<DOCUMENT>
<TYPE>N-2
<SEQUENCE>1
<FILENAME>s460700.txt
<TEXT>
   As filed with the Securities and Exchange Commission on November 1, 2002

                                           Securities Act Registration No. 333-
                                  Investment Company Registration No. 811-21178

                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                  FORM N-2

        REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |x|
                         Pre-Effective Amendment No.
                        Post-Effective Amendment No.
                                   and/or
                        REGISTRATION STATEMENT UNDER
                    THE INVESTMENT COMPANY ACT OF 1940 |x|
                             AMENDMENT NO. 6 |x|

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

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

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

                        Robert S. Kapito, President
                  BlackRock Insured Municipal Income Trust
                            40 East 52nd Street
                          New York, New York 10022
                  (Name and Address of Agent for Service)

                                  Copy to:

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



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

<TABLE>
<CAPTION>

                         CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

                                         Amount       Proposed          Proposed
                                          Being   Maximum Offering  Maximum Aggregate     Amount of
 Title of Securities Being Registered  Registered  Price per Unit    Offering Price   Registration Fee

<S>                                      <C>         <C>            <C>                    <C>
Preferred Shares, $.001 par value          40          $25,000        $1,000,000(1)          $92
</TABLE>



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

The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that the
<PAGE>

Registration Statement shall thereafter become effective in accordance with
Section 8 of the Securities Act of 1933 or until the Registration Statement
shall become effective on such dates as the Commission, acting pursuant to
said Section 8, may determine.

<TABLE>
<CAPTION>

                  BLACKROCK INSURED MUNICIPAL INCOME TRUST
                           CROSS REFERENCE SHEET

                             Part A--Prospectus

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


                Part B--Statement of Additional Information

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


                         Part C--Other Information

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



                                    A-2
<PAGE>


PROSPECTUS
                                                                          LOGO
                                    [ ]
                  BlackRock Insured Municipal Income Trust
             Municipal Auction Rate Cumulative Preferred Shares
                            ("Preferred Shares")
                           [ ] Shares, Series [ ]
                           [ ] Shares, Series [ ]
                           [ ] Shares, Series [ ]

                  Liquidation Preference $25,000 per share

         Investment Objective. BlackRock Insured Municipal Income Trust
(the "Trust") is a recently 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 circumstances, be invested primarily in
municipal bonds rated in the highest category at the time of investment
(which is "Aaa" by Moody's Investors Service, Inc. ("Moody's") or "AAA" by
Standard & Poor's Ratings Group ("S&P") or Fitch, 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.

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

         Investing in the Preferred Shares involves certain risks. See
"Risks" beginning on page . The minimum purchase amount of the Preferred
Shares is $25,000.

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

                                                  Per Share (2)           Total
Public Offering Price                             $25,000.00              $
Sales Load                                        $                       $
Estimated Offering Expenses                       $                       $
Proceeds, after expenses, to the Trust(1)         $                       $


         (1) The Trust, its investment advisor, BlackRock Advisors, Inc.,
and its investment sub-advisor, BlackRock Financial Management, Inc., have
agreed to indemnify the several Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended.

         (2) Rounded to the nearest penny.

         The Underwriters are offering the Preferred Shares subject to
various conditions. The Underwriters expect to deliver the Preferred Shares
to purchasers, in book-entry form, through the facilities of The Depository
Trust Company on or about , 2002.


                        , 2002



<PAGE>




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

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

         The Trust is offering shares of Series Municipal Auction Rate
Cumulative Preferred Shares, shares of Series Municipal Auction Rate
Cumulative Preferred Shares and shares of Series Municipal Auction Rate
Cumulative Preferred Shares. The shares are referred to in this prospectus
as "Preferred Shares." The Preferred Shares have a liquidation preference
of $25,000 per share, plus any accumulated, unpaid dividends. The Preferred
Shares also have priority over the Trust's common shares as to distribution
of assets as described in this prospectus. It is a condition of closing
this offering that the Preferred Shares be offered with a rating of "Aaa"
from Moody's and "AAA" from S&P.

         The dividend rate for the initial dividend rate period will be for
Series , for Series and for Series . The initial rate period is from the
date of issuance through , 2002 for Series , , 2002 for Series and , 2002
for Series . For subsequent rate periods, Preferred Shares pay dividends
based on a rate set at auction, usually held weekly. Prospective purchasers
should carefully review the auction procedures described in this prospectus
and should note: (1) a buy order (called a "bid order") or sell order is a
commitment to buy or sell Preferred Shares based on the results of an
auction; (2) auctions will be conducted by telephone; and (3) purchases and
sales will be settled on the next business day after the auction.

         The Preferred Shares are redeemable, in whole or in part, at the
option of the Trust on any dividend payment date for the Preferred Shares,
and will be subject to mandatory redemption in certain circumstances at a
redemption price of $25,000 per Preferred Share, plus accumulated but
unpaid dividends to the date of the redemption, plus a premium in certain
circumstances.

         Preferred Shares are not listed on an exchange. You may only buy
or sell Preferred Shares through an order placed at an auction with or
through a broker-dealer that has entered into an agreement with the auction
agent and the Trust or in a secondary market maintained by certain
broker-dealers. These broker-dealers are not required to maintain this
market, and it may not provide you with liquidity.

         Dividends on Preferred Shares, to the extent payable from
tax-exempt income earned on the Trust's investments, will be exempt from
Federal income tax in the hands of owners of such shares. The Trust is
required to allocate net capital gains and other taxable income, if any,
proportionately between common and preferred shares, including the
Preferred Shares, based on the percentage of total dividends distributed to
each class for that year. The Trust may at its election give notice of the
amount of any income subject to Federal income tax to be included in a
dividend on a share of Preferred Shares in advance of the related auction.
If the Trust does not give such advance notice, whether or not by reason of
the fact that a taxable allocation was made retroactively as a result of a
redemption of all or part of the Preferred Shares or the liquidation of the
Trust, it generally will be required to pay additional amounts to holders
of Preferred Shares in order to adjust for their receipt of income subject
to Federal income tax.


                                     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 date other that the date on the front of this prospectus.

                             TABLE OF CONTENTS

PROSPECTUS SUMMARY............................................................5

FINANCIAL HIGHLIGHTS (Unaudited).............................................10

THE TRUST....................................................................11

USE OF PROCEEDS..............................................................11

CAPITALIZATION (Unaudited)...................................................11

PORTFOLIO COMPOSITION........................................................12

THE TRUST'S INVESTMENTS......................................................12

RISKS........................................................................18

MANAGEMENT OF THE TRUST......................................................21

DESCRIPTION OF PREFERRED SHARES..............................................24

THE AUCTION..................................................................31

DESCRIPTION OF COMMON SHARES.................................................35

CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST.................35

REPURCHASE OF COMMON SHARES..................................................37

TAX MATTERS..................................................................37

UNDERWRITING.................................................................39

CUSTODIAN, TRANSFER AGENT AND AUCTION AGENT..................................39

LEGAL OPINIONS...............................................................40

AVAILABLE INFORMATION........................................................40

TABLE OF CONTENTS OF  STATEMENT OF ADDITIONAL INFORMATION....................41

APPENDIX A Taxable Equivalent Yield Table...................................A-1


                      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).

                                     3
<PAGE>

         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.


                                     4
<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 Preferred
Shares. You should read the more detailed information contained in this
prospectus, the Statement of Additional Information and the Trust's
Statement of Preferences of Municipal Auction Rate Cumulative Preferred
Shares (the "Statement") attached as Appendix A to the Statement of
Additional Information. Capitalized terms used but not defined in this
prospectus shall have the meanings given to such terms in the Statement.

<TABLE>
<CAPTION>

<S>                                                 <C>
The Trust .........................................  BlackRock Insured Municipal Income Trust is a recently 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 Trust's common shares are traded on the New York Stock
                                                     Exchange under the symbol "BYM". See "Description of Common
                                                     Shares." As of      , 2002, the Trust had common shares outstanding
                                                     and net assets of $           .

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 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,

                                                           5
<PAGE>

                                                          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. 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 Trust's assets that may be invested in municipal bonds insured
                                                     by any one insurer.

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 arrears, 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 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."

The Offering ......................................  The Trust is offering shares of Series Preferred Shares, shares of

                                                           6
<PAGE>

                                                     Series Preferred Shares and shares of Series Preferred Shares each
                                                     at a purchase price of $25,000 per share. Preferred Shares are
                                                     being offered by the underwriters listed under "Underwriting."

Risk Factors Summary ..............................  Risk is inherent in all investing. Therefore, before investing in
                                                     the Preferred Shares you should consider certain risks carefully.
                                                     The primary risks of investing in the Preferred Shares are:

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

                                                     o    because of the nature of the market for Preferred Shares, you
                                                          may receive less than the price you paid for your shares if
                                                          you sell them outside of the auction, especially when market
                                                          interest rates are rising;

                                                     o    a rating agency could suspend, withdraw or downgrade the
                                                          rating assigned to the Preferred Shares, which could affect
                                                          liquidity;

                                                     o    the Trust may be forced to redeem your shares to meet
                                                          regulatory or rating agency requirements or may voluntarily
                                                          redeem your shares in certain circumstances;

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

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

                                                     o    if an issuer of a municipal bond in which the Trust invests
                                                          experiences financial difficulty or defaults, there may be a
                                                          negative impact on the income and net asset value of the
                                                          Trust's portfolio; and

                                                     o    the Trust may invest up to 20% of its Managed Assets in
                                                          securities that are below investment grade quality, which are
                                                          regarded as having predominately speculative characteristics
                                                          with respect to the issuer's capacity to pay interest and
                                                          principal.

