a copy of such notice.

5. VOTING RIGHTS.

      (a) ONE VOTE PER SHARE OF AMPS. Except as otherwise provided in the
Declaration or as otherwise required by law, (i) each Holder of AMPS shall be
entitled to one vote for each share of AMPS held by such Holder on each matter
submitted to a vote of shareholders of the Trust, and (ii) the holders of
outstanding preferred shares, including each share of the AMPS, and of Common
Shares shall vote together as a single class; provided, however, that, at any
meeting of the shareholders of the Trust held for the election of trustees, the
holders of outstanding preferred shares, including the AMPS, represented in
person or by proxy at said meeting, shall be entitled, as a class, to the
exclusion of the holders of all other securities and classes of shares of
beneficial interest of the Trust, to elect two trustees of the Trust, each of
the AMPS entitling the holder thereof to one vote. Subject to paragraph (b) of
this Section 5, the holders of outstanding Common Shares and AMPS voting
together as a single class, shall elect the balance of the trustees.

     (b) Voting For Additional Trustees.

          (i) VOTING PERIOD. Except as otherwise provided in the Declaration or
    as otherwise required by law, during any period in which any one or more of
    the conditions described in subparagraphs (A) or (B) of this subparagraph
    (b)(i) shall exist (such period being referred to herein as a "Voting
    Period"), the number of trustees constituting the Board of Trustees shall be
    automatically increased by the smallest number that, when added to the two
    trustees elected exclusively by the holders of preferred shares, including
    the AMPS, would constitute a majority of the Board of Trustees as so
    increased by such smallest number, and the holders of preferred shares,
    including the AMPS, shall be entitled, voting as a class on a
    one-vote-per-share basis (to the exclusion of the holders of all other
    securities and classes of shares of beneficial interest of the Trust), to
    elect such smallest number of additional trustees, together with the two
    trustees that such holders are in any event entitled to elect. A Voting
    Period shall commence:

            (A) if at the close of business on any dividend payment date
       accumulated dividends (whether or not earned or declared) on any
       outstanding AMPS, equal to at least two full years' dividends shall be
       due and unpaid and sufficient cash or specified securities shall not have
       been deposited with the Auction Agent for the payment of such accumulated
       dividends; or

            (B) if at any time holders of preferred shares, including the AMPS,
       are entitled under the Investment Company Act to elect a majority of the
       trustees of the Trust.

    Upon the termination of a Voting Period, the voting rights described in this
subparagraph (b)(i) shall cease, subject always, however, to the revesting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this subparagraph (b)(i).

         (ii) NOTICE OF SPECIAL MEETING. As soon as practicable after the
    accrual of any right of the holders of preferred shares, including the AMPS,
    to elect additional trustees as described in subparagraph (b)(i) of this
    Section 5, the Trust shall notify the Auction Agent and the Auction Agent
    shall call a special meeting of such holders, by mailing a notice of such
    special meeting to such holders, such meeting to be held not less than 10
    nor more than 20 days after the date of mailing of such notice. If the Trust
    fails to send such notice to the Auction Agent or if the Auction Agent does
    not call such a special meeting, it may be called by any such holder on like
    notice. The

                                      A-21
<Page>
    record date for determining the holders entitled to notice of and to vote at
    such special meeting shall be the close of business on the fifth Business
    Day preceding the day on which such notice is mailed. At any such special
    meeting and at each meeting of holders of preferred shares, including the
    AMPS, held during a Voting Period at which trustees are to be elected, such
    holders, voting together as a class (to the exclusion of the holders of all
    other securities and classes of shares of beneficial interest of the Trust),
    shall be entitled to elect the number of trustees prescribed in subparagraph
    (b)(i) of this Section 5 on a one-vote-per-share basis.

         (iii) TERMS OF OFFICE OF EXISTING TRUSTEES. The terms of office of all
    persons who are trustees of the Trust at the time of a special meeting of
    Holders and holders of other preferred shares to elect trustees shall
    continue, notwithstanding the election at such meeting by the Holders and
    such other holders of the number of trustees that they are entitled to
    elect, and the persons so elected by the Holders and such other holders,
    together with the two incumbent trustees elected by the Holders and such
    other holders of preferred shares and the remaining incumbent trustees
    elected by the holders of the Common Shares and AMPS, shall constitute the
    duly elected trustees of the Trust.

         (iv) TERMS OF OFFICE OF CERTAIN TRUSTEES TO TERMINATE UPON TERMINATION
    OF VOTING PERIOD. Simultaneously with the termination of a Voting Period,
    the terms of office of the additional trustees elected by the Holders and
    holders of other AMPS pursuant to subparagraph (b)(i) of this Section 5
    shall terminate, the remaining trustees shall constitute the trustees of the
    Trust and the voting rights of the Holders and such other holders to elect
    additional trustees pursuant to subparagraph (b)(i) of this Section 5 shall
    cease, subject to the provisions of the last sentence of subparagraph
    (b)(i) of this Section 5.

          (c) Holders of AMPS to Vote on Certain Other Matters.

          (i) INCREASES IN CAPITALIZATION. So long as any AMPS are outstanding,
    the Trust shall not, without the affirmative vote or consent of the Holders
    of at least a majority of the AMPS outstanding at the time, in person or by
    proxy, either in writing or at a meeting, voting as a separate class:
    (a) authorize, create or issue any class or series of shares ranking prior
    to or on a parity with the AMPS with respect to the payment of dividends or
    the distribution of assets upon dissolution, liquidation or winding up of
    the affairs of the Trust, or authorize, create or issue additional shares of
    any series of AMPS (except that, notwithstanding the foregoing, but subject
    to the provisions of paragraph (c) of Section 10 of this Part I, the Board
    of Trustees, without the vote or consent of the Holders of AMPS, may from
    time to time authorize and create, and the Trust may from time to time
    issue, additional shares of any series of AMPS or classes or series of other
    preferred shares ranking on a parity with 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; provided, however, that if Moody's
    or S&P is not then rating the AMPS, the aggregate liquidation preference of
    all preferred shares of the Trust outstanding after any such issuance,
    exclusive of accumulated and unpaid dividends, may not exceed the amount set
    forth in Section 10 of Appendix A hereto) or (b) amend, alter or repeal the
    provisions of the Declaration or this Statement, whether by merger,
    consolidation or otherwise, so as to adversely affect any preference, right
    or power of such AMPS or the Holders thereof; 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

                                      A-22
<Page>
    Company Act Preferred Shares Asset Coverage or the Preferred Shares Basic
    Maintenance Amount. 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. If any action set forth above would adversely
    affect the rights of one or more series (the "Affected Series") of AMPS in a
    manner different from any other series of AMPS, the Trust will not approve
    any such action without the affirmative vote or consent of the Holders of at
    least a majority of the shares of each such Affected Series outstanding at
    the time, in person or by proxy, either in writing or at a meeting (each
    such Affected Series voting as a separate class).

         (ii) INVESTMENT COMPANY ACT MATTERS. Unless a higher percentage is
    provided for in the Declaration, (A) the affirmative vote of the Holders of
    at least a majority of the AMPS outstanding at the time, voting as a
    separate class, shall be required to approve any conversion of the Trust
    from a closed-end to an open-end investment company and (B) the affirmative
    vote of the Holders of a "majority of the outstanding AMPS," voting as a
    separate class, shall be required to approve any plan of reorganization (as
    such term is used in the Investment Company Act) adversely affecting such
    shares. The affirmative vote of the holders of a "majority of the
    outstanding AMPS," voting as a separate class, shall be required to approve
    any action not described in the first sentence of this
    Section 5(c)(ii) requiring a vote of security holders of the Trust under
    section 13(a) of the Investment Company Act. For purposes of the foregoing,
    "majority of the outstanding AMPS" means (i) 67% or more of such shares
    present at a meeting, if the Holders of more than 50% of such shares are
    present or represented by proxy, or (ii) more than 50% of such shares,
    whichever is less. In the event a vote of Holders of AMPS is required
    pursuant to the provisions of section 13(a) of the Investment Company Act,
    the Trust shall, not later than ten Business Days prior to the date on which
    such vote is to be taken, notify Moody's (if Moody's is then rating the
    AMPS) and S&P (if S&P is then rating the AMPS) that such vote is to be taken
    and the nature of the action with respect to which such vote is to be taken.
    The Trust shall, not later than ten Business Days after the date on which
    such vote is taken, notify Moody's (if Moody's is then rating the AMPS) and
    S&P (if S&P is then rating the AMPS) of the results of such vote.

     (d) BOARD MAY TAKE CERTAIN ACTIONS WITHOUT SHAREHOLDER APPROVAL. The Board
of Trustees, without the vote or consent of the shareholders of the Trust, may
from time to time amend, alter or repeal any or all of the definitions of the
terms listed below, or any provision of this Statement viewed by Moody's or S&P
as a predicate for any such definition, and any such amendment, alteration or
repeal will not be deemed to affect the preferences, rights or powers of AMPS or
the Holders thereof; provided, however, that the Board of Trustees receives
written confirmation from Moody's or S&P (such confirmation being required to be
obtained only in the event Moody's or S&P is rating the AMPS and in no event
being required to be obtained in the case of the definitions of (x) Deposit
Securities, Discounted Value and Receivables for Municipal Obligations Sold as
such terms apply to S&P Eligible Assets and (y) S&P Discount Factor, S&P
Eligible Asset, S&P Exposure Period and S&P Volatility Factor) and S&P (such
confirmation being required to be obtained only in the event S&P is rating the
AMPS and in no event being required to be obtained in the case of the
definitions of (x) Discounted Value and Receivables for Municipal Obligations
Sold as such terms apply to Moody's Eligible Assets, and (y) Moody's Discount
Factor, Moody's Eligible Asset, Moody's Exposure Period

                                      A-23
<Page>
and Moody's Volatility Factor) that any such amendment, alteration or repeal
would not impair the ratings then assigned by Moody's or S&P, as the case may
be, to the AMPS:

<Table>
<S>                                                 <C>
Deposit Securities................................  Preferred Shares Basic Maintenance Amount
Discounted Value..................................  Preferred Shares Basic Maintenance Cure Date
Escrowed Bonds....................................  Preferred Shares Basic Maintenance Report
Market Value......................................  Quarterly Valuation Date
Maximum Potential Gross-up Payment Liability......  Receivables for Municipal Obligations Sold
Moody's Discount Factor...........................  S&P Discount Factor
Moody's Eligible Asset............................  S&P Eligible Asset
Moody's Exposure Period...........................  S&P Exposure Period
Moody's Volatility Factor.........................  S&P Volatility Factor
1940 Act Cure Date................................  Valuation Date
1940 Act Preferred Asset Coverage.................  Volatility Factor
</Table>

      (e) VOTING RIGHTS SET FORTH HEREIN ARE SOLE VOTING RIGHTS. Unless
otherwise required by law, the Holders of AMPS shall not have any relative
rights or preferences or other special rights other than those specifically set
forth herein.

      (f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders of AMPS shall
have no preemptive rights or rights to cumulative voting.

      (g) VOTING FOR TRUSTEES SOLE REMEDY FOR TRUST'S FAILURE TO PAY DIVIDENDS.
In the event that the Trust fails to pay any dividends on the AMPS, the
exclusive remedy of the Holders shall be the right to vote for trustees pursuant
to the provisions of this Section 5.

     (h) HOLDERS ENTITLED TO VOTE. For purposes of determining any rights of the
Holders to vote on any matter, whether such right is created by this Statement,
by the other provisions of the Declaration, by statute or otherwise, no Holder
shall be entitled to vote any Preferred Share and no Preferred Share shall be
deemed to be "outstanding" for the purpose of voting or determining the number
of shares required to constitute a quorum if, prior to or concurrently with the
time of determination of shares entitled to vote or shares deemed outstanding
for quorum purposes, as the case may be, the requisite Notice of Redemption with
respect to such shares shall have been mailed as provided in paragraph (c) of
Section 11 of this Part I and the Redemption Price for the redemption of such
shares shall have been deposited in trust with the Auction Agent for that
purpose. No Preferred Share held by the Trust or any affiliate of the Trust
(except for shares held by a Broker-Dealer that is an affiliate of the Trust for
the account of its customers) shall have any voting rights or be deemed to be
outstanding for voting or other purposes.

6. INVESTMENT COMPANY ACT PREFERRED SHARES ASSET COVERAGE.

    The Trust shall maintain, as of the last Business Day of each month in which
any AMPS are outstanding, the Investment Company Act Preferred Shares Asset
Coverage.

7. PREFERRED SHARES BASIC MAINTENANCE AMOUNT.

      (a) So long as AMPS are outstanding, the Trust shall maintain, on each
Valuation Date, and shall verify to its satisfaction that it is maintaining on
such Valuation Date (i) Moody's Eligible Assets having an aggregate Discounted
Value equal to or greater than the Preferred Shares Basic Maintenance Amount (if
Moody's is then rating the AMPS) and S&P Eligible Assets having an aggregate
Discounted Value equal to or greater than the Preferred Shares Basic Maintenance
Amount (if S&P is then rating the AMPS).

                                      A-24
<Page>
     (b) On or before 5:00 P.M., New York City time, on the third Business Day
after a Valuation Date on which the Trust fails to satisfy the Preferred Shares
Basic Maintenance Amount, and on the third Business Day after the Preferred
Shares Basic Maintenance Cure Date with respect to such Valuation Date, the
Trust shall complete and deliver to Moody's (if Moody's is then rating the
AMPS), S&P (if S&P is then rating the AMPS) and the Auction Agent (if either
Moody's or S&P is then rating the AMPS) a Preferred Shares Basic Maintenance
Report as of the date of such failure or such Preferred Shares Basic Maintenance
Cure Date, as the case may be, which will be deemed to have been delivered to
the Auction Agent if the Auction Agent receives a copy or telecopy, telex or
other electronic transcription thereof and on the same day the Trust mails to
the Auction Agent for delivery on the next Business Day the full Preferred
Shares Basic Maintenance Report. The Trust shall also deliver a Preferred Shares
Basic Maintenance Report to (i) the Auction Agent (if either Moody's or S&P is
then rating the AMPS) as of (A) the fifteenth day of each month (or, if such day
is not a Business Day, the next succeeding Business Day) and (B) the last
Business Day of each month, (ii) Moody's (if Moody's is then rating the AMPS)
and S&P (if S&P is then rating the AMPS) as of any Quarterly Valuation Date, in
each case on or before the third Business Day after such day, and S&P, if and
when requested for any Valuation Date, on or before the third Business Day after
such request. A failure by the Trust to deliver a Preferred Shares Basic
Maintenance Report pursuant to the preceding sentence shall be deemed to be
delivery of a Preferred Shares Basic Maintenance Report indicating the
Discounted Value for all assets of the Trust is less than the Preferred Shares
Basic Maintenance Amount, as of the relevant Valuation Date.

      (c) Within ten Business Days after the date of delivery of a Preferred
Shares Basic Maintenance Report in accordance with paragraph (b) of this
Section 7 relating to a Quarterly Valuation Date, the Trust shall cause the
Independent Accountant to confirm in writing to Moody's (if Moody's is then
rating the AMPS), S&P (if S&P is then rating the AMPS) and the Auction Agent (if
either Moody's or S&P is then rating the AMPS) (i) the mathematical accuracy of
the calculations reflected in such Report (and in any other Preferred Shares
Basic Maintenance Report, randomly selected by the Independent Accountant, that
was prepared by the Trust during the quarter ending on such Quarterly Valuation
Date), (ii) that, in such Report (and in such randomly selected Report), the
Trust determined in accordance with this Statement whether the Trust had, at
such Quarterly Valuation Date (and at the Valuation Date addressed in such
randomly selected Report), Moody's Eligible Assets (if Moody's is then rating
the AMPS) and S&P Eligible Assets (if S&P is then rating the AMPS) of an
aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount (such confirmation being herein called the "Accountant's
Confirmation"), (iii) with respect to the S&P ratings on Municipal Obligations,
the issuer name, issue size and coupon rate listed in such Report, that the
Independent Accountant has sought to verify by reference to Bloomberg Financial
Services or another independent source approved in writing by S&P, and the
Independent Accountant shall provide a listing in its letter of any differences,
(iv) with respect to the Moody's ratings on Municipal Obligations, the issuer
name, issue size and coupon rate listed in such Report, that the Independent
Accountant has sought to verify by reference to Bloomberg Financial Services or
another independent source approved in writing by Moody's, and the Independent
Accountant shall provide a listing in its letter of any differences, (v) with
respect to the bid or mean price (or such alternative permissible factor used in
calculating the Market Value) provided by the custodian of the Trust's assets to
the Trust for purposes of valuing securities in the Trust's portfolio, the
Independent Accountant has traced the price used in such Report to the bid or
mean price listed in such Report as provided to the Trust and verified that such
information agrees (in the event such information does not agree, the
Independent Accountant will provide a listing in its letter of such differences)
and (vi) with respect to such confirmation to Moody's and S&P, that the Trust
has satisfied the requirements of Section 13 of Appendix A to this Statement
(such information is herein called the "Accountant's Confirmation").

     (d) Within ten Business Days after the date of delivery of a Preferred
Shares Basic Maintenance Report in accordance with paragraph (b) of this
Section 7 relating to any Valuation Date on which the

                                      A-25
<Page>
Trust failed to satisfy the Preferred Shares Basic Maintenance Amount, and
relating to the Preferred Shares Basic Maintenance Cure Date with respect to
such failure to satisfy the Preferred Shares Basic Maintenance Amount, the Trust
shall cause the Independent Accountant to provide to Moody's (if Moody's is then
rating the AMPS), S&P (if S&P is then rating the AMPS) and the Auction Agent (if
either Moody's or S&P is then rating the AMPS) an Accountant's Confirmation as
to such Preferred Shares Basic Maintenance Report.

      (e) If any Accountant's Confirmation delivered pursuant to paragraph
(c) or (d) of this Section 7 shows that an error was made in the Preferred
Shares Basic Maintenance Report for a particular Valuation Date for which such
Accountant's Confirmation was required to be delivered, or shows that a lower
aggregate Discounted Value for the aggregate of all Moody's Eligible Assets (if
Moody's is then rating the AMPS) or S&P Eligible Assets (if S&P is then rating
the AMPS), as the case may be, of the Trust was determined by the Independent
Accountant, the calculation or determination made by such Independent Accountant
shall be final and conclusive and shall be binding on the Trust, and the Trust
shall accordingly amend and deliver the Preferred Shares Basic Maintenance
Report to Moody's (if Moody's is then rating the AMPS), S&P (if S&P is then
rating the AMPS) and the Auction Agent (if either Moody's or S&P is then rating
the AMPS) promptly following receipt by the Trust of such Accountant's
Confirmation.

      (f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of any AMPS, the Trust shall complete and
deliver to Moody's (if Moody's is then rating the AMPS) and S&P (if S&P is then
rating the AMPS) a Preferred Shares Basic Maintenance Report as of the close of
business on such Date of Original Issue. Within five Business Days of such Date
of Original Issue, the Trust shall cause the Independent Accountant to confirm
in writing to S&P (if S&P is then rating the AMPS) (i) the mathematical accuracy
of the calculations reflected in such Report and (ii) that the Discounted Value
of S&P Eligible Assets reflected thereon equals or exceeds the Preferred Shares
Basic Maintenance Amount reflected thereon.

      (g) On or before 5:00 p.m., New York City time, on the third Business Day
after either (i) the Trust shall have redeemed Common Shares or (ii) the ratio
of the Discounted Value of Moody's Eligible Assets or the S&P Eligible Assets to
the Preferred Shares Basic Maintenance Amount is less than or equal to 105%, or
(iii) whenever requested by Moody's (if Moody's is then rating the AMPS) or S&P
(if S&P is then rating the AMPS) , the Trust shall complete and deliver to
Moody's (if Moody's is then rating the AMPS) or S&P (if S&P is then rating the
AMPS), as the case may be, a Preferred Shares Basic Maintenance Report as of the
date of such event.

8. RESERVED.

9. RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS.

      (a) DIVIDENDS ON SHARES OTHER THAN THE AMPS. Except as set forth in the
next sentence, no dividends shall be declared or paid or set apart for payment
on the shares of any class or series of shares of beneficial interest of the
Trust ranking, as to the payment of dividends, on a parity with the AMPS for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid on the shares of each series of the AMPS through its most
recent Dividend Payment Date. When dividends are not paid in full upon the
shares of each series of the AMPS through its most recent Dividend Payment Date
or upon the shares of any other class or series of shares of beneficial interest
of the Trust ranking on a parity as to the payment of dividends with the AMPS
through their most recent respective dividend payment dates, all dividends
declared upon the AMPS and any other such class or series of shares of
beneficial interest ranking on a parity as to the payment of dividends with AMPS
shall be declared pro rata so that the amount of dividends declared per share on
AMPS and such other class or series of shares of beneficial interest shall in
all cases bear to each other the

                                      A-26
<Page>
same ratio that accumulated dividends per share on the AMPS and such other class
or series of shares of beneficial interest bear to each other (for purposes of
this sentence, the amount of dividends declared per share of AMPS shall be based
on the Applicable Rate for such share for the Dividend Periods during which
dividends were not paid in full).

     (b) DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO COMMON SHARES UNDER
THE INVESTMENT COMPANY ACT. The Board of Trustees shall not declare any dividend
(except a dividend payable in Common Shares), or declare any other distribution,
upon the Common Shares, or purchase Common Shares, unless in every such case the
AMPS have, at the time of any such declaration or purchase, an asset coverage
(as defined in and determined pursuant to the Investment Company Act) of at
least 200% (or such other asset coverage as may in the future be specified in or
under the Investment Company Act as the minimum asset coverage for senior
securities which are shares or stock of a closed-end investment company as a
condition of declaring dividends on its common shares or stock) after deducting
the amount of such dividend, distribution or purchase price, as the case may be.

      (c) OTHER RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. For so long
as any AMPS are outstanding, and except as set forth in paragraph (a) of this
Section 9 and paragraph (c) of Section 12 of this Part I, (A) the Trust shall
not declare, pay or set apart for payment any dividend or other distribution
(other than a dividend or distribution paid in shares of, or in options,
warrants or rights to subscribe for or purchase, Common Shares or other shares,
if any, ranking junior to the AMPS as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up) in respect
of the Common Shares or any other shares of the Trust ranking junior to or on a
parity with the AMPS as to the payment of dividends or the distribution of
assets upon dissolution, liquidation or winding up, or call for redemption,
redeem, purchase or otherwise acquire for consideration any Common Shares or any
other such junior shares (except by conversion into or exchange for shares of
the Trust ranking junior to the AMPS as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), or any such
parity shares (except by conversion into or exchange for shares of the Trust
ranking junior to or on a parity with AMPS as to the payment of dividends and
the distribution of assets upon dissolution, liquidation or winding up), unless
(i) full cumulative dividends on shares of each series of AMPS through its most
recently ended Dividend Period shall have been paid or shall have been declared
and sufficient funds for the payment thereof deposited with the Auction Agent
and, (ii) the Trust has redeemed the full number of AMPS required to be redeemed
by any provision for mandatory redemption pertaining thereto, and (iii) any
Gross Up Payment required to be paid on or before the date of such transaction
has been paid and (B) the Trust shall not declare, pay or set apart for payment
any dividend or other distribution (other than a dividend or distribution paid
in shares of, or in options, warrants or rights to subscribe for or purchase,
Common Shares or other shares, if any, ranking junior to AMPS as to the payment
of dividends and the distribution of assets upon dissolution, liquidation or
winding up) in respect of Common Shares or any other shares of the Trust ranking
junior to AMPS as to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up, or call for redemption, redeem, purchase
or otherwise acquire for consideration any Common Shares or any other such
junior shares (except by conversion into or exchange for shares of the Trust
ranking junior to AMPS as to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up), unless immediately after
such transaction the Discounted Value of Moody's Eligible Assets (if Moody's is
then rating the AMPS) and S&P Eligible Assets (if S&P is then rating the AMPS)
would at least equal the Preferred Shares Basic Maintenance Amount.

10. RATING AGENCY RESTRICTIONS.

    For so long as any AMPS are outstanding and Moody's or S&P or both is rating
such shares, the Trust will not, unless it has received written confirmation
from Moody's or S&P, or both, as applicable,

                                      A-27
<Page>
that any such action would not impair the rating then assigned by such rating
agency to such shares, engage in any one or more of the following transactions:

          (a) buy or sell futures or write put or call options;

         (b) borrow money, except that the Trust may, without obtaining the
    written confirmation described above, borrow money for the purpose of
    clearing securities transactions if (i) the Preferred Shares Basic
    Maintenance Amount would continue to be satisfied after giving effect to
    such borrowing and (ii) such borrowing (A) is privately arranged with a bank
    or other person and is evidenced by a promissory note or other evidence of
    indebtedness that is not intended to be publicly distributed or (B) is for
    "temporary purposes," is evidenced by a promissory note or other evidence of
    indebtedness and is in an amount not exceeding 5 per centum of the value of
    the total assets of the Trust at the time of the borrowing; for purposes of
    the foregoing, "temporary purpose" means that the borrowing is to be repaid
    within sixty days and is not to be extended or renewed;

          (c) issue additional shares of any series of AMPS or any class or
    series of shares ranking prior to or on a parity with AMPS with respect to
    the payment of dividends or the distribution of assets upon dissolutions,
    liquidation or winding up of the Trust, or reissue any AMPS previously
    purchased or redeemed by the Trust;

         (d) engage in any short sales of securities;

          (e) lend securities;

          (f) merge or consolidate into or with any other corporation;

          (g) change the pricing service (currently FT Interactive Data
    Corporation) referred to in the definition of Market Value; or

         (h) enter into reverse repurchase agreements.

    In the event any AMPS are outstanding and another rating agency is rating
such shares in addition to or in lieu of Moody's or S&P, the Trust shall comply
with any restrictions imposed by such rating agency, which restrictions may be
more restrictive than those imposed by Moody's or S&P.

11. REDEMPTION.

          (a) Optional Redemption.

          (i) Subject to the provisions of subparagraph (v) of this paragraph
    (a), AMPS of any series may be redeemed, at the option of the Trust, as a
    whole or from time to time in part, on any Dividend Payment Date for shares
    of such series, out of funds legally available therefor, at a redemption
    price per share equal to the sum of $25,000 plus an amount equal to
    accumulated but unpaid dividends thereon (whether or not earned or declared)
    to (but not including) the date fixed for redemption; provided, however,
    that (1) shares of a series of AMPS may not be redeemed in part if after
    such partial redemption fewer than 300 shares of such series remain
    outstanding; (2) unless otherwise provided in Section 11 of Appendix A
    hereto, shares of a series of AMPS are redeemable by the Trust during the
    Initial Rate Period thereof only on the second Business Day next preceding
    the last Dividend Payment Date for such Initial Rate Period; and
    (3) subject to subparagraph (ii) of this paragraph (a), the Notice of
    Special Rate Period relating to a Special Rate Period of shares of a series
    of AMPS, as delivered to the Auction Agent and filed with the

                                      A-28
<Page>
    Secretary of the Trust, may provide that shares of such series shall not be
    redeemable during the whole or any part of such Special Rate Period (except
    as provided in subparagraph (iv) of this paragraph (a)) or shall be
    redeemable during the whole or any part of such Special Rate Period only
    upon payment of such redemption premium or premiums as shall be specified
    therein ("Special Redemption Provisions").

         (ii) A Notice of Special Rate Period relating to shares of a series of
    AMPS for a Special Rate Period thereof may contain Special Redemption
    Provisions only if the Trust's Board of Trustees, after consultation with
    the Broker-Dealer or Broker-Dealers for such Special Rate Period of shares
    of such series, determines that such Special Redemption Provisions are in
    the best interest of the Trust.

         (iii) If fewer than all of the outstanding shares of a series of AMPS
    are to be redeemed pursuant to subparagraph (i) of this paragraph (a), the
    number of shares of such series to be redeemed shall be determined by the
    Board of Trustees, and such shares shall be redeemed pro rata from the
    Holders of shares of such series in proportion to the number of shares of
    such series held by such Holders.

         (iv) Subject to the provisions of subparagraph (v) of this paragraph
    (a), shares of any series of AMPS may be redeemed, at the option of the
    Trust, as a whole but not in part, out of funds legally available therefor,
    on the first day following any Dividend Period thereof included in a Rate
    Period consisting of more than 364 Rate Period Days if, on the date of
    determination of the Applicable Rate for shares of such series for such Rate
    Period, such Applicable Rate equaled or exceeded on such date of
    determination the Treasury Note Rate for such Rate Period, at a redemption
    price per share equal to the sum of $25,000 plus an amount equal to
    accumulated but unpaid dividends thereon (whether or not earned or declared)
    to (but not including) the date fixed for redemption.

          (v) The Trust may not on any date mail a Notice of Redemption pursuant
    to paragraph (c) of this Section 11 in respect of a redemption contemplated
    to be effected pursuant to this paragraph (a) unless on such date the Trust
    has available liquid securities having a value not less than the amount
    (including any applicable premium) due to Holders of AMPS by reason of
    redemption of such shares or such redemption date, and (b) the Discounted
    Value of Moody's Eligible Assets (if Moody's is then rating the AMPS) and
    S&P Eligible Assets (if S&P is then rating the AMPS) each at least equals
    the Preferred Shares Basic Maintenance Amount, and would at least equal the
    Preferred Shares Basic Maintenance Amount immediately subsequent to such
    redemption if such redemption were to occur on such date. For purposes of
    determining in clause (b) of the preceding sentence whether the Discounted
    Value of Moody's Eligible Assets at least equals the Preferred Shares Basic
    Maintenance Amount, the Moody's Discount Factors applicable to Moody's
    Eligible Assets shall be determined by reference to the first Exposure
    Period longer than the Exposure Period then applicable to the Trust, as
    described in the definition of Moody's Discount Factor herein.

     (b) MANDATORY REDEMPTION. The Trust shall redeem, at a redemption price
equal to $25,000 per share plus accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed by the
Board of Trustees for redemption, certain of the AMPS, if the Trust fails to
have either Moody's Eligible Assets or S&P Eligible Assets with a Discounted
Value greater than or equal to the Preferred Shares Basic Maintenance Amount or
fails to maintain the Investment Company Act Preferred Shares Asset Coverage, in
accordance with the requirements of the rating agency or agencies then rating
the AMPS, and such failure is not cured on or before the Preferred Shares Basic
Maintenance Cure Date or the Investment Company Act Cure Date, as the case may
be. The number of AMPS to be redeemed shall be equal to the lesser of (i) the
minimum number of

                                      A-29
<Page>
AMPS, together with all other preferred shares subject to redemption or
retirement, the redemption of which, if deemed to have occurred immediately
prior to the opening of business on the Cure Date, would have resulted in the
Trust's having Moody's Eligible Assets and S&P Eligible Assets with a Discounted
Value greater than or equal to the Preferred Shares Basic Maintenance Amount or
maintaining the Investment Company Act Preferred Shares Asset Coverage, as the
case may be, on such Cure Date (provided, however, that if there is no such
minimum number of AMPS and other preferred shares the redemption or retirement
of which would have had such result, all AMPS and other AMPS then outstanding
shall be redeemed), and (ii) the maximum number of AMPS, together with all other
AMPS subject to redemption or retirement, that can be redeemed out of funds
expected to be legally available therefor in accordance with the Declaration and
applicable law. In determining the AMPS required to be redeemed in accordance
with the foregoing, the Trust shall allocate the number required to be redeemed
to satisfy the Preferred Shares Basic Maintenance Amount or the Investment
Company Act Preferred Shares Asset Coverage, as the case may be, pro rata among
AMPS and other preferred shares (and, then, pro rata among each series of AMPS)
subject to redemption or retirement. The Trust shall effect such redemption on
the date fixed by the Trust therefor, which date shall not be earlier than 20
days nor later than 40 days after such Cure Date, except that if the Trust does
not have funds legally available for the redemption of all of the required
number of the AMPS and other preferred shares which are subject to redemption or
retirement or the Trust otherwise is unable to effect such redemption on or
prior to 40 days after such Cure Date, the Trust shall redeem those AMPS and
other preferred shares which it was unable to redeem on the earliest practicable
date on which it is able to effect such redemption. If fewer than all of the
outstanding shares of a series of AMPS are to be redeemed pursuant to this
paragraph (b), the number of shares of such series to be redeemed shall be
redeemed pro rata from the Holders of shares of such series in proportion to the
number of shares of such series held by such Holders.

