<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>c21635_n30d-.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>


--------------------------------------------------------------------------------
                         BLACKROCK MUNICIPAL INCOME TRUST
                          ANNUAL REPORT TO SHAREHOLDERS
                          REPORT OF INVESTMENT ADVISOR
--------------------------------------------------------------------------------

                                                               November 30, 2001
Dear Shareholder:

     Economic  activity  slowed  significantly  during the annual  period  ended
October  31,  2001,  continuing  the  downturn  that  began in March  2000.  The
September 11 attacks on the World Trade Center and the Pentagon accelerated this
decline.  Inflation  adjusted Gross Domestic Product (GDP) fell at a 0.4% annual
rate during the third quarter, reaffirming that the economy is officially headed
towards  recession,  which is defined as two  consecutive  quarters  of negative
growth as measured by GDP.  In  response  to the  dramatic  slowdown in the U.S.
economy,  The Federal Reserve Board aggressively lowered interest rates over the
period.  In stark  contrast to its three  interest  rate  increases in February,
March,  and May of 2000,  the  Federal  Open  Market  Committee  (FOMC)  has cut
interest rates ten times in 2001.  Year-to-date,  the FOMC has reduced  interest
rates by 4.50%,  bringing the current  Federal  Funds rate to 2.00%,  its lowest
level since September 1961.

     The  weakening  U.S.  economic  environment  and the  accompanying  Federal
Reserve  activity  have had a  positive  effect  on the  fixed  income  markets.
Virtually  all sectors of the fixed income  market,  with the  exception of high
yield,  posted  double-digit  returns over the annual  period ended  October 31,
2001. As short-term interest rates declined faster than long-term interest rates
over the period, the yield curve reached historically steep levels,  making it a
very  attractive  time for leveraged  bond funds.  Because these funds borrow at
short-term rates and invest in long-term securities,  the amount they earn grows
as the difference between short-term and long-term rates increases. Furthermore,
inflation is anticipated to decline to multi-decade  lows,  which should support
high-quality fixed income securities, especially those with longer maturities.

     The rallies in the fixed  income  markets  have  barely  offset the adverse
impact of the deteriorating equity market. For the year ending October 31, 2001,
the S&P 500 and Nasdaq  fell  25.49% and  49.39%,  respectively,  and,  while we
believe that  aggressive  monetary and fiscal  stimulus will help  stabilize the
economy, we expect growth to remain below potential for a more prolonged period.
Consumption  is  unlikely  to pick up  significantly  in the face of sizable job
cuts, the likelihood that flexible compensation (bonus, profit sharing, options)
will be sharply  lower,  and that  state and local  government  spending  may be
significantly  curtailed next year. In this  environment,  we expect a period of
prolonged lower interest rates.  Although somewhat discouraging for the American
consumer,  this low inflation/low  interest rate environment  should continue to
benefit fixed income  securities.  We expect  spread  products like high quality
corporates and mortgages to perform well relative to U.S. Treasuries.

     This  annual  report  contains  a summary of market  conditions  during the
annual  period and a review of portfolio  strategy by your  Trust's  managers in
addition  to the  Trust's  audited  financial  statements  and a listing  of the
portfolio's  holdings at October 31, 2001.  Continued thanks for your confidence
in BlackRock.  We appreciate the  opportunity to help you achieve your long-term
investment goals.


Sincerely,



/s/ Laurence D. Fink                     /s/ Ralph L. Schlosstein

Laurence D. Fink                         Ralph L. Schlosstein
Chairman                                 President

                                       1
<PAGE>


                                                               November 30, 2001
Dear Shareholder:

     We are pleased to present the first audited annual report for the BlackRock
Municipal  Income Trust (the  "Trust") for the period ended October 31, 2001. We
would like to take this  opportunity  to review the Trust's  stock price and net
asset  value  (NAV)  performance,  summarize  developments  in the fixed  income
markets and discuss recent portfolio management activity.

     The Trust is a diversified,  actively  managed  closed-end  bond fund whose
shares are traded on the New York Stock  Exchange  under the symbol  "BFK".  The
Trust's  investment  objective is to provide  current income exempt from regular
Federal  income tax. The Trust seeks to achieve  this  objective by investing in
tax-exempt general obligation and revenue bonds issued by city, county and state
municipalities  throughout the United States. The Trust will invest at least 80%
of its total  assets  in  municipal  bonds  that at the time of  investment  are
investment  grade  quality  (rated "AAA" to "BBB" by a major rating agency or of
equivalent  quality).  The  Trust may  invest  up to 20% of its total  assets in
municipal bonds that at the time of investment are non-investment  grade quality
(rated "BB" or "B" by a major rating agency or of equivalent quality).

     The table below  summarizes  the changes in the Trust's stock price and net
asset value since inception:

                                      ------------------------------------------
                                         10/31/01         HIGH           LOW
--------------------------------------------------------------------------------
  STOCK PRICE                             $14.75         $15.26        $14.26
--------------------------------------------------------------------------------
  NET ASSET VALUE (NAV)                   $14.30         $14.49        $14.09
--------------------------------------------------------------------------------


THE FIXED INCOME MARKETS

     Investors'  hopes for a soft landing quickly turned to fears of a recession
as the U.S. economy rapidly  deteriorated  over the year. Prior to the events of
September 11, our economic  outlook  envisioned  an extended  period of sluggish
growth, with the risk of a more severe  deterioration if consumer confidence and
spending declined by any considerable degree. Economic data prior to the attacks
suggests  that the  scenario of a more severe  contraction  may have been in the
works.  Year-over-year  industrial  production  was down,  4.8% in  August,  the
largest yearly decline since 1982. The unemployment  rate had drifted up to 4.9%
from a low of 3.9% in October of last year, and the four-week average of initial
jobless claims rose to its highest level in nearly a decade. Consumer confidence
was starting to wane, and consumer credit outstanding had begun to decline.  The
events of September 11 undoubtedly  further  weakened  consumer  sentiment.  The
Conference  Board's  consumer  confidence  index  posted its  biggest  one-month
decline  since 1990.  According  to the minutes of the October 2, 2001,  Federal
Open  Market  Committee  meeting,  "The  terrorist  attacks  have  significantly
heightened  uncertainty  in an  economy  that was  already  weak.  Business  and
household spending as a consequence are being further damped.  Nonetheless,  the
long-term prospects for productivity growth and the economy remain favorable and
should become evident once the unusual forces  restraining demand abate." During
the fiscal year ended October 31, 2001, the Federal  Reserve Board  aggressively
lowered  the  Federal  Funds  rate by a total of 4.00% to bring it to 2.50%.  On
November 6, 2001, the Federal Reserve Board announced another interest rate cut,
bringing the current Federal Funds rate to 2.00%.

     Over the  course of the  year,  the U.S.  Treasury  yield  curve  steepened
significantly as the bond market rallied in response to the slowing U.S. economy
and the  aggressive  interest rate cuts by the Federal  Reserve.  U.S.  Treasury
yields on the  short-end  of the yield curve fell  sharply from a 5.91% yield on
2-year U.S.  Treasuries  as of October 31, 2000, to a 2.42% yield on October 31,
2001, in reaction to the Federal Reserve Board cutting  short-term  rates by 4%.
During the period,  the yield on the 10-year  U.S.  Treasury  fell from 5.75% on
October 31, 2000, to 4.23% on October 31, 2001. U.S. Treasury yields continue to
fall due to further  Federal  Reserve  easing and an  anticipation  of increased
supply in order to raise capital to support programs  implemented as a result of
the tragic events that occurred on September 11, 2001. On October 31, 2001,  the
U.S.  Treasury   announced  plans  to  stop  selling  30-year  U.S.   Treasuries
maintaining  that the  government  "does not need the 30-year bond to meet [its]
current financing needs." On the news that the U.S. Treasury would discontinue a
program that issued a total of $600 billion in debt since its official inception
in 1977,  the 30-year  bond price  increased  by more than 5% and yields,  which
react inversely to changes in price, fell over 36 basis points. As a result, the
on-the-run  curve,  which  measures  yields  on newly  issued  U.S.  Treasuries,
flattened 32 basis points.

