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<SEC-DOCUMENT>0000950136-02-003035.txt : 20021029
<SEC-HEADER>0000950136-02-003035.hdr.sgml : 20021029
<ACCEPTANCE-DATETIME>20021029162349
ACCESSION NUMBER:		0000950136-02-003035
CONFORMED SUBMISSION TYPE:	497
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20021029
EFFECTIVENESS DATE:		20021029

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BLACKROCK INSURED MUNICIPAL INCOME TRUST
		CENTRAL INDEX KEY:			0001181187

	FILING VALUES:
		FORM TYPE:		497
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-98357
		FILM NUMBER:		02801560

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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	BLACKROCK MUNICIPAL INCOME TRUST III
		DATE OF NAME CHANGE:	20020819
</SEC-HEADER>
<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<FILENAME>file001.txt
<DESCRIPTION>DEFINITIVE MATERIALS
<TEXT>
<PAGE>

                                               Filed Pursuant to Rule 497(h)
                                               Registration File No.: 333-98357


PROSPECTUS                                                      [BLACKROCK LOGO]




                               24,000,000 SHARES

                          BLACKROCK INSURED MUNICIPAL
                                  INCOME TRUST
                                 COMMON SHARES
                                $15.00 PER SHARE

                                  ----------

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

     Portfolio Contents. The Trust will invest primarily in insured municipal
bonds that pay interest that is exempt from Federal income tax, including the
alternative minimum tax. The Trust will invest in municipal bonds that, in the
opinion of the Trust's investment advisor or 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, under normal
market conditions, be invested primarily in municipal bonds rated in the
highest category at the time of investment (which is Aaa by Moody's Investor's
Service, Inc. ("Moody's") or AAA by Standard & Poor's Ratings Group ("S&P") or
Fitch IBCA, Inc. ("Fitch") or, if unrated, determined to be of comparable
quality by the Trust's investment advisor or sub-advisor). Up to 20% of the
Trust's Managed Assets (as defined herein) may be invested in bonds rated below
Aaa or AAA (but not lower than BBB or Baa) and comparable unrated municipal
bonds and/or municipal bonds that are uninsured. Accordingly, the Trust does
not intend to invest any of its assets in municipal bonds rated below
investment grade or in comparable unrated municipal 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 will be listed on
the New York Stock Exchange under the symbol "BYM".


     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.

     Insurance. Insurance does not protect the market value of municipal bonds
or the net asset value of the Trust.

     INVESTING IN THE COMMON SHARES INVOLVES CERTAIN RISKS. SEE "RISKS"
BEGINNING ON PAGE 21.

     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.

                                  ----------

<TABLE>
<CAPTION>
                                                        PER SHARE         TOTAL
                                                       -----------   ---------------
<S>                                                    <C>           <C>
Public offering price ..............................    $ 15.000      $360,000,000
Sales load .........................................    $  0.675      $ 16,200,000
Estimated offering expenses ........................    $  0.030      $    720,000
Proceeds, after expenses, to the Trust(1) ..........    $ 14.295      $343,080,000
</TABLE>



(1)   Aggregate offering expenses are expected to be $930,862. BlackRock has
      agreed to reimburse offering expenses in excess of $0.03 per common
      share.

     The underwriters may also purchase up to 3,600,000 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.

     The Underwriters expect to deliver the common shares to purchasers on or
about October 31, 2002.

                                  ----------

SALOMON SMITH BARNEY                                         MERRILL LYNCH & CO.
PRUDENTIAL SECURITIES                                        WACHOVIA SECURITIES
FAHNESTOCK & CO. INC.                                JANNEY MONTGOMERY SCOTT LLC
J.J.B. HILLIARD, W.L. LYONS, INC.                         LEGG MASON WOOD WALKER
           A PNC COMPANY                                         INCORPORATED
QUICK & REILLY, INC.                                             RYAN BECK & CO.
                                  TD WATERHOUSE

October 28, 2002

<PAGE>


     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
October 28, 2002, containing additional information about the Trust, has been
filed with the Securities and Exchange Commission and is incorporated by
reference in its entirety into this prospectus. You may request a free copy of
the Statement of Additional Information, the table of contents of which is on
page 42 of this prospectus, by calling (888) 825-2257 or by writing to the
Trust, or obtain a copy (and other information regarding the Trust) from the
Securities and Exchange Commission's web site (http://www.sec.gov).



     The 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.


                                       2
<PAGE>

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE AS OF ANY OTHER DATE THAN
THE DATE ON THE FRONT OF THIS PROSPECTUS.


                               TABLE OF CONTENTS





<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>                                                                      <C>
Prospectus Summary .....................................................  4
Summary of Trust Expenses .............................................. 11
The Trust .............................................................. 13
Use of Proceeds ........................................................ 13
The Trust's Investments ................................................ 13
Preferred Shares and Leverage .......................................... 19
Risks .................................................................. 21
How the Trust Manages Risk ............................................. 24
Management of the Trust ................................................ 26
Net Asset Value ........................................................ 29
Distributions .......................................................... 29
Dividend Reinvestment Plan ............................................. 30
Description of Shares .................................................. 31
Certain Provisions in the Agreement and Declaration of Trust ........... 34
Closed-End Trust Structure ............................................. 35
Repurchase of Common Shares ............................................ 36
Tax Matters ............................................................ 36
Underwriting ........................................................... 38
Custodian and Transfer Agent ........................................... 41
Legal Opinions ......................................................... 41
Table of Contents for the Statement of Additional Information .......... 42
</TABLE>



     Until November 22, 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.


                                       3
<PAGE>

                              PROSPECTUS SUMMARY

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

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


THE OFFERING................   The Trust is offering 24,000,000 common shares
                               of beneficial interest at $15.00 per share
                               through a group of underwriters (the
                               "Underwriters") led by Salomon Smith Barney Inc.,
                               Merrill Lynch, Pierce, Fenner & Smith
                               Incorporated ("Merrill Lynch"), Prudential
                               Securities Incorporated, Wachovia Securities,
                               Inc., Fahnestock & Co. Inc., Janney Montgomery
                               Scott LLC, J.J.B. Hilliard, W.L. Lyons, Inc.,
                               Legg Mason Wood Walker, Incorporated, Quick &
                               Reilly, Inc. A FleetBoston Financial Company,
                               Ryan Beck & Co., Inc. and TD Waterhouse Investor
                               Services, Inc. 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
                               3,600,000 additional common shares to cover
                               orders in excess of 24,000,000 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 Federal income tax,
                               including the alternative minimum tax. The Trust
                               cannot ensure that it will achieve its investment
                               objective.

INVESTMENT POLICIES.........   The Trust will invest primarily in insured
                               municipal bonds that pay interest that is exempt
                               from Federal income tax, including the
                               alternative minimum tax. Under normal
                               circumstances, the Trust expects to be fully
                               invested in tax exempt municipal bonds. The Trust
                               will not invest in a municipal bond if the
                               interest on that bond is subject to the
                               alternative minimum tax. Municipal bond insurance
                               does not protect the market value of such
                               municipal bonds or the net asset value of the
                               Trust. The value of a municipal bond will be
                               affected by the credit standing of its insurer.

                               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


                                       4
<PAGE>

                               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.

                               At least 80% of the Trust's Managed Assets will,
                               under normal circumstances, be invested in
                               municipal bonds:

                                o that pay interest that is exempt from Federal
                                  income tax, including the alternative minimum
                                  tax;

                                o insured as to timely payment of principal and
                                  interest; and

                                o rated in the highest category at the time of
                                  investment (which is Aaa by Moody's or AAA by
                                  S&P or Fitch or, if unrated, determined to be
                                  of comparable quality by the Advisor or
                                  Sub-Advisor), which ratings are independent
                                  of any insurance on the bonds.

                               Up to 20% of the Trust's Managed Assets may be
                               invested in obligations rated below Aaa or AAA
                               (but not lower than BBB or Baa) and comparable
                               unrated municipal bonds and/or municipal bonds
                               that are uninsured. Accordingly, the Trust does
                               not intend to invest any of its assets in
                               municipal bonds rated below investment grade or
                               in comparable unrated municipal bonds. The
                               foregoing policies are non-fundamental, except
                               the policy with respect to investing in
                               municipal bonds that pay interest exempt from
                               Federal income tax, including the alternative
                               minimum tax, is fundamental. 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. See "The
                               Trust's Investments."

INSURANCE...................   Insured municipal bonds held by the Trust will
                               be insured as to their scheduled payment of
                               principal and interest under (i) an insurance
                               policy obtained by the issuer or underwriter of
                               the municipal bond at the time of its original
                               issuance ("Original Issue Insurance"), (ii) an
                               insurance policy obtained by the Trust or a third
                               party subsequent to the municipal bond's original
                               issuance ("Secondary Market Insurance") or (iii)
                               another municipal insurance policy purchased by
                               the Trust ("Portfolio Insurance"). This insurance
                               does not protect the market value of such bonds
                               or the net asset value of the Trust. The Trust
                               expects initially to emphasize investments in
                               municipal bonds insured under bond-specific
                               insurance policies (i.e., Original Issue
                               Insurance or Secondary Market Insurance). There
                               is no limit on the percentage of the Trusts'
                               assets that may be invested in municipal bonds
                               insured by any one insurer.


                                       5
<PAGE>

SPECIAL TAX CONSIDERATIONS...  Distributions of any capital gain or other
                               taxable income will be taxable to shareholders.
                               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 0.55% 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


                                       6
<PAGE>

                               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 0.20% of the average weekly values
                               of the Trust's Managed Assets for the first five
                               years of the Trust's operations (through October
                               31, 2007), and for a declining amount for an
                               additional three years (through October 31,
                               2010). See "Management of the Trust."

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

                               The Trust will distribute to holders of its
                               common shares monthly dividends of all or a
                               portion of its tax-exempt interest income after
                               payment of dividends on any Preferred Shares of
                               the Trust 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 will be listed on the New
                               York Stock Exchange under the symbol "BYM". 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


                                       7
<PAGE>

                               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.

                               Municipal Bond Insurance. In the event Moody's,
                               S&P or Fitch (or all of them) should downgrade
                               its assessment of the claims-paying ability of a
                               particular insurer, it (or they) could also be
                               expected to downgrade the ratings assigned to
                               municipal bonds insured by such insurer, and
                               municipal bonds insured under Portfolio
                               Insurance (as defined below) issued by such
                               insurer also would be of reduced quality in the
                               portfolio of the Trust. There is no limit on the
                               percentage of the Trust's assets that may be
                               invested in municipal bonds insured by any one
                               insurer. Any such downgrade could have an
                               adverse impact on the net asset value and market
                               price of the Trust's shares.


                                       8
<PAGE>

                               In addition, to the extent the Trust employs
                               Portfolio Insurance, the Trust may be subject to
                               certain restrictions on investments imposed by
                               guidelines of the insurance companies issuing
                               such Portfolio Insurance. The Trust does not
                               expect these guidelines to prevent BlackRock
                               from managing the Trust's portfolio in
                               accordance with the Trust's investment objective
                               and policies.

                               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


                                       9
<PAGE>

                               BlackRock than would be a stock fund or taxable
                               bond fund. The secondary market for municipal
                               bonds, also tends to be less well-developed or
                               liquid than many other securities markets, which
                               may adversely affect the Trust's ability to sell
                               its bonds at attractive prices.

