<DOCUMENT>
<TYPE>N-2
<SEQUENCE>1
<FILENAME>s452372.txt
<TEXT>
    As filed with the Securities and Exchange Commission on August 19, 2002
                                       Securities Act Registration No. 333-
                                   Investment Company Registration No. 811-

                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                  FORM N-2

         Registration Statement under the Securities Act of 1933 /x/
                        Pre-Effective Amendment No.
                        Post-Effective Amendment No.
                                   and/or
                        Registration Statement Under
                    The Investment Company Act of 1940 /x/
                               Amendment No.

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

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

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

                        Anne F. Ackerley, President
                    BlackRock Municipal Income Trust III
                            40 East 52nd Street
                          New York, New York 10022
                  (Name and Address of Agent for Service)

                                  Copy to:

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

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

      CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<TABLE>
<CAPTION>
                                                               Proposed       Proposed Maximum
                                          Amount Being     Maximum Offering      Aggregate           Amount of
Title of Securities Being Registered       Registered       Price per Unit     Offering Price    Registration Fee
------------------------------------       ----------       --------------     --------------    ----------------
<S>                                      <C>                    <C>              <C>                  <C>
Common Shares, $.001 par value.........  100,000 shares         $15.00           $1,500,000           $138(1)
</TABLE>

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

<TABLE>
<CAPTION>
                    BLACKROCK MUNICIPAL INCOME TRUST III
                           CROSS REFERENCE SHEET

                            Part A -- Prospectus

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

               Part B -- Statement of Additional Information

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

                        Part C -- Other Information

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


PROSPECTUS
                                                               [GRAPHIC OMITTED]

                                   Shares
                    BlackRock Municipal Income Trust III
                               Common Shares
                              $15.00 per Share

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

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

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

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

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

<TABLE>
<CAPTION>
                                                                      Per Share        Total
<S>                                                                   <C>             <C>
Public offering price..............................................   $                $
Sales load.........................................................   $                $
Estimated offering expenses........................................   $                $
Proceeds, after expenses, to the Trust(1)..........................   $                $
</TABLE>

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

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

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

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


                   The date of this prospectus is , 2002.

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

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

         You should rely only on the information contained or incorporated
by reference in this prospectus. We have not, and the Underwriters have
not, authorized any other person to provide you with different information.
If anyone provides you with different or inconsistent information, you
should not rely on it. We are not, and the Underwriters are not, making an
offer to sell these securities in any jurisdiction where the offer or sale
is not permitted. You should assume that the information in this prospectus
is accurate only as of the date of this prospectus. Our business, financial
condition and prospects may have changed since that date.


                             TABLE OF CONTENTS

                                                                      PAGE
                                                                      ----
Prospectus Summary..................................................    4
Summary of Trust Expenses...........................................   11
The Trust...........................................................   13
Use of Proceeds.....................................................   13
The Trust's Investments.............................................   13
Preferred Shares and Leverage.......................................   18
Risks...............................................................   20
How the Trust Manages Risk..........................................   23
Management of the Trust.............................................   24
Net Asset Value.....................................................   27
Distributions.......................................................   28
Dividend Reinvestment Plan..........................................   28
Description of Shares...............................................   30
Certain Provisions in the Agreement and Declaration of Trust........   32
Closed-End Trust Structure..........................................   34
Repurchase of Common Shares.........................................   34
Tax Matters.........................................................   34
Underwriting........................................................   37
Custodian and Transfer Agent........................................   38
Legal Opinions......................................................   38
Table of Contents for the Statement of Additional Information.......   39



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

                      PRIVACY PRINCIPLES OF THE TRUST

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

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

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


                             PROSPECTUS SUMMARY

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

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

The Offering.............................  The Trust is offering common shares of beneficial interest at $15.00 per
                                           share through a group of underwriters (the "Underwriters") led by . The
                                           common shares of beneficial interest are called "common shares" in the rest
                                           of this prospectus. You must purchase at least 100 common shares ($1,500)
                                           in order to participate in this offering. The Trust has given the
                                           Underwriters an option to purchase up to additional common shares to cover
                                           orders in excess of common shares. BlackRock Advisors, Inc. has agreed to
                                           pay organizational expenses and offering costs (other than sales load) that
                                           exceed $0.03 per common share. See "Underwriting."

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

Investment Policies......................  The Trust will invest  primarily in municipal bonds that pay interest that
                                           is exempt  from  regular  Federal  income  tax.  The Trust will  invest in
                                           municipal  bonds  that,  in  the  opinion  of  BlackRock  Advisors,   Inc.
                                           ("BlackRock   Advisors"  or  the   "Advisor")   and  BlackRock   Financial
                                           Management,  Inc. ("BlackRock  Financial Management" or the "Sub-Advisor")
                                           are  underrated  or  undervalued.  Underrated  municipal  bonds  are those
                                           whose ratings do not, in the Advisor's or Sub-Advisor's  opinion,  reflect
                                           their true  creditworthiness.  Undervalued municipal bonds are bonds that,
                                           in the Advisor's or Sub-Advisor's  opinion,  are worth more than the value
                                           assigned to them in the marketplace.  Under normal market conditions,  the
                                           Trust expects to be fully invested in these  tax-exempt  municipal  bonds.
                                           The Trust  will  invest at least 80% of its  Managed  Assets in  municipal
                                           bonds  that at the  time  of  investment  are  investment  grade  quality.
                                           Investment  grade  quality  bonds are bonds rated  within the four highest
                                           grades (Baa or BBB or better by  Moody's,  S&P or Fitch) or bonds that are
                                           unrated  but  judged to be of  comparable  quality  by the  Advisor or the
                                           Sub-Advisor.  The Trust  may  invest  up to 20% of its  Managed  Assets in
                                           municipal  bonds that at the time of  investment  are rated  Ba/BB or B by
                                           Moody's,  S&P or Fitch  or bonds  that are  unrated  but  judged  to be of
                                           comparable  quality  by the  Advisor  or the  Sub-Advisor.  Bonds of below
                                           investment grade quality are regarded as having predominately  speculative
                                           characteristics  with respect to the issuer's capacity to pay interest and
                                           repay principal,  and are commonly  referred to as "junk bonds." The Trust
                                           intends to invest  primarily in long-term  bonds and expects  bonds in its
                                           portfolio to have a dollar weighted  average  maturity of 15 years or more
                                           under  current  market  conditions.  The Trust cannot  ensure that it will
                                           achieve its investment objective.  See "The Trust's Investments."

