<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>s323636.txt
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      As filed with the Securities and Exchange Commission on June 1, 2001
                                 Securities Act Registration No. 333-58224
                             Investment Company Registration No. 811-10339
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM N-2


          REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
                       Pre-Effective Amendment No. 1              |X|
                        Post-Effective Amendment No.               o
                                    and/or
                         REGISTRATION STATEMENT UNDER
                    THE INVESTMENT COMPANY ACT OF 1940            |X|
                              AMENDMENT NO. 1                     |X|


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


                        BlackRock Municipal Income Trust
        (Exact Name of Registrant as Specified In Declaration of Trust)

                              100 Bellevue Parkway
                           Wilmington, Delaware 19809
                    (Address of Principal Executive Offices)

                                 (888) 825-2257
              (Registrant's Telephone Number, including Area Code)


                         Ralph L. Schlosstein, President
                        BlackRock Municipal Income Trust
                                 345 Park Avenue
                            New York, New York 10154
                    (Name and Address of Agent for Service)


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

                                  Copies to:

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



                            Cynthia G. Cobden, Esq.
                           Simpson Thacher & Bartlett
                              425 Lexington Avenue
                            New York, New York 10017
                            ----------------------
                            ----------------------


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    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

==============================================================================================================
                                                               PROPOSED         PROPOSED
            TITLE OF SECURITIES              AMOUNT BEING  MAXIMUM OFFERING MAXIMUM AGGREGATE    AMOUNT OF
              BEING REGISTERED                REGISTERED    PRICE PER UNIT  OFFERING PRICE(1) REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------
<S>            <C>                          <C>                 <C>                 <C>             <C>
Common Shares, $.001 par value............  100,000 shares      $15.00              $1,500,000      $375(2)
--------------------------------------------------------------------------------------------------------------
      (1) Estimated solely for the purpose of calculating the registration fee.
      (2) Previously paid.
</TABLE>


   The registrant hereby amends this Registration Statement on such date or
  dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
 the Securities Act of 1933 or until the Registration Statement shall become
  effective on such dates as the Commission, acting pursuant to said Section
                             8(a), may determine.



                        BLACKROCK MUNICIPAL INCOME TRUST

                              CROSS REFERENCE SHEET

                               Part A - Prospectus
<TABLE>
<CAPTION>

                  Items in Part A of Form N-2                                    Location in Prospectus
                  ---------------------------                                    ----------------------


<S>   <C>                                                   <C>
Item  1.  Outside Front Cover...........................    Cover Page

Item  2.  Inside Front and Outside Back
                    Cover Page..........................    Cover Page

Item  3.  Fee Table and Synopsis........................    Prospectus Summary; Summary of Trust Expenses

Item  4.  Financial Highlights..........................    Not Applicable

Item  5.  Plan of Distribution..........................    Cover Page; Prospectus Summary; Underwriting

Item  6.  Selling Shareholders..........................    Not Applicable

Item  7.  Use of Proceeds...............................    Use of Proceeds; The Trust's Investments

Item  8.  General Description of the
                    Registrant..........................    The Trust; The Trust's Investments; Risks;
                                                            Description of Shares; Certain Provisions in the
                                                            Declaration of Trust

Item  9.  Management....................................    Management of the Trust; Custodian and Transfer
                                                            and Dividend Disbursing Agent

Item 10.  Capital Stock, Long-Term Debt,
                    and Other Securities................    Description of Shares; Distributions; Dividend
                                                            Reinvestment Plan; Certain Provisions in the
                                                            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; Portfolio Transactions

Item 18.          Management............................     Management of the Trust; Portfolio Transactions

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

Item 22.          Tax Status............................     Tax Matters; Distributions

Item 23.          Financial Statements..................     Report of Independent Auditors


                           Part C - Other Information

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

</TABLE>




The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.


SUBJECT TO COMPLETION,  DATED JUNE 1 , 2001
PROSPECTUS
                                   [ ] Shares


                        BlackRock Municipal Income Trust

                                  Common Shares

                                $15.00 per share



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

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

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

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

         This prospectus contains information you should know before
investing, including information about risks. Please read it before you invest
and keep it for future reference.

         Investing in the common shares involves certain risks. See "Risks" on
page of this prospectus.

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



                                                Per Share                Total

Public Offering Price                         $15.00               $
Sales Load                                    $ 0.675              $
Proceeds, before expenses, to the Trust       $ 14.325             $


                The underwriters expect to deliver the common shares to
purchasers on or about July ___, 2001.

Salomon Smith Barney                      Merrill Lynch & Co.


July __, 2001.





                You should read the prospectus, which contains important
information about the Trust, before deciding whether to invest and retain it
for future reference. A Statement of Additional Information, dated July ,
2001, containing additional information about the Trust, has been filed with
the Securities and Exchange Commission and is incorporated by reference in its
entirety into this prospectus. You may request a free copy of the Statement of
Additional Information, the table of contents of which is on page of this
prospectus, by calling (800) 825-2257 or by writing to the Trust, or obtain a
copy (and other information regarding the Trust from the Securities and
Exchange Commission web site (http://www.sec.gov).

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

                The underwriters named in this prospectus may purchase up to
additional common shares at the public offering price within 45 days from the
date of this prospectus to cover over-allotments.


You should rely only on the information contained or incorporated by reference
in this prospectus. The Trust has not authorized anyone to provide you with
different information. The Trust is not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information contained in this prospectus is accurate as of any date other than
the date on the front of this prospectus.

                                TABLE OF CONTENTS

                                                                         Page

Prospectus Summary...........................................................
Summary of Trust Expenses....................................................
The Trust....................................................................
Use of Proceeds..............................................................
The Trust's Investments......................................................
Preferred Shares and Leverage................................................
Risks........................................................................
How the Trust Manages Risk ..................................................
Management of the Trust......................................................
Net Asset Value..............................................................
Distributions   .............................................................
Dividend Reinvestment Plan...................................................
Description of Shares........................................................
Certain Provisions in the Agreement and Declaration of Trust.................
Closed-End Trust Structure ..................................................
Repurchase of Shares ........................................................
Tax Matters     .............................................................
Underwriting    .............................................................
Custodian and Transfer Agent.................................................
Legal Opinions...............................................................
Table of Contents for the Statement of Additional Information          ......


                Until , 2001 (25 days after the date of this prospectus), all
dealers that buy, sell or trade the common shares, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.



                         PRIVACY PRINCIPLES OF THE TRUST

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


                The Trust restricts access to non-public personal information
about the stockholders 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 stockholders.



                               PROSPECTUS SUMMARY

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


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

The Offering...........    The Trust is offering common shares of beneficial
                           interest at $15.00 per share through a group of
                           underwriters led by Salomon Smith Barney Inc. and
                           Merrill Lynch, Pierce, Fenner & Smith Incorporated.
                           The common shares of beneficial interest are called
                           "common shares" in the rest of this prospectus. You
                           must purchase at least 100 common shares ($1,500).
                           The Trust has given the underwriters an option to
                           purchase up to additional common shares to cover
                           orders in excess of common shares. See
                           "Underwriting."

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

Investment
Policies.................. The Trust will invest primarily in municipal bonds
                           that pay interest that is exempt from regular
                           Federal income tax. The Trust will invest in
                           municipal bonds that, in the opinion of BlackRock
                           Advisors, Inc. ("BlackRock Advisors" or the
                           "Advisor") 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 total
                           assets in municipal bonds that at the time of
                           investment are investment grade quality. Investment
                           grade quality bonds are bonds rated within the four
                           highest grades (Baa or BBB or better by Moody's
                           Investor Service, Inc. ("Moody's"), Standard &
                           Poors Ratings Group ("S&P") or Fitch IBCA, Inc.
                           ("Fitch")) or bonds that are unrated but judged to
                           be of comparable quality by the Advisor or the
                           Sub-Advisor. The Trust may invest up to 20% of its
                           total 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 or the Sub-
                           Advisor. Bonds of below investment grade quality
                           are regarded as having predominately speculative
                           characteristics with respect to the issuer's
                           capacity to pay interest and repay principal, and
                           are commonly referred to as "junk bonds." The Trust
                           intends to invest primarily in long-term bonds and
                           expects bonds in its portfolio to have a dollar
                           weighted average maturity of 15 years or more under
                           current market conditions. The Trust cannot ensure
                           that it will achieve its investment objective. See
                           "The Trust's Investments."


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



Proposed Offering
of Preferred Shares....    Approximately one to three months after completion
                           of this offering of the common shares (subject to
                           market conditions), the Trust intends to offer
                           preferred shares of beneficial interest ("Preferred
                           Shares") that will represent approximately 38% of
                           the Trust's capital after their issuance. The
                           issuance of Preferred Shares will leverage the
                           common shares. Leverage involves greater risks. The
                           Trust's leveraging strategy may not be successful.
                           See "Risks--Leverage Risk." The money the Trust
                           obtains by selling the Preferred Shares will be
                           invested in long-term municipal bonds that will
                           generally pay fixed rates of interest over the life
                           of the bond. The Preferred Shares will pay
                           adjustable rate dividends based on shorter-term
                           interest rates. The adjustment period could be as
                           short as a day or as long as a year or more. If the
                           rate of return, after the payment of applicable
                           expenses of the Trust, on the long-term bonds
                           purchased by the Trust is greater than the
                           dividends paid by the Trust on the Preferred
                           Shares, the Trust will generate more income by
                           investing the proceeds of the Preferred Shares than
                           it will need to pay dividends on the Preferred
                           Shares. If so, the excess income will be used to
                           pay higher dividends to holders of common shares.
                           However, the Trust cannot assure you that the
                           issuance of Preferred Shares will result in a
                           higher yield on the common shares. Once Preferred
                           Shares are issued, the net asset value and market
                           price of the common shares and the yield to holders
                           of common shares will be more volatile. See
                           "Preferred Shares and Leverage" and "Description of
                           Shares - Preferred Shares."

Investment Advisor.....    BlackRock Advisors, Inc. will be the Trust's
                           investment advisor and BlackRock Advisors'
                           affiliate, BlackRock Financial Management, Inc.,
                           will provide certain day-to-day investment
                           management services to the Trust. Throughout the
                           prospectus, we sometimes refer to BlackRock
                           Advisors and BlackRock Financial Management
                           collectively as "BlackRock". BlackRock Advisors
                           will receive an annual fee, payable monthly, in a
                           maximum amount equal to 0.60% of the average weekly
                           value of the Trust's Managed Assets. "Managed
                           Assets" means the total assets of the Trust
                           (including any assets attributable to any Preferred
                           Shares that may be outstanding) minus the sum of
                           accrued liabilities (other than debt representing
                           financial leverage). The liquidation preference of
                           the Preferred Shares is not a liability. BlackRock
                           Advisors has voluntarily agreed to waive receipt of
                           a portion of the investment management fee or other
                           expenses of the Trust in the amount of 0.25% of the
                           average weekly values of the Trust's Managed Assets
                           for the first five years of the Trust's operations
                           (through July 31, 2006), and for a declining amount
                           for an additional four years (through July 31,
                           2010). See "Management of the Trust."

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


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


Listing...............     The common shares are expected to be approved for
                           listing on the New York Stock Exchange, subject to
                           notice of issuance under the trading or "ticker"
                           symbol "BFK". See "Description of Shares -Common
                           Shares."

Custodian and
TransferAgent......        EquiServe Trust Company, N.A. will serve as the
                           Trust's Custodian and Transfer Agent. See
                           "Custodian and Transfer Agent."

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


Special Risk
Considerations........     No Operating History. The Trust is a newly
                           organized closed-end investment company with no
                           history of operations.


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

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

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

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


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

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

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


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


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


                           Anti-takeover Provisions. The Trust's Agreement and
                           Declaration of Trust includes provisions that could
                           limit the ability of other entities or persons to
                           acquire control of the Trust or convert the Trust to
                           open-end status. These provisions could deprive the
                           holders of common shares of opportunities to sell
                           their common shares at a premium over the then
                           current market price of the common shares or at net
                           asset value.


                            SUMMARY OF TRUST EXPENSES

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


Shareholder Transaction Expenses
  Sales Load Paid by You (as a percentage
   of offering price)..........................        4.50%
  Dividend Reinvestment Plan Fees..........           None*

                                               Percentage of Net
                                                   Assets Attributable
                                                  to Common Shares**
                                                  ----------------
Annual Expenses
  Management Fees..............................         0.97%
  Fee and Expense Waiver
  Years 1-5....................................        (0.40%)***
                                                       -------

Net Management Fees Years 1-5...............            0.57%***
Other Expenses.................................         0.24%
                                                        -----

Total Annual Expenses Years 1-5................         0.81%***
                                                        =====



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

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


**     Stated as a percentage of the Trust's total Managed Assets assuming the
       issuance of Preferred Shares in an amount equal to 38% of the Trust's
       capital (after their issuance), the Trust's expenses would be estimated
       as set out in the table below. "Managed Assets" means the total assets
       of the Trust (including any assets attributable to any Preferred Shares
       that may be outstanding) minus the sum of accrued liabilities (other
       than debt representing financial leverage). The liquidation preference
       of the Preferred Shares is not a liability.