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

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


                                       10
<PAGE>

                           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


<TABLE>
<S>                                                                     <C>
 Sales Load Paid by You (as a percentage of offering price) .........   4.50%
 Dividend Reinvestment Plan Fees ....................................   None*
</TABLE>


<TABLE>
<CAPTION>
                                                              PERCENTAGE OF
                                                                NET ASSETS
                                                             ATTRIBUTABLE TO
                                                              COMMON SHARES
                                                            (ASSUMESPREFERRED
                                                           SHARES ARE ISSUED)**
                                                          ---------------------
<S>                                                       <C>
ANNUAL EXPENSES
 Management Fees ......................................          0.89%
 Other Expenses .......................................          0.32%
                                                                -----
 Total Annual Expenses ................................          1.21%***
                                                                =====
 Fee and Expense Waiver ...............................         (0.32)%***
                                                                -----
 Net Annual Expenses ..................................          0.89%***
</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)
                                                      ----------------------
<S>                                                   <C>
   ANNUAL EXPENSES
     Management Fees ..............................           0.55%
     Other Expenses ...............................           0.20%
                                                             -----
     Total Annual Expenses ........................           0.75%***
                                                             =====
     Fee and Expense Waiver .......................          (0.20)%***
                                                             -----
     Net Annual Expenses ..........................           0.55%***
</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
      0.32% of average weekly net assets attributable to common shares (0.20%
      of average weekly Managed Assets) for the first 5 years of the Trust's
      operations, 0.24% (0.15%) in year 6, 0.16% (0.10%) in year 7 and 0.08%
      (0.05%) in year 8. Without the waiver, "Total Annual Expenses" would be
      estimated to be 1.21% of average weekly net assets attributable to common
      shares and 0.75% 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


                                       11
<PAGE>


amounts for the Trust's first full year of operations and assume that the Trust
issues 24,000,000 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 0.89% of net assets attributable to common
shares in years 1 through 5, and (2) a 5% annual return:(1)


<TABLE>
<CAPTION>
                                      1 YEAR     3 YEARS     5 YEARS     10 YEARS(2)
                                     --------   ---------   ---------   ------------
<S>                                  <C>        <C>         <C>         <C>
Total Expenses Incurred ..........      $54        $72         $92          $164
</TABLE>

- ----------
(1)   THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
      EXPENSES. The example assumes that the estimated "Other Expenses" set
      forth in the Annual Expenses table are accurate, that fees and expenses
      increase as described in note 2 below and that all dividends and
      distributions are reinvested at net asset value. Actual expenses may be
      greater or less than those assumed. Moreover, the Trust's actual rate of
      return may be greater or less than the hypothetical 5% return shown in
      the example.

(2)   Assumes waiver of fees and expenses of 0.24% of average weekly net assets
      attributable to common shares in year 6 (0.15% of average weekly Managed
      Assets), 0.16% (0.10%) in year 7 and, 0.08% (0.05%) in year 8 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 October 31, 2010. See "Management of the
      Trust--Investment Management Agreement."


                                       12
<PAGE>

                                   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, as subsequently amended and restated,
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
$343,080,000 ($394,542,000 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
Federal income tax, including the alternative minimum tax.

     The Trust will invest primarily in insured municipal bonds that pay
interest that is exempt from Federal income tax, including the alternative
minimum tax. Under normal circumstances, the Trust will invest as least 80% of
its Managed Assets in municipal bonds that pay interest that is exempt from
Federal income tax, including the alternative minimum tax. The Trust intends to
be fully invested in such tax exempt municipal bonds. The Trust will not invest
in any bond if the interest on that bond is subject to the alternative minimum
tax. Under normal circumstances the Trust will invest at least 80% of its
Managed Assets in municipal bonds that are insured as to principal and
interest. Such municipal bond insurance will be from insurers having a claims
paying ability of rated "Aaa" by Moody's or "AAA" by S&P or Fitch. This
insurance does not protect the market of such bonds or the net asset value of
the Trust. The value of an insured municipal bond will be affected by the
credit rating of its insurer.

     At least 80% of the Trust's Managed Assets will normally be invested in
municipal bonds rated in the highest category at the time of investment (which
is Aaa by Moody's or AAA by S&P or Fitch or, if unrated, determined to be of
comparable quality by the Advisor or Sub-Advisor), which ratings are
independent of any insurance on the bonds. Up to 20% of the Trust's Managed
Assets may be invested in obligations rated below Aaa or AAA (but not lower
than BBB or Baa) and comparable unrated obligations and/or municipal bonds that
are uninsured. Accordingly, the Trust does not intend to invest any of its
assets in municipal bonds rated below investment grade or in comparable unrated
bonds. 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 or insurer. 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 and
the insurer, the price at which the security could be sold and the rating, if
any, assigned to the security and the insurer by other rating agencies.

     The Trust's policy of investing 80% of its Managed Assets in bonds that
pay interest that is exempt from Federal income tax, including the alternative
minimum tax, is fundamental and may not be changed without approval of
shareholders. The Trust's 80% policies with respect to credit quality


                                       13
<PAGE>

and investment in insured municipal bonds are non-fundamental and may be
changed by the Trust's board of trustees. In addition, the Trust's 80% policy
with respect to investment in insured municipal bonds may only be changed by
the Trust's board or trustees upon 60 days' prior notice to shareholders.

     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 and
insurers.

     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 Federal income tax, including alternative minimum 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.

     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


                                       14
<PAGE>

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 Federal income tax,
including the alternative minimum 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 Federal income
tax, including the alternative minimum 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 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.

     Municipal Bond Insurance Generally. Insured municipal bonds held by the
Trust will be insured as to their scheduled payment of principal and interest
under (i) an insurance policy obtained by the issuer or underwriter of the
municipal bond at the time of its original issuance ("Original Issue
Insurance"), (ii) an insurance policy obtained by the Trust or a third party
subsequent to the municipal bond's original issuance ("Secondary Market
Insurance") or (iii) another municipal insurance policy purchased by the Trust
("Portfolio Insurance"). See below for a discussion of these different types of
municipal bond insurance. This insurance does not protect the market value of
such bonds or the net asset value of the Trust. The Trust expects initially to
emphasize investments in municipal bonds insured under bond-specific insurance
policies (i.e., Original Issue Insurance or Secondary Market Insurance). The
Trust may obtain Portfolio Insurance from the insurers described under
"Investment Policies and Techniques--Description of Insurers" in the Statement
of Additional Information. The Trust, as a non-fundamental policy that can be
changed by the Trust's board of trustees, will only obtain policies of
Portfolio Insurance issued by insurers whose claims-paying ability is rated
"Aaa" by Moody's or "AAA" by S&P or Fitch. There is no limit on the percentage
of the Trusts' assets that may be invested in municipal bonds insured by any
one insurer.

     Municipal bonds covered by Original Issue Insurance or Secondary Market
Insurance are themselves typically assigned a rating of "Aaa" or "AAA," as the
case may be, by virtue of the rating of the "Aaa" or "AAA" claims-paying
ability of the insurer and would generally be assigned a lower rating if the
ratings were based primarily upon the credit characteristics of the issuer
without regard to the insurance feature. By way of contrast, the ratings, if
any, assigned to municipal bonds insured under Portfolio Insurance will be
based primarily upon the credit characteristics of the issuer, without regard
to the insurance feature, and generally will carry a rating that is below "Aaa"
or "AAA." While in the portfolio of the Trust, however, a municipal bond backed
by Portfolio Insurance will effectively be of the same credit quality as a
municipal bond issued by an issuer of comparable credit characteristics that is
backed by Original Issue Insurance or Secondary Market Insurance.


                                       15
<PAGE>

     The Trust's policy of investing in municipal bonds insured by insurers
whose claims-paying ability is rated "Aaa" or "AAA" applies only at the time of
purchase of a security, and the Trust will not be required to dispose of the
securities in the event Moody's, S&P or Fitch, as the case may be, downgrades
its assessment of the claims-paying ability of a particular insurer or the
credit characteristics of a particular issuer or withdraws its assessment. In
this connection, it should be noted that in the event Moody's, S&P or Fitch (or
all of them) should downgrade its assessment of the claims-paying ability of a
particular insurer, it (or they) could also be expected to downgrade the
ratings assigned to municipal bonds insured by such insurer, and municipal
bonds insured under Portfolio Insurance issued by such insurer also would be of
reduced quality in the portfolio of the Trust. Moody's, S&P and Fitch
continually assess the claims-paying ability of insurers and the credit
characteristics of issuers, and there can be no assurance that they will not
downgrade or withdraw their assessments subsequent to the time the Trust
purchases securities.

     The value of municipal bonds covered by Portfolio Insurance that are in
default or in significant risk of default will be determined by separately
establishing a value for the municipal bond and a value for the Portfolio
Insurance.

     Original Issue Insurance. Original Issue Insurance is purchased with
respect to a particular issue of municipal bonds by the issuer thereof or a
third party in conjunction with the original issuance of such municipal bonds.
Under this insurance, the insurer unconditionally guarantees to the holder of
the municipal bond the timely payment of principal and interest on such
obligations when and as these payments become due but not paid by the issuer,
except that in the event of the acceleration of the due date of the principal
by reason of mandatory or optional redemption (other than acceleration by
reason of a mandatory sinking fund payment), default or otherwise, the payments
guaranteed may be made in the amounts and at the times as payment of principal
would have been due had there not been any acceleration. The insurer is
responsible for these payments less any amounts received by the holder from any
trustee for the municipal bond issuer or from any other source. Original Issue
Insurance does not guarantee payment on an accelerated basis, the payment of
any redemption premium (except with respect to certain premium payments in the
case of certain small issue industrial development and pollution control
municipal bonds), the value of the Trust's shares, the market value of
municipal bonds, or payments of any tender purchase price upon the tender of
the municipal bonds. Original Issue Insurance also does not insure against
nonpayment of principal or interest on municipal bonds resulting from the
insolvency, negligence or any other act or omission of the trustee or other
paying agent for these bonds.

     Original Issue Insurance remains in effect as long as the municipal bonds
it covers remain outstanding and the insurer remains in business, regardless of
whether the Trust ultimately disposes of these municipal bonds. Consequently,
Original Issue Insurance may be considered to represent an element of market
value with respect to the municipal bonds so insured, but the exact effect, if
any, of this insurance on the market value cannot be estimated.

     Secondary Market Insurance. Subsequent to the time of original issuance of
a municipal bond, the Trust or a third party may, upon the payment of a single
premium, purchase insurance on that security. Secondary Market Insurance
generally provides the same type of coverage as Original Issue Insurance and,
as with Original Issue Insurance, Secondary Market Insurance remains in effect
as long as the municipal bonds it covers remain outstanding and the insurer
remains in business, regardless of whether the Trust ultimately disposes of
these municipal bonds.

     One of the purposes of acquiring Secondary Market Insurance with respect
to a particular municipal bond would be to enable the Trust to enhance the
value of the security. The Trust, for example, might seek to purchase a
particular municipal bond and obtain Secondary Market Insurance for it if, in
BlackRock's opinion, the market value of the security, as insured, less the
cost of the Secondary Market Insurance, would exceed the current value of the
security without insurance. Similarly, if the Trust owns but wishes to sell a
municipal bond that is then covered by Portfolio Insurance, the Trust might
seek to obtain Secondary Market Insurance for it if, in BlackRock's opinion,
the net proceeds of the Trust's sale of the security, as insured, less the cost
of the Secondary


                                       16
<PAGE>

Market Insurance, would exceed the current value of the security. In
determining whether to insure municipal bonds the Trust owns, an insurer will
apply its own standards, which correspond generally to the standards the
insurer has established for determining the insurability of new issues of
municipal bonds. See "Original Issue Insurance" above.

     Portfolio Insurance. Portfolio Insurance guarantees the payment of
principal and interest on specified eligible municipal bonds purchased by the
Trust and presently held by the Trust. Except as described below, Portfolio
Insurance generally provides the same type of coverage as is provided by
Original Issue Insurance or Secondary Market Insurance. Municipal bonds insured
under a Portfolio Insurance policy would generally not be insured under any
other policy. A municipal bond is eligible for coverage under a policy if it
meets certain requirements of the insurer. Portfolio Insurance is intended to
reduce financial risk, but the cost thereof and compliance with investment
restrictions imposed under the policy will reduce the yield to shareholders of
the Trust.