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

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

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

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

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

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

Listing..................................  The  common  shares  are  expected  to be  listed  on the New  York  Stock
                                           Exchange  under  the  symbol  "  ".  See  "Description  of  Shares--Common
                                           Shares."

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                         SUMMARY OF TRUST EXPENSES

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

Shareholder Transaction Expenses

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


<TABLE>
<CAPTION>
                                                 Percentage of Net Assets Attributable
                                                  to Common Shares (Assumes Preferred
                                                          Shares Are Issued)**
Annual Expenses
    <S>                                                       <C>
    Management Fees.....................................      %
    Other Expenses......................................      %
    Total Annual Expenses...............................      %* **
    Fee and Expense Waiver..............................      %***
    Net Annual Expenses.................................      %* **
</TABLE>

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

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

<TABLE>
<CAPTION>
                                                 Percentage of Net Assets Attributable
                                                 to Common Shares (Assumes No Preferred
                                                  Shares Are Issued or Outstanding)
         Annual Expenses
             <S>                                              <C>
             Management Fees............................      %
             Other Expenses.............................      %
             Total Annual Expenses......................      %* **
             Fee and Expense Waiver.....................      %***
             Net Annual Expenses........................      %* **
</TABLE>

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

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

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


                                  1 Year    3 Years    5 Years    10 Years(2)
                                  ------    -------    ------     ---------
Total Expenses Incurred.......    $         $          $          $

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

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


                                 THE TRUST

         The Trust is a newly organized, diversified, closed-end management
investment company registered under the Investment Company Act. The Trust
was organized as a Delaware business trust on August 19, 2002, pursuant to
an Agreement and Declaration of Trust governed by the laws of the State of
Delaware. As a newly organized entity, the Trust has no operating history.
The Trust's principal office is located at 100 Bellevue Parkway,
Wilmington, Delaware 19809, and its telephone number is (888) 825-2257.


                              USE OF PROCEEDS

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


                          THE TRUST'S INVESTMENTS

Investment Objective and Policies

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

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

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

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

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

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

Municipal Bonds

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

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

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

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

When-Issued and Forward Commitment Securities

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

Other Investment Companies

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

Tax-Exempt Preferred Securities

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

High Yield Securities

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

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

Initial Portfolio Composition

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


                       PREFERRED SHARES AND LEVERAGE

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

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

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

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

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

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

Effects of Leverage

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

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

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


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

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


                                   RISKS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                         HOW THE TRUST MANAGES RISK

Investment Limitations

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

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

Quality of Investments

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

Limited Issuance of Preferred Shares

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

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

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

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

Hedging Strategies

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


                          MANAGEMENT OF THE TRUST

Trustees and Officers

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

Investment Advisor and Sub-Advisor

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

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

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

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

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

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

         As of June 30, 2002, BlackRock's municipal bond portfolio managers
were responsible for over 85 municipal bond portfolios, valued at
approximately $12.7 billion. Municipal mandates include the management of
open- and closed-end mutual funds, municipal-only separate accounts or
municipal allocations within larger institutional mandates. In addition,
BlackRock manages 12 municipal liquidity accounts valued at approximately
$4.8 billion. The team currently manages 28 closed-end municipal funds,
with over $6.6 billion in assets under management.

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

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

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

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

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

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

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

Investment Management Agreement

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

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

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

                                                 Percentage Waived
                                                (as a Percentage of
                       Twelve Month               Average Weekly
                      Period Ending              Managed Assets)*
                      -------------              ---------------
                           2003**                       %
                           2004                         %
                           2005                         %
                           2006                         %
                           2007                         %
                           2008                         %
                           2009                         %
                           2010                         %
                           2011                         %
                           2012                         %

*        Including net assets attributable to Preferred Shares.
**       From the commencement of operations.