                                              Percentage of Total
                                              Managed Assets
         Annual Expenses
           Management Fees.................             0.60%
          Fee & Expense Waiver
           Years 1-5.......................            (0.25%)***


         Net Management Fees Years 1-5.....             0.35%***
                                                        -----
         Other Expenses....................             0.15%
         Total Net Annual Expenses
           Years 1-5.......................             0.50%***
                                                        =====
***      BlackRock Advisors has voluntarily agreed to waive receipt of a
         portion of the investment management fee or other expenses of the
         Trust in the amount of 0.25% of average weekly Managed Assets for the
         first 5 years of the Trust's operations, 0.20% in year 6, 0.15% in
         year 7, 0.10% in year 8, and 0.05% in year 9. Without the waiver,
         "Total Net Annual Expenses" would be estimated to be 0.75% of average
         daily total net assets and 1.21% of weekly Managed Assets
         attributable to common shares.


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


         The following example illustrates the expenses (including the sales
load of $45) that you would pay on a $1,000 investment in common shares,
assuming (1) total net annual expenses of 0.81 % of net assets attributable to
common shares in years 1 through 5, increasing to 1.21%, in year 10 and (2) a
5% annual return:(1)

                                       1 Year  3 Years  5 Years 10 Years(2)
                                       ------  -------  ------- -----------

   Total Expenses Incurred ............$53     $71      $90      $165


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


(1)      The example should not be considered a representation of future
         expenses. The example assumes that the estimated Other Expenses set
         forth in the Annual Expenses table are accurate, that fees and expenses
         increase as described in note 2 below and that all dividends and
         distributions are reinvested at net asset value. Actual expenses may be
         greater or less than those assumed. Moreover, the Trust's actual rate
         of return may be greater or less than the hypothetical 5% return shown
         in the example.

(2)      Assumes waiver of fees and expenses of 0.32% of average weekly net
         assets attributable to common shares in year 6 (0.20% of average weekly
         Managed Assets), 0.24% (0.15%) in year 7, 0.16% (0.10%) in year 8, and
         0.08% (0.05%) in year 9 and assumes that Preferred Shares remain 38% of
         the Trust's capital throughout the periods reflected. BlackRock
         Advisors has not agreed to waive any portion of its fees and expenses
         beyond July 31, 2010. See "Management of the Fund - Investment
         Management Agreement."



                                    THE TRUST


         The Trust is a newly organized, diversified, closed-end management
investment company registered under the Investment Company Act. The Trust was
organized as a Delaware business trust on March 30, 2001, pursuant to an
Agreement and Declaration of Trust governed by the laws of the State of
Delaware. As a newly organized entity, the Trust has no operating history. The
Trust's principal office is located at 100 Bellevue Parkway, Wilmington,
Delaware 19809, and its telephone number is (888) 825-2257.



                                 USE OF PROCEEDS

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


                             THE TRUST'S INVESTMENTS

Investment Objective and Policies

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


         The Trust will invest primarily in municipal bonds that pay interest
that is exempt from regular Federal income tax. Under normal market
conditions, the Trust expects to be fully invested (at least 95% of its net
assets) in such tax-exempt municipal bonds. Under normal market conditions,
the Trust will invest at least 80% of its total 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 municipal
bonds that are rated BBB or Baa (or that have equivalent ratings) to make
principal and interest payments than is the case for higher grade municipal
bonds. The Trust may invest up to 20% of its total assets in municipal bonds
that are rated, at the time of investment, Ba/BB or B by Moody's, S&P or Fitch
or that are unrated but judged to be of comparable quality by BlackRock. Bonds
of below investment grade quality (Ba/BB or below) are commonly referred to as
"junk bonds." Bonds of below investment grade quality are regarded as having
predominantly speculative characteristics with respect to the issuer's
capacity to pay interest and repay principal. These credit quality policies
apply only at the time a security is purchased, and the Trust is not required
to dispose of a security if a rating agency downgrades its assessment of the
credit characteristics of a particular issue. In determining whether to retain
or sell a security that a rating agency has downgraded, BlackRock may consider
such factors as BlackRock's assessment of the credit quality of the issuer of
the security, the price at which the security could be sold and the rating, if
any, assigned to the security by other rating agencies. Appendix A to the
Statement of Additional Information contains a general description of Moody's,
S&P's and Fitch's ratings of municipal bonds. The Trust may also invest in
securities of other open- or closed-end investment companies that invest
primarily in municipal bonds of the types in which the Trust may invest
directly and in tax-exempt preferred shares that pay dividends exempt from
regular Federal income tax. See "--Other Investment Companies,", "--Tax-Exempt
Preferred Shares" and "--Initial Portfolio Composition."

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


         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, once the
Preferred Shares are issued, the Preferred Shares voting together as a single
class, and of the holders of a majority of the outstanding Preferred Shares
voting as a separate class. A "majority of the outstanding", means (1) 67% or
more of the shares present at a meeting, if the holders of more than 50% of
the shares are present or represented by proxy, or (2) more than 50% of the
shares, whichever is less. See "Description of Shares--Preferred
Shares--Voting Rights" and the Statement of Additional Information under
"Description of Shares--Preferred Shares" for additional information with
respect to the voting rights of holders of Preferred Shares.

Municipal Bonds


         Municipal bonds are either general obligation or revenue bonds and
typically are issued to finance public projects, such as roads or public
buildings, to pay general operating expenses or to refinance outstanding debt.
Municipal bonds may also be issued for private activities, such as housing,
medical and educational facility construction or for privately owned
industrial development and pollution control projects. General obligation
bonds are backed by the full faith and credit, or taxing authority, of the
issuer and may be repaid from any revenue source. Revenue bonds may be repaid
only from the revenues of a specific facility or source. The Trust also may
purchase municipal bonds that represent lease obligations. These carry special
risks because the issuer of the bonds may not be obligated to appropriate
money annually to make payments under the lease. In order to reduce this 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 tax, 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 primarily invest 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. A separate account of the Trust will be established with its
custodian consisting of cash, or other liquid high grade debt securities
having a market value at all times, at least equal to the amount of the
commitment.

Other Investment Companies


         The Trust may invest up to 10% of its total assets in securities of
other open- or closed-end investment companies that invest primarily in
municipal bonds of the types in which the Trust may invest directly. The Trust
generally expects to invest in other investment companies either during
periods when it has large amounts of uninvested cash, such as the period
shortly after the Trust receives the proceeds of the offering of its common
shares or Preferred Shares, or during periods when there is a shortage of
attractive, high-yielding municipal bonds available in the market. As a
shareholder in an investment company, the Trust will bear its ratable share of
that investment company's expenses, and would remain subject to payment of the
Trust's advisory and other fees and expenses with respect to assets so
invested. Holders of common shares would therefore be subject to duplicative
expenses to the extent the Trust invests in other investment companies.
BlackRock will take expenses into account when evaluating the investment
merits of an investment in an investment company relative to available
municipal bond investments. In addition, the securities of other investment
companies may also be leveraged and will therefore be subject to the same
leverage risks to which the Trust is subject. As described in this prospectus
in the sections entitled "Risks" and "Preferred Shares and Leverage," the net
asset value and market value of leveraged shares will be more volatile and the
yield to shareholders will tend to fluctuate more than the yield generated by
unleveraged shares. Investment companies may have investment policies that
differ from those of the 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 the Advisor. 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 taxes. 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. Investment 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.
Revenue bonds issued by state or local agencies to finance the development of
low- income, multi-family housing involve special risks in addition to those
associated with municipal bonds generally, including that the underlying
properties may not generate sufficient income to pay expenses and interest
costs. Such bonds are generally non-recourse against the property owner, may be
junior to the rights of others with an interest in the properties, may pay
interest that changes based in part on the financial performance of the
property, may be prepayable without penalty and may be used to finance the
construction of housing developments which, until completed and rented, do not
generate income to pay interest. Increases in interest rates payable on senior
obligations may make it more difficult for issuers to meet payment obligations
on subordinated bonds. The Trust will treat investments in tax-exempt preferred
shares as investments in municipal bonds.

Initial Portfolio Composition

         If current market conditions persist, the Trust expects that
approximately 100% of its initial portfolio will consist of investment grade
quality municipal bonds, rated as such at the time of investment, meaning that
such bonds are rated by national rating agencies within the four highest
grades or are unrated but judged to be of comparable quality by BlackRock
(approximately 60% in Aaa/AAA; 20% in A; and 20% in Baa/BBB). BlackRock
generally expects to select obligations that may not be redeemed at the option
of the issuer for approximately seven to nine years from the date of purchase
by the Trust. See "--Investment Objective and Policies."


                          PREFERRED SHARES AND LEVERAGE


         Approximately one to three months after the completion of the
offering of the common shares, subject to market conditions, the Trust intends
to offer Preferred Shares representing approximately 38% of the Trust's
capital immediately after the issuance of the Preferred Shares. The Preferred
Shares will have complete priority upon distribution of assets over the common
shares. The issuance of Preferred Shares will leverage the common shares.
Leverage involves greater risks. The Trust's leveraging strategy may not be
successful. Although the timing and other terms of the offering of Preferred
Shares and the terms of the Preferred Shares will be determined by the Trust's
board of trustees, the Trust expects to invest the proceeds of the Preferred
Shares offering in long-term municipal bonds. The Preferred Shares will pay
adjustable rate dividends based on shorter-term interest rates, which would be
redetermined periodically by an auction process. The adjustment period for
Preferred Share dividends could be as short as one day or as long as a year or
more. So long as the Trust's portfolio is invested in securities that provide
a higher rate of return than the dividend rate of the Preferred Shares, after
taking expenses into consideration, the leverage will cause you to receive a
higher current rate of income than if the Trust were not leveraged.

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


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


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

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


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


         Assuming that the Preferred Shares will represent approximately 38% of
the Trust's capital and pay dividends at an annual average rate of 3.50%, the
income generated by the Trust's portfolio (net of estimated expenses) must
exceed 1.56% in order to cover the dividend payments and other expenses
specifically related to the Preferred Shares. Of course, these numbers are
merely estimates used for illustration. Actual Preferred Share dividend rates
will vary frequently and may be significantly higher or lower than the rate
estimated above.

         The following table is furnished in response to requirements of the
Securities and Exchange Commission. It is designed to illustrate the effect of
leverage on common share total return, assuming investment portfolio total
returns (comprised of income and changes in the value of bonds held in the
Trust's portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment
portfolio returns are hypothetical figures and are not necessarily indicative
of the investment portfolio returns experienced or expected to be experienced
by the Trust. See "Risks" and "Preferred Shares and Leverage." The table
further reflects the issuance of Preferred Shares representing 38% of the
Trust's total capital, a % yield on the Trust's investment portfolio, net of
expenses, and the Trust's currently projected annual Preferred Share dividend
rate of (3.5%).

Assumed Portfolio Total Return
(Net of Expenses)...................(10)%    (5)%      0%     5%       10%
Common Share Total Return....       (18.27)% (10.21)% (2.15) %5.92 %   13.98%

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


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


                                      RISKS

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

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


         Market Discount Risk. As with any stock, the price of the Trust's
shares will fluctuate with market conditions and other factors. If shares are
sold, the price received may be more or less than the original investment. Net
asset value will be reduced immediately following the initial offering by the
amount of the sales load and organizational and selling expenses paid by the
Trust. Common shares are designed for long-term investors and should not be
treated as trading vehicles. Shares of closed-end management investment
companies frequently trade at a discount from their net asset value. The
Trust's shares may trade at a price that is less than the initial offering
price. This risk may be greater for investors who sell their shares in a
relatively short period of time after completion of the initial offer. The
Trust's initial net asset value will be reduced by a 4.5% sales load charge.

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

         Credit Risk. Credit risk is the risk that an issuer of a municipal
bond will become unable to meet its obligation to make interest and principal
payments. In general, lower rated municipal bonds carry a greater degree of
risk that the issuer will lose its ability to make interest and principal
payments, which could have a negative impact on the Trust's net asset value or
dividends. The Trust may invest up to 20% of its total 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 is the case for 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.

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

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

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

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

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

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

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


                           HOW THE TRUST MANAGES RISK

Investment Limitations

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

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

Quality Investments

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

Limited Issuance of Preferred Shares

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

Management of Investment Portfolio and Capital Structure to Limit Leverage Risk

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

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

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

Hedging Strategies

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


                             MANAGEMENT OF THE TRUST

Trustees and Officers


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

Investment Advisor and Sub-Advisor

         BlackRock Advisors, Inc. acts as the Trust's investment advisor.
BlackRock Financial Management Inc. acts as the Trust's sub-advisor. BlackRock
Advisors and BlackRock Financial Management both are wholly-owned subsidiaries
of BlackRock, Inc., which is one of the largest publicly traded investment
management firms in the United States with $201.6 billion of assets under
management as of March 31, 2001. BlackRock Advisors manages assets on behalf
of more than 3,300 institutions and 200,000 individuals worldwide, including
nine of the 10 largest companies in the U.S. as determined by Fortune
Magazine, through a variety of equity, fixed income, liquidity and alternative
investment separate accounts and mutual funds, including the company's
flagship fund families, BlackRock Funds and BlackRock Provident Institutional
Funds. BlackRock, Inc. is the nation's 26th largest asset management firm
according to Pensions & Investments, May 14, 2001.

         BlackRock has over 12 years of experience managing closed-end products
and currently advises a closed-end family of 20 funds. BlackRock has 13
leveraged municipal closed-end funds and six open-end municipal funds under
management and over $16.2 billion in municipal assets firm-wide. Clients are
served from the company's headquarters in New York City, as well as offices in
Wilmington, DE, Edinburgh, Scotland and Tokyo, Japan. BlackRock, Inc. is a
member of the PNC Financial Services Group, Inc. ("PNC"), one of the largest
diversified financial services organizations in the United States, and is
majority-owned by PNC and by BlackRock employees.