                                                     For additional risks of investing in the Trust, see "Risks" below.

Trading Market.....................................  Preferred Shares are not listed on an exchange. Instead, you may
                                                     buy or sell the Preferred Shares at an auction that normally is
                                                     held weekly, by submitting orders to a broker-dealer that has
                                                     entered into an agreement with the auction agent and the Trust (a
                                                     "Broker-Dealer"), or to a broker-dealer that has entered into a
                                                     separate agreement with a Broker-Dealer. In addition to the
                                                     auctions, Broker-Dealers and other broker-dealers may maintain a
                                                     secondary trading market in Preferred Shares outside of auctions,
                                                     but may discontinue this activity at any time. There is no

                                                           7
<PAGE>

                                                     assurance that a secondary market will provide shareholders with
                                                     liquidity. You may transfer shares outside of auctions only to or
                                                     through a Broker-Dealer or a broker-dealer that has entered into a
                                                     separate agreement with a Broker-Dealer.

                                                     The table below shows the first auction date for each series of
                                                     Preferred Shares and the day on which each subsequent auction will
                                                     normally be held for each series of Preferred Shares. The first
                                                     auction date for each series of Preferred Shares will be the
                                                     business day before the dividend payment date for the initial rate
                                                     period for each series of Preferred Shares. The start date for
                                                     subsequent rate periods will normally be the business day following
                                                     the auction dates unless the then-current rate period is a special
                                                     rate period or the first day of the subsequent rate period is not a
                                                     business day.

                                                                            First Auction      Subsequent
                                                          Series                Date*         Auction Date
                                                          ------                ----          ------------



                                                     * All Dates are 2002.

Dividends and Rate Periods ........................  The table below shows the dividend rate for the initial rate period
                                                     on the Preferred Shares offered in this prospectus. For subsequent
                                                     rate periods, Preferred Shares will pay dividends based on a rate
                                                     set at auctions, normally held weekly. In most instances, dividends
                                                     are also paid weekly, on the day following the end of the rate
                                                     period. The rate set at auction will not exceed the maximum
                                                     applicable rate. See "Description of Preferred Shares--Dividends
                                                     and Dividend Periods."

                                                     In addition, the table below also shows the date from which
                                                     dividends on the Preferred Shares will accumulate at the initial
                                                     rate, the dividend payment date for the initial rate period and the
                                                     day on which dividends will normally be paid. If the day on which
                                                     dividends otherwise would be paid is not a business day, then your
                                                     dividends will be paid on the first business day that falls after
                                                     that day.

                                                     Finally, the table below shows the number of days of the initial
                                                     rate period for the Preferred Shares. Subsequent rate periods
                                                     generally will be seven days. The dividend payment date for special
                                                     rate periods of more than seven days will be set out in the notice
                                                     designating a special rate period. See "Description of Preferred
                                                     Shares--Dividends and Dividend Periods--Designation of Special Rate
                                                     Periods."

                                                                                      Dividend               Number
                                                                          Date of     Payment   Subsequent  of Days
                                                              Initial  Accumulation   Date for   Dividend   Of Initial
                                                              Dividend  at Initial  initial Rate  Payment     Rate
                                                     Series     Rate       Rate*      Period*       Day      Period
                                                     ------     ----       ----       ------        ---      ------


                                                           8
<PAGE>


                                                     * All Dates are 2002.

Special Tax Considerations ........................  Because under normal circumstances the Trust will invest
                                                     substantially all of its assets in municipal bonds that pay
                                                     interest that is exempt from regular Federal income tax, the income
                                                     you receive will ordinarily be exempt from Federal income tax.
                                                     Taxable income or gain earned by the Trust will be allocated
                                                     proportionately to holders of Preferred Shares and common shares,
                                                     based on the percentage of total dividends paid to each class for
                                                     that year. Accordingly, certain specified Preferred Shares
                                                     dividends may be taxable to holders of Preferred Shares. Under
                                                     certain circumstances, the Trust will be required to pay additional
                                                     amounts to holders of Preferred Shares in order to offset the
                                                     Federal income tax effect of the taxable income so allocated. See
                                                     "Tax Matters" and "Description of Preferred Shares--Dividends and
                                                     Dividend Periods."

Ratings ...........................................  The shares of each series of Preferred Shares are expected to be
                                                     issued with a rating of "Aaa" from Moody's and "AAA" from S&P. In
                                                     order to maintain these ratings, the Trust must own portfolio
                                                     securities of a sufficient value and with adequate credit quality
                                                     to meet the rating agencies' guidelines. See "Description of
                                                     Preferred Shares--Rating Agency Guidelines and Asset Coverage."

Redemption ........................................  The Trust may be required to redeem Preferred Shares if, for
                                                     example, the Trust does not meet an asset coverage ratio required
                                                     by law or to correct a failure to meet a rating agency guideline in
                                                     a timely manner. The Trust voluntarily may redeem Preferred Shares
                                                     under certain conditions. See "Description of Preferred
                                                     Shares--Redemption" and "Description of Preferred Shares--Rating
                                                     Agency Guidelines and Asset Coverage."

Liquidation Preference ............................  The liquidation preference for shares of each series of Preferred
                                                     Shares will be $25,000 per share plus accumulated but unpaid
                                                     dividends. See "Description of Preferred Shares--Liquidation."

Voting Rights .....................................  The holders of preferred shares, including Preferred Shares, voting
                                                     as a separate class, have the right to elect at least two trustees
                                                     of the Trust at all times. Such holders also have the right to
                                                     elect a majority of the trustees in the event that two years'
                                                     dividends on the preferred shares are unpaid. In each case, the
                                                     remaining trustees will be elected by holders of common shares and
                                                     preferred shares, including Preferred Shares, voting together as a
                                                     single class. The holders of preferred shares, including Preferred
                                                     Shares, will vote as a separate class or classes on certain other
                                                     matters as required under the Trust's Agreement and Declaration of
                                                     Trust, the Investment Company Act of 1940, as amended (the
                                                     "Investment Company Act") and Delaware law. See "Description of
                                                     Preferred Shares--Voting Rights," and "Certain Provisions in the
                                                     Agreement and Declaration of Trust."
</TABLE>


                                                           9
<PAGE>


                      FINANCIAL HIGHLIGHTS (Unaudited)

         Information contained in the table below shows the unaudited
operating performance of the Trust from the commencement of the Trust's
investment operations on , 2002 through , 2002. Since the Trust was
recently organized and commenced investment operations on , 2002, the table
covers less than weeks of operations, during which a substantial portion of
the Trust's portfolio was held in temporary investments pending investment
in municipal securities that meet the Trust's investment objective and
policies. Accordingly, the information presented may not provide a
meaningful picture of the Trust's future operating performance.

<TABLE>
<CAPTION>

                                                                                                For the period
                                                                                                     , 2002(1)
                                                                                                   through
                                                                                                           , 2002
                                                                                                -----------------
<S>                                                                                            <C>
Per Common Share Operating Performance:
     Net asset value, beginning of period(2)
     Investment operations:
     Net investment income(3)
     Net realized and unrealized loss on investments(3)
     Net decrease from investment operations
Capital charges with respect to issuance of common shares
     Net asset value, end of period(2)
     Market value, end of period(2)
     Total Investment Return(3)
Ratios To Average Net Assets Of Common Shareholders:(4)
     Expenses after fee waiver
     Expenses before fee waiver
     Net investment income after fee waiver
Supplemental Data:
     Average net assets of common shareholders (000)
     Portfolio turnover
     Net assets of common shareholders, end of period (000)

(1)  Commencement of investment operations. This information includes the
     initial investment by an affiliate of BlackRock Advisors, Inc. Net
     asset value immediately after the closing of the public offering was
     $       .

(2)  Net asset value and market value are published in Barron's on Saturday
     and The Wall Street Journal on Monday.

(3)  Total investment return is calculated assuming a purchase of common
     shares at the current market price on the first day and a sale at the
     current market price on the last day of the period reported. Dividends
     and Distributions, if any, are assumed for purposes of this
     calculation, to be reinvested at prices obtained under the Trust's
     dividend reinvestment plan. Total investment return does not reflect
     brokerage commissions. Past performance is not a guarantee of future
     results.

(4)  Annualized.

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


                                    10
<PAGE>

                                 THE TRUST

         The Trust is a recently organized, diversified, closed-end
management investment company registered under the Investment Company Act.
The Trust was organized as a Delaware statutory 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. On October ,
2002, the Trust issued an aggregate of common shares of beneficial
interest, par value $.001 per share, pursuant to the initial public
offering and commenced its investment operations. On , 2002, the Trust
issued an additional common shares, pursuant to an over allotment
provision. The Trust's common shares are traded on the New York Stock
Exchange under the symbol "BYM". The Trust's principal office is located at
100 Bellevue Parkway, Wilmington, Delaware 19809, and its telephone number
is (888) 825-2257.

         The following provides information about the Trust's outstanding
shares as of            , 2002:

<TABLE>

                                                                   Amount held by
                                            Amount                the Trust or for                Amount
          Title of Class                  Authorized                 its Account                Outstanding
          --------------                  ----------                 -----------                -----------
<S>                                      <C>                      <C>                           <C>
          Common Shares                    Unlimited                      0
         Preferred Shares                  Unlimited                      0
              Series
              Series
              Series
</TABLE>

                              USE OF PROCEEDS

         The net proceeds of this offering will be approximately $      after
payment of the sales load and estimated offering costs. The Trust will
invest the net proceeds of the offering in accordance with the Trust's
investment objective and policies as stated below. We currently anticipate
that the Trust will be able to invest primarily in tax exempt municipal
bonds that meet the Trust's investment objective and policies within six to
eight weeks after the completion of the offering. Pending such investment,
it is anticipated that the proceeds will be invested in short-term,
tax-exempt or taxable investment grade securities.