     If a municipal obligation is already covered by Original Issue Insurance
or Secondary Market Insurance, then the security is not required to be
additionally insured under any Portfolio Insurance that the Trust may purchase.
All premiums respecting municipal bonds covered by Original Issue Insurance or
Secondary Market Insurance are paid in advance by the issuer or other party
obtaining the insurance.

     Portfolio Insurance policies are effective only as to municipal bonds
owned by and held by the Trust, and do not cover municipal bonds for which the
contract for purchase fails. A "when-issued" municipal bond will be covered
under a Portfolio Insurance policy upon the settlement date of the issue of
such "when-issued" municipal bond.

     In determining whether to insure municipal bonds held by the Trust, an
insurer will apply its own standards, which correspond generally to the
standards it has established for determining the insurability of new issues of
municipal bonds. See "Original Issue Insurance" above.

     Each Portfolio Insurance policy will be noncancellable and will remain in
effect so long as the Trust is in existence, the municipal bonds covered by the
policy continue to be held by the Trust, and the Trust pays the premiums for
the policy. Each insurer will generally reserve the right at any time upon 90
days' written notice to the Trust to refuse to insure any additional bonds
purchased by the Trust after the effective date of such notice. The Trust's
Board generally will reserve the right to terminate each policy upon seven
days' written notice to an insurer if it determines that the cost of such
policy is not reasonable in relation to the value of the insurance to the
Trust.

     Each Portfolio Insurance policy will terminate as to any municipal bond
that has been redeemed from or sold by the Trust on the date of redemption or
the settlement date of sale, and an insurer will not have any liability
thereafter under a policy for any municipal bond, except that if the redemption
date or settlement date occurs after a record date and before the related
payment date for any municipal bond, the policy will terminate for that
municipal bond on the business day immediately following the payment date. Each
policy will terminate as to all municipal bonds covered thereby on the date on
which the last of the covered municipal bonds mature, are redeemed or are sold
by the Trust.

     One or more Portfolio Insurance policies may provide the Trust, pursuant
to an irrevocable commitment of the insurer, with the option to exercise the
right to obtain permanent insurance ("Permanent Insurance") for a municipal
bond that is sold by the Trust. The Trust would exercise the right to obtain
Permanent Insurance upon payment of a single, predetermined insurance premium
payable from the sale proceeds of the municipal bond. The Trust expects to
exercise the right to obtain Permanent Insurance for a municipal bond only if,
in BlackRock's opinion, upon the exercise the net proceeds from the sale of the
municipal bond, as insured, would exceed the proceeds from the sale of the
security without insurance.

     The Portfolio Insurance premium for each municipal bond is determined
based upon the insurability of each security as of the date of purchase and
will not be increased or decreased for any


                                       17
<PAGE>

change in the security's creditworthiness unless the security is in default as
to payment of principal or interest, or both. If such event occurs, the
Permanent Insurance premium will be subject to an increase predetermined at the
date of the Trust's purchase.

     Because each Portfolio Insurance policy will terminate for municipal bonds
sold by the Trust on the date of sale, in which event the insurer will be
liable only for those payments of principal and interest that are then due and
owing (unless Permanent Insurance is obtained by the Trust), the provision for
this insurance will not enhance the marketability of the Trust's bonds, whether
or not the obligations are in default or in significant risk of default. On the
other hand, because Original Issue Insurance and Secondary Market Insurance
generally will remain in effect as long as the municipal bonds they cover are
outstanding, these insurance policies may enhance the marketability of these
bonds even when they are in default or in significant risk of default, but the
exact effect, if any, on marketability, cannot be estimated. Accordingly, the
Trust may determine to retain or, alternatively, to sell municipal bonds
covered by Original Issue Insurance or Secondary Market Insurance that are in
default or in significant risk of default.

     Premiums for a Portfolio Insurance policy are paid monthly, and are
adjusted for purchases and sales of municipal bonds covered by the policy
during the month. The yield on the Trust is reduced to the extent of the
insurance premiums it pays.

     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 current yield. Insurance will be obtained from insurers
with a claims-paying ability rated "Aaa" by Moody's or "AAA" by S&P or Fitch.
The insurance does not guarantee the market value of the insured obligation or
the net asset value of the Trust's Shares.

     Other Types of Credit Support. The Trust may also invest in uninsured
municipal bonds that are secured by an escrow or trust account that contains
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, that are backed by the full faith and credit of the United
States, and sufficient, in combination with available trustee-held funds, in
amount to ensure the payment of interest on and principal of the secured
obligation ("collateralized obligations"). These collateralized obligations
generally will not be insured and will include, but are not limited to,
municipal bonds that have been advance refunded where the proceeds of the
refunding have been used to buy U.S. Government or U.S. Government agency
securities that are placed in escrow and whose interest or maturing principal
payments, or both, are sufficient to cover the remaining scheduled debt service
on that municipal bond. Collateralized obligations generally are regarded as
having the credit characteristics of the underlying U.S. Government, U.S.
Government agency or instrumentality securities. These obligations will not be
subject to Original Issue Insurance, Secondary Market Insurance or Portfolio
Insurance. Accordingly, despite the existence of the foregoing credit support
characteristics, these bonds will not be considered to be insured bonds for
purposes of the Trust's non-fundamental policy of investing at least 80% of its
Managed Assets in insured bonds. The credit quality of companies that provide
such credit enhancements will affect the value of those securities.


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


                                       18
<PAGE>

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. The Trust has no
present intention to invest in other investment companies managed by BlackRock
or its affiliates.


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
Federal income tax, including the alternative minimum 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 Federal
income tax, including the alternative minimum 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.


INITIAL PORTFOLIO COMPOSITION

     If current market conditions persist, the Trust expects that 100% of its
initial portfolio will consist of investment grade quality municipal bonds,
rated as such at the time of investment, meaning that such bonds are rated by
national rating agencies within the four highest grades or are unrated but
judged to be of comparable quality by BlackRock (approximately 80% in
"Aaa/AAA"; and 20% 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


                                       19
<PAGE>

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.
Only holders of common shares bear the cost of the Trust's fees and expenses,
including the costs associated with any offering of Preferred Shares (estimated
to be slightly more than 1.25% of the total amount of the Preferred Share
offering), which will be borne immediately by holders of common shares and the
costs associated with any borrowing. See "Summary of Trust Expenses."

     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.


                                       20
<PAGE>

     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 and the Trust's currently
projected annual Preferred Share dividend rate of 2.00%.


<TABLE>
<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


                                       21
<PAGE>

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.

     Market interest rates for investment grade municipal bonds in which the
Trust will primarily invest have recently declined significantly below the
recent historical average rates for such bonds. This decline may have increased
the risk that these rates will rise in the future (which would cause the value
of the Trust's net assets to decline) and the degree to which asset values may
decline in such event.

     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 securities
rated BBB/Baa which, while investment grade, may have speculative
characteristics.

     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
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


                                       22
<PAGE>

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.

     Municipal Bond Insurance. In the event Moody's, S&P or Fitch (or all of
them) should downgrade its assessment of the claims-paying ability of a
particular insurer, it (or they) could also be expected to downgrade the
ratings assigned to municipal bonds insured by such insurer, and municipal
bonds insured under Portfolio Insurance issued by such insurer also would be of
reduced quality in the portfolio of the Trust. There is no limit on the
percentage of the Trust's assets that may be invested in municipal bonds
insured by any one insurer. Any such downgrade could have an adverse impact on
the net asset value and market price of the common shares.

     In addition, to the extent the Trust employs Portfolio Insurance, the
Trust may be subject to certain restrictions on investments imposed by
guidelines of the insurance companies issuing such Portfolio Insurance. The
Trust does not expect these guidelines to prevent BlackRock from managing the
Trust's portfolio in accordance with the Trust's investment objective and
policies.

     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


                                       23
<PAGE>

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 bonds of issuers in the same state (or U.S.
territory) or in municipal bonds in the same economic sector, including without
limitation the following: lease rental bonds of state and local authorities;
bonds dependent on annual appropriations by a state's legislature for payment;
bonds of state and local housing finance authorities, municipal utilities
systems or public housing authorities; bonds 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.


                          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 outstanding 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

     At least 80% of the Trust's Managed Assets will, under normal
circumstances, be invested in municipal bonds rated in the highest category at
the time of investment (which is "Aaa" by Moody's or "AAA" by S&P or Fitch or,
if unrated, determined to be of comparable quality by the Advisor or


                                       24
<PAGE>

Sub-Advisor), which ratings are independent of any insurance on the bonds. Up
to 20% of the Trust's Managed Assets may be invested in municipal bonds rated
below "Aaa" or "AAA" (but not lower than "BBB" or "Baa") and comparable unrated
municipal bonds and/or municipal bonds that are uninsured. Accordingly, the
Trust does not intend to invest any of its assets in municipal bonds rated
below investment grade or in comparable unrated municipal bonds. At least 80%
of the Trust's Managed Assets will, under normal circumstances, be invested in
municipal bonds insured as to timely payment of principal and interest.


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.


STRATEGIC TRANSACTIONS

     The Trust may use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These 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 of these
strategies would generate taxable income and the Trust has no present intention
to use these strategies.


                                       25
<PAGE>

                            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 $246 billion of assets under management as of September 30, 2002.
BlackRock manages assets on behalf of institutional and individual investors
worldwide through a variety of equity, fixed income, liquidity and alternative
investment products, including the BlackRock Funds and BlackRock Provident
Institutional Funds. In addition, BlackRock provides risk management and
investment system services to institutional investors under the BlackRock
Solutions name.

     The BlackRock organization has over 13 years of experience managing
closed-end products and currently advises a closed-end family of 40 funds with
approximately $10.4 billion in assets. BlackRock has 31 leveraged municipal
closed-end funds and six open-end municipal funds under management. As of
September 30, 2002, BlackRock had approximately $18.6 billion in municipal
assets under management 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 Federal income tax, including the
alternative minimum 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 four portfolio managers and five
credit research analysts with an average experience of 16 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, F. Howard Downs and James Pruskowski. 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


                                       26
<PAGE>

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. Mr. Pruskowski has been a portfolio manager and a member of
the Investment Strategy Group at BlackRock since 2000. From 1996 to 2000 Mr.
Pruskowski was an analyst in BlackRock's Risk Management and Analytics Group,
focusing on portfolio risk reporting and pricing of individual fixed income
assets.


     As of September 30, 2002, BlackRock's municipal bond portfolio managers
were responsible for over 85 municipal bond portfolios, valued at approximately
$13.8 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 31 closed-end municipal funds, with over $7.6
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 $13.8 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


                                       27
<PAGE>

authored a number of articles on municipal finance and edited The Handbook of
Municipal Bonds published in the fall of 1994. Dr. Heide was selected by the
Bond Buyer as a first team All-American Municipal Analyst in 1990 and was
nominated for the same award in several subsequent years.

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


INVESTMENT MANAGEMENT AGREEMENT

     Pursuant to an investment management agreement between BlackRock Advisors
and the Trust, the Trust has agreed to pay for the investment advisory services
and facilities provided by BlackRock Advisors a fee payable monthly in arrears
at an annual rate equal to 0.55% of the average weekly value of the Trust's
Managed Assets (the "Management Fee"). BlackRock has voluntarily agreed to
waive receipt of a portion of its Management Fee in the amount of 0.20% of the
average weekly value of the Trust's Managed Assets for the first five years of
the Trust's operations (through October 31, 2007), and for a declining amount
for an additional three years (through October 31, 2010). 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.