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


                              NET ASSET VALUE

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

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


                               DISTRIBUTIONS

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

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


                         DIVIDEND REINVESTMENT PLAN

         Unless the registered owner of common shares elects to receive
cash by contacting the Plan Administrator, all dividends declared on common
shares of the Trust will be automatically reinvested by EquiServe Trust
Company, N.A. (the "Plan Administrator"), Administrator for shareholders in
administering the Trust's Dividend Reinvestment Plan (the "Plan"), in
additional common shares of the Trust. Shareholders who elect not to
participate in the Plan will receive all dividends and other distributions
in cash paid by check mailed directly to the shareholder of record (or, if
the common shares are held in street or other nominee name, then to such
nominee) by EquiServe Trust Company, N.A., as dividend disbursing agent.
You may elect not to participate in the Plan and to receive all dividends
in cash by contacting EquiServe Trust Company, N.A., as dividend disbursing
agent, at the address set forth below. Participation in the Plan is
completely voluntary and may be terminated or resumed at any time without
penalty by notice if received and processed by the Plan Administrator prior
to the dividend record date; otherwise such termination or resumption will
be effective with respect to any subsequently declared dividend or other
distribution. Some brokers may automatically elect to receive cash on your
behalf and may re-invest that cash in additional common shares of the Trust
for you. If you wish for all dividends declared on your common shares of
the Trust to be automatically reinvested pursuant to the Plan, please
contact your broker.

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

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

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

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

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

         All correspondence or questions concerning the Plan should be
directed to the Plan Administrator, Equiserve Trust Company, N.A., P.O. Box
43011, Providence, RI 02940-3011 or Equiserve Trust Company, N.A., 150
Royall Street, Canton, Massachusetts 02021 Ph: (800) 699-1236.


                           DESCRIPTION OF SHARES

Common Shares

         The Trust is an unincorporated business trust organized under the
laws of Delaware pursuant to an Agreement and Declaration of Trust dated as
of August 19, 2002. The Trust is authorized to issue an unlimited number of
common shares of beneficial interest, par value $.001 per share. Each
common share has one vote and, when issued and paid for in accordance with
the terms of this offering, will be fully paid and non-assessable, except
that the trustees shall have the power to cause shareholders to pay
expenses of the Trust by setting off charges due from shareholders from
declared but unpaid dividends or distributions owed the shareholders and/or
by reducing the number of common shares owned by each respective
shareholder. Whenever Preferred Shares are outstanding, the holders of
common shares will not be entitled to receive any distributions from the
Trust unless all accrued dividends on Preferred Shares have been paid,
unless asset coverage (as defined in the Investment Company Act) with
respect to Preferred Shares would be at least 200% after giving effect to
the distributions and unless certain other requirements imposed by any
rating agencies rating the Preferred Shares have been met. See "--Preferred
Shares" below. All common shares are equal as to dividends, assets and
voting privileges and have no conversion, preemptive or other subscription
rights. The Trust will send annual and semi-annual reports, including
financial statements, to all holders of its shares.

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

         The Trust's common shares are expected to be listed on the New
York Stock Exchange under the symbol " ".

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

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

Preferred Shares

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

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

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

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

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

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

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


        CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST

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

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

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

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

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

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

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

         To convert the Trust to an open-end investment company, the
Trust's Agreement and Declaration of Trust requires the favorable vote of a
majority of the board of the trustees followed by the favorable vote of the
holders of at least 75% of the outstanding shares of each affected class or
series of shares of the Trust, voting separately as a class or series,
unless such amendment has been approved by at least 80% of the trustees, in
which case "a majority of the outstanding voting securities" (as defined in
the Investment Company Act) of the Trust shall be required. The foregoing
vote would satisfy a separate requirement in the Investment Company Act
that any conversion of the Trust to an open-end investment company be
approved by the shareholders. If approved in the foregoing manner,
conversion of the Trust to an open-end investment company could not occur
until 90 days after the shareholders' meeting at which such conversion was
approved and would also require at least 30 days' prior notice to all
shareholders. Conversion of the Trust to an open-end investment company
would require the redemption of any outstanding Preferred Shares, which
could eliminate or alter the leveraged capital structure of the Trust with
respect to the common shares. Following any such conversion, it is also
possible that certain of the Trust's investment policies and strategies
would have to be modified to assure sufficient portfolio liquidity. In the
event of conversion, the common shares would cease to be listed on the New
York Stock Exchange or other national securities exchanges or market
systems. Shareholders of an open-end investment company may require the
company to redeem their shares at any time, except in certain circumstances
as authorized by or under the Investment Company Act, at their net asset
value, less such redemption charge, if any, as might be in effect at the
time of a redemption. The Trust expects to pay all such redemption requests
in cash, but reserves the right to pay redemption requests in a combination
of cash or securities. If such partial payment in securities were made,
investors may incur brokerage costs in converting such securities to cash.
If the Trust were converted to an open-end fund, it is likely that new
shares would be sold at net asset value plus a sales load. The board of
trustees believes, however, that the closed-end structure is desirable in
light of the Trust's investment objective and policies. Therefore, you
should assume that it is not likely that the board of trustees would vote
to convert the Trust to an open-end fund.

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

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

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


                         CLOSED-END TRUST STRUCTURE

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

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


                        REPURCHASE OF COMMON SHARES

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

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


                                TAX MATTERS

Federal Tax Matters

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

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

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

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

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

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

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

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

State and Local Tax Matters

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

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


                                UNDERWRITING

                 are acting as representatives of the Underwriters named
below. Subject to the terms and conditions stated in the underwriting
agreement dated , 2002, each Underwriter named below has agreed to
purchase, and the Trust has agreed to sell to such Underwriter, the number
of common shares set forth opposite the name of such Underwriter.

                                                                       Number of
Underwriters                                                       Common Shares



         Total...................................................

         The underwriting agreement provides that the obligations of the
several Underwriters to purchase the common shares included in this
offering are subject to approval of certain legal matters by counsel and to
certain other conditions. The Underwriters are obligated to purchase all
the common shares (other than those covered by the over-allotment option
described below) if they purchase any of the common shares.