                         CAPITALIZATION (Unaudited)

         The following table sets forth the capitalization of the Trust as
of , 2002, and as adjusted to give effect to the issuance of the Preferred
Shares offered hereby.

<TABLE>
<CAPTION>

                                                                                   Actual                As Adjusted
<S>                                                                                <C>                   <C>
Shareholder's Equity:
     Preferred Shares, $.001 par value, $25,000 stated value per share, at
     liquidation value; unlimited shares authorized (no shares issued;
     shares issued, as adjusted)
     Common shares, $.001 par value per share; unlimited shares authorized,
     shares outstanding*
Paid-in surplus
Balance of undistributed net investment income
     Accumulated net realized gain/loss from investment transactions
     Net unrealized appreciation/depreciation of investments
     Net assets

* None of these outstanding shares are held by or for the account of the
Trust.
</TABLE>


                                    11
<PAGE>


                           PORTFOLIO COMPOSITION

         As of        , 2002, approximately     % of the market value of the
Trust's portfolio was invested in long-term municipal securities and
approximately    % of the market value of the Trust's portfolio was invested
in short-term municipal securities. The following table sets forth certain
information with respect to the composition of the Trust's investment
portfolio as of           , 2002, based on the highest rating assigned.

<TABLE>
<CAPTION>

                                                                                           Value
Credit Rating                                                                              (000)        Percent
<S>                                                                                      <C>          <C>
AAA/Aaa*
AA/Aa
A/A
BBB/Baa
BB/Ba
Unrated +
Short-Term
TOTAL

*        Includes securities that are backed by an escrow or trust
         containing sufficient U.S. Government Securities to ensure the
         timely payment of principal and interest.

+        Refers to securities that have not been rated by Moody's, S&P or
         Fitch, but that have been assessed by BlackRock as being of
         comparable credit quality to rated securities in which the Trust
         may invest. See "The Trust's Investments--Investment Objective and
         Policies."
</TABLE>


                          THE TRUST'S INVESTMENTS

         The following section describes the Trust's investment objective,
significant investment policies and investment techniques. More complete
information describing the Trust's significant investment policies and
techniques, including the Trust's fundamental investment restrictions, can
be found in the Statement of Additional Information, which is herein
incorporated by reference.

Investment Objective and Policies

         The Trust's investment objective is to provide current income
exempt from 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 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

                                    12
<PAGE>

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 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 of trustees upon 60 days' prior notice to
shareholders.

         Appendix B to the Statement of Additional Information contains a
general description of Moody's, S&P's and Fitch's ratings of municipal
bonds 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,
including the alternative minimum tax.

         The Trust cannot change its investment objective without the
approval of the holders of a majority of the outstanding common shares and
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 Preferred Shares--Voting Rights" for
additional information with respect to the voting rights of holders of
Preferred Shares.


                                    13
<PAGE>


Municipal Bonds

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

         The municipal bonds in which the Trust will invest pay interest
that, in the opinion of bond counsel to the issuer, or on the basis of
another authority believed by BlackRock to be reliable, is exempt from
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 Trust's 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.

                                    14
<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 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.

                                    15
<PAGE>

         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 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

                                    16
<PAGE>

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 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
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 Preferred 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. 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

                                    17
<PAGE>

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.

                                   RISKS

         Risk is inherent in all investing. Investing in any investment
company security involves risk, including the risk that you may receive
little or no return on your investment or that you may lose part or all of
your investment. Therefore, before investing you should consider carefully
the following risks that you assume when you invest in Preferred Shares.

Recently Organized

         The Trust is a recently organized, diversified, closed-end
management investment company and has a limited operating history.

Interest Rate Risk

         Interest rate risk is the risk that bonds, and the Trust's assets,
will decline in value because of changes in interest rates. Generally,
municipal bonds will decrease in value when interest rates rise and
increase in value when interest rates decline. The Trust issues Preferred
Shares, which pay dividends based on short-term interest rates. The Trust
then uses the proceeds from the sale of Preferred Shares to buy municipal
bonds, which pay interest based on long-term rates. Both long-term and
short-term interest rates may fluctuate. If short-term interest rates rise,
the Preferred Shares dividend rates may rise so that the amount of
dividends paid to holders of Preferred Shares exceeds the income from the
portfolio securities purchased with the proceeds from the sale of Preferred
Shares. Because income from the Trust's entire investment portfolio (not
just the portion of the portfolio purchased with the proceeds of the
Preferred Shares offering) is available to pay Preferred Share dividends,
however, Preferred Share dividend rates would need to greatly exceed the
yield on the Trust's portfolio before the Trust's ability to pay Preferred
Share dividends would be impaired. If long-term rates rise, the value of
the Trust's investment portfolio will decline, reducing the amount of
assets serving as asset coverage for the Preferred Shares.

         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.

Auction Risk

         The dividend rate for the Preferred Shares normally is set through
an auction process. In the auction, holders of Preferred Shares may
indicate the dividend rate at which they would be willing to hold or sell
their Preferred Shares or purchase additional Preferred Shares. The auction
also provides liquidity for the sale of Preferred Shares. An auction fails
if there are more Preferred Shares offered for sale than there are buyers.
You may not be able to sell your Preferred Shares at an auction if the

                                    18
<PAGE>

auction fails. Finally, if you buy shares or elect to retain shares without
specifying a dividend rate below which you would not wish to buy or
continue to hold those shares, you could receive a lower rate of return on
your shares than the market rate. See "Description of Preferred Shares" and
"The Auction--Auction Procedures."

Secondary Market Risk

         If you try to sell your Preferred Shares between auctions you may
not be able to sell any or all of your shares or you may not be able to
sell them for $25,000 per share or $25,000 per share plus accumulated
dividends. If the Trust has designated a special rate period (a rate period
of more than seven days), changes in interest rates could affect the price
you would receive if you sold your shares in the secondary market.
Broker-dealers that maintain a secondary trading market for Preferred
Shares are not required to maintain this market, and the Trust is not
required to redeem shares either if an auction or an attempted secondary
market sale fails because of a lack of buyers. Preferred Shares are not
listed on a stock exchange or traded on the NASDAQ stock market. If you
sell your Preferred Shares to a broker-dealer between auctions, you may
receive less than the price you paid for them, especially if market
interest rates have risen since the last auction.

Ratings and Asset Coverage Risk

         It is expected that while Moody's will assign a rating of "Aaa" to
the Preferred Shares and S&P will assign a rating of "AAA" to the Preferred
Shares, such ratings do not eliminate or necessarily mitigate the risks of
investing in Preferred Shares. Moody's or S&P could withdraw or downgrade
Preferred Shares, which may make your shares less liquid at an auction or
in the secondary market. If Moody's or S&P withdraws its rating or
downgrades Preferred Shares, the Trust may alter its portfolio or redeem
Preferred Shares in an effort to reinstate or improve, as the case may be,
the rating, although there is no assurance that it will be able to do so to
the extent necessary to restore the prior rating. The Trust also may
voluntarily redeem Preferred Shares under certain circumstances. See
"Description of Preferred Shares--Rating Agency Guidelines and Asset
Coverage" for a description of the asset maintenance tests the Trust must
meet.

Credit Risk

         Credit risk is the risk that an issuer of a municipal bond will
become unable to meet its obligation to make interest and principal
payments. In general, lower rated municipal bonds carry a greater degree of
risk that the issuer will lose its ability to make interest and principal
payments, which could have a negative impact on the Trust's net asset value
or dividends. The Trust may invest up to 20% of its Managed Assets in
municipal bonds that are rated "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 by Congress or state legislatures or
referenda in the future 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.

                                    19
<PAGE>

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

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 Trust's ability to pay dividends in respect of the Preferred 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 Trust's ability to pay dividends in respect of the Preferred
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 Preferred
Shares and distributions on those shares can decline. In an inflationary
period, however, it is expected that, through the auction process, dividend
rates on the Preferred Shares would increase, tending to offset this risk.

Economic Sector and Geographic Risk

         The Trust may invest 25% or more of its Managed Assets in
municipal bonds of issuers located 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 assets.

                                    20
<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 FundsSM and BlackRock Provident Institutional Funds. In addition,
BlackRock provides risk management and investment system services to
institutional investors under the BlackRock SolutionsSM name.

         The BlackRock organization has over 13 years of experience
managing closed-end products and currently advises a closed-end family of
44 funds with approximately $11 billion in assets as of October 31, 2002.
BlackRock has 35 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 and Manager of the Municipal Strategy Group from 1995 to
1999 with Prudential Securities Incorporated. Mr. McGinley joined

                                    21
<PAGE>

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 as of . The team currently manages 35 closed-end municipal
funds, with over $8.2 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 as of .

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

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


                                    22
<PAGE>

         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.

         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>                                                       <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%

-----------------
*        Including net assets attributable to Preferred Shares.
**       From the commencement of operations.
</TABLE>

                                    23
<PAGE>

         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.

                      DESCRIPTION OF PREFERRED SHARES

         The following is a brief description of the terms of the Preferred
Shares. For the complete terms of the Preferred Shares, including the
meanings of the defined terms used herein but not otherwise defined, please
refer to the detailed description of the Preferred Shares in the Statement
of Preferences (the "Statement") attached as Appendix A to the Statement of
Additional Information.

General

         The Trust's Agreement and Declaration of Trust, as amended and
restated, authorizes the issuance of an unlimited number of preferred
shares, par value $.001 per share, in one or more classes or series with
rights as determined by the board of trustees without the approval of
common shareholders. The Statement currently authorizes the issuance of
Preferred Shares, Series , Preferred Shares, Series and Preferred Shares,
Series . All Preferred Shares will have a liquidation preference of $25,000
per share, plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared).