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

         BlackRock uses a relative value strategy that evaluates the trade-off
between risk and return to seek to achieve the Trust's investment objective of
generating high income. 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 to
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 five portfolio managers with
an average experience of 14 years and five credit research analysts with an
average experience of 11 years. Kevin M. Klingert, a managing director, senior
portfolio manager and head of municipal bonds at BlackRock Advisors, leads the
team, a position he has held since joining BlackRock in 1991. Mr. Klingert has
over 17 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, which he joined in 1985. The portfolio
management team also includes Craig Kasap, James McGinley, F. Howard Downs and
Anthony Pino . Mr. Kasap, CFA has been a portfolio manager at BlackRock
Financial Management for over four years and is a member of BlackRock's
Investment Strategy Group. Prior to joining BlackRock in 1997 Mr. Kasap spent
three years as a municipal bond trader with Keystone Investments in Boston
where he was involved in formulating the firm's municipal bond investment
strategies. Mr. McGinley has been a portfolio manager and a member of the
Investment Strategy Group at BlackRock Financial Management 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. Mr. McGinley joined Prudential
Securities in 1993 as an Associate in Municipal Research. F. Howard Downs has
been a portfolio manager since joining BlackRock Advisors 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 and Sons
Municipal Securities, Inc. Mr. Downs was one of the original employees of
William E. Simon and Sons Municipal Securities, Inc., founded in 1990, and was
responsible for sales of municipals bonds. Anthony Pino has been a portfolio
manager since joining BlackRock Advisors in 1999. Prior to joining BlackRock
in 1999, he was a Brokerage Coordinator at CPI Capital. From 1996 to 1999, Mr.
Pino was an Assistant Vice President and trader in the Municipal Strategy
Group at Prudential Securities.

         BlackRock's municipal bond portfolio managers are responsible for
over 70 municipal bond portfolios, valued at approximately $12 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 manages 14 municipal
liquidity accounts valued at approximately $4.2 billion. Currently, the team
manages 13 closed-end municipal funds with approximately $3.5 billion in
managed assets as of March 31, 2001.

         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 on sectors. BlackRock believes that 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.,
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
the $12 billion in municipal bonds managed by BlackRock.

         Prior to joining BlackRock as a Vice President and Head of Municipal
Credit Research in 1993, Dr. Heide was Director of Research and a portfolio
manager at OFFITBANK. For eight years prior to this assignment (1984 to 1992),
Dr. Heide was with American Express Company's Investment Division where she was
the Vice President of Credit Research, responsible for the creditworthiness of
$6 billion in municipal securities. Dr. Heide began her investment career in
1983 at Moody's Investors Service 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. As a result
of these efforts, the SEC implemented primary and secondary disclosure
regulations for municipal bonds in July 1995. Dr. Heide has authored a number
of articles on municipal finance and edited The Handbook of Municipal Bonds
published in the fall of 1994. Dr. Heide was selected by the Bond Buyer as a
first team All-American Municipal Analyst in 1990 and was recognized in
subsequent years.

         BlackRock's approach to credit risk incorporates a combination of
sector-based top-down macro-analysis of industry sectors to determine relative
weightings with a name-specific (issuer-specific) bottom-up detailed credit
analysis of issuers and structures. The sector-based approach focuses on
rotating into sectors that are undervalued and exiting sectors when
fundamentals or technicals become unattractive. The name-specific approach
focuses on identifying special opportunities where the market undervalues a
credit, and devoting concentrated resources to research the credit and monitor
the position. BlackRock's analytic 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 and certain waivers relating thereto, 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
0.60% of the average weekly value of the Trust's Managed Assets (the
"management fee"). BlackRock Advisors has voluntarily agreed to waive receipt
of a portion of the management fee or other expenses of the Trust in the
amount of 0.25% of the average weekly values of the Trust's Managed Assets for
the first five years of the Trust's operations (through July 31, 2006), and
for a declining amount for an additional four years (through July 31, 2010).
The Trust will also reimburse BlackRock Advisors for all out-of-pocket
expenses BlackRock Advisors incurs in connection with performing
administrative 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 or the operations of
other investment companies advised by the Trust may be reimbursed to BlackRock
Advisors. Managed Assets are the total assets of the Trust which includes any
proceeds from the proceeds of Preferred Shares minus the sum of accrued
liabilities (other than indebtedness attributable to leverage). This means
that during periods in which the Trust is using leverage, the fee paid to
BlackRock Advisors will be higher than if the Trust did not use leverage
because the fee is calculated as a percentage of the Trust's Managed Assets,
which include those assets purchased with leverage.


         In addition to the 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 expenses, legal fees, rating agency fees, expenses of
independent auditors, expenses of repurchasing shares, expenses of preparing,
printing and distributing shareholder reports, notices, proxy statements and
reports to governmental agencies, and taxes, if any.


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

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

        2002............                                0.25%**
        2003............                                0.25%
        2004............                                0.25%
        2005............                                0.25%
        2006............                                0.25%
        2007............                                0.20%
        2008............                                0.15%
        2009............                                0.10%
        2010............                                0.05%


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


* Including net assets attributable to Preferred Shares.

** From the commencement of operations.

         BlackRock Advisors has not undertaken to waive any portion of the
Trust's fees and expenses beyond July 31, 2010 or after termination of the
investment management agreement.


                                 NET ASSET VALUE


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


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


                                  DISTRIBUTIONS


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

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



                           DIVIDEND REINVESTMENT PLAN


         Unless you elect to receive cash, all dividends declared for your
common shares of the Trust will be automatically reinvested by EquiServe Trust
Company, N.A., agent for shareholders in administering the Trust's Dividend
Reinvestment Plan (the "Plan Agent"), in additional shares of the Trust. If
you elect not to participate in the Dividend Reinvestment Plan, you will
receive all dividends in cash paid by check mailed directly to you (or, if the
shares are held in street or other nominee name, then to such nominee) by
EquiServe Trust Company, N.A., as dividend disbursing agent. You may elect not
to participate in the Dividend Reinvestment Plan and to receive all dividends
in cash by sending written instructions to EquiServe Trust Company, N.A., as
dividend disbursing agent, at the address set forth below. Participation in
the Dividend Reinvestment Plan is completely voluntary and may be terminated
or resumed at any time without penalty by written notice if received by the
Plan Agent not less than ten days prior to any dividend record date; otherwise
such termination will be effective with respect to any subsequently declared
dividend or distribution.

         The Plan Agent will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Trust declares a dividend payable in cash,
non-participants in the Plan will receive cash and participants in the Plan
will receive the equivalent in common shares. The common shares will be
acquired by the Plan Agent for the participants' accounts, depending upon the
circumstances described below, either (i) through receipt of additional
unissued but authorized common shares from the Trust ("newly issued common
shares") or (ii) by purchase of outstanding common shares on the open market
("open-market purchases") on the New York Stock Exchange (the "NYSE"), or
elsewhere. If, on the payment date for any dividend, the net asset value per
common share is equal to or less than the market price per common share, the
Plan Agent will invest the dividend amount in newly issued common shares on
behalf of the participants. The number of newly issued common shares to be
credited to each participant's account will be determined by dividing the
dollar amount of the dividend by the net asset value per common share on the
date the common shares are issued. If, on the payment date for any dividend,
the net asset value per common share is greater than the market value, the
Plan Agent will invest the dividend amount in common shares acquired on behalf
of the participants in open-market purchases. In the event of a market
discount on the payment date for any dividend, the Plan Agent will have until
the last business day before the next date on which the common shares trade on
an "ex-dividend" basis or 30 days after the payment date for such dividend,
whichever is sooner, to invest the dividend amount in common shares acquired
in open- market purchases. It is contemplated that the Trust will pay monthly
income dividends. Therefore, the period during which open- market purchases
can be made will exist only from the payment date of each dividend through the
date before the next "ex-dividend" date which typically will be approximately
ten trading days. If, before the Plan Agent has completed its open-market
purchases, the market price per common share exceeds the net asset value per
common share, the average per common share purchase price paid by the Plan
Agent may exceed the net asset value of the common shares, resulting in the
acquisition of fewer common shares than if the dividend had been paid in newly
issued common shares on the dividend payment date. Because of the foregoing
difficulty with respect to open-market purchases, the Plan provides that if
the Plan Agent is unable to invest the full dividend amount in open market
purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Agent may cease making
open-market purchases and may invest the uninvested portion of the dividend
amount in newly issued common shares at the net asset value per common share
at the close of business on the last purchase date.


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

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

         There will be no brokerage charges with respect to common shares
issued directly by the Trust. However, each participant will pay a pro rata
share of brokerage commissions incurred in connection with open-market
purchases. The automatic reinvestment of dividends will not relieve
participants of any Federal, state or local income tax that may be payable (or
required to be withheld) on such dividends. See "Tax Matters."

         Experience under the Dividend Reinvestment Plan may indicate that
changes are desirable. Accordingly, the Trust reserves the right to amend or
terminate the Dividend Reinvestment Plan. There is no direct service charge to
participants in the Dividend Reinvestment Plan; however, the Trust reserves
the right to amend the Dividend Reinvestment Plan to include a service charge
payable by the participants.

         All correspondence concerning the Dividend Reinvestment Plan should
be directed to the Plan Agent at 225 Franklin Street, Boston, MA 02110.


                              DESCRIPTION OF SHARES

Common Shares


         The Trust is an unincorporated business trust organized under the
laws of Delaware pursuant to an Agreement and Declaration of Trust dated as of
March 30, 2001. The Trust is authorized to issue an unlimited number of common
shares of beneficial interest, par value $.001 per share. Each common share
has one vote and, when issued and paid for in accordance with the terms of
this offering, will be fully paid and non-assessable. Whenever Preferred
Shares are outstanding, the holders of common shares will not be entitled to
receive any distributions from the Trust unless all accrued dividends on
Preferred Shares have been paid, and unless asset coverage (as defined in the
Investment Company Act) with respect to Preferred Shares would be at least
200% after giving effect to the distributions and unless certain other
requirements imposed by any rating agencies rating the Preferred Shares have
been met. See "--Preferred Shares" below. All common shares are equal as to
dividends, assets and voting privileges and have no conversion, preemptive or
other subscription rights. The Trust will send annual and semi-annual reports,
including financial statements, to all holders of its shares.

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

         The Trust intends to apply for listing of the common shares on the New
York Stock Exchange under the symbol "BFK".


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


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

Preferred Shares

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

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

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

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


         It is presently required that in connection with the election of the
Trust's trustees, on and after issuance of any Preferred Shares, the holders of
all outstanding Preferred Shares, voting as a separate class, would be entitled
to elect two trustees of the Trust, and the remaining trustees would be elected
by holders of common shares and Preferred Shares, voting together as a single
class.


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


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

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


          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 two- thirds of the remaining trustees or
by a vote of the holders of at least two-thirds of the shares.


         In addition, the Trust's Agreement and Declaration of Trust requires
the favorable vote of the holders of at least 75% of the outstanding shares of
each class of the Trust, voting as a class, then entitled to vote to approve,
adopt or authorize certain transactions with five percent-or-greater holders
of a class of shares and their associates, unless two-thirds of the board of
trustees by resolution has approved a memorandum of understanding with such
holders, in which case normal voting requirements would be in effect. For
purposes of these provisions, a five percent-or-greater holder of a class 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 of shares of beneficial interest of the Trust.


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


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

         o        the issuance of any securities of the Trust to any Principal
                  Shareholder for cash, except pursuant to the Dividend
                  Reinvestment Plan;

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

         o        the sale, lease or exchange to the Trust or any subsidiary
                  of the Trust, 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 and the favorable vote of the holders of at least
75% of the outstanding shares of each class of the Trust, voting as a class
then entitled to vote. The foregoing vote would satisfy a separate requirement
in the Investment Company Act that any conversion of the Trust to an open-end
investment company be approved by the shareholders. If approved in the
foregoing manner, conversion of the Trust to an open-end investment company
could not occur until 90 days after the shareholders' meeting at which such
conversion was approved and would also require at least 30 days' prior notice
to all shareholders. Conversion of the Trust to an open-end investment company
would require the redemption of any outstanding Preferred Shares, which could
eliminate or alter the leveraged capital structure of the Trust with respect
to the 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 New York 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 intends to reserve the right to pay
redemption requests in a combination of cash or securities. If such partial
payment in securities were made, investors may incur brokerage costs in
converting such securities to cash. If the Trust were converted to an open-end
fund, it is likely that new shares would be sold at net asset value plus a
sales load. The board of trustees believes, however, that the closed-end
structure is desirable in light of the Trust's investment objective and
policies. Therefore, you should assume that it is not likely that the board of
trustees would vote to convert the Trust to an open-end fund.

         The board of trustees has determined that provisions with respect to
the board of trustees and the 75% voting requirements described above, which
voting requirements are greater than the minimum requirements under Delaware
law or the Investment Company Act, are in the best interest of shareholders
generally. Reference should be made to the Agreement and Declaration of Trust
on file with the Securities and Exchange Commission for the full text of these
provisions.