         The Underwriters propose to offer some of the common shares
directly to the public at the public offering price set forth on the cover
page of this prospectus and some of the common shares to certain dealers at
the public offering price less a concession not in excess of $ per common
share. The sales load the Trust will pay of $0.675 per common share is
equal to 4.5% of the initial offering price.

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

         The Trust and BlackRock have agreed that, for a period of 180 days
from the date of this prospectus, they will not, without the prior written
consent of , on behalf of the Underwriters, dispose of or hedge any common
shares of the Trust or any securities convertible into or exercisable or
exchangeable for common shares of the Trust, or grant any options or
warrants to purchase common shares of the Trust. in its sole discretion may
release any of the securities subject to the foregoing agreement at any
time without notice.

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

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

         In connection with the requirements for listing the Trust's common
shares on the New York Stock Exchange, the Underwriters have undertaken to
sell lots of 100 or more common shares to a minimum of 2,000 beneficial
owners in the United States. The minimum initial investment requirement is
100 common shares ($1,500) in order to participate in this offering.
Certain Underwriters may make a market in the common shares after trading
in the common shares has commenced on the New York Stock Exchange. No
Underwriter is, however, obligated to conduct market-making activities and
any such activities may be discontinued at any time without notice, at the
sole discretion of the Underwriter. No assurance can be given as to the
liquidity of, or the trading market for, the common shares as a result of
any market-making activities undertaken by any Underwriter. This prospectus
is to be used by any Underwriter in connection with the offering and,
during the period in which a prospectus must be delivered, with offers and
sales of the common shares in market-making transactions in the
over-the-counter market at negotiated prices related to prevailing market
prices at the time of the sale.

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

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

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

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

         The principal business address of           is                     .


                        CUSTODIAN AND TRANSFER AGENT

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


                               LEGAL OPINIONS

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




<PAGE>



                         TABLE OF CONTENTS FOR THE
                    STATEMENT OF ADDITIONAL INFORMATION

                                                                      Page
Use of Proceeds...................................................    B-2
Investment Objective and Policies.................................    B-2
Investment Policies and Techniques................................    B-4
Other Investment Policies and Techniques..........................    B-20
Management of the Trust...........................................    B-23
Portfolio Transactions and Brokerage..............................    B-32
Description of Shares.............................................    B-33
Repurchase of Common Shares.......................................    B-33
Tax Matters.......................................................    B-34
Performance Related and Comparative Information...................    B-39
Experts...........................................................    B-42
Additional Information............................................    B-42
Independent Auditors Report.......................................    F-1
Financial Statements..............................................    F-2
APPENDIX A  Ratings of Investments................................    A-1
APPENDIX B  Taxable Equivalent Yield Table........................    B-1
APPENDIX C  General Characteristics and Risks of Hedging
            Transactions..........................................    C-1






                                                              Shares

                    Blackrock Municipal Income Trust III

                               Common Shares


                                 PROSPECTUS



                                                          , 2002



                    BlackRock Municipal Income Trust III

                    STATEMENT OF ADDITIONAL INFORMATION

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

                             TABLE OF CONTENTS

                                                                         Page
                                                                         ----
Use of Proceeds......................................................    B-2
Investment Objective and Policies....................................    B-2
Investment Policies and Techniques...................................    B-4
Other Investment Policies and Techniques.............................    B-20
Management of the Trust..............................................    B-23
Portfolio Transactions and Brokerage.................................    B-32
Description of Shares................................................    B-33
Repurchase of Common Shares..........................................    B-33
Tax Matters..........................................................    B-34
Performance Related and Comparative Information......................    B-39
Experts..............................................................    B-42
Additional Information...............................................    B-42
Independent Auditors Report..........................................    F-1
Financial Statements.................................................    F-2
APPENDIX A  Ratings of Investments...................................    A-1
APPENDIX B  Taxable Equivalent Yield Table...........................    B-1
APPENDIX C  General Characteristics and Risks of
            Hedging Transactions.....................................    C-1

         This Statement of Additional Information is dated , 2002.


                            USE OF PROCEEDS

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

                     INVESTMENT OBJECTIVE AND POLICIES

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

Investment Restrictions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                     INVESTMENT POLICIES AND TECHNIQUES