                                       28
<PAGE>


     For the first 8 years of the Trust's operation, BlackRock Advisors has
undertaken to waive its investment advisory fees and expenses payable by the
Trust in the amounts, and for the time periods, set forth below:


<TABLE>
<CAPTION>
                                                     PERCENTAGE WAIVED
                                                    (AS A PERCENTAGE OF
          TWELVE MONTH                                AVERAGE WEEKLY
          PERIOD ENDING                              MANAGED ASSETS)*
          --------------------------------------   --------------------
          <S>                                        <C>
          October 31, 2003** ...................            0.20%
          October 31, 2004 .....................            0.20%
          October 31, 2005 .....................            0.20%
          October 31, 2006 .....................            0.20%
          October 31, 2007 .....................            0.20%
          October 31, 2008 .....................            0.15%
          October 31, 2009 .....................            0.10%
          October 31, 2010 .....................            0.05%
</TABLE>

- ----------
*     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 October 31, 2010 or after termination of the
investment management agreement.


                                NET ASSET VALUE

     The net asset value of the common shares of the Trust will be computed
based upon the value of the Trust's portfolio securities and other assets. Net
asset value per common share will be determined as of the close of the regular
trading session on the New York Stock Exchange no less frequently than 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



                                       29
<PAGE>

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"), the administrator for shareholders in 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


                                       30
<PAGE>

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, telephone (800) 699-1236.


                             DESCRIPTION OF SHARES

COMMON SHARES


     The Trust is an unincorporated statutory trust organized under the laws of
Delaware pursuant to an Agreement and Declaration of Trust dated as of August
19, 2002, as subsequently amended and restated. 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



                                       31
<PAGE>

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 will be listed on the New York Stock Exchange
under the symbol "BYM".


     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,


                                       32
<PAGE>

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.


                                       33
<PAGE>

         CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST

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

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

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

    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


                                       34
<PAGE>

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


                                       35
<PAGE>

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 invests primarily in municipal bonds the income of which is
exempt from Federal income tax, including alternative minimum tax.
Consequently, the regular monthly dividends you receive will generally be
exempt from Federal income tax, including 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. 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.


                                       36
<PAGE>

     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 exempt dividend 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.


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.


                                       37
<PAGE>

                                  UNDERWRITING


     Salomon Smith Barney Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Prudential Securities Incorporated, Wachovia Securities, Inc.,
Fahnestock & Co. Inc., Janney Montgomery Scott LLC, J.J.B. Hilliard, W.L.
Lyons, Inc., Legg Mason Wood Walker, Incorporated, Quick & Reilly, Inc. A
FleetBoston Financial Company, Ryan Beck & Co., Inc. and TD Waterhouse Investor
Services, Inc. are acting as representatives of the Underwriters named below.
Subject to the terms and conditions stated in the underwriting agreement dated
October 28, 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.



<TABLE>
<CAPTION>
                                                                     NUMBER OF
        UNDERWRITERS                                               COMMON SHARES
        ------------                                               -------------
   <S>                                                               <C>
   Salomon Smith Barney Inc. ...................................     1,731,000
   Merrill Lynch, Pierce, Fenner & Smith
     Incorporated ..............................................     1,731,000
   Prudential Securities Incorporated ..........................     1,722,000
   Wachovia Securities, Inc. ...................................     1,722,000
   Fahnestock & Co. Inc. .......................................     1,722,000
   Janney Montgomery Scott LLC .................................     1,722,000
   J.J.B. Hilliard, W.L. Lyons, Inc. ...........................     1,722,000
   Legg Mason Wood Walker, Incorporated ........................     1,722,000
   Quick & Reilly, Inc. A FleetBoston Financial Company ........     1,722,000
   Ryan Beck & Co., Inc. .......................................     1,722,000
   TD Waterhouse Investor Services, Inc. .......................     1,722,000
   CIBC World Markets Corp. ....................................       300,000
   Deutsche Bank Securities Inc. ...............................       300,000
   A.G. Edwards & Sons, Inc. ...................................       300,000
   RBC Dain Rauscher Inc. ......................................       300,000
   U.S. Bancorp Piper Jaffray Inc. .............................       300,000
   Wells Fargo Securities, LLC .................................       300,000
   Advest, Inc. ................................................       180,000
   Robert W. Baird & Co. Incorporated ..........................       180,000
   BB&T Capital Markets, a division of Scott & Stringfellow ....       180,000
   Crowell, Weedon & Co. .......................................       180,000
   D.A. Davidson & Co. Inc. ....................................       180,000
   Ferris, Baker Watts, Incorporated ...........................       180,000
   Fifth Third/The Ohio Company ................................       180,000
   Morgan Keegan & Company, Inc. ...............................       180,000
   Stifel, Nicolaus & Company, Incorporated ....................       180,000
   Wedbush Morgan Securities Inc. ..............................       180,000
   Allen & Company of Florida Inc. .............................       120,000
   Chester Harris & Co., Inc. ..................................       120,000
   Hennion & Walsh, Inc. .......................................       120,000
   Howe Barnes Investments, Inc. ...............................       120,000
   Wayne Hummer & Co. ..........................................       120,000
   Johnston, Lemon & Co. Incorporated ..........................       120,000
   Mesirow Financial, Inc. .....................................       120,000
   David A. Noyes & Company ....................................       120,000
   Sands Brothers & Co., Ltd. ..................................       120,000
</TABLE>


                                       38
<PAGE>



<TABLE>
<CAPTION>
                                                                     NUMBER OF
        UNDERWRITERS                                               COMMON SHARES
        ------------                                               -------------
   <S>                                                               <C>
   Sterling Financial Investment Group .........................       120,000
   M.L. Stern & Co., Inc. ......................................       120,000
   SWS Securities, Inc. ........................................       120,000
                                                                    ----------
      Total ....................................................    24,000,000
                                                                    ==========
</TABLE>


     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 $0.45 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 Underwriters may allow, and such dealers may
reallow, a concession not in excess of $0.10 per common share on sales to
certain other dealers. If all of the common shares are not sold at the initial
offering price, the representatives may change the public offering price and
other selling terms. The representatives have advised the Trust that the
Underwriters do not intend to confirm any sales to any accounts over which they
exercise discretionary authority. Investors must pay for any common shares
purchased on or before October 31, 2002.


     BlackRock Advisors has also agreed to pay from its own assets to the
Underwriters a fee at an annual rate equal to 0.10% of the Trust's Managed
Assets. This fee will be payable in arrears at the end of each calendar quarter
during the continuance of the investment management agreement or other advisory
agreement between BlackRock Advisors and the Trust. Salomon Smith Barney Inc.
will be entitled to receive the entire amount of this fee unless other
Underwriters meet certain minimum sales thresholds during this offering or in
combination with other affiliated offerings. If an Underwriter other than
Salomon Smith Barney Inc. meets these minimum thresholds, it will receive an
annual fee equal to 0.10% of the Trust's Managed Assets multiplied by the
percentage of the Trust's common shares sold by the qualifying Underwriter.
Salomon Smith Barney Inc.'s fee will be reduced by an amount equal to the fee
paid to other qualifying Underwriters. The total amount of the fee payments
plus the amounts paid by the Trust to reimburse certain Underwriter legal
expenses, will not exceed 4.5% of the total price to the public of the common
shares offered hereby. In exchange for this fee, Salomon Smith Barney Inc. and
each qualifying Underwriter will provide certain after-market shareholder
support services designed to maintain the visibility of the Trust in the
investor community and to provide relevant information, studies or reports
regarding the Trust and the closed-end investment company industry.


     The Trust has granted to the Underwriters an option, exercisable for 45
days from the date of this prospectus, to purchase up to 3,600,000 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 Salomon Smith Barney Inc. on behalf of the Underwriters, dispose of or hedge
any common shares of the Trust or any securities convertible into or
exercisable or exchangeable for common shares of the Trust, or grant any
options or warrants to purchase common shares of the Trust. Salomon Smith
Barney Inc., 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,


                                       39
<PAGE>

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 "BYM".

     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 the
Underwriters 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
Trust's common shares shall have been suspended by the Securities and Exchange
Commission or the American Stock Exchange or trading in securities generally on
the New York Stock Exchange or the American Stock Exchange shall have been
suspended or limited or minimum prices shall have been established on either of
such Exchanges, (2) a commercial banking moratorium shall have been declared by
either federal or New York state authorities, or (3) there shall have occurred
any outbreak or escalation of hostilities, declaration by the United States of
a national emergency or war,


                                       40
<PAGE>

or other calamity or crisis the effect of which on financial markets in the
United States is such as to make it, in the sole judgment of the
representatives, impracticable or inadvisable to proceed with the offering or
delivery of the common shares as contemplated by this prospectus (exclusive of
any supplement thereto).

     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.


     J.J.B Hilliard, W.L. Lyons, Inc., one of the Underwriters, is an affiliate
of BlackRock.


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


                          CUSTODIAN AND TRANSFER AGENT

     The Custodian of the assets of the Trust is 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 Simpson Thacher & Bartlett, New York, New
York. Simpson Thacher & Bartlett may rely as to certain matters of Delaware law
on the opinion of Skadden, Arps, Slate, Meagher & Flom LLP.











                                       41
<PAGE>

                           TABLE OF CONTENTS FOR THE
                      STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
Use of Proceeds .......................................................    B-2
Investment Objective and Policies .....................................    B-2
Investment Policies and Techniques ....................................    B-4
Other Investment Policies and Techniques ..............................   B-13
Management of the Trust ...............................................   B-16
Portfolio Transactions and Brokerage ..................................   B-22
Description of Shares .................................................   B-23
Repurchase of Common Shares ...........................................   B-24
Tax Matters ...........................................................   B-25
Performance Related and Comparative Information .......................   B-29
Experts ...............................................................   B-33
Additional Information ................................................   B-33
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 Strategic Transactions     C-1
</TABLE>













                                       42
<PAGE>

================================================================================

                               24,000,000 SHARES




                          BLACKROCK INSURED MUNICIPAL
                                 INCOME TRUST


                                 COMMON SHARES

                                   --------

                              P R O S P E C T U S


                                OCTOBER 28, 2002




                                   --------

                              SALOMON SMITH BARNEY

                              MERRILL LYNCH & CO.

                             PRUDENTIAL SECURITIES

                              WACHOVIA SECURITIES

                             FAHNESTOCK & CO. INC.

                          JANNEY MONTGOMERY SCOTT LLC

                       J.J.B. HILLIARD, W.L. LYONS, INC.
                                 A PNC COMPANY

                             LEGG MASON WOOD WALKER
                                  INCORPORATED

                              QUICK & REILLY, INC.

                                RYAN BECK & CO.

                                 TD WATERHOUSE

================================================================================

<PAGE>

                   BLACKROCK INSURED MUNICIPAL INCOME TRUST

                      STATEMENT OF ADDITIONAL INFORMATION



     BlackRock Insured Municipal Income Trust (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 October 28, 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

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
Use of Proceeds .......................................................    B-2
Investment Objective and Policies .....................................    B-2
Investment Policies and Techniques ....................................    B-4
Other Investment Policies and Techniques ..............................   B-13
Management of the Trust ...............................................   B-16
Portfolio Transactions and Brokerage ..................................   B-22
Description of Shares .................................................   B-23
Repurchase of Common Shares ...........................................   B-24
Tax Matters ...........................................................   B-25
Performance Related and Comparative Information .......................   B-29
Experts ...............................................................   B-33
Additional Information ................................................   B-33
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 Strategic Transactions     C-1
</TABLE>


      This Statement of Additional Information is dated October 28, 2002.