      (c) NOTICE OF REDEMPTION. If the Trust shall determine or be required to
redeem shares of a series of AMPS pursuant to paragraph (a) or (b) of this
Section 11, it shall mail a Notice of Redemption with respect to such redemption
by first-class mail, postage prepaid, to (i) each Holder of the shares of such
series to be redeemed, at such Holder's address as the same appears on the
record books of the Trust on the record date established by the Board of
Trustees. Such Notice of Redemption shall be so mailed not less than 20 nor more
than 45 days prior to the date fixed for redemption; and (ii) to S&P. Each such
Notice of Redemption shall state: (i) the redemption date; (ii) the number of
AMPS to be redeemed and the series thereof; (iii) the CUSIP number for shares of
such series; (iv) the Redemption Price; (v) the place or places where the
certificate(s) for such shares (properly endorsed or assigned for transfer, if
the Board of Trustees shall so require and the Notice of Redemption shall so
state) are to be surrendered for payment of the Redemption Price; (vi) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date; and (vii) that the holders of any shares of a series of AMPS
being so redeemed shall not participate in the Auction, if any, immediately
preceding the redemption date; and (viii) the provisions of this Section 11
under which such redemption is made. If fewer than all shares of a series of
AMPS held by any Holder are to be redeemed, the Notice of Redemption mailed to
such Holder shall also specify the number of shares of such series to be
redeemed from such Holder. The Trust may provide in any Notice of Redemption
relating to a redemption contemplated to be effected pursuant to paragraph
(a) of this Section 11 that such redemption is subject to one or more conditions
precedent and that the Trust shall not be required to effect such redemption
unless each such condition shall have been satisfied at the time or times and in
the manner specified in such Notice of Redemption.

     (d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding the
provisions of paragraphs (a) or (b) of this Section 11, if any dividends on
shares of a series of AMPS (whether or not earned or declared) are in arrears,
no shares of such series shall be redeemed unless all outstanding shares of such
series are simultaneously redeemed, and the Trust shall not purchase or
otherwise acquire any

                                      A-30
<Page>
shares of such series; provided, however, that the foregoing shall not prevent
the purchase or acquisition of all outstanding shares of such series pursuant to
the successful completion of an otherwise lawful purchase or exchange offer made
on the same terms to, and accepted by, Holders of all outstanding shares of such
series.

      (e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent that any
redemption for which Notice of Redemption has been mailed is not made by reason
of the absence of legally available funds therefor in accordance with the
Declaration and applicable law, such redemption shall be made as soon as
practicable to the extent such funds become available. Failure to redeem AMPS
shall be deemed to exist at any time after the date specified for redemption in
a Notice of Redemption when the Trust shall have failed, for any reason
whatsoever, to deposit in trust with the Auction Agent the Redemption Price with
respect to any shares for which such Notice of Redemption has been mailed;
provided, however, that the foregoing shall not apply in the case of the Trust's
failure to deposit in trust with the Auction Agent the Redemption Price with
respect to any shares where (1) the Notice of Redemption relating to such
redemption provided that such redemption was subject to one or more conditions
precedent and (2) any such condition precedent shall not have been satisfied at
the time or times and in the manner specified in such Notice of Redemption.
Notwithstanding the fact that the Trust may not have redeemed AMPS for which a
Notice of Redemption has been mailed, dividends may be declared and paid on AMPS
and shall include those AMPS for which a Notice of Redemption has been mailed.

      (f) AUCTION AGENT AS TRUSTEE OF REDEMPTION PAYMENTS BY TRUST. All moneys
paid to the Auction Agent for payment of the Redemption Price of AMPS called for
redemption shall be held in trust by the Auction Agent for the benefit of
Holders of shares so to be redeemed.

      (g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE NO LONGER
OUTSTANDING. Provided a Notice of Redemption has been mailed pursuant to
paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on
the Business Day next preceding the date fixed for redemption thereby, in funds
available on the next Business Day in The City of New York, New York) of funds
sufficient to redeem the AMPS that are the subject of such notice, dividends on
such shares shall cease to accumulate and such shares shall no longer be deemed
to be outstanding for any purpose, and all rights of the Holders of the shares
so called for redemption shall cease and terminate, except the right of such
Holders to receive the Redemption Price, but without any interest or other
additional amount, except as provided in subparagraph (e)(i) of Section 2 of
this Part I and in Section 3 of this Part I. Upon surrender in accordance with
the Notice of Redemption of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Trustees shall so
require and the Notice of Redemption shall so state), the Redemption Price shall
be paid by the Auction Agent to the Holders of AMPS subject to redemption. In
the case that fewer than all of the shares represented by any such certificate
are redeemed, a new certificate shall be issued, representing the unredeemed
shares, without cost to the Holder thereof. The Trust shall be entitled to
receive from the Auction Agent, promptly after the date fixed for redemption,
any cash deposited with the Auction Agent in excess of (i) the aggregate
Redemption Price of the AMPS called for redemption on such date and (ii) all
other amounts to which Holders of AMPS called for redemption may be entitled.
Any funds so deposited that are unclaimed at the end of 90 days from such
redemption date shall, to the extent permitted by law, be repaid to the Trust,
after which time the Holders of AMPS so called for redemption may look only to
the Trust for payment of the Redemption Price and all other amounts to which
they may be entitled.

     (h) COMPLIANCE WITH APPLICABLE LAW. In effecting any redemption pursuant to
this Section 11, the Trust shall use its best efforts to comply with all
applicable conditions precedent to effecting such redemption under the
Investment Company Act and any applicable Delaware law, but shall effect no
redemption except in accordance with the Investment Company Act and any
applicable Delaware law.

                                      A-31
<Page>
      (i) ONLY WHOLE AMPS MAY BE REDEEMED. In the case of any redemption
pursuant to this Section 11, only whole AMPS shall be redeemed, and in the event
that any provision of the Declaration would require redemption of a fractional
share, the Auction Agent shall be authorized to round up so that only whole
shares are redeemed.

      (j) MODIFICATION OF REDEMPTION PROCEDURES. Notwithstanding any of the
foregoing provisions of this Section 11, the Trust may modify any or all of the
requirements relating to the Notice of Redemption provided that (i) any such
modification does not materially and adversely affect any Holder of the relevant
series of AMPS, and (ii) the Trust receives written notice from Moody's (if
Moody's is then rating the AMPS) and S&P (if S&P is then rating the AMPS) that
such modification would not impair the ratings assigned by Moody's and S&P to
shares of AMPS.

12. LIQUIDATION RIGHTS

      (a) RANKING. The shares of a series of AMPS shall rank on a parity with
each other, with shares of any other series of preferred shares and with shares
of any other series of AMPS as to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Trust.

     (b) DISTRIBUTIONS UPON LIQUIDATION. Upon the dissolution, liquidation or
winding up of the affairs of the Trust, whether voluntary or involuntary, the
Holders of AMPS then outstanding shall be entitled to receive and to be paid out
of the assets of the Trust available for distribution to its shareholders,
before any payment or distribution shall be made on the Common Shares or on any
other class of shares of the Trust ranking junior to the AMPS upon dissolution,
liquidation or winding up, an amount equal to the Liquidation Preference with
respect to such shares plus an amount equal to all dividends thereon (whether or
not earned or declared) accumulated but unpaid to (but not including) the date
of final distribution in same day funds, together with any payments required to
be made pursuant to Section 3 of this Part I in connection with the liquidation
of the Trust. After the payment to the Holders of the AMPS of the full
preferential amounts provided for in this paragraph (b), the Holders of AMPS as
such shall have no right or claim to any of the remaining assets of the Trust.

      (c) PRO RATA DISTRIBUTIONS. In the event the assets of the Trust available
for distribution to the Holders of AMPS upon any dissolution, liquidation, or
winding up of the affairs of the Trust, whether voluntary or involuntary, shall
be insufficient to pay in full all amounts to which such Holders are entitled
pursuant to paragraph (b) of this Section 12, no such distribution shall be made
on account of any shares of any other class or series of preferred shares
ranking on a parity with the AMPS with respect to the distribution of assets
upon such dissolution, liquidation or winding up unless proportionate
distributive amounts shall be paid on account of the AMPS, ratably, in
proportion to the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such dissolution, liquidation or
winding up.

     (d) RIGHTS OF JUNIOR SHARES. Subject to the rights of the holders of shares
of any series or class or classes of shares ranking on a parity with the AMPS
with respect to the distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Trust, after payment shall have been made in
full to the Holders of the AMPS as provided in paragraph (b) of this
Section 12, but not prior thereto, any other series or class or classes of
shares ranking junior to the AMPS with respect to the distribution of assets
upon dissolution, liquidation or winding up of the affairs of the Trust shall,
subject to the respective terms and provisions (if any) applying thereto, be
entitled to receive any and all assets remaining to be paid or distributed, and
the Holders of the AMPS shall not be entitled to share therein.

      (e) CERTAIN EVENTS NOT CONSTITUTING LIQUIDATION. Neither the sale of all
or substantially all the property or business of the Trust, nor the merger or
consolidation of the Trust into or with any business

                                      A-32
<Page>
trust or corporation nor the merger or consolidation of any business trust or
corporation into or with the Trust shall be a dissolution, liquidation or
winding up, whether voluntary or involuntary, for the purposes of this
Section 12.

13. MISCELLANEOUS.

      (a) AMENDMENT OF APPENDIX A TO ADD ADDITIONAL SERIES. Subject to the
provisions of paragraph (c) of Section 10 of this Part I, the Board of Trustees
may, by resolution duly adopted, without shareholder approval (except as
otherwise provided by this Statement or required by applicable law), amend
Appendix A hereto to (1) reflect any amendments hereto which the Board of
Trustees is entitled to adopt pursuant to the terms of this Statement without
shareholder approval or (2) add additional series of AMPS or additional shares
of a series of AMPS (and terms relating thereto) to the series and AMPS
theretofore described thereon. Each such additional series and all such
additional shares shall be governed by the terms of this statement.

     (b) APPENDIX A INCORPORATED BY REFERENCE. Appendix A hereto is incorporated
in and made a part of this Statement by reference thereto.

      (c) NO FRACTIONAL SHARES. No fractional shares of AMPS shall be issued.

     (d) STATUS OF AMPS REDEEMED, EXCHANGED OR OTHER WISE ACQUIRED BY THE TRUST.
AMPS which are redeemed, exchanged or otherwise acquired by the Trust shall
return to the status of authorized and unissued preferred shares without
designation as to series.

      (e) BOARD MAY RESOLVE AMBIGUITIES. To the extent permitted by applicable
law, the Board of Trustees may interpret or adjust the provisions of this
Statement to resolve any inconsistency or ambiguity or to remedy any formal
defect, and may amend this Statement with respect to any series of AMPS prior to
the issuance of shares of such series.

      (f) HEADINGS NOT DETERMINATIVE. The headings contained in this Statement
are for convenience of reference only and shall not affect the meaning or
interpretation of this statement.

      (g) NOTICES. All notices or communications, unless otherwise specified in
the By-Laws of the Trust or this Statement, shall be sufficiently given if in
writing and delivered in person or mailed by first-class mail, postage prepaid.

                                    PART II.

1. ORDERS.

      (a) Prior to the Submission Deadline on each Auction Date for shares of a
series of AMPS:

          (i) each Beneficial Owner of shares of such series may submit to its
    Broker-Dealer by telephone or otherwise information as to:

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

            (B) the number of Outstanding shares, if any, of such series held by
       such Beneficial Owner which such Beneficial Owner offers to sell if the
       Applicable Rate for shares of such

                                      A-33
<Page>
       series for the next succeeding Rate Period of shares of such series shall
       be less than the rate per annum specified by such Beneficial Owner;
       and/or

            (C) the number of Outstanding shares, if any, of such series held by
       such Beneficial Owner which such Beneficial Owner offers to sell without
       regard to the Applicable Rate for shares of such series for the next
       succeeding Rate Period of shares of such series;

                and

         (ii) (one or more Broker-Dealers, using lists of Potential Beneficial
    Owners, shall in good faith for the purpose of conducting a competitive
    Auction in a commercially reasonable manner, contact Potential Beneficial
    Owners (by telephone or otherwise), including Persons that are not
    Beneficial Owners, on such lists to determine the number of shares, if any,
    of such series which each such Potential Beneficial Owner offers to purchase
    if the Applicable Rate for shares of such series for the next succeeding
    Rate Period of shares of such series shall not be less than the rate per
    annum specified by such Potential Beneficial Owner.

    For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, of information referred to in clause (i) (A), (i) (B),
(i) (C) or (ii) of this paragraph (a) is hereinafter referred to as an "Order"
and collectively as "Orders" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order with a Broker-Dealer, and such Broker-Dealer
placing an order with the Auction Agent, is hereinafter referred to as a
"Bidder" and collectively as "Bidders"; an Order containing the information
referred to in clause (i)(A) of this paragraph (a) is hereinafter referred to as
a "Hold Order" and collectively as "Hold Orders"; an Order containing the
information referred to in clause (i)(B) or (ii) of this paragraph (a) is
hereinafter referred to as a "Bid" and collectively as "Bids"; and an Order
containing the information referred to in clause (i)(C) of this paragraph
(a) is hereinafter referred to as a "Sell Order" and collectively as "Sell
Orders."

     (b) (i) A Bid by a Beneficial Owner or an Existing Holder of shares of a
series of AMPS subject to an Auction on any Auction Date shall constitute an
irrevocable offer to sell:

            (A) the number of Outstanding shares of such series specified in
       such Bid if the Applicable Rate for shares of such series determined on
       such Auction Date shall be less than the rate specified therein;

            (B) such number or a lesser number of Outstanding shares of such
       series to be determined as set forth in clause (iv) of paragraph (a) of
       Section 4 of this Part II if the Applicable Rate for shares of such
       series determined on such Auction Date shall be equal to the rate
       specified therein; or

            (C) the number of Outstanding shares of such series specified in
       such Bid if the rate specified therein shall be higher than the Maximum
       Rate for shares of such series, or such number or a lesser number of
       Outstanding shares of such series to be determined as set forth in clause
       (iii) of paragraph (b) of Section 4 of this Part II if the rate specified
       therein shall be higher than the Maximum Rate for shares of such series
       and Sufficient Clearing Bids for shares of such series do not exist.

                                      A-34
<Page>
         (ii) A Sell Order by a Beneficial Owner or an Existing Holder of shares
    of a series of AMPS subject to an Auction on any Auction Date shall
    constitute an irrevocable offer to sell:

            (A) the number of Outstanding shares of such series specified in
       such Sell Order; or

            (B) such number or a lesser number of Outstanding shares of such
       series as set forth in clause (iii) of paragraph (b) of Section 4 of this
       Part II if Sufficient Clearing Bids for shares of such series do not
       exist; provided, however, that a Broker-Dealer that is an Existing Holder
       with respect to shares of a series of AMPS shall not be liable to any
       Person for failing to sell such shares pursuant to a Sell Order described
       in the proviso to paragraph (c) of Section 2 of this Part II if (1) such
       shares were transferred by the Beneficial Owner thereof without
       compliance by such Beneficial Owner or its transferee Broker-Dealer (or
       other transferee person, if permitted by the Trust) with the provisions
       of Section 7 of this Part II or (2) such Broker-Dealer has informed the
       Auction Agent pursuant to the terms of its Broker-Dealer Agreement that,
       according to such Broker-Dealer's records, such Broker-Dealer believes it
       is not the Existing Holder of such shares.

         (iii) A Bid by a Potential Beneficial Holder or a Potential Holder of
    shares of a series of AMPS subject to an Auction on any Auction Date shall
    constitute an irrevocable offer to purchase:

            (A) the number of Outstanding shares of such series specified in
       such Bid if the Applicable Rate for shares of such series determined on
       such Auction Date shall be higher than the rate specified therein; or

            (B) such number or a lesser number of Outstanding shares of such
       series as set forth in clause (v) of paragraph (a) of Section 4 of this
       Part II if the Applicable Rate for shares of such series determined on
       such Auction Date shall be equal to the rate specified therein.

             (c) No Order for any number of AMPS other than whole shares shall
       be valid.

            (d) A Bid by a Potential Beneficial Holder or a Potential Holder
       specifying a rate higher than the Maximum Rate for AMPS on the Auction
       Date will not be accepted.

2. SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.

      (a) Each Broker-Dealer shall submit in writing to the Auction Agent prior
to the Submission Deadline on each Auction Date all Orders for Preferred shares
of a series subject to an Auction on such Auction Date obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the Trust) as
an Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:

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

         (ii) the aggregate number of shares of such series that are the subject
    of such Order;

         (iii) to the extent that such Bidder is an Existing Holder of shares of
    such series:

            (A) the number of shares, if any, of such series subject to any Hold
       Order of such Existing Holder;

                                      A-35
<Page>
            (B) the number of shares, if any, of such series subject to any Bid
       of such Existing Holder and the rate specified in such Bid; and

            (C) the number of shares, if any, of such series subject to any Sell
       Order of such Existing Holder; and

         (iv) to the extent such Bidder is a Potential Holder of shares of such
    series, the rate and number of shares of such series specified in such
    Potential Holder's Bid.

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

      (c) If an Order or Orders covering all of the outstanding AMPS of a series
held by any Existing Holder is not submitted to the Auction Agent prior to the
Submission Deadline, the Auction Agent shall deem a Hold Order to have been
submitted by or on behalf of such Existing Holder covering the number of
Outstanding shares of such series held by such Existing Holder and not subject
to Orders submitted to the Auction Agent; provided, however, that if an Order or
Orders covering all of the Outstanding shares of such series held by any
Existing Holder is not submitted to the Auction Agent prior to the Submission
Deadline for an Auction relating to a Special Rate Period consisting of more
than 28 Rate Period Days, the Auction Agent shall deem a Sell order to have been
submitted by or on behalf of such Existing Holder covering the number of
outstanding shares of such series held by such Existing Holder and not subject
to Orders submitted to the Auction Agent.

     (d) If one or more Orders of an Existing Holder is submitted to the Auction
Agent covering in the aggregate more than the number of Outstanding AMPS of a
series subject to an Auction held by such Existing Holder, such Orders shall be
considered valid in the following order of priority:

          (i) all Hold Orders for shares of such series shall be considered
    valid, but only up to and including in the aggregate the number of
    Outstanding shares of such series held by such Existing Holder, and if the
    number of shares of such series subject to such Hold Orders exceeds the
    number of Outstanding shares of such series held by such Existing Holder,
    the number of shares subject to each such Hold Order shall be reduced pro
    rata to cover the number of Outstanding shares of such series held by such
    Existing Holder;

         (ii) (A) any Bid for shares of such series shall be considered valid up
    to and including the excess of the number of Outstanding shares of such
    series held by such Existing Holder over the number of shares of such series
    subject to any Hold Orders referred to in clause (i) above;

            (B) subject to subclause (A), if more than one Bid of an Existing
       Holder for shares of such series is submitted to the Auction Agent with
       the same rate and the number of Outstanding shares of such series subject
       to such Bids is greater than such excess, such Bids shall be considered
       valid up to and including the amount of such excess, and the number of
       shares of such series subject to each Bid with the same rate shall be
       reduced pro rata to cover the number of shares of such series equal to
       such excess;

            (C) subject to subclauses (A) and (B), if more than one Bid of an
       Existing Holder for shares of such series is submitted to the Auction
       Agent with different rates, such Bids shall be considered valid in the
       ascending order of their respective rates up to and including the amount
       of such excess; and

            (D) in any such event, the number, if any, of such Outstanding
       shares of such series subject to any portion of Bids considered not valid
       in whole or in part under this clause

                                      A-36
<Page>
       (ii) shall be treated as the subject of a Bid for shares of such series
       by or on behalf of a Potential Holder at the rate therein specified; and

         (iii) all Sell Orders for shares of such series shall be considered
    valid up to and including the excess of the number of Outstanding shares of
    such series held by such Existing Holder over the sum of shares of such
    series subject to valid Hold Orders referred to in clause (i) above and
    valid Bids referred to in clause (ii) above.

      (e) If more than one Bid for one or more shares of a series of AMPS is
submitted to the Auction Agent by or on behalf of any Potential Holder, each
such Bid submitted shall be a separate Bid with the rate and number of shares
therein specified.

      (f) Any Order submitted by a Beneficial Owner or a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date, shall be irrevocable.

3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BIDS RATE AND APPLICABLE
RATE.

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

          (i) the excess of the number of Outstanding shares of such series over
    the number of Outstanding shares of such series subject to Submitted Hold
    Orders (such excess being hereinafter referred to as the "Available AMPS" of
    such series);

         (ii) from the Submitted Orders for shares of such series whether:

            (A) the number of Outstanding shares of such series subject to
       Submitted Bids of Potential Holders specifying one or more rates equal to
       or lower than the Maximum Rate for shares of such series;

            (B) the number of Outstanding shares of such series subject to
       Submitted Bids of Existing Holders specifying one or more rates higher
       than the Maximum Rate for shares of such series; and

            (C) the number of Outstanding shares of such series subject to
       Submitted Sell Orders

        (in the event such excess or such equality exists (other than because
        the number of shares of such series in subclauses (B) and (C) above is
        zero because all of the Outstanding shares of such series are subject to
        Submitted Hold Orders), such Submitted Bids in subclause (A) above being
        hereinafter referred to collectively as "Sufficient Clearing Bids" for
        shares of such series); and

                                      A-37
<Page>
         (iii) if Sufficient Clearing Bids for shares of such series exist, the
    lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for
    shares of such series) which if:

            (A) (I) each such Submitted Bid of Existing Holders specifying such
       lowest rate and (II) all other such Submitted Bids of Existing Holders
       specifying lower rates were rejected, thus entitling such Existing
       Holders to continue to hold the shares of such series that are subject to
       such Submitted Bids; and

            (B) (I) each such Submitted Bid of Potential Holders specifying such
       lowest rate and (II) all other such Submitted Bids of Potential Holders
       specifying lower rates were accepted;

would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such series
which, when added to the number of Outstanding shares of such series to be
purchased by such Potential Holders described in subclause (B) above, would
equal not less than the Available AMPS of such series.

     (b) Promptly after the Auction Agent has made the determinations pursuant
to paragraph (a) of this Section 3, the Auction Agent shall advise the Trust of
the Maximum Rate for shares of the series of AMPS for which an Auction is being
held on the Auction Date and, based on such determination the Applicable Rate
for shares of such series for the next succeeding Rate Period thereof as
follows:

          (i) if Sufficient Clearing Bids for shares of such series exist, that
    the Applicable Rate for all shares of such series for the next Succeeding
    Rate Period thereof shall be equal to the Winning Bid Rate for shares of
    such series so determined;

         (ii) if sufficient Clearing Bids for shares of such series do not exist
    (other than because all of the Outstanding shares of such series are subject
    to Submitted Hold Orders), that the Applicable Rate for all shares of such
    series for the next succeeding Rate Period thereof shall be equal to the
    Maximum Rate for shares of such series; or

         (iii) if all of the Outstanding shares of such series are subject to
    Submitted Hold Orders, that the Applicable Rate for all shares of such
    series for the next succeeding Rate Period thereof shall be as set forth in
    Section 12 of Appendix A hereto.

4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS AND
ALLOCATION OF SHARES.

    Existing Holders shall continue to hold the AMPS that are subject to
Submitted Hold Orders, and, based on the determinations made pursuant to
paragraph (a) of Section 3 of this Part II, the Submitted Bids and Submitted
Sell Orders shall be accepted or rejected by the Auction Agent and the Auction
Agent shall take such other action as set forth below:

      (a) If Sufficient Clearing Bids for shares of a series of AMPS have been
made, all Submitted Sell Orders with respect to shares of such series shall be
accepted and, subject to the provisions of paragraphs (d) and (e) of this
section 4, Submitted Bids with respect to shares of such series shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids with respect to shares of such series shall be rejected:

          (i) Existing Holders' Submitted Bids for shares of such series
    specifying any rate that is higher than the Winning Bid Rate for shares of
    such series shall be accepted, thus requiring each such Existing Holder to
    sell the AMPS subject to such Submitted Bids;

                                      A-38
<Page>
         (ii) Existing Holders' Submitted Bids for shares of such series
    specifying any rate that is lower than the Winning Bid Rate for shares of
    such series shall be rejected, thus entitling each such Existing Holder to
    continue to hold the AMPS subject to such Submitted Bids;

         (iii) Potential Holders' Submitted Bids for shares of such series
    specifying any rate that is lower than the Winning Bid Rate for shares of
    such series shall be accepted;

         (iv) each Existing Holder's Submitted Bid for shares of such series
    specifying a rate that is equal to the Winning Bid Rate for shares of such
    series shall be rejected, thus entitling such Existing Holder to continue to
    hold the AMPS subject to such Submitted Bid, unless the number of
    Outstanding AMPS subject to all such Submitted Bids shall be greater than
    the number of AMPS ( "remaining shares") in the excess of the Available AMPS
    of such series over the number of AMPS subject to Submitted Bids described
    in clauses (ii) and (iii) of this paragraph (a), in which event such
    Submitted Bid of such Existing Holder shall be rejected in part, and such
    Existing Holder shall be entitled to continue to hold AMPS subject to such
    Submitted Bid, but only in an amount equal to the number of AMPS of such
    series obtained by multiplying the number of remaining shares by a fraction,
    the numerator of which shall be the number of Outstanding AMPS held by such
    Existing Holder subject to such Submitted Bid and the denominator of which
    shall be the aggregate number of Outstanding AMPS subject to such Submitted
    Bids made by all such Existing Holders that specified a rate equal to the
    Winning Bid Rate for shares of such series; and

          (v) each Potential Holder's Submitted Bid for shares of such series
    specifying a rate that is equal to the Winning Bid Rate for shares of such
    series shall be accepted but only in an amount equal to the number of shares
    of such series obtained by multiplying the number of shares in the excess of
    the Available AMPS of such series over the number of AMPS subject to
    Submitted Bids described in clauses (ii) through (iv) of this paragraph
    (a) by a fraction, the numerator of which shall be the number of Outstanding
    AMPS subject to such Submitted Bid and the denominator of which shall be the
    aggregate number of Outstanding AMPS subject to such Submitted Bids made by
    all such Potential Holders that specified a rate equal to the Winning Bid
    Rate for shares of such series.

     (b) If Sufficient Clearing Bids for shares of a series of AMPS have not
been made (other than because all of the Outstanding shares of such series are
subject to Submitted Hold Orders), subject to the provisions of paragraph
(d) of this Section 4, Submitted Orders for shares of such series shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids for shares of such series shall be rejected:

          (i) Existing Holders' Submitted Bids for shares of such series
    specifying any rate that is equal to or lower than the Maximum Rate for
    shares of such series shall be rejected, thus entitling such Existing
    Holders to continue to hold the AMPS subject to such Submitted Bids;

         (ii) Potential Holders' Submitted Bids for shares of such series
    specifying any rate that is equal to or lower than the Maximum Rate for
    shares of such series shall be accepted; and

         (iii) Each Existing Holder's Submitted Bid for shares of such series
    specifying any rate that is higher than the Maximum Rate for shares of such
    series and the Submitted Sell Orders for shares of such series of each
    Existing Holder shall be accepted, thus entitling each Existing Holder that
    submitted or on whose behalf was submitted any such Submitted Bid or
    Submitted Sell Order to sell the shares of such series subject to such
    Submitted Bid or Submitted Sell Order, but in both cases only in an amount
    equal to the number of shares of such series obtained by multiplying the
    number of shares of such series subject to Submitted Bids described in
    clause (ii) of this paragraph

                                      A-39
<Page>
    (b) by a fraction, the numerator of which shall be the number of Outstanding
    shares of such series held by such Existing Holder subject to such Submitted
    Bid or Submitted Sell Order and the denominator of which shall be the
    aggregate number of Outstanding shares of such series subject to all such
    Submitted Bids and Submitted Sell Orders.

      (c) If all of the Outstanding shares of a series of AMPS are subject to
Submitted Hold Orders, all Submitted Bids for shares of such series shall be
rejected.

     (d) If, as a result of the procedures described in clause (iv) or (v) of
paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing
Holder would be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a share of a series of AMPS on
any Auction Date, the Auction Agent shall, in such manner as it shall determine
in its sole discretion, round up or down the number of AMPS of such series to be
purchased or sold by any Existing Holder or Potential Holder on such Auction
Date as a result of such procedures so that the number of shares so purchased or
sold by each Existing Holder or Potential Holder on such Auction Date shall be
whole AMPS.

      (e) If, as a result of the procedures described in clause (v) of paragraph
(a) of this Section 4, any Potential Holder would be entitled or required to
purchase less than a whole share of a series of AMPS on any Auction Date, the
Auction Agent shall, in such manner as it shall determine in its sole
discretion, allocate AMPS of such series for purchase among Potential Holders so
that only whole shares of AMPS of such series are purchased on such Auction Date
as a result of such procedures by any Potential Holder, even if such allocation
results in one or more Potential Holders not purchasing AMPS of such series on
such Auction Date.

      (f) Based on the results of each Auction for shares of a series of AMPS,
the Auction Agent shall determine the aggregate number of shares of such series
to be purchased and the aggregate number of shares of such series to be sold by
Potential Holders and Existing Holders and, with respect to each Potential
Holder and Existing Holder, to the extent that such aggregate number of shares
to be purchased and such aggregate number of shares to be sold differ, determine
to which other Potential Holder(s) or Existing Holder(s) they shall deliver, or
from which other Potential Holder(s) or Existing Holder(s) they shall receive,
as the case may be, AMPS of such series. Notwithstanding any provision of the
Auction Procedures to the contrary, in the event an Existing Holder or
Beneficial Owner of a series of AMPS with respect to whom a Broker-Dealer
submitted a Bid to the Auction Agent for such shares that was accepted in whole
or in part, or submitted or is deemed to have submitted a Sell Order for such
shares that was accepted in whole or in part, fails to instruct its Agent Member
to deliver such shares against payment therefor, partial deliveries of AMPS that
have been made in respect of Potential Holders' or Potential Beneficial Owners'
submitted Bids for shares of such series that have been accepted in whole or in
part shall constitute good delivery to such Potential Holders and Potential
Beneficial Owners.

      (g) Neither the Trust nor the Auction Agent nor any affiliate of either
shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder, a Beneficial Owner, a Potential Beneficial
Owner or its respective Agent Member to deliver AMPS of any series or to pay for
AMPS of any series sold or purchased pursuant to the Auction Procedures or
otherwise.

5. NOTIFICATION OF ALLOCATIONS.

    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,
but shall not be required to, notify the Auction Agent of the amount to be so
included not later than the Dividend Payment Date next preceding the Auction
Date on which the Applicable Rate for such dividend is to be established.

                                      A-40
<Page>
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, in accordance with its Broker-Dealer Agreement, will be required to notify
its Beneficial Owners and Potential Beneficial Owners of AMPS believed by it to
be interested in submitting an Order in the Auction to be held on such Auction
Date.