         The Preferred Shares of each series will rank on parity with any
other series of Preferred Shares and any other series of preferred shares
of the Trust as to the payment of dividends and the distribution of assets
upon liquidation. Each Preferred Shares carries one vote on matters that
Preferred Shares can be voted. Preferred Shares, when issued, will be fully
paid and non-assessable and have no preemptive, conversion or cumulative
voting rights.

Dividends and Dividend Periods

         The following is a general description of dividends and Rate
Periods.

         Rate Periods.  The Initial Rate Period for each series is as set
forth below:

                          Series                         Initial Rate Period




         Any subsequent Rate Periods of shares of a series of Preferred
Shares will generally be seven days. The Trust, subject to certain
conditions, may change the length of Subsequent Rate Periods designating
them as Special Rate Periods. See "Designation of Special Rate Periods"
below.

         Dividend Payment Dates. Dividends on each series of Preferred
Shares will be payable when, as and if declared by the board of trustees,
out of legally available funds in accordance with the Agreement and
Declaration of Trust, the Statement and applicable law. Dividends are
scheduled to be paid for each series of Preferred Shares as follows:

<TABLE>
<CAPTION>

                                                                                  Subsequent Dividend
                                            Initial Dividend                         Payment Dates
               Series                         Payment Date                              on Each
<S>           <C>                          <C>                                   <C>




</TABLE>

         If dividends are payable on a day that is not a Business Day, then
dividends will be payable on the next business day. In addition, the Trust
may specify different Dividend Payment Dates for any Special Rate Period of
more than 28 Rate Period Days.

                                    24
<PAGE>

         Dividends will be paid through the Securities Depository on each
Dividend Payment Date. The Securities Depository, in accordance with its
current procedures, is expected to distribute dividends received from the
Trust in next-day funds on each Dividend Payment Date to Agent Members.
These Agent Members are in turn expected to distribute such dividends to
the persons for whom they are acting as agents. However, each of the
current Broker-Dealers has indicated to the Trust that dividend payments
will be available in same-day funds on each Dividend Payment Date to
customers that use such Broker-Dealer or that Broker-Dealer's designee as
Agent Member.

         Calculation of Dividend Payment. The Trust computes the dividends
per share payable on shares of a series of Preferred Shares by multiplying
the applicable rate for shares of such series in effect by a fraction. The
numerator of this fraction will normally be seven (i.e., the number of days
in the Dividend Period) and the denominator will normally be 365 if such
Dividend Period consists of seven days, 360 for all other Dividend Periods.
In either case, this rate is then multiplied by $25,000 to arrive at
dividends per share.

         Dividends on shares of each series of Preferred Shares will
accumulate from the date of their original issue. For each dividend payment
period after the initial dividend period, the dividend rate will be the
dividend rate determined at auction, except that the dividend rate that
results from an auction will not be greater than the maximum applicable
rate described below.

         The maximum applicable rate for any rate period for a series of
Preferred Shares will generally be the applicable percentage (set forth in
the Applicable Percentage Payment Table below) of the reference rate (set
forth in the Reference Rate Table below) for the applicable rate period
based on the prevailing rating of the Preferred Shares in effect at the
close of business on the Business Day next preceding the auction date. If
Moody's or S&P or both shall not make such rating available, the rate shall
be determined by reference to equivalent ratings issued by a substitute
rating agency. The applicable percentage for a series of Preferred Shares
is determined on the day that a notice of a special dividend period is
delivered if the notice specifies a maximum applicable rate for a special
dividend period. If the Trust has provided notification to the auction
agent prior to an auction establishing the applicable rate for a dividend
period that net capital gains or other taxable income will be included in
the dividend determined at such auction, the applicable percentage will be
derived from the column captioned "Applicable Percentage: Notification" in
the Applicable Percentage Table below:

<TABLE>
<CAPTION>

                                    Applicable Percentage Payment Table

                  Credit Ratings                                     Applicable Percentage Table
                                                           Applicable Percentage:          Applicable Percentage:
<S>                     <C>                              <C>                             <C>
      Moody's                    S&P                          No Notification                   Notification
"Aa3" or higher            "AA-" or higher                          110%                            150%
"A3" to "A1"                "A-" to "A+"                            125%                            160%
"Baa3" to "Baa1"          "BBB-" to "BBB+"                          150%                            250%
"Ba3" to "Ba1"             "BB-" to "BB+"                           200%                            275%
Below "Ba3"                  Below "BB-"                            250%                            300%
</TABLE>

         The reference rate used to determine the maximum applicable rate
generally varies depending on the length of the applicable rate period, as
set forth in the Reference Rate Table below:

<TABLE>
<CAPTION>

                            Reference Rate Table

Rate Period                                      Reference Rate
<S>                                              <C>
28 days or less                                  Greater of:
                                                 o AA Composite Commercial Paper Rate
                                                 o Taxable Equivalent of the Short-Term Municipal Bond Rate
29 days to 182 days                              AA Composite Commercial Paper Rate
183 days to 364 days                             Treasury Bill Rate
365 days or more                                 Treasury Note Rate
</TABLE>

         The "AA Composite Commercial Paper Rate" is as set forth in the
table set forth below:

                                    25
<PAGE>

<TABLE>
<CAPTION>

                                      AA Composite Commercial Paper Rate Table

         Minimum Rate Period                   Special Rate Period                    AA Composite Commercial Paper Rate*
<S>            <C>                              <C>                                               <C>
               7 days                           48 days or fewer                                  30-day rate
                                               49 days to 69 days                                 60-day rate
                                               70 days to 84 days                     Average of 60-day and 90-day rates
                                               85 days to 98 days                                 90-day rate
                                               99 days to 119 days                    Average of 90-day and 120-day rates
                                              120 days to 140 days                               120-day rate
                                              141 days to 161 days                   Average of 120-day and 180-day rates
                                              162 days to 182 days                               180-day rate

* Rates stated on a discount basis
</TABLE>

         If the Federal Reserve Bank of New York does not make available
any such rate, the rate shall be the average rate quoted on a discount
basis by commercial paper dealers to the auction agent at the close of
business on the business day next preceding such date. If any commercial
paper dealer does not quote a rate, the rate shall be determined by quotes
provided by the remaining commercial paper dealers.

         "Taxable Equivalent of the Short-Term Municipal Bond Rate" means
90% of an amount equal to the per annum rate payable on taxable bonds in
order for such rate, on an after-tax basis, to equal the per annum rate
payable on tax-exempt bonds issued by "high grade" issuers as determined in
accordance with the procedures set forth in the Statement.

         Prior to each dividend payment date, the Trust is required to
deposit with the auction agent sufficient funds for the payment of declared
dividends. The failure to make such deposit will not result in the
cancellation of any auction. The Trust does not intend to establish any
reserves for the payment of dividends.

         If an auction for any series of Preferred Shares is not held when
scheduled for any reason, other than by reason of force majeure, the
dividend rate for the corresponding rate period will be the maximum
applicable rate on the date the auction was scheduled to be held.

         Additional Dividends. If the Trust allocates any net capital gain
or other income taxable for Federal income tax purposes to a dividend paid
on Preferred Shares without having provided advance notice (a "Taxable
Allocation"), whether or not such allocation is made retroactively as a
result of the redemption of all or a portion of the Preferred Shares or a
liquidation of the Trust, the Trust shall pay an additional dividend. The
additional dividend will be in an amount approximately equal to the amount
of taxes paid by a holder of Preferred Shares on the Taxable Allocation and
the additional dividend, provided that the additional dividend will be
calculated:

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

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

     o   assuming that each Taxable Allocation and such additional dividend
         (except to the extent such additional dividend is designated as an
         exempt-interest dividend under Section 852(b)(5) of the Code or
         successor provisions) would be taxable in the hands of each holder
         of Preferred Shares at the maximum marginal regular Federal income
         tax rate applicable to ordinary income or net capital gain for
         individuals, as applicable, or the maximum marginal regular
         Federal corporate income tax rate applicable to ordinary income or
         net capital gain, as applicable whichever is greater, in effect
         during the fiscal year in question.

         The Trust will not pay additional dividends with respect to net
capital gains or other taxable income determined by the Internal Revenue
Service to be allocable in a manner different from that allocated by the
Trust.

                                    26
<PAGE>

         Although the Trust generally intends to designate any additional
dividend as an exempt-interest dividend to the extent permitted by
applicable law, it is possible that all or a portion of any additional
dividend will be taxable to the recipient thereof. See "Tax Matters." The
Trust will not pay a further additional dividend with respect to any
taxable portion of an additional dividend not provided for in the
additional dividend calculation above.

         The Trust will, within 90 days (and generally within 60 days)
after the end of its fiscal year for which a Taxable Allocation is made,
provide notice thereof to the auction agent. The Trust will pay, out of
legally available funds, any additional dividend due on all Taxable
Allocations made during the fiscal year in question, within 30 days after
such notice is given to the auction agent.

         Restrictions on Dividends and Other Distributions. While the
Preferred Shares are outstanding, the Trust generally may not declare, pay
or set apart for payment any dividend or other distribution in respect of
its common shares. In addition, the Trust may not call for redemption or
redeem any of its common shares. However, the Trust is not confined by the
above restrictions if:

     o   immediately after such transaction, the Discounted Value of the
         Trust's portfolio would be equal to or greater than the Preferred
         Shares Basic Maintenance Amount and the Investment Company Act
         Preferred Shares Asset Coverage (see "Rating Agency Guidelines and
         Asset Coverage" below);

     o   full cumulative dividends on each series of Preferred Shares due
         on or prior to the date of the transaction have been declared and
         paid or shall have been declared and sufficient funds for the
         payment thereof deposited with the auction agent; and

     o   the Trust has redeemed the full number of Preferred Shares
         required to be redeemed by any provision for mandatory redemption
         contained in the Statement.