     For the annual period ended October 31, 2001,  municipal bonds outperformed
the taxable domestic bond market on a tax-adjusted  basis,  returning 17.12% (as
measured by the LEHMAN  MUNICIPAL  INDEX at a tax  bracket of 38.6%)  versus the
LEHMAN

                                       2
<PAGE>


AGGREGATE INDEX'S 14.56%.  Cash inflows over the period increased  significantly
from the previous year due to turmoil in the equity markets and  diversification
into fixed income  securities.  While  municipals  performed in line with spread
products (i.e. corporates,  mortgages, etc.) and Treasuries throughout the first
half of the period,  the municipal yield curve steepened over the latter half of
the year, and showed significant  outperformance versus Treasuries.  Refinancing
opportunities,  which are  expected  to reach  historic  levels  due to  falling
interest  rates,  continue  to drive  the pace of new  issues  in the  municipal
market.

THE TRUST'S PORTFOLIO AND INVESTMENT STRATEGY

     The Trust's portfolio is actively managed to diversify  exposure to various
sectors,  issuers,  revenue sources and security types.  BlackRock's  investment
strategy  emphasizes  a  relative  value  approach,  which  allows  the Trust to
capitalize  upon  changing  market  conditions  by rotating  municipal  sectors,
credits and coupons.

     Additionally,  the Trust employs leverage via auction rate preferred shares
to enhance its income by borrowing at short-term  municipal  rates and investing
the proceeds in longer  maturity  issues that have higher yields.  The degree to
which the Trust can benefit  from its use of leverage  may affect its ability to
pay monthly income.  At the period ended October 31, 2001, the Trust's  leverage
amount was approximately 36% of total assets.

     Municipals outperformed most spread products on a tax-adjusted basis during
the period, except on the short-end of the yield curve. The curve steepened over
most of the period and the 5 to 15 year part of the curve  remains very steep on
a historical  basis.  We remain  overweight in premium  coupon  securities in an
effort to avoid potential market discount  problems.  Premium coupon  securities
offer better price  performance  during periods of falling  interest rates,  and
similar  performance to discounts  when interest  rates rise.  Retail demand has
been robust throughout the period, with record inflows into municipal bond funds
of $2.92 billion during the month of August 2001, the largest  monthly  increase
since  1994.  Year-to-date,  net  inflows  into  municipal  bond  funds is $7.98
billion.

     The following charts show the Trust's asset  composition and credit quality
allocations:

                                SECTOR BREAKDOWN
--------------------------------------------------------------------------------
  SECTOR                                        OCTOBER 31, 2001
--------------------------------------------------------------------------------
  Hospital                                            23%
--------------------------------------------------------------------------------
  Transportation                                      18%
--------------------------------------------------------------------------------
  School                                              13%
--------------------------------------------------------------------------------
  Water & Sewer                                       10%
--------------------------------------------------------------------------------
  Industrial & Pollution Control                      10%
--------------------------------------------------------------------------------
  Other                                                9%
--------------------------------------------------------------------------------
  City, County & State                                 7%
--------------------------------------------------------------------------------
  Tobacco                                              7%
--------------------------------------------------------------------------------
  Housing                                              2%
--------------------------------------------------------------------------------
  Power                                                1%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
  CREDIT RATING*                                OCTOBER 31, 2001
--------------------------------------------------------------------------------
  AAA/Aaa                                             30%
--------------------------------------------------------------------------------
  AA/Aa                                               26%
--------------------------------------------------------------------------------
  A/A                                                 31%
--------------------------------------------------------------------------------
  BBB/Baa                                              8%
--------------------------------------------------------------------------------
  BB/Ba                                                3%
--------------------------------------------------------------------------------
  Not Rated                                            2%
--------------------------------------------------------------------------------

----------
*  Using the higher of Standard & Poor's, Moody's or Fitch's rating.

                                       3
<PAGE>


     We look  forward to  continuing  to manage  the Trust to  benefit  from the
opportunities  available to investors in the investment grade municipal  market.
We  thank  you for your  investment  and  continued  interest  in the  BlackRock
Municipal  Income Trust.  Please feel free to call our marketing center at (800)
227-7BFM  (7236) if you have any specific  questions  that were not addressed in
this report.


Sincerely,



/s/ Robert S. Kapito                     /s/ Kevin M. Klingert

Robert S. Kapito                         Kevin M. Klingert
Vice Chairman and Portfolio Manager      Managing Director and Portfolio Manager

--------------------------------------------------------------------------------
                        BLACKROCK MUNICIPAL INCOME TRUST
--------------------------------------------------------------------------------
  Symbol on New York Stock Exchange:                                  BFK
--------------------------------------------------------------------------------
  Initial Offering Date:                                         July 27, 2001
--------------------------------------------------------------------------------
  Closing Stock Price as of 10/31/01:                              $14.75
--------------------------------------------------------------------------------
  Net Asset Value as of 10/31/01:                                  $14.30
--------------------------------------------------------------------------------
  Yield on Closing Stock Price as of 10/31/01 ($14.75)(1):           6.25%
--------------------------------------------------------------------------------
  Current Monthly Distribution per Share(2):                        $0.076875
--------------------------------------------------------------------------------
  Current Annualized Distribution per Share(2):                     $0.9225
--------------------------------------------------------------------------------
(1)  Yield on  Closing  Stock  Price  is  calculated  by  dividing  the  current
     annualized  distribution  per share by the closing stock price per share.
(2)  The distribution is not constant and is subject to change.

                         PRIVACY PRINCIPLES OF THE TRUST

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

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

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

                                       4
<PAGE>


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
BLACKROCK MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2001
------------------------------------------------------------------------------------------------------------------------------------
           PRINCIPAL                                                                                   OPTION CALL
  RATING*   AMOUNT                                                                                     PROVISIONS+       VALUE
(UNAUDITED)  (000)                                 DESCRIPTION                                         (UNAUDITED)     (NOTE 1)
------------------------------------------------------------------------------------------------------------------------------------
<S>      <C>         <C>                                                                                <C>           <C>
                    LONG-TERM INVESTMENTS--158.6%
                     ALABAMA--0.8%
    AAA  $ 4,960     Jefferson Cnty. Swr. Rev., Cap. Impvt. Wts., Ser. A, 5.00%, 2/01/41, FGIC ....     2/11 @ 101    $  4,853,162
                                                                                                                      ------------
                     ALASKA--2.8%
                     No. Tobacco Securitization Corp., Tobacco Settlement Rev.,
    Aa3   10,500       5.50%, 6/01/29 .............................................................     6/11 @ 100      10,376,100
    Aa3    6,500       6.50%, 6/01/31 .............................................................     6/10 @ 100       7,000,110
                                                                                                                      ------------
                                                                                                                        17,376,210
                                                                                                                      ------------
                    ARIZONA--1.1%
    A3     7,000    Scottsdale Ind. Devel. Auth. Hosp. Rev., Scottsdale Hlth. Care,
                       5.80%, 12/01/31, (WI) ......................................................    12/11 @ 101       6,999,160
                                                                                                                      ------------
                    CALIFORNIA--6.0%
     A    25,500    California Infrastructure & Econ. Dev., J David Gladstone Inst.
                       Proj., 5.25%, 10/01/34 .....................................................    10/11 @ 101      25,269,225
                     Foothill / Eastn. Transp. Corridor Agcy. Toll Road Rev.,
    BBB-  20,535       Zero Coupon, 1/15/34 .......................................................   1/10 @ 24.228      3,016,797
    BBB-  75,000       Zero Coupon, 1/15/38 .......................................................   1/10 @ 19.014      8,611,500
                                                                                                                      ------------
                                                                                                                        36,897,522
                                                                                                                      ------------
                     COLORADO--2.4%
    BBB+   3,500     Denver Hlth.& Hosp. Auth. Hlth. Care Rev., Ser. A, 6.00%, 12/01/31 ...........     12/11@100        3,559,955
    AAA   11,235     Northwest Pkwy. Pub. Hwy. Auth. Rev., Ser. A, 5.25%, 6/15/41, FSA ............     6/11 @ 102      11,366,562
                                                                                                                      ------------
                                                                                                                        14,926,517
                                                                                                                      ------------
                    CONNECTICUT--5.9%
    BBB   17,840    Connecticut St. Dev. Auth. P.C.R., Connecticut Lt. & Pwr.,
                       Ser. A, 5.85%, 9/01/28 .....................................................    10/08 @ 102      18,227,842
    BBB-  18,215     Mohegan Tribe Indians, Pub. Impvt. Priority Distr., 6.25%, 1/01/31 ...........     1/11 @ 101      18,250,519
                                                                                                                      ------------
                                                                                                                        36,478,361
                                                                                                                      ------------
                     DISTRICT OF COLUMBIA--1.9%
                     Dist. of Columbia Rev., Georgetown Univ., Ser. A, MBIA,
    AAA   15,600       Zero Coupon, 4/01/36 .......................................................   4/11 @ 22.875      2,034,552
    AAA   51,185       Zero Coupon, 4/01/37 .......................................................   4/11 @ 21.546      6,262,997
     A1    3,305     Dist. of Columbia Tobacco Settlement Fin., 6.50%, 5/15/33 ....................   No. Opt. Call      3,701,600
                                                                                                                      ------------
                                                                                                                        11,999,149
                                                                                                                      ------------
                     FLORIDA--16.6%
     A-    8,500     Highlands Cnty. Hlth. Facs. Auth. Rev., Hosp. Adventist/Sunbelt, 6.00%, 11/15/31  11/11 @ 101       8,720,745
                     Jacksonville Econ. Dev. Comm. Hlth. Facs. Rev., Mayo Clinic,
     AA   15,000       Ser. B, 5.50%, 11/15/36 ....................................................    11/11 @ 101      15,235,500
     AA   20,000       Ser. C, 5.50%, 11/15/36 ....................................................    11/11 @ 101      20,314,000
    Aa3   50,410     Jacksonville Elec. Auth. Wtr. & Swr. Sys. Rev., Ser. C, 5.25%, 10/01/37 ......    10/06 @ 100      50,452,344
    BBB-   8,000     Martin Cnty. Indl. Dev. Auth., Indiantown Cogeneration Proj.,
                       Ser. A, 7.875%, 12/15/25 ...................................................    12/04 @ 102       8,361,680
                                                                                                                      ------------
                                                                                                                       103,084,269
                                                                                                                      ------------
                     IDAHO--2.8%
    AAA   16,970     Univ. Idaho. Rev., Student Fee Hsg. Impvt. Projs., 5.40%, 4/01/41, FGIC ......     4/11 @ 100      17,516,604
                                                                                                                      ------------
</TABLE>