                           CLOSED-END TRUST STRUCTURE


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

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

                              REPURCHASE OF SHARES

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


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


                                   TAX MATTERS

Federal Income Tax Matters


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

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


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


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


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


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


         The Trust may be required to withhold 31% of certain of your
dividends if you have not provided the Trust with your correct taxpayer
identification number (if you are an individual normally your Social Security
number), or if you are otherwise subject to back-up withholding. If you
receive Social Security benefits, you should be aware that tax-free income is
taken into account in calculating the amount of these benefits that may be
subject to Federal income tax. If you borrow money to buy Trust shares, you
may not deduct the interest on that loan. Under Federal income tax rules,
Trust shares may be treated as having been bought with borrowed money even if
the purchase of the Trust shares cannot be traced directly to borrowed money.

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

State and Local Tax Matters


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

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


                                  UNDERWRITING


         Subject to the terms and conditions stated in the underwriting
agreement dated the date of this prospectus, each Underwriter named below has
agreed to purchase, and the Trust has agreed to sell to such Underwriter, the
number of common shares set forth opposite the name of such Underwriter.

                                                      Number
Underwriters                                        of Shares

Salomon Smith Barney Inc...............
Merrill Lynch, Pierce, Fenner & Smith
              Incorporated ................
                                                    ----------
  Total.......................................      __________
                                                    ==========


         The underwriting agreement provides that the obligations of the
several Underwriters to purchase the common shares included in this offering
are subject to approval of certain legal matters by counsel and to certain
other conditions. The Underwriters are obligated to purchase all the common
shares (other than those covered by the over-allotment option described below)
if they purchase any of the common shares. The representatives have advised
the Trust that the Underwriters do not intend to confirm any sales to any
accounts over which they exercise discretionary authority.

         The Underwriters, for whom Salomon Smith Barney Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives,
propose to offer some of the common shares directly to the public at the
public offering price set forth on the cover page of this prospectus and some
of the common shares to certain dealers at the public offering price less a
concession not in excess of $0.___ per common share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $0.___ per
common share on sales to certain other dealers. If all of the common shares
are not sold at the initial offering price, the representatives may change the
public offering price and other selling terms. The representatives have
advised the Trust that the Underwriters do not intend to confirm any sales to
any accounts over which they exercise discretionary authority. Investors must
pay for any common shares purchased on or before __________, 2001.

         The Trust has granted to the Underwriters an option, exercisable for
45 days from the date of this prospectus, to purchase up to _____ additional
common shares at the public offering price less the underwriting discount. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent such
option is exercised, each Underwriter will be obligated, subject to certain
conditions, to purchase a number of additional common shares approximately
proportionate to such Underwriter's initial purchase commitment.

         The Trust and BlackRock Advisors have agreed that, for a period of
180 days from the date of this prospectus, they will not, without the prior
written consent of Salomon Smith Barney Inc., on behalf of the Underwriters,
dispose of or hedge any common shares of the Trust or any securities
convertible into or exchangeable for common shares of the Trust or any
securities convertible into or exchangeable for common shares. Salomon Smith
Barney Inc. in its sole discretion may release any of the securities subject
to these agreements at any time without notice.

         Prior to this offering, there has been no public market for the
common shares. Consequently, the initial public offering price for the common
shares was determined by negotiation among the Trust, BlackRock Advisors and
the representatives. There can be no assurance, however, that the price at
which the common shares will sell in the public market after this offering
will not be lower than the price at which they are sold by the Underwriters or
that an active trading market in the common shares will develop and continue
after this offering. An application has been made to list the common shares on
the New York Stock Exchange.

         The Trust and BlackRock Advisors have each agreed to indemnify the
several Underwriters or contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act of 1933.

         The Trust has agreed to pay the Underwriters $ as partial
reimbursement of expenses incurred in connection with the offering. BlackRock
Advisors has agreed to pay organizational expenses and offering costs (other
than sales load) that exceed $0.03 per share.

         In connection with the requirements for listing the Trust's common
shares on the New York Stock Exchange, the Underwriters have undertaken to
sell lots of 100 or more common shares to a minimum of 2,000 beneficial owners
in the United States. The minimum investment requirement is 100 common shares.
Certain Underwriters may make a market in the common shares after trading in
the common shares has commenced on the New York Stock Exchange. No Underwriter
is, however, obligated to conduct market-making activities and any such
activities may be discontinued at any time without notice, at the sole
discretion of the Underwriter. No assurance can be given as to the liquidity
of, or the trading market for, the common shares as a result of any
market-making activities undertaken by any Underwriter. This prospectus is to
be used by any Underwriter in connection with the offering and, during the
period in which a prospectus must be delivered, with offers and sales of the
common shares in market-making transactions in the over-the-counter market at
negotiated prices related to prevailing market prices at the time of the sale.

         The Underwriters have advised the Trust that, pursuant to Regulation
M under the Securities and Exchange Act of 1934, as amended, certain persons
participating in the offering may engage in transactions, including
stabilizing bids, covering transactions or the imposition of penalty bids,
which may have the effect of stabilizing or maintaining the market price of
the common shares at a level above that which might otherwise prevail in the
open market. A "stabilizing bid" is a bid for or the purchase of common shares
on behalf of an Underwriter for the purpose of fixing or maintaining the price
of the common shares. A "covering transaction" is a bid for or purchase of the
common shares on behalf of an Underwriter to reduce a short position incurred
by the Underwriters in connection with the offering. A "penalty bid" is a
contractual arrangement whereby if, during a specified period after the
issuance of the common shares, the Underwriters purchase common shares in the
open market for the account of the underwriting syndicate and the common
shares purchased can be traced to a particular Underwriter or member of the
selling group, the underwriting syndicate may require the Underwriter or
selling group member in question to purchase the common shares in question at
the cost to the syndicate or may recover from (or decline to pay to) the
Underwriter or selling group member in question any or all compensation
(including, with respect to a representative, the applicable syndicate
management fee) applicable to the common shares in question. As a result, an
Underwriter or selling group member and, in turn, brokers may lose the fees
that they otherwise would have earned from a sale of common shares if their
customer resells the common shares while the penalty bid is in effect. The
Underwriters are not required to engage in any of these activities, and any
such activities, if commenced, may be discontinued at any time.

         The underwriting agreement provides that it may be terminated in the
absolute discretion of the representatives without liability on the part of
any Underwriter to the Trust or BlackRock Advisors by notice to the Trust or
BlackRock Advisors if, prior to delivery of and payment for the common shares,
(1) trading in the common shares or securities generally on the New York Stock
Exchange, American Stock Exchange, Nasdaq National Market or the Nasdaq Stock
Market shall have been suspended or materially limited, (2) additional
material governmental restrictions not in force on the date of the
underwriting agreement have been imposed upon trading in securities generally
or a general moratorium on commercial banking activities in New York shall
have been declared by either Federal or state authorities or (3) any outbreak
or material escalation of hostilities or other international or domestic
calamity, crisis or change in political, financial or economic conditions,
occurs, the effect of which is such as to make it, in the judgment of the
representatives, impracticable or inadvisable to commence or continue the
offering of the common shares at the offering price to the public set forth on
the cover page of the prospectus or to enforce contracts for the resale of the
common shares by the Underwriters .

         The Trust anticipates that from time to time the representatives of
the Underwriters and certain other Underwriters may act as brokers or dealers
in connection with the execution of the Trust's portfolio transactions after
they have ceased to be Underwriters and, subject to certain restrictions, may
act as brokers while they are Underwriters.

         Prior to the public offering of common shares, BlackRock Advisors
will purchase common shares from the Trust in an amount satisfying the net
worth requirements of Section 14(a) of the Investment Company Act.

         The principal business address of Salomon Smith Barney Inc. is 388
Greenwich Street, New York, New York 10013. The principal business address of
Merrill Lynch, Pierce, Fenner & Smith Incorporated is 4 World Financial
Center, New York, New York 10080.

                          CUSTODIAN AND TRANSFER AGENT

         The Custodian of the assets of the Trust is EquiServe Trust Company,
N.A., 225 Franklin Street, Boston, Massachusetts 02110. The Custodian performs
custodial, fund accounting and portfolio accounting services. The Custodian is
also the transfer and dividend disbursing agent for the Trust. The Custodian
may employ sub-custodians outside the U.S. approved by the board of trustees
in accordance with regulations under the Investment Company Act.


                                 LEGAL OPINIONS

         Certain legal matters in connection with the common shares will be
passed upon for the Trust by Skadden, Arps, Slate, Meagher & Flom LLP, New York,
New York and for the Underwriters by Simpson Thacher & Bartlett, New York, New
York. Simpson Thacher & Bartlett may rely as to certain matters of Delaware law
on the opinion of (location).





                            TABLE OF CONTENTS FOR THE
                       STATEMENT OF ADDITIONAL INFORMATION

                                                                          Page

         Use of Proceeds....................................................B-
         Investment Objective and Policies..................................B-
         Investment Policies and Techniques.................................B-
         Other Investment Policies and Techniques...........................B-
         Management of the Trust............................................B-
         Portfolio Transactions and Brokerage...............................B-
         Description of Shares..............................................B-
         Repurchase of Common Shares........................................B-
         Tax Matters........................................................B-
         Performance Related and Comparative Information....................B-
         Experts............................................................B-
         Additional Information.............................................B-
         Report of Independent Auditors.....................................B-
         Financial Statements...............................................B-
         Ratings of Investments (Appendix A)................................A-
         Taxable Equivalent Yield Table (Appendix B)........................B-
         General Characteristics
         and Risks of Hedging Strategies (Appendix C........................C-










                                     Shares




                                    BlackRock
                             Municipal Income Trust



                                  Common Shares







                                   PROSPECTUS

                                   July , 2001




                              Salomon Smith Barney

                               Merrill Lynch & Co.

















The information in this Statement of Additional Information is not complete
and may be changed. We may not sell these securities until the Registration
Statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 1, 2001


                        BlackRock Municipal Income Trust

                       STATEMENT OF ADDITIONAL INFORMATION


         BlackRock Municipal Income Trust (the "Trust") is a newly organized,
closed-end, diversified management investment company. This Statement of
Additional Information relating to common shares does not constitute a
prospectus, but should be read in conjunction with the prospectus relating
thereto dated July , 2001. This Statement of Additional Information does not
include all information that a prospective investor should consider before
purchasing common shares, and investors should obtain and read the prospectus
prior to purchasing such shares. A copy of the prospectus may be obtained
without charge by calling (888) 825-2257. You may also obtain a copy of the
prospectus on the Securities and Exchange Commission's web site
(http://www.sec.gov). Capitalized terms used but not defined in this Statement
of Additional Information have the meanings ascribed to them in the prospectus.



                                TABLE OF CONTENTS

                                                                           Page

         Use of Proceeds ....................................................B-
         Investment Objective and Policies...................................B-
         Investment Policies and Techniques..................................B-
         Other Investment Policies and Techniques............................B-
         Management of the Trust.............................................B-
         Portfolio Transactions and Brokerage................................B-
         Description of Shares...............................................B-
         Repurchase of Common Shares.........................................B-
         Tax Matters.........................................................B-
         Performance Related and Comparative Information.....................B-
         Experts.............................................................B-
         Additional Information..............................................B-
         Report of Independent Auditors......................................B-
         Financial Statements................................................B-
         Ratings of Investments (Appendix A).................................A-
         Taxable Equivalent Yield Table (Appendix B).........................B-
         General Characteristics and
         Risks of Hedging Strategies (Appendix C.............................C-



This Statement of Additional Information is dated July      , 2001.


                                 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--Investment in Municipal Bonds--Portfolio Investments," the income
on which is subject to regular Federal income tax and securities of other
open- or closed-end investment companies that invest primarily in municipal
bonds of the type in which the Trust may invest directly.

                        INVESTMENT OBJECTIVE AND POLICIES


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


Investment Restrictions


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


         (1)      invest 25% or more of the value of its total 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 users;

         (2)      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;


         (3)      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;


         (4)      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;


         (5)      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

         (6)      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 Commodities Futures Trading Commission
                  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 users may for this purpose be deemed to be issued
by such non-governmental users. Thus, the 25% limitation would apply to such
obligations. It is nonetheless possible that the Trust may invest more than 25%
of its total 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 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 of 1940, 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 would remain subject to payment of
the Trust's advisory fees and expenses with respect to assets so invested.
Holders of common shares would therefore be subject to duplicative expenses to
the extent the Trust invests in other investment companies. In addition, the
securities of other investment companies may also be leveraged and will
therefore be subject to the same leverage risks described herein and in the
prospectus. As described in the prospectus in the section entitled "Risks",
the net asset value and market value of leveraged shares will be more volatile
and the yield to shareholders will tend to fluctuate more than the yield
generated by unleveraged shares.


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


         (1)      make any short sale of securities except in conformity with
                  applicable laws, rules and regulations and unless, giving
                  effect to such sale, the market value of all securities sold
                  short does not exceed 25% of the value of the Trust's total
                  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 an 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
fiscal year, (a) no more than 25% of the value of the Trust's total assets are
invested in the securities (other than United States government securities or
securities of other regulated investment companies) of a single issuer or two
or more issuers controlled by the Trust and engaged in the same, similar or
related trades or businesses and (b) with regard to at least 50% of the
Trust's total assets, no more than 5% of its total assets are invested in the
securities (other than United States government securities or securities of
other regulated investment companies) of a single issuer. These tax-related
limitations may be changed by the Trustees to the extent appropriate in light
of changes to applicable tax requirements.