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

Portfolio Investments

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

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

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

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

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

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

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

Short-Term Taxable Fixed Income Securities

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

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

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

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

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

Short-Term Tax-Exempt Fixed Income Securities

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

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

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

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

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

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

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

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

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

Duration Management and Other Management Techniques

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

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

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

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

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

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

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

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

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

Short Sales

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

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

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

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

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

                  OTHER INVESTMENT POLICIES AND TECHNIQUES

Restricted and Illiquid Securities

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

When-Issued and Forward Commitment Securities

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

Borrowing

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

Reverse Repurchase Agreements

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

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

Repurchase Agreements

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

Zero Coupon Bonds

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

Lending of Securities

         The Trust may lend its portfolio securities to banks or dealers
which meet the creditworthiness standards established by the Board of
Trustees of the Trust ("Qualified Institutions"). By lending its portfolio
securities, the Trust attempts to increase its income through the receipt
of interest on the loan. Any gain or loss in the market price of the
securities loaned that may occur during the term of the loan will be for
the account of the Trust. The Trust may lend its portfolio securities so
long as the terms and the structure of such loans are not inconsistent with
requirements of the Investment Company Act, which currently require that
(i) the borrower pledge and maintain with the Trust collateral consisting
of cash, a letter of credit issued by a domestic U.S. bank, or securities
issued or guaranteed by the U.S. government having a value at all times not
less than 100% of the value of the securities loaned, (ii) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e.,
the value of the loan is "marked to the market" on a daily basis), (iii)
the loan be made subject to termination by the Trust at any time and (iv)
the Trust receive reasonable interest on the loan (which may include the
Trust's investing any cash collateral in interest bearing short term
investments), any distributions on the loaned securities and any increase
in their market value. The Trust will not lend portfolio securities if, as
a result, the aggregate of such loans exceeds 331/3% of the value of the
Trust's total assets (including such loans). Loan arrangements made by the
Trust will comply with all other applicable regulatory requirements,
including the rules of the New York Stock Exchange, which rules presently
require the borrower, after notice, to redeliver the securities within the
normal settlement time of five business days. All relevant facts and
circumstances, including the creditworthiness of the Qualified Institution,
will be monitored by BlackRock, and will be considered in making decisions
with respect to lending securities, subject to review by the Trust's Board
of Trustees.

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

High Yield Securities

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

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

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

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

         The ratings of Moody's, S&P and other rating agencies represent
their opinions as to the quality of the obligations which they undertake to
rate. Ratings are relative and subjective and, although ratings may be
useful in evaluating the safety of interest and principle payments, they do
not evaluate the market value risk of such obligations. Although these
ratings may be an initial criterion for selection of portfolio investments,
BlackRock also will independently evaluate these securities and the ability
for the issuers of such securities to pay interest and principal. To the
extent that the Trust invests in lower grade securities that have not been
rated by a rating agency, the Trust's ability to achieve its investment
objectives will be more dependent on BlackRock's credit analysis than would
be the case when the Trust invests in rated securities.

Residual Interest Municipal Bonds

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

                          MANAGEMENT OF THE TRUST

Investment Management Agreement

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

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

         The investment management agreement was approved by the Trust's
board of trustees at an in-person meeting of the board of trustees held on
, 2002, including a majority of the trustees who are not parties to the
agreement or interested persons of any such party (as such term is defined
in the Investment Company Act). This agreement provides for the Trust to
pay a management fee at an annual rate equal to ____% of the average weekly
value of the Trust's Managed Assets. A related waiver letter from BlackRock
Advisors provided for temporary fee waiver of ____% the average weekly
value of the Trust's Managed Assets in each of the first five years of the
Trust's operations (through , 2007) and for a declining amount for an
additional five years (through , 2012). In approving this agreement the
board of trustees considered, among other things, the nature and quality of
services to be provided by BlackRock Advisors, the profitability to
BlackRock Advisors of its relationship with the Trust, economies of scale
and comparative fees and expense ratios.

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

Sub-Investment Advisory Agreement

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

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

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

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

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

Trustees and Officers

         The officers of the Trust manage its day-to-day operations. The
officers are directly responsible to the Trust's board of trustees which
sets broad policies for the Trust and chooses its officers. Anne F.
Ackerley is the sole initial Trustee of the Trust. Following is a list of
her present positions and principal occupations during the last five years.
Ms Ackerley is an interested person of the Trust (as de.ned by the
Investment Company Act). The business address of the Trust, BlackRock
Advisors and their board members and officers is 100 Bellevue Parkway,
Wilmington, Delaware 19809, unless specified otherwise below. Ms Ackerley
is an officer of other closed-end funds in which BlackRock Advisors acts as
investment advisor.

<TABLE>
<CAPTION>
                                                              Principal Occupation During the
Name and Age              Title                          Past Five Years and Other Affiliations
------------              -----                      --------------------------------------------------------------
<S>                        <C>                       <C>
Anne F. Ackerley           Sole Initial              Managing Director of BlackRock, Inc. since 2000.  Formerly
Age 40                     Trustee, President,       First Vice President and Chief Operating Officer, Mergers
                           Chief Executive           and Acquisition Group at Merrill Lynch & Co. from 1997
                           Officer and               to 2000; First Vice President and Chief Operating Officer,
                           Chief Financial           Public Finance Group at Merrill Lynch & Co. from 1995 to
                           Officer                   1997; First Vice President, Emerging Markets Fixed Income
                                                     Research at Merrill Lynch & Co. prior thereto.

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

                                                              Aggregate Dollar Range of Equity Securities
                                                                  In all Registered Investment Companies
                           Dollar Range of Equity                    Overseen by Trustees in the Family
Name of Trustee            Securities in the Fund*                             Investment Companies
-----------------          -----------------------            -----------------------------------------------------


</TABLE>

----------

* Trustees do not own equity securities of the Trust because the Trust is a
newly organized closed-end investment company.

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

<TABLE>
<CAPTION>
                                                                                    Total Compensation from the
                                                  Estimated Compensation From       Trust and Fund Complex Paid
Name of Board Member                                         Trust                      to Board Member(1)
<S>                                               <C>                               <C>

                                                           $2,000(2)                        $195,000(3),(4),(5)
                                                           $2,000(2)                        $160,000(4)
                                                           $2,000(2)                        $160,000(4)
                                                           $2,000(2)                        $160,000(4)
                                                           $2,000(2)                        $160,000(4)
                                                           $2,000(2)                        $160,000(4)
</TABLE>


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

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

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

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

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

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

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

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

         The Audit Committee consists of           and           , The Audit
Committee acts according to the Audit Committee charter. has been appointed
as Chairman of the Audit Committee. The Audit Committee is responsible for
reviewing and evaluating issues related to the accounting and financial
reporting policies of the Trust, overseeing the quality and objectivity of
the Trust's financial statements and the audit thereof and to act as a
liaison between the Board of Trustees and the Trust's independent
accountants.