6. AUCTION AGENT.

    For so long as any AMPS are outstanding, the Auction Agent, duly appointed
by the Trust to so act, shall be in each case a commercial bank, trust company
or other financial institution independent of the Trust and its affiliates
(which however may engage or have engaged in business transactions with the
Trust or its affiliates) and at no time shall the Trust or any of its affiliates
act as the Auction Agent in connection with the Auction Procedures. If the
Auction Agent resigns or for any reason its appointment is terminated during any
period that any AMPS are outstanding, the Board of Trustees shall use its best
efforts promptly thereafter to appoint another qualified commercial bank, trust
company or financial institution to act as the Auction Agent. The Auction
Agent's registry of Existing Holders of a series of AMPS shall be conclusive and
binding on the Broker-Dealers. A Broker-Dealer may inquire of the Auction Agent
between 3:00 p.m. on the Business Day preceding an Auction for a series of AMPS
and 9:30 a.m. on the Auction Date for such Auction to ascertain the number of
shares of such series in respect of which the Auction Agent has determined such
Broker-Dealer to be an Existing Holder. If such Broker-Dealer believes it is the
Existing Holder of fewer shares of such series than specified by the Auction
Agent in response to such Broker-Dealer's inquiry, such Broker-Dealer may so
inform the Auction Agent of that belief. Such Broker-Dealer shall not, in its
capacity as Existing Holder of shares of such series, submit Orders in such
Auction in respect of shares of such series covering in the aggregate more than
the number of shares of such series specified by the Auction Agent in response
to such Broker-Dealer's inquiry.

7. TRANSFER OF AMPS.

    Unless otherwise permitted by the Trust, a Beneficial Owner or an Existing
Holder may sell, transfer or otherwise dispose of AMPS only in whole shares and
only pursuant to a Bid or Sell Order placed with the Auction Agent in accordance
with the procedures described in this Part II or to a Broker-Dealer; provided,
however, that (a) 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
for purposes of this Section 7 if such Broker-Dealer remains the Existing Holder
of the shares so sold, transferred or disposed of immediately after such sale,
transfer or disposition and (b) 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 shall advise the Auction Agent of such transfer.

8. GLOBAL CERTIFICATE.

    Prior to the commencement of a Voting Period, (i) all of the shares of a
series of AMPS outstanding from time to time shall be represented by one global
certificate registered in the name of the Securities Depository or its nominee
and (ii) no registration of transfer of shares of a series of AMPS shall be made
on the books of the Trust to any Person other than the Securities Depository or
its nominee.

9. FORCE MAJEURE.

      (a) Notwithstanding anything else set forth herein, 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,

                                      A-41
<Page>
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 Auction Rate for the next Dividend
Period shall be the Dividend Rate determined on the previous Dividend Date.

     (b) Notwithstanding anything else set forth herein, 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:

          (i) the Dividend Payment Date for the affected Dividend Period shall
    be the next Business Day on which the Trust and its paying agent, if any,
    are able to cause the dividend to be paid using their reasonable best
    efforts;

         (ii) the affected Dividend Period shall end on the day it would have
    ended had such event not occurred and the Dividend Payment Date had remained
    the scheduled date; and

         (iii) the next Dividend Period will begin and end on the dates on which
    it would have begun and ended had such event not occurred and the Dividend
    Payment Date remained the scheduled date.

                                      A-42
<Page>
    IN WITNESS WHEREOF, BLACKROCK MUNICIPAL INCOME TRUST II, has caused these
presents to be signed as of ____ , 2002 in its name and on its behalf by its
Vice President and attested by its Secretary. Said officers of the Trust have
executed this Statement as officers and not individually, and the obligations
and rights set forth in this Statement are not binding upon any such officers,
or the trustees or shareholders of the Trust, individually, but are binding only
upon the assets and property of the Trust.

<Table>
<S>                                         <C>
                                            BLACKROCK MUNICIPAL
                                            INCOME TRUST II
                                            By: ------------------------
                                            Name: Kevin Klingert
                                            Title: Vice President

ATTEST: ------------------------
Name: Anne F. Ackerley
Title: Secretary
_____ , 2002
</Table>

                                      A-43
<Page>
                      BLACKROCK MUNICIPAL INCOME TRUST II

                                   APPENDIX A

                                   SECTION 1
DESIGNATION AS TO SERIES.

    SERIES [      ]: A series of       AMPS, liquidation preference $25,000 per
share, is hereby designated "Auction Market Preferred Shares, Series [      ]."
Each of the       shares of Series [      ] AMPS issued on            , 2002
shall, for purposes hereof, be deemed to have a Date of Original Issue of
           , 2002; have an Applicable Rate for its Initial Rate Period equal to
  % per annum; have an initial Dividend Payment Date of            , 2002; and
have such other preferences, limitations and relative voting rights, in addition
to those required by applicable law or set forth in the Agreement and
Declaration of Trust, as amended and restated, applicable to AMPS of the Trust,
as set forth in Part I and Part II of this Statement. Any shares of
Series [      ] AMPS issued thereafter shall be issued on the first day of a
Rate Period of the then outstanding shares of Series [      ] AMPS, shall have,
for such Rate Period, an Applicable Rate equal to the Applicable Rate for shares
of such series established in the first Auction for shares of such series
preceding the date of such issuance; and shall have such other preferences,
limitations and relative voting rights, in addition to those required by
applicable law or set forth in the Agreement and Declaration of Trust applicable
to AMPS of the Trust, as set forth in Part I and Part II of this Statement. The
Series [      ] AMPS shall constitute a separate series of AMPS of the Trust,
and each share of Series [      ] AMPS shall be identical except as provided in
Section 11 of Part I of this statement.

    SERIES [      ]: A series of       AMPS, liquidation preference $25,000 per
share, is hereby designated "Auction Market Preferred Shares, Series [      ]."
Each of the       shares of Series [      ] AMPS issued on            , 2002
shall, for purposes hereof, be deemed to have a Date of Original Issue of
           , 2002; have an Applicable Rate for its Initial Rate Period equal to
  % per annum; have an initial Dividend Payment Date of            , 2002; and
have such other preferences, limitations and relative voting rights, in addition
to those required by applicable law or set forth in the Agreement and
Declaration of Trust, as amended and restated, applicable to AMPS of the Trust,
as set forth in Part I and Part II of this Statement. Any shares of
Series [      ] AMPS issued thereafter shall be issued on the first day of a
Rate Period of the then outstanding shares of Series [      ] AMPS, shall have,
for such Rate Period, an Applicable Rate equal to the Applicable Rate for shares
of such series established in the first Auction for shares of such series
preceding the date of such issuance; and shall have such other preferences,
limitations and relative voting rights, in addition to those required by
applicable law or set forth in the Agreement and Declaration of Trust applicable
to AMPS of the Trust, as set forth in Part I and Part II of this Statement. The
Series [      ] AMPS shall constitute a separate series of AMPS of the Trust,
and each share of Series [      ] AMPS shall be identical except as provided in
Section 11 of Part I of this statement.

    SERIES [      ]: A series of       AMPS, liquidation preference $25,000 per
share, is hereby designated "Auction Market Preferred Shares, Series [      ]."
Each of the       shares of Series [      ] AMPS issued on            , 2002
shall, for purposes hereof, be deemed to have a Date of Original Issue of
           , 2002; have an Applicable Rate for its Initial Rate Period equal to
  % per annum; have an initial Dividend Payment Date of            , 2002; and
have such other preferences, limitations and relative voting rights, in addition
to those required by applicable law or set forth in the Agreement and
Declaration of Trust, as amended and restated, applicable to AMPS of the Trust,
as set forth in Part I and Part II of this Statement. Any shares of
Series [      ] AMPS issued thereafter shall be issued on the first day of a
Rate Period of the then outstanding shares of Series [      ] AMPS, shall have,
for such Rate Period, an Applicable Rate equal to the Applicable Rate for shares
of such series established in the first Auction for shares of such series
preceding the

                                      AA-1
<Page>
date of such issuance; and shall have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Agreement and Declaration of Trust applicable to AMPS of the Trust,
as set forth in Part I and Part II of this Statement. The Series [      ] AMPS
shall constitute a separate series of AMPS of the Trust, and each share of
Series [      ] AMPS shall be identical except as provided in Section 11 of Part
I of this statement.

    SERIES [      ]: A series of       AMPS, liquidation preference $25,000 per
share, is hereby designated "Auction Market Preferred Shares, Series [      ]."
Each of the       shares of Series [      ] AMPS issued on            , 2002
shall, for purposes hereof, be deemed to have a Date of Original Issue of
           , 2002; have an Applicable Rate for its Initial Rate Period equal to
  % per annum; have an initial Dividend Payment Date of            , 2002; and
have such other preferences, limitations and relative voting rights, in addition
to those required by applicable law or set forth in the Agreement and
Declaration of Trust, as amended and restated, applicable to AMPS of the Trust,
as set forth in Part I and Part II of this Statement. Any shares of
Series [      ] AMPS issued thereafter shall be issued on the first day of a
Rate Period of the then outstanding shares of Series [      ] AMPS, shall have,
for such Rate Period, an Applicable Rate equal to the Applicable Rate for shares
of such series established in the first Auction for shares of such series
preceding the date of such issuance; and shall have such other preferences,
limitations and relative voting rights, in addition to those required by
applicable law or set forth in the Agreement and Declaration of Trust applicable
to AMPS of the Trust, as set forth in Part I and Part II of this Statement. The
Series [      ] AMPS shall constitute a separate series of AMPS of the Trust,
and each share of Series [      ] AMPS shall be identical except as provided in
Section 11 of Part I of this statement.

                                   SECTION 2
NUMBER OF AUTHORIZED SHARES PER SERIES.

    The number of authorized shares constituting Series [      ] AMPS is
        .

    The number of authorized shares constituting Series [      ] AMPS is
        .

    The number of authorized shares constituting Series [      ] AMPS is
        .

    The number of authorized shares constituting Series [      ] AMPS is
        .

                                   SECTION 3
EXCEPTIONS TO CERTAIN DEFINITIONS.

    Notwithstanding the definitions contained under the heading "Definitions" in
this Statement, the following terms shall have the following meanings for
purposes of this Statement:

    Not applicable.

                                   SECTION 4
CERTAIN DEFINITIONS.

    For purposes of this Statement, the following terms shall have the following
meanings (with terms defined in the singular having comparable meanings when
used in the plural and vice versa), unless the context otherwise requires:

    "ESCROWED BONDS" shall mean Municipal Obligations that (i) have been
determined to be legally defeased in accordance with S&P's legal defeasance
criteria, (ii) have been determined to be economically defeased in accordance
with S&P's economic defeasance criteria and assigned a rating of

                                      AA-2
<Page>
AAA by S&P, (iii) are not rated by S&P but have been determined to be legally
defeased by Moody's or (iv) have been determined to be economically defeased by
Moody's and assigned a rating no lower than the rating that is Moody's
equivalent of S&P's AAA rating.

    "GROSS-UP PAYMENT" means payment to a Holder of AMPS of an amount which,
when taken together with the aggregate amount of Taxable Allocations made to
such Holder to which such Gross-up Payment relates, would cause such Holder's
dividends in dollars (after Federal income tax consequences) from the aggregate
of such Taxable Allocations and the related Gross-up Payment to be at least
equal to the dollar amount of the dividends which would have been received by
such Holder if the amount of such aggregate Taxable Allocations had been
excludable from the gross income of such Holder. Such Gross-up Payment shall be
calculated (i) without consideration being given to the time value of money;
(ii) assuming that no Holder of AMPS is subject to the Federal alternative
minimum tax with respect to dividends received from the Trust; and
(iii) assuming that each Taxable Allocation and each Gross-up Payment (except to
the extent such Gross-up Payment 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
individual income tax rate applicable to ordinary income or net capital gain, as
applicable, or the maximum marginal regular Federal corporate income tax rate
applicable to ordinary income or net capital gain, as applicable, which ever is
greater, in effect at the time such Gross-up Payment is made.

    "INVERSE FLOATER" shall mean trust certificates or other instruments
evidencing interests in one or more Municipal Obligations that qualify as S&P
Eligible Assets, the interest rates on which are adjusted at short-term
intervals on a basis that is inverse to the simultaneous readjustment of the
interest rates on corresponding floating rate trust certificates or other
instruments issued by the same issuer, provided that the ratio of the aggregate
dollar amount of floating rate instruments to inverse floating rate instruments
issued by the same issuer does not exceed one to one at their time of original
issuance unless the floating instruments have only one reset remaining until
maturity.

    "MOODY'S DISCOUNT FACTOR" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set forth
opposite such rating that is the same length as or is longer than the Moody's
Exposure Period, in accordance with the table set forth below:

                                RATING CATEGORY

<Table>
<Caption>
EXPOSURE PERIOD            AAA*  AA*    A*   BAA*  OTHER**  (V)MIG-1***  SP-1+****  UNRATED*****
- ---------------            ----  ---    --   ----  -------  -----------  ---------  ------------
<S>                        <C>   <C>   <C>   <C>   <C>      <C>          <C>        <C>
7 weeks..................  151%  159%  166%  173%   187%       136%        148%         225%
8 weeks or less but
  greater than seven
  weeks..................  154%  161%  168%  176%   190%       137%        149%         231%
9 weeks or less but
  greater than eight
  weeks..................  156%  163%  170%  177%   192%       138%        150%         240%
</Table>

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

  *  Moody's rating.
 **  Municipal Obligations not rated by Moody's but rated BBB by S&P.
***  Municipal Obligations rated MIG-1 or VMIG-1, which do not mature or have a
     demand feature at par exercisable in 30 days and which do not have a
     long-term rating.
**** Municipal Obligations not rated by Moody's but rated SP-1+ by S&P, which do
     not mature or have a demand feature at par exercisable in 30 days and which
     do not have a long-term rating.
***** Municipal Obligations rated less than Baa3 by Moody's or less than BBB by
     S&P or not rated by Moody's or S&P.

    Unrated securities may comprise no more than 10% of total Moody's Eligible
Assets.

                                      AA-3
<Page>
    Notwithstanding the foregoing, (i) the Moody's Discount Factor for
short-term Municipal Obligations will be 115% so long as such Municipal
Obligations are rated at least MIG-1, VMIG-l or P-1 by Moody's and mature or
have a demand feature at par exercisable in 30 days or less, or 125% as long as
such Municipal Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and
mature or have a demand feature at par exercisable in 30 days or less and
(ii) no Moody's Discount Factor will be applied to cash or to Receivables for
Municipal Obligations Sold.

    "MOODY'S ELIGIBLE ASSET" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash,
(ii) does not have its Moody's rating, as applicable, suspended by Moody's, and
(iii) is part of an issue of Municipal Obligations of at least $10 million.
Municipal Obligations issued by any one issuer and rated BBB or lower by S&P, Ba
or B by Moody's or not rated by S&P and Moody's ("Other Securities") may
comprise no more than 4% of total Moody's Eligible Assets; such other
Securities, if any, together with any Municipal Obligations issued by the same
issuer and rated Baa by Moody's or A by S&P, may comprise no more than 6% of
total Moody's Eligible Assets; such Other Securities, Baa and A-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the same
issuer and rated A by Moody's or AA by S&P, may comprise no more than 10% of
total Moody's Eligible Assets; and such Baa, A and AA-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the same
issuer and rated Aa by Moody's or AAA by S&P, may comprise no more than 20% of
total Moody's Eligible Assets. For purposes of the foregoing sentence any
Municipal Obligation backed by the guaranty, letter of credit or insurance
issued by a third party shall be deemed to be issued by such third party if the
issuance of such third party credit is the sole determinant of the rating on
such Municipal Obligation. Other Securities issued by issuers located within a
single state or territory may comprise no more than 12% of total Moody's
Eligible Assets; such Other Securities, if any, together with any Municipal
Obligations issued by issuers located within the same state or territory and
rated Baa by Moody's or A by S&P, may comprise no more than 20% of total Moody's
Eligible Assets; such Other Securities, Baa and A-rated Municipal Obligations,
if any, together with any Municipal Obligations issued by issuers located within
the same state or territory and rated A by Moody's or AA by S&P, may comprise no
more than 40% of total Moody's Eligible Assets; and such Other Securities, Baa,
A and AA-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by issuers located within the same state or territory and
rated Aa by Moody's or AAA by S&P, may comprise no more than 60% of total
Moody's Eligible Assets. For purposes of applying the foregoing requirements, a
Municipal Obligation shall be deemed to be rated BBB by S&P if rated BBB-, BBB
or BBB+ by S&P, Moody's Eligible Assets shall be calculated without including
cash, and Municipal Obligations rated MIG-1, VMIG-1 or P-1 or, if not rated by
Moody's, rated A-1+/AA or SP-1+/AA by S&P, shall be considered to have a
long-term rating of A. When the Trust sells a Municipal Obligation and agrees to
repurchase such Municipal Obligation at a future date, such Municipal Obligation
shall be valued at its Discounted Value for purposes of determining Moody's
Eligible Assets, and the amount of the repurchase price of such Municipal
Obligation shall be included as a liability for purposes of calculating the
Preferred Basic Maintenance Amount. When the Trust purchases a Moody's Eligible
Asset and agrees to sell it at a future date, such Eligible Asset shall be
valued at the amount of cash to be received by the Trust upon such future date,
provided that the counterparty to the transaction has a long-term debt rating of
at least A2 from Moody's and the transaction has a term of no more than 30 days,
otherwise, such Eligible Asset shall be valued at the Discounted Value of such
Eligible Asset.

    Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset to the extent it is (i) subject to any material lien, mortgage
pledge, security interest or security agreement of any kind (collectively,
"Liens"), except for (a) Liens which are being contested in good faith by
appropriate proceedings and which Moody's has indicated to the Trust will not
affect the status of such asset as a Moody's Eligible Asset, (b) Liens for taxes
that are not then due and payable or that can be paid thereafter without
penalty, (c) Liens to secure payment for services rendered or cash advanced to
the Trust by BlackRock Advisors, Inc., BlackRock Financial Management, Inc.,
State Street Bank and Trust

                                      AA-4
<Page>
or the Auction Agent and (d) Liens by virtue of any repurchase agreement; or
(ii) deposited irrevocably for the payment of any liabilities for purposes of
determining the Preferred Shares Basic Maintenance Amount.

    "RATE MULTIPLE," for shares of a series of AMPS on any Auction Date for
shares of such series, shall mean the percentage, determined as set forth in the
columns below (depending on whether the trust has notified the Auction Agent of
its intent to allocate income taxable for Federal income tax purposes to shares
of such series prior to the Auction establishing the Applicable Rate for shares
of such series as provided in this statement) based on the prevailing rating of
shares of such series in effect at the close of business on the Business Day
next preceding such Auction Date:

<Table>
<Caption>
                                            APPLICABLE      APPLICABLE
                                            PERCENTAGE      PERCENTAGE
PREVAILING RATING                         NO NOTIFICATION  NOTIFICATION
- -----------------                         ---------------  ------------
<S>                                       <C>              <C>
"Aa3"/AA- or higher.....................       110%            150%
"A3"/A-.................................       125%            160%
"Baa3"/BBB-.............................       150%            250%
"Ba3"/BB-...............................       200%            275%
Below "Ba3"/BB-.........................       250%            300%
</Table>

    For purposes of this definition, the "prevailing rating" of shares of a
series of AMPS shall be (i) "Aa3"/AA- or higher if such shares have a rating of
"Aa3" or better by Moody's and AA- or better by S&P or the equivalent of such
ratings by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, (ii) if not "Aa3"/AA- or higher, then
"A3"/A- if such shares have a rating of "A3" or better by Moody's and A- or
better by S&P or the equivalent of such ratings by such agencies or a substitute
rating agency or substitute rating agencies selected as provided below,
(iii) if not "Aa3"/AA- or higher or "A3"/A- then "Baa3"/BBB- if such shares have
a rating of "Baa3" or better by Moody's and BBB- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (iv) if not "Aa3"/AA-or
higher, "A3"/A- or "Baa3"/BBB-, then "Ba3"/BB- if such shares have a rating of
"Ba3" or better by Moody's and BB- or better by S&P or the equivalent of such
ratings by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, and (v) if not "Aa3"/AA- or higher,
"A3"/A-, "Baa3"/BBB-, or "Ba3"/BB-, then Below "Ba3"/BB-; provided, however,
that if such shares are rated by only one rating agency, the prevailing rating
will be determined without reference to the rating of any other rating agency.
The Trust shall take all reasonable action necessary to enable either S&P or
Moody's to provide a rating for the AMPS. If neither S&P nor Moody's shall make
such a rating available, the party set forth in Section 7 of this Appendix A or
its successor shall select one nationally recognized statistical rating
organization (as that term is used in the rules and regulations of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended from time, to time) to act as a substitute rating agency in respect of
shares of the series of AMPS set forth opposite such party's name in Section 7
of this Appendix A and the Trust shall take all reasonable action to enable such
rating agency to provide a rating for such shares.

    "S&P DISCOUNT FACTOR" shall mean, for purposes of determining the Discounted
Value of any S&P Eligible Asset, the percentage determined by reference to the
rating on such asset and the

                                      AA-5
<Page>
shortest Exposure Period set forth opposite such rating that is the same length
as or is longer than the S&P Exposure Period, in accordance with the table set
forth below:

                                RATING CATEGORY

<Table>
<Caption>
EXPOSURE PERIOD            AAA*    AA*    A*    BBB*   HIGH YIELD
- ---------------            ----    ---    --    ----   ----------
<S>                        <C>    <C>    <C>    <C>    <C>
45 Business Days.........   190%   195%   210%   250%     220%
25 Business Days.........   170    175    190    230      220
10 Business Days.........   155    160    175    215      220
7 Business Days..........   150    155    170    210      220
3 Business Days..........   130    135    150    190      220
</Table>

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

  *  S&P rating.

    Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term
Municipal Obligations will be 115% so long as such Municipal Obligations are
rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable
within 30 days or less, or 120% so long as such Municipal Obligations are rated
A-1 or SP-1 by S&P and mature or have a demand feature exercisable in 30 days or
less, or 125% if such Municipal Obligations are not rated by S&P but are rated
equivalent to A-1+ or SP-1+ by another nationally recognized statistical rating
organization, on a case by case basis; provided, however, that any such non-S&P
rated short-term Municipal Obligations which have demand features exercisable
within 30 days or less must be backed by a letter of credit, liquidity facility
or guarantee from a bank or other financial institution with a short-term rating
of at least A-1+ from S&P; and further provided that such non-S&P rated
short-term Municipal Obligations may comprise no more than 50% of short-term
Municipal Obligations that qualify as S&P Eligible Assets; provided, however,
that Municipal Obligations not rated by S&P but rated equivalent to BBB or lower
by another nationally recognized statistical rating organization, rated BB+ or
lower by S&P or non-rated (such Municipal Obligations are hereinafter referred
to as "High Yield Securities") may comprise no more than 20% of the short-term
Municipal Obligations that qualify as S&P Eligible Assets; (ii) the S&P Discount
Factor for Receivables for Municipal Obligations Sold that are due in more than
five Business Days from such Valuation Date will be the S&P Discount Factor
applicable to the Municipal Obligations sold; (iii) no S&P Discount Factor will
be applied to cash or to Receivables for Municipal Obligations Sold if such
receivables are due within five Business Days of such Valuation Date; and
(iv) except as set forth in clause (i) above, in the case of any Municipal
Obligation that is not rated by S&P but qualifies as an S&P Eligible Asset
pursuant to clause (iii) of that definition, such Municipal Obligation will be
deemed to have an S&P rating one full rating category lower than the S&P rating
category that is the equivalent of the rating category in which such Municipal
Obligation is placed by a nationally recognized statistical rating organization.
"Receivables for Municipal Obligations Sold," for purposes of calculating S&P
Eligible Assets as of any Valuation Date, means the book value of receivables
for Municipal Obligations sold as of or prior to such Valuation Date. The Trust
may adopt S&P Discount Factors for Municipal Obligations other than Municipal
Obligations provided that S&P advises the Trust in writing that such action will
not adversely affect its then current rating on the AMPS. For purposes of the
foregoing, Anticipation Notes rated SP-1+ or, if not rated by S&P, equivalent to
A-1+ or SP-1+ by another nationally recognized statistical rating organization,
on a case by case basis, which do not mature or have a demand feature at par
exercisable in 30 days and which do not have a long-term rating, shall be
considered to be short-term Municipal Obligations.

    "S&P ELIGIBLE ASSET" shall mean cash (excluding any cash irrevocably
deposited by the Trust for the payment of any liabilities within the meaning of
AMPS Basic Maintenance Amount), Receivables for Municipal Obligations Sold or a
Municipal Obligation owned by the Trust that (i) is interest bearing and pays
interest at least semi-annually; (ii) is payable with respect to principal and
interest in U.S. Dollars; (iii) is publicly rated BBB or higher by S&P or, if
not rated by S&P but rated equivalent

                                      AA-6
<Page>
or higher to an A by another nationally recognized statistical rating
organization, on a case by case basis; (iv) is not subject to a covered call or
put option written by the Trust; (v) except for Inverse Floaters, is not part of
a private placement of Municipal Obligations; and (vi) except for Inverse
Floaters, is part of an issue of Municipal Obligations with an original issue
size of at least $10 million or, if of an issue with an original issue size
below $10 million (but in no event below $5 million), is issued by an issuer
with a total of at least $50 million of securities outstanding. Solely for
purposes of this definition, the term "Municipal Obligation" means any
obligation the interest on which is exempt from regular Federal income taxation
and which is issued by any of the fifty United States, the District of Columbia
or any of the territories of the United States, their subdivisions, counties,
cities, towns, villages, school districts and agencies (including authorities
and special districts created by the states), and federally sponsored agencies
such as local housing authorities. Notwithstanding the foregoing limitations:

          (1) Municipal Obligations (excluding Escrowed Bonds) of any one issuer
    or guarantor (excluding bond insurers) shall be considered S&P Eligible
    Assets only to the extent the Market Value of such Municipal Obligations
    (including short-term Municipal Obligations) does not exceed 10% of the
    aggregate Market Value of S&P Eligible Assets, provided that 2% is added to
    the applicable S&P Discount Factor for every 1% by which the Market Value of
    such Municipal Obligations exceeds 5% of the aggregate Market Value of S&P
    Eligible Assets. High Yield Securities of any one issuer shall be considered
    S&P Eligible Assets only to the extent the Market Value of such Municipal
    Obligations does not exceed 5% of the aggregate Market Value of S&P Eligible
    Assets;

          (2) Municipal Obligations not rated by S&P shall be considered S&P
    Eligible Assets only to the extent the Market Value of such Municipal
    Obligations does not exceed 50% of the aggregate Market Value of S&P
    Eligible Assets; provided, however, that High Yield Securities shall be
    considered S&P Eligible Assets only to the extent the Market Value of such
    Municipal Obligations does not exceed 20% of the aggregate Market Value of
    S&P Eligible Assets;

          (3) Out of State Bonds shall be considered S&P Eligible Assets only to
    the extent that the Market Value of such Municipal Obligations does not
    exceed 20% of the aggregate Market Value of S&P Eligible Assets and

          (4) Municipal Obligations (excluding Escrowed Bonds) of any one Issue
    Type Category shall be considered S&P Eligible Assets only to the extent the
    Market Value of such Municipal Obligations does not exceed 25% of the
    aggregate Market Value of S&P Eligible Assets; provided, however, that
    Municipal Obligations falling within the utility Issue Type Category will be
    broken down into three sub-categories and such Municipal Obligations will be
    considered S&P Eligible Assets to the extent the Market Value of such
    Municipal Obligations in each sub-category does not exceed 25% of the
    aggregate Market Value of S&P Eligible Assets per each sub-category provided
    that the total utility Issue Type Category does not exceed 60% of the
    Aggregate Market Value of S&P Eligible Assets; provided, however, that
    Municipal Obligations falling within the transportation Issue Type Category
    will be broken down into two sub-categories and such Municipal Obligations
    will be considered S&P Eligible Assets to the extent the Market Value of
    such Municipal Obligations in both sub-categories combined does not exceed
    40% of the aggregate Market Value of S&P Eligible Assets (exposure to
    transportation sub-category (i) described in the definition of Issue Type
    Category is limited to 25% of the aggregate Market Value of S&P Eligible
    Assets, provided, however, exposure to transportation sub-category (ii) can
    exceed the 25% limit to the extent that exposure to transportation
    sub-category (i) is reduced, for a total exposure up to and not exceeding
    40% of the aggregate Market Value of S&P Eligible Assets for the
    transportation Issue Type Category); and provided, however, that the general
    obligation issues will be considered

                                      AA-7
<Page>
    S&P Eligible Assets only to the extent the Market Value of such general
    obligation issues does not exceed 50% of the aggregate Market Value of S&P
    Eligible Assets.

                                   SECTION 5
INITIAL RATE PERIODS.

    The Initial Rate Period for shares of Series [      ] AMPS shall be the
period from and including the Date of Original Issue thereof to but excluding
           , 2002.

    The Initial Rate Period for shares of Series [      ] AMPS shall be the
period from and including the Date of Original Issue thereof to but excluding
           , 2002.

    The Initial Rate Period for shares of Series [      ] AMPS shall be the
period from and including the Date of Original Issue thereof to but excluding
           , 2002.

    The Initial Rate Period for shares of Series [      ] AMPS shall be the
period from and including the Date of Original Issue thereof to but excluding
           , 2002.

                                   SECTION 6
DATE FOR PURPOSES OF THE DEFINITION OF "QUARTERLY VALUATION DATE" CONTAINED
UNDER THE HEADING "DEFINITIONS" IN THIS STATEMENT.

    [      ], 2002

                                   SECTION 7
PARTY NAMED FOR PURPOSES OF THE DEFINITION OF "RATE MULTIPLE" IN THIS STATEMENT.

<Table>
<Caption>
PARTY:                                                         SERIES OF AMPS
- ------                                                ---------------------------------
<S>                                                   <C>
Merrill Lynch, Pierce, Fenner & Smith
  Incorporated....................................            Series [      ]
Merrill Lynch, Pierce, Fenner & Smith
  Incorporated....................................            Series [      ]
Merrill Lynch, Pierce, Fenner & Smith
  Incorporated....................................            Series [      ]
Merrill Lynch, Pierce, Fenner & Smith
  Incorporated....................................            Series [      ]
</Table>

                                   SECTION 8
ADDITIONAL DEFINITIONS.

    Not applicable.

                                   SECTION 9
DIVIDEND PAYMENT DATES.

    Except as otherwise provided in paragraph (d) of Section 2 of Part I of this
Statement, dividends shall be payable on shares of: Series [      ] AMPS, for
the Initial Rate Period on            , 2002, and on each thereafter,
Series [      ] AMPS, for the Initial Rate Period on            , 2002, and on
each         thereafter, Series [      ] AMPS, for the Initial Rate Period on
           , 2002, and on each         thereafter, Series [      ] AMPS, for the
Initial Rate Period on            , 2002 and on each         thereafter.

                                      AA-8
<Page>
                                   SECTION 10
AMOUNT FOR PURPOSES OF SUBPARAGRAPH (C) (I) OF SECTION 5 OF PART I OF THIS
STATEMENT.

                                   SECTION 11
REDEMPTION PROVISIONS APPLICABLE TO INITIAL RATE PERIODS.

    Not applicable.

                                   SECTION 12
APPLICABLE RATE FOR PURPOSES OF SUBPARAGRAPH (B) (III) OF SECTION 3 OF PART II
OF THIS STATEMENT.