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


                       INVESTMENT POLICIES AND TECHNIQUES

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

Portfolio Investments


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

         Issuers of bonds rated Ba/BB or B are regarded as having current
capacity to make principal and interest payments but are subject to business,
financial or economic conditions which could adversely affect such payment
capacity. Municipal bonds rated Baa or BBB are considered "investment grade"
securities; municipal bonds rated Baa are considered medium grade obligations
which lack outstanding investment characteristics and have speculative
characteristics, while municipal bonds rated BBB are regarded as having
adequate capacity to pay principal and interest. Municipal bonds rated AAA in
which the Trust may invest may have been so rated on the basis of the
existence of insurance guaranteeing the timely payment, when due, of all
principal and interest. Municipal bonds rated below investment grade quality
are obligations of issuers that are considered predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal according
to the terms of the obligation and, therefore, carry greater investment risk,
including the possibility of issuer default and bankruptcy and increased
market price volatility. Municipal bonds rated below investment grade tend to
be less marketable than higher-quality bonds because the market for them is
less broad. The market for unrated municipal bonds is even narrower. During
periods of thin trading in these markets, the spread between bid and asked
prices is likely to increase significantly and the Trust may have greater
difficulty selling its portfolio securities. The Trust will be more dependent
on BlackRock's research and analysis when investing in these securities.

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

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


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


         Also included within the general category of municipal bonds
described in the prospectus are participations in lease obligations or
installment purchase contract obligations (hereinafter collectively called
"Municipal Lease Obligations") of municipal authorities or entities. Although
a Municipal Lease Obligation does not constitute a general obligation of the
municipality for which the municipality's taxing power is pledged, a Municipal
Lease Obligation is ordinarily backed by the municipality's covenant to budget
for, appropriate and make the payments due under the Municipal Lease
Obligation. However, certain Municipal Lease Obligations contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years
unless money is appropriated for such purpose on a yearly basis. In the case
of a "non-appropriation" lease, the Trust's ability to recover under the lease
in the event of non-appropriation or default will be limited solely to the
repossession of the leased property, without recourse to the general credit of
the lessee, and the disposition or releasing 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 tax, 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
                  agency securities include securities issued by (a) the
                  Federal Housing Administration, Farmers Home Administration,
                  Export-Import Bank of the United States, Small Business
                  Administration, and the Government National Mortgage
                  Association, whose securities are supported by the full
                  faith and credit of the United States; (b) the Federal Home
                  Loan Banks, Federal Intermediate Credit Banks, and the
                  Tennessee Valley Authority, whose securities are supported
                  by the right of the agency to borrow from the U.S. Treasury;
                  (c) the Federal National Mortgage Association, whose
                  securities are supported by the discretionary authority of
                  the U.S. government to purchase certain obligations of the
                  agency or instrumentality; and (d) the Student Loan
                  Marketing Association, whose securities are supported only
                  by its credit. While the U.S. government provides financial
                  support to such U.S. government-sponsored agencies or
                  instrumentalities, no assurance can be given that it always
                  will do so since it is not so obligated by law. The U.S.
                  government, its agencies and instrumentalities do not
                  guarantee the market value of their securities.
                  Consequently, the value of such securities may fluctuate.


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

         (3)      Repurchase agreements, which involve purchases of debt
                  securities. At the time the Trust purchases securities
                  pursuant to a repurchase agreement, it simultaneously agrees
                  to resell and redeliver such securities to the seller, who
                  also simultaneously agrees to buy back the securities at a
                  fixed price and time. This assures a predetermined yield for
                  the Trust during its holding period, since the resale price
                  is always greater than the purchase price and reflects an
                  agreed-upon market rate. Such actions afford an opportunity
                  for the Trust to invest temporarily available cash. The
                  Trust may enter into repurchase agreements only with respect
                  to obligations of the U.S. government, its agencies or
                  instrumentalities; certificates of deposit; or bankers'
                  acceptances in which the Trust may invest. Repurchase
                  agreements may be considered loans to the seller,
                  collateralized by the underlying securities. The risk to the
                  Trust is limited to the ability of the seller to pay the
                  agreed-upon sum on the repurchase date; in the event of
                  default, the repurchase agreement provides that the Trust is
                  entitled to sell the underlying collateral. If the value of
                  the collateral declines after the agreement is entered into,
                  and if the seller defaults under a repurchase agreement when
                  the value of the underlying collateral is less than the
                  repurchase price, the Trust could incur a loss of both
                  principal and interest. BlackRock monitors the value of the
                  collateral at the time the action is entered into and at all
                  times during the term of the repurchase agreement. BlackRock
                  does so in an effort to determine that the value of the
                  collateral always equals or exceeds the agreed-upon
                  repurchase price to be paid to the Trust. If the seller were
                  to be subject to a Federal bankruptcy proceeding, the
                  ability of the Trust to liquidate the collateral could be
                  delayed or impaired because of certain provisions of the
                  bankruptcy laws.

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


Short-Term Tax-Exempt Fixed Income Securities

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

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

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

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

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

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


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


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

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

Duration Management and Other Management Techniques


         The Trust may use a variety of other investment management techniques
and instruments. The Trust may purchase and sell futures contracts, enter into
various interest rate transactions and may purchase and sell exchange-listed
and over-the-counter put and call options on securities, financial indices and
futures contracts (collectively, "Additional Investment Management
Techniques"). These Additional Investment Management Techniques may be used
for duration management and other risk management techniques in an attempt to
protect against possible changes in the market value of the Trust's portfolio
resulting from trends in the debt securities markets and changes in interest
rates, to protect the Trust's unrealized gains in the value of its portfolio
securities, to facilitate the sale of such securities for investment purposes,
to establish a position in the securities markets as a temporary substitute
for purchasing particular securities and to enhance income or gain. There is
no particular strategy that requires use of one technique rather than another
as the decision to use any particular strategy or instrument is a function of
market conditions and the composition of the portfolio. The Additional
Investment Management Techniques are described below. The ability of the Trust
to use them successfully will depend on BlackRock's ability to predict
pertinent market movements as well as sufficient correlation among the
instruments, which cannot be assured. Inasmuch as any obligations of the Trust
that arise from the use of Additional Investment Management Techniques will be
covered by segregated liquid assets 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
Commodity Futures Trading Commission (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 segregate
with a custodian an amount of cash or liquid high grade securities having an
aggregate net asset value at all times at least equal to the accrued excess.
The Trust will not enter into any interest rate swap, cap or floor transaction
unless the unsecured senior debt or the claims-paying ability of the other
party thereto is rated in the highest rating category of at least one
nationally recognized statistical rating organization at the time of entering
into such transaction. If there is a default by the other party to such a
transaction, the Trust will have contractual remedies pursuant to the
agreements related to the transaction.

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


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


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

         Municipal Market Data Rate Locks. The Trust may purchase and sell
Municipal Market Data Rate Locks ("MMD Rate Locks"). An MMD Rate Lock permits
the Trust to lock in a specified municipal interest rate for a portion of its
portfolio to preserve a return on a particular investment or a portion of its
portfolio as a duration management technique or to protect against any
increase in the price of securities to be purchased at a later date. The Trust
will ordinarily use these transactions as a hedge or for duration or risk
management although it is permitted to enter into them to enhance income or
gain. An MMD Rate Lock is a contract between the Trust and an MMD Rate Lock
provider pursuant to which the parties agree to make payments to each other on
a notional amount, contingent upon whether the Municipal Market Data AAA
General Obligation Scale is above or below a specified level on the expiration
date of the contract. For example, if the Trust buys an MMD Rate Lock and the
Municipal Market Data AAA General Obligation Scale is below the specified
level on the expiration date, the counterparty to the contract will make a
payment to the Trust equal to the specified level minus the actual level,
multiplied by the notional amount of the contract. If the Municipal Market
Data AAA General Obligation Scale is above the specified level on the
expiration date, the Trust will make a payment to the counterparty equal to
the actual level minus the specified level multiplied by the notional amount
of the contract. In entering into MMD Rate Locks, there is a risk that
municipal yields will move in the direction opposite of the direction
anticipated by the Trust. The Trust will not enter into MMD Rate Locks if, as
a result, more than 50% of its assets would be required to cover its potential
obligations under its hedging and other investment transactions.


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


         Certain provisions of the Internal Revenue Code of 1986 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 high grade liquid securities. The Trust will
also be required to segregate 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 total assets or the Trust's aggregate short sales of a particular class
of securities exceeds 25% of the outstanding securities of that class. The
Trust may also make short sales "against the box" without respect to such
limitations. In this type of short sale, at the time of the sale, the Trust
owns or has the immediate and unconditional right to acquire at no additional
cost the identical security.

                    OTHER INVESTMENT POLICIES AND TECHNIQUES

Restricted and Illiquid Securities

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

When-Issued and Forward Commitment Securities


         The Trust may purchase 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 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 can incur a gain or loss. At the time the
Trust entered into a transaction on a when-issued or forward commitment basis,
it will segregate with its custodian cash or other liquid high grade debt
securities with a value not less than 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 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 Limitations". The
proceeds of borrowings may be used for any valid purpose including, without
limitation, liquidity, investing and repurchases of shares of the Trust.
Borrowing is a form of leverage and, in that respect, entails risks comparable
to those associated with the issuance of Preferred Shares.

Reverse Repurchase Agreements

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


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

Repurchase Agreements


         As temporary investments, the Trust may invest in repurchase
agreements. A repurchase agreement is a contractual agreement whereby the
seller of securities (U.S. government securities or municipal bonds) agrees to
repurchase the same security at a specified price on a future date agreed upon
by the parties. The agreed-upon repurchase price determines the yield during
the Trust's holding period. Repurchase agreements are considered to be loans
collateralized by the underlying security that is the subject of the
repurchase contract. Income generated from transactions in repurchase
agreements will be taxable. See "Tax Matters" for information relating to the
allocation of taxable income between common shares and Preferred Shares, if
any. 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 brokers, dealers and
other financial institutions which meet the creditworthiness standards
established by the board of trustees of the Trust ("Qualified Institutions").
By lending its portfolio securities, the Trust attempts to increase its income
through the receipt of interest on the loan. Any gain or loss in the market
price of the securities loaned that may occur during the term of the loan will
be for the account of the Trust. The Trust may lend its portfolio securities
so long as the terms and the structure of such loans are not inconsistent with
the requirements of the Investment Company Act, which currently require that
(a) the borrower pledge and maintain with the Trust collateral consisting of
cash, a letter of credit issued by a U.S. bank, or securities issued or
guaranteed by the U.S. government having a value at all times not less than
100% of the value of the securities loaned, (b) the borrower add to such
collateral whenever the price of the securities loaned rises (i.e., the value
of the loan is "marked to the market" on a daily basis), (c) the loan be made
subject to termination by the Trust at any time and (d) the Trust receive
reasonable interest on the loan (which may include the Trust's investing any
cash collateral in interest bearing short-term investments), any distributions
on the loaned securities and any increase in their market value. The Trust
will not lend portfolio securities if, as a result, the aggregate value of
such loans exceeds 33 1/3% of the value of the Trust's total assets (including
such loans). Loan arrangements made by the Trust will comply with all other
applicable regulatory requirements, including the rules of the New York Stock
Exchange. 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.

Residual Interest Municipal Bonds


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


                             MANAGEMENT OF THE TRUST

Investment Management Agreement

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

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


         The Investment Management Agreement and certain scheduled waivers of
investment advisory fees were approved by the Trust's board of trustees, on
May 24, 2001, 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 an
investment advisory fee at an annual rate equal to 0.70% of the average weekly
value of the Trust's Managed Assets. A related waiver letter from BlackRock
Advisors provided for a temporary fee waiver of 0.30% of the average weekly
value of the Trust's total Managed Assets in each of the first five years of
the Trust's operations (through July 31, 2006) and for a declining amount for
an additional five years. Subsequently, BlackRock Advisors unilaterally agreed
to permanently waive a portion of the advisory fee to which it is entitled
equal to 0.10% of the average weekly value of the Trust's total Managed Assets
and adjusted the temporary fee waiver so that BlackRock Advisors would waive
0.25% of the average weekly value of the Trust's total Managed Assets in each
of the first five years and would waive a declining amount for an additional
four years as set forth in the prospectus under "Management of the Trust -
Investment Management Agreement." The net effect of the permanent fee waiver
and the adjusted temporary fee waiver schedule was to reduce the advisory fee
paid by the Trust by 0.05% of the Trust's total Managed Assets in each of the
first ten years of the Trust's operations and to reduce the advisory fee paid
by the Trust by 0.10% of the Trust's total Managed Assets in each year
thereafter.

         The Investment Management Agreement and the scheduled waivers of
investment advisory fees were approved by the sole common shareholder of the
Trust as of , 2001. 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 Advisors. 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 advisory fee paid by the Trust to BlackRock Advisors. From the
management fee, BlackRock Advisors will pay BlackRock Financial Management,
for serving as sub-advisor, a fee equal to an annual rate of: (i) prior to
July 31, 2002, to 38% of the monthly advisory fees received by BlackRock
Advisors, (ii) from August 1, 2002 to July 31, 2003, to 19% of the monthly
advisory fee received by BlackRock Advisors; and (iii) after July 31, 2003, 0%
of the advisory fees received by BlackRock Advisors; provided thereafter that
the sub-advisor may be compensated at cost for any services rendered to the
Trust at the request of BlackRock Advisors and approved of by the Board of
Trustees.