<PAGE>

                                USE OF PROCEEDS

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


                       INVESTMENT OBJECTIVE AND POLICIES

     The Trust's investment objective is to provide current income exempt from
Federal income tax, including alternative minimum tax. 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


                                      B-2
<PAGE>

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 Federal income tax, including the alternative minimum 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


                                      B-3
<PAGE>

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

     As a matter of non-fundamental policy, under normal market conditions, the
Trust will invest at least 80% of its Managed Assets in insured securities. For
the purposes of the above non-fundamental policy an insured security is a
security that is insured as to the timely payment of both principal and
interest by an insurance company, which insurance may include, without
limitation, original issue insurance, secondary insurance or portfolio
insurance. The Trust has adopted a policy to provide shareholders of the Trust
at least 60 days' prior notice of any change in this non-fundamental investment
policy, if the change is not first approved by shareholders, which notice will
comply with the Investment Company Act, and the rules and regulations
thereunder. 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 insured grade municipal
bonds that are exempt from Federal income tax, including the alternative
minimum tax. Under normal circumstances, these municipal bonds will be rated
investment grade.

     In general, there are three categories of municipal obligations the
interest on which is exempt from federal income tax and is not a tax preference
item for purposes of the alternative minimum tax ("AMT"): (i) certain "public
purpose" obligations (whenever issued), which include obligations issued
directly by state and local governments or their agencies to fulfill essential
governmental functions;
(ii) certain obligations issued before August 8, 1986 for the benefit of
non-governmental persons or entities; and (iii) certain "private activity
bonds" issued after August 7, 1986 which include "qualified Section 501(c)(3)
bonds" or refundings of certain obligations included in the second category.

     Interest on certain "private activity bonds" issued after August 7, 1986
is exempt from regular federal income tax, but is treated as a tax preference
item that could subject the recipient to or


                                      B-4
<PAGE>

increase the recipient's liability for the AMT. For corporate shareholders, the
Fund's distributions derived from interest on all municipal obligations
(whenever issued) is included in "adjusted current earnings" for purposes of
the AMT as applied to corporations (to the extent not already included in
alternative minimum taxable income as income attributable to private activity
bonds). In assessing the federal income tax treatment of interest on any such
obligation, the Fund will rely on an opinion of the issuer's counsel (when
available) obtained by the issuer or other reliable authority and will not
undertake any independent verification thereof.

     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.

     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


                                      B-5
<PAGE>

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. To enforce its rights in the
event of a default in the payment of interest or repayment of principal, or
both, the Fund may take possession of and manage the assets or have a receiver
appointed to collect and disburse pledged revenues securing the issuer's
obligations on such securities, which may increase the operating expenses and
adversely affect the net asset value of the Fund. Any income derived from the
ownership or operation of such assets may not be tax-exempt. In addition, the
Fund's intention to qualify as a "regulated investment company" ("RIC") under
the Internal Revenue Code of 1986, as amended (the "Code") may limit the extent
to which the Fund may exercise its rights by taking possession of such assets,
because as a regulated investment company, the Fund is subject to certain
limitations on its investments and on the nature of its income.

     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 Federal income tax, including the
alternative minimum 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.


DESCRIPTION OF INSURERS

     In General. Insured bonds held by the Trust will be insured as to their
scheduled payment of principal and interest under (i) an insurance policy
obtained by the issuer or underwriter of the obligation at the time of its
original issuance ("Original Issue Insurance"), (ii) an insurance policy
obtained by the Trust or a third party subsequent to the obligation's original
issuance ("Secondary Market Insurance") or (iii) a municipal insurance policy
purchased by the Trust ("Portfolio Insurance"). The Trust anticipates that all
or substantially all of its insured bonds will be subject to Original Issue
Insurance or Secondary Market Insurance. Although the insurance feature reduces
certain financial risks, the premiums for Portfolio Insurance (which, if
purchased by the Trust, are paid from the Trust's assets) and the higher market
price paid for obligations covered by Original Issue Insurance or Secondary
Market Insurance reduce the Trust's current yield.

     Insurance will cover the timely payment of interest and principal on bonds
and, as a matter of non-fundamental policy, will be obtained from insurers with
a claims-paying ability rated "Aaa" by Moody's or "AAA" by S&P or Fitch.
Obligations insured by any insurer with such a claims-paying ability rating
will generally carry the same rating or credit risk as the insurer. See
Appendix A for a brief description of Moody's, Fitch's and S&P's claims-paying
ability ratings. Such insurers must guarantee the timely payment of all
principal and interest on bonds as they become due. Such insurance may,
however, provide that in the event of non-payment of interest or principal when
due with respect to an insured bond, the insurer is not obligated to make such
payment until a specified


                                      B-6
<PAGE>

time period has lapsed (which may be 30 days or more after it has been notified
by the Trust that such non-payment has occurred). For these purposes, a payment
of principal is due only at final maturity of the bonds and not at the time any
earlier sinking fund payment is due. While the insurance will guarantee the
timely payment of principal and interest, it does not guarantee the market
value of the bonds or the net asset value of the Trust.

     Bonds are generally eligible to be insured under Portfolio Insurance if,
at the time of purchase by the Trust, they are identified separately or by
category in qualitative guidelines furnished by the mutual fund insurer and are
in compliance with the aggregate limitations on amounts set forth in such
guidelines. Premium variations are based, in part, on the rating of the bonds
being insured at the time the Trust purchases the obligations. The insurer may
prospectively withdraw particular obligations from the classifications of
securities eligible for insurance or change the aggregate amount limitation of
each issue or category of eligible bonds. The insurer must, however, continue
to insure the full amount of the obligations previously acquired which the
insurer has indicated are eligible for insurance, so long as they continue to
be held by the Trust. The qualitative guidelines and aggregate amount
limitations established by the insurer from time to time will not necessarily
be the same as those the Trust would use to govern selection of bonds for the
Trust. Therefore, from time to time such guidelines and limitations may affect
investment decisions in the event the Trust's securities are insured by
Portfolio Insurance.

     For Portfolio Insurance that terminates upon the sale of the insured
security, the insurance does not have any effect on the resale value of such
security. Therefore, the Trust will generally retain any insured bonds which
are in default or, in the judgment of the Investment Adviser, are in
significant risk of default and place a value on the insurance. This value will
be equal to the difference between the market value of the defaulted insured
bonds and the market value of similar bonds which are not in default. As a
result, BlackRock may be unable to manage the securities held by the Trust to
the extent the Trust holds defaulted insured bonds, which will limit its
ability in certain circumstances to purchase other bonds. While a defaulted
insured obligation is held by the Trust, the Trust will continue to pay the
insurance premium thereon but will also collect interest payments from the
insurer and retain the right to collect the full amount of principal from the
insurer when the insured bond becomes due. The Trust expects that the market
value of a defaulted insured bond covered by Original Issue Insurance or
Secondary Market Insurance will generally be greater than the market value of
an otherwise comparable defaulted bond covered by Portfolio Insurance.

     The Trust may also invest in bonds that are secured by an escrow or trust
account which contains securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, that are backed by the full faith and credit
of the United States, and sufficient in amount to ensure the payment of
interest on and principal of the secured obligation ("collateralized
obligations"). Collateralized obligations generally are regarded as having the
credit characteristics of the underlying U.S. Government, agency or
instrumentality securities. These obligations will not be subject to Issue
Insurance, Secondary Market Insurance or Portfolio Insurance. Accordingly,
despite the existence of these credit support characteristics, these
obligations will not be considered to be insured obligations for purposes of
the Trust's policy of investing at least 80% of its Managed Assets in insured
bonds.

     Principal Insurers. Currently, Municipal Bond Investors Assurance
Corporation ("MBIA"), Financial Guaranty Insurance Company ("FGIC"), AMBAC
Indemnity Corporation ("AMBAC"), XL Capital Assurance ("XL Capital"), CDC IXIS
Financial Guaranty North America, Inc. ("CIFG NA"), and Financial Security
Assurance Corp., together with its affiliated insurance companies -- Financial
Security Assurance International Inc. and Financial Security Assurance of
Oklahoma, Inc. (collectively, "FSA"), are considered to have a high
claims-paying ability and, therefore, are eligible insurers for the Trust's
bonds. Additional insurers may be added without further notification. The
following information concerning these eligible insurers is based upon
information provided by such insurers or information filed with the Securities
and Exchange Commission or other public sources. Neither the Trust has
independently verified such information and make no representations as to the
accuracy and adequacy of such information or as to the absence of material
adverse changes subsequent to the date thereof.


                                      B-7
<PAGE>

     MBIA is a monoline financial guaranty insurance company. MBIA issues
municipal bond insurance policies guarantying the timely payment of principal
and interest on new municipal bond issues and leasing obligations of municipal
entities, secondary market insurance of such instruments and insurance on such
instruments held in unit investment trusts and mutual funds. As of December 31,
2001, MBIA had total assets of approximately $11.8 billion and qualified
statutory capital of approximately $4.9 billion. MBIA has a claims-paying
ability rating of "AAA" by S&P and "Aaa" by Moody's.

     Financial Guaranty Insurance Corporation, a wholly owned subsidiary of
FGIC Corporation, which is a wholly owned subsidiary of General Electric
Capital Corporation, is an insurer of municipal securities, including new
issues, securities held in unit investment trusts and mutual funds, and those
traded on secondary markets. As of December 31, 2000, FGIC had total assets of
approximately $2.75 billion. FGIC has a claims-paying ability rating of "AAA"
by S&P and Fitch, and "Aaa" by Moody's.

     AMBAC, a wholly owned subsidiary of AMBAC Inc., is a monoline insurance
company whose policies guaranty the payment of principal and interest on
municipal obligations issues. As of December 31, 2001, AMBAC had assets of
approximately $3.7 billion. AMBAC has a claims-paying ability rating of "AAA"
by S&P and "Aaa" by Moody's.

     XL Capital is a new "AAA" rated financial guarantor and a wholly owned
subsidiary of property casualty insurer XL Capital Ltd. XL Capital began
transactions in January of 2001 and is rated AAA/Aaa by Moody's and S&P
respectively. As of December 31, 2001 XL Capital Ltd. had assets of
approximately $6.9 billion.

     CIFG NA is a new financial Guarantor rated "AAA" from Fitch, Moody's and
S&P. CIFG NA is a subsidiary of CDC IXIS Financial Guaranty ("CIFG"), which is
a subsidiary of CIFG Holding, which is in turn owned by parent company CDC
IXIS. CDC IXIS is a French domiciled corporation with a broad spectrum of
insurance related businesses. CIFG recently entered the bond insurance business
with two companies, CIFG Europe and CIFG NA. CIFG is capitalized with $280
million in cash, with CIFG NA holding $100 million in cash. CDC IXIS backs the
two entities with $220 million in the form of a subordinated loan agreement.
Over 75% of CIFG NA's business will be passed on through a reinsurance policy
to CIFG. Combining all capital, CIFG NA will have claims paying resources of
$500 million.

     FSA is a monoline insurer whose policies guaranty the timely payment of
principal and interest on new issue and secondary market issue municipal
securities transactions, among other financial obligations. As of December 31,
2001, FSA had total assets of approximately $4.3 billion and qualified
statutory capital of approximately $1.59 billion. FSA has a claims-paying
ability rating of "AAA" by S&P and "Aaa" by Moody's. FSA is a separately
capitalized indirect subsidiary of Dexia, a leading European banking group.