    For purposes of subparagraph (b)(iii) of Section 3 of Part II of this
Statement, the Applicable Rate for shares of such series for the next succeeding
Rate Period of shares of such series shall be equal to the lesser of the Kenny
Index (if such Rate Period consists of fewer than 183 Rate Period Days) or the
product of (A) (I) the "AA" Composite Commercial Paper Rate on such Auction Date
for such Rate Period, if such Rate Period consists of fewer than 183 Rate Period
Days; (II) the Treasury Bill Rate on such Auction Date for such Rate Period, if
such Rate Period consists of more than 182 but fewer than 365 Rate Period Days;
or (III) the Treasury Note Rate on such Auction Date for such Rate Period, if
such Rate Period is more than 364 Rate Period Days (the rate described in the
foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein
as the "Benchmark Rate") and (B) 1 minus 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; provided, however, that if the Trust has notified the
Auction Agent of its intent to allocate to shares of such series in such Rate
Period any net capital gains or other income taxable for Federal income tax
purposes ("Taxable Income"), the Applicable Rate for shares of such series for
such Rate Period will be (i) if the Taxable Yield Rate (as defined below) 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 lesser of the Kenny Index (if such Rate Period consists of
fewer than 183 Rate Period Days) or the product of the Benchmark Rate multiplied
by the factor set forth in the preceding clause (B) 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
applicable to ordinary income, whichever is greater, multiplied by the Taxable
Yield Rate. For purposes of the foregoing, "Taxable Yield Rate" means the rate
determined by (a) dividing the amount of Taxable Income available for
distribution per such AMPS by the number of days in the Dividend Period in
respect of which such Taxable Income is contemplated to be distributed,
(b) multiplying the amount determined in (a) above by 365 (in the case of a
Dividend Period of 7 Rate Period Days) or 360 (in the case of any other Dividend
Period), and (c) dividing the amount determined in (b) above by $25,000.

                                   SECTION 13
CERTAIN OTHER RESTRICTIONS AND REQUIREMENTS.

      (a) For so long as any AMPS are rated by Moody's, the Trust will not buy
or sell futures contracts, write, purchase or sell call options on futures
contracts or purchase put options on futures contracts or write call options
(except covered call options) on portfolio securities unless it receives written
confirmation from Moody's that engaging in such transactions would not impair
the ratings then assigned to the AMPS by Moody's, except that the Trust may
purchase or sell exchange-traded futures contracts based on the Bond Buyer
Municipal Bond Index (the "Municipal Index") or United States Treasury Bonds or
Notes ("Treasury Bonds"), and purchase, write or sell exchange-traded put
options

                                      AA-9
<Page>
on such futures contracts and purchase, write or sell exchange-traded call
options on such futures contracts (collectively, "Moody's Hedging
Transactions"), subject to the following limitations:

          (i) the Trust will not engage in any Moody's Hedging Transaction based
    on the Municipal Index (other than transactions which terminate a futures
    contract or option held by the Trust by the Trust's taking an opposite
    position thereto ("Closing Transactions")) which would cause the Trust at
    the time of such transaction to own or have sold (A) outstanding futures
    contracts based on the Municipal Index exceeding in number 10% of the
    average number of daily traded futures contracts based on the Municipal
    Index in the 30 days preceding the time of effecting such transaction as
    reported by the Wall Street Journal or (B) outstanding futures contracts
    based on the Municipal Index having a Market Value exceeding 50% of the
    Market Value of all Municipal Bonds constituting Moody's Eligible Assets
    owned by the Trust (other than Moody's Eligible Assets already subject to a
    Moody's Hedging Transaction);

         (ii) the Trust will not engage in any Moody's Hedging Transaction based
    on Treasury Bonds (other than Closing Transactions) which would cause the
    Trust at the time of such transaction to own or have sold (A) outstanding
    futures contracts based on Treasury Bonds having an aggregate Market Value
    exceeding 20% of the aggregate Market Value of Moody's Eligible Assets owned
    by the Trust and rated Aa by Moody's (or, if not rated by Moody's but rated
    by S&P, rated AAA by S&P) or (B) outstanding futures contracts based on
    Treasury Bonds having an aggregate Market Value exceeding 40% of the
    aggregate Market Value of all Municipal Bonds constituting Moody's Eligible
    Assets owned by the Trust (other than Moody's Eligible Assets already
    subject to a Moody's Hedging Transaction) and rated Baa or A by Moody's (or,
    if not rated by Moody's but rated by S&P, rated A or AA by S&P (for purpose
    of the foregoing clauses (i) and (ii), the Trust shall be deemed to own the
    number of futures contracts that underlie any outstanding options written by
    the Trust);

         (iii) the Trust will engage in Closing Transactions to close out any
    outstanding futures contract based on the Municipal Index if the amount of
    open interest in the Municipal Index as reported by The Wall Street Journal
    is less than 5,000;

         (iv) the Trust will engage in a Closing Transaction to close out any
    outstanding futures contract by no later than the fifth Business Day of the
    month in which such contract expires and will engage in a Closing
    Transaction to close out any outstanding option on a futures contract by no
    later than the first Business Day of the month in which such option expires;

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

         (vi) the Trust will not engage in options and futures transactions for
    leveraging or speculative purposes and will not write any call options or
    sell any futures contracts for the purpose of hedging the anticipated
    purchase of an asset prior to completion of such purchase; and

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

    For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the Preferred Shares
Basic Maintenance Amount, the Discounted Value of Moody's Eligible Assets which
the Trust is obligated to deliver or receive pursuant to an outstanding futures
contract or option shall be as follows: (i) assets subject to call options
written by

                                     AA-10
<Page>
the Trust which are either exchange-traded and "readily reversible" or which
expire within 49 days after the date as of which such valuation is made shall be
valued at the lesser of (a) Discounted Value and (b) the exercise price of the
call option written by the Trust; (ii) assets subject to call options written by
the Trust not meeting the requirements of clause (i) of this sentence shall have
no value; (iii) assets subject to put options written by the Trust shall be
valued at the lesser of (A) the exercise price and (B) the Discounted Value of
the subject security; (iv) futures contracts shall be valued at the lesser of
(A) settlement price and (B) the Discounted Value of the subject security,
provided that, if a contract matures within 49 days after the date as of which
such valuation is made, where the Trust is the seller the contract may be valued
at the settlement price and where the Trust is the buyer the contract may be
valued at the Discounted Value of the subject securities; and (v) where delivery
may be made to the Trust with any security of a class of securities, the Trust
shall assume that it will take delivery of the security with the lowest
Discounted Value.

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

     (b) For so long as any AMPS are rated by Moody's, the Trust will not enter
into any contract to purchase securities for a fixed price at a future date
beyond customary settlement time (other than such contracts that constitute
Moody's Hedging Transactions that are permitted under Section 13(a) of this
Annex A to this Statement), except that the Trust may enter into such contracts
to purchase newlyissued securities on the date such securities are issued
("Forward Commitments"), subject to the following limitation:

          (i) the Trust will maintain in a segregated account with its custodian
    cash, cash equivalents or short-term, fixed-income securities rated P-1,
    MTG-1 or MIG-1 by Moody's and maturing prior to the date of the Forward
    Commitment with a Market Value that equals or exceeds the amount of the
    Trust's obligations under any Forward Commitments to which it is from time
    to time a party, or long-term fixed income securities with a Discounted
    Value that equals or exceeds the amount of the Trust's obligations under any
    Forward Commitment to which it is from time to time a party; and

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

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

      (c) For so long as any AMPS are rated by S&P, the Trust will not purchase
or sell futures contracts, write, purchase or sell options on futures contracts
or write put options (except covered put options) or call options (except
covered call options) on portfolio securities unless it receives written
confirmation from S&P that engaging in such transactions will not impair the
ratings then assigned to

                                     AA-11
<Page>
the AMPS by S&P, except that the Trust may purchase or sell futures contracts
based on the Bond Buyer Municipal Bond Index or United States Treasury Bonds or
Notes and write, purchase or sell put and call options on such contracts
(collectively, "S&P Hedging Transactions"), subject to the following
limitations:

          (i) the Trust will not engage in any S&P Hedging Transaction based on
    the Municipal Index (other than transactions which terminate a futures
    contract or option held by the fund by the Trust's taking an opposite
    position thereto), which would cause the Trust at the time of such
    transaction to own or have sold the least of (A) more than 1,000 outstanding
    futures contracts based on the Municipal Index, (B) outstanding futures
    contracts based on the Municipal Index exceeding in number 25% of the
    quotient of the Market Value of the Trust's total assets divided by $1,000
    or (C) outstanding futures contracts based on the Municipal Index exceeding
    in number 10% of the average number of daily traded futures contracts based
    on the Municipal Index in the 30 days preceding the time of effecting such
    transaction as reported by The Wall Street Journal;

         (ii) the Trust will not engage in any S&P Hedging Transaction based on
    Treasury Bonds (other than Closing Transactions) which would cause the Trust
    at the time of such transaction to own or have sold the lesser of
    (A) outstanding futures contracts based on Treasury Bonds exceeding in
    number 50% of the quotient of the Market Value of the Trust's total assets
    divided by $100,000 ($200,000 in the case of the two-year United States
    Treasury Note) or (B) outstanding futures contracts based on Treasury Bonds
    exceeding in number 10% of the average number of daily traded futures
    contracts based on Treasury Bonds in the 30 days preceding the time of
    effecting such transaction as reported by The Wall Street Journal.

         (iii) the Trust will engage in Closing Transactions to close out any
    outstanding futures contract which the Trust owns or has sold or any
    outstanding option thereon owned by the Trust in the event (A) the Trust
    does not have S&P Eligible Assets with an aggregate Discounted Value equal
    to or greater than the Preferred Shares Basic Maintenance Amount on two
    consecutive Valuation Dates and (B) the Trust is required to pay variation
    margin on the second such Valuation Date;

         (iv) the Trust will engage in a Closing Transaction to close out any
    outstanding futures contract or option thereon in the month prior to the
    delivery month under the terms of such futures contract or option thereon
    unless the Trust holds the securities deliverable under such terms; and

          (v) when the Trust writes a futures contract or option thereon, it
    will either maintain an amount of cash, cash equivalents or high grade
    (rated A or better by S&P), fixed-income securities in a segregated account
    with the Trust's custodian, so that the amount so segregated plus the amount
    of initial margin and variation margin held in the account of or on behalf
    of the Trust's broker with respect to such futures contract or option equals
    the Market Value of the futures contract or option, or, in the event the
    Trust writes a futures contract or option thereon which requires delivery of
    an underlying security, it shall hold such underlying security in its
    portfolio.

    For purposes of determining whether the Trust has S&P Eligible Assets with a
Discounted Value that equals or exceeds the Preferred Shares Basic Maintenance
Amount, the Discounted Value of cash or securities held for the payment of
initial margin or variation margin shall be zero and the aggregate Discounted
Value of S&P Eligible Assets shall be reduced by an amount equal to (i) 30% of
the aggregate settlement value, as marked to market, of any outstanding futures
contracts based on the Municipal Index which are owned by the Trust plus
(ii) 25% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on Treasury Bonds which contracts are owned
by the Trust.

                                     AA-12
<Page>
                                   APPENDIX B

                             RATINGS OF INVESTMENTS

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

LONG-TERM DEBT

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

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

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

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

    1.  Likelihood of default-capacity and willingness of the obligor as to the
        timely payment of interest and repayment of principal in accordance with
        the terms of the obligation;

    2.  Nature of and provisions of the obligation; and

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

INVESTMENT GRADE

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

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

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

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

SPECULATIVE GRADE RATING

    Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least

                                      B-1
<Page>
degree of speculation and "C" the highest. While such debt will likely have some
quality and protective characteristics these are outweighed by major
uncertainties or major exposures to adverse conditions.

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

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

 CCC  Debt rated "CCC" has a currently identifiable vulnerability to default,
      and is dependent upon favorable business, financial, and economic
      conditions to meet timely payment of interest and repayment of principal.
      In the event of adverse business, financial, or economic conditions, it is
      not likely to have the capacity to pay interest and repay principal. The
      "CCC" rating category is also used for debt subordinated to senior debt
      that is assigned an actual or implied "B" or "B" rating.

 CC   Debt rated "CC" has a currently identifiable high vulnerability to
      default. It typically is applied to debt subordinated to senior debt that
      is assigned an actual or implied "CCC" debt rating.

 C    Debt rated "C" is currently vulnerable to nonpayment and is dependent upon
      business, financial and economic conditions for the obligor to meet its
      financial commitment or obligation. It typically is applied to debt
      subordinated to senior debt which is assigned an actual or implied "CCC"
      debt rating. The "C" rating may be used to cover a situation where a
      bankruptcy petition has been filed, but debt service payments are
      continued.

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

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

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

    PROVISIONAL RATINGS: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful and
timely completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise judgment with respect to such likelihood and risk.

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

                                      B-2
<Page>
     closing of the insured institution or, in the event that the deposit is
     assumed by a successor insured institution, upon maturity.

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

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

MUNICIPAL NOTES

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

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

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

       Note rating symbols are as follows:

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

 SP-2  Satisfactory capacity to pay principal and interest.

 SP-3  Speculative capacity to pay principal and interest.

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

COMMERCIAL PAPER

    An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.

    Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. These categories are as
follows:

 A-1  This highest category indicates that the degree of safety regarding timely
      payment is strong. Those issues determined to possess extremely strong
      safety characteristics are denoted with a plus sign (+) designation.

 A-2  Capacity for timely payment on issues with this designation is
      satisfactory. However, the relative degree of safety is not as high as for
      issues designated "A-1."

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

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

                                      B-3
<Page>
 C   This rating is assigned to short-term debt obligations with currently high
     vulnerability for nonpayment.

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

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

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

MUNICIPAL BONDS

 Aaa  Bonds which are rated Aaa are judged to be of the best quality. They carry
      the smallest degree of investment risk and are generally referred to as
      "gilt edge." Interest payments are protected by a large or by an
      exceptionally stable margin and principal is secure. While the various
      protective elements are likely to change, such changes as can be
      visualized are most unlikely to impair the fundamentally strong position
      of such issues.

 Aa   Bonds which are rated Aa are judged to be of high quality by all
      standards. Together with the Aaa group they comprise what are generally
      known as high grade bonds. They are rated lower than the best bonds
      because margins of protection may not be as large as in Aaa securities or
      fluctuation of protective elements may be of greater amplitude or there
      may be other elements present which make the long-term risks appear
      somewhat larger than in Aaa securities.

 A   Bonds which are rated A possess many favorable investment attributes and
     are to be considered as upper medium grade obligations. Factors giving
     security to principal and interest are considered adequate, but elements
     may be present which suggest a susceptibility to impairment sometime in the
     future.

 Baa   Bonds which are rated Baa are considered as medium grade obligations,
       i.e., they are neither highly protected nor poorly secured. Interest
       payments and principal security appear adequate for the present but
       certain protective elements may be lacking or may be characteristically
       unreliable over any great length of time. Such bonds lack outstanding
       investment characteristics and in fact have speculative characteristics
       as well.

 Ba   Bonds which are rated Ba are judged to have speculative elements; their
      future cannot be considered as well assured. Often the protection of
      interest and principal payments may be very moderate and thereby not well
      safeguarded during both good and bad times over the future. Uncertainty of
      position characterizes bonds in this class.

 B    Bonds which are rated B generally lack characteristics of the desirable
      investment. Assurance of interest and principal payments or of maintenance
      of other terms of the contract over any long period of time may be small.

 Caa   Bonds which are rated Caa are of poor standing. Such issues may be in
       default or there may be present elements of danger with respect to
       principal or interest.

 Ca   Bonds which are rated Ca represent obligations which are speculative in a
      high degree. Such issues are often in default or have other marked
      shortcomings.

                                      B-4
<Page>
 C    Bonds which are rated C are the lowest rated class of bonds, and issues so
      rated can be regarded as having extremely poor prospects of ever attaining
      any real investment standing.

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

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

SHORT-TERM LOANS

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

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

 MIG 3/VMIG 3  This designation denotes acceptable credit quality. Liquidity and
               cash flow protection may be narrow and market access for
               refinancing is likely to be less well-established.

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

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

COMMERCIAL PAPER

    Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:

     --  Leading market positions in well-established industries.

     --  High rates of return on funds employed.

     --  Conservative capitalization structures with moderate reliance on debt
         and ample asset protection.

     --  Broad margins in earnings coverage of fixed financial charges and high
         internal cash generation.

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

    Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to

                                      B-5
<Page>
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

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

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

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

LONG-TERM CREDIT RATINGS

        Investment Grade

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

 AA    VERY HIGH CREDIT QUALITY. 'AA' ratings denote a very low expectation of
       credit risk. They indicate very strong capacity for timely payment of
       financial commitments. This capacity is not significantly vulnerable to
       foreseeable events.

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

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

        Speculative Grade

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

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

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

                                      B-6
<Page>
 DDD,
 DD,
 and D  DEFAULT. The ratings of obligations in this category are based on their
        prospects for achieving partial or full recovery in a reorganization or
        liquidation of the obligor. While expected recovery values are highly
        speculative and cannot be estimated with any precision, the following
        serve as general guidelines. 'DDD' obligations have the highest
        potential for recovery, around 90%-100% of outstanding amounts and
        accrued interest. 'DD' indicates potential recoveries in the range of
        50%-90%, and 'D' the lowest recovery potential, i.e., below 50%.

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

SHORT-TERM CREDIT RATINGS

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

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

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

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

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

 C   HIGH DEFAULT RISK. Default is a real possibility. Capacity for meeting
     financial commitments is solely reliant upon a sustained, favorable
     business and economic environment.

 D   DEFAULT. Denotes actual or imminent payment default.

Notes:

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

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

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

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

                                      B-7
<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,

                                      C-1
<Page>
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

                                      C-2
<Page>
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.

                                      C-3
<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


<Table>
<S>                                       <C>       <C>
                                          (a)       Agreement and Declaration of Trust.(1)
                                          (b)       By-Laws.(1)
                                          (c)       Inapplicable.
                                          (d)(1)    Statement of Preferences of Auction
                                                    Market Preferred Shares.(2)
                                          (d)(2)    Form of Specimen Stock Certificate.(4)
                                          (e)       Dividend Reinvestment Plan.(3)
                                          (f)       Inapplicable.
                                          (g)(1)    Investment Management Agreement.(3)
                                          (g)(2)    Waiver Reliance Letter.(3)
                                          (g)(3)    Sub-Investment Advisory Agreement.(3)
                                          (h)       Form of Underwriting Agreement.(4)
                                          (i)       Deferred Compensation Plan for
                                                    Independent Trustees.(3)
                                          (j)       Custodian Agreement.(3)
                                          (k)(1)    Transfer Agency Agreement.(3)
                                          (k)(2)    Auction Agency Agreement.(4)
                                          (k)(3)    Broker-Dealer Agreement.(4)
                                          (k)(4)    Form of DTC Agreement.(4)
                                          (l)       Opinion and Consent of Counsel to the
                                                    Trust.(4)
                                          (m)       Inapplicable.
                                          (n)       Consent of Independent Public
                                                    Accountants.(4)
                                          (o)       Inapplicable.
                                          (p)       Initial Subscription Agreement.(3)
                                          (q)       Inapplicable.
                                          (r)(1)    Code of Ethics of Trust.(3)
                                          (r)(2)    Code of Ethics of Advisor and
                                                    Sub-Advisor.(3)
</Table>


                                    PART C-1
<Page>

<Table>
<S>                                       <C>       <C>
                                          (r)(3)    Code of Ethics of J.J.B. Hilliard, W.L.
                                                    Lyons, Inc.(3)
                                          (s)       Powers of Attorney(1)
</Table>


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

(2)  Incorporated by reference to Exhibit A to the Statement of Additional
     Information

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

(4)  Filed herewith.


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:


<Table>
<S>                                                 <C>
Registration fees.................................   18,911
Rating fees.......................................  143,885
Printing (other than certificates)................   25,522
Accounting fees and expenses......................    3,000
Legal fees and expenses...........................  119,636
Miscellaneous.....................................    6,000
                                                    -------
    Total.........................................  316,984
</Table>


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

    None.

ITEM 28. NUMBER OF HOLDERS OF SHARES


    As of July 25, 2002


<Table>
<Caption>
                                                      NUMBER OF
TITLE OF CLASS                                      RECORD HOLDERS
- --------------                                      --------------
<S>                                                 <C>
Common Shares of Beneficial Interest..............         1
AMPS..............................................         0
</Table>

ITEM 29. INDEMNIFICATION

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

    5.1   NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC.   No Shareholder
of the Trust shall be subject in such capacity to any personal liability
whatsoever to any Person in connection with Trust Property or the acts,
obligations or affairs of the Trust. Shareholders shall have the same limitation
of personal liability as is extended to stockholders of a private corporation
for profit incorporated under the Delaware General Corporation Law. No Trustee
or officer of the Trust shall be subject in such capacity to any personal
liability whatsoever to any Person, save only liability to the Trust or its
Shareholders arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and, subject to the foregoing
exception, all such Persons shall look solely to the

                                    PART C-2
<Page>
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

                                    PART C-3
<Page>
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.

                                    PART C-4
<Page>
    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

                                    PART C-5
<Page>
    (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.

                                    PART C-6
<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 17th day of
September, 2002.


<Table>
<S>                                                   <C>
                                                                    /s/ ROBERT S. KAPITO
                                                      ------------------------------------------------
                                                                      Robert S. Kapito
                                                                         PRESIDENT
</Table>


    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 17th day of September, 2002.


<Table>
<Caption>
                        NAME                                      TITLE
                        ----                                      -----
<C>                                                    <S>                          <C>
                /s/ ROBERT S. KAPITO
     -------------------------------------------       Trustee, President and
                  Robert S. Kapito                       Chief Executive Officer
                  /s/ HENRY GABBAY
     -------------------------------------------       Treasurer and Principal
                    Henry Gabbay                         Financial Officer
                          *
     -------------------------------------------       Trustee
                  Andrew F. Brimmer
                          *
     -------------------------------------------       Trustee
                 Richard E. Cavanagh
                          *
     -------------------------------------------       Trustee
                     Kent Dixon
                          *
     -------------------------------------------       Trustee
                  Frank J. Fabozzi
                          *
     -------------------------------------------       Trustee
            James Clayburn La Force, Jr.
                          *
     -------------------------------------------       Trustee
                  Walter F. Mondale
              /s/ RALPH L. SCHLOSSTEIN
     -------------------------------------------       Trustee
                Ralph L. Schlosstein
</Table>

<Table>
<S>   <C>                                                    <C>                          <C>
*By:                /s/ RALPH L. SCHLOSSTEIN
             --------------------------------------
                      Ralph L. Schlosstein
                        ATTORNEY-IN-FACT
</Table>
<Page>

                               INDEX TO EXHIBITS



<Table>
<S>                                       <C>           <C>
                                          Ex 99 (d)(2)  Form of Specimen Stock Certificate.
                                          Ex 99 (h)     Form of Underwriting Agreement.
                                          Ex 99 (k)(2)  Auction Agency Agreement.
                                          Ex 99 (k)(3)  Broker-Dealer Agreement.
                                          Ex 99 (k)(4)  Form of DTC Agreement.
                                          Ex 99 (l)     Opinion and Consent of Counsel to the
                                                        Trust.
                                          Ex 99 (n)     Consent of Independent Public
                                                        Accountants.
</Table>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(D)(2)
<SEQUENCE>3
<FILENAME>a2089402zex-99_d2.txt
<DESCRIPTION>EXHIBIT 99.(D)(2)
<TEXT>
<Page>

CERTIFICATE NO.                                                           SHARES
     1                                                                    2,055

                      BLACKROCK MUNICIPAL INCOME TRUST II
               Organized Under the Laws of The State of Delaware
                  Auction Market Preferred Shares - Series M7
                           $.001 Par Value Per Share
                    $25,000 Liquidation Preference Per Share

                              Cusip No.09249N 20 0

     This certifies that Cede & Co. is the owner of 2,055 fully paid and
non-assessable shares of Auction Market Preferred Shares - Series M7, $.001 par
value per share, $25,000 liquidation preference per share, of BlackRock
Municipal Income Trust II (the "Trust") transferable only on the books of the
Trust by the holder thereof in person or by duly authorized Attorney upon
surrender of this Certificate properly endorsed. This Certificate is not valid
unless countersigned by the transfer agent and registrar.

A statement in full, of all the designations, preferences, qualifications,
limitations, restrictions and special or relative rights of the shares of each
class authorized to be issued, will be furnished by the Trust to any
shareholders upon request and without charge.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed by its
duly authorized officers this 19th day of September 2002

DEUTSCH BANK TRUST                          BLACKROCK MUNICIPAL
COMPANY AMERICAS                            INCOME TRUST II
As Transfer Agent and Registrar

By:_______________________                  By:_______________________
      Lisa McDermid                                 Kevin Klingert
      Associate                                     Vice President

                                            Attest:_____________________
                                                    Anne F. Ackerley
                                                    Secretary
<Page>

FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers
______ Shares represented by this Certificate unto _______________ , and do
hereby irrevocably constitute and appoint ________________ Attorney to transfer
the said Shares on the books of the within named Trust with full power of
substitution in the premises.

Dated ______________, 20__

In presence of

___________________________      ____________________________

Shares of Auction Market Preferred Shares evidenced by this Certificate may be
sold, transferred, or otherwise disposed of only pursuant to the provisions of
the Trust's Agreement and Declaration of Trust and the Trust's Statement of
Preferences.

The Trust will furnish to any shareholder, upon request and without charge, the
Trust's Agreement and Declaration of Trust and a full statement of the
designations, preferences, limitations and relative rights of the shares of each
class or series of capital stock of the Trust authorized to be issued, so far as
they have been determined, and the authority of the Board of Trustees to
determine the relative rights and preferences of subsequent classes or series.
Any such request should be addressed to the Secretary of the Trust.

Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Trust or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(H)
<SEQUENCE>4
<FILENAME>a2089402zex-99_h.txt
<DESCRIPTION>EXHIBIT 99(H)
<TEXT>
<Page>



                       BlackRock Municipal Income Trust II
                           (a Delaware business trust)

         Auction Market Preferred Shares ("AMPS") of Beneficial Interest
                         [ ] Shares ___ AMPS, Series [ ]
                         [ ] Shares ___ AMPS, Series [ ]
                         [ ] Shares ___ AMPS, Series [ ]
                    Liquidation Preference $25,000 per share

                               PURCHASE AGREEMENT

                                                            September [ ], 2002

Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
               Incorporated
Salomon Smith Barney Inc.
Prudential Securities
UBS Warburg

c/o Merrill Lynch, Pierce, Fenner & Smith
                  Incorporated
4 World Financial Center
New York, New York 10080

Ladies and Gentlemen:

         BlackRock Municipal Income Trust II, a Delaware business trust (the
"Trust"), proposes, upon the terms and conditions set forth herein, to issue and
sell an aggregate of [ ] shares of its Auction Market Preferred Shares of
Beneficial Interest, Series [ ], [ ] shares of its Auction Market Preferred
Shares of Beneficial Interest, Series [ ] and [ ] shares of its Auction Market
Preferred Shares of Beneficial Interest, Series [ ], each with a liquidation
preference of $25,000 per share (the "AMPS"). The AMPS will be authorized by,
and subject to the terms and conditions of, the Statement of Preferences of
Auction Market Preferred Shares of the Trust, dated as of [ ], 2002 (the
"Statement") and the Agreement and Declaration of Trust of the Trust, as amended
and restated, dated as of [ ], 2002 (the "Declaration"), in the forms filed as
exhibits to the Registration Statement referred to in the second following
paragraph of this Agreement, as the same may be amended from time to time. The
Trust, the Trust's investment adviser, BlackRock Advisors, Inc., a Delaware
corporation ("BAI"), and its investment sub-adviser, BlackRock Financial
Management, Inc., a Delaware corporation ("BFM") (each, an "Adviser" and
together, the "Advisers"), each confirms its agreement with Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") , Salomon
Smith Barney Inc. ("Salomon Smith Barney"), Prudential Securities, UBS Warburg
and each of the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch and Salomon
Smith Barney are acting as representatives (in such capacity, the
"Representatives"), with respect to the issue and sale by the Trust and the
purchase by the Underwriters, acting severally and not jointly, of the
respective number of AMPS set forth in said SCHEDULE A.

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

         The Trust has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (No. 333-[ ] and No. 811-[ ])
covering the registration of the AMPS under the Securities Act of 1933, as
amended (the "1933 Act"), including the related preliminary prospectus or
prospectuses, and a notification on Form N-8A of registration (the "1940 Act
Notification") of the Trust as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
of the Commission under the 1933 Act and the 1940 Act (the "Rules and
Regulations"). Promptly after execution and delivery of this Agreement, the
Trust will either (i) prepare and file a prospectus in accordance with the
provisions of Rule 430A ("Rule 430A") of the Rules and Regulations and paragraph
(c) or (h) of Rule 497 ("Rule 497") of the Rules and Regulations or (ii) if the
Trust has elected to rely upon Rule 434 ("Rule 434") of the Rules and
Regulations, prepare and file a term sheet (a "Term Sheet") in accordance with
the provisions of Rule 434 and Rule 497. The information included in any such
prospectus or in any such Term Sheet, as the case may be, that was omitted from
such registration statement at the time it became effective but that is deemed
to be part of such registration statement at the time it became effective, if
applicable, (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each prospectus used before such registration statement
became effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, including in each
case any statement of additional information incorporated therein by reference,
is herein called a "preliminary prospectus." Such registration statement,
including the exhibits thereto and schedules thereto at the time it became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the Rules and Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectus in the form first furnished to the Underwriters
for use in connection with the offering of the Securities, including the
statement of additional information incorporated therein by reference, is herein
called the "Prospectus." If Rule 434 is relied on, the term "Prospectus" shall
refer to the preliminary prospectus dated [ ], 2002 together with the Term Sheet
and all references in this Agreement to the date of the Prospectus shall mean
the date of the Term Sheet. For purposes of this Agreement, all references to
the Registration Statement, any preliminary prospectus, the Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").

         All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be.

SECTION 1.        Representations and Warranties.

     (a) REPRESENTATIONS AND WARRANTIES BY THE TRUST AND THE ADVISERS. The Trust
and the Advisers jointly and severally represent and warrant to each Underwriter
as of the date hereof, and as of the Closing Time referred to in Section 2(c)
hereof and agree with each Underwriter, as follows:

          (i)     COMPLIANCE WITH REGISTRATION REQUIREMENTS. Each of the
     Registration Statement and any Rule 462(b) Registration Statement has
     become effective under the 1933 Act and no stop order suspending the
     effectiveness of the Registration Statement or any Rule 462(b) Registration

                                       2
<Page>

     Statement has been issued under the 1933 Act, or order of suspension or
     revocation of registration pursuant to Section 8(e) of the 1940 Act, and no
     proceedings for any such purpose have been instituted or are pending or, to
     the knowledge of the Trust or the Advisers, are contemplated by the
     Commission, and any request on the part of the Commission for additional
     information has been complied with.

          At the respective times the Registration Statement, any Rule 462(b)
     Registration Statement and any post-effective amendments thereto became
     effective and at the Closing Time, the Registration Statement, the Rule
     462(b) Registration Statement, the notification of Form N-8A and any
     amendments and supplements thereto complied and will comply in all material
     respects with the requirements of the 1933 Act, the 1940 Act and the Rules
     and Regulations and did not and will not contain an untrue statement of a
     material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading. Neither
     the Prospectus nor any amendments or supplements thereto, at the time the
     Prospectus or any such amendment or supplement was issued and at the
     Closing Time, included or will include an untrue statement of a material
     fact or omitted or will omit to state a material fact necessary in order to
     make the statements therein, in the light of the circumstances under which
     they were made, not misleading. If Rule 434 is used, the Trust will comply
     with the requirements of Rule 434 and the Prospectus shall not be
     "materially different", as such term is used in Rule 434, from the
     prospectus included in the Registration Statement at the time it became
     effective.