                       See Notes to Financial Statements.

                                        5
<PAGE>


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
           PRINCIPAL                                                                                   OPTION CALL
  RATING*   AMOUNT                                                                                     PROVISIONS+       VALUE
(UNAUDITED)  (000)                                 DESCRIPTION                                         (UNAUDITED)     (NOTE 1)
------------------------------------------------------------------------------------------------------------------------------------
<S>      <C>         <C>                                                                                <C>           <C>
                     ILLINOIS--26.8%
    AAA  $40,000     Chicago, Neighborhoods Alive 21, G.O., Ser. A, 5.00%, 1/01/41, FGIC ..........     1/11 @ 100    $ 38,875,600
    AAA   23,000     Chicago O' Hare Intl. Arpt. Rev., Passenger Fac., Ser. C, 5.25%,
                       1/01/32, AMBAC .............................................................     1/11 @ 101      22,831,640
    A-     7,095     Illinois Dev. Fin. Auth. Hosp. Rev., Adventist Hlth. Sys. Sunbelt
                       Obl., 5.65%, 11/15/24 ......................................................    11/09 @ 101       7,013,975
                     Illinois Edl. Facs. Auth. Rev., Univ. of Chicago, Ser. A,
    Aa1   32,240       5.125%, 7/01/38 ............................................................     7/08 @ 101      31,647,751
    Aa1   53,000       5.25%, 7/01/41 .............................................................     7/11 @ 101      52,754,080
    AAA   20,000     Illinois Sports Facs. Auth. St. Tax Supported, Zero Coupon, 6/15/30 ..........     6/15 @ 101      12,653,400
                                                                                                                      ------------
                                                                                                                       165,776,446
                                                                                                                      ------------
                     INDIANA--6.8%
                     Indiana Hlth. Fac. Hosp. Rev., Methodist Hosp. Inc.,
     A+    6,500       5.375%, 9/15/22 ............................................................     9/11 @ 100       6,471,140
     A+    9,000       5.50%, 9/15/31 .............................................................     9/11 @ 100       9,109,530
                     Petersburg P.C.R., Indiana Pwr. & Lt. Conv.,
     A3   10,000       5.90%, 12/01/24 ............................................................    No Opt. Call     10,169,200
     A3   16,000       5.95%, 12/01/29 ............................................................     8/11 @ 102      16,324,800
                                                                                                                      ------------
                                                                                                                        42,074,670
                                                                                                                      ------------
                     IOWA--7.1%
     A1   45,000     Iowa Tobacco Settlement Auth. Rev., Ser. B, 5.60%, 6/01/35 ...................     6/11 @ 101      43,747,200
                                                                                                                      ------------
                     KENTUCKY--1.5%
    AAA    9,090     Kentucky Hsg. Corp. Hsg. Rev., Ser. F, 5.45%, 1/01/32, FNMA ..................     7/11 @ 100       9,191,354
                                                                                                                      ------------
                     LOUISIANA--3.9%
     A    21,425     Louisiana Local Gov't. Environ. Facs. & Cmnty. Dev. Auth. Rev.,
                       Cap. Projs. & Equip. Acquisition, 6.55%, 9/01/25, ACA ......................    No Opt. Call     24,025,138
                                                                                                                      ------------
                     MARYLAND--1.4%
     NR    8,000++   MuniMae TE Bond Subsidiary, LLC, Ser. A, 6.875%, 6/30/09 .....................    No Opt. Call      8,383,760
                                                                                                                      ------------
                     MASSACHUSETTS--7.4%
    AAA   20,500     Massachusetts St. Port Auth. Spec. Facs. Rev., Delta Air Lines
                       Inc. Proj., Ser. A, 5.00%, 1/01/27, AMBAC ..................................     1/11 @ 101      19,957,365
                     Massachusetts St. Tpke. Auth. Met. Hwy. Sys. Rev., Ser. A,
    AAA   13,000       5.00%, 1/01/37, MBIA .......................................................     1/07 @ 102      12,750,530
    AAA   13,685       5.00%, 1/01/39, AMBAC ......................................................     1/09 @ 101      13,417,595
                                                                                                                      ------------
                                                                                                                        46,125,490
                                                                                                                      ------------
                     MICHIGAN--6.5%
     AA   17,210     Kent Hosp. Fin. Auth. Rev., Spectrum Hlth., Ser. A, 5.50%, 1/15/31 ...........     7/11 @ 101      17,387,607
     A-   22,500     Michigan St. Strategic Fund Ltd. Oblig. Rev., Detroit Edison
                       Poll. Ctrl., Ser. C, 5.45%, 9/01/29 ........................................     9/11 @ 100      22,766,625
                                                                                                                      ------------
                                                                                                                        40,154,232
                                                                                                                      ------------
                     MISSISSIPPI--3.0%
     A2   18,680     Gulfport Hosp. Fac. Rev., Mem. Hosp. Gulfport Proj., Ser. A, 5.75%, 7/01/31 ..     7/11 @ 100      18,727,821
                                                                                                                      ------------
                     NEVADA--12.5%
    AAA   32,420     Clark Cnty. Arpt. Rev., Ser. B, 5.25%, 7/01/34, FGIC .........................     7/11 @ 100      32,769,163
    AAA   22,025     Director St. Dept. Business & Ind. Rev., Las Vegas Monorail Proj.,
                       5.375%, 1/01/40, AMBAC .....................................................     1/10 @ 100      22,220,142
    AAA   22,000     Truckee Meadows Wtr. Auth. Rev., Ser. A, 5.25%, 7/01/34, FSA .................     7/11 @ 100      22,203,280
                                                                                                                      ------------
                                                                                                                        77,192,585
                                                                                                                      ------------
</TABLE>

                       See Notes to Financial Statements.