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


                                      B-8
<PAGE>

   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:


                                      B-9
<PAGE>

     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, "Strategic Transactions"). These Strategic
Transactions 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


                                      B-10
<PAGE>

and the composition of the portfolio. The Strategic Transactions 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 Strategic Transactions 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 Strategic Transactions 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


                                      B-11
<PAGE>

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 Strategic Transactions 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 Strategic Transactions are: (a) less than perfect
correlation between the prices of the instrument and the market value of the
securities in the Trust's portfolio; (b) possible lack of a liquid secondary
market for closing out a position in such instruments; (c) losses resulting
from interest rate or other market movements not anticipated by BlackRock; and
(d) the obligation to meet additional variation margin or other payment
requirements, all of which could result in the Trust being in a worse position
than if such techniques had not been used.

     Certain provisions of the Code may restrict or affect the ability of the
Trust to engage in Strategic Transactions. 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.


                                      B-12
<PAGE>

     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.


                                      B-13
<PAGE>

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


                                      B-14
<PAGE>

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 33 1/3% of the value of the Trust's
total assets (including such loans). Loan arrangements made by the Trust will
comply with all other applicable regulatory requirements, including the rules
of the New York Stock Exchange, which rules presently require the borrower,
after notice, to redeliver the securities within the normal settlement time of
five business days. All relevant facts and circumstances, including the
creditworthiness of the Qualified Institution, will be monitored by BlackRock,
and will be considered in making decisions with respect to lending securities,
subject to review by the Trust's Board of Trustees.

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


RESIDUAL INTEREST MUNICIPAL BONDS

     The Trust currently does not intend to invest in residual interest
municipal bonds. Residual interest municipal bonds pay interest at rates that
bear an inverse relationship to the interest rate on another security or the
value of an index ("inverse floaters"). An investment in inverse floaters may
involve greater risk than an investment in a fixed-rate bond. Because changes
in the interest rate on the other security or index inversely affect the
residual interest paid on the inverse floater, the value of an inverse floater
is generally more volatile than that of a fixed-rate bond. Inverse floaters
have interest rate adjustment formulas which generally reduce or, in the
extreme, eliminate the interest paid to the Trust when short-term interest
rates rise, and increase the interest paid to the Trust when short-term
interest rates fall. Inverse floaters have varying degrees of liquidity, and
the market for


                                      B-15
<PAGE>

these securities is relatively volatile. These securities tend to underperform
the market for fixed-rate bonds in a rising interest rate environment, but tend
to outperform the market for fixed-rate bonds when interest rates decline.
Shifts in long-term interest rates may, however, alter this tendency. Although
volatile, inverse floaters typically offer the potential for yields exceeding
the yields available on fixed-rate bonds with comparable credit quality,
coupon, call provisions and maturity. These securities usually permit the
investor to convert the floating rate to a fixed rate (normally adjusted
downward), and this optional conversion feature may provide a partial hedge
against rising rates if exercised at an opportune time. Investment in inverse
floaters may amplify the effects of the Trust's use of leverage. Should
short-term interest rates rise, the combination of the Trust's investment in
inverse floaters and the use of leverage likely will adversely affect the
Trust's income and distributions to common shareholders. Although the Trust
does not intend initially to invest in inverse floaters, the Trust may do so at
some point in the future. The Trust will provide shareholders 30 days' written
notice prior to any change in its policy of not investing in inverse floaters.


                            MANAGEMENT OF THE TRUST

INVESTMENT MANAGEMENT AGREEMENT

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

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

     The investment management agreement and certain scheduled waivers of the
investment advisory fees were approved by the Trust's board of trustees at a
telephonic meeting of the board of trustees held on October 22, 2002, including
a majority of the trustees who are not parties to the agreement or interested
persons of any such party (as such term is defined in the Investment Company
Act). This agreement provides for the Trust to pay a management fee at an
annual rate equal to 0.55% of the average weekly value of the Trust's Managed
Assets. A related waiver letter from BlackRock Advisors provided for temporary
fee waiver of 0.20% the average weekly value of the Trust's Managed Assets in
each of the first five years of the Trust's operations (through October 31,
2007) and for a declining amount for an additional three years (through October
31, 2010). 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 October 22,
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


                                      B-16
<PAGE>

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 October 31, 2003, 38% of the
monthly management fees received by BlackRock Advisors, (ii) from October 31,
2003 to October 31, 2004, 19% of the monthly management fees received by
BlackRock Advisors; and (iii) after October 31, 2004, 0% of the management fees
received by BlackRock Advisors; provided thereafter that the Sub-Advisor may be
compensated at cost for any services rendered to the Trust at the request of
BlackRock Advisors and approved of by the board of trustees.


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

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

     The sub-investment advisory agreement was approved by the Trust's board of
trustees at an "in person" meeting held on October 22, 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 October 22, 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).


                                      B-17
<PAGE>


TRUSTEES AND OFFICERS

     The officers of the Trust manage its day-to-day operations. The officers
are directly responsible to the Trust's board of trustees which sets broad
policies for the Trust and chooses its officers. The following is a list of the
trustees and officers of the Trust and their present positions and principal
occupations during the past five years. Trustees who are interested persons of
the Trust (as defined in the Investment Company Act) are denoted by an asterisk
(*). Trustees who are independent trustees (as defined in the Investment
Company Act) (the "Independent Trustees") are denoted without an asterisk. The
business address of the Trust, BlackRock Advisors and their board members and
officers is 100 Bellevue Parkway, Wilmington, Delaware 19809, unless specified
otherwise below. The trustees listed below are either trustees or directors of
other closed-end funds in which BlackRock Advisors acts as investment advisor.


<TABLE>
<CAPTION>
                                                                            NUMBER OF
                                                                          PORTFOLIOS IN
                                                                          FUND COMPLEX
                          TERM OF                                          OVERSEEN BY
NAME, ADDRESS, AGE       OFFICE AND    PRINCIPAL OCCUPATION DURING THE     TRUSTEE OR
AND POSITION(S)          LENGTH OF        PAST FIVE YEARS AND OTHER        NOMINEE FOR               OTHER DIRECTORSHIPS
HELD WITH REGISTRANT    TIME SERVED             AFFILIATIONS                 TRUSTEE                   HELD BY TRUSTEE
- ---------------------- ------------- -----------------------------------  ------------- --------------------------------------------
<S>                    <C>           <C>                                   <C>          <C>
INDEPENDENT
TRUSTEES:

Andrew F. Brimmer      3 year(1)(2)  President of Brimmer & Company,           44       Director of CarrAmerica Realty Corporation
P.O. Box 4546                        Inc., a Washington, D.C. based                     and Borg-Warner Automotive. Formerly
New York, NY 10163                   economic and financial consulting                  member of the Board of Governors of the
Age: 76                              firm. Lead Director and Chairman                   Federal Reserve System. Formerly Director of
Trustee                              of the Audit Committee of each of                  AirBorne Express, BankAmerica Corporation
                                     the closed-end Trusts in which                     (Bank of America), Bell South Corporation,
                                     BlackRock Advisors Inc. acts as                    College Retirement Equities Fund (Trustee),
                                     investment advisor.                                Commodity Exchange, Inc. (Public Governor),
                                                                                        Connecticut Mutual Life Insurance Company
                                                                                        E.I. Dupont de Nemours & Company,
                                                                                        Equitable Life Assurance Society of the
                                                                                        United States, Gannett Company, Mercedes
                                                                                        Benz of North America, MNC Financial
                                                                                        Corporation (American Security Bank), NMC
                                                                                        Capital Management, Navistar International
                                                                                        Corporation, PHH Corp. and UAL
                                                                                        Corporation (United Airlines).

Richard E. Cavanagh    3 years(1)(2) President and Chief Executive             44       Trustee Emeritus, Wesleyan University,
P.O. Box 4546                        Officer of The Conference Board,                   Trustee: Drucker Foundation, Airplanes
New York, NY 10163                   Inc., a leading global business                    Group, Aircraft Finance Trust (AFT) and
Age: 56                              membership organization, from                      Education Testing Service (ETS). Director,
Trustee                              1995-present. Former Executive                     Arch Chemicals, Fremont Group and The
                                     Dean of the John F. Kennedy                        Guardian Life Insurance Company of
                                     School of Government at Harvard                    America.
                                     University from 1988-1995. Acting
                                     Director, Harvard Center for
                                     Business and Government
                                     (1991-1993). Formerly Partner
                                     (principal) of McKinsey &
                                     Company, Inc. (1980-1988). Former
                                     Executive Director of Federal Cash
                                     Management, White House Office
                                     of Management and Budget
                                     (1977-1979). Co-author, THE
                                     WINNING PERFORMANCE
                                     (best selling management book
                                     published in 13 national editions).

Kent Dixon             3 years(1)(2) Consultant/Investor, Former               44       Former Director of ISFA (the owner of
P.O. Box 4546                        President and Chief Executive                      INVEST, a national securities brokerage
New York, NY 10163                   Officer of Empire Federal Savings                  service designed for banks and thrift
Age: 65                              Bank of America and Banc PLUS                      institutions).
Trustee                              Savings Association, former
                                     Chairman of the Board, President
                                     and Chief Executive Officer of
                                     Northeast Savings.
</TABLE>

                                      B-18
<PAGE>



<TABLE>
<CAPTION>
                            TERM OF
NAME, ADDRESS, AGE         OFFICE AND       PRINCIPAL OCCUPATION DURING THE
AND POSITION(S)            LENGTH OF           PAST FIVE YEARS AND OTHER
HELD WITH REGISTRANT      TIME SERVED                AFFILIATIONS
- ----------------------- --------------- --------------------------------------
<S>                     <C>             <C>
Frank J. Fabozzi        3 years(1)(2)   Consultant, Editor of THE
P.O. Box 4546                           JOURNAL OF PORTFOLIO
New York, NY 10163                      MANAGEMENT and Adjunct
Age: 54                                 Professor of Finance at the School
Trustee                                 of Management at Yale University.
                                        Author and editor of several books
                                        on fixed income portfolio
                                        management. Visiting Professor of
                                        Finance and Accounting at the
                                        Sloan School of Management,
                                        Massachusetts Institute of
                                        Technology from 1986 to August
                                        1992.

James Clayburn          3 years(1)(2)   Dean Emeritus of The John E.
La Force, Jr.                           Anderson Graduate School of
P.O. Box 4546                           Management, University of
New York, NY 10163                      California since July 1, 1993. Acting
Age: 73                                 Dean of The School of Business,
Trustee                                 Hong Kong University of Science
                                        and Technology 1990-1993, from
                                        1978 to September 1993, Dean of
                                        The John E. Anderson Graduate
                                        School of Management, University
                                        of California.

Walter F. Mondale       3 years(1)(2)   Partner, Dorsey & Whitney, a law
P.O. Box 4546                           firm (December 1996-present,
New York, NY 10163                      September 1987-August 1993).
Age: 74                                 Formerly U.S. Ambassador to
Trustee                                 Japan (1993-1996). Formerly, Vice
                                        President of the United States, U.S.
                                        Senator and Attorney General of
                                        the State of Minnesota. 1984
                                        Democratic Nominee for President
                                        of the United States.
INTERESTED
TRUSTEES

Robert S. Kapito*       3 years(1)(2)   Vice Chairman of BlackRock, Inc.,
Age: 45                                 is Head of the Portfolio
Trustee and President                   Management Group, a member of
                                        the Management Committee, the
                                        Investment Strategy Group, the
                                        Fixed Income and Global Equity
                                        Operating Committees and the
                                        Equity Investment Strategy Group.
                                        Formerly, Vice President of the
                                        First Boston Corporation, head of
                                        its Mortgage Capital Markets
                                        Group. Currently, President and
                                        Director of each of the closed-end
                                        Trusts which BlackRock Advisors,
                                        Inc. acts as investment advisor.