         The governance committee consists of           and           .
The Governance committee acts in accordance with the Governance Committee
charter. has been appointed as Chairman of the Governance Committee. The
Governance Committee consists of the independent Trustees and performs
those functions enumerated in the Governance Committee Charter including,
but not limited to, making nominations for the appointment or election of
independent Trustees, reviewing independent Trustee compensation,
retirement policies and personnel training policies and administrating the
provisions of the Code of Ethics applicable to the independent Trustees.

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

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

Codes of Ethics

         The Trust, the Advisor, the Sub-Advisor and the Trust's principal
underwriters have adopted codes of ethics under Rule 17j-1 of the
Investment Company Act. These codes permit personnel subject to the codes
to invest in securities, including securities that may be purchased or held
by the Trust. These codes can be reviewed and copied at the Security and
Exchange Commission's Public Reference Room in Washington, D.C. Information
on the operation of the Public Reference Room may be obtained by calling
the Security and Exchange Commission at 1-202-942-8090. The code of ethics
are available on the EDGAR Database on the Security and Exchange
Commission's web site (http://www.sec.gov), and copies of these codes may
be obtained, after paying a duplicating fee, by electronic request at the
following e-mail address: publicinfo@sec.gov, or by writing the Security
and Exchange Commission's Public Reference Section, Washington, D.C.
20549-0102.

Investment Advisor and Sub-Advisor

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

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

                    PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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

         The Advisor and the Sub-Advisor are able to fulfill their
obligation to furnish a continuous investment program to the Trust without
receiving research or other information from brokers; however, each
considers access to such information to be an important element of
financial management. Although such information is considered useful, its
value is not determinable, as it must be reviewed and assimilated by the
Advisor and/or the Sub-Advisor, and does not reduce the Advisor's and/or
the Sub-Advisor's normal research activities in rendering investment advice
under the investment management agreement or the sub-investment advisory
agreement. It is possible that the Advisor's and/or the Sub-Advisor's
expenses could be materially increased if it attempted to purchase this
type of information or generate it through its own staff.

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

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

                           DESCRIPTION OF SHARES

Common Shares

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

Preferred Shares

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

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

Other Shares

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

                        REPURCHASE OF COMMON SHARES

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

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

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

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

         The repurchase by the Trust of its shares at prices below net
asset value will result in an increase in the net asset value of those
shares that remain outstanding. However, there can be no assurance that
share repurchases or tender offers at or below net asset value will result
in the Trust's shares trading at a price equal to their net asset value.
Nevertheless, the fact that the Trust's shares may be the subject of
repurchase or tender offers from time to time, or that the Trust may be
converted to an open-end investment company, may reduce any spread between
market price and net asset value that might otherwise exist.

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

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

                                TAX MATTERS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



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


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

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

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

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

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

              PERFORMANCE RELATED AND COMPARATIVE INFORMATION

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

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

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

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

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

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

<TABLE>
<CAPTION>
                                    Tax
10 Year Period                      Adj.
<C>  <C>  <C>  <C>                                      <C>             <C>           <C>
5/31/92 - 5/31/02                  Munis       Aggregate(2)     Treasury(3)     Agency(4)
Annualized Return...........       10.94%           7.40%          7.47%          7.40%
Standard Deviation..........        4.40            3.76           4.31           3.91


10 Year Period                                                      Asset        High         S&P
5/31/92 - 5/31/02             Corporates(5)     Mortgages(6)      Backed(7)     Yield(8)      500(9)      NASDAQ(10)
Annualized Return...........      7.73%             7.28%            7.13%        6.91%       12.06%         10.68%
Standard Deviation..........      4.72              3.00             2.59         6.10        14.14          27.33
</TABLE>

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

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

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

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

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

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

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

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

(9)  Standard & Poor's 500 Index

(10)     NASDAQ Composite Index

Chart B

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

<TABLE>
<CAPTION>
                                                Yield of Munis             Bond Buyer           30-Year
                                          (As a % of Treasuries)(2)         40 Index            Treasury

<C>                                                 <C>                        <C>                <C>
9/30/1992...........................                89.01%                     6.57               7.381
3/31/1993...........................                87.93%                     6.09               6.926
3/31/1994...........................                99.27%                     7.04               7.092
3/31/1995...........................                86.13%                     6.40               7.431
3/29/1996...........................                96.60%                     6.44               6.667
3/31/1997...........................                88.22%                     6.26               7.096
3/31/1998...........................                92.03%                     5.46               5.933
3/31/1999...........................                95.82%                     5.39               5.625
3/31/2000...........................               104.50%                     6.09               5.828
3/30/2001...........................                99.01%                     5.39               5.444
3/29/2002...........................                98.53%                     5.71               5.795
5/31/2002...........................                98.47%                     5.53               5.616
</TABLE>


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

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

                      TAXABLE EQUIVALENT YIELD TABLES
                 FOR BLACKROCK MUNICIPAL INCOME TRUSTS III

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

<TABLE>
<CAPTION>
                                                         Your Combined
                    Single                             Federal/State Tax
                  Return ($)      Joint Return ($)      Bracket Is (%):              Taxable Equivalent Yield
                                                                            5.0(%)(1)    5.5(%)(1)  6.0(%)(1) 7.0(%)(1)