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

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

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

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

          (iv)    INCORPORATED DOCUMENTS. The documents incorporated or deemed
     to be incorporated by reference in the Registration Statement and the
     Prospectus, at the time they were or hereafter are filed with the
     Commission, complied and will comply in all material respects with the
     requirements of the 1933 Act and the Rules and Regulations and, when read
     together with the other information in the Prospectus, at the date the
     Registration Statement became effective, at the date the Prospectus was
     issued and at the Closing Time, did not and will not contain an untrue
     statement of a material fact or omit to state a material fact required to
     be stated therein or necessary to make the statement therein not
     misleading.

          (v)     NO MATERIAL ADVERSE CHANGE. Since the respective dates as of
     which information is given in the Registration Statement and the
     Prospectus, except as otherwise stated therein, (A)

                                       3
<Page>

     there has been no material adverse change in the condition, financial or
     otherwise, or in the earnings, business affairs or business prospects of
     the Trust, whether or not arising in the ordinary course of business (other
     than as a result of changes in market conditions) (a "Material Adverse
     Effect"), (B) there have been no transactions entered into by the Trust,
     other than those in the ordinary course of business, which are material
     with respect to the Trust, and (C) there has been no dividend or
     distribution of any kind declared, paid or made by the Trust on any class
     of its capital stock except for dividends declared on Common Stock.

          (vi)    GOOD STANDING OF THE TRUST. The Trust has been duly organized
     and is validly existing as a business trust in good standing under the laws
     of the State of Delaware and has business trust power and authority to own,
     lease and operate its properties and to conduct its business as described
     in the Prospectus and to enter into and perform its obligations under this
     Agreement; and the Trust is duly qualified as a foreign business trust to
     transact business and is in good standing in each other jurisdiction in
     which such qualification is required, whether by reason of the ownership or
     leasing of property or the conduct of business, except where the failure so
     to qualify or to be in good standing would not result in a Material Adverse
     Effect.

          (vii)   NO SUBSIDIARIES. The Trust has no subsidiaries.

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

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

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

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

                                       4
<Page>

          (xii)   ABSENCE OF DEFAULTS AND CONFLICTS. The Trust is not in
     violation of its declaration of trust or by-laws, or in default in the
     performance or observance of any obligation, agreement, covenant or
     condition contained in any contract, indenture, mortgage, deed of trust,
     loan or credit agreement, note, lease or other agreement or instrument to
     which it is a party or by which it may be bound, or to which any of the
     property or assets of the Trust is subject (collectively, "Agreements and
     Instruments") except for such violations or defaults that would not result
     in a Material Adverse Effect; and the execution, delivery and performance
     of this Agreement, the Management Agreement, the Sub-Advisory Agreement,
     the Custodian Agreement, the Transfer Agent and Service Agreement and the
     Auction Agency Agreement referred to in the Registration Statement (as used
     herein, the "Management Agreement," the "Sub-Advisory Agreement", the
     "Custodian Agreement," the "Transfer Agency Agreement," and the "Auction
     Agency Agreement" respectively) and the consummation of the transactions
     contemplated herein and in the Registration Statement (including the
     issuance and sale of the AMPS and the use of the proceeds from the sale of
     the AMPS as described in the Prospectus under the caption "Use of
     Proceeds") and compliance by the Trust with its obligations hereunder have
     been duly authorized by all necessary corporate action and do not and will
     not, whether with or without the giving of notice or passage of time or
     both, conflict with or constitute a breach of, or default or Repayment
     Event (as defined below) under, or result in the creation or imposition of
     any lien, charge or encumbrance upon any property or assets of the Trust
     pursuant to, the Agreements and Instruments (except for such conflicts,
     breaches or defaults or liens, charges or encumbrances that would not
     result in a Material Adverse Effect), nor will such action result in any
     violation of the provisions of the declaration of trust or by-laws of the
     Trust or any applicable law, statute, rule, regulation, judgment, order,
     writ or decree of any government, government instrumentality or court,
     domestic or foreign, having jurisdiction over the Trust or any of its
     assets, properties or operations. As used herein, a "Repayment Event" means
     any event or condition which gives the holder of any note, debenture or
     other evidence of indebtedness (or any person acting on such holder's
     behalf) the right to require the repurchase, redemption or repayment of all
     or a portion of such indebtedness by the Trust.

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

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

          (xv)    POSSESSION OF INTELLECTUAL PROPERTY. The Trust owns or
     possesses, or can acquire on reasonable terms, adequate patents, patent
     rights, licenses, inventions, copyrights, know-how (including trade secrets
     and other unpatented and/or unpatentable proprietary or confidential
     information, systems or procedures), trademarks, service marks, trade names
     or other intellectual property (collectively, "Intellectual Property")
     necessary to carry on the business now operated by

                                       5
<Page>

     the Trust, and the Trust has not received any notice or is not otherwise
     aware of any infringement of or conflict with asserted rights of others
     with respect to any Intellectual Property or of any facts or circumstances
     which would render any Intellectual Property invalid or inadequate to
     protect the interest of the Trust therein, and which infringement or
     conflict (if the subject of any unfavorable decision, ruling or finding) or
     invalidity or inadequacy, singly or in the aggregate, would result in a
     Material Adverse Effect; provided that the Trust's right to use the name
     "BlackRock" is limited as set forth in Section 16 of the Management
     Agreement. The Trust does not own any Intellectual Property concerning the
     name "BlackRock."

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

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

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

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

          (xx)    DISTRIBUTION OF OFFERING MATERIALS. The Trust has not
     distributed and, prior to the later to occur of (A) the Closing Time and
     (B) completion of the distribution of the AMPS, will not distribute any
     offering material in connection with the offering and sale of the AMPS
     other than the Registration Statement, a preliminary prospectus, the
     Prospectus or other materials, if any, permitted by the 1933 Act or the
     1940 Act or the Rules and Regulations.

                                       6
<Page>

          (xxi)   ACCOUNTING CONTROLS. The Trust maintains a system of internal
     accounting controls sufficient to provide reasonable assurances that (A)
     transactions are executed in accordance with management's general or
     specific authorization and with the applicable requirements of the 1940
     Act, the Rules and Regulations and the Code; (B) transactions are recorded
     as necessary to permit preparation of financial statements in conformity
     with generally accepted accounting principles and to maintain
     accountability for assets and to maintain compliance with the books and
     records requirements under the 1940 Act and the Rules and Regulations; (C)
     access to assets is permitted only in accordance with the management's
     general or specific authorization; and (D) the recorded accountability for
     assets is compared with existing assets at reasonable intervals and
     appropriate action is taken with respect to any differences.

          (xxii)  ABSENCE OF UNDISCLOSED PAYMENTS. To the Trust's knowledge,
     neither the Trust nor any employee or agent of the Trust has made any
     payment of funds of the Trust or received or retained any funds, which
     payment, receipt or retention of funds is of a character required to be
     disclosed in the Prospectus.

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

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

          (xxv)   AMEX LISTING. The Trust's common shares are duly listed on
     the American Stock Exchange ("AMEX").

          (xxvi)  RATINGS. The AMPS have been, or prior to the Closing Date will
     be, assigned a rating of `Aaa' by Moody's Investor Service, Inc.
     ("Moody's") and "AAA" by Standard & Poor's Rating Services ("S&P").

     (b) REPRESENTATIONS AND WARRANTIES BY THE ADVISERS. The Advisers represent
and warrant to each Underwriter as of the date hereof, as of the Closing Time
referred to in Section 2(c) hereof as follows:

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

          (ii)    INVESTMENT ADVISER STATUS. Each of Advisers is duly registered
     and in good standing with the Commission as an investment adviser under the
     Advisers Act, and is not prohibited by the Advisers Act or the 1940 Act, or
     the rules and regulations under such acts, from

                                       7
<Page>

     acting under the Management Agreement and the Sub-Advisory Agreement for
     the Trust as contemplated by the Prospectus.

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

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

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

          (vi)    NO MATERIAL ADVERSE CHANGE. Since the respective dates as of
     which information is given in the Registration Statement and the
     Prospectus, except as otherwise stated therein, there has not occurred any
     event which should reasonably be expected to have a material adverse effect
     on the ability of either Adviser to perform its respective obligations
     under this Agreement and the respective Management Agreement and
     Sub-Advisory Agreement to which it is a party.

          (vii)   ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding,
     inquiry or investigation before or brought by any court or governmental
     agency or body, domestic or foreign, now pending, or, to the knowledge of
     the Advisers, threatened against or affecting either of the Advisers or any
     "affiliated person" of either of the Advisers (as such term is defined in
     the 1940 Act) or any partners, directors, officers or employees of the
     foregoing, whether or not arising in the ordinary course of business, which
     might reasonably be expected to result in any material adverse change in
     the condition, financial or otherwise, or earnings, business affairs or
     business prospects of either of the Advisers, materially and adversely
     affect the properties or assets of either of the Advisers or materially
     impair or adversely affect the ability of either of the

                                       8
<Page>

     Advisers to function as an investment adviser or perform its obligations
     under the Management Agreement or the Sub-Advisory Agreement, or which is
     required to be disclosed in the Registration Statement and the Prospectus.

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

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

     SECTION 2. Sale and Delivery to Underwriters; Closing.

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

     (b) COMMISSION. The Trust agrees to pay to the Underwriters a commission
set forth in Schedule B as compensation to the Underwriters for their
performance under this Agreement.

     (c) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the AMPS shall be made at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 4 Times Square, New York, New York 10036, or through the
facilities of The Depository Trust Company ("DTC") or at such other place as
shall be agreed upon by the Representatives and the Trust, at 10:00 A.M.
(Eastern time) on the business day after the date hereof (unless postponed in
accordance with the provisions of Section 10), or such other time not later than
ten business days after such date as shall be agreed upon by the Representatives
and the Trust (such time and date of payment and delivery being herein called
"Closing Time").

     Payment shall be made to the Trust by wire transfer of immediately
available funds to a bank account designated by the Trust, against delivery to
the Representatives through DTC for the respective accounts of the Underwriters
of the AMPS to be purchased by them. It is understood that each Underwriter has
authorized the Representatives, for its account, to accept delivery of, receipt
for, and make payment of the purchase price for, the AMPS, if any, which it has
agreed to purchase.

     (d) DENOMINATIONS; REGISTRATION. Certificates for AMPS shall be in such
denominations and registered in such names as the Representatives may request in
writing at least one full business day before the Closing Time. The certificates
for the AMPS will be made available for examination and packaging by the
Representatives in the City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time.

     SECTION 3. Covenants.

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

          (i)     COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION
     REQUESTS. The Trust, subject to Section 3(a)(ii), will comply with the
     requirements of Rule 430A or Rule 434, as applicable, and, except as
     otherwise stated in (C) below, for a period of three years from the date

                                       9
<Page>

     hereof, the Trust (in the case of (A), (B), (C)(i) and (D) below) and the
     Advisors (in the case of (C)(iii) below) will advise you promptly and will
     confirm such advice in writing: (A) of any request made by the Commission
     for amendment of or a supplement to the Registration Statement, any
     preliminary prospectus or the Prospectus (or any amendment or supplement to
     any of the foregoing) or for additional information, (B) of the issuance by
     the Commission, the NASD, any state securities commission, any national
     securities exchange, any arbitrator, any court or any other governmental,
     regulatory, self-regulatory or administrative agency or any official of any
     order suspending the effectiveness of the Registration Statement,
     prohibiting or suspending the use of the Prospectus or any preliminary
     prospectus, or any sales material (as hereinafter defined), of any notice
     pursuant to Section 8(e) of the 1940 Act, of the suspension of
     qualification of the AMPS for offering or sale in any jurisdiction, or the
     initiaiton of any proceeding for any such purposes, (C) of receipt by (i)
     the Trust, any affiliate of the Trust or any representative or attorney of
     the Trust of any other material communication adverse to the Trust from the
     Commission or (ii) the Trust, the Advisors, any affiliate of the Trust or
     the Advisors or any representative or attorney of the Trust or the Advisors
     of any other material communication adverse to the Trust from the
     Commission, the NASD, any state securities commission, any national
     securities exchange, any arbitrator, any court or any other governmental,
     regulatory, self-regulatory or administrative agency or any official
     relating to the Trust (if such communication relating to the Trust is
     received by such person within three years after the date of this
     Agreement), the Registration Statement, the 1940 Act Notification, the
     Prospectus, any preliminary prospectus, any sales material (or any
     amendment or supplement to any of the foregoing) or this Agreement or any
     of the Trust Agreements and (D) within the period of time referred to in
     paragraph (iv) below, of any material adverse change in the condition
     (financial or other), general affairs, assets or results of operations of
     the Trust or any event which should reasonably be expected to have a
     material adverse effect on the ability of either Advisor to perform its
     respective obligations under this Agreement and the Advisory Agreements to
     which it is a party (in either case, other than as a result of changes in
     market conditions generally or the market for municipal securities
     generally) or of the happening of any other event which makes any statement
     of a material fact made in the Registration Statement or the Prospectus, or
     any preliminary prospectus (or any amendment or supplement to any of the
     foregoing) untrue or which requires the making of any additions to or
     changes in the Registration Statement or the Prospectus, or any preliminary
     prospectus (or any amendment or supplement to any of the foregoing) in
     order to state a material fact required by the 1933 Act, the 1940 or the
     Rules and Regulations to be stated therein or necessary in order to make
     the statements therein (in the case of a prospectus, in light of the
     circumstances under which they were made) not misleading or of the
     necessity to amend or supplement the Registrations Statement, the
     Prospectus, or any preliminary prospectus (or any amendment or supplement
     to any of the foregoing) to comply with the 1933 Act, the 1940 Act, the
     Rules and Regulations or any other law or order of any court or regulatory
     body. If at any time the Commission shall issue any order suspending the
     effectiveness of the Registration Statement, prohibiting or suspending the
     use of the Prospectus or any sales material (or any amendment or supplement
     to any of the foregoing) or suspending the qualification of the AMPS for
     offering or sale in any jurisdiction, the Trust and the Advisors will use
     their reasonable best efforts to obtain the withdrawal of such order at the
     earliest possible time. If at any time the NASD, any state securities
     commission, any national securities exchange, any arbitrator, any court or
     any other governmental, regulatory, self-regulatory or administrative
     agency or any official shall issue any order prohibiting or suspending the
     use of the Prospectus or any sales material (or any amendment or supplement
     to any of the foregoing) or suspending the qualification of the AMPS for
     offering or sale in any jurisdiction, the Advisors will use their
     reasonable best efforts to obtain the withdrawal of such order at the
     earliest possible time. The Trust will notify the Representatives
     immediately, and, if requested by the Representatives, confirm the notice
     in writing, (i) when any post-effective amendment to the Registration

                                       10
<Page>

     Statement shall become effective, or any supplement to the Prospectus of
     any amended Prospectus shall have been filed, (ii) of the receipt of any
     comments from the Commission, (iii) of any request by the Commission for
     any amendment to the Registration Statement or any amendment or supplement
     to the Prospectus or for additional information, and (iv) of the issuance
     by the Commission of any stop order suspending the effectiveness of the
     Registration Statement or of any order preventing or suspending the use of
     any preliminary prospectus, or of the suspension of the qualification of
     the AMPS for offering or sale in any jurisdiction, or of the initiation or
     threatening of any proceedings for any of such purposes. The Trust will
     promptly effect the filings necessary pursuant to Rule 497 and will take
     such steps as it deems necessary to ascertain promptly whether the form of
     prospectus transmitted for filing under Rule 497 was received for filing by
     the Commission and, in the event that it was not, it will promptly file
     such prospectus. The Trust will make every reasonable effort to prevent the
     issuance of any stop order, or order of suspension or revocation of
     registration pursuant to Section 8(e) of the 940 Act, and, if any such stop
     order or order of suspension or revocation of registration is issued, to
     obtain the lifting thereof at the earliest possible moment.

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

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

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

          (v)     CONTINUED COMPLIANCE WITH SECURITIES LAWS. If at any time when
     a prospectus is required by the 1933 Act to be delivered in connection with
     sales of the AMPS, any event shall occur or condition shall exist as a
     result of which it is necessary, in the opinion of counsel for the
     Underwriters or for the Trust, to amend the Registration Statement or amend
     or supplement the Prospectus in order that the Prospectus will not include
     any untrue statements of a material fact or omit to state a material fact
     necessary in order to make the statements therein not misleading in

                                       11
<Page>

     the light of the circumstances existing at the time it is delivered to a
     purchaser, or if it shall be necessary, in the opinion of such counsel, at
     any such time to amend the Registration Statement or amend or supplement
     the Prospectus in order to comply with the requirements of the 1933 Act or
     the Rules and Regulations, the Trust will promptly prepare and file with
     the Commission, subject to Section 3(a)(ii), such amendment or supplement
     as may be necessary to correct such statement or omission or to make the
     Registration Statement or the Prospectus comply with such requirements, and
     the Trust will furnish to the Underwriters such number of copies of such
     amendment or supplement as the Underwriters may reasonably request.

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

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

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

          (ix)    REPORTING REQUIREMENTS. The Trust, during the period when the
     Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
     will file all documents required to be filed with the Commission pursuant
     to the 1940 Act and the 1934 Act within the time periods required by the
     1940 Act and the Rules and Regulations and the 1934 Act and the rules and
     regulations of the Commission thereunder, respectively.

          (x)     SUBCHAPTER M. The Trust will comply with the requirements of
     Subchapter M of the Code to qualify as a regulated investment company under
     the Code.

          (xi)    NO MANIPULATION OF MARKET FOR SHARES. The Trust will not (a)
     take, directly or indirectly, any action designed to cause or to result in,
     or that might reasonably be expected to constitute, the stabilization or
     manipulation of the price of any security of the Trust to facilitate the
     sale or resale of the AMPS, and (b) until the Closing Date, or the Date of
     Delivery, if any, (i) sell, bid for or purchase the AMPS or pay any person
     any compensation for soliciting purchases of the AMPS or (ii) pay or agree
     to pay to any person any compensation for soliciting another to purchase
     any other Shares of the Trust .

          (xii)   RULE 462(b) REGISTRATION STATEMENT. If the Trust elects to
     rely upon Rule 462(b), the Trust shall file a Rule 462(b) Registration
     Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M.,
     Washington, D.C. time, on the day following the date of this Agreement, and
     the Trust shall at the time of filing either pay to the Commission the
     filing fee for the Rule 462(b) Registration Statement or give irrevocable
     instructions for the payment of such fee pursuant to Rule 111(b) under the
     1933 Act.

                                       12
<Page>

          (xiii)  ACCOUNTANT'S CERTIFICATE. The Trust will furnish to the
     Underwriters, on the date on which delivery is made to the Rating Agencies,
     the report and the confirmation of the Independent Accountant (as defined
     in the Statement) required to be delivered pursuant to paragraph 7(f) of
     Part I of the Statement.

     (b) Except as provided in this Agreement, the Trust will not sell, contract
to sell or otherwise dispose of any of its preferred shares of beneficial
interest of the same series as the AMPS or any securities convertible into or
exercisable or exchangeable for its preferred shares of beneficial interest of
the same series as the AMPS, or grant any options or warrants to purchase its
preferred shares of beneficial interest of the same series as the AMPS, for a
period of 180 days after the date of the Prospectus, without the prior written
consent of Merrill Lynch.

     SECTION 4. Payment of Expenses.

     (a) EXPENSES. The Trust will pay all expenses incident to the performance
of its obligations under this Agreement, including (i) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the AMPS,
(iii) the preparation, issuance and delivery of the certificates for the AMPS to
the Underwriters, including any stock or other transfer taxes and any stamp or
other duties payable upon the sale, issuance or delivery of the AMPS to the
Underwriters, (iv) the fees and disbursements of the Trust's counsel,
accountants and other advisors, (v) the qualification of the AMPS under
securities laws in accordance with the provisions of Section 3(a)(vi) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, (vi) the printing and
delivery to the Underwriters of copies of each preliminary prospectus,
Prospectus and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the AMPS, (ix) the filing fees incident to, and the reasonable
fees and disbursements of counsel to the Underwriters in connection with, the
review by the NASD of the terms of the sale of the AMPS, (x) the fees and
expenses incurred in connection with the listing of the AMPS on the AMEX and
(xi) the printing of any sales material.

     (b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section 9(a)
hereof, the Trust and the Advisers, jointly and severally, agree that they shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.

     SECTION 5. Conditions of Underwriters' Obligations.

     The obligations of the several Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Trust and the Advisers
contained in Section 1 hereof or in certificates of any officer of the Trust or
the Advisers delivered pursuant to the provisions hereof, to the performance by
the Trust and the Advisers of their respective covenants and other obligations
hereunder, and to the following further conditions:

     (a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act, no notice or order pursuant
to Section 8(e) of the 1940 Act shall have been issued, and no proceedings with
respect to either shall have been initiated or threatened by the Commission, and
any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of

                                       13
<Page>

counsel to the Underwriters. A prospectus containing the Rule 430A Information
shall have been filed with the Commission in accordance with Rule 497 (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if the
Trust has elected to rely upon Rule 434, a Term Sheet shall have been filed with
the Commission in accordance with Rule 497.

     (b) OPINION OF COUNSEL FOR TRUST AND THE ADVISERS. At Closing Time, the
Representatives shall have received the favorable opinions, dated as of Closing
Time, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Trust, and
Daniel R. Waltcher, counsel for the Advisers, in form and substance satisfactory
to counsel for the Underwriters, together with signed or reproduced copies of
such letters for each of the other Underwriters substantially to the effect set
forth in EXHIBIT A hereto and to such further effect as counsel to the
Underwriters may reasonably request.

     (c) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Clifford Chance Rogers & Wells LLP, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the other
Underwriters with respect to the matters set forth in clauses (A) (i), (ii),
(iv), (v), (ix), (x) (solely as to preemptive or other similar rights arising by
operation of law or under the charter or by-laws of the Trust), inclusive, (xi)
(solely as to the information in the Prospectus under "Description of AMPS"),
(xiii) and the last paragraph of EXHIBIT A hereto. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York and the federal law of the United States,
upon the opinions of counsel satisfactory to the Representatives. Such counsel
may also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Trust and certificates of public officials.

     (d) OFFICERS' CERTIFICATES. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, or business affairs of the Trust, whether or
not arising in the ordinary course of business, and the Representatives shall
have received a certificate of a duly authorized officer of the Trust and of the
Treasurer of the Trust and of the President or a Vice President or Managing
Director of each of the Advisers, dated as of Closing Time, to the effect that
(i) there has been no such material adverse change, (ii) the representations and
warranties in Sections 1(a) and (b) hereof are true and correct in all material
respects with the same force and effect as though expressly made at and as of
Closing Time, (iii) each of the Trust and the Advisers, respectively, has
complied in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied in all material respects at
or prior to Closing Time, and (iv) no stop order suspending the effectiveness of
the Registration Statement, or order of suspension or revocation of registration
pursuant to Section 8(e) of the 1940 Act, has been issued and no proceedings for
any such purpose have been instituted or are pending or are contemplated by the
Commission.

     (e) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of this
Agreement, the Representatives shall have received from Deloitte & Touche LLP a
letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.

     (f) BRING-DOWN COMFORT LETTER. At Closing Time, the Representatives shall
have received from Deloitte & Touche LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.

                                       14
<Page>

     (g) NO OBJECTION. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.

     (h) RATINGS. The Trust shall have delivered and you shall have received
evidence satisfactory to you that the AMPS are rated `Aaa' by Moody's and `AAA'
by S&P as of the Closing Date, and there shall not have been given any notice of
any intended or potential downgrading, or of any review for a potential
downgrading, in the rating accorded to the AMPS or any other securities issued
by the Trust, by Moody's or by S&P.

     (i) ASSET COVERAGE. As of the Closing Date and assuming the receipt of the
net proceeds from the sale of the AMPS, the Investment Company Act Preferred
Shares Asset Coverage and the Preferred Shares Basic Maintenance Amount (each as
defined in the Statement) each will be met.

     (j) ADDITIONAL DOCUMENTS. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may reasonably require for the purpose of enabling them to pass
upon the issuance and sale of the AMPS as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Trust and the Advisers in connection with the organization and
registration of the Trust under the 1940 Act and the issuance and sale of the
AMPS as herein contemplated shall be reasonably satisfactory in form and
substance to the Representatives and counsel for the Underwriters.

     (k) TERMINATION OF AGREEMENT. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representatives by notice to the Trust at any
time at or prior to Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6, 7, 8 and 13 shall survive any such termination and
remain in full force and effect.

     SECTION 6. Indemnification.

     (a) INDEMNIFICATION OF UNDERWRITERS. The Trust and the Advisers, jointly
and severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, as follows:

          (i)     against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, arising out of any untrue statement or alleged
     untrue statement of a material fact contained in the Registration Statement
     (or any amendment thereto), including the Rule 430A Information and the
     Rule 434 Information, if applicable, or the omission or alleged omission
     therefrom of a material fact required to be stated therein or necessary to
     make the statements therein not misleading or arising out of any untrue
     statement or alleged untrue statement of a material fact included in any
     preliminary prospectus or the Prospectus (or any amendment or supplement
     thereto), or the omission or alleged omission therefrom of a material fact
     necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading;

          (ii)    against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, to the extent of the aggregate amount paid in
     settlement of any litigation, or any investigation or proceeding by any
     governmental agency or body, commenced or threatened, or of any claim
     whatsoever based upon any such untrue statement or omission, or any such
     alleged untrue statement or omission; provided that (subject to Section
     6(e) below) any such settlement is effected with the written consent of the
     Trust; and

          (iii)   against any and all expense whatsoever, as incurred (including
     the reasonable fees and disbursements of counsel chosen by Merrill Lynch),
     reasonably incurred in investigating,

                                       15
<Page>

     preparing or defending against any litigation, or any investigation or
     proceeding by any governmental agency or body, commenced or threatened, or
     any claim whatsoever based upon any such untrue statement or omission, or
     any such alleged untrue statement or omission, to the extent that any such
     expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Trust or the
Advisers by any Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).

     (b) INDEMNIFICATION OF TRUST, ADVISERS, TRUSTEES, DIRECTORS AND OFFICERS.
Each Underwriter severally agrees to indemnify and hold harmless the Trust and
the Advisers, their respective trustees and directors, each of the Trust's
officers who signed the Registration Statement, and each person, if any, who
controls the Trust or the Advisers within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act against any and all loss, liability, claim,
damage and expense described in the indemnity contained in subsection (a) of
this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Trust or the Advisers by
such Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).

     (c) INDEMNIFICATION FOR MARKETING MATERIALS. In addition to the foregoing
indemnification, the Trust and the Advisers also, jointly and severally, agree
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss, liability, claim, damage
and expense described in the indemnity contained in Section 6(a), as limited by
the proviso set forth therein, with respect to any sales material.

     (d) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Trust and the Advisers. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party

                                       16
<Page>

from all liability arising out of such litigation, investigation, proceeding or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.

     SECTION 7. Contribution.

     If the indemnification provided for in Section 6 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Trust and the Advisers on the one hand and the
Underwriters on the other hand from the offering of the AMPS pursuant to this
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Trust and the Advisers on the one hand and of the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.

     The relative benefits received by the Trust and the Advisers on the one
hand and the Underwriters on the other hand in connection with the offering of
the AMPS pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the AMPS pursuant to
this Agreement (before deducting expenses) received by the Trust and the total
underwriting discount received by the Underwriters (whether from the Trust or
otherwise), in each case as set forth on the cover of the Prospectus, or, if
Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate initial public offering price of the AMPS as set forth on such cover.

     The relative fault of the Trust and the Advisers on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Trust or the Advisers or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.

     The Trust, the Advisers and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.

     Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the AMPS underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of any such untrue or alleged
untrue statement or omission or alleged omission.

     No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

     For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each trustee of the Trust and each director of the Advisers,

                                       17
<Page>

respectively, each officer of the Trust who signed the Registration Statement,
and each person, if any, who controls the Trust or the Advisers, within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as the Trust and the Advisers, respectively. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of AMPS set forth opposite their
respective names in SCHEDULE A hereto and not joint.

     SECTION 8. Representations, Warranties and Agreements to Survive Delivery.

     All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Trust or the Advisers submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Trust or the Advisers, and shall survive delivery of the
AMPS to the Underwriters.

     SECTION 9. Termination of Agreement.

     (a) TERMINATION; GENERAL. The Representatives may terminate this Agreement,
by notice to the Trust, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus (exclusive of any
supplement thereto), any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Trust or the Advisers, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States or the international financial markets,
any outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable or inadvisable to market the AMPS or to enforce contracts for the
sale of the AMPS, or (iii) if trading in the common shares of the Trust has been
suspended or materially limited by the Commission or the AMEX, or if trading
generally on the New York Stock Exchange or the AMEX or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the NASD
or any other governmental authority, or a material disruption has occurred in
commercial banking or securities settlement or clearance services in the United
States, or (iv) if a banking moratorium has been declared by either Federal or
New York authorities.

     (b) LIABILITIES. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7, 8 and 13 shall survive such termination and remain in full force and effect.

     SECTION 10. Default by One or More of the Underwriters.

     If one or more of the Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the AMPS which it or they are obligated to purchase under
this Agreement (the "Defaulted Shares"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Shares in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:

     (a) if the number of Defaulted Shares does not exceed 10% of the number of
Shares to be purchased on such date, each of the non-defaulting Underwriters
shall be obligated, severally and not jointly, to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or

                                       18
<Page>

     (b) if the number of Defaulted Shares exceeds 10% of the number of Shares
to be purchased on such date, this Agreement shall terminate without liability
on the part of any non-defaulting Underwriter.

     No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.

     In the event of any such default which does not result in a termination of
this Agreement, either the Representatives or the Trust shall have the right to
postpone Closing Time for a period not exceeding seven days in order to effect
any required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 10.

     SECTION 11. Notices.

     All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to the
Representatives, c/o Merrill Lynch & Co., North Tower, World Financial Center,
New York, New York 10080, attention of Equity Capital Markets; and notices to
the Trust or the Advisers shall be directed, as appropriate, to the office of
BlackRock Financial Management, Inc. at 345 Park Avenue, New York, New York
10154, Attention: Ralph L. Schlosstein.

     SECTION 12. Parties.

     This Agreement shall each inure to the benefit of and be binding upon the
Underwriters, the Trust, the Advisers and their respective partners and
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters, the Trust, the Advisers and their respective successors and the
controlling persons and officers, trustees and directors referred to in Sections
6 and 7 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriters, the Trust, the
Advisers and their respective partners and successors, and said controlling
persons and officers, trustees and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Shares from any Underwriter shall be deemed to be a successor by
reason merely of such purchase.

     SECTION 13. GOVERNING LAW AND TIME.

     THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SAID STATE. UNLESS OTHERWISE EXPLICITLY PROVIDED, SPECIFIED TIMES OF DAY
REFER TO NEW YORK CITY TIME.

     SECTION 14. Effect of Headings.

     The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.

                                       19
<Page>

     If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among the
Underwriters, the Trust and the Advisers in accordance with its terms.

                                         Very truly yours,


                                         BlackRock Municipal Income Trust II


                                         By:
                                             ----------------------------------
                                             Name:
                                             Title:


                                         BlackRock Advisors, Inc.


                                         By:
                                             ----------------------------------
                                             Name:
                                             Title:


                                         BlackRock Financial Management, Inc.