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

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

         The sub-investment advisory agreement was approved by the Trust's
board of trustees on May 24, 2001, 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). The sub-investment
advisory agreement was approved by the sole common shareholder of the Trust as
of , 2001. The sub-investment advisory agreement will continue in effect for a
period of two years from its effective date, and if not sooner terminated,
will continue in effect for successive periods of 12 months thereafter,
provided that each continuance is specifically approved at least annually by
both (1) the vote of a majority of the Trust's board of trustees or the vote
of a majority of the outstanding voting securities of the Trust (as defined in
the Investment Company Act) and (2) by the vote of a majority of the trustees
who are not parties to such agreement or interested persons (as such term is
defined in the Investment Company Act) of any such party, cast in person at a
meeting called for the purpose of voting on such approval. The sub-investment
advisory agreement may be terminated as a whole at any time by the Trust
without the payment of any penalty, upon the vote of the a majority of the
Trust's board of trustees or a majority of the outstanding voting securities
of the Trust or by BlackRock Advisors or by BlackRock Financial Management, on
60 days' written notice by either party to the other. The sub-investment
advisory agreement will also terminate automatically in the event of its
assignment (as such term is defined in the Investment Company Act and the
rules thereunder).

Trustees and Officers

         The officers of the Trust manage its day to day operations. The
officers are directly responsible to the Trust's board of trustees which sets
broad policies for the Trust and chooses its officers. The following is a list
of the trustees and officers of the Trust and a brief statement of 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 345 Park Avenue,
New York, New York 10154, 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.




                                             Principal Occupation
                                             During the Past-Five-Years
Name and Address               Title         -and-Other-Affiliations
----------------------------------------   -----------------------------------
Andrew F. Brimmer             Trustee      President of Brimmer & Company,
4400 MacArthur Blvd N.W.                   Inc., a Washington, D.C.-based
Suite 302                                  economic and financial consulting
Washington, DC  20007                      firm. Director of CarrAmerica
Age:  74                                   Realty Corporation and Borg-Warner
                                           Automotive. Formerly member of the
                                           Board of Governors of the Federal
                                           Reserve System. Formerly Director
                                           of AirBorne Express, BankAmerica
                                           Corporation (Bank of America), 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).

Richard E. Cavanagh           Trustee      President and Chief Executive
845 Third Avenue                           Officer of The Conference Board,
New York, NY  10022                        Inc., a leading global business
Age:  54                                   membership organization, from 1995-
                                           present. Former Executive Dean of
                                           the John F. Kennedy School of
                                           Government at Harvard University
                                           from 1988-1995. Acting Director,
                                           Harvard Center for Business and
                                           Government (1991-1993). Formerly
                                           Partner (principal) of McKinsey &
                                           Company, Inc. (1980-1988). Former
                                           Executive Director of Federal Cash
                                           Management, White House Office of
                                           Management and Budget (1977-1979).
                                           Co-author, The Winning Performance
                                           (best selling management book
                                           published in 13 national editions).
                                           Trustee Emeritus, Wesleyan
                                           University. Trustee, Drucker
                                           Foundation, Airplanes Group,
                                           Aircraft Finance Trust (AFT) and
                                           Educational Testing Service (ETS).
                                           Director, Arch Chemicals, Fremont
                                           Group and The Guardian Life
                                           Insurance Company of America.

Kent Dixon                    Trustee      Consultant/Investor. Former
430 Sandy Hook Road                        President and Chief Executive
St. Petersburg, FL  33704                  Officer of Empire Federal Savings
Age:  63                                   Bank of America and Banc PLUS
                                           Savings Association, former
                                           Chairman of the Board, President
                                           and Chief Executive Officer of
                                           Northeast Savings. Former Director
                                           of ISFA (the owner of INVEST, a
                                           national securities brokerage
                                           service designed for banks and
                                           thrift institutions).

Frank J. Fabozzi              Trustee      Consultant. Editor of The Journal
858 Tower View Circle                      of Portfolio Management and Adjunct
New Hope, PA  18938                        Professor of Finance at the School
Age:  52                                   of Management at Yale University.
                                           Director, Guardian Mutual Funds
                                           Group. 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.

  Laurence D. Fink*             Trustee    Director, Chairman and Chief
  Age:  48                                 Executive Officer of BlackRock,
                                           Inc. since its formation in 1998
                                           and of BlackRock, Inc.'s
                                           predecessor entities since 1988.
                                           Chairman of the Management
                                           Committee of BlackRock, Inc.
                                           Formerly, Managing Director of the
                                           First Boston Corporation, Member of
                                           its Management Committee, Co-head
                                           of its Taxable Fixed Income
                                           Division and Head of its Mortgage
                                           and Real Estate Products Group.
                                           Currently, Chairman of the Board of
                                           each of the closed-end Trusts in
                                           which BlackRock Advisors, Inc. acts
                                           as investment advisor, President,
                                           Treasurer and a Trustee of the
                                           BlackRock Funds, Chairman of the
                                           Board and Director of Anthracite
                                           Capital, Inc., a Director of
                                           BlackRock's offshore funds and
                                           alternative products and Chairman
                                           of the Board of Nomura BlackRock
                                           Asset Management Co., Ltd.
                                           Currently, Vice Chairman of the
                                           Board of Trustees of Mount Sinai-
                                           New York University Medical Center
                                           and Health System and a Member of
                                           the Board of Phoenix House.

James Clayburn La Force,      Trustee      Dean Emeritus of The John E.
P.O. Box 1595                              Anderson Graduate School of
Pauma Valley, CA  92061                    Management, University of
Age:  72                                   California since July 1, 1993.
                                           Director, Jacobs Engineering Group,
                                           Inc., Payden & Rygel Investment
                                           Trust, Provident Investment Counsel
                                           Funds, Timken Company, Motor Cargo
                                           Industries and Trust for Investment
                                           Managers. Acting Dean of The School
                                           of Business, Hong Kong University
                                           of Science and Technology
                                           1990-1993. From 1978 to September
                                           1993, Dean of The John E. Anderson
                                           Graduate School of Management,
                                           University of California.

Walter F. Mondale             Trustee      Partner, Dorsey & Whitney, a law
220 South Sixth Street                     firm (December 1996-present,
Minneapolis, MN  55402                     September 1987-August 1993).
Age:  73                                   Formerly, 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.

Ralph L. Schlosstein*       Trustee and    Director since 1999 and President
Age:  50                     President     of BlackRock, Inc. since its
                                           formation in 1998 and of BlackRock,
                                           Inc.'s predecessor entities since
                                           1988. Member of the Management
                                           Committee and Investment Strategy
                                           Group of BlackRock, Inc. Formerly,
                                           Managing Director of Lehman
                                           Brothers, Inc. and Co-head of its
                                           Mortgage and Savings Institutions
                                           Group. Currently, President of each
                                           of the closed-end Trusts in which
                                           BlackRock Advisors, Inc. acts as
                                           investment advisor and a Director
                                           and Officer of BlackRock's
                                           alternative products. Currently, a
                                           Member of the Visiting Board of
                                           Overseers of the John F. Kennedy
                                           School of Government at Harvard
                                           University, the Financial
                                           Institutions Center Board of the
                                           Wharton School of the University of
                                           Pennsylvania, and a Trustee of New
                                           Visions for Public Education in New
                                           York City. Formerly, a Director of
                                           Pulte Corporation and a Member of
                                           Fannie Mae's Advisory Council.

Anne F. Ackerley             Secretary     Managing Director of BlackRock,
Age:  39                                   Inc. since 2000. Formerly First
                                           Vice President and Chief Operating
                                           Officer, Mergers and Acquisitions
                                           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.

Keith T. Anderson         Vice President   Managing Director of BlackRock, Inc.
Age: 41                                    and its predecessor entities.

Henry Gabbay                 Treasurer     Managing Director of BlackRock, Inc.
Age: 53                                    and its predecessor entities.

Michael C. Huebsch        Vice President   Managing Director of BlackRock, Inc.
Age: 42                                    and its predecessor entities.

Robert S. Kapito          Vice President   Vice Chairman of BlackRock, Inc.
Age: 44                                    and its predecessor entities.

Kevin Klingert            Vice President   Managing Director of BlackRock, Inc.
Age:  38                                   and its predecessor entities.

James Kong                   Assistant     Managing Director of BlackRock, Inc.
Age: 40                      Treasurer     and its predecessor entities.

Robert Shea, Esq.         Vice President   Managing Director of BlackRock,
Age: 41                        /Tax        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.


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

         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,
2000, the Independent Trustees/Directors earned the compensation set forth
below in their capacities as trustees/directors of the funds in the BlackRock
Family of Funds. It is estimated that the Independent Trustees will receive
from the Trust the amounts set forth below for the Trust's calendar year
ending December 31,2001, assuming the Trust had been in existence for the full
calendar year.


<TABLE>
<CAPTION>
                                                 Estimated                  Total Compensation from the Trust and Fund
        Name of Board Member               Compensation-From Trust               Complex-Paid-to-Board-Member (1)
-----------------------------------    --------------------------------    --------------------------------------------
<S>                                          <C>                                   <C>
Andrew R. Brimmer..................           $          6,000 (2)(3)               $           160,000 (4)
Richard E. Cavanagh................           $          6,000 (2)                  $           160,000 (4)
Kent Dixon.........................           $          6,000 (2)                  $           160,000 (4)
Frank J. Fabozzi...................           $          6,000 (2)                  $           160,000 (4)
James Clayburn La Force, Jr........           $          6,000 (2)                  $           160,000 (4)
Walter F. Mondale..................           $          6,000 (2)                  $           160,000 (4)
------------------



(1)      Represents the total compensation earned by such persons during the
         calendar year ended December 31, 2000 from the twenty-two closed-end
         funds advised by the Advisor (the "Fund Complex"). One of these funds,
         BlackRock Target Term Trust was terminated on December 29, 2000 and the
         BlackRock 2001 Term Trust is scheduled to terminate on June 30, 2001.

(2)      Of these amounts it is anticipated that Messrs. Brimmer, Cavanagh,
         Dixon, Fabozzi, La Force and Mondale will defer $1,500, $1,500, $0, $0,
         $3,750, and $1,500, respectively, pursuant to the Fund Complex's
         deferred compensation plan (described below).

(3)      At a meeting of the Boards of Directors/Trustees held on August 24,
         2000, Dr. Brimmer was appointed "lead director" for each Board of
         Trustees/Directors in the Fund Complex. For his services as lead
         trustee/director, Dr. 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, Dixon, Fabozzi, La Force
         and Mondale deferred $12,000, $12,000, $0, $0, $77,500, and $31,000,
         respectively, pursuant to the Trust's deferred compensation plan
         (as described below).
</TABLE>

         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
head independent trustee on the Board's Governance Committee. 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 held on a single day does not exceed $20,000
for any Trustee/Director.


Codes of Ethics


         The Trust, the Advisor, the Sub-Advisor and the Trust's principal
underwriters have adopted codes of ethics under Rule 17j-1 of the Investment
Company Act of 1940. These codes permit personnel subject to the codes to
invest in securities, including securities that may be purchased or held by
the Trust.

Investment Advisor

         BlackRock Advisors, Inc. acts as the Trust's investment manager.
BlackRock Advisors is a wholly-owned subsidiary of BlackRock, Inc., which is
one of the largest publicly traded investment management firms in the United
States with $201.6 billion of assets under management as of March 31, 2001.
BlackRock Advisors is one of the nation's leading fixed income managers with
over $120 billion of fixed income assets under management. BlackRock Advisors
manages assets on behalf of more than 3,300 institutions and 200,000
individuals worldwide, including nine of the 10 largest companies in the U.S.
as determined by Fortune Magazine, through a variety of equity, fixed income,
liquidity and alternative investment separate accounts and mutual funds,
including the company's flagship fund families, BlackRock Funds and BlackRock
Provident Institutional Funds. BlackRock, Inc. is the nation's 26th largest
asset management firm according to Pensions & Investments, May 14, 2001.

         BlackRock has over 12 years of experience managing closed-end
products and currently advises a closed-end family of 20 funds. BlackRock has
13 leveraged municipal closed-end funds under management and over $16.2
billion in municipal assets firm- wide. As of March 31, 2001, BlackRock
managed over $6.8 billion in closed-end products. In March 2001, the Fortune
Magazine article entitled "The Hidden Beauty of Bonds" by Andy Serwer called
BlackRock "perhaps the greatest success story on Wall Street in the past
half-decade." In addition, BlackRock provides risk management and investment
system services to a growing number of institutional investors under the
BlackRock Solutions name. In January 2001, Risk Magazine named BlackRock
"Asset Management Risk Manager of the Year." Clients are served from the
company's headquarters in New York City, as well as offices in Wilmington, DE,
Edinburgh, Scotland and Tokyo, Japan. BlackRock, Inc. is a member of the PNC
Financial Services Group, Inc. ("PNC"), one of the largest diversified
financial services organizations in the United States, and is majority-owned
by PNC and by BlackRock employees.


                      PORTFOLIO TRANSACTIONS AND BROKERAGE


         The Advisor is 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 is 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
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 size of the
difficulty in executing the order, and the best net price. There are many
instances when, in the judgment of the 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 such
information from brokers; however, it considers access to such information to
be an important element of financial management. Although such information is
considered useful, its value is not determinable, as it must be reviewed and
assimilated by the Advisor and/or the Sub-Advisor, and does not reduce the
Advisor's and/or the Sub-Advisor's normal research activities in rendering
investment advice under the Investment Management Agreement or the
Sub-Investment Advisory Agreement. It is possible that the Advisor's and/or
the Sub-Advisor's expenses could be materially increased if it attempted to
purchase this type of information or generate it through its own staff.