<S>             <C>               <C>                        <C>                <C>       <C>        <C>        <C>
National        27,951-67,700      46,701-112,850            27.0              6.85       7.53       8.22       9.59
(XXX)           67,701-141,250    112,851-171,950            30.0              7.14       7.86       8.57      10.00
               141,251-307,050    171,951-307,050            35.0              7.69       8.46       9.23      10.77
                 Over 307,050       Over 307,050             38.6              8.14       8.96       9.77      11.40
California      37,726-67,700      75,451-112,850            33.8              7.55       8.31       9.06      10.57
(XXX)           67,701-141,250    112,851-171,950            36.5              7.88       8.66       9.45      11.03
               141,251-307,050    171,951-307,050            41.1              8.48       9.33      10.18      11.87
                 Over 307,050       Over 307,050             44.3              8.98       9.88      10.77      12.57
New York        27,951-67,700      46,701-112,850            32.0              7.35       8.09       8.82      10.29
(XXX)           67,701-141,250    112,851-171,950            34.8              7.67       8.43       9.20      10.74
               141,251-307,050    171,951-307,050            39.5              8.26       9.08       9.91      11.56
                 Over 307,050       Over 307,050             42.8              8.74       9.62      10.49      12.24
Florida         27,951-67,700      46,701-112,850            27.0                         7.53       8.22       9.59
-------------   67,701-141,250    112,851-171,950            30.0                         7.86       8.57      10.00
(XXX)          141,251-307,050    171,951-307,050            35.0                         8.46       9.23      10.77
                 Over 307,050       Over 307,050             38.6                         8.96       9.77      11.40
</TABLE>

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

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



<PAGE>



                                  EXPERTS

         The Statement of Net Assets of the Trust as of , 2002 of appearing
in this Statement of Additional Information has been audited by ,
independent auditors, as set forth in their report thereon appearing
elsewhere herein, and is included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing. , located
at , provides accounting and auditing services to the Trust.


                           ADDITIONAL INFORMATION

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

                        INDEPENDENT AUDITORS' REPORT

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

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

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

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



                    BLACKROCK MUNICIPAL INCOME TRUST III

                    STATEMENT OF ASSETS AND LIABILITIES

                                           , 2002


                                 APPENDIX A

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

         Long-Term Debt

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

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

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

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

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

         2.   Nature of and provisions of the obligation; and

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

         Investment Grade

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

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

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

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

         Speculative Grade Rating

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

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

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

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

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

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

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

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

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

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

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

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

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

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

         Municipal Notes

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

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

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

         Note rating symbols are as follows:

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

SP-2     Satisfactory capacity to pay principal and interest.

SP-3     Speculative capacity to pay principal and interest.

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

         Commercial Paper

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

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

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

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

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

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

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

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

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

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

         Municipal Bonds

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

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

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

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

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

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

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

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

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

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

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

         Short-Term Loans

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

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

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

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

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

         Commercial Paper

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

         --Leading market positions in well-established industries.

         --High rates of return on funds employed.

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

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

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

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

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

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

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

         Long-Term Credit Ratings

         Investment Grade

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

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

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

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

         Speculative Grade

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

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

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

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

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

         Short-Term Credit Ratings

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

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

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

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

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

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

D        Default.  Denotes actual or imminent payment default.

Notes:

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

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

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

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



                                 APPENDIX B

                       TAXABLE EQUIVALENT YIELD TABLE

         The taxable equivalent yield is the current yield you would need
to earn on a taxable investment in order to equal a stated tax-free yield
on a municipal investment. To assist you to more easily compare municipal
investments like the Trust with taxable alternative investments, the table
below presents the taxable equivalent yields for a range of hypothetical
tax-free yields assuming the stated marginal Federal tax rates for 2002
listed below:

               2002-2003 FEDERAL TAXABLE VS. TAX-FREE YIELDS

                                                               FEDERAL
                   SINGLE                JOINT                 TAX
                   RETURN                RETURN BRACKET        RATE
                   ------                --------------        ----
                   $0 - 6,000            $0 - 12,000           10.00%
                   $6,001 - 27,950       $12,001 - 46,700      15.00%
                   $27,951 - 67,700      $46,701 - 112,850     27.00%
                   $67,701 - 141,250     $112,851 - 171,950    30.00%
                   $141,251 - 307,050    $171,951 - 307,050    35.00%
                   Over $307,050         Over $307,050         38.60%

<TABLE>
<CAPTION>

  SINGLE                JOINT
  RETURN                RETURN BRACKET                  TAXABLE EQUIVALENT ESTIMATE CURRENT RETURN

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



                                 APPENDIX C

                     GENERAL CHARACTERISTICS AND RISKS

                          OF HEDGING TRANSACTIONS

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

Put And Call Options On Securities And Indices

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

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

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

Futures Contracts And Related Options

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

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

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

         Segregation and Cover Requirements. Futures contracts, interest
rate swaps, caps, floors and collars, short sales, reverse repurchase
agreements and dollar rolls, and listed or OTC options on securities,
indices and futures contracts sold by the Trust are generally subject to
earmarking and coverage requirements of either the CFTC or the SEC, with
the result that, if the Trust does not hold the security or futures
contract underlying the instrument, the T rust will be required to
designate on its books and records an ongoing basis, cash, U.S. government
securities, or other liquid high grade debt obligations in an amount at
least equal to the Trust's obligations with respect to such instruments.
Such amounts fluctuate as the obligations increase or decrease. The
earmarking requirement can result in the Trust maintaining securities
positions it would otherwise liquidate, segregating assets at a time when
it might be disadvantageous to do so or otherwise restrict portfolio
management.