Ralph L. Schlosstein*   3 years         Director since 1999 and President
Age: 51                                 of BlackRock, Inc. since its
Chairman                                formation in 1998 and of
                                        BlackRock, Inc.'s predecessor
                                        entities since 1988. Member of the
                                        Management Committee and
                                        Investment Strategy Group of
                                        BlackRock, Inc. Formerly,
                                        Managing Director of Lehman
                                        Brothers, Inc. and Co-head of its
                                        Mortgage and Savings Institutions
                                        Group. Currently, Chairman and
                                        Director of each of the closed-end
                                        Trusts in which BlackRock
                                        Advisors, Inc. acts as investment
                                        advisor.




<CAPTION>
                           NUMBER OF
                         PORTFOLIOS IN
                         FUND COMPLEX
                          OVERSEEN BY
NAME, ADDRESS, AGE        TRUSTEE OR
AND POSITION(S)           NOMINEE FOR                 OTHER DIRECTORSHIPS
HELD WITH REGISTRANT        TRUSTEE                     HELD BY TRUSTEE
- ----------------------- -------------- ------------------------------------------------
<S>                     <C>            <C>
Frank J. Fabozzi              44       Director, Guardian Mutual Funds Group.
P.O. Box 4546
New York, NY 10163
Age: 54
Trustee

James Clayburn                44       Director, Jacobs Engineering Group, Inc.,
La Force, Jr.                          Payden & Rygel Investment Trust, Provident
P.O. Box 4546                          Investment Counsel Funds.
New York, NY 10163
Age: 73
Trustee

Walter F. Mondale             44       Director, Northwest Airlines Corp.,
P.O. Box 4546                          UnitedHealth Group, Formerly, Director,
New York, NY 10163                     RBC Dain Rauscher, Inc.
Age: 74
Trustee

INTERESTED
TRUSTEES

Robert S. Kapito*             44       Mr. Kapito currently serves as President of the
Age: 45                                Board of Directors of Periwinkle National
Trustee and President                  Theatre, a national non-profit effort to help
                                       disadvantaged youth, and Chairman of the
                                       Hope & Heroes/Babies & Children's Cancer
                                       Fund.

Ralph L. Schlosstein*         44       Chairman and President of the BlackRock
Age: 51                                Provident Institutional Funds, Director of
Chairman                               several of BlackRock's alternative investment
                                       vehicles. Currently, a Member of the Visiting
                                       Board of Overseers of the John F. Kennedy
                                       School of Government at Harvard University,
                                       the Financial Institutions Center Board of the
                                       Wharton School of the University of
                                       Pennsylvania, a trustee of Trinity School in
                                       New York City and a Trustee of New Visions
                                       for Public Education in New York Council.
                                       Formerly, a Director of Pulte Corporation and
                                       a Member of Fannie Mae's Advisory Council.
</TABLE>


                                      B-19
<PAGE>


<TABLE>
<CAPTION>
                                                       PRINCIPAL OCCUPATION DURING THE
NAME AND AGE                   TITLE               PAST FIVE YEARS AND OTHER AFFILIATIONS
- --------------------   ---------------------   ----------------------------------------------
<S>                    <C>                     <C>
OFFICERS:
Anne F. Ackerley            Secretary          Managing Director of BlackRock, Inc. since
Age: 40                                        2000. Formerly First Vice President and
                                               Chief Operating Officer, Mergers and
                                               Acquisition Group at Merrill Lynch & Co..
                                               from 1997 to 2000; First Vice President and
                                               Chief Operating Officer, Public Finance
                                               Group at Merrill Lynch & Co. from 1995 to
                                               1997; First Vice President, Emerging
                                               Markets Fixed Income Research at Merrill
                                               Lynch & Co. prior thereto.

Henry Gabbay                Treasurer          Managing Director of BlackRock, Inc. and
Age: 54                                        its predecessor entities.

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

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

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

- ----------
(1)   After a Trustee's initial term, each Trustee is expected to serve a three
      year term concurrent with the class of trustees for which he serves;

      --  Messrs. Cavanagh and La Force, as Class I trustees, are expected to
          stand for re-election at the Trust's 2003 annual meeting of
          shareholders

      --  Messrs. Schlosstein, Fabozzi and Mondale, as Class II trustees, are
          expected to stand for re-election at the Trust's 2004 annual meeting
          of shareholders

      --  Messrs. Kapito, Brimmer and Dixon, as Class III Trustees, are expected
          to stand for re-election at the Trust's 2005 annual meeting of
          shareholders

(2)   Each Trustee has served in such capacity since the Trust's inception.


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


<TABLE>
<CAPTION>
                                                                     AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES
                                          DOLLAR RANGE OF EQUITY       IN ALL REGISTERED INVESTMENT COMPANIES
                                             SECURITIES IN THE           OVERSEEN BY DIRECTORS IN THE FAMILY
NAME OF DIRECTOR                                 TRUST(*)                      INVESTMENT COMPANIES(*)
- --------------------------------------   ------------------------   --------------------------------------------
<S>                                                <C>                              <C>
Andrew F. Brimmer ....................             $0                                  $1-$10,000
Richard E. Cavanagh ..................             $0                               $50,000-$100,000
Kent Dixon ...........................             $0                                 over $100,000
Frank J. Fabozzi .....................             $0                                  $1-$10,000
James Clayburn La Force, Jr. .........             $0                               $50,001-$100,000
Robert S. Kapito .....................             $0                                 over $100,000
Walter F. Mondale ....................             $0                               $50,001-$100,000
Ralph L. Schlosstein .................             $0                               $50,001-$100,000
</TABLE>

- ----------

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


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


                                      B-20
<PAGE>


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

- ----------
(1)   Represents the total compensation earned by such person during the
      calendar year ended December 31, 2001 from the thirty closed-end funds
      advised by 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. Brimmer, Cavanagh, Dixon,
      Fabozzi, La Force and Mondale may defer $0, $0, $0, $0, $2,000 and
      $1,000, respectively, pursuant to the Fund Complex's deferred
      compensation plan.

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

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

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


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

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

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

     The governance committee consists of Messrs. Brimmer, Cavanagh, Dixon,
Fabozzi, La Force and Mondale. The Governance committee acts in accordance with
the Governance Committee charter. Dr. Brimmer has been appointed as Chairman of
the Governance Committee. The Governance


                                      B-21
<PAGE>

Committee consists of the independent Trustees and performs those functions
enumerated in the Governance Committee Charter including, but not limited to,
making nominations for the appointment or election of independent Trustees,
reviewing independent Trustee compensation, retirement policies and personnel
training policies and administrating the provisions of the Code of Ethics
applicable to the independent Trustees.

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

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


CODES OF ETHICS

     The Trust, the Advisor, the Sub-Advisor and the 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 $246 billion of assets under management as of September 30, 2002.
BlackRock manages assets on behalf of institutional and individual investors
worldwide through a variety of equity, fixed income, liquidity and alternative
investment products, including the BlackRock Funds and BlackRock Provident
Institutional Funds. In addition, BlackRock provides risk management and
investment system services to institutional investors under the BlackRock
Solutions name.

     The BlackRock organization has over 13 years of experience managing
closed-end products and currently advises a closed-end family of 40 funds with
approximately $10.4 billion in assets. BlackRock has 31 leveraged municipal
closed-end funds and six open-end municipal funds under management. As of
September 30, 2002, BlackRock had approximately $18.6 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),


                                      B-22
<PAGE>

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.


                                      B-23
<PAGE>

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


                                      B-24
<PAGE>

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. 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


                                      B-25
<PAGE>

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.


                                      B-26
<PAGE>

     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.

     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.

     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.

     Federal income tax law imposes an alternative minimum tax with respect to
both corporations and individuals based on certain items of tax preference.
Interest on certain "private activity bonds" is an item of tax preference
subject to the alternative minimum tax on individuals and corporations. The
Trust will not invest in such "private activity bonds." However, 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.


                                      B-27
<PAGE>

     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 to unmarried individuals (currently, 30%) 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.


                                      B-28
<PAGE>

                PERFORMANCE RELATED AND COMPARATIVE INFORMATION

     Municipal bonds can provide tax-free income.

     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.

     Insured Municipal bonds have had a taxable equivalent annualized total
return for the 10 years ended August 31, 2002, of 11.04% which is better than
the after tax return of other major fixed income categories.

     The Federal Alternative Minimum Tax (AMT) was initially designed to reduce
a number of deductions used by wealthy individuals to ensure that these
higher-income taxpayers paid a fair amount of income tax.

     However, since it is not indexed for inflation, more taxpayers are
becoming subject to the AMT. BlackRock's Insured Municipal Income Trusts intend
to distribute monthly income that is exempt from the AMT (for non-corporate
investors).


                       TAX ADJUSTED MUNICIPALS VS. OTHER
                         FIXED INCOME CATEGORY RETURNS
                         LAST 10 YEARS ENDING 8/31/02

10 YEAR INSURED MUNICIPAL BOND TAXABLE-EQUIVALENT ANNUALIZED RETURNS AND
STANDARD DEVIATION VS. ALTERNATIVES.(1)



<TABLE>
<CAPTION>
                          TAX
                          ADJ.
10 YEAR PERIOD          INSURED    AGGREGATE(2)
8/31/92 - 8/31/2002      MUNIS         BONDS      TREASURY(3)   AGENCY(4)
- --------------------- ----------- -------------- ------------- -----------
<S>                   <C>         <C>            <C>           <C>
Annualized Return ...     11.04%        7.33%         7.58%        7.45%
Standard Deviation ..      4.85         3.75          4.33         3.91



<CAPTION>
10 YEAR PERIOD                         MORTGAGES-     ASSET       HIGH        S&P
8/31/92 - 8/31/2002    CORPORATES(5)    BACKED(6)   BACKED(7)   YIELD(8)     500(9)    NASDAQ(10)
- --------------------- --------------- ------------ ----------- ---------- ----------- -----------
<S>                   <C>             <C>          <C>         <C>        <C>         <C>
Annualized Return ...       7.48%          7.22%       7.13%       5.52%      10.37%      8.85%
Standard Deviation ..       4.71           2.99        2.59        6.80       14.14      27.33
</TABLE>

     Over the past 10 years on a taxable-equivalent basis, insured municipal
bonds have returned 106% of the total return of the S&P 500 with only 34% of
the volatility.(11)

 (1) Lehman Brothers. Past performance is no guarantee of future results. The
     taxable-equivalent return for insured 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 Insured 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.

 (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.


                                      B-29
<PAGE>

 (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) S&P 500 Index

(10) NASDAQ Composite Index

(11) Source: Lehman Brothers/BlackRock Advisors, Inc. Past performance does
     not guarantee future results. Calculations result from comparing the
     Lehman Brothers Insured Municipal Index with the S&P 500 Index, for the
     ten year period from 8/31/92-8/31/02. The Lehman Brothers Insured
     Municipal Index produced a taxable-equivalent annualized return of 11.04%
     for the period with 4.85 Standard Deviation (volatility). In comparison
     the S&P 500 Index produced an annualized return of 10.37% for the same
     period with 14.14 Standard Deviation. These indices are unmanaged and an
     investment cannot be made directly in an index.