         The Trust generally will not declare, pay or set apart for payment
any dividend on any class or series of shares of the Trust ranking, as to
the payment of dividends, on a parity with Preferred Shares unless the
Trust has declared and paid or contemporaneously declares and pays full
cumulative dividends on each series of the Preferred Shares through its
most recent dividend payment date. However, when the Trust has not paid
dividends in full upon the shares of each series of Preferred Shares
through the most recent dividend payment date or upon any other class or
series of shares of the Trust ranking, as to the payment of dividends, on a
parity with Preferred Shares through their most recent respective dividend
payment dates, the amount of dividends declared per share on Preferred
Shares and such other class or series of shares will in all cases bear to
each other the same ratio that accumulated dividends per share on the
Preferred Shares and such other class or series of shares bear to each
other.

         Designation of Special Rate Periods. The Trust may, at its sole
option, declare a special rate period of shares of a particular series of
Preferred Shares. To declare a special rate period, the Trust will give
notice to the auction agent. The notice will request that the next
succeeding rate period for the series of Preferred Shares be a number of
days (other than seven) evenly divisible by seven as specified in such
notice and not more than 1,820 days long; provided, however, that a special
rate period may be a number of days not evenly divisible by seven if all
shares of the series of Preferred Shares are to be redeemed at the end of
such special rate period. The Trust may not request a special rate period
unless sufficient clearing bids for shares of such series were made in the
most recent auction.

Redemption

         Mandatory Redemption. The Trust is required to maintain (a) a
Discounted Value of eligible portfolio securities equal to the Preferred
Shares Basic Maintenance Amount and (b) the Investment Company Act
Preferred Shares Asset Coverage. Eligible portfolio securities for these
purposes will be determined from time to time by the rating agencies then
rating the Preferred Shares. If the Trust fails to maintain such asset
coverage amounts and does not timely cure such failure in accordance with
the requirements of the rating agency that rates the Preferred Shares, the
Trust must redeem all or a portion of the Preferred Shares. This mandatory
redemption will take place on a date that the board of trustees specifies
out of legally available funds in accordance with the Agreement and
Declaration of Trust, as amended and restated, the Statement and applicable
law, at the redemption price of $25,000 per share plus accumulated but

                                    27
<PAGE>

unpaid dividends (whether or not earned or declared) to the date fixed for
redemption. The number of Preferred Shares that must be redeemed in order
to cure such failure will be allocated pro rata among the outstanding
preferred shares of the Trust. The mandatory redemption will be limited to
the number of Preferred Shares necessary to restore the required Discounted
Value or the Investment Company Act Preferred Shares Asset Coverage, as the
case may be.

         Optional Redemption. The Trust, at its option, may redeem the
shares of any series of Preferred Shares, in whole or in part, out of funds
legally available therefor. Any optional redemption will occur on any
dividend payment date at the optional redemption price per share of $25,000
per share plus an amount equal to accumulated but unpaid dividends to the
date fixed for redemption plus the premium, if any, specified in a special
redemption provision. No shares of a series of Preferred Shares may be
redeemed if the redemption would cause the Trust to violate the Investment
Company Act or applicable law. In addition, holders of a series of
Preferred Shares may be entitled to receive additional dividends if the
redemption causes the Trust to make a Taxable Allocation without having
given advance notice to the auction agent. Shares of a series of Preferred
Shares may not be redeemed in part if fewer than 300 Preferred Shares would
remain outstanding after the redemption. The Trust has the authority to
redeem the series of Preferred Shares for any reason.

Liquidation

         If the Trust is liquidated, the holders of any series of
outstanding Preferred Shares will receive the liquidation preference on
such series, plus all accumulated but unpaid dividends, plus any applicable
additional dividends payable before any payment is made to the common
shares. The holders of Preferred Shares will be entitled to receive these
amounts from the assets of the Trust available for distribution to its
shareholders. In addition, the rights of holders of Preferred Shares to
receive these amounts are subject to the rights of holders of any series or
class of shares, including other series of preferred shares, ranking on a
parity with the Preferred Shares with respect to the distribution of assets
upon liquidation of the Trust. After the payment to the holders of
Preferred Shares of the full preferential amounts as described, the holders
of Preferred Shares will have no right or claim to any of the remaining
assets of the Trust.

         For purpose of the foregoing paragraph, a voluntary or involuntary
liquidation of the Trust does not include:

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

     o   the merger or consolidation of the Trust into or with any other
         business trust or corporation; or

     o   the merger or consolidation of any other business trust or
         corporation into or with the Trust.

Rating Agency Guidelines and Asset Coverage

         The Trust is required under guidelines of Moody's and S&P to
maintain assets having in the aggregate a Discounted Value at least equal
to the Preferred Shares Basic Maintenance Amount. Moody's and S&P have each
established separate guidelines for calculating Discounted Value. To the
extent any particular portfolio holding does not satisfy a rating agency's
guidelines, all or a portion of the holding's value will not be included in
the rating agency's calculation of Discounted Value. The Moody's and S&P
guidelines do not impose any limitations on the percentage of the Trust's
assets that may be invested in holdings not eligible for inclusion in the
calculation of the Discounted Value of the Trust's portfolio. The amount of
ineligible assets included in the Trust's portfolio at any time may vary
depending upon the rating, diversification and other characteristics of the
eligible assets included in the portfolio. The Preferred Shares Basic
Maintenance Amount includes the sum of (a) the aggregate liquidation
preference of the Preferred Shares then outstanding and (b) certain accrued
and projected payment obligations of the Trust.

         The Trust is also required under the Investment Company Act to
maintain asset coverage of at least 200% with respect to senior securities
which are equity shares, including the Preferred Shares ("Investment
Company Act Preferred Shares Asset Coverage"). The Trust's Investment
Company Act Preferred Shares Asset Coverage is tested as of the last

                                    28
<PAGE>

business day of each month in which any senior equity securities are
outstanding. The minimum required Investment Company Act Preferred Shares
Asset Coverage amount of 200% may be increased or decreased if the
Investment Company Act is amended. Based on the composition of the
portfolio of the Trust and market conditions as of , 2002, the Investment
Company Act Preferred Shares Asset Coverage with respect to all of the
Trust's preferred shares, assuming the issuance on that date of all
Preferred Shares offered hereby and giving effect to the deduction of
related sales load and related offering costs estimated at $ , would have
been computed as follows:





         Value of Trust assets less liabilities
         not constituting senior securities                              =
         ----------------------------------

         Senior securities representing indebtedness
         plus
         liquidation value of the preferred shares

         In the event the Trust does not timely cure a failure to maintain
(a) a Discounted Value of its portfolio equal to the Preferred Shares Basic
Maintenance Amount or (b) the Investment Company Act Preferred Shares Asset
Coverage, in each case in accordance with the requirements of the rating
agency or agencies then rating the Preferred Shares, the Trust will be
required to redeem Preferred Shares as described under
"Redemption--Mandatory Redemption" above.

         The Trust may, but is not required to, adopt any modifications to
the guidelines that may be established by Moody's or S&P. Failure to adopt
any such modifications, however, may result in a change in the ratings
described above or a withdrawal of ratings altogether. In addition, any
rating agency providing a rating for the Preferred Shares may, at any time,
change, suspend or withdraw any such rating. The board of trustees may,
without shareholder approval, amend, alter or repeal any or all of the
definitions and related provisions which have been adopted by the Trust
pursuant to the rating agency guidelines in the event the Trust receives
written confirmation from Moody's or S&P, as the case may be, that any such
amendment, alteration or repeal would not impair the rating then assigned
to the Preferred Shares.

         As described by Moody's and S&P, a preferred stock rating is an
assessment of the capacity and willingness of an issuer to pay preferred
stock obligations. The rating on the Preferred Shares is not a
recommendation to purchase, hold or sell those shares, inasmuch as the
rating does not comment as to market price or suitability for a particular
investor. The rating agency guidelines referred to above also do not
address the likelihood that an owner of Preferred Shares will be able to
sell such shares in an auction or otherwise. The rating is based on current
information furnished to Moody's and S&P by the Trust and the Advisor and
information obtained from other sources. The rating may be changed,
suspended or withdrawn as a result of changes in, or the unavailability of,
such information. The common shares have not been rated by a nationally
recognized statistical rating organization.

         The rating agency's guidelines will apply to the Preferred Shares
only so long as the rating agency is rating the shares. The Trust will pay
certain fees to Moody's and S&P for rating the Preferred Shares.

Voting Rights

         Except as otherwise provided in this prospectus and in the
Statement of Additional Information or as otherwise required by law,
holders of Preferred Shares will have equal voting rights with holders of
common shares and any other preferred shares (one vote per share) and will
vote together with holders of common shares and any preferred shares as a
single class.

                                    29
<PAGE>

         Holders of outstanding preferred shares, including Preferred
Shares, voting as a separate class, are entitled to elect two of the
Trust's trustees. The remaining trustees are elected by holders of common
shares and preferred shares, including Preferred Shares, voting together as
a single class. In addition, if at any time dividends (whether or not
earned or declared) on outstanding preferred shares, including Preferred
Shares, are due and unpaid in an amount equal to two full years of
dividends, and sufficient cash or specified securities have not been
deposited with the auction agent for the payment of such dividends, then,
the sole remedy of holders of outstanding preferred shares, including
Preferred Shares, is that the number of trustees constituting the board of
trustees will be automatically increased by the smallest number that, when
added to the two trustees elected exclusively by the holders of preferred
shares including Preferred Shares as described above, would constitute a
majority of the board of trustees. The holders of preferred shares,
including Preferred Shares, will be entitled to elect that smallest number
of additional trustees at a special meeting of shareholders held as soon as
possible and at all subsequent meetings at which trustees are to be
elected. The terms of office of the persons who are trustees at the time of
that election will continue. If the Trust thereafter shall pay, or declare
and set apart for payment, in full, all dividends payable on all
outstanding preferred shares, including Preferred Shares, the special
voting rights stated above will cease, and the terms of office of the
additional trustees elected by the holders of preferred shares, including
Preferred Shares, will automatically terminate.