                                        6
<PAGE>


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
           PRINCIPAL                                                                                   OPTION CALL
  RATING*   AMOUNT                                                                                     PROVISIONS+       VALUE
(UNAUDITED)  (000)                                 DESCRIPTION                                         (UNAUDITED)     (NOTE 1)
------------------------------------------------------------------------------------------------------------------------------------
<S>      <C>         <C>                                                                                <C>           <C>
                     NEW JERSEY--1.4%
    BB-  $10,585     New Jersey Econ. Dev. Auth. Rev., Continental Airlines Inc. Proj.,
                       Ser. B, 7.00%, 11/15/30 ....................................................    11/10 @ 101    $  8,955,863
                                                                                                                      ------------
                     NEW YORK--5.5%
                     Charter Mac Equity Issuer Trust,
     NR   11,000++     Ser. A, 6.30%, 6/30/49 .....................................................    No Opt. Call     11,000,000
     NR    1,000++     Ser. A, 6.625%, 6/30/09 ....................................................    No. Opt Call      1,037,550
     NR    6,500++     Ser. B, 6.80%, 11/30/50 ....................................................    No Opt. Call      6,500,000
     AA   15,670     New York City Mun. Wtr. Fin. Auth., Wtr. & Swr. Sys. Rev., Ser. C,
                       5.125%, 6/15/33 ............................................................     6/11 @ 101      15,637,406
                                                                                                                      ------------
                                                                                                                        34,174,956
                                                                                                                      ------------
                     OHIO--6.2%
    AA-   24,150     Lorain Cnty. Hosp. Rev., Impvt. Catholic Hlth. Care, Ser. A, 5.25%, 10/01/33 .    10/11 @ 101      23,830,012
    BBB   14,500     Ohio St. Air Quality Dev. Auth., P.C.R., Cleveland Elec.
                       Illuminating Co. Proj., Ser. B, 6.00%, 8/01/20 .............................     8/07 @ 102      14,767,815
                                                                                                                      ------------
                                                                                                                        38,597,827
                                                                                                                      ------------
                     PENNSYLVANIA--3.7%
    A3     5,000     Pennsylvania Econ. Dev. Fin. Auth. Exempt Facs. Rev., Amtrak Proj.,
                       6.375%, 11/01/41 ...........................................................     5/11 @ 101       5,185,700
     A    17,250     Pennsylvania St. Higher Edl. Facs. Auth. Rev., Univ.
                       Pennsylvania Hlth. Svcs., Ser. A, 5.75%, 1/01/22 ...........................     1/06 @ 101      17,473,042
                                                                                                                      ------------
                                                                                                                        22,658,742
                                                                                                                      ------------
                     SOUTH CAROLINA--3.1%
                     Greenwood Cnty. Hosp. Rev., Self Mem. Hosp. Facs.,
     A+    3,280       5.50%, 10/01/26 ............................................................    10/11 @ 100       3,281,542
     A+    3,250       5.50%, 10/01/31 ............................................................    10/11 @ 100       3,244,150
     AA    5,265     So. Carolina Jobs Econ. Dev. Auth. Hosp. Facs. Rev., Georgetown
                       Mem. Hosp., 5.375%, 2/01/30, GNMA ..........................................     8/11 @ 100       5,271,792
     A1    6,750     So. Carolina Tobacco Settlement Auth. Rev., Ser. B, 6.375%, 5/15/30 ..........    No Opt. Call      7,461,652
                                                                                                                      ------------
                                                                                                                        19,259,136
                                                                                                                      ------------
                     TEXAS--6.8%
    BB    26,310     Dallas Ft. Worth Intl. Arpt. Fac. Impvt. Rev.,
                       Amer. Airlines Inc., 6.375%, 5/01/35 .......................................    11/09 @ 101      21,675,493
    AAA   12,580     Harris Cnty. Houston Sports Auth. Spl. Rev., Ser. A,
                       Zero Coupon, 11/15/38, MBIA ................................................   11/30 @ 61.17      1,504,191
    AAA   13,410     Texas St. Dept. Hsg. & Cmnty. Affairs, Ser. A, 5.35%, 7/01/33 ................     7/11 @ 100      13,449,157
   Baa1    5,500     Tyler Hlth. Facs. Dev. Corp., Mother Frances Hosp. Regl. Hlth.,
                       6.00%, 7/01/31 .............................................................     7/12 @ 100       5,455,560
                                                                                                                      ------------
                                                                                                                        42,084,401
                                                                                                                      ------------
                     VIRGINIA--7.8%
                     Arlington Cnty. Ind. Dev. Auth., Virginia Hosp. Ctr. Arlington Hlth. Sys.,
     A2   15,000       5.25%, 7/01/25 .............................................................     7/11 @ 101      14,761,350
     A2   34,000       5.25%, 7/01/31 .............................................................     7/11 @ 101      33,261,180
                                                                                                                      ------------
                                                                                                                        48,022,530
                                                                                                                      ------------
                     WASHINGTON--4.7%
    AAA   30,000     Port Seattle Rev., Ser. B, 5.10%, 4/01/24, FGIC ..............................    10/08 @ 100      29,179,500
                                                                                                                      ------------
                     WISCONSIN--2.2%
     A+   13,750     Wisconsin St. Hlth.& Edl. Facs. Auth. Rev., Froedert & Cmnty. Hlth. Obl.,
                       5.375%, 10/01/30 ...........................................................    10/11 @ 101      13,447,912
                                                                                                                      ------------
                     TOTAL LONG-TERM INVESTMENTS (COST $976,679,248)...............................                    981,910,517
                                                                                                                      ------------
</TABLE>

                       See Notes to Financial Statements.

                                        7
<PAGE>


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
          PRINCIPAL                                                                                    OPTION CALL
  RATING*  AMOUNT                                                                                       PROVISIONS+       VALUE
(UNAUDITED) (000)                                  DESCRIPTION                                          (UNAUDITED)     (NOTE 1)
------------------------------------------------------------------------------------------------------------------------------------
<S>      <C>         <C>                                                                                <C>           <C>
                     SHORT-TERM INVESTMENTS**FRDD--1.6%
                     CALIFORNIA--0.4%
    A1+  $ 2,300     Irvine Ranch Wtr. Dist., Ser. A, 1.65%, 11/01/01 .............................        N/A        $  2,300,000
                                                                                                                      ------------
                     GEORGIA--0.1%
     A2      900     Monroe Cnty. Dev. Auth., P.C.R., Georgia Pwr. Co. Scherer, 2.15%, 11/01/01 ...        N/A             900,000
                                                                                                                      ------------
                     INDIANA--1.0%
    A1+    6,000     Indiana St. Dev. Fin. Auth. Environ. Rev., PSI Energy Inc. Proj.,
                       2.15%, 11/01/01 ............................................................        N/A           6,000,000
                                                                                                                      ------------
                     MICHIGAN--0.1%
     P1      700     Midland Cnty. Econ. Dev. Corp., Econ. Dev. Ltd. Oblig. Rev., Ser. B, 2.05%,
                       11/01/01 ...................................................................        N/A             700,000
                                                                                                                      ------------
                     TOTAL SHORT-TERM INVESTMENTS (COST $9,900,000) ..............................                       9,900,000
                                                                                                                      ------------
                     TOTAL INVESTMENTS--160.2% (COST $986,579,248) ...............................                     991,810,517
                     Other assets in excess of liabilities--0.4% .................................                       2,563,100
                     Liquidation value of preferred stock--(60.6%) ................................                   (375,125,000)
                                                                                                                      ------------

                     NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS--100% ..........................                    $619,248,617
                                                                                                                      ============
</TABLE>

----------
*    Using the higher of Standard & Poor's, Moody's or Fitch's rating.

**   For  purposes of amortized  cost  valuation,  the  maturity  dates of these
     instruments  is  considered to be the earlier of the next date on which the
     security  can be  redeemed  at par,  or the next  date on which the rate of
     interest is adjusted.

+    Option call provisions: date (month/year) and price of the earliest call or
     redemption.  There may be other call  provisions at varying prices at later
     dates.

++   Security is exempt from registration  under Rule 144A of the Securities Act
     of 1933.  These  securities  may be  resold  in  transactions  exempt  from
     registration to qualified institutional buyers.

--------------------------------------------------------------------------------
                              KEY TO ABBREVIATIONS:

            ACA   -- American Capital Access
            AMBAC -- American Municipal Bond Assurance Corporation
            FGIC  -- Financial Guaranty Insurance Company
            FNMA  -- Federal National Mortgage Association
            FRDD  -- Floating Rate Daily Demand
            FSA   -- Financial Security Assurance
            GNMA  -- Government National Mortgage Association
            G.O.  -- General Obligation
            MBIA  -- Municipal Bond Insurance Association
            WI    -- When issued
--------------------------------------------------------------------------------

                       See Notes to Financial Statements.