                                      B-30
<PAGE>

CHART B


     INSURED MUNICIPAL BONDS ARE ATTRACTIVE COMPARED TO U.S. TREASURIES(1)

<TABLE>
<CAPTION>
                                                       30 YEAR
                       30 YEAR                      INSURED MUNI
                     INSURED AAA                    AS PERCENTAGE
                      MUNICIPAL        30 YEAR       OF TREASURY
DATE                    YIELD      TREASURY YIELD     YIELD(2)
- ----                ------------- ---------------- --------------
<S>                 <C>           <C>              <C>
  8/31/92 .........      6.35%           7.42%          85.63%
  9/30/92 .........      6.25%           7.37%          84.77%
  9/30/93 .........      5.40%           6.03%          89.48%
  9/30/04 .........      6.49%           7.82%          82.94%
  9/29/95 .........      6.00%           6.48%          92.54%
  9/30/96 .........      5.75%           6.93%          82.98%
  9/30/97 .........      5.45%           6.41%          85.03%
  9/30/98 .........      4.92%           4.98%          98.85%
  9/30/99 .........      5.83%           6.06%          96.23%
  9/29/00 .........     5.745            5.88%          97.62%
  9/28/01 .........      5.20%           5.42%          95.99%
  8/30/02 .........      5.00%           4.93%         101.36%
</TABLE>

- ----------
(1)   Source: JP Morgan/BlackRock Advisors, Inc. Past performance is no
      guarantee of future results. Chart shows the relationship between the 30
      Year Insured AAA Municipal Yield Benchmark 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 8/31/02 the average yield (measured monthly) of Insured AAA
      municipal bonds as a percentage of Treasuries was 89.75%.


                                      B-31
<PAGE>

                        TAXABLE EQUIVALENT YIELD TABLES
                 FOR BLACKROCK INSURED MUNICIPAL INCOME TRUSTS


     The information below shows how much more a taxable investment needs to
yield to match the yield of a tax-free investment.1 On August 30, 2002, the
Lehman Brothers Aggregate Bond Index, a common measure of the taxable bond
market, yielded 4.69%.2


<TABLE>
<CAPTION>
                                                                                    TAXABLE EQUIVALENT YIELD
                                                         YOUR COMBINED    ---------------------------------------------
                     SINGLE              JOINT          FED./STATE TAX       5.0         5.5         6.0         7.0
                   RETURN ($)          RETURN ($)       BRACKET IS (%):      (%)3        (%)3        (%)3        (%)3
               -----------------   -----------------   ----------------   ---------   ---------   ---------   ---------
<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
                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
                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
                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            6.85        7.53        8.22        9.59
               067,701-141,250     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
</TABLE>

- ----------
1  The tax-free yields used in the charts are for illustrative purposes only
   and do not represent or predict the tax-free yield of any of the Trusts.
   Trust yields will vary. The lower your combined federal and state tax rate,
   the less you can take advantage of tax-free investing, which can be seen by
   comparing the taxable-equivalent yields at a given tax-free yield level for
   different tax brackets. The tables do not take into account among other
   things, the effects of the federal alternative minimum tax or capital gains
   taxes. In addition, the Trusts may invest in securities that are not exempt
   from federal or state income taxes, although they do not intend to do so to
   a significant degree. Consult your tax advisor for more information.

2  The Lehman Brothers Aggregate Bond Index is an unmanaged index
   representative of intermediate-term government bonds, investment-grade
   corporate debt securities and mortgage backed securities. It is not
   possible to invest directly in an index.

3  This tax-free yield is equivalent to the taxable yields below in the chart.



                        AVERAGE ANNUAL TOTAL RETURNS(1)
                             As of August 31, 2002

<TABLE>
<CAPTION>
                                                            1-YEAR       3-YEAR       5-YEAR       10-YEAR
                                                          ----------   ----------   ----------   ----------
<S>                                                       <C>          <C>          <C>          <C>
Lipper Closed-End Insured Muni Debt Funds (Leveraged)         9.44%        9.54%        6.47%        6.92%
Lipper Open-End Insured Muni Debt Funds                       5.12%        6.79%        5.30%        5.96%
</TABLE>

- ----------
(1)   Source: Lipper, Inc. Past performance is no guarantee of future results.
      The Lipper Peer Groups shown contains funds with fees and expenses
      different from those of the Trusts. Fund fees and expenses affect
      performance and the Trusts' performance may vary from the Peer Groups.


                                      B-32
<PAGE>

                                    EXPERTS

     The Statement of Net Assets of the Trust as of October 21, 2002 of
appearing in this Statement of Additional Information has been audited by
Deloitte & Touche LLP, 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. Deloitte & Touche LLP, located at 200 Berkeley Street, Boston, MA
02116, provides accounting and auditing services to the Trust.


                             ADDITIONAL INFORMATION

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











                                      B-33
<PAGE>

                         INDEPENDENT AUDITORS' REPORT


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


     We have audited the accompanying statement of assets and liabilities of
BlackRock Insured Municipal Income Trust (the "Trust") as of October 21, 2002
and the related statements of operations and changes in net assets for the
period from August 19, 2002 (date of inception) to October 21, 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 October 21, 2002 and the
results of its operations and changes in its net assets for the period then
ended, in conformity with accounting principles generally accepted in the
United States of America.



/s/ Deloitte & Touche LLP
Boston, Massachusetts
October 25, 2002













                                      F-1
<PAGE>


                   BLACKROCK INSURED MUNICIPAL INCOME TRUST
                      STATEMENT OF ASSETS AND LIABILITIES
                               OCTOBER 21, 2002

<TABLE>
<S>                                                                                    <C>
ASSETS:
Cash ...............................................................................  $115,001
LIABILITIES:
Payable for organization costs .....................................................    15,000
                                                                                      --------
Net Assets .........................................................................  $100,001
                                                                                      ========
NET ASSETS WERE COMPRISED OF:
 Common stock at par (Note 1) ......................................................  $      8
 Paid-in capital in excess of par ..................................................   114,993
                                                                                      --------
                                                                                       115,001
 Accumulated net investment loss ...................................................   (15,000)
                                                                                      --------
Net assets, October 21, 2002 .......................................................  $100,001
                                                                                      ========
NET ASSET VALUE PER SHARE:
Equivalent to 8,028 shares of common stock issued and outstanding, par value $0.001,
 unlimited shares authorized .......................................................  $  12.46
                                                                                      ========
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                             STATEMENT OF OPERATIONS
     FOR THE PERIOD AUGUST 19, 2002 (DATE OF INCEPTION) TO OCTOBER 21, 2002

Investment Income ..................................................................  $     --
Expenses
 Organization expenses .............................................................    15,000
                                                                                      --------
Net investment loss ................................................................  $(15,000)
                                                                                      ========

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                       STATEMENT OF CHANGES IN NET ASSETS
     FOR THE PERIOD AUGUST 19, 2002 (DATE OF INCEPTION) TO OCTOBER 21, 2002

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



                                      F-2
<PAGE>

                         NOTES TO FINANCIAL STATEMENTS


NOTE 1. ORGANIZATION

BlackRock Insured Municipal Income Trust (the "Trust") was organized as a
Delaware business trust on August 19, 2002, and is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940. The Trust had no operations other than a sale to Blackrock Advisors, Inc.
of 8,028 shares of common stock for $115,001 ($14.325 per share).


NOTE 2. AGREEMENTS

The Trust has entered into an Investment Advisory Agreement with BlackRock
Advisors, Inc. The Trust will pay BlackRock Advisors, Inc. a monthly fee (the
"Investment Management Fee") at an annual rate of 0.55% of the average weekly
value of the Trust's Managed Assets. BlackRock Advisors, Inc. has voluntarily
agreed to waive receipt of a portion of its management fee in the amount of
0.20% of the average weekly value of the Trust's managed assets for the first
five years of the Trust's operations (through October 31, 2007), and for a
declining amount for an additional three years (through October 31, 2010).


NOTE 3. ORGANIZATION EXPENSES AND OFFERING COSTS

Organization expenses of $15,000 have been expensed. Offering costs, estimated
to be approximately $585,000 will be charged to paid-in capital at the time
shares of beneficial interest are sold.


NOTE 4. CASH & CASH EQUIVALENTS

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




                                      F-3
<PAGE>

                                   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.


                                      A-1
<PAGE>

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).


                                      A-2
<PAGE>

   --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.


                                      A-3
<PAGE>

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

     Municipal Bonds

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

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

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

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

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

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

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

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

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

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

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

                                      A-4
<PAGE>

 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:


                                      A-5
<PAGE>

     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 meeting
          financial commitments is

CC, C     solely reliant upon sustained, favorable business or economic
          developments. A "CC" rating indicates that default of some kind
          appears probable. "C" ratings signal imminent default.
DDD,      Default. The ratings of obligations in this category are based on
          their prospects for
DD,       achieving partial or full recovery in a reorganization or liquidation
          of the obligor. While
and D     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.


                                      A-6
<PAGE>


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.


DESCRIPTION OF THE INSURANCE CLAIMS-PAYING ABILITY RATINGS OF STANDARD & POOR'S
RATINGS GROUP AND MOODY'S INVESTORS SERVICE, INC.

     An S&P insurance claims-paying ability rating is an assessment of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with the terms. An insurer with an insurance
claims-paying ability of "AAA" has the highest rating assigned by S&P. Capacity
to honor insurance contracts is adjudged by S&P to be extremely strong and
highly likely to remain so over a long period of time. A Moody's insurance
claims-paying ability rating is an opinion of the ability of an insurance
company to repay punctually senior policy holder obligations and claims. An
insurer with an insurance claims-paying ability rating of "Aaa" is adjudged by
Moody's to be of the best quality. In the opinion of Moody's, the policy
obligations of an insurance company with an insurance claims-paying ability
rating of "Aaa" carry the smallest degree of credit risk and, while the
financial strength of the these companies is likely to change, such changes as
can be visualized are most unlikely to impair the company's fundamentally
strong position.

     An insurance claims-paying ability rating by S&P or Moody's does not
constitute an opinion on an specific contract in that such an opinion can only
be rendered upon the review of the specific insurance contract. Furthermore, an
insurance claims-paying ability rating does not take in account deductibles,
surrender or cancellation penalties or the timeliness of payment; nor does it
address the ability of a company to meet nonpolicy obligations (i.e., debt
contracts).

     The assignment of ratings by S&P and Moody's to debt issues that are fully
or partially supported by insurance policies, contracts, or guarantees is a
separate process from the determination of claims-paying ability ratings. The
likelihood of a timely flow of funds from the insurer to the trustee for the
bondholders is a key element in the rating determination of such debt issues.


                                      A-7
<PAGE>

                                   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

<TABLE>
<CAPTION>
    SINGLE RETURN       JOINT RETURN BRACKET     FEDERAL TAX RATE
- --------------------   ----------------------   -----------------
<S>                    <C>                      <C>
       $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>


<TABLE>
<CAPTION>
                                                            TAXABLE EQUIVALENT ESTIMATE CURRENT RETURN
                                           ----------------------------------------------------------------------------
    SINGLE RETURN    JOINT RETURN BRACKET     4.00%      4.50%      5.00%      5.50%      6.00%      6.50%      7.00%
- -------------------- --------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S>                  <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>














                                      B-1
<PAGE>

                                  APPENDIX C

                       GENERAL CHARACTERISTICS AND RISKS
                           OF STRATEGIC 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
Strategic Transactions. 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


                                      C-1
<PAGE>

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. The sale of a futures contract
creates an obligation by the Trust, as seller, to deliver the specific type of
financial instrument called for in the contract at a specified future time for
a specified price. Options on futures contracts are similar to options on
securities except that an option on a futures contract gives the purchaser the
right in return for the premium paid to assume a position in a futures contract
(a long position if the option is a call and a short position if the option is
a put).

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

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

     Segregation and Cover Requirements. Futures contracts, interest rate
swaps, caps, floors and collars, short sales, reverse repurchase agreements and
dollar rolls, and listed or OTC options on securities, indices and futures
contracts sold by the Trust are generally subject to earmarking and coverage
requirements of either the CFTC or the SEC, with the result that, if the Trust
does not hold the security or futures contract underlying the instrument, the
Trust will be required to designate on


                                      C-2
<PAGE>

its books and records an ongoing basis, cash, U.S. government securities, or
other liquid 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.

     Strategic Transactions 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 Strategic
Transactions 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 Strategic Transactions will reduce net asset
value.

















                                      C-3



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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