         As long as any Preferred Shares are outstanding, the Trust will
not, without the affirmative vote or consent of the holders of at least a
majority of the Preferred Shares outstanding at the time (voting together
as a separate class):

         (a) authorize, create or issue, or increase the authorized or
issued amount of, any class or series of stock ranking prior to or on a
parity with the Preferred Shares with respect to payment of dividends or
the distribution of assets on liquidation, authorize, create or issue
additional shares of or increase the authorized amount of the Preferred
Shares or any other preferred shares, unless, in the case of shares of
preferred stock on parity with the Preferred Shares, the Trust obtains
written confirmation from Moody's (if Moody's is then rating preferred
shares), S&P (if S&P is then rating preferred shares) or any substitute
rating agency (if any such substitute rating agency is then rating
preferred shares) that the issuance of a class or series would not impair
the rating then assigned by such rating agency to the Preferred Shares and
the Trust continues to comply with Section 13 of the Investment Company
Act, the Investment Company Act Preferred Shares Asset Coverage
requirements and the Preferred Shares Basic Maintenance Amount
requirements, in which case the vote or consent of the holders of the
Preferred Shares is not required;

         (b) amend, alter or repeal the provisions of the Agreement and
Declaration of Trust or the Statement, by merger, consolidation or
otherwise, so as to adversely affect any preference, right or power of the
Preferred Shares or holders of Preferred Shares; provided, however, that
(i) none of the actions permitted by the exception to (a) above will be
deemed to affect such preferences, rights or powers, (ii) a division of
Preferred Shares will be deemed to affect such preferences, rights or
powers only if the terms of such division adversely affect the holders of
Preferred Shares and (iii) the authorization, creation and issuance of
classes or series of shares ranking junior to the Preferred Shares with
respect to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Trust, will be
deemed to affect such preferences, rights or powers only if Moody's or S&P
is then rating the Preferred Shares and such issuance would, at the time
thereof, cause the Trust not to satisfy the Investment Company Act
Preferred Shares Asset Coverage or the Preferred Shares Basic Maintenance
Amount;

         (c) authorize the Trust's conversion from a closed-end to an open-end
investment company;

         (d) amend those provisions of the Agreement and Declaration of
Trust or the Statement that provide for the classification of the board of
trustees of the Trust into three classes, each with a term of office of
three years with only one class of trustees standing for election in any
year; or

         (e) approve any reorganization (as such term is used in the
Investment Company Act) adversely affecting the Preferred Shares.

         So long as any shares of the Preferred Shares are outstanding, the
Trust shall not, without the affirmative vote or consent of the Holders of
at least 66-2/3% of the Preferred Shares outstanding at the time, in person
or by proxy, either in writing or at a meeting, voting as a separate class,
file a voluntary application for relief under Federal bankruptcy law or any
similar application under state law for so long as the Trust is solvent and
does not foresee becoming insolvent.

                                    30
<PAGE>

         To the extent permitted under the Investment Company Act, the
Trust will not approve any of the actions set forth in (a) or (b) above
which adversely affects the rights expressly set forth in the Agreement and
Declaration of Trust or the Statement, of a holder of shares of a series of
preferred shares differently than those of a holder of shares of any other
series of preferred shares without the affirmative vote or consent of the
holders of at least a majority of the shares of each series adversely
affected. However, to the extent permitted by the Agreement and Declaration
of Trust or the Statement, no vote of holders of common shares, either
separately or together with holders of preferred shares as a single class,
is necessary to take the actions contemplated by (a) and (b) above. The
holders of common shares will not be entitled to vote in respect of such
matters, unless, in the case of the actions contemplated by (b) above, the
action would adversely affect the contract rights of the holders of common
shares expressly set forth in the Trust's charter.

         The foregoing voting provisions will not apply with respect to
Preferred Shares if, at or prior to the time when a vote is required, such
shares have been (i) redeemed or (ii) called for redemption and sufficient
funds have been deposited in trust to effect such redemption.

                                THE AUCTION

General

         The Statement provides that, except as otherwise described in this
prospectus, the applicable rate for the shares of each series of Preferred
Shares for each dividend period after the initial dividend period will be
the rate that results from an auction conducted as set forth in the
Statement and summarized below. In such an auction, persons determine to
hold or offer to sell or, based on dividend rates bid by them, offer to
purchase or sell shares of a series of Preferred Shares. See the Statement
included in the Statement of Additional Information for a more complete
description of the auction process.

         Auction Agency Agreement. The Trust will enter into an auction
agency agreement with the auction agent (currently, The Bank of New York)
which provides, among other things, that the auction agent will follow the
auction procedures to determine the applicable rate for shares of each
series of Preferred Shares, so long as the applicable rate for shares of
such series of Preferred Shares is to be based on the results of an
auction.

         The auction agent may terminate the auction agency agreement upon
45 days notice to the Trust. If the auction agent should resign, the Trust
will use its best efforts to enter into an agreement with a successor
auction agent containing substantially the same terms and conditions as the
auction agency agreement. The Trust may remove the auction agent provided
that, prior to removal, the Trust has entered into a replacement agreement
with a successor auction agent.

         Broker-Dealer Agreements. Each auction requires the participation
of one or more Broker-Dealers. The auction agent will enter into agreements
with several Broker-Dealers selected by the Trust, which provide for the
participation of those Broker-Dealers in auctions for Preferred Shares.

         The auction agent will pay to each Broker-Dealer after each
auction, from funds provided by the Trust, a service charge at the annual
rate of 1/4 of 1% in the case of any auction before a dividend period of
364 days or less, or a percentage agreed to by the Trust and the
Broker-Dealers, in the case of any auction before a dividend period of 365
days or longer, of the purchase price of Preferred Shares placed by a
Broker-Dealer at the auction.

         The Trust may request the auction agent to terminate one or more
Broker-Dealer Agreements at any time upon five days' notice, provided that
at least one Broker-Dealer Agreement is in effect after termination of the
agreements.


                                    31
<PAGE>


Auction Procedures

         Prior to the submission deadline on each auction date for shares
of a series of Preferred Shares, each customer of a Broker-Dealer who is
listed on the records of that Broker-Dealer (or, if applicable, the auction
agent) as a beneficial owner of such series of Preferred Shares may submit
the following types of orders with respect to shares of such series of
Preferred Shares to that Broker-Dealer.

         1. Hold order--indicating its desire to hold shares of such series
without regard to the applicable rate for the next dividend period.

         2. Bid--indicating its desire to sell shares of such series at
$25,000 per share if the applicable rate for shares of such series for the
next dividend period is less than the rate or spread specified in the bid.

         3. Sell order--indicating its desire to sell shares of such series
at $25,000 per share without regard to the applicable rate for shares of
such series for the next dividend period.

         A beneficial owner may submit different types of orders to its
Broker-Dealer with respect to shares of a series of Preferred Shares then
held by the beneficial owner. A beneficial owner for shares of such series
that submits its bid with respect to shares of such series to its
Broker-Dealer having a rate higher than the maximum applicable rate for
shares of such series on the auction date will be treated as having
submitted a sell order to its Broker-Dealer. A beneficial owner of shares
of such series that fails to submit an order to its Broker-Dealer with
respect to such shares will ordinarily be deemed to have submitted a hold
order with respect to such shares of such series to its Broker-Dealer.
However, if a beneficial owner of shares of such series fails to submit an
order with respect to such shares of such series to its Broker-Dealer for
an auction relating to a dividend period of more than 28 days such
beneficial owner will be deemed to have submitted a sell order to its
Broker-Dealer. A sell order constitutes an irrevocable offer to sell the
Preferred Shares subject to the sell order. A beneficial owner that offers
to become the beneficial owner of additional Preferred Shares is, for
purposes of such offer, a potential holder as discussed below.

         A potential holder is either a customer of a Broker-Dealer that is
not a beneficial owner of a series of Preferred Shares but that wishes to
purchase Preferred Shares of such series or that is a beneficial owner of
Preferred Shares of such series that wishes to purchase additional
Preferred Shares of such series. A potential holder may submit bids to its
Broker-Dealer in which it offers to purchase shares of such series at
$25,000 per share if the applicable rate for shares of such series for the
next dividend period is not less than the specified rate in such bid. A bid
placed by a potential holder of shares of such series specifying a rate
higher than the maximum applicable rate for shares of such series on the
auction date will not be accepted.

         The Broker-Dealers in turn will submit the orders of their
respective customers who are beneficial owners and potential holders to the
auction agent. They will designate themselves (unless otherwise permitted
by the Trust) as existing holders of shares subject to orders submitted or
deemed submitted to them by beneficial owners. They will designate
themselves as potential holders of shares subject to orders submitted to
them by potential holders. However, neither the Trust nor the auction agent
will be responsible for a Broker-Dealer's failure to comply with these
procedures. Any order placed with the auction agent by a Broker-Dealer as
or on behalf of an existing holder or a potential holder will be treated
the same way as an order placed with a Broker-Dealer by a beneficial owner
or potential holder. Similarly, any failure by a Broker-Dealer to submit to
the auction agent an order for any Preferred Shares held by it or customers
who are beneficial owners will be treated as a beneficial owner's failure
to submit to its Broker-Dealer an order in respect of Preferred Shares held
by it. A Broker-Dealer may also submit orders to the auction agent for its
own account as an existing holder or potential holder, provided it is not
an affiliate of the Trust.