                                       8
<PAGE>

--------------------------------------------------------------------------------
BLACKROCK
MUNICIPAL INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2001
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $986,579,248)
  (Note 1) ...................................................   $  991,810,517
Receivable for investments sold ..............................       38,540,815
Interest receivable ..........................................       10,450,040
Other ........................................................           46,505
                                                                 --------------
                                                                  1,040,847,877
                                                                 --------------
LIABILITIES
Payable for investments purchased ............................       41,905,782
Dividends payable--common stock ..............................        3,330,387
Dividends payable--preferred stock ...........................           66,592
Investment advisory fee payable (Note 2) .....................          276,699
Organization and offering costs payable ......................          458,295
Due to custodian .............................................          227,940
Other accrued expenses .......................................          208,565
                                                                 --------------
                                                                     46,474,260
                                                                 --------------
NET INVESTMENT ASSETS ........................................   $  994,373,617
                                                                 ==============
Net assets were comprised of:
  Common shares of beneficial interest:
    Par value (Note 4) .......................................   $       43,311
    Paid-in capital in excess of par .........................      614,735,998
  Preferred stock (Note 4) ...................................      375,125,000
                                                                 --------------
                                                                    989,904,309
  Distribtions in excess of net investment
    income (Note 1) ..........................................         (235,690)
  Accumulated net realized loss (Note 1) .....................         (526,271)
  Net unrealized appreciation (Note 1) .......................        5,231,269
                                                                 --------------
Net investment assets, October 31, 2001 ......................   $  994,373,617
                                                                 ==============
Net assets applicable to common shareholders .................   $  619,248,617
                                                                 ==============
Net asset value per common share of
  beneficial interest:
  ($619,248,617 / 43,310,774 common shares
  of beneficial interest issued and outstanding) .............   $        14.30
                                                                 ==============

--------------------------------------------------------------------------------
BLACKROCK
MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 27, 2001
(COMMENCEMENT OF INVESTMENT OPERATIONS)
TO OCTOBER 31, 2001
--------------------------------------------------------------------------------

NET INVESTMENT INCOME
Income
  Interest (Note 1) ..........................................   $    7,924,153
                                                                 --------------
Expenses
  Investment advisory ........................................        1,066,877
  Auction Agent ..............................................           71,777
  Independent accountants ....................................           56,500
  Reports to shareholders ....................................           50,000
  Custodian ..................................................           36,488
  Trustees ...................................................           22,053
  Transfer agent .............................................           17,125
  Organization expenses ......................................           15,000
  Legal ......................................................            3,058
  Miscellaneous ..............................................           45,355
                                                                 --------------
  Total expenses .............................................        1,384,233
  Less fees waived by advisor (Note 2) .......................         (444,532)
  Less fees paid indirectly (Note 2) .........................          (22,227)
                                                                 --------------
  Net expenses ...............................................          917,474
                                                                 --------------
Net investment income ........................................        7,006,679
                                                                 --------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss on investments .............................         (526,271)
Net change in unrealized appreciation
  on investments .............................................        5,231,269
                                                                 --------------
Net gain on investments ......................................        4,704,998
                                                                 --------------
NET INCREASE IN NET INVESTMENT
ASSETS RESULTING FROM OPERATIONS .............................   $   11,711,677
                                                                 ==============
                       See Notes to Financial Statements.

                                       9
<PAGE>


-------------------------------------------------------------------------------
BLACKROCK MUNICIPAL INCOME TRUST
STATEMENT OF CHANGES IN NET INVESTMENT ASSETS
-------------------------------------------------------------------------------

                                                                 FOR THE PERIOD
                                                                 JULY 27, 2001*
                                                                     THROUGH
                                                                OCTOBER 31, 2001
                                                                ----------------

INCREASE (DECREASE) IN NET INVESTMENT ASSETS

OPERATIONS:
  Net investment income ......................................   $    7,006,679
  Net realized loss on investments ...........................         (526,271)
  Net change in unrealized appreciation on investments .......        5,231,269
                                                                 --------------
    Net increase in net assets resulting from operations .....       11,711,677
                                                                 --------------
DIVIDENDS:
  To common shareholders from net investment income ..........       (6,444,012)
  To common shareholders in excess of net investment income ..         (216,763)
  To preferred shareholders from net investment income .......         (562,667)
  To preferred shareholders in excess of net
    investment income ........................................          (18,927)
                                                                 --------------
    Total dividends ..........................................       (7,242,369)
                                                                 --------------
CAPITAL SHARE TRANSACTIONS:
  Net proceeds from the issuance of common shares ............      535,236,781
  Common shares issued in connection with the reinvestment
    of common dividends ......................................           38,778
  Net proceeds from underwriter's over-allotment
    option exercised .........................................       79,503,750
  Gross proceeds from the issuance of preferred shares .......      375,125,000
                                                                 --------------
    Net proceeds from capital share transactions..............      989,904,309
                                                                 --------------
    Total increase ...........................................      994,373,617
                                                                 --------------
NET INVESTMENT ASSETS
Beginning of period ..........................................               --
                                                                 --------------
End of period (including distributions in excess
  of net investment income of $235,690) ......................   $  994,373,617
                                                                 ==============

----------
* Commencement of investment operations (Note 1)


                       See Notes to Financial Statements.

                                       10
<PAGE>


--------------------------------------------------------------------------------
BLACKROCK MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
                                                                FOR THE PERIOD
                                                                JULY 27, 2001(1)
                                                                    THROUGH
                                                                OCTOBER 31, 2001
                                                                ----------------
PER COMMON SHARE OPERATING PERFORMANCE:(2)
Net asset value, beginning of period(3) ........................   $  14.33
                                                                   --------
  Net investment income ........................................       0.17
  Net realized and unrealized gain on investments ..............       0.12
                                                                   --------
Net increase from investment operations ........................       0.29
                                                                   --------
Dividends and distributions:
  Dividends from net investment income to:
    Common shareholders ........................................      (0.16)
    Preferred shareholders .....................................      (0.01)
  Distributions in excess of net investment income to:
    Common shareholders ........................................      (0.01)
    Preferred shareholders .....................................      (0.00)(4)
                                                                   --------
Total dividends and distributions ..............................      (0.18)
                                                                   --------
Capital charges:
  Capital charge with respect to issuance
    of common shares ...........................................      (0.03)
  Capital charge with respect to issuance
    of preferred shares ........................................      (0.11)
                                                                   --------
Total capital charges ..........................................      (0.14)
                                                                   --------
Net asset value, end of period(3) ..............................   $  14.30
                                                                   ========
Market value, end of period(3) .................................   $  14.75
                                                                   ========
TOTAL INVESTMENT RETURN(5) .....................................      (1.13)%
                                                                   ========
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:(6)
Expenses after fee waiver ......................................       0.61%(7)
Expenses before fee waiver .....................................       0.91%(7)
Net investment income after fee waiver
     and before preferred stock dividends ......................       4.59%(7)
Preferred stock dividends ......................................       0.38%(7)
Net investment income available to common shareholders .........       4.21%(7)
SUPPLEMENTAL DATA:
Average net assets of common shareholders (000) ................   $572,610
Portfolio turnover .............................................         27%
Net assets of common shareholders, end of period (000) .........   $619,249
Preferred stock outstanding (000) ..............................   $375,125
Asset coverage per preferred share, end of period ..............   $ 66,275

----------
(1)  Commencement of investment  operations.  Net asset value  immediately after
     the closing of the first public offering was $14.30. (Note 1)
(2)  Calculated using the average shares outstanding method.
(3)  Net asset value and market value are  published in BARRON'S on Saturday and
     THE WALL STREET JOURNAL on Monday.
(4)  Amount is less than $0.005 per share.
(5)  Total investment return is calculated assuming a purchase of a common share
     at the  current  market  price on the first  day and a sale at the  current
     market  price  on the  last  day  of the  period  reported.  Dividends  and
     Distributions,  are  assumed  for  purposes  of  this  calculation,  to  be
     reinvested at prices obtained under the Trust's dividend reinvestment plan.
     Total  investment  return does not  reflect  brokerage  commissions.  Total
     investment  returns  for less  than a full  year are not  annualized.  Past
     performance is not a guarantee of future results.
(6)  Ratios are  calculated  on the basis of income and expenses  applicable  to
     both the common and preferred  shares relative to the average net assets of
     the common shareholders.
(7)  Annualized.

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

                       See Notes to Financial Statements.

                                       11
<PAGE>


--------------------------------------------------------------------------------
BLACKROCK
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1. ORGANIZATION & ACCOUNTING POLICIES

The BlackRock  Municipal  Income Trust (the "Trust") was organized as a Delaware
business trust on March 30, 2001 and is registered as a diversified,  closed-end
management  investment  company under the  Investment  Company Act of 1940.  The
Trust had no  transactions  until July 16, 2001 when it sold 8,028 Common Shares
for $115,001 to BlackRock Advisors, Inc. Investment operations commenced on July
27, 2001. The Trust's investment objectives are to provide current income exempt
from regular  Federal  income  taxes and to invest in municipal  bonds that over
time will perform better than the broader municipal bond market.  The ability of
issuers of debt  securities  held by the Trust to meet their  obligations may be
affected by economic  developments  in certain  states,  a specific  industry or
region. No assurance can be given that the Trust's investment  objective will be
achieved.