                                         By:
                                             ----------------------------------
                                             Name:
                                             Title:
CONFIRMED AND ACCEPTED,
   as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
                     INCORPORATED

SALOMON SMITH BARNEY INC.
PRUDENTIAL SECURITIES
UBS WARBURG

By:      MERRILL LYNCH, PIERCE, FENNER & SMITH
                              INCORPORATED

By:
    ----------------------------------
     Authorized Signatory

For themselves and as
Representatives of the
other Underwriters named
in SCHEDULE A hereto.

                                       20
<Page>


                                   SCHEDULE A

<Table>
<Caption>
                                                            Number of
                     NAME OF UNDERWRITER                       AMPS
                     -------------------                    ---------
<S>                                                         <C>
Merrill Lynch, Pierce, Fenner & Smith
    Incorporated
Salomon Smith Barney Inc.                                      [ ]
Prudential Securities                                          [ ]
UBS Warburg LLC                                                [ ]

         Total                                                 [ ]
                                                               ===
</Table>


                                     Sch A-1
<Page>

                                   SCHEDULE B

                       BLACKROCK MUNICIPAL INCOME TRUST II
           [ ] Auction Market Preferred Shares of Beneficial Interest
                         [ ] Shares __ AMPS, Series [ ]
                         [ ] Shares __ AMPS, Series [ ]
                         [ ] Shares __ AMPS, Series [ ]
                    Liquidation Preference $25,000 per share

     1. The initial public offering price per share for the AMPS, determined as
provided in said Section 2, shall be $25,000.

     2. The purchase price per share for the AMPS to be paid by the several
Underwriters shall be $25,000.

     3. The commission to be paid to the Underwriters for their performance
hereunder shall be $[ ] per share.

     4. The initial dividend rate on the AMPS shall be [ ]% per annum for the
Series [ ], [ ]% per annum for the Series [ ] and [ ]% per annum for the Series
[ ].

                                     Sch B-1
<Page>

                                                                       Exhibit A

                    FORM OF OPINION OF TRUST'S AND ADVISERS'
                       COUNSEL TO BE DELIVERED PURSUANT TO
                                  SECTION 5(b)

(A)  With respect to the Trust:

          (i)     The Trust has been created and is in good standing and has a
     legal existence as a statutory business trust under the Delaware Business
     Trust Act. The opinion set forth in this paragraph (i) with respect to the
     good standing and legal existence of the Trust as a statutory business
     trust under the Delaware Business Trust Act is based solely on a review of
     the Delaware Good Standing Certificate.

          (ii)    The Trust has the necessary power and authority under the
     Delaware Business Trust Act as a business trust to execute, deliver and
     perform all of its obligations under the Purchase Agreement and the
     Transaction Agreements and the consummation by the Trust of the
     transactions contemplated thereby have been duly authorized by all
     requisite action on the part of the Trust under Delaware Business Trust
     Act. Each of the Purchase Agreement and the Transaction Agreements has been
     duly executed and delivered by the Trust under the applicable Laws of the
     State of New York and the Commonwealth of Massachusetts, as the case may
     be, to the extent applicable.

          (iii)   Each of the Transaction Agreements constitutes the valid and
     binding obligation of the Trust enforceable against the Trust in accordance
     with its terms under the Applicable laws of the State of New York or the
     Commonwealth of Massachusetts, as the case may be.

          (iv)    The execution and delivery by the Trust of the Purchase
     Agreement and each of the Transaction Agreements and the performance by the
     Trust of its obligations under the Purchase Agreement and each of the
     Transaction Agreements, each in accordance with its terms, do not (i)
     conflict with the Declaration or By-laws of the Trust, (ii) constitute a
     violation of, or a default under, any Applicable Contract or (iii) cause
     the creation of any security interest or lien upon any of the property of
     the Trust pursuant to any Applicable Contract. We do not express any
     opinion, however, as to whether the execution, delivery or performance by
     the Trust of the Purchase Agreement or the Transaction Agreements will
     constitute a violation of, or a default under, any covenant, restriction or
     provision with respect to financial ratios or tests or any aspect of the
     financial condition or results of operations of the Trust.

          (v)     Neither the execution, delivery or performance by the Trust
     of its obligations under the Purchase Agreement or the Transaction
     Agreements nor the compliance by the Trust with the terms and provisions
     thereof will contravene any provision of Applicable Law or the 1940 Act or
     the rules and regulations of the Commission under the 1940 Act.

          (vi)    No Governmental Approval, which has not been obtained or taken
     and is not in full force and effect, is required to authorize, or is
     required in connection with, the execution, delivery or performance of the
     Purchase Agreement or any of the Transaction Agreements by the Trust.

          (vii)   Neither the execution, delivery or performance by t he Trust
     of its obligations under the Purchase Agreement or the Transaction
     Agreements nor compliance by the Trust with the terms and provisions
     thereof will contravene any Applicable Order.

                                      A-1
<Page>

          (viii)  The Trust is registered with the Commission pursuant to
     Section 8 of the 1940 Act as a diversified, closed-end management
     investment company; and the Declaration and By-Laws comply in all material
     respects with the 1940 Act Rules and Regulations;

          (ix)    As if the date of the Prospectus, the Trust has an authorized,
     issued and outstanding capitalization as set forth in the Prospectus
     (without giving effect to the issuance and sale of the AMPS to you pursuant
     to the Purchase Agreement); all of the outstanding Common Shares have been
     duly authorized and validly issued, and are fully paid and non-assessable
     (except as provided in the last sentence of Section 3.8 of the Declaration)
     undivided beneficial ownership interests in the assets of the Trust; the
     AMPS have been duly authorized by all necessary action of the Trust under
     the Delaware Business Trust Act and, when issued and delivered to and paid
     for by the Underwriters pursuant to the Purchase Agreement, will be validly
     issued, fully paid and non-assessable (except as provided in the last
     sentence of Section 3.8 of the Declaration) undivided beneficial ownership
     interests in the assets of the Trust.

          (x)     No holders of outstanding Common Shares are entitled as such
     to any preemptive or other rights to subscribe for any AMPS under any
     Applicable Contract, under the Declaration or By-Laws or under the Delaware
     Business Trust Act.

          (xi)    The statements set forth under the headings "Description of
     AMPS," "The Auction" and the Description of Common Shares" in the
     Prospectus, insofar as such statements purport to summarize certain
     provisions of the 1940 Act, the Delaware Business Trust Act, the AMPS, the
     Common Shares or the Declaration, fairly summarize such provisions in all
     material respects; and the statements contained in the Prospectus under the
     heading "Tax Matters - Federal Income Tax Matters" (in the Prospectus) and
     "Tax Matters" (in the Statement of Additional Information) to such extent
     that such statements constitute matters of law or legal conclusions provide
     a fair summary of such law or conclusions, which statements are based on
     the current United States tax laws and our understanding of the Trust's
     proposed operations as disclosed in the Prospectus.

          (xii)   No legal or governmental proceedings are pending to which the
     Trust is a party that are required to be described in the Registration
     Statement or the Prospectus and are not so described therein, and no
     contract or other document is required to be described in the Registration
     Statement or Prospectus or to be filed as an exhibit to the Registration
     Statement that is not described therein or filed as required. In rendering
     the opinion set forth in this paragraph 12, we have relied solely on the
     Officer's Certificate; we have made no other inquires or investigations or
     any search of the public docket records of any court, governmental agency
     or bode or administrative agency.

          (xiii)  The filing of the Prospectus pursuant to Rule 497(h) under
     the 1933 Act Rules and Regulations has been made in the manner and within
     the time period required by Rule 497(h) of the rules and regulations of the
     Commission under the 1933 Act.

          (xiv)   The Registration Statement, the Prospectus and the 1940 Act
     Notification (in each case, other than the financial statements and other
     financial and/or statistical information contained therein or incorporated
     therein by reference and other than any exhibits, schedules or appendices
     included or incorporated by the reference therein, as to which we express
     no opinion) comply as to form in all material respects with the applicable
     requirements of the 1933 Act, the 1940 Act, the 1933 Act Rules and
     Regulations and the rules and regulations of the Commission under the 1940
     Act ("the 940 Act Rules and Regulations"). Subject to the opinion set forth
     above in paragraph 11, we do not assume any responsibility for the
     accuracy, completeness or fairness of the statements contained in the
     Registration Statement, and the Prospectus.

                                      A-2
<Page>

(B)  With respect to the Advisers:

          (i)     Each Adviser has been duly organized and is validly existing
     as a corporation in good standing under the laws of the State of Delaware.

          (ii)    Each Adviser has full corporate power and authority to own,
     lease and operate its properties and to conduct its business as described
     in the Prospectus and to enter into and perform its obligations under the
     Purchase Agreement.

          (iii)   Each Adviser is duly qualified as a foreign corporation to
     transact business and is in good standing in each other jurisdiction in
     which such qualification is required, whether by reason of the ownership or
     leasing of property or the conduct of business, except where the failure to
     so qualify would not result in a Material Adverse Effect.

          (iv)    Each Adviser is duly registered with the Commission as an
     investment adviser under the Advisers Act and is not prohibited by the
     Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the
     Rules and Regulations from acting under the Management Agreement for the
     Trust as contemplated by the Prospectus.

          (v)     The Purchase Agreement, the Management Agreement and the
     Sub-Advisory Agreement have been duly authorized, executed and delivered by
     the respective Adviser, and the Management Agreement and the Sub-Advisory
     Agreement each constitutes a valid and binding obligation of the respective
     Adviser, enforceable in accordance with its terms, except as affected by
     bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
     and other similar laws relating to or affecting creditors' rights generally
     and general equitable principles (whether considered in a proceeding in
     equity or at law).

          (vi)    To the best of our knowledge, there is not pending or
     threatened any action, suit, proceeding, inquiry or investigation, to which
     the Advisers are a party, or to which the property of the Advisers is
     subject, before or brought by any court or governmental agency or body,
     domestic or foreign, which might reasonably be expected to result in any
     material adverse change in the condition, financial or otherwise, in the
     earnings, business affairs or business prospects of the Advisers,
     materially and adversely affect the properties or assets of the Advisers or
     materially impair or adversely affect the ability of the Advisers to
     function as an investment adviser or perform its obligations under the
     Management Agreement or the Sub-Advisory Agreement, or which is required to
     be disclosed in the Registration Statement or the Prospectus.

          (vii)   To the best of our knowledge, there are no franchises,
     contracts, indentures, mortgages, loan agreements, notes, leases or other
     instruments required to be described or referred to in the Registration
     Statement or to be filed as exhibits thereto other than those described or
     referred to therein or filed or incorporated by reference as exhibits
     thereto, and the descriptions thereof or references thereto are correct in
     all material respects.

          (viii)  To the best of our knowledge, each Adviser is not in
     violation of its certificate of incorporation, by-laws or other
     organizational documents and no default by the Advisers exists in the due
     performance or observance of any material obligation, agreement, covenant
     or condition contained in any contract, indenture, mortgage, loan
     agreement, note, lease or other agreement or instrument that is described
     or referred to in the Registration Statement or the Prospectus or filed or
     incorporated by reference as an exhibit to the Registration Statement.

          (ix)    No filing with, or authorization, approval, consent, license,
     order, registration, qualification or decree of, any court or governmental
     authority or agency, domestic or foreign (other than under the 1933 Act,
     the 1940 Act and the Rules and Regulations, which have been obtained, or as
     may be required under the securities or blue sky laws of the various
     states, as to

                                      A-3
<Page>

     which we need express no opinion) is necessary or required in connection
     with the due authorization, execution and delivery of the Purchase
     Agreement.

          (x)     The execution, delivery and performance of the Purchase
     Agreement and the consummation of the transactions contemplated in the
     Purchase Agreement and in the Registration Statement and compliance by the
     Advisers with their obligations under the Purchase Agreement do not and
     will not, whether with or without the giving of notice or lapse of time or
     both, conflict with or constitute a breach of, or default or Repayment
     Event (as defined in Section 1(a)(xii) of the Purchase Agreement) under or
     result in the creation or imposition of any lien, charge or encumbrance
     upon any property or assets of the Advisers pursuant to any contract,
     indenture, mortgage, deed of trust, loan or credit agreement, note, lease
     or any other agreement or instrument, known to us, to which the Advisers is
     a party or by which it or any of them may be bound, or to which any of the
     property or assets of the Advisers is subject (except for such conflicts,
     breaches or defaults or liens, charges or encumbrances that would not have
     a Material Adverse Effect), nor will such action result in any violation of
     the provisions of the charter or by-laws of the Advisers, or any applicable
     law, statute, rule, regulation, judgment, order, writ or decree, known to
     us, of any government, government instrumentality or court, domestic or
     foreign, having jurisdiction over the Advisers or any of its properties,
     assets or operations.

     In addition, we have participated in the preparation of the Registration
Statement and the Prospectus and participated in discussions with certain
officers, trustees and employees of the Trust, representatives of Deloitte &
Touche LLP, the independent accountants who examined the statement of assets and
liabilities of the Trust included or incorporated by reference in the
Registration Statement and the Prospectus, and you and your representatives and
we have reviewed certain Trust records and documents. While we have not
independently verified and are not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the information
contained in the Registration Statement and the Prospectus, except to the extent
necessary to enable us to give the opinions with respect to the Trust in
paragraphs (A)(v), (xiv) and (xix), on the basis of such participation and
review, nothing has come to our attention that would lead us to believe that the
Registration Statement (except for financial statements, supporting schedules
and other financial data included therein or omitted therefrom and for
statistical information derived from such financial statements, supporting
schedules or other financial data, as to which we do not express any belief), at
the time such Registration Statement became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus (except for financial statements, supporting schedules and
other financial data included therein or omitted therefrom and for statistical
information derived from such financial statements, supporting schedules or
other financial data, as to which we do not express any belief), at the time the
Prospectus was issued, or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

                                      A-4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(K)(2)
<SEQUENCE>5
<FILENAME>a2089402zex-99_k2.txt
<DESCRIPTION>EXHIBIT 99(K)(2)
<TEXT>
<Page>

                       BLACKROCK MUNICIPAL INCOME TRUST II

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

                        FORM OF AUCTION AGENCY AGREEMENT

                         DATED AS OF SEPTEMBER 19, 2002

                                   RELATING TO

                         AUCTION MARKET PREFERRED SHARES
                                       OF

                       BLACKROCK MUNICIPAL INCOME TRUST II

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

                      DEUTSCHE BANK TRUST COMPANY AMERICAS,
                                AS AUCTION AGENT

<Page>

This Auction Agency Agreement (this "Agreement"), dated as of September 19,
2002, is between BlackRock Municipal Income Trust II (the "Trust") and Deutsche
Bank Trust Company Americas, a New York banking corporation.

         The Trust proposes to issue three series of preferred shares of
beneficial interest ( shares of Series  , shares of Series   and   shares of
Series ), par value $.001 per share, liquidation preference $25,000 per
share, designated as Series  , Series  and Series  Auction Market Preferred
Shares (cumulatively, the "AMPS"), pursuant to the Trust's Statement (as
defined below).

         The Trust desires that Deutsche Bank Trust Company Americas perform
certain duties as agent in connection with each Auction of AMPS (in such
capacity, the "Auction Agent"), and as the transfer agent, registrar, dividend
paying agent and redemption agent with respect to the AMPS (in such capacity,
the "Paying Agent"), upon the terms and conditions of this Agreement, and the
Trust hereby appoints Deutsche Bank Trust Company Americas as said Auction Agent
and Paying Agent in accordance with those terms and conditions (hereinafter
generally referred to as the "Auction Agent," except in Sections 3 and 4 below).

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Trust and the Auction Agent agree as follows:

               1.   DEFINITIONS AND RULES OF CONSTRUCTION.


               1.1  TERMS DEFINED BY REFERENCE TO THE STATEMENT. Capitalized
terms not defined herein shall have the respective meanings specified in the
Statement.

               1.2  TERMS DEFINED HEREIN. As used herein and in the Settlement
Procedures (defined below), the following terms shall have the following
meanings, unless the context otherwise requires:

                    (a)  "Agent Member" of any Person shall mean such Person's
agent member of the Securities Depository that will act on behalf of a Bidder.

                    (b)  "Auction" shall have the meaning specified in Section
2.1 hereof.

                    (c)  "Auction Procedures" shall mean the Auction Procedures
that are set forth in Part II of the Statement.

                    (d)  "Authorized Officer" shall mean each Managing Director,
Vice President, Assistant Vice President and Associate of the Auction Agent and
every other officer or employee of the Auction Agent designated as an
"Authorized Officer" for purposes hereof in a written communication from the
Auction Agent to the Trust.

                    (e)  "Broker-Dealer Agreement" shall mean each agreement
between the Auction Agent and a Broker-Dealer substantially in the form attached
hereto as Exhibit A.

<Page>

                    (f)  "Holder" shall be a holder of record of one or more
AMPS, listed as such in the share register maintained by the Paying Agent
pursuant to Section 4.6 hereof.

                    (g)  "Settlement Procedures" shall mean the Settlement
Procedures attached as Exhibit B.

                    (h)  "Statement" shall mean the Statement of Preferences of
Auction Market Preferred Shares, as may be amended, supplemented or modified
from time to time.

                    (i)  "Trust Officer" shall mean the Chairman and Chief
Executive Officer, the President, each Vice President (whether or not designated
by a number or word or words added before or after the title "Vice President"),
the Secretary, the Treasurer, each Assistant Secretary and each Assistant Vice
President, each Assistant Treasurer of the Trust and every other officer or
employee of the Trust designated as a "Trust Officer" for purposes hereof in a
notice from the Trust to the Auction Agent.

               1.3  RULES OF CONSTRUCTION. Unless the context or use indicates
another or different meaning or intent, the following rules shall apply to the
construction of this Agreement:

                    (a)  Words importing the singular number shall include the
plural number and vice versa.

                    (b)  The captions and headings herein are solely for
convenience of reference and shall not constitute a part of this Agreement nor
shall they affect its meaning, construction or effect.

                    (c)  The words "hereof," "herein," "hereto," and other words
of similar import refer to this Agreement as a whole.

                    (d)  All references herein to a particular time of day shall
be to New York City time.

               2.   THE AUCTION.

               2.1  PURPOSE; INCORPORATION BY REFERENCE OF AUCTION PROCEDURES
AND SETTLEMENT PROCEDURES.

               (a)  The Statement provides that the Applicable Rate on shares of
each series of AMPS for each Dividend Period therefore after the initial
Dividend Period shall generally be the rate per annum that a commercial bank,
trust company or other financial institution appointed by the Trust advises
results from the implementation of the Auction Procedures. The Board of Trustees
of the Trust have adopted a resolution appointing Deutsche Bank Trust Company
Americas as Auction Agent for purposes of the Auction Procedures. The Auction
Agent hereby accepts such appointment and agrees that, on each Auction Date, it
shall follow the procedures set forth in this Section 2 and


                                       2
<Page>

the Auction Procedures for the purpose of determining the Applicable Rate for
the AMPS for the next Dividend Period. Each periodic operation of such
procedures is hereinafter referred to as an "Auction."

                    (b) All of the provisions contained in the Auction
Procedures and the Settlement Procedures are incorporated herein by reference in
their entirety and shall be deemed to be a part hereof to the same extent as if
such provisions were set forth fully herein.

               2.2  PREPARATION FOR EACH AUCTION; MAINTENANCE OF REGISTRY OF
EXISTING HOLDERS.

                    (a)  As of the date hereof, the Trust shall provide the
Auction Agent with a list of the Broker-Dealers previously approved by the
Auction Agent and shall cause to be delivered to the Auction Agent for execution
by the Auction Agent a Broker-Dealer Agreement signed by each such
Broker-Dealer. The Auction Agent shall keep such list current and accurate and
shall indicate thereon, or on a separate list, the identity of each Existing
Holder, if any, whose most recent Order was submitted by a Broker-Dealer on such
list and resulted in such Existing Holder continuing to hold or purchase AMPS.
Not later than five Business Days prior to any Auction Date for which any change
in such list of Broker-Dealers is to be effective, the Trust shall notify the
Auction Agent in writing of such change and, if any such change is the addition
of a Broker-Dealer to such list, the Trust shall cause to be delivered to the
Auction Agent for execution by the Auction Agent a Broker-Dealer Agreement
signed by such Broker-Dealer. The Auction Agent shall have entered into a
Broker-Dealer Agreement with each Broker-Dealer prior to the participation of
any such Broker-Dealer in any Auction.

                    (b)  In the event that the Auction Date for any Auction
shall be changed after the Auction Agent shall have given the notice, the
Auction Agent, by such means as the Auction Agent deems practicable, shall give
notice of such change to the Broker-Dealers not later than the earlier of 9:15
A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date.

                    (c)  The provisions contained in

                         (i)  Section 2 of Part I of the Statement concerning
dividend rates and calculation of dividends, and

                         (ii) Section 4 of Part I of the Statement concerning
Special Rate Periods and the notification of a Special Rate Period will be
followed by the Trust and, to the extent applicable, the Auction Agent, and the
provisions contained therein are incorporated herein by reference in their
entirety and shall be deemed to be a part of this Agreement to the same extent
as if such provisions were set forth fully herein.

                    (d)  (i) On each Auction Date, the Auction Agent shall
                         determine the Maximum Rate for such series. Not later
                         than 9:30 a.m. on each Auction Date, the Auction Agent
                         shall notify the Trust and the Broker-Dealers of the
                         Maximum Applicable Rate.


                                       3
<Page>

                         (i)  If any "AA" Composite Commercial Paper Rate,
Taxable Equivalent of the Short-Term Municipal Bond Rate, Treasury Note Rate or
Treasury Bill Rate, as the case may be, is not quoted on an interest or bond
equivalent, as the case may be, basis, the Auction Agent shall convert the
quoted rate to the interest or bond equivalent thereof as set forth in the
definition of such rate in the Statement if the rate obtained by the Auction
Agent is quoted on a discount basis, or if such rate is quoted on a basis other
than an interest or bond equivalent or discount basis the Auction Agent shall
convert the quoted rate to an interest or bond equivalent rate after
consultation with the Trust as to the method of such conversion.

                         (ii) If any "AA" Composite Commercial Paper Rate is to
be based on rates supplied by Commercial Paper Dealers and one or more of the
Commercial Paper Dealers shall not provide a quotation for the determination of
such "AA" Composite Commercial Paper Rate, the Auction Agent shall immediately
notify the Trust so that the Trust can determine whether to select a Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers to provide the
quotation or quotations not being supplied by any Commercial Paper Dealer or
Commercial Paper Dealers. The Trust shall promptly advise the Auction Agent of
any such selection. If the Trust does not select any such Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers, then the rates shall be
supplied by the remaining Commercial Paper Dealer or Commercial Paper Dealers.

                         (iii) If any Treasury Note Rate or Treasury Bill Rate
is to be based on rates supplied by U.S. Government Securities Dealers and one
or more of the U.S. Government Securities Dealers shall not provide a quotation
for the determination of such Treasury Rate, the Auction Agent shall immediately
notify the Trust so that the Trust can determine whether to select a Substitute
U.S. Government Securities Dealer or Substitute U.S. Government Securities
Dealers to provide the quotation or quotations not being supplied by any U.S.
Government Securities Dealer or U.S. Government Securities Dealers. The Trust
shall promptly advise the Auction Agent of any such selection. If the Trust does
not select any such Substitute U.S. Government Securities Dealer or Substitute
U.S. Government Securities Dealers, then the rates shall be supplied by the
remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers.

                    (e) The Auction Agent shall

                         (i) maintain a registry of the beneficial owners of the
AMPS of each series who shall constitute Existing Holders of AMPS of such series
for purposes of Auctions and shall indicate thereon the identity of the
respective Broker-Dealer of each Existing Holder, if any, on whose behalf such
Broker-Dealer submitted the most recent Order in any Auction which resulted in
such Existing Holder continuing to hold or purchasing AMPS of such series. The
Auction Agent shall keep such registry current and accurate based on the
information provided to it from time to time by the Broker-Dealer. The Trust
shall provide or cause to be provided to the Auction Agent at or prior to the
Date of Original Issue of the AMPS of each series a list of the initial Existing
Holders of the shares of each such series of AMPS, the number of shares
purchased by each such Existing Holder and the respective Broker-Dealer of each
such Existing Holder


                                       4
<Page>

or the affiliate thereof through which each such Existing Holder purchased such
shares. The Auction Agent may rely upon, as conclusive evidence of the
identities of the Existing Holders of AMPS of any series (A) such list, (B) the
results of Auctions, (C) notices from any Broker-Dealer and (D) the results of
any procedures approved by the Trust that have been devised for the purpose of
determining the identities of Existing Holders in situations where AMPS may have
been transferred without compliance with any restriction on the transfer thereof
set forth in the Auction Procedures.

                         (ii) In the event of any partial redemption of any
series of AMPS, upon notice by the Trust to the Auction Agent of such partial
redemption, the Auction Agent promptly shall request the Securities Depository
to notify the Auction Agent of the identities of the Agent Members (and the
respective numbers of shares) from the accounts of which shares have been called
for redemption and the person or department at such Agent Member to contact
regarding such redemption. At least two Business Days prior to the Auction
preceding the date of redemption, the Auction Agent shall request each Agent
Member so identified to disclose to the Auction Agent (upon selection by such
Agent Member of the Existing Holders whose shares are to be redeemed) the number
of AMPS of each such Existing Holder, if any, to be redeemed by the Trust,
provided that the Auction Agent has been furnished with the name and telephone
number of a person or department at such Agent Member from which it is to
request such information. In the absence of receiving any such information with
respect to an Existing Holder, from such Existing Holder's Agent Member or
otherwise, the Auction Agent may continue to treat such Existing Holder as
having ownership of the number of AMPS shown in the Auction Agent's registry of
Existing Holders.

                         (iii) The Auction Agent shall register a transfer of
the ownership of any series of AMPS from an Existing Holder of such AMPS only if
such transfer is to another Existing Holder, or to other Person if permitted by
the Trust, and only if such transfer is made (A) pursuant to an Auction, (B) the
Auction Agent has been notified in writing (I) in a notice substantially in the
form of Exhibit C to the Broker-Dealer Agreement by a Broker-Dealer of such
transfer or (II) in a notice substantially in the form of Exhibit D to the
Broker-Dealer Agreement by the Broker-Dealer of any Existing Holder, or other
Person if permitted by the Trust, that purchased or sold such AMPS in an Auction
of the failure of such AMPS to be transferred as a result of such Auction or (C)
pursuant to procedures approved by the Fund that have been devised for the
purpose of determining the identities of Existing Holders in situations where
AMPS may have been transferred without compliance with any restriction on the
transfer thereof set forth in the Auction Procedures. 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 on the Business Day preceding such Auction.

                    (f)  The Auction Agent may, but shall have no obligation to,
request the Broker-Dealers, as set forth in the Broker-Dealer Agreement, to
provide the Auction Agent with a list of Persons who such Broker-Dealer believes
should be Existing Holders based upon inquiries of those Persons such
Broker-Dealer believes are Beneficial Owners as a result of the most recent
Auction and with respect to each such Person, the


                                       5
<Page>

number of shares of such series of AMPS such Broker-Dealer believes to be owned
by such Person. The Auction Agent shall keep confidential such registry of
Existing Holders and shall not disclose the identities of the Existing Holders
of such AMPS to any Person other than the Trust and the Broker-Dealer that
provided such information; provided, however, that the Auction Agent reserves
the right and is authorized to disclose any such information if (a) it is
ordered to do so by a court of competent jurisdiction or a regulatory body,
judicial or quasi-judicial agency or authority having the authority to compel
such disclosure, (b) it is advised by its counsel that its failure to do so
would be unlawful or (c) failure to do so would expose the Auction Agent to
loss, liability, claim, damage or expense for which it has not received
indemnity or security satisfactory to it.

               2.3  AUCTION SCHEDULE. The Auction Agent shall conduct Auctions
in accordance with the schedule set forth below. Such schedule may be changed by
the Auction Agent with the consent of the Trust, which consent shall not be
withheld unreasonably. The Auction Agent shall give notice of any such change to
each Broker-Dealer. Such notice shall be received prior to the first Auction
Date on which any such change shall be effective.

TIME                        EVENT

By 9:30 A.M.                Auction Agent shall advise the Fund and the
                            Broker-Dealers of the applicable Maximum Rate
                            and the Reference Rate(s), the "AA" Composite
                            Commercial Paper Rate(s), the Taxable Equivalent
                            of the Short-Term Municipal Rate(s), Treasury
                            Note Rate(s) and Treasury Bill Rate(s), as the
                            case may be, used in determining such Maximum
                            Rate as set forth in Section 2.2(d) hereof.

9:30 A.M. - 1:30 P.M.       Auction Agent shall assemble information
                            communicated to it by Broker-Dealers as provided
                            in Section 4(a) of Part II of the Statement.
                            Submission deadline is 1:30 P.M.

Not earlier than 1:30 P.M.  Auction Agent shall make determinations pursuant
                            to Section 4(a) of Part II of the Statement.

By approximately 3:00 P.M.  Auction Agent shall advise the Trust of the
                            results of the Auction as provided in Section
                            4(b) of Part II of the Statement. Submitted Bids
                            and Submitted Sell Orders will be accepted and
                            rejected in whole or in part and AMPS will be
                            allocated as provided in Section 5 of Part II of the


                                   6
<Page>

                            Statement. Auction Agent shall give notice of the
                            Auction results as set forth in Section 2.4 hereof.

               2.4  NOTICE OF AUCTION RESULTS. On each Auction Date, the Auction
Agent shall notify Broker-Dealers of the results of the Auction held on such
date by telephone or through the Auction Agent's Auction Processing System.

               2.5  BROKER-DEALERS.

                    (a)  Not later than 12:00 noon on each Dividend Payment Date
for any series of the Trust's AMPS, the Trust shall pay to the Auction Agent in
Federal Funds or similar same-day funds an amount in cash equal to the aggregate
fees payable to the Broker-Dealers for such series pursuant to Section 3.5 of
the Broker-Dealer Agreements for such series.

                    (b)  The Trust shall not designate any Person to act as a
Broker-Dealer, or permit an Existing Holder or a Potential Beneficial Owner to
participate in Auctions through any Person other than a Broker-Dealer, without
the prior written approval of the Auction Agent, which approval shall not be
withheld unreasonably.

                    (c)  The Auction Agent shall terminate any Broker-Dealer
Agreement as set forth therein if so directed by the Trust.

                    (d)  Subject to Section 2.5(b) hereof, the Auction Agent
from time to time shall enter into such Broker-Dealer Agreements as the Trust
shall request.

                    (e)  The Auction Agent shall maintain a list of
Broker-Dealers.

               2.6  OWNERSHIP OF AMPS AND SUBMISSION OF BIDS BY THE TRUST AND
ITS AFFILIATES. Neither the Trust nor any Affiliate of the Trust may submit any
Sell Order or Bid, directly or indirectly, in any Auction, except that an
Affiliate of the Trust that is a Broker-Dealer may submit a Sell Order or Bid on
behalf of a Beneficial Owner or a Potential Beneficial Owner. Any shares of AMPS
redeemed, purchased or otherwise acquired (i) by the Trust shall not be
reissued, except in accordance with the requirements of the Securities Act of
1933, as amended, or (ii) by its Affiliates shall not be transferred (other than
to the Trust). The Auction Agent shall have no duty or liability with respect to
enforcement of this Section 2.6.