         There are sufficient clearing bids for shares of a series in an
auction if the number of shares of such series subject to bids submitted or
deemed submitted to the auction agent by Broker-Dealers for potential
holders with rates or spreads equal to or lower than the maximum applicable
rate for such series is at least equal to or exceeds the sum of the number
of shares of such series subject to sell orders and the number of shares of
such series subject to bids specifying rates or spreads higher than the
maximum applicable rate for such series submitted or deemed submitted to
the auction agent by Broker-Dealers for existing holders of such series. If
there are sufficient clearing bids for shares of a series, the applicable
rate for shares of such series for the next succeeding dividend period

                                    32
<PAGE>

thereof will be the lowest rate specified in the submitted bids which,
taking into account such rate and all lower rates bid by Broker-Dealers as
or on behalf of existing holders and potential holders, would result in
existing holders and potential holders owning the shares of such series
available for purchase in the auction.

         If there are not sufficient clearing bids for shares of such
series, the applicable rate for the next dividend period will be the
maximum applicable rate for shares of such series on the auction date. If
this happens, beneficial owners of shares of such series that have
submitted or are deemed to have submitted sell orders may not be able to
sell in the auction all shares of such series subject to such sell orders.
If all of the outstanding shares of such series are the subject of
submitted hold orders, the applicable rate for the next dividend period
will then be:

     o   (i) if the applicable rate period is less than 183 days, the "AA"
         Composite Commercial Paper Rate, (ii) if the applicable rate
         period is more than 182 days but fewer than 365 days, the Treasury
         Bill Rate, and (iii) if the applicable rate period is more than
         364 days, the Treasury Note Rate (the applicable rate being
         referred to as the "Benchmark Rate"); multiplied by

     o   1 minus the maximum marginal regular individual Federal income tax
         rate applicable to ordinary income or the maximum marginal regular
         corporate Federal income tax rate applicable to ordinary income,
         whichever is greater.

         If the applicable rate period is less than 183 days and the Kenny
Index is less than the amount determined above for a rate period of less
than 183 days, then the applicable rate for an all hold period will be the
rate equal to the Kenny Index.

         The "Kenny Index" is the Kenny S&P 30 day High Grade Index or any
successor index.

         The "Treasury Bill Rate" is either (i) the bond equivalent yield,
calculated in accordance with prevailing industry convention, of the rate
on the most recently auctioned Treasury bill with a remaining maturity
closest to the length of such Rate Period, as quoted in The Wall Street
Journal on such date for the business day next preceding such date or, if
the length of the Rate Period exceeds the remaining maturity of any
recently auctioned Treasury Bill, the weighted average rate of the most
recently auctioned Treasury Bill and Treasury Note with maturities closest
to the length of the Rate Period; or (ii) in the event that any such rate
is not published in The Wall Street Journal, then the bond equivalent
yield, calculated in accordance with prevailing industry convention, as
calculated by reference to the arithmetic average of the bid price
quotations of the most recently auctioned Treasury bill with a remaining
maturity closest to the length of such Rate Period, as determined by bid
price quotations as of the close of business on the business day
immediately preceding such date obtained by the auction agent.

         The "Treasury Note Rate" on any date for any Rate Period, shall
mean (i) the yield on the most recently auctioned Treasury note with a
remaining maturity closest to the length of such Rate Period, as quoted in
The Wall Street Journal on such date for the business day next preceding
such date; or (ii) in the event that any such rate is not published in The
Wall Street Journal, then the yield as calculated by reference to the
arithmetic average of the bid price quotations of the most recently
auctioned Treasury Note with a remaining maturity closest to the length of
such Rate Period, as determined by bid price quotations as of the close of
business on the business day immediately preceding such date obtained by
the auction agent.

         If all the shares of a series are subject to hold orders and the
Trust has notified the auction agent of its intent to allocate to a series
of Preferred Shares any net capital gains or other income taxable for
Federal income tax purposes ("Taxable Income"), the applicable rate for the
series of Preferred Shares for the applicable rate period will be (i) if
the Taxable Yield Rate is greater than the Benchmark Rate, then the
Benchmark Rate, or (ii) if the Taxable Yield Rate is less than or equal to
the Benchmark Rate, then the rate equal to the sum of (x) the amount
determined pursuant to the two bullet points above, and (y) the product of
the maximum marginal regular Federal individual income tax rate applicable
to ordinary income or the maximum marginal regular Federal corporate income
tax rate applicable to ordinary income, whichever is greater, multiplied by
the Taxable Yield Rate.

         The "Taxable Yield Rate" is the rate determined by (i) dividing
the amount of Taxable Income available for distribution on each Preferred
Share in the affected series by the number of days in the Dividend Period
in respect of which the Taxable Income is contemplated to be distributed,

                                    33
<PAGE>

(ii) multiplying the amount determined in (i) by 365 (in the case of a
Dividend Period of 7 days) or 360 (in the case of any other Dividend
Period), and (iii) dividing the amount determined in (ii) by $25,000.

         The auction procedure includes a pro rata allocation of shares for
purchase and sale, which may result in an existing holder continuing to
hold or selling, or a potential holder purchasing, a number of shares of a
series of Preferred Shares that is different than the number of shares of
such series specified in its order. To the extent the allocation procedures
have that result, Broker-Dealers that have designated themselves as
existing holders or potential holders in respect of customer orders will be
required to make appropriate pro rata allocations among their respective
customers.

         Settlement of purchases and sales will be made on the next
business day (which is also a dividend payment date) after the auction date
through DTC. Purchasers will make payment through their Agent Members in
same-day funds to DTC against delivery to their respective Agent Members.
DTC will make payment to the sellers' Agent Members in accordance with
DTC's normal procedures, which now provide for payment against delivery by
their Agent Members in same-day funds.

         The auctions for Series will normally be held every , and each
subsequent dividend period will normally begin on the following . The
auctions for Series will normally be held every , and each subsequent
dividend period will normally begin on the following . The auctions for
Series will normally be held every , and each subsequent dividend period
will normally begin on the following .

         If an Auction Date is not a business day because the New York
Stock Exchange is closed for business due to an act of God, natural
disaster, act of war, civil or military disturbance, act of terrorism,
sabotage, riots or a loss or malfunction of utilities or communications
services, or the auction agent is not able to conduct an Auction in
accordance with the Auction Procedures for any such reason, then the
Applicable Rate for the next Dividend Period will be the Applicable Rate
determined on the previous Auction Date.

         If a Dividend Payment Date is not a business day because the New
York Stock Exchange is closed for business due to an act of God, natural
disaster, act of war, civil or military disturbance, act of terrorism,
sabotage, riots or a loss or malfunction of utilities or communications
services, or the dividend payable on such date can not be paid for any such
reason, then:

         The Dividend Payment Date for the affected Dividend Period will be
the next Business Day on which the Trust and its paying agent, if any, can
pay the dividend;

         The affected Dividend Period will end on the day it otherwise would
have ended; and

         The next Dividend Period will begin and end on the dates on which
it otherwise would have begun and ended.

         Whenever the Trust intends to include any net capital gains or
other income taxable for Federal income tax purposes in any dividend on
Preferred Shares, the Trust may notify the auction agent of the amount to
be so included not later than the dividend payment date before the auction
date. Whenever the auction agent receives such notice from the Trust, it
will be required in turn to notify each Broker-Dealer, who, on or prior to
such auction date, will be required to notify its customers who are
beneficial owners and potential holders believed by it to be interested in
submitting an order in the auction to be held on such auction date. In the
event of such notice, the Trust will not be required to pay an additional
dividend with respect to such dividend.

Secondary Market Trading and Transfers of Preferred Shares

         The Broker-Dealers are expected to maintain a secondary trading
market in Preferred Shares outside of auctions, but are not obligated to do
so, and may discontinue such activity at any time. There can be no
assurance that any secondary trading market in Preferred Shares will
provide owners with liquidity of investment. The Preferred Shares will not
be listed on any stock exchange or traded on the NASDAQ Stock Market.

                                    34
<PAGE>

Investors who purchase shares in an auction for a special dividend period
in which the Bid Requirements, if any, do not require a bid to specify a
spread, should note that because the dividend rate on such shares will be
fixed for the length of such dividend period, the value of the shares may
fluctuate in response to changes in interest rates and may be more or less
than their original cost if sold on the open market in advance of the next
auction. Investors who purchase shares in an auction for a special dividend
period in which the Bid Requirements require a bid to specify a spread
should be aware that the value of their shares may also fluctuate and may
be more or less than their original cost if sold in the open market in
advance of the next auction, particularly if market spreads narrow or widen
in a manner unfavorable to such purchaser's position.

         A beneficial owner or an existing holder may sell, transfer or
otherwise dispose of Preferred Shares only in whole shares and only:

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

     o   to a Broker-Dealer; or

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

     o   a sale, transfer or other disposition of Preferred Shares from a
         customer of a Broker-Dealer who is listed on the records of that
         Broker-Dealer as the holder of such shares to that Broker-Dealer
         or another customer of that Broker-Dealer shall not be deemed to
         be a sale, transfer or other disposition if such Broker-Dealer
         remains the existing holder of the shares; and

     o   in the case of all transfers other than pursuant to auctions, the
         Broker-Dealer (or other person, if permitted by the Trust) to whom
         such transfer is made will advise the auction agent of such
         transfer.