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

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

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

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

DIVIDENDS  AND  DISTRIBUTIONS:   The  Trust  declares  and  pays  dividends  and
distributions to common  shareholders  monthly from net investment  income,  net
realized short-term capital gains and other sources, if necessary. Net long-term
capital  gains,  if any,  in excess  of loss  carryforwards  may be  distributed
annually.  Dividends and  distributions  are recorded on the  ex-dividend  date.
Dividends and distributions to preferred shareholders are accrued and determined
as described in Note 4.

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

DEFERRED  COMPENSATION PLAN: Under a deferred  compensation plan approved by the
Board of Trustees on May 24,  2001,  non-interested  Trustees may elect to defer
receipt of all or a portion of their annual compensation.

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

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

NOTE 2. AGREEMENTS

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

     The  investment  advisory  fee paid to the Advisor is  computed  weekly and
payable monthly at an annual rate of 0.60% of the Trust's average weekly Managed
Assets.  The Advisor 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,

                                       12
<PAGE>


0.10% in year 8 and 0.05% in year 9.  Pursuant  to the  agreement,  the  Advisor
waived fees of $444,532 during the period ended October 31, 2001.

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

     Pursuant to the terms of the custody agreement, the Trust receives earnings
credits from its custodian when positive cash balances are maintained, which are
used to offset custody fees.  The earnings  credits for the period ended October
31, 2001 were approximately $22,227.

NOTE 3. PORTFOLIO SECURITIES

Purchases and sales of investment securities, other than short-term investments,
for  the  period  ended   October  31,  2001   aggregated   $1,180,735,536   and
$203,694,656, respectively.

     The Federal income tax basis of the Trust's investments at October 31, 2001
was $986,578,062,  and accordingly,  net unrealized  appreciation was $5,232,455
(gross unrealized  appreciation--$10,336,777,  gross unrealized  depreciation --
$5,104,322).

     For Federal income tax purposes,  the Trust had a capital loss carryforward
at  October  31,  2001 of  approximately  $526,271  which  will  expire in 2009.
Accordingly, no capital gain distribution is expected to be paid to shareholders
until net gains have been realized in excess of such amount.

NOTE 4. CAPITAL

There are an  unlimited  number of $.001 par value common  shares of  beneficial
interest  authorized.  The Trust may classify or reclassify  any unissed  common
shares of beneficial  interest into one or more series of preferred  shares.  Of
the 43,310,774 common shares of beneficial  interest  outstanding at October 31,
2001, the Advisor owned 8,116 shares.

     Transactions  in common shares of  beneficial  interest for the period July
27, 2001  (commencement  of investment  operations)  to October 31, 2001 were as
follows:

   Shares Issued in connection with
     initial public offering                                       37,758,028
   Shares issued in connection with
     the exercise of the underwriters'
     over-allotment option                                          5,550,000
   Shares issued in connection with
     the reinvestment of common
     dividends                                                          2,746
                                                                   ----------
   Net increase in shares outstanding                              43,310,774
                                                                   ==========

     Offering  costs of  $1,284,241  incurred  in  connection  with the  Trust's
offering of common shares have been charged to paid-in  capital in excess of par
of the common shares.

     On  October  5,  2001  the  trust  reclassified  15,005  common  shares  of
beneficial  interest and issued five series of Auction Market  Preferred  Shares
("preferred  shares") Series  M7--3,001,  Series  T7--3,001,  Series  W7--3,001,
Series R7--3,001 and Series  F7--3,001.  The preferred shares have a liquidation
value of $25,000 per share plus any accumulated  unpaid dividends.  Underwriting
discounts of $3,751,250  and offering  costs of $608,345  incurred in connection
with the preferred share offering have been charged to paid-in capital in excess
of par of the common shares.

     Dividends on Series M7,  Series T7,  Series W7, Series R7 and Series F7 are
cumulative  at a rate  which is reset  every 7 days  based on the  results of an
auction.  Dividend  rates  ranged  from 1.55% to 2.05%  during the period  ended
October 31, 2001.

     The Trust may not declare  dividends or make other  distributions to common
shares  or  purchase  any  such  shares  if,  at the  time  of the  declaration,
distribution,  or  purchase,  asset  coverage  with  respect to the  outstanding
preferred shares would be less than 200%.

     The preferred shares are redeemable at the option of the Trust, in whole or
in part, on any dividend  payment date at $25,000 per share plus any accumulated
or unpaid  dividends  whether or not  declared.  The  preferred  shares are also
subject to mandatory  redemption  at $25,000 per share plus any  accumulated  or
unpaid dividends,  whether or not declared,  if certain requirements relating to
the  composition of the assets and  liabilities of the Trust as set forth in the
Declaration of Trust are not satisfied.

     The holders of preferred  shares have voting rights equal to the holders of
common shares (one vote per share) and will vote together with holders of common
shares as a single class. However, holders of preferred shares are also entitled
to elect two of the Trust's directors.  In addition,  the Investment Company Act
of 1940 requires that, along with 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 (a) adopt
any plan of reorganization that would adversely affect the preferred shares, and
(b) take any action requiring a vote of security holders, including, among other
things,  changes in the Trust's  subclassification  as a  closed-end  investment
company or changes in its fundamental investment restrictions.

<PAGE>


NOTE 5. DIVIDENDS

Subsequent  to October 31, 2001,  the Board of Trustees of the Trust  declared a
dividend of $0.076875 per common share payable December 3, 2001, to shareholders
of record on November 15, 2001.

     For the period  November  1, 2001  through  November  30,  2001,  dividends
declared on preferred  stock totaled  $559,324 in aggregate for the  outstanding
preferred shares.

                                       13
<PAGE>


--------------------------------------------------------------------------------
                        BLACKROCK MUNICIPAL INCOME TRUST
                         REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------

To the Shareholders and Board of Trustees of
BlackRock Municipal Income Trust

     We have audited the  accompanying  statement of assets and  liabilities  of
BlackRock  Municipal  Income Trust (the  "Trust"),  including  the  portfolio of
investments,  as of October 31, 2001,  and the related  statement of operations,
statement of changes in net investment  assets and financial  highlights for the
period from July 27, 2001 (commencement of investment operations) to October 31,
2001. These financial statements and financial highlights are the responsibility
of the Trust's management.  Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

     We conducted our audit in  accordance  with  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial statements. Our procedures included confirmation of
securities  owned as of October 31, 2001, by  correspondence  with the custodian
and brokers;  where replies were not received from brokers,  we performed  other
auditing procedures.  An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audit provides a
reasonable basis for our opinion.

     In our opinion,  the financial statements and financial highlights referred
to above present fairly,  in all material  respects,  the financial  position of
BlackRock  Municipal  Income  Trust as of October 31,  2001,  the results of its
operations,  changes in its net investment  assets and financial  highlights for
the period from July 27, 2001 (commencement of investment operations) to October
31, 2001, in conformity with  accounting  principles  generally  accepted in the
United States of America.




/s/ Deloitte & Touche LLP

Boston, Massachusetts
December 7, 2001


                                       14
<PAGE>


--------------------------------------------------------------------------------
                        BLACKROCK MUNICIPAL INCOME TRUST
                                 TAX INFORMATION
--------------------------------------------------------------------------------

     We are required by the  Internal  Revenue Code to advise you within 60 days
of the  Trust's  tax  year end as to the  federally  exempt  interest  dividends
received by you during such fiscal year. Accordingly,  during the year the Trust
paid Federal tax-exempt  dividends of $0.0769 to common  shareholders and $34.32
to preferred shareholders.

     For purposes of preparing your annual Federal income tax return, you should
report the amounts as reflected on the  appropriate  Form 1099-DIV or substitute
1099 DIV.

--------------------------------------------------------------------------------
                           DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------

     Pursuant to the Trust's  Dividend  Reinvestment  Plan (the "Plan"),  common
shareholders are  automatically  enrolled to have all distributions of dividends
and capital gains reinvested by EquiServe Trust Company, N.A. (the "Plan Agent")
in Trust shares pursuant to the Plan.  Shareholders who elect not to participate
in the Plan  will  receive  all  distributions  in cash  paid by check in United
States dollars mailed  directly to the  shareholders of record (or if the shares
are held in street or other nominee  name,  then to the nominee) by the transfer
agent, as dividend disbursing agent.