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


                                   PART C

                             Other Information

Item 24.  Financial Statements And Exhibits

(1)      Financial Statements

         Part A--None.

         Part B--Statement of Assets and Liabilities.

(2)      Exhibits

         (a)       Agreement and Declaration of Trust.1

         (b)       By-Laws. 1

         (c)       Inapplicable.

         (d)       Form of Specimen Certificate. 2

         (e)       Dividend Reinvestment Plan. 2

         (f)       Inapplicable.

         (g)(1)      Investment Management Agreement. 2

         (g)(2)      Sub-Investment Advisory Agreement. 2

         (g)(3)      Waiver Reliance Letter. 2

         (h)       Form of Underwriting Agreement. 2

         (i)       Form of Deferred Compensation Plan for Independent
                   Trustees. 2

         (j)       Custodian Agreement 2

         (k)       Transfer Agency Agreement 2

         (l)       Opinion and Consent of Counsel to the Trust. 2

         (m)       Inapplicable.

         (n)       Consent of Independent Public Accountants. 2

         (o)       Inapplicable.

         (p)       Initial Subscription Agreement. 2

         (q)       Inapplicable.

         (r)(1)      Code of Ethics of Trust. 2

         (r)(2)      Code of Ethics of Advisor and Sub-Advisor. 2

         (s)       Powers of Attorney. 2

         1  Filed herewith

         2.  To be filed by amendment

Item 25.  Marketing Arrangements

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



Item 26.  Other Expenses Of Issuance And Distribution

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

         Registration fee..............................................$
         NYSE listing fee..............................................$
         Printing (other than certificates)............................$
         Engraving and printing certificates...........................$
         Accounting fees and expenses..................................$
         Legal fees and expenses.......................................$
         NASD fee......................................................$
         Miscellaneous.................................................$
              Total....................................................$


Item 27.  Persons Controlled By Or Under Common Control With The Registrant

         None.

Item 28.  Number Of Holders Of Shares

                                                                    Number of
         Title Of Class                                         Record Holders

         Shares of Beneficial Interest                                   0


Item 29.  Indemnification

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

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

         5.2 Mandatory Indemnification. (a) The Trust hereby agrees to
indemnify each person who at any time serves as a Trustee or officer of the
Trust (each such person being an "indemnitee") against any liabilities and
expenses, including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and reasonable counsel fees
reasonably incurred by such indemnitee in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which
he may be or may have been involved as a party or otherwise or with which
he may be or may have been threatened, while acting in any capacity set
forth in this Article V by reason of his having acted in any such capacity,
except with respect to any matter as to which he shall not have acted in
good faith in the reasonable belief that his action was in the best
interest of the Trust or, in the case of any criminal proceeding, as to
which he shall have had reasonable cause to believe that the conduct was
unlawful, provided, however, that no indemnitee shall be indemnified
hereunder against any liability to any person or any expense of such
indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith,
(iii) gross negligence, or (iv) reckless disregard of the duties involved
in the conduct of his position (the conduct referred to in such clauses (i)
through (iv) being sometimes referred to herein as "disabling conduct").
Notwithstanding the foregoing, with respect to any action, suit or other
proceeding voluntarily prosecuted by any indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action,
suit or other proceeding by such indemnitee (1) was authorized by a
majority of the Trustees or (2) was instituted by the indemnitee to enforce
his or her rights to indemnification hereunder in a case in which the
indemnitee is found to be entitled to such indemnification. The rights to
indemnification set forth in this Declaration shall continue as to a person
who has ceased to be a Trustee or officer of the Trust and shall inure to
the benefit of his or her heirs, executors and personal and legal
representatives. No amendment or restatement of this Declaration or repeal
of any of its provisions shall limit or eliminate any of the benefits
provided to any person who at any time is or was a Trustee or officer of
the Trust or otherwise entitled to indemnification hereunder in respect of
any act or omission that occurred prior to such amendment, restatement or
repeal.

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

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

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

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

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

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

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

         Insofar as indemnification for liabilities arising under the Act,
may be terminated to Trustees, officers and controlling persons of the
Trust, pursuant to the foregoing provisions or otherwise, the Trust has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue. Reference is made to Article __ of the
underwriting agreement attached as Exhibit (h), which is incorporated herein
by reference.

Item 30.  Business And Other Connections Of Investment Advisor

         Not Applicable

Item 31.  Location Of Accounts And Records

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

Item 32.  Management Services

         Not Applicable

Item 33.  Undertakings

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

         (2) Not applicable

         (3) Not applicable

         (4) Not applicable

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

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

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



                                 SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York,
on the 19th day of August, 2002.

                                /s/Anne F. Ackerley
                                ------------------------------------------------
                                Anne F. Ackerley
                                Sole Initial Trustee, President, Chief Executive
                                Officer and Chief Financial Officer


         Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities set forth below on the 19th day of August, 2002.

         Name                                     Title
         ----                                     -----
     /s/Anne F. Ackerley
---------------------------------    Sole Initial Trustee, President, Chief
 Anne F. Ackerley                 Executive Officer and  Chief Financial Officer


         INDEX TO EXHIBITS

         (a)       Agreement and Declaration of Trust.

         (b)       By-Laws.

</TEXT>
</DOCUMENT>