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

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



                              DESCRIPTION OF SHARES

Common Shares

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

Preferred Shares

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


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



                           REPURCHASE OF COMMON SHARES


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

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

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

         Although the decision to take action in response to a discount from
net asset value will be made by the board of trustees at the time it considers
such issue, it is the board's present policy, which may be changed by the
board of trustees, not to authorize repurchases of common shares or a tender
offer for such shares if (1) such transactions, if consummated, would (a)
result in the delisting of the common shares from the New York Stock Exchange,
or (b) impair the Trust's status as a regulated investment company under the
Internal Revenue Code of 1986,as amended (the "Code") (which would make the
Trust a taxable entity, causing the Trust's income to be taxed at the
corporate level in addition to the taxation of shareholders who receive
dividends from the Trust) or as a registered closed-end investment company
under the Investment Company Act; (2) the Trust would not be able to liquidate
portfolio securities in an orderly manner and consistent with the Trust's
investment objective and policies in order to repurchase shares; or (3) there
is, in the board's judgment, any (a) material legal action or proceeding
instituted or threatened challenging such transactions or otherwise materially
adversely affecting the Trust, (b) general suspension of or limitation on
prices for trading securities on the New York Stock Exchange, (c) declaration
of a banking moratorium by Federal or state authorities or any suspension of
payment by United States or New York banks, (d) material limitation affecting
the Trust or the issuers of its portfolio securities by Federal or state
authorities on the extension of credit by lending institutions or on the
exchange of foreign currency, (e) commencement of war, armed hostilities or
other international or national calamity directly or indirectly involving the
United States, or (f) other event or condition which would have a material
adverse effect (including any adverse tax effect) on the Trust or its
shareholders if shares were repurchased. The board of trustees may in the
future modify these conditions in light of experience.

         The repurchase by the Trust of its shares at prices below net asset
value will result in an increase in the net asset value of those shares that
remain outstanding. However, there can be no assurance that share repurchases
or tender offers at or below net asset value will result in the Trust's shares
trading at a price equal to their net asset value. Nevertheless, the fact that
the Trust's shares may be the subject of repurchase or tender offers from time
to time, or that the Trust may be converted to an open-end 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 total assets which would likely have the effect of
increasing the Trust's expense ratio. Any purchase by the Trust of its common
shares at a time when Preferred Shares are outstanding will increase the
leverage applicable to the outstanding common shares then remaining.

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


                                   TAX MATTERS

Federal Income Tax Matters


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

         The Trust intends to qualify under Subchapter M of the Internal
Revenue Code of 1986, as amended, for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, the Trust must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to its
shareholders. First, the Trust must derive at least 90% of its annual gross
income (including tax-exempt interest) from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies, or other income (including but not
limited to gains from options, futures and forward contracts) derived with
respect to its business of investing in such stock, securities or currencies
(the "90% gross income test"). Second, the Trust must diversify its holdings
so that, at the close of each quarter of its taxable year, (i) at least 50% of
the value of its total assets is comprised of cash, cash items, United States
government securities, securities of other regulated investment companies and
other securities limited in respect of any one issuer to an amount not greater
in value than 5% of the value of the Trust's total assets and to not more than
10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of the total assets is invested in the securities of any
one issuer (other than United States government securities and securities of
other regulated investment companies) or two or more issuers controlled by the
Trust and engaged in the same, similar or related trades or businesses.

         As a regulated investment company, the Trust will not be subject to
Federal income tax in any taxable year for which it distributes at least 90%
of the sum of (i) its "investment company taxable income" (which includes
dividends, taxable interest, taxable original issue discount and market
discount income, income from securities lending, net short-term capital gain
in excess of long-term capital loss, and any other taxable income other than
"net capital gain" (as defined below) and is reduced by deductible expenses)
determined without regard to the deduction for dividends paid and (ii) its net
tax-exempt interest (the excess of its gross tax-exempt interest income over
certain disallowed deductions). The Trust may retain for investment its net
capital gain (which consists of the excess of its net long-term capital gain
over its net short-term capital loss). However, if the Trust retains any net
capital gain or any investment company taxable income, it will be subject to
tax at regular corporate rates on the amount retained. If the Trust retains
any net capital gain, it may designate the retained amount as undistributed
capital gains in a notice to its holders of common shares who, if subject to
Federal income tax on long-term capital gains, (i) will be required to include
in income for Federal income tax purposes, as long-term capital gain, their
share of such undistributed amount and (ii) will be entitled to credit their
proportionate shares of the tax paid by the Trust against their Federal income
tax liabilities, if any, and to claim refunds to the extent the credit exceeds
such liabilities. For Federal income tax purposes, the tax basis of shares
owned by a holder of common shares of the Trust will be increased by the
amount of undistributed capital gains included in the gross income of the
holder of common shares less the tax deemed paid by the holder of common
shares under clause (ii) of the preceding sentence. The Trust intends to
distribute at least annually to its shareholders all or substantially all of
its net tax-exempt interest and any investment company taxable income and net
capital gain.

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

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

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


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

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


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

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

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


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

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


         Although exempt-interest dividends generally may be treated by
holders of common shares as items of interest excluded from their gross
income, each holder is advised to consult his tax advisor with respect to
whether exempt-interest dividends retain their exclusion if the shareholder
would be treated as a "substantial user," or a "related person" of a
substantial user, of the facilities financed with respect to any of the
tax-exempt obligations held by the Trust. "Substantial user" is defined under
the Treasury Regulations to include a non-exempt person who regularly uses in
his trade or business a part of the facilities financed with the tax- exempt
obligations and whose gross revenues derived from such facilities exceed 5% of
the useable area of the facilities or from whom the facilities or a part
thereof were specifically constructed, reconstructed or acquired. "Related
persons" include certain natural persons, affiliated corporations, a
partnership and its partners and an S corporation and its shareholders.


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


         The redemption, sale or exchange of common shares normally will
result in capital gain or loss to the holders of common shares who hold their
shares as capital assets. Generally, a shareholder's gain or loss will be
long-term capital gain or loss if the shares have been held for more than one
year even though the increase in value in such common shares is attributable
to tax exempt interest income. In addition, gain realized by the Trust from
the disposition of a tax-exempt municipal obligation that is attributable to
accrued market discount will be treated as ordinary income rather than capital
gain, and thus may increase the amount of ordinary income dividends received
by holders on common shares. Present law taxes both long- and short-term
capital gains of corporations at the rates applicable to ordinary income. For
non-corporate taxpayers, however, long-term capital gains will be taxed at a
maximum rate of 20%, while short-term capital gains and other ordinary income
will be taxed at a maximum rate of 39.6%. Because of the limitations on
itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective tax rate may be higher in certain
circumstances.

         All or a portion of a sales charge paid in purchasing common shares
cannot be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent common shares or shares of another fund are subsequently acquired
without payment of a sales charge pursuant to the reinvestment or exchange
privilege. Any disregarded portion of such charge will result in an increase
in the shareholder's tax basis in the shares subsequently acquired. In
addition, no loss will be allowed on the redemption or exchange of common
shares if the shareholder purchases other shares of the Trust (whether through
reinvestment of distributions or otherwise) or the shareholder acquires or
enters into a contract or option to acquire securities that are substantially
identical to shares of the Trust within a period of 61 days beginning 30 days
before and ending 30 days after such redemption or exchange. If disallowed,
the loss will be reflected in an adjustment to the basis of the shares
acquired. Further, any losses realized on the sale or exchange of common
shares held for six months or less will be disallowed to the extent of any
exempt-interest dividends received with respect to such common shares and, if
not disallowed, such losses will be treated as long-term capital losses to the
extent of any capital gain dividends received (or credited as undistributed
capital gain) with respect to such common shares.

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


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


         The Trust is required in certain circumstances to withhold 31% of
taxable dividends and certain other payments paid to non-corporate
shareholders who have not furnished to the Trust their correct taxpayer
identification number (in the case of individuals, their Social Security
number) and certain certifications, or who are otherwise subject to backup
withholding. Backup withholding is not an additional tax and any amount
withheld may be credited against the shareholder's federal income tax
liability.

         The foregoing is a general and abbreviated summary of the provisions
of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations
presently in effect as they directly govern the taxation of the Trust and its
shareholders. For complete provisions, reference should be made to the
pertinent Code sections and Treasury Regulations. The Code and the Treasury
Regulations are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Trust transactions. Holders
of common shares are advised to consult their own tax advisors for more
detailed information concerning the Federal taxation of the Trust and the
income tax consequences to its holders of common shares.


         See Appendix B for additional information on Federal taxation.


                 PERFORMANCE RELATED AND COMPARATIVE INFORMATION


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


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

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


The Advantages of Compounding


Year           Lehman Aggregate       Municipal Bond Portfolio
                Yielding 6.14%     Yielding 6.25% (tax equivalent
                                             of 10.35%)
                   10,000.00                  10,000.00
            1      10,614.00                  11,035.00
            2      11,265.70                  12,177.12
            3      11,957.41                  13,437.45
            4      12,691.60                  14,828.23
            5      13,470.86                  16,362.95
            6      14,297.97                  18,056.52
            7      15,175.87                  19,925.37
            8      16,107.67                  21,987.64
            9      17,096.68                  24,263.37
           10      18,146.41                  26,774.62
           11      19,260.60                  29,545.80
           12      20,443.21                  32,603.79
           13      21,698.42                  35,978.28
           14      23,030.70                  39,702.03
           15      24,444.79                  43,811.19
           16      25,945.70                  48,345.65
           17      27,538.76                  53,349.42
           18      29,229.64                  58,871.09
           19      31,024.34                  64,964.25
           20      32,929.24                  71,688.05

The hypothetical chart above is designed to illustrate the effects of
compounding and is not intended to predict the results of an actual fund
investment. The tax-free advantage shown represents the difference in value
between, respectively, a $10,000 investment compounded at a taxable yield of
6.14% (represents the yield to worst as of 4/30/01 on the Lehman Aggregate
Index, Source: Lehman Brothers) and a $10,000 investment compounded at the
taxable equivalent yield of 10.35%, based upon an assumed federal tax rate of
39.6%. If applicable state and local taxes are taken into account, the
tax-free advantage would be even greater. This example assumes that no change
in principal value or yield over the 20-year holding period, whereas, the net
asset value and yield of an actual fund investment will rise or fall as market
conditions change.

The Rigorous BlackRock Investment Process

Each security purchased by the Trusts must undergo the following in-depth
investment process and meet all pre-determined requirements before being added.
The process is designed to ensure that your money is being invested for the
highest possible return with the appropriate level of risk


         Step 1.
         Constant Research of Municipal Bond Universe
         for Securities with Most Attractive Opportunities

         Step 2.
         Evaluate Return/Risk Analytics


         Step 3.
         Additional In-depth research of security through
         direct communication with bond issuer

         Step 4.
         On sight research, in person, where appropriate

         Step 5.
         Evaluate Credit Enhancements

         Step 6.
         If Security Meets All Requirements After Daily review of portfolio
         construction to maintain Rigorous Review, Add to Portfolio Targeted
         credit quality, yield and diversification

Increased cash flows into the Municipal Sector Bodes well for Investors

                     2001 Projected US Municipal Cash Flows


month        mm
Jan               $25,754

Feb               $17,406

March             $13,958

April             $15,737

May               $14,813

June              $30,544

July              $34,633

Aug               $23,513

Sept              $16,467

Oct               $19,186

Nov               $16,515

Dec               $22,859


         Source: MUNIVIEW/BonBuyer (1/4/01)
         Figures represent anticipated payouts in 2001, in millions of dollars

The table above displays that cash flows into the Municipal sectors have
historically trended higher during the months of June, July and August.
Increased cash flows bodes well. Increased demand for municipals has the
potential to drive prices higher.

Municipal Bonds Have Had the Best After-Tax Return When Compared To Any Other
Major Fixed Income Category.

<TABLE>
<CAPTION>
                       Tax Adjusted Returns vs. Volatility
                              Fixed Income Classes
                          Last 10 Years Ending 4/30/01



10 year Period    Muni     Aggregate  Treasury   Agency   Corporates  Mortgages    Asset     High   Eurodollar    Global
                                                                                   Backed    Yield                Treasury
4/30/91 -
4/30/2001
<S>               <C>      <C>        <C>        <C>      <C>         <C>          <C>       <C>    <C>           <C>
Annualized        11.55%   7.82%      7.69%      7.81%    8.27%       7.70%                  9.19%  7.71%         6.53%
Return
Annualized        4.28     3.76       4.16       3.85     4.72        3.05                   5.62   3.56          5.84
 STD

                                                                                                          Source: Lehman Brothers
</TABLE>

The table above shows that over the past 10 years, on an after tax basis,
Municipal Bonds have has higher annualized returns than any other major fixed
income category.

         The tax equivalent return reflects an adjustment of 35% of the
portion of the Lehman Brothers Municipal Index attributable to coupon payment
(to adjust for an assumed tax bracket of 35%) and no adjustment to the portion
of the Lehman Brothers Municipal Index attributable to principal appreciation.


                                     EXPERTS


         The Statement of Net Assets of the Trust as of , 2001 appearing in
this Statement of Additional Information has been audited by , independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
is included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing. , located at , provides accounting and
auditing services to the Trust.

                             ADDITIONAL INFORMATION

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

                         REPORT OF INDEPENDENT AUDITORS

[To follow]








                        BLACKROCK MUNICIPAL INCOME TRUST

                             STATEMENT OF NET ASSETS
                                                                       , 2001


[To come]









                                   APPENDIX A

Ratings of Investments

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

Long-Term Debt

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

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

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

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

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


         2.       Nature of and provisions of the obligation; and


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

Investment Grade

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

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

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

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

Speculative Grade Rating

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Municipal Notes

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

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

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

Note rating symbols are as follows:

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

SP-2     Satisfactory capacity to pay principal and interest.