     The Plan Agent serves as agent for the  shareholders in  administering  the
Plan.  After the Trust  declares a dividend or determines to make a capital gain
distribution,  the  transfer  agent will  acquire  shares for the  participants'
accounts,  depending upon the circumstances  described below, either (i) through
receipt of unissued but authorized shares from the Trust ("newly issued shares")
or (ii) by purchase of  outstanding  shares on the open market,  on the New York
Stock  Exchange or  elsewhere  ("open-market  purchases").  If, on the  dividend
payment date,  the net asset value per share is equal to or less than the market
price per share plus  estimated  brokerage  commissions  (such  condition  being
referred  to herein as "market  premium"),  the  transfer  agent will invest the
dividend amount in newly issued shares on behalf of the participants. The number
of newly  issued  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 share on the date the shares are issued.  If, on the dividend  payment date,
the net asset value per share is greater  than the market  value per share (such
condition  being  referred to herein as "market  discount"),  the transfer agent
will invest the dividend amount in shares acquired on behalf of the participants
in open-market purchases.

     Participants  in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive  certificates  for whole Trust shares and a cash
payment for any fraction of a Trust share.

     The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions  will be paid by the Trust.  However,  each participant will pay a
pro rata  share of  brokerage  commissions  incurred  with  respect  to the Plan
Agent's open market  purchases in connection with the  reinvestment of dividends
and  distributions.  The automatic  reinvestment of dividends and  distributions
will not relieve  participants  of any federal income tax that may be payable on
such dividends or distributions.

     The Trust  reserves the right to amend or terminate  the Plan as applied to
any dividend or  distribution  paid  subsequent to written  notice of the change
sent to all  shareholders  of the Trust at least 90 days  before the record date
for the dividend or distribution.  The Plan also may be amended or terminated by
the Plan Agent upon at least 90 days written notice to all  shareholders  of the
Trust.  All  correspondence  concerning  the Plan should be directed to the Plan
Agent at (800) 699-1BFM. The address is on the front of this report.

--------------------------------------------------------------------------------
                             ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

     There have been no material changes in the Trust's investment objectives or
policies  that have not been approved by the  shareholders  or to its charter or
by-laws or in the  principal  risk factors  associated  with  investment  in the
Trust.  There have been no changes in the persons who are primarily  responsible
for the day-to-day management of the Trust's portfolio.

     Quarterly  performance  and other  information  regarding  the Trust may be
found    on    BlackRock's     website,     which    can    be    accessed    at
http://www.blackrock.com/funds/cefunds.html.   This   reference  to  BlackRock's
website is intended to allow  investors  public access to quarterly  information
regarding the Trust and is not intended to incorporate  BlackRock's website into
this report.

                                       15
<PAGE>


--------------------------------------------------------------------------------
                        BLACKROCK MUNICIPAL INCOME TRUST
                               INVESTMENT SUMMARY
--------------------------------------------------------------------------------

THE TRUST'S INVESTMENT OBJECTIVES

The BlackRock Strategic  Municipal Trust's investment  objectives are to provide
current  income  exempt from  regular  Federal  income tax  consistent  with the
preservation  of capital  and to invest in  municipal  bonds that over time will
perform better than the broader municipal bond market.

WHO MANAGES THE TRUST?

BlackRock  Advisors,  Inc. (the "Advisor")  manages the Trust.  The Advisor is a
wholly-owned subsidiary of BlackRock,  Inc.  ("BlackRock"),  which is one of the
largest  publicly traded  investment  management firms in the United States with
$226 billion of assets under  management  as of  September  30, 2001.  BlackRock
manages assets on behalf of more than 3,300 institutions and 200,000 individuals
worldwide through a variety of equity,  fixed income,  liquidity and alternative
investment  separate  accounts and mutual funds,  including  BLACKROCK FUNDS and
BLACKROCK PROVIDENT  INSTITUTIONAL  FUNDS. In addition,  BlackRock provides risk
management and investment  system services to institutional  investors under the
BLACKROCK SOLUTIONS name. Clients are served from the Company's  headquarters in
New York City, as well as offices in Wilmington,  DE, San Francisco,  Edinburgh,
Scotland,  Tokyo,  Japan,  and  Hong  Kong.  BlackRock  is a  member  of The PNC
Financial  Services  Group,  Inc.  (NYSE:  PNC), one of the largest  diversified
financial services  organizations in the United States, and is majority-owned by
PNC and by BlackRock employees.

WHAT CAN THE TRUST INVEST IN?

Under normal  conditions,  the Trust expects to continue to manage its assets so
that at least 80% of its investments are rated at least  investment grade ("BBB"
by Standard & Poor's or "Baa" by Moody's Investor Services) and up to 20% of its
assets are rated  below  investment  grade  (Ba/BB or B) or that are unrated but
deemed to be of comparable quality by the Advisor.

WHAT IS THE ADVISOR'S INVESTMENT STRATEGY?

The Advisor will manage the assets of the Trust in  accordance  with the Trust's
investment  objective and policies to seek to achieve its objective by investing
substantially  all of its assets in municipal  bonds that pay  interest  that is
exempt from regular  Federal income tax. As such, the Advisor  actively  manages
the assets in relation to market conditions and interest rate changes. Depending
on yield and  portfolio  allocation  considerations,  the  Advisor may choose to
invest a portion of the Trust's assets in securities  which pay interest that is
subject to AMT (alternative  minimum tax). The Trust intends to invest primarily
in  long-term  bonds and expects  bonds in its  portfolio to maintain an average
portfolio  maturity of 15 years or more,  but the average  may be  shortened  or
lengthened from time to time depending on market conditions.

Under current market conditions the use of leverage  increases the income earned
by the Trust.  The Trust  employs  leverage  primarily  through the  issuance of
preferred  shares.  Preferred  shareholders  will  receive  dividends  based  on
short-term rates in exchange for allowing the Trust to borrow additional assets.
These assets will be invested in longer-term assets which typically offer higher
interest  rates and the  difference  between the cost of the  dividends  paid to
preferred  shareholders  and the interest earned on the  longer-term  securities
will provide higher income levels for common  shareholders in most interest rate
environments.  The Trust issued preferred shares to leverage the portfolio.  See
"Leverage Considerations in the Trust".

                                       16
<PAGE>


HOW ARE THE TRUST'S  SHARES  PURCHASED  AND SOLD?  DOES THE TRUST PAY  DIVIDENDS
REGULARLY?

The  Trust's  common  shares  are traded on the New York  Stock  Exchange  which
provides investors with liquidity on a daily basis. Orders to buy or sell shares
of the Trust must be placed  through a registered  broker or financial  advisor.
The Trust pays monthly  dividends which are typically paid on the first business
day of the month. For shares held in the  shareholder's  name,  dividends may be
reinvested in additional  shares of the fund through the Trust's transfer agent,
EquiServe Trust Company,  N.A.  Investors who wish to hold shares in a brokerage
account  should check with their  financial  advisor to determine  whether their
brokerage firm offers dividend reinvestment services.

LEVERAGE CONSIDERATIONS IN THE TRUST

Leverage  increases  the duration (or price  sensitivity  of the net assets with
respect to changes  in  interest  rates) of the  Trust,  which can  improve  the
performance  of the Trust in a  declining  rate  environment,  but can cause net
assets to decline  faster in a rapidly  rising  interest rate  environment.  The
Trust may reduce, or unwind,  the amount of leverage employed should the Advisor
consider that reduction to be in the best interests of the Trust.  The Advisor's
portfolio managers  continuously monitor and regularly review the Trust's use of
leverage  and  maintain  the  ability to unwind the  leverage  if that course is
chosen.

SPECIAL CONSIDERATIONS AND RISK FACTORS RELEVANT TO THE TRUST

THE TRUST IS  INTENDED  TO BE A  LONG-TERM  INVESTMENT  AND IS NOT A  SHORT-TERM
TRADING VEHICLE.

INVESTMENT  OBJECTIVES.  Although  the  objectives  of the Trust are to  provide
current  income  exempt from  regular  Federal  income tax  consistent  with the
preservation  of capital  and to invest in  municipal  bonds that over time will
perform better than the broader municipal bond market, there can be no assurance
that this objective will be achieved.