               2.7  ACCESS TO AND MAINTENANCE OF AUCTION RECORDS. The Auction
Agent shall afford to the Trust, its agents, independent public accountants and
counsel, access at reasonable times during normal business hours to review and
make extracts or copies (at the Trust's sole cost and expense) of all books,
records, documents and other information concerning the conduct and results of
Auctions, provided that any such agent, accountant or counsel shall furnish the
Auction Agent with a letter from the Trust requesting that the Auction Agent
afford such person access. The Auction Agent shall maintain records relating to
any Auction for a period of at least two years after such


                                       7
<Page>

Auction (unless requested by the Trust to maintain such records for such longer
period not in excess of four years, then for such longer period), and such
records, in reasonable detail, shall accurately and fairly reflect the actions
taken by the Auction Agent hereunder. The Trust agrees to keep confidential any
information regarding the customers of any Broker-Dealer received from the
Auction Agent in connection with this Agreement or any Auction, and shall not
disclose such information or permit the disclosure of such information without
the prior written consent of the applicable Broker-Dealer to anyone except such
agent, accountant or counsel engaged to audit or review the results of Auctions
as permitted by this Section 2.7. The Trust reserves the right to disclose any
such information if it is advised by its counsel that its failure to do so would
(i) be unlawful or (ii) expose it to liability, unless the Broker-Dealer shall
have offered indemnification satisfactory to the Trust. Any such agent,
accountant or counsel, before having access to such information, shall agree to
keep such information confidential and not to disclose such information or
permit disclosure of such information without the prior written consent of the
applicable Broker-Dealer, provided that such agent, accountant or counsel may
reserve the right to disclose any such information if it is advised by its
counsel that its failure to do so would (i) be unlawful or (ii) expose it to
liability, unless the Broker-Dealer shall have offered indemnification
satisfactory to such agent, accountant or counsel.

               3.   THE AUCTION AGENT AS PAYING AGENT.

               3.1  THE PAYING AGENT. The Board of Trustees of the Trust has
adopted a resolution appointing Deutsche Bank Trust Company Americas as Auction
Agent and Paying Agent. The Paying Agent hereby accepts such appointment and
agrees to act in accordance with its standard procedures and the provisions of
the Statement which are specified herein with respect to the AMPS and as set
forth in this Section 3.

               3.2  THE TRUST'S NOTICES TO THE PAYING AGENT. Whenever any AMPS
are to be redeemed, the Trust promptly shall deliver to the Paying Agent a
Notice of Redemption, which will be mailed by the Paying Agent to each Holder
within at least one Business Day prior to the date such Notice of Redemption is
required to be mailed pursuant to Section 11 of Part I of the Statement. The
Paying Agent shall have no responsibility to confirm or verify the accuracy of
any such Notice.

               3.3  THE TRUST TO PROVIDE FUNDS FOR DIVIDENDS AND REDEMPTIONS.

                    (a)  Not later than 12:00 noon on each Dividend Payment
Date, the Trust shall deposit with the Paying Agent an aggregate amount of funds
available on the next Business Day in The City of New York, New York equal to
the declared dividends to be paid to Holders on such Dividend Payment Date.

                    (b)  If the Trust shall give a Notice of Redemption, then by
noon on the Business Day next preceding the date fixed for redemption, the Trust
shall deposit in trust with the Paying Agent an aggregate amount of funds
available on the next Business Day in The City of New York, New York sufficient
to redeem such shares of Preferred Shares called for redemption and shall give
the Paying Agent irrevocable


                                       8
<Page>

instructions and authority to pay the redemption price to the Holders of AMPS
called for redemption upon surrender of the certificate or certificates
therefore.

               3.4  DISBURSING DIVIDENDS AND REDEMPTION PRICE. After receipt of
the funds and instructions from the Trust described in Section 3.3 above, the
Paying Agent shall pay to the Holders (or former Holders) entitled thereto (i)
on each corresponding Dividend Payment Date, dividends on the AMPS, and (ii) on
any date fixed for redemption, the redemption price of any AMPS called for
redemption. The amount of dividends for any Dividend Period to be paid by the
Paying Agent to Holders will be determined by the Trust as set forth in Section
2 of Part I of the Statement. The redemption price to be paid by the Paying
Agent to the Holders of any Trust called for redemption will be determined as
set forth in Section 11 of Part I of the Statement. The Paying Agent shall have
no duty to determine the redemption price and may rely on the amount thereof set
forth in a Notice of Redemption.

               4.   THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR.

               4.1  ORIGINAL ISSUE OF STOCK CERTIFICATES. On the Date of
Original Issue for any share of AMPS, one certificate for each series of AMPS
shall be issued by the Trust and registered in the name of Cede & Co., as
nominee of the Securities Depository, and countersigned by the Paying Agent.

               4.2  REGISTRATION OF TRANSFER OR EXCHANGE OF SHARES. Except as
provided in this Section 4.2, the shares of each series of AMPS shall be
registered solely in the name of the Securities Depository or its nominee. If
the Securities Depository shall give notice of its intention to resign as such,
and if the Trust shall not have selected a substitute Securities Depository
acceptable to the Paying Agent prior to such resignation, then upon such
resignation the shares of each Series of AMPS, at the Trust's request, may be
registered for transfer or exchange, and new certificates thereupon shall be
issued in the name of the designated transferee or transferees, upon surrender
of the old certificate in form deemed by the Paying Agent to be properly
endorsed for transfer with (a) all necessary endorsers' signatures guaranteed in
such manner and form and by such guarantor as the Paying Agent may reasonably
require, (b) such assurances as the Paying Agent shall deem necessary or
appropriate to evidence the genuineness and effectiveness of each necessary
endorsement and (c) satisfactory evidence of compliance with all applicable laws
relating to the collection of taxes in connection with any registration of
transfer or exchange or funds necessary for the payment of such taxes. If the
certificate or certificates for AMPS are not held by the Securities Depository
or its nominee, payments upon transfer of shares in an Auction shall be made in
Federal Funds or similar same-day funds to the Auction Agent against delivery of
certificates therefore.

               4.3  REMOVAL OF LEGEND. Any request for removal of a legend
indicating a restriction on transfer from a certificate evidencing AMPS shall be
accompanied by an opinion of counsel stating that such legend may be removed and
such shares may be transferred free of the restriction described in such legend,
said opinion to be delivered under cover of a letter from a Trust Officer
authorizing the Paying Agent to remove the legend on the basis of said opinion.


                                       9
<Page>

               4.4  LOST, STOLEN OR DESTROYED STOCK CERTIFICATES. The Paying
`Agent shall issue and register replacement certificates for certificates
represented to have been lost, stolen or destroyed, upon the fulfillment of such
requirements as shall be deemed appropriate by the Trust and by the Paying
Agent, subject at all times to provisions of law, the Statement governing such
matters and resolutions adopted by the Trust with respect to lost, stolen or
destroyed securities. The Paying Agent may issue new certificates in exchange
for and upon the cancellation of mutilated certificates. Any request by the
Trust to the Paying Agent to issue a replacement or new certificate pursuant to
this Section 4.4 shall be deemed to be a representation and warranty by the
Trust to the Paying Agent that such issuance will comply with provisions of
applicable law and the Statement and resolutions of the Trust.

               4.5  DISPOSITION OF CANCELED CERTIFICATES; RECORD RETENTION. The
Paying Agent shall retain stock certificates which have been canceled in
transfer or in exchange and accompanying documentation in accordance with
applicable rules and regulations of the Securities and Exchange Commission (the
"SEC") for at least two calendar years from the date of such cancellation. The
Paying Agent, upon written request by the Trust, shall afford to the Trust, its
agents and counsel access at reasonable times during normal business hours to
review and make extracts or copies (at the Trust's sole cost and expense) of
such certificates and accompanying documentation. Upon request by the Trust at
any time after the expiration of this two-year period, the Paying Agent shall
deliver to the Trust the canceled certificates and accompanying documentation.
The Trust, at its expense, shall retain such records for a minimum additional
period of at least four calendar years from the date of delivery of the records
to the Trust and shall make such records available during this period at any
time, or from time to time, for reasonable periodic, special, or other
examinations by representatives of the SEC. The Trust also shall undertake to
furnish to the SEC, upon demand, either at its principal office or at any
regional office, complete, correct and current hard copies of any and all such
records.

               4.6  SHARE REGISTER. The Paying Agent shall maintain the share
register, which shall contain a list of the Holders, the number of shares held
by each Holder and the address of each Holder. The Paying Agent shall record in
the share register any change of address of a Holder upon notice by such Holder.
In case of any written request or demand for the inspection of the share
register or any other books of the Trust in the possession of the Paying Agent,
the Paying Agent will notify the Trust and secure instructions as to permitting
or refusing such inspection. The Paying Agent reserves the right, however, to
exhibit the share register or other records to any person in case it is advised
by its counsel that its failure to do so would (i) be unlawful or (ii) expose it
to liability, unless the Trust shall have offered indemnification satisfactory
to the Paying Agent.

               4.7  RETURN OF FUNDS. Any funds deposited with the Paying Agent
by the Trust for any reason under this Agreement, including for the payment of
dividends or the redemption of AMPS, that remain with the Paying Agent after 12
months shall be repaid to the Trust upon written request by the Trust. The Trust
shall be entitled to receive from the Auction Agent, promptly after the date
fixed for redemption, any cash


                                       10
<Page>

deposited with the Auction Agent in excess of:

                    (a)  the aggregate Redemption Price of the AMPS called for
redemption on such date and

                    (b)  all other amounts to which Holders of AMPS called for
redemption may be entitled.

                    Any funds so deposited that are unclaimed at the end of 90
days from such redemption date shall, to the extent permitted by law, be repaid
to the Trust.

               5.   REPRESENTATIONS AND WARRANTIES.

               5.1  REPRESENTATIONS AND WARRANTIES OF THE TRUST. The Trust
represents and warrants to the Auction Agent that:

                         (i) the Trust is a duly organized and existing business
trust in good standing under the laws of the State of its incorporation or
organization, and has full corporate power to execute and deliver this Agreement
and to authorize, create and issue the AMPS;

                         (ii) this Agreement has been duly and validly
authorized, executed and delivered by the Trust and constitutes the legal, valid
and binding obligation of the Trust, enforceable against the Trust in accordance
with its terms, subject as to such enforceability to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equitable principles;

                         (iii) the form of the certificates evidencing the AMPS
comply with all applicable laws of the State of Delaware;

                         (iv) the AMPS has been duly and validly authorized by
the Trust and, upon completion of the initial sale of the series of AMPS and
receipt of payment therefor, will be validly issued by the Trust, fully paid and
nonassessable;

                         (v) when issued, the shares of AMPS will have been duly
registered under the Securities Act of 1933, as amended, and no further action
by or before any governmental body or authority of the United States or of any
state thereof is required in connection with the execution and delivery of this
Agreement or will be required in connection with the issuance of the AMPS;

                         (vi) the execution and delivery of this Agreement and
the issuance and delivery of the AMPS do not and will not conflict with,
violate, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, the Agreement and Declaration of the Trust or the
By-Laws of the Trust, any order or decree of any court or public authority
having jurisdiction over the Trust, or any mortgage, indenture, contract,
agreement or undertaking to which the Trust is a party or by which it is bound;
and


                                       11
<Page>

                         (vii) no taxes are payable upon or in respect of the
execution of this Agreement or will be payable upon or in respect of the
issuance of the AMPS.

               5.2  REPRESENTATIONS AND WARRANTIES OF THE AUCTION AGENT. The
Auction Agent represents and warrants to the Trust that:

                         (i) the Auction Agent is duly organized and is validly
existing as a banking corporation in good standing under the laws of the State
of New York, and has the corporate power to enter into and perform its
obligations under this Agreement; and

                         (ii) this Agreement has been duly and validly
authorized, executed and delivered by the Auction Agent and constitutes the
legal, valid and binding obligation of the Auction Agent, enforceable against
the Auction Agent in accordance with its terms, subject as to such
enforceability to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles.

               6.   THE AUCTION AGENT.

               6.1  DUTIES AND RESPONSIBILITIES.

                    (a)  The Auction Agent is acting solely as agent for the
Trust hereunder and owes no fiduciary duties to any Person except as provided by
this Agreement.

                    (b)  The Auction Agent undertakes to perform such duties and
only such duties as are set forth specifically in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Auction
Agent.

                    (c)  In the absence of bad faith or negligence on its part,
the Auction Agent shall not be liable for any action taken, suffered or omitted
by it or for any error of judgment made by it in the performance of its duties
under this Agreement.

               6.2  RIGHTS OF THE AUCTION AGENT.

                    (a)  The Auction Agent may rely upon, and shall be fully
protected in acting or refraining from acting upon, any communication authorized
hereby and any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document reasonably
believed by it to be genuine. The Auction Agent shall not be liable for acting
upon any telephone communication authorized hereby which the Auction Agent
reasonably believes in good faith to have been given by the Trust or by a
Broker-Dealer. The Auction Agent may record telephone communications with the
Trust or with the Broker-Dealers or with both.


                                       12
<Page>

                    (b)  The Auction Agent may consult with counsel of its
choice, and the written advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reasonable reliance thereon.

                    (c)  The Auction Agent shall not be required to advance,
expend or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder. The Auction Agent shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Trust.

                    (d)  The Auction Agent may perform its duties and exercise
its rights hereunder either directly or by or through agents or attorneys.

               6.3  COMPENSATION, EXPENSES AND INDEMNIFICATION.

                    (a) The Trust shall pay to the Auction Agent from time to
time reasonable compensation for all services rendered by it under this
Agreement and under the Broker-Dealer Agreements as shall be set forth in a
separate writing signed by the Trust and the Auction Agent, subject to
adjustments if the AMPS no longer are held of record by the Securities
Depository or its nominee or if there shall be such other change as shall
increase or decrease materially the Auction Agent's obligations hereunder or
under the Broker-Dealer Agreements.

                    (b)  The Trust shall reimburse the Auction Agent upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Auction Agent in accordance with any provision of this Agreement and of
the Broker-Dealer Agreements (including the reasonable compensation, expenses
and disbursements of its agents and counsel), except any expense, disbursement
or advance attributable to its negligence or bad faith.

                    (c)  The Trust shall indemnify the Auction Agent for, and
hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Auction Agent arising out of or in
connection with its agency under this Agreement and under the Broker-Dealer
Agreements, including the costs and expenses of defending itself against any
claim of liability in connection with its exercise or performance of any of its
duties hereunder and thereunder, except such as may result from its negligence
or bad faith.

               7.   MISCELLANEOUS.

               7.1  TERM OF AGREEMENT.

                    (a)  The term of this Agreement is unlimited unless it shall
be terminated as provided in this Section 7.1. The Trust may terminate this
Agreement at any time by so notifying the Auction Agent, provided that, if any
AMPS remain outstanding, the Trust shall have entered into an agreement with a
successor auction agent. The Auction Agent may terminate this Agreement upon
prior notice to the Trust


                                       13
<Page>

on the date specified in such notice, which date shall be no earlier than 60
days after delivery of such notice. If the Auction Agent terminates this
Agreement while any AMPS of a series remains outstanding, the Trust shall use
its best efforts to enter into an agreement with a successor auction agent
containing substantially the same terms and conditions as this Agreement.

                    (b)  Except as otherwise provided in this Section 7.1(b),
the respective rights and duties of the Trust and the Auction Agent under this
Agreement with respect to AMPS shall cease upon termination of this Agreement.
The Trust's representations, warranties, covenants and obligations to the
Auction Agent under Sections 5 and 6.3 hereof shall survive the termination of
the Agreement. Upon termination of this Agreement, the Auction Agent shall (i)
resign as Auction Agent under the Broker-Dealer Agreements, (ii) at the Trust's
request, deliver promptly to the Trust copies of all books and records
maintained by it in connection with its duties hereunder, and (iii) at the
request of the Trust, transfer promptly to the Trust or to any successor auction
agent any funds deposited by the Trust with the Auction Agent (whether in its
capacity as Auction Agent or as Paying Agent) pursuant to this Agreement which
have not been distributed previously by the Auction Agent in accordance with
this Agreement.

               7.2  COMMUNICATIONS. Except for (i) communications authorized to
be made by telephone pursuant to this Agreement or the Auction Procedures and
(ii) communications in connection with Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given to such party at its address or telecopier number set forth
below:

         If to the Trust,                   BlackRock Municipal Income Trust II
         addressed to:                      c/o Black Rock Financial
                                            Management, Inc.
                                            40 East 52nd Street
                                            New York, New York,   10022
                                            Attention: Treasurer
                                            Telecopier No.: (212) 409-3200
                                            Telephone No.: (212) 409-3210
         If to the Auction Agent,           Deutsche Bank Trust Company Americas
         addressed to:                      c/o DB Services N.J., Inc.
                                            100 Plaza One, 6th Floor
                                            Jersey City, NJ,  07311
                                            Attention: Lisa Wahl-McDermid
                                            Telecopier No.: (212) 593-6879
                                            Telephone No.: (212) 593-644

or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Trust by a Trust Officer and on
behalf of the Auction Agent by an


                                       14
<Page>

Authorized Officer.

               7.3  ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and there
are no other representations, endorsements, promises, agreements or
understandings, oral, written or implied, between the parties relating to the
subject matter hereof, except for agreements relating to the compensation of the
Auction Agent.

               7.4  BENEFITS. Nothing herein, express or implied, shall give to
any Person, other than the Trust, the Auction Agent and their respective
successors and assigns, any benefit of any legal or equitable right, remedy or
claim hereunder.

               7.5  AMENDMENT; WAIVER.

                    (a)  This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the party to
be charged.

                    (b)  Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.

               7.6  SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the respective successors
and permitted assigns of each of the Trust and the Auction Agent. This Agreement
may not be assigned by either party hereto absent the prior written consent of
the other party, which consent shall not be withheld unreasonably.

               7.7  SEVERABILITY. If any clause, provision or section hereof
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any of the remaining clauses, provisions or sections hereof.

               7.8  EXECUTION IN COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

               7.9  GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said state.


                                       15
<Page>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.

                                      BLACKROCK MUNICIPAL INCOME TRUST II


                                      -------------------------------------
                                      By:
                                      Title:


                                      DEUTSCHE BANK TRUST COMPANY AMERICAS



                                      -------------------------------------
                                      By:
                                      Title:

















                                       16
<Page>

                                                                       EXHIBIT A

                            [Broker Dealer Agreement]



































                                       17
<Page>

                                                                       EXHIBIT B

                             [Settlement Procedures]




































                                       18

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(K)(3)
<SEQUENCE>6
<FILENAME>a2089402zex-99_k3.txt
<DESCRIPTION>EXHIBIT 99(K)(3)
<TEXT>
<Page>

                       BLACKROCK MUNICIPAL INCOME TRUST II

                      DEUTSCHE BANK TRUST COMPANY AMERICAS,

                                as Auction Agent

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

                         FORM OF BROKER-DEALER AGREEMENT

                         dated as of September 19, 2002

                                   Relating to

                         Auction Market Preferred Shares

                                       of

                       BlackRock Municipal Income Trust II

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

<Page>

                  Broker-Dealer Agreement dated as of September 19, 2002, among
BlackRock Municipal Income Trust II (the "Trust"), a Delaware business trust,
Deutsche Bank Trust Company Americas, a subsidiary of Deutsche Bank Group and a
New York banking corporation (the "Auction Agent") (not in its individual
capacity, but solely as agent of the Trust, pursuant to authority granted to it
in the Auction Agency Agreement (as defined below) and each broker-dealer whose
name appears on the signature page hereof, as broker-dealer (together with its
successors and assigns as such hereinafter collectively referred to as "BD").

                  Whereas the Trust proposes to issue   series of preferred
shares of beneficial interest ( shares of Series  , shares of Series   and
shares of Series ), par value $.001 per share, liquidation preference $25,000
per share, designated as Series  , Series and Series   Auction Market
Preferred Shares (cumulatively, the "AMPS"), pursuant to the Statement (as
defined below).

                  The Trust's Statement provides that for each Subsequent Rate
Period of each series of AMPS then outstanding, the Applicable Rate for such
series of AMPS for such Subsequent Rate Period shall be determined through the
operation of the Auction Procedures on the respective Auction Date therefor next
preceding Subsequent Rate Period. The Trustees have authorized the officers of
the Trust to negotiate the terms and provisions of and enter into the Auction
Agency Agreement, and have appointed Deutsche Bank Trust Company Americas as
Auction Agent for the purposes of the Auction Agency Agreement.

                  The Auction Procedures require the participation of one or
more Broker-Dealers for AMPS.

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the Auction Agent and BD agrees as follows:

                  BD agree as follows:

1.   DEFINITIONS AND RULES OF CONSTRUCTION.

          1.1. TERMS DEFINED BY REFERENCE TO THE STATEMENT.

          Capitalized terms not defined herein shall have the respective
meanings specified in the Statement.

          1.2. TERMS DEFINED HEREIN.

          As used herein, the following terms shall have the following meanings,
unless the context otherwise requires:

               (a)  "Auction" shall have the meaning specified in Section 2.1 of
the Auction Agency Agreement.

               (b)  "Auction Procedures" shall mean the Auction Procedures


                                       2
<Page>

that are set forth in Part II of the Statement.

               (c)  "Authorized Officer" shall mean each Managing Director, Vice
President, Assistant Vice President and Associate of the Auction Agent and every
other officer or employee of the Auction Agent designated as an "Authorized
Officer" for purposes of this Agreement in a communication to BD.

               (d)  "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a Broker-Dealer.

               (e)  "BD Officer" shall mean each officer or employee of BD
designated as a "BD Officer" for purposes of this Agreement in a communication
to the Auction Agent.

               (f)  "Settlement Procedures" shall mean the Settlement Procedures
attached to the Auction Agent Agreement as Exhibit B.

               (g)  "Statement" shall mean the Statement of Preferences of
Auction Rate Municipal Preferred Shares, as the same may be amended,
supplemented or modified from time to time.

          1.3. RULES OF CONSTRUCTION.

          Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of this Agreement:

               (a)  Words importing the singular number shall include the plural
number and vice versa.

               (b)  The captions and headings herein are solely for convenience
of reference and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.

               (c)  The words "hereof," "herein," "hereto," and other words of
similar import refer to this Agreement as a whole.

               (d)  All references herein to a particular time of day shall be
to New York City time.

2.   NOTIFICATION OF DIVIDEND.

          The provisions contained in

               (a)  (i) Section 2 of Part I of the Statement concerning dividend
rates and calculation of dividends, and

               (b)  Section 4 of Part I of the Statement concerning Special Rate
Periods and the notification of a Special Rate Period


                                       3
<Page>

will be followed by the Auction Agent and BD, and the provisions contained
therein are incorporated herein by reference in their entirety and shall be
deemed to be a part of this Agreement to the same extent as if such provisions
were set forth fully herein.

3.   THE AUCTION.

     3.1. PURPOSE; INCORPORATION BY REFERENCE OF AUCTION PROCEDURES AND
          SETTLEMENT PROCEDURES.

               (a)  On each Auction Date, the provisions of the Auction
Procedures will be followed by the Auction Agent for the purpose of determining
the Applicable Rate for the AMPS, for each Dividend Period. Each periodic
operation of such procedures is hereinafter referred to as an "Auction."

               (b)  All of the provisions contained in the Auction Procedures
and Settlement are incorporated herein by reference in their entirety and shall
be deemed to be a part of this Agreement to the same extent as if such
provisions were set forth fully herein.

               (c)  BD agrees to act as, and assumes the obligations of and
limitations and restrictions placed upon, a Broker-Dealer under this Agreement
and to follow the Auction Procedures. BD understands that other Persons meeting
the requirements specified in the definition of "Broker-Dealer" contained in
paragraph 18 of the Definitions Section of the Statement may execute a
Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.

               (d)  BD and other Broker-Dealers may participate in Auctions for
their own accounts. However, the Trust, by notice to BD and all other
Broker-Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions
for their own accounts, provided that Broker-Dealers may continue to submit Hold
Orders and Sell Orders. The Auction Agent shall be under no duty to monitor
compliance by Broker Dealers with respect to any notice furnished pursuant to
this Section 3.1(d).

          3.2. PREPARATION FOR EACH AUCTION.

               (a)  Not later than 9:30 A.M. on each Auction Date for the AMPS,
the Auction Agent shall advise BD by telephone or otherwise of the Reference
Rate(s), the "AA" Composite Commercial Paper Rate(s), the Taxable Equivalent of
the Short-Term Municipal Rate(s), Treasury Note Rate(s), Treasury Bill Rate(s)
and the Maximum Rate in effect on such Auction Date.

               (b)  The Auction Agent from time to time may request BD to
provide it with a list of the respective customers BD believes are Beneficial
Owners of AMPS. BD shall comply with any such request, and the Auction Agent
shall keep confidential any such information, including information received as
to the identity of Bidders in any Auction, and shall not disclose any such
information so provided to any Person other than the Trust; and such information
shall not be used by the Auction Agent or its officers, employees, agents or
representatives for any purpose other than such


                                       4
<Page>

purposes as are described herein. The Auction Agent shall transmit any list of
customers BD believes are Beneficial Owners of AMPS and information related
thereto only to its officers, employees, agents or representatives who need to
know such information for the purposes of acting in accordance with this
Agreement, and the Auction Agent shall prevent the transmission of such
information to others and shall cause its officers, employees, agents and
representatives to abide by the foregoing confidentiality restrictions;
provided, however, that the Auction Agent shall have no responsibility or
liability for the actions of any of its officers, employees, agents or
representatives after they have left the employ of the Auction Agent.

          3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.

               (a)  The Trust and the Auction Agent shall conduct Auctions for
AMPS in accordance with the schedule set forth below. Such schedule may be
changed at any time by the Auction Agent with the consent of the Trust, which
consent shall not be withheld unreasonably. The Auction Agent shall give notice
of any such change to BD. Such notice shall be received prior to the first
Auction Date on which any such change shall be effective.

           TIME                              EVENT

By 9:30 A.M.                Auction Agent shall advise the Fund and the
                            Broker-Dealers of the applicable Maximum Rate and
                            the Reference Rate(s), the "AA" Composite Commercial
                            Paper Rate(s), the Taxable Equivalent of the
                            Short-Term Municipal Rate(s), Treasury Note Rate(s)
                            and Treasury Bill Rate(s), as the case may be, used
                            in determining such Maximum Rate as set forth in
                            Section 3.2(a) hereof.

9:30 A.M. - 1:30 P.M.       Auction Agent shall assemble information
                            communicated to it by Broker-Dealers as provided in
                            Section 2(a) of Part II of the Statement. Submission
                            Deadline is 1:30 P.M.

Not earlier than 1:30 P.M.  Auction Agent shall make determinations pursuant to
                            Section 4(a) of Part II of the Statement.

By approximately 3:00 P.M.  Auction Agent shall advise the Trust of the results
                            of the Auction as provided in Section 4(b) of
                            Part II of the Statement.  Submitted Bids and
                            Submitted Sell Orders will be accepted and rejected
                            in whole or in part and AMPS will be allocated as
                            provided in Section 5 of Part II of the Articles
                            Supplementary.  Auction Agent shall


                                       5
<Page>

                            give notice of the Auction results as set forth in
                            Section 3.4(a) hereof.

               (b)  BD agrees to maintain a list of Potential Beneficial Owners
and to contact the Potential Beneficial Owners on such list on or prior to each
Auction Date for the purposes set forth in Section 2 of Part II of the
Statement.

               (c)  BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit A. BD shall submit separate
Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial
Owner on whose behalf BD is submitting an Order and shall not net or aggregate
the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf
BD is submitting Orders.

               (d)  BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit B, of transfers of AMPS,
made through BD by an Existing Holder to another Person other than pursuant to
an Auction, and (ii) a written notice, substantially in the form attached hereto
as Exhibit C, of the failure of AMPS to be transferred to or by any Person that
purchased or sold AMPS through BD pursuant to an Auction. The Auction Agent is
not required to accept any notice delivered pursuant to the terms of the
foregoing sentence with respect to an Auction unless it is received by the
Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable
Auction Date.

          3.4. NOTICE OF AUCTION RESULTS.

               (a)  On each Auction Date, the Auction Agent shall notify BD by
telephone or otherwise. On the Business Day next succeeding such Auction Date,
the Auction Agent shall notify BD in writing of the disposition of all Orders
submitted by BD in the Auction held on such Auction Date.

               (b)  BD shall notify each Beneficial Owner, Potential Beneficial
Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an
Order, and take such other action as is required of BD.

          If any Beneficial Owner or Existing Holder selling AMPS in an Auction
fails to deliver such shares, the Broker-Dealer of any Person that was to have
purchased AMPS in such Auction may deliver to such Person a number of whole
shares of AMPS that is less than the number of shares that otherwise was to be
purchased by such Person. In such event, the number of AMPS to be so delivered
shall be determined by such Broker-Dealer. Delivery of such lesser number of
shares shall constitute good delivery. Upon the occurrence of any such failure
to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the
notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing
terms of this Section 3.4(b), any delivery or non-delivery of AMPS which
represents any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall
have been notified of such delivery or non-delivery in accordance with the terms
of Section


                                       6
<Page>

3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to
enforcement of this Section 3.4(b).

          3.5. SERVICE CHARGE TO BE PAID TO BD.

               (a)  No later than 12:00 noon on each Dividend Payment Date, the
Auction Agent after each Auction will pay a service charge from funds provided
by the Trust to each Broker-Dealer on the basis of the purchase price of AMPS
placed by such Broker-Dealer at such Auction. The service charge shall be (i) in
the case of any Auction Date immediately preceding a seven-day Dividend Period,
the product of (A) a fraction the numerator of which is the number of days in
such Dividend Period (calculated by counting the date of original issue of such
shares to but excluding the next succeeding dividend payment date of such
shares) and the denominator of which is 365, times (B) 1/4 of 1%, times (C)
$25,000 times (D) the sum of the aggregate number of shares of outstanding AMPS
for which the Auction is conducted and (ii) in the case of any Special Dividend
Period the amount determined by mutual consent of the Trust and any such
Broker-Dealers and shall be based upon a selling concession that would be
applicable to an underwriting of fixed or variable rate preferred shares with a
similar final maturity or variable rate dividend period, respectively, at the
commencement of the Dividend Period with respect to such Auction.

          For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Beneficial Owner who acquired AMPS through BD transfers those shares to another
Person other than pursuant to an Auction, then the Broker-Dealer for the shares
so transferred shall continue to be BD, provided, however, that if the transfer
was effected by, or if the transferee is, a Broker-Dealer other than BD, then
such Broker-Dealer shall be the Broker-Dealer for such shares.

4.   THE AUCTION AGENT.

          4.1. DUTIES AND RESPONSIBILITIES.

               (a)  The Auction Agent is acting solely as agent for the Trust
hereunder and owes no fiduciary duties to any other Person by reason of this
Agreement.

               (b)  The Auction Agent undertakes to perform such duties and only
such duties as are set forth specifically in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Auction
Agent.

               (c)  In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or, omitted by
it, or for any error of judgment made by it in the performance of its duties
under this Agreement. The Auction Agent shall not be liable for any error of
judgment made in good faith unless the Auction Agent shall have been negligent
in ascertaining (or failing to ascertain) the pertinent facts.

          4.2. RIGHTS OF THE AUCTION AGENT.


                                       7
<Page>

               (a)  The Auction Agent may rely upon, and shall be protected in
acting or refraining from acting upon, any communication authorized by this
Agreement and any written instruction, notice, request, direction, consent,
report, certificate, share certificate or other instrument, paper or document
reasonably believed by it to be genuine. The Auction Agent shall not be liable
for acting upon any telephone communication authorized by this Agreement which
the Auction Agent reasonably believes in good faith to have been given by the
Trust or by BD. The Auction Agent may record telephone communications with BD.

               (b)  The Auction Agent may consult with counsel of its own
choice, and the advice of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.

               (c)  The Auction Agent shall not be required to advance, expend
or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.

               (d)  The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys.

          4.3. AUCTION AGENT'S DISCLAIMER.

          The Auction Agent makes no representation as to the validity or
adequacy of this Agreement or the AMPS.