SP-3     Speculative capacity to pay principal and interest.

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

Commercial Paper

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

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

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

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

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

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

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

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

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

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

Municipal Bonds

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

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

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

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

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

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

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

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

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

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

Note:    Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
         category from Aa to B in the public finance sectors. The modifier 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

MIG1/
VMIG1    This designation denotes best quality. There is present
         strong protection by established cash flows, superior liquidity
         support or demonstrated broadbased access to the market for
         refinancing.

MIG2/
VMIG 2   This designation denotes high quality. Margins of
         protection are ample although not so large as in the preceding group.

MIG3/
VMIG 3   This designation denotes favorable quality. All security
         elements are accounted for but there is lacking the undeniable
         strength of the preceding grades. Liquidity and cash flow protection
         may be narrow and market access for refinancing is likely to be less
         well-established.

MIG4/
VMIG 4   This designation denotes adequate quality. Protection
         commonly regarded as required of an investment security is present
         and although not distinctly or predominantly speculative, there is
         specific risk.

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

Commercial Paper

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

     --  Leading market positions in well-established industries.

     --  High rates of return on funds employed.

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

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

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

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

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

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

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

Long-Term Credit Ratings

Investment Grade

AAA      Highest credit quality. 'AAA' ratings denote the lowest expectation
         of credit risk. They are assigned only in case of exceptionally
         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.

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.





                                   APPENDIX B

                         TAXABLE EQUIVALENT YIELD TABLE

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



  2001 Federal Taxable vs. Tax-Free Yields
<TABLE>
<CAPTION>

           Federal
           Tax              Taxable Equivalent Estimate Current Return
           Bracket     4.00%        4.50%      5.00%       5.50%     6.00%     6.50%
           -------------------------------------------------------------------------
<S>         <C>          <C>          <C>         <C>         <C>        <C>        <C>
            15.0%        4.71%        5.29%       5.88%       6.47%      7.06%      7.65%
            28.0%        5.56%        6.25%       6.94%       7.64%      8.33%      9.03%
            31.0%        5.80%        6.52%       7.25%       7.97%      8.70%      9.42%
            36.0%        6.25%        7.03%       7.81%       8.59%      9.38%     10.16%
            39.6%        6.62%        7.45%       8.28%       9.11%      9.93%     10.76%


  2001-2003 Federal Taxable vs. Tax-Free Yields

           Federal
           Tax              Taxable Equivalent Estimate Current Return
           Bracket     4.00%        4.50%      5.00%       5.50%     6.00%     6.50%
           -------------------------------------------------------------------------
            15.0%        4.71%        5.29%       5.88%       6.47%      7.06%      7.65%
            27.0%        5.48%        6.16%       6.85%       7.53%      8.22%      8.90%
            30.0%        5.71%        6.43%       7.14%       7.86%      8.57%      9.29%
            35.0%        6.15%        6.92%       7.69%       8.46%      9.23%     10.00%
            38.6%        6.51%        7.33%       8.14%       8.96%      9.77%     10.59%

  2004-2005 Federal Taxable vs. Tax-Free Yields

           Federal
           Tax              Taxable Equivalent Estimate Current Return
           Bracket     4.00%        4.50%      5.00%       5.50%     6.00%     6.50%
           -------------------------------------------------------------------------
            15.0%        4.71%        5.29%       5.88%       6.47%      7.06%      7.65%
            26.0%        5.41%        6.08%       6.76%       7.43%      8.11%      8.78%
            29.0%        5.63%        6.34%       7.04%       7.75%      8.45%      9.15%
            34.0%        6.06%        6.82%       7.58%       8.33%      9.09%      9.85%
            37.6%        6.41%        7.21%       8.01%       8.81%      9.62%     10.42%

    2006 Federal Taxable vs. Tax-Free Yields

           Federal
           Tax              Taxable Equivalent Estimate Current Return
           Bracket     4.00%        4.50%      5.00%       5.50%     6.00%     6.50%
           -------------------------------------------------------------------------
            15.0%        4.71%        5.29%       5.88%       6.47%      7.06%      7.65%
            25.0%        5.33%        6.00%       6.67%       7.33%      8.00%      8.67%
            28.0%        5.56%        6.25%       6.94%       7.64%      8.33%      9.03%
            33.0%        5.97%        6.72%       7.46%       8.21%      8.96%      9.70%
            35.0%        6.15%        6.92%       7.69%       8.46%      9.23%     10.00%

</TABLE>



                                   APPENDIX C

                        GENERAL CHARACTERISTICS AND RISKS
                             OF HEDGING TRANSACTIONS

         In order to manage the risk of its securities portfolio, including
management, 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 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 below the exercise price of the option, less the premium received on
the sale of the option. The Trust is authorized to purchase and sell exchange
listed options and over-the-counter options ("OTC Options") which are
privately negotiated with the counterparty. Listed options are issued by the
Options Clearing Corporation ("OCC") which guarantees the performance of the
obligations of the parties to such options.

         The Trust's ability to close out its position as a purchaser or
seller of an exchange-listed put or call option is dependent upon the
existence of a liquid secondary market on option exchanges. Among the possible
reasons for the absence of a liquid secondary market on an exchange are: (i)
insufficient trading interest in certain options; (ii) restrictions on
transactions imposed by an exchange; (iii) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of options
or underlying securities; (iv) interruption of the normal operations on an
exchange; (v) inadequacy of the facilities of an exchange or OCC to handle
current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist, although outstanding options
on that exchange that had been listed by the OCC as a result of trades on that
exchange would generally continue to be exercisable in accordance with their
terms. OTC options are purchased from or sold to dealers, financial
institutions or other counterparties which have entered into direct agreements
with the Trust. With OTC Options, such variables as expiration date, exercise
price and premium will be agreed upon between the Trust and the counterparty,
without the intermediation of a third party such as the OCC. If the
counterparty fails to make or take delivery of the securities underlying an
option it has written, or otherwise settle the transaction in accordance with
the terms of that option as written, the Trust would lose the premium paid for
the option as well as any anticipated benefit of the transaction. As the Trust
must rely on the credit quality of the counterparty rather than the guarantee
of the OCC, it will only enter into OTC options with counterparties with the
highest long-term credit ratings, and with primary United States government
securities dealers recognized by the Federal Reserve Bank of New York.

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

Futures Contracts and Related Options

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

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

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

         Segregation and Cover Requirements. Futures contracts, interest rate
swaps, caps, floors and collars, short sales, reverse repurchase agreements
and dollar rolls, and listed or OTC options on securities, indices and futures
contracts sold by the Trust are generally subject to segregation 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 segregate on an ongoing basis with its custodian,
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 segregation 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 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.




                                     PART C

<TABLE>
                                OTHER INFORMATION

Item 24.  Financial Statements and Exhibits

(1)      Financial Statements
         Part A - Report of Independent Accountants.***
         Statement of Assets and Liabilities.***

         Part B -          None.

(2)      Exhibits



<S>     <C>               <C>
         (a)               Amended and Restated Agreement and Declaration of Trust.***
         (b)               By-Laws.*
         (c)               Inapplicable.
         (d)               Form of Specimen Certificate.**
         (e)               Form of Dividend Reinvestment Plan.*
         (f)               Inapplicable.
         (g)(1)            Form of Investment Management Agreement.**
         (g)(2)            Form of Waiver Reliance Letter.**
         (g)(3)            Form of Sub-Investment Advisory Agreement.**
         (h)               Form of Underwriting Agreement.**
         (i)               Form of Deferred Compensation Plan for Independent Trustees.**
         (j)               Form of Custodian Agreement.*
         (k)               Form of Transfer Agency Agreement.**
         (l)               Opinion and Consent of Counsel to the Trust.***
         (m)               Inapplicable.
         (n)               Consent of Independent Public Accountants.***
         (o)               Inapplicable.
         (p)               Form of Initial Subscription Agreement.*
         (q)               Inapplicable.
         (r)(1)            Code of Ethics of Trust.*
         (r)(2)            Code of Ethics of Advisor and Sub-Advisor.*
         (s)               Powers of Attorney**


-----------


*        Previously filed in the initial filing on April 3, 2001
**       Filed herewith.
***      To be filed by amendment.
</TABLE>


Item 25.  Marketing Arrangements


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


Item 26.  Other Expenses of Issuance and Distribution

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

         Registration fees............................................    $ *
         New York Stock Exchange listing fee..........................       *
         Printing (other than certificates)...........................       *
         Engraving and printing certificates..........................       *
         Fees and expenses of qualification under
           state securities laws (excluding fees
           of counsel)................................................       *
         Accounting fees and expenses.................................       *
         Legal fees and expenses......................................       *
         NASD fee.....................................................       *
         Miscellaneous................................................       *

                  Total...............................................    $ *


*        To be furnished by amendment.

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

         Prior to March 30, 2001 the Registrant had no existence.

Item 28.  Number of Holders of Shares

                                                            Number of
Title of class                                           Record Holders

Shares of Beneficial Interest                                    0

Item 29.  Indemnification

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

         Section 5.1. 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
general corporation law of the State of Delaware. No Trustee or officer of the
Trust shall be subject in such capacity to any personal liability whatsoever
to any Person, other than the Trust or its Shareholders, in connection with
Trust Property or the affairs of the Trust, save only liability to the Trust
or its Shareholders arising from bad faith, willful misfeasance, gross
negligence (negligence in the case of those Trustees or officers who are
directors, officers or employees of the Trust's investment advisor
("Affiliated Indemnitees")) or reckless disregard for his duty to such person;
and, subject to the foregoing exception, all such persons shall look solely to
the Trust property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any shareholder, trustee or
officer, as such, of the Trust, is made a party to any suit or proceeding to
enforce any such liability, subject to the foregoing exception, he shall not,
on account thereof, be held to any personal liability.

         Section 5.2. a. The Trust hereby agrees to indemnify the Trustees and
officers 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 above
in this Section 5.2 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 was authorized by a majority of
the Trustees.

                  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 (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 conclude 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 he is entitled
to such indemnification and if a majority of the Trustees determine that the
applicable standards of conduct necessary for indemnification appear to have
been met. In addition, at least one of the following conditions must be met:
(i) the indemnitee shall provide adequate security for his undertaking, (ii)
the Trust shall be insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of the Disinterested Non-Party
Trustees, or if a majority vote of such quorum so direct, independent legal
counsel in a written opinion, shall conclude, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is
substantial reason to believe that the indemnitee ultimately will be found
entitled to indemnification.

                  d. The rights accruing to any indemnitee under these
provisions shall not exclude any other right to which he may be lawfully
entitled.

                  e. Subject to any limitations provided by the Investment
Company Act and this Declaration, the Trust shall have the power and authority
to indemnify other Persons providing services to the Trust to the full extent
provided by law as if the Trust were a corporation organized under the
Delaware General Corporation Law provided that such indemnification has been
approved by a majority of the Trustees.

         Insofar as indemnification for liabilities arising under the Act, may
be permitted 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 attached as Exhibit
, which is incorporated herein by reference.


Item 30.  Business and Other Connections of Investment Advisor


                           Not Applicable

Item 31.  Location of Accounts and Records


         The Registrant's accounts, books and other documents are currently
located at the offices of the Registrant, c/o BlackRock Advisors, Inc., 100
Bellevue Parkway, Wilmington, Delaware 19809 and at the offices of EquiServe
Trust Company, N.A. (formerly known as State Street Bank and Trust Company),
the Registrant's Custodian, 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) The Registrant hereby undertakes that (i) for the purpose of
determining any liability under the 1933 Act, the information omitted from the
form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
under Rule 497(h) under the 1933 Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and(ii) for
the purpose of determining any liability under the 1933 Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of the securities at that time shall be deemed to be the
initial bona fide offering thereof.


         (3)      Not applicable

         (4)      Not applicable

         (5) (a) For the purposes of determining any liability under the
Securities Act of 1933, the information omitted form the form of prospectus
filed as part of a registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant under Rule 497 (h)
under the Securities Act of 1933 shall be deemed to be part of the
Registration Statement as of the time it was declared effective.

                  (b) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering thereof.

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





                                   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 first day of June, 2001.

                                    /s/Ralph L. Schlosstein
                                       Ralph L. Schlosstein
                                    President

               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 first day of June, 2001.


Name                                         Title


                *                           Trustee and President
---------------------------------------
Ralph L. Schlosstein                        (Principal Executive Officer)

                *                           Treasurer (Principal
---------------------------------------
Henry Gabbay                                Financial and Accounting Officer)

                *                           Trustee
Andrew F. Brimmer

                *                           Trustee
Richard E. Cavanagh

                *                           Trustee
Kent Dixon

                *                           Trustee
Frank J. Fabozzi

                *                           Trustee
Laurence D. Fink

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

                 *                          Trustee
Walter F. Mondale



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



         INDEX TO EXHIBITS

(d)      Form of Specimen Certificate
(g)(1)   Form of Investment Management Agreement.
(g)(2)   Form of Waiver Reliance Letter
(g)(3)   Form of Sub-Investment Advisory Agreement
(h)      Form of Underwriting Agreement
(i)      Form of Deferred Compensation Plan for Independent Trustees
(k)      Form of Transfer Agency Agreement
(s)      Powers of attorney


</TEXT>
</DOCUMENT>