DIVIDEND  CONSIDERATIONS.  The income and dividends paid by the Trust are likely
to vary over time as fixed income market conditions change. Future dividends may
be higher or lower than the dividend the Trust is currently paying.

LEVERAGE.  The Trust utilizes  leverage through the issuance of preferred stock,
which involves  special risks.  The Trust's net asset value and market value may
be more volatile due to its use of leverage.

MARKET PRICE OF SHARES.  The shares of closed-end  investment  companies such as
the Trust trade on the New York Stock  Exchange  (NYSE symbol:  BFK) and as such
are subject to supply and demand influences.  As a result, shares may trade at a
discount or a premium to their net asset value.

MUNICIPAL  OBLIGATIONS.  The value of municipal debt securities generally varies
inversely with changes in prevailing  market  interest  rates.  Depending on the
amount of call  protection  that the securities in the Trust have, the Trust may
be subject to certain  reinvestment  risks in environments of declining interest
rates.

ILLIQUID  SECURITIES.  The Trust may  invest in  securities  that are  illiquid,
although  under current  market  conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.

ANTITAKEOVER  PROVISIONS.  Certain antitakeover provisions will make a change in
the Trust's  business or management  more difficult  without the approval of the
Trustees and may have the effect of depriving  shareholders of an opportunity to
sell their shares at a premium above the prevailing market price.

                                       17
<PAGE>


--------------------------------------------------------------------------------
                        BLACKROCK MUNICIPAL INCOME TRUST
                                    GLOSSARY
--------------------------------------------------------------------------------


CLOSED-END FUND:         Investment  vehicle  which  initially  offers  a  fixed
                         number of shares  and trades on a stock  exchange.  The
                         Trust   invests  in  a  portfolio  of   securities   in
                         accordance  with its stated  investment  objectives and
                         policies.

DISCOUNT:                When a Trust's  net  asset  value is  greater  than its
                         stock  price  the  fund  is  said  to be  trading  at a
                         discount.

DIVIDEND:                Income  generated  by  securities  in a  portfolio  and
                         distributed  to  shareholders  after the  deduction  of
                         expenses.  This Trust  declares  and pays  dividends to
                         common shareholders on a monthly basis.

DIVIDEND REINVESTMENT:   Shareholders  may have all dividends and  distributions
                         of  capital   gains   automatically   reinvested   into
                         additional shares of a Trust.

MARKET PRICE:            Price per share of a security  trading in the secondary
                         market.  For a  closed-end  fund,  this is the price at
                         which  one  share  of the  fund  trades  on  the  stock
                         exchange.  If you were to buy or sell shares, you would
                         pay or receive the market price.

NET ASSET VALUE (NAV):   Net  asset  value  is the  total  market  value  of all
                         securities  and other  assets  held by the Trust,  plus
                         income   accrued   on  its   investments,   minus   any
                         liabilities including accrued expenses,  divided by the
                         total number of outstanding  common  shares.  It is the
                         underlying  value of a single  common  share on a given
                         day. Net asset value for the Trust is calculated weekly
                         and  published  in BARRON'S  on  Saturday  and THE WALL
                         STREET JOURNAL on Monday.

PREMIUM:                 When a  Trust's  stock  price is  greater  than its net
                         asset  value,  the  Trust  is said to be  trading  at a
                         premium.

PREREFUNDED BONDS:       These securities are collateralized by U.S.  Government
                         securities which are held in escrow and are used to pay
                         principal  and  interest  on the tax  exempt  issue and
                         retire  the  bond  in  full  at  the  date   indicated,
                         typically at a premium to par.

                                       18
<PAGE>


--------------------------------------------------------------------------------
                            BLACKROCK ADVISORS, INC.
                           SUMMARY OF CLOSED-END FUNDS
--------------------------------------------------------------------------------


TAXABLE TRUSTS
--------------------------------------------------------------------------------

                                                                 STOCK  MATURITY
PERPETUAL TRUSTS                                                SYMBOL    DATE
                                                                 -----    -----
The BlackRock Income Trust Inc.                                   BKT       N/A
The BlackRock North American Government Income Trust Inc.         BNA       N/A
The BlackRock High Yield Trust                                    BHY       N/A
BlackRock Core Bond Trust                                         BHK       N/A

TERM TRUSTS
The BlackRock Strategic Term Trust Inc.                           BGT      12/02
The BlackRock Investment Quality Term Trust Inc.                  BQT      12/04
The BlackRock Advantage Term Trust Inc.                           BAT      12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc.         BCT      12/09

TAX-EXEMPT TRUSTS
--------------------------------------------------------------------------------
                                                                 STOCK  MATURITY
PERPETUAL TRUSTS                                                SYMBOL    DATE
                                                                 -----    -----
The BlackRock Investment Quality Municipal Trust Inc.             BKN       N/A
The BlackRock California Investment Quality Municipal Trust Inc.  RAA       N/A
The BlackRock Florida Investment Quality Municipal Trust          RFA       N/A
The BlackRock New Jersey Investment Quality Municipal Trust Inc.  RNJ       N/A
The BlackRock New York Investment Quality Municipal Trust Inc.    RNY       N/A
The Blackrock Pennsylvania Strategic Municipal Trust              BPS       N/A
The Blackrock Strategic Municipal Trust                           BSD       N/A
BlackRock California Municipal Income Trust                       BFZ       N/A
BlackRock Municipal Income Trust                                  BFK       N/A
BlackRock New York Municipal Income Trust                         BNY       N/A
BlackRock New Jersey Municipal Income Trust                       BNJ       N/A
BlackRock Florida Municipal Income Trust                          BBF       N/A

TERM TRUSTS
The BlackRock Municipal Target Term Trust Inc.                    BMN      12/06
The BlackRock Insured Municipal 2008 Term Trust Inc.              BRM      12/08
The BlackRock California Insured Municipal 2008 Term Trust Inc.   BFC      12/08
The BlackRock Florida Insured Municipal 2008 Term Trust           BRF      12/08
The BlackRock New York Insured Municipal 2008 Term Trust Inc.     BLN      12/08
The BlackRock Insured Municipal Term Trust Inc.                   BMT      12/10
BlackRock California Municipal 2018 Term Trust                    BJZ      12/18
BlackRock New York Municipal 2018 Term Trust                      BLH      12/18
BlackRock Municipal 2018 Term Trust                               BPK      12/18


 IF YOU WOULD LIKE FURTHER INFORMATION PLEASE DO NOT HESITATE TO CALL BLACKROCK
        AT (800) 227-7BFM (7236) OR CONSULT WITH YOUR FINANCIAL ADVISOR.

                                       19
<PAGE>


---------
BLACKROCK
---------

DIRECTORS
Laurence D. Fink, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Clayburn La Force, Jr.
Walter F. Mondale
Ralph L. Schlosstein

OFFICERS
Ralph L. Schlosstein, PRESIDENT
Robert S. Kapito, VICE PRESIDENT
Kevin M. Klingert, VICE PRESIDENT
Richard M. Shea, VICE PRESIDENT/TAX
Henry  Gabbay,  TREASURER
James Kong, ASSISTANT TREASURER
Anne Ackerley, SECRETARY

INVESTMENT ADVISOR
BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM

SUB ADVISOR
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154

CUSTODIAN
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171

TRANSFER AGENT
EquiServe Trust Company, N.A.
150 Royall Street
Canton, MA 02021
(800) 699-1BFM

AUCTION AGENT
Bank of New York
Five Penn Plaza, 13th Floor
New York, NY 10001

INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116

LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036

LEGAL COUNSEL - INDEPENDENT DIRECTORS
Debevoise & Plimpton
919 Third Avenue
New York, NY 10022

     This  report  is for  shareholder  information.  This  is not a  prospectus
intended for use in the purchase or sale of Trust shares.

     Statements and other information  contained in this report are as dated and
are subject to change.

                                    BLACKROCK
                             MUNICIPAL INCOME TRUST
                          c/o BlackRock Advisors, Inc.
                              100 Bellevue Parkway
                              Wilmington, DE 19809
                                 (800) 227-7BFM
                                   09248F-10-9

[RECYCLE LOGO] Printed on recycled paper                09248F-10-9
                                                        09248F-20-8
                                                        09248F-30-7
                                                        09248F-40-6
                                                        09248F-50-5
                                                        09248F-60-4

---------
BLACKROCK
---------
MUNICIPAL
INCOME TRUST
===================================
ANNUAL REPORT
OCTOBER 31, 2001


[BLACKROCK LOGO]

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