5.   MISCELLANEOUS.

          5.1. TERMINATION.

          Any party may terminate this Agreement at any time upon five days'
prior written notice to the other party; provided, however, that neither BD nor
the Auction Agent may terminate this Agreement without first obtaining the prior
written consent of the Trust to such termination, which consent shall not be
withheld unreasonably.

          5.2. Participant in Securities Depository; Payment of Dividends in
SAME-DAY FUNDS.

               (a)  BD is, and shall remain for the term of this Agreement, a
member of, or a participant in, the Securities Depository (or an affiliate of
such a member or participant).

               (b)  BD represents that it (or if BD does not act as Agent
Member, one of its affiliates) shall make all dividend payments on the AMPS
available in same-day funds on each Dividend Payment Date to customers that use
BD (or its affiliate) as Agent Member.

          5.3. AGENT MEMBER.


                                       8
<Page>

          At the date hereof, BD is a participant of the Securities Depository.

          5.4. COMMUNICATIONS.

          Except for (i) communications authorized to be made by telephone
pursuant to this Agreement or the Auction Procedures and (ii) communications in
connection with the Auctions (other than those expressly required to be in
writing), all notices, requests and other communications to any party hereunder
shall be in writing (including telecopy or similar writing) and shall be given
to such party at its address or telecopier number set forth below:

          If to the Company,
          addressed to:

          BlackRock Municipal Income Trust II
          c/o Black Rock Financial Management, Inc.
          40 East 52nd Street
          New York, New York,   10022
          Attention: Treasurer
          Telecopier No.: (212) 409-3200
          Telephone No.: (212) 409-3210

          If to the Auction Agent, addressed to:

          Deutsche Bank Trust Company Americas
          c/o DB Services NJ, Inc.
          100 Plaza One, 6th Floor
          Jersey City, NJ,  07311
          Attention: Lisa Wahl-McDermid
          Telecopier No.: (212) 593-6879
          Telephone No.: (212) 593-6447


          If to the BD,
          addressed to:

          Attention: __________________
          Telecopier No.:  (212) ___-____
          Telephone No.:  (212) ___-____

or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. Telephone communications may be
recorded.


                                       9
<Page>

          5.5. ENTIRE AGREEMENT.

          This Agreement contains the entire agreement between the parties
relating to the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or implied,
between the parties relating to the subject matter hereof.

          5.6. BENEFITS.

          Nothing in this Agreement, express or implied, shall give to any
person, other than the Trust, the Auction Agent and BD and their respective
successors and assigns, any benefit of any legal or equitable right, remedy or
claim under this Agreement.

          5.7. AMENDMENT; WAIVER.

               (a)  This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the party to
be charged.

               (b)  Failure of either party to this Agreement to exercise any
right or remedy hereunder in the event of a breach of this Agreement by the
other party shall not constitute a waiver of any such right or remedy with
respect to any subsequent breach.

          5.8. SUCCESSORS AND ASSIGNS.

               (a)  This Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the respective successors and permitted assigns of
each of BD and the Auction Agent. This Agreement may not be assigned by either
party hereto absent the prior written consent of the other party; provided,
however, that this Agreement may be assigned by the Auction Agent to a successor
Auction Agent selected by the Trust without the consent of BD.

          5.9. SEVERABILITY.

          If any clause, provision or section of this Agreement shall be ruled
invalid or unenforceable by any court of competent jurisdiction, the invalidity
or unenforceability of such clause, provision or section shall not affect any
remaining clause, provision or section hereof.

          5.10. EXECUTION IN COUNTERPARTS.

          This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.

          5.11. GOVERNING LAW.


                                       10
<Page>

          This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in said state.
















                                       11
<Page>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the date first above written.

                            BLACKROCK MUNICIPAL INCOME TRUST II



                            --------------------------------------------
                            By:
                            Title:


                            DEUTSCHE BANK TRUST COMPANY AMERICAS

                            --------------------------------------------
                            By:
                            Title:


                            [              ]



                            --------------------------------------------
                            By:
                            Title:



















                                       12
<Page>

                                    EXHIBIT A

                      DEUTSCHE BANK TRUST COMPANY AMERICAS

                                AUCTION BID FORM

Submit To:                                          Issue:
Deutsche Bank Trust Company Americas                Auction Market
Corporate Trust and                                 Preferred Shares ("AMPS
Agency Group

- ------------------
New York, NY ______
Attention: Auction Rate Securities
Telecopier No.: (212) ___-____
Telephone No.: (212) ___-____



                  The undersigned Broker-Dealer submits the following Order on
behalf of the Bidder listed below:

                  Name of Bidder: _______________________________

                  BENEFICIAL OWNER Shares of Series ___ now held

                  HOLD___________________________________________

                  BID at rate of_________________________________

                  SELL __________________________________________

                  POTENTIAL BENEFICIAL OWNER

                  # of shares of Series ___

                  BID at rate of __________ Notes:

                  (1) If submitting more than one Bid for one Bidder, use
additional Auction Bid Forms.

                  (2) If one or more Bids covering in the aggregate more than
the number of outstanding shares held by any Beneficial Owner are submitted,
such bid shall be considered valid in the order of priority set forth in the
Auction Procedures on the above issue.

                  (3) A Hold or Sell Order may be placed only by a Beneficial
Owner covering a number of shares not greater than the number of shares
currently held.


                                       A-1

<Page>

                  (4) Potential Beneficial Owners may make only Bids, each of
which must specify a rate. If more than one Bid is submitted on behalf of any
Potential Beneficial Owner, each Bid submitted shall be a separate Bid with the
rate specified.

                  (5) Bids may contain no more than three figures to the right
of the decimal point (.001 of 1%). Fractions will not be accepted.

NAME OF BROKER-DEALER________________________________

Authorized Signature_________________________________











                                       A-2

<Page>

                                    EXHIBIT B

  (Note: To be used only for transfers made other than pursuant to an Auction)
                                  TRANSFER FORM

                  Re:  BlackRock Municipal Income Trust II

                  Auction Market Preferred Shares ("AMPS")

                  We are (check one):

                  [ ] the Existing Holder named below;

                  [ ] the Broker-Dealer for such Existing Holder; or

                  [ ] the Agent Member for such Existing Holder.

                  We hereby notify you that such Beneficial Owner has
transferred shares of Series ___ AMPS to



                            --------------------------------------------
                            (Name of Existing Holder)



                            --------------------------------------------
                            (Name of Broker-Dealer)



                            --------------------------------------------
                            (Name of Agent Member)



                            By:



                            --------------------------------------------
                            Printed Name:
                            Title:





                                       B-1

<Page>

                                    EXHIBIT C

          (Note: To be used only for failures to deliver or to pay for
                        AMPS sold pursuant to an Auction)
                         NOTICE OF A FAILURE TO DELIVER

          We are a Broker-Dealer for ___________________ (the "Purchaser"),
which purchased ________ shares of Series ___ AMPS of BlackRock Municipal Income
Trust II in the Auction held on ____________________ from the seller of such
shares.

               We hereby notify you that (check one):

               _____ the Seller failed to deliver such shares to the Purchaser.

               _____ the Purchaser failed to make payment to the Seller upon
                     delivery of such shares.

                            Name:


                            --------------------------------------------
                            (Name of Broker-Dealer)



                            --------------------------------------------
                            (Name of Agent Member)



                            By:



                            --------------------------------------------
                            Printed Name:
                            Title:








                                       C-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(K)(4)
<SEQUENCE>7
<FILENAME>a2089402zex-99_k4.txt
<DESCRIPTION>EXHIBIT 99(K)(4)
<TEXT>
<Page>

- --------------------------------------------------------------------------------
              BOOK-ENTRY-ONLY AUCTION-RATE/MONEY MARKET PREFERRED/
                       AND REMARKETED PREFERRED SECURITIES
- --------------------------------------------------------------------------------
                            LETTER OF REPRESENTATIONS

                  [To be Completed by Issuer and Trust Company]

                  ---------------------------------------------
                                [Name of Issuer]

                  ---------------------------------------------
                             [Name of Trust Company]

                                                                  --------------
                                                                      [Date]
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street 49th Floor
New York, NY 10041-0099

                  Re:

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

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

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

                  [Issue description, including CUSIP number (the "Securities")]
Ladies and Gentlemen:

     This letter sets forth our understanding with respect to certain matters
relating to the Securities. Trust Company shall act as transfer agent,
registrar, dividend disbursing agent, redemption agent or other such agent with
respect to the Securities. The Securities have been issued pursuant to a
prospectus, private placement memorandum, or other such document authorizing the
issuance of the Securities dated______________________________ (the "Document").
____________________ is distributing the Securities through the Depository Trust
   ["Underwriter/
  Placement Agent"]

<Page>

Company ("DTC").

     To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer and
Trust Company make the following representations to DTC:

     1. Prior to closing on the Securities on____________________ there shall be
deposited with DTC one or more Security certificates registered in the name of
DTC's nominee, Cede & Co., which represents 100% of the offering value of the
Securities. Said certificate(s) shall remain in DTC's custody as provided in the
Document. If, however, the aggregate principal amount of the Securities exceeds
$400 million, one certificate shall be issued with respect to each $400 million
of principal amount and an additional certificate shall be issued with respect
to any remaining principal amount. Each Security certificate shall bear the
following legend:

                    Unless this certificate is presented by an authorized
               representative of The Depository Trust Company, a New York
               corporation ("DTC"), to Issuer or its agent for registration of
               transfer, exchange, or payment, and any certificate issued is
               registered in the name of Cede & Co. or in such other name as is
               requested by an authorized representative of DTC (and any payment
               is made to Cede & Co. or to such other entity as is requested by
               an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR
               OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
               WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
               an interest herein.

     2. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its participants ("Participants") or to any person having an
interest in the Securities any information contained in the Security
certificate(s); and (b) acknowledges that neither DTC's Participants nor any
person having an interest in the Securities shall be deemed to have notice of
the provisions of the Security certificate(s) by virtue of submission of such
certificate(s) to DTC.

     3. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer shall establish a record date for such purposes (with
no provision for revocation of consents or votes by subsequent holders) and
shall send notice of such record date to DTC no fewer than 15 calendar days in
advance of such record date. Notices to DTC pursuant to this Paragraph by
telecopy shall be directed to DTC's Reorganization Department, Proxy Unit at
(212) 855-5181 or (212) 855-5182. If the party sending the notice does not
receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (212) 855-5202. Notices to DTC pursuant to
this Paragraph, by mail or by any other means, shall be sent to:
                           Supervisor, Proxy Unit
                           Reorganization Department
                           The Depository Trust Company
                           55 Water Street 50th Floor
                           New York, NY 10041-0099


                                      -2-

<Page>

     4. In the event of a full or partial redemption of the Secunities, Issuer
or Trust Company shall send a notice to DTC specifying: (a) the number of
Securities to be redeemed; and (b) the date such notice is to be distributed to
Security holders (the "Publication Date"). Such notice shall be sent to DTC by a
secure means (E.G., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before or, if
possible, two business days before the Publication Date. Issuer or Trust Company
shall forward such notice either in a separate secure transmission for each
CUSIP number or in a secure transmission for multiple CUSIP numbers (if
applicable) which includes a manifest or list of each CUSIP number submitted in
that transmission. (The party sending such notice shall have a method to verify
subsequently the use of such means and the timeliness of such notice.) The
Publication Date shall be no fewer than 30 days nor more than 60 days prior to
the redemption date. Notices to DTC pursuant to this Paragraph by telecopy shall
be directed to DTC's Call Notification Department at (516) 227-4164 or
(516) 227-4190. If the party sending the notice does not receive a telecopy
receipt from DTC confirming that the notice has been received, such party
shall telephone (516) 227-4070. Notices to DTC pursuant to this Paragraph, by
mail or by any other means, shall be sent to:

                     Manager, Call Notification Department
                     The Depository Trust Company
                     711 Stewart Avenue
                     Garden City, NY 11530-4719

     5. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust
Company to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions by telecopy shall be directed
to DTC's Reorganization Department at (212) 855-5488. If the party sending the
notice does not receive a telecopy receipt from DTC confirming that the notice
has been received, such party shall telephone (212) 855-5290. Notices to DTC
pursuant to this Paragraph, by mail or by any other means, shall be sent to:
                       Manager, Reorganization Department
                       Reorganization Window
                       The Depository Trust Company
                       55 Water Street 50th Floor
                       New York, NY 10041-0099

     6. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.

     7. The Document indicates that the dividend rate for the Securities may
vary from time to time. Absent other existing arrangements with DTC, Issuer or
Trust Company shall give DTC notice of each such change in the dividend rate, on
the same day that the new rate is determined, by telephoning DTC's Dividend
Announcement Section at (212) 855-4550, or by telecopy sent to (212) 855-4555.
Such verbal or telecopy notice shall be followed by prompt written confirmation
sent by

                                      -3-

<Page>

a secure means (E.G., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before or, if
possible, two business days before the Publication Date. Issuer or Agent shall
forward such notice either in a separate secure transmission for each CUSIP
number or in a secure transmission for multiple CUSIP numbers (if applicable)
which includes a manifest or list of each CUSIP number submitted in that
transmission. (The party sending such notice shall have a method to verify
subsequently the use and timeliness of such notice.) Notices to DTC pursuant to
this Paragraph, by mail or by any other means, shall be sent to:
                             Manager, Announcements
                             Dividend Department
                             The Depository Trust Company
                             55 Water Street 25th Floor
                             New York, NY 10041-0099

     8. The Document indicates that each purchaser of Securities must sign a
purchaser's letter which contains provisions restricting transfer of the
Securities purchased. Issuer and Trust Company acknowledge that as long as Cede
& Co. is the sole record owner of the Securities, Cede & Co. shall be entitled
to all voting rights applicable to the Securities and to receive the full amount
of all dividends, liquidation proceeds, and redemption proceeds payable with
respect to the Securities, even if the credits of Securities to the DTC accounts
of any DTC Participant result from transfers or failures to transfer in
violation of the provisions of the purchaser's letter. Issuer and Trust Company
acknowledge that DTC shall treat any Participant having Securities credited to
its DTC accounts as entitled to the full benefits of ownership of such
Securities. Without limiting the generality of the preceding sentence, Issuer
and Trust Company acknowledge that DTC shall treat any Participant having
Securities credited to its DTC accounts as entitled to receive dividends,
distributions, and voting rights, if any, in respect of Securities and, subject
to Paragraphs 12 and 13, to receive certificates evidencing Securities if such
certificates are to be issued in accordance with Issuer's certificate of
incorporation. (The treatment by DTC of the effects of the crediting by it of
Securities to the accounts of Participants described in the preceding two
sentences shall not affect the rights of Issuer, participants in auctions
relating to the Securities, purchasers, sellers, or holders of Securities
against any Participant.) DTC shall not have any responsibility to ascertain
whether any transfer of Securities is made in accordance with the provisions of
the purchaser's letter.

     9. Issuer or Trust Company shall provide a written notice of dividend
payment and distribution information to DTC as soon as the information is
available. Issuer or Trust Company shall provide this information to DTC
electronically, as previously arranged by Issuer or Trust Company and DTC, as
soon as the information is available. If electronic transmission has not been
arranged, absent any other arrangements between Issuer or Trust Company and DTC,
such information shall be sent by telecopy to DTC's Dividend Department at
(212) 855-4555 or (212) 855-4556, and receipt of such notices shall be
confirmed by telephoning (212) 855-4550. Notices to DTC pursuant to this
Paragraph, by mail or by any other means, shall be addressed as indicated in
Paragraph 7.

                                      -4-

<Page>

     10. Dividend payments and distributions shall be received by Cede & Co., as
nominee of DTC, or its registered assigns, in same-day funds no later than 2:30
p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m.
(Eastern Time) on the payment date, dividend and distribution payments due Trust
Company, or at such earlier time as may be required by Trust Company to
guarantee that DTC shall receive payment in same-day funds no later than 2:30
p.m. (Eastern Time) on the payment date. Absent any other arrangements between
Issuer or Trust Company and DTC, such funds shall be wired to the Dividend
Deposit Account number that will be stamped on the signature page hereof at the
time DTC executes this Letter of Representations.

     11. Issuer or Trust Company shall provide DTC, no later than 12:00 noon
(Eastern Time) on each payment date, automated notification of CUSIP-level
detail. If the circumstances prevent the funds paid to DTC from equaling the
dollar amount associated with the detail payments by 12:00 noon (Eastern
Time), Issuer or Trust Company must provide CUSIP-level reconciliation to DTC
no later than 2:30 p.m. (Eastern Time). Reconciliation must be provided by
either automated means or written format. Such reconciliation notice, if sent
by telecopy, shall be directed to DTC's Dividend Department at (212) 855-4633,
and receipt of such reconciliation notice shall be confirmed by telephoning
(212) 855-4430.

     12. Redemption payments shall be received by Cede & Co., as nominee of DTC,
or its registered assigns, in same-day funds no later than 2:30 p.m. (Eastern
Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time) on the
payment date all such redemption payments due Trust Company, or at such earlier
time as required by Trust Company to guarantee that DTC shall receive payment in
same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date.
Absent any other arrangements between Issuer or Trust Company and DTC, such
funds shall be wired to the Redemption Deposit Account number that will be
stamped on the signature page hereof at the time DTC executes this Letter of
Representations.

     13. Reorganization payments and CUSIP-level detail resulting from corporate
actions (such as tender offers, remarketings, or mergers) shall be received by
Cede & Co., as nominee of DTC, or its registered assigns, in same-day funds no
later than 2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by
1:00 p.m. (Eastern Time) on the payment date all such reorganization payments
due Trust Company, or at such earlier time as required by Trust Company to
guarantee that DTC shall receive payment in same-day funds no later than 2:30
p.m. (Eastern Time) on the payment date. Absent any other arrangements between
Issuer or Trust Company and DTC, such funds shall be wired to the Reorganization
Deposit Account number that will be stamped on the signature page hereof at the
time DTC executes this Letter of Representations.

     14. DTC may direct Issuer or Trust Company to use any other number or
address as the number or address to which notices or payments may be sent.

     15. In the event of a redemption acceleration, or any similar transaction
(E.G., tender made and accepted in response to Issuer's or Trust Company's
invitation) necessitating a reduction in the number of Securities outstanding,
or an advance refunding of part of the Securities outstanding DTC, in its
discretion: (a) may request Issuer or Trust Company to issue and authenticate a
new Security certificate; or (b) may make an appropriate notation on the
Security certificate indicating the date and amount of such reduction in the
number of Securities outstanding, except in the case of final

                                     -5-

<Page>

redemption, in which case the certificate will be presented to Issuer or Trust
Company prior to payment, if required

     16. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trust
Company shall notify DTC of the availability of certificates. In such event,
Issuer or Trust Company shall issue, transfer, and exchange certificates in
appropriate amounts, as required by DTC and others.

     17. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trust Company (at which time DTC will confirm with Issuer or Trust Company
the aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request, Issuer and Trust Company shall cooperate fully
with DTC by taking appropriate action to make available one or more separate
certificates evidencing Securities to any DTC Participant having Securities
credited to its DTC accounts.

     18. Issuer hereby authorizes DTC to provide to Trust Company listings of
Participants' holdings, known as Security Position Listings ("SPLs") with
respect to the Securities from time to time at the request of Trust Company.
Issuer also authorizes DTC, in the event of a partial redemption of Securities,
to provide Trust Company, upon request, with the names of those Participants
whose positions in Securities have been selected for redemption by DTC. DTC will
use its best efforts to notify Trust Company of those Participants whose
positions in Securities have been selected for redemption by DTC. Issuer
authorizes and instructs Trust Company to provide DTC with such signatures,
examples of signatures, and authorizations to act as may be deemed necessary or
appropriate by DTC to permit DTC to discharge its obligations to its
Participants and appropriate regulatory authorities. DTC charges a customary fee
for such SPLs. This authorization, unless revoked by Issuer, shall continue with
respect to the Securities while any Securities are on deposit at DTC, until and
unless Trust Company shall no longer be acting. In such event, Issuer shall
provide DTC with similar evidence, satisfactory to DTC, of the authorization of
any successor thereto so to act. Requests for SPLs shall be directed to the
Proxy Unit of DTC's Reorganization Department at (212) 855-5181 or
(212) 855-5182. Receipt of such requests shall be confirmed by telephoning
(212) 855-5202. Delivery by mail or by any other means, with respect to such
SPL request, shall be directed to the address indicated in Paragraph 3.

     19. Nothing herein shall be deemed to require Trust Company to advance
funds on behalf of Issuer.

     20. This Letter of Representations may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts together shall constitute but one and the same
instrument.

     21. This Letter of Representations shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
principles of conflicts of law.

     22. The sender of each notice delivered to DTC pursuant to this Letter of
Representations is responsible for confirming that such notice was properly
received by DTC.

                                      -6-

<Page>

     23. Issuer recognizes that DTC does not in any way undertake to, and shall
not have any responsibility to, monitor or ascertain the compliance of any
transactions in the Securities with the following, as amended from time to time:
(a) any exemptions from registration under the Securities Act of 1933; (b) the
Investment Company Act of 1940; (c) the Employee Retirement Income Security Act
of 1974; (d) the Internal Revenue Code of 1986; (e) any rules of any
self-regulatory organizations (as defined under the Securities Exchange Act of
1934); or (f) any other local, state, or federal laws or regulations thereunder.

     24. Issuer and Trust Company shall comply with the applicable requirements
stated in DTC's Operational Arrangements, as they may be amended from time to
time. DTC's Operational Arrangements are posted on DTC's website at
"www.DTC.org."

     25. The following rider(s), attached hereto, are hereby incorporated into
this Letter of Representations:

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

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

                                      -7-

<Page>

NOTES:

A. IF THERE IS A TRUST COMPANY (AS DEFINED IN THIS LETTER OF REPRESENTATIONS),
TRUST COMPANY, AS WELL AS ISSUER, MUST SIGN THIS LETTER. IF THERE IS NO TRUST
COMPANY, IN SIGNING THIS LETTER ISSUER ITSELF UNDERTAKES TO PERFORM ALL OF THE
OBLIGATIONS SET FORTH HEREIN.

B. SCHEDULE B CONTAINS STATEMENTS THAT DTC BELIEVES ACCURATELY DESCRIBE DTC, THE
METHOD OF EFFECTING BOOK-ENTRY TRANSFERS OF SECURITIES DISTRIBUTED THROUGH DTC,
AND CERTAIN RELATED MATTERS.

                         Very truly yours,


                         ------------------------------------------------------
                                               [Issuer]

                         By:

                         ------------------------------------------------------
                                    [Authorized Officer's Signature]
                         ------------------------------------------------------
                                           [Trust Company]

                         By:

                         ------------------------------------------------------
                                     [Authorized Officer's Signature]
Received and Accepted:
THE DEPOSITORY TRUST COMPANY


cc:     Underwriter
        Underwriter's Counsel


                                      -8-

<Page>

                                                                      SCHEDULE A
                                                                     -----------

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

- --------------------------------------------------------------------------------
                                [Describe Issue]


CUSIP Number                       Share Total                  Value ($Amount)
- ------------                       -----------                  ---------------


                                      -9-

<Page>

SCHEDULE B
- ----------

                        SAMPLE OFFERING DOCUMENT LANGUAGE
                       DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
                       -----------------------------------

(Prepared by DTC--bracketed material may be applicable only to certain issues)

     1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities will
be issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate will
be issued for [each issue of] the Securities, [each] in the aggregate principal
amount of such issue, and will be deposited with DTC. [If, however, the
aggregate principal amount of [any] issue exceeds $400 million, one certificate
will be issued with respect to each $400 million of principal amount and an
additional certificate will be issued with respect to any remaining principal
amount of such issue.]

     2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Direct Participants")
deposit with DTC. DTC also facilitates the settlement among Direct Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Direct
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks, and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The Rules
applicable to DTC and its Direct and Indirect Participants are on file with the
Securities and Exchange Commission.

     3. Purchases of Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Securities, except in the event that use of the book-entry system
for the Securities is discontinued.


                                      -10-

<Page>

     4. To facilitate subsequent transfers, all Securities deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or such other name as may be requested by an authorized
representative of DTC. The deposit of Securities with DTC and their registration
in the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Secunities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Securities are credited, which may or may
not be the Beneficial Owners. The Direct and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.

     5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. [Beneficial Owners of Securities may wish to
take certain steps to augment transmission to them of notices of significant
events with respect to the Securities, such as redemptions, tenders, defaults,
and proposed amendments to the security documents. Beneficial Owners of
Securities may wish to ascertain that the nominee holding the Securities for
their benefit has agreed to obtain and transmit notices to Beneficial Owners, or
in the alternative, Beneficial Owners may wish to provide their names and
addresses to the registrar and request that copies of the notices be provided
directly to them.]

     [6. Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.]

     7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or
vote with respect to the Securities. Under its usual procedures, DTC mails an
Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).

     8. Redemption proceeds, distributions, and dividend payments on the
Securities will be made to Cede & Co., or such other nominee as may be requested
by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts, upon DTC's receipt of funds and corresponding detail
information from Issuer or Agent on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of DTC, Agent, or Issuer, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, and dividends to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the
responsibility of Issuer or Agent, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.


                                      -11-

<Page>

     [9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to [Tender/Remarketing] Agent,
and shall effect delivery of such Securities by causing the Direct Participant
to transfer the Participant's interest in the Securities, on DTC's records, to
[Tender/Remarketing] Agent. The requirement for physical delivery of Securities
in connection with an optional tender or a mandatory purchase will be deemed
satisfied when the ownership rights in the Securities are transferred by Direct
Participants on DTC's records and followed by a book-entry credit of tendered
Securities to [Tender/Remarketing] Agent's DTC account.]

     10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Agent. Under such circumstances, in the event that a successor securities
depository is not obtained, Security certificates are required to be printed and
delivered.

     11. Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.

     12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.


                                      -12-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(L)
<SEQUENCE>8
<FILENAME>a2089402zex-99_l.txt
<DESCRIPTION>EXHIBIT 99(L)
<TEXT>
<Page>

                                                                      Exh. 99(L)

                    SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
                                FOUR TIMES SQUARE
                             NEW YORK, NY 10036-6522

                                 (212) 735-3000

                                                              September 17, 2002

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

                               Re:   BlackRock Municipal Income Trust II
                                     Registration Statement On Form N-2
                                     -----------------------------------

Ladies and Gentlemen:

          We have acted as special counsel to BlackRock Municipal Income Trust
II, a business trust created under the Delaware Business Trust Act (the
"Trust"), in connection with the public offering by the Trust of up to 2,055
shares of the Trust's Series M7 Preferred Shares of Beneficial Interest, 2,056
shares of the Trust's Series T7 Preferred Shares of Beneficial Interest,2,055
shares of the Trust's Series W7 Preferred Shares of Beneficial Interest and
2,055 shares of the Trust's Series R7 Preferred Shares of Beneficial Interest in
each case having liquidation preference $25,000 per share (the "Preferred
Shares").

          This opinion is being furnished in accordance with the requirements of
Item 24 of the Form N-2 Registration Statement under the Securities Act of 1933,
<Page>

as amended (the "1933 Act"), and the Investment Company Act of 1940, as amended
(the "1940 Act").

          In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Notification of Registration of the Trust as an investment company under the
1940 Act, on Form N-8A, dated June 24, 2002, as filed with the Securities and
Exchange Commission (the "Commission") on June 24, 2002, (ii) the
Registration Statement of the Trust on Form N-2 (File Nos. 333-97607 and
811-21124), as filed with the Commission on August 2, 2002 under the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act,
Pre-Effective Amendment No. 1 thereto, as filed with the Commission on
September 13, 2002, and Pre-Effective Amendment No. 2 filed with the
Commission on the date hereof, under the 1933 Act (such Registration
Statement, as so amended and proposed to be amended, being hereinafter
referred to as the "Registration Statement"); (iii) the form of the Purchase
Agreement (the "Purchase Agreement") proposed to be entered into between the
Trust, as issuer, BlackRock Advisors, Inc., as investment adviser to the
Trust, BlackRock Financial Management, Inc., as investment sub-adviser to the
Trust, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
representative of the several underwriters named therein (the
"Underwriters"), filed as an exhibit to the Registration Statement; (iv) a
specimen certificate representing the Preferred Shares; (v) the Certificate
of Trust and Agreement and Declaration of Trust of the Trust, as amended to
dated and currently in effect; (vi) the Statement of Preferences setting
forth the rights, powers, terms and preferences of the Preferred Shares;
(vii) the By-Laws of the Trust, as currently in effect; (viii) certain
resolutions of the Board of Trustees of the Trust relating to the issuance
and sale of the Preferred Shares and related matters and (ix) certain
resolutions of the shareholders of the Trust relating to the Agreement and
Declaration of Trust. We also have examined originals or copies, certified or
otherwise identified to our satisfaction, of such records of the Trust and
such agreements, certificates of public officials, certificates of officers
or other representatives of the Trust and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a
basis for the opinions set forth herein.

          In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submit-
<Page>

BlackRock Municipal Income Trust II
September 17, 2002
Page 3

ted to us as certified, conformed or photostatic copies and the authenticity of
the originals of such latter documents. In making our examination of documents,
we have assumed that the parties thereto, other than the Trust, its directors
and officers, had or will have the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof on such
parties. In rendering the opinion set forth below, we have assumed that the
share certificates representing the Preferred Shares will conform to the
specimen examined by us and will have been manually signed by an authorized
officer of the transfer agent and registrar for the Preferred Shares and
registered by such transfer agent and registrar. As to any facts material to the
opinions expressed herein which we have not independently established or
verified, we have relied upon statements and representations of officers and
other representatives of the Trust and others.

          Members of our firm are admitted to the bar in the State of Delaware
and we do not express any opinion as to the laws of any jurisdiction other than
the Delaware Business Trust Act.

          Based upon and subject to the foregoing, we are of the opinion that
when (i) the Registration Statement becomes effective; (ii) the Purchase
Agreement has been duly executed and delivered; (iii) certificates representing
the Preferred Shares in the form of the specimen certificate examined by us have
been manually signed by an authorized officer of the transfer agent and
registrar for the Preferred Shares and registered by such transfer agent and
registrar; and (iv) the Preferred Shares have been delivered to and paid for by
the Underwriters at a price per share not less than the per share par value of
the Preferred Shares as contemplated by the Purchase Agreement, the issuance and
sale of the Preferred Shares will have been duly authorized, and the Preferred
Shares will be validly issued, fully paid and nonassessable (except as provided
in the last sentence of Section 3.8 of the Agreement and Declaration of Trust).

          We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our
<Page>

BlackRock Municipal Income Trust II
September 17, 2002
Page 4

firm under the caption "Legal Opinions" in the Registration Statement. In giving
this consent, we do not thereby admit that we are included in the category of
persons whose consent is required under Section 7 of the 1933 Act or the rules
and regulations of the Commission.

                                Very truly yours,

                                /s/ Skadden, Arps, Slate, Meagher & Flom LLP

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(N)
<SEQUENCE>9
<FILENAME>a2089402zex-99_n.txt
<DESCRIPTION>EXHIBIT 99(N)
<TEXT>
<Page>

INDEPENDENT AUDITORS' CONSENT


We consent to the use in this Pre-Effective Amendment No. 2 to the Registration
Statement of BlackRock Municipal Income Trust II (Registration No. 333-97607) of
our report dated July 17, 2002, relating to the financial statements of
BlackRock Municipal Income Trust II as of July 16, 2002 and for the period then
ended in the Statement of Additional Information which is part of such
registration statement.

We also consent to the reference to our Firm under the heading "Experts" in the
Registration Statement.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Boston, Massachusetts
September 17, 2002

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