                        DESCRIPTION OF COMMON SHARES

         In addition to the Preferred Shares, the Agreement and Declaration
of Trust dated as of August 19, 2002, as later amended and restated,
authorizes the issuance of an unlimited number of common shares of
beneficial interest, par value $.001 per share. Each common share has one
vote and is fully paid and non-assessable, except that the trustees shall
have the power to cause shareholders to pay expenses of the Trust by
setting off charges due from common shareholders from declared but unpaid
dividends or distributions owed by the common shareholders and/or by
reducing the number of common shares owned by each respective common
shareholder. So long as any Preferred Shares are outstanding, the holders
of common shares will not be entitled to receive any distributions from the
Trust unless all accrued dividends on Preferred Shares have been paid,
unless asset coverage (as defined in the Investment Company Act) with
respect to Preferred Shares would be at least 200% after giving effect to
the distributions and unless certain other requirements imposed by any
rating agencies rating the Preferred Shares have been met. All common
shares are equal as to dividends, assets and voting privileges and have no
conversion, preemptive or other subscription rights.

         The Trust's common shares are traded on the New York Stock
Exchange under the symbol "BYM".

        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.

                                    35
<PAGE>

         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, except pursuant to any automatic dividend
         reinvestment plan;

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

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

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

         To liquidate the Trust, the Trust's Agreement and Declaration of
Trust requires the favorable vote of a majority of the board of trustees
followed by the favorable vote of the holders of at least 75% of the
outstanding shares of each affected class or series of the Trust, voting
separately as a class or series, unless such liquidation has been approved

                                    36
<PAGE>

by at least 80% of the trustees, in which case "a majority of the
outstanding voting securities" (as defined in the Investment Company Act)
of the Trust shall be required.

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

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

                        REPURCHASE OF COMMON SHARES

         Shares of closed-end investment companies often trade at a
discount to their net asset values, and the Trust's common shares may also
trade at a discount to their net asset value. The market price of the
Trust's common shares will be determined by such factors as relative demand
for and supply of such common shares in the market, the Trust's net asset
value, general market and economic conditions and other factors beyond the
control of the Trust. Although the Trust's common shareholders will not
have the right to redeem their common shares, the Trust may take action to
repurchase common shares in the open market or make tender offers for its
common shares at their net asset value. This may have the effect of
reducing any market discount from net asset value. Any such repurchase may
cause the Trust to repurchase Preferred Shares to maintain asset coverage
requirements imposed by the Investment Company Act or any rating agency
rating the Preferred Shares at that time.

                                TAX MATTERS

         The following is a description of certain U.S. Federal income tax
consequences to a investor of acquiring, holding and disposing of Preferred
Shares of the Trust. The discussion reflects applicable tax laws of the
United States as of the date of this prospectus, which tax laws may be
changed or subject to new interpretations by the courts or the Internal
Revenue Service (the "IRS") retroactively or prospectively. No attempt is
made to present a detailed explanation of all U.S. Federal, state, local
and foreign tax concerns affecting the Trust and its shareholders, and the
discussion set forth herein does not constitute tax advice. Investors are
urged to consult their own tax advisers to determine the tax consequences
to them of investing in the Trust.

         The Trust intends to elect to be treated and to qualify to be
taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and intends to distribute
substantially all of its net income and gains to its shareholders.
Therefore, it is not expected that the Trust will be subject to any U.S.
Federal income tax. The Trust expects that substantially all of the
dividends it distributes to its common shareholders and holders of the
Preferred Shares will qualify as "exempt-interest dividends." A shareholder
treats an exempt-interest dividend as interest on state and local bonds
which is exempt from regular U.S. Federal income tax. In addition to
exempt-interest dividends, the Trust also may distribute to its
shareholders amounts that are treated as long-term capital gain or ordinary
income. The Trust will allocate tax-exempt interest income, long-term
capital gain and other taxable income, if any, among the common shares and
the Preferred Shares in proportion to total dividends paid to each class
for the year. The Trust intends to notify holders of Preferred Shares in
advance if it will allocate income to them that is not exempt from regular
U.S. Federal income tax. In certain circumstances, the Trust will make
payments to holders of Preferred Shares to offset the tax effects of the
taxable distribution. See "Description of Preferred Shares--Dividends and
Dividend Periods--Additional Dividends." The sale or other disposition of
common shares or Preferred Shares of the Trust will normally result in
capital gain or loss to shareholders. Both long-term and short-term capital
gains of corporations are taxed at the rates applicable to ordinary income.
For non-corporate taxpayers, short-term capital gains and ordinary income
are taxed currently at a maximum rate of 38.6%, while long-term capital
gains are generally taxed at a maximum rate of 20% (or 18% for capital
assets that have been held for more than five years and the holding period
of which began after December 31, 2000).* Because of certain limitations on

                                    37
<PAGE>

itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective rate of tax may be higher in certain
circumstances.

         Losses realized by a shareholder on the sale or exchange of shares
of the Trust held for six months or less are disallowed to the extent of
any exempt-interest dividends received with respect to such shares, and, if
not disallowed, such losses are treated as long-term capital losses to the
extent of any capital gain dividends received (or amounts credited as an
undistributed capital gain) with respect to such shares. Any loss realized
on a sale or exchange of shares of the Trust will be disallowed to the
extent those shares of the Trust are replaced by other substantially
identical shares within a period of 61 days beginning 30 days before and
ending 30 days after the date of disposition of the original shares. In
that event, the basis of the replacement shares of the Trust will be
adjusted to reflect the disallowed loss. This summary of tax consequences
is intended for general information.

State and Local Tax Matters

         While exempt-interest dividends are exempt from regular U.S.
Federal income tax, they may not be exempt from state or local income or
other taxes. Some states exempt from state income tax that portion of any
exempt-interest dividend that is derived from interest that a regulated
investment company receives on its holdings of securities of that state and
its political subdivisions and instrumentalities. Therefore, the Trust will
report annually to its shareholders the percentage of interest income the
Trust earned during the preceding year on tax-exempt obligations and the
Trust will indicate, on a state-by-state basis, the source of this income.
You should consult with your tax adviser about state and local tax matters.


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

*        The Economic Growth and Tax Relief Reconciliation Act of 2001,
         effective for taxable years beginning after December 31, 2000,
         creates a new 10 percent income tax bracket and reduces the tax
         rates applicable to ordinary income over a six year phase-in
         period. Beginning in the taxable year 2006, ordinary income will
         be subject to a 35% maximum rate, with approximately proportionate
         reductions in the other ordinary rates. You should consult a tax
         advisor concerning the tax consequences of your investment in the
         Trust. The foregoing discussion is subject to and qualified in its
         entirety by the discussion in "Tax Matters" in the Statement of
         Additional Information below.


                                    38
<PAGE>


                                UNDERWRITING

                 is acting as representative of the Underwriters named below.
Subject to the terms and conditions of the underwriting agreement dated the
date hereof, each Underwriter named below has severally agreed to purchase,
and the Trust has agreed to sell to such Underwriter, the number of
Preferred Shares set forth opposite the name of such Underwriter.


                                             Number of Shares
                             -------------------------------------------------
Name                             Series            Series           Series
----                             ------            ------           ------



         The underwriting agreement provides that the obligations of the
Underwriters to purchase the shares included in this offering are subject
to the approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to purchase all the Preferred
Shares if they purchase any shares. In the underwriting agreement, the
Trust, BlackRock Advisors and BlackRock Financial Management have agreed to
indemnify the Underwriters against certain liabilities, including
liabilities arising under the Securities Act of 1933, or to contribute
payments the Underwriters may be required to make for any of those
liabilities.

         The Underwriters propose to initially offer some of the Preferred
Shares directly to the public at the public offering price set forth on the
cover page of this prospectus and some of the Preferred Shares to certain
dealers at the public offering price less a concession not in excess of $
per share. The sales load the Trust will pay of $ per share is equal to 1%
of the initial offering price. After the initial public offering, the
Underwriters may change the public offering price and the concession.
Investors must pay for any Preferred Shares purchased in the public
offering on or before , 2002.

         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. The Underwriters
are active underwriters of, and dealers in, securities and act as market
makers in a number of such securities, and therefore can be expected to
engage in portfolio transactions with the Trust.

         The Trust anticipates that the Underwriters or one of their
respective affiliates may, from time to time, act in auctions as
Broker-Dealers and receive fees as set forth under "The Auction."

         The principal business address of

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

                CUSTODIAN, TRANSFER AGENT AND AUCTION AGENT

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

         The Bank of New York, 100 Church Street, New York, New York 10286,
a banking corporation organized under the laws of New York, is the auction
agent with respect to the Preferred Shares and acts as transfer agent,
registrar, dividend disbursing agent and redemption agent with respect to
such shares.



                                    39
<PAGE>


                               LEGAL OPINIONS

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

                           AVAILABLE INFORMATION

         The Trust is subject to the informational requirements of the
Securities Exchange Act of 1934 and the Investment Company Act and is
required to file reports, proxy statements and other information with the
SEC. These documents can be inspected and copied for a fee at the SEC's
public reference room, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the SEC's Chicago Regional Office, Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Reports,
proxy statements, and other information about the Trust can be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.

         This prospectus does not contain all of the information in the
Trust's registration statement, including amendments, exhibits, and
schedules. Statements in this prospectus about the contents of any contact
or other document are not necessarily complete and in each instance
reference is made to the copy of the contact or other document filed as an
exhibit to the registration statement, each such statement being qualified
in all respects by this reference.

         Additional information about the Trust and Preferred Shares can be
found in the Trust's registration statement (including amendments,
exhibits, and schedules) on Form N-2 filed with the SEC. The SEC maintains
a web site (http://www.sec.gov) that contains the Trust's registration
statement, other documents incorporated by reference, and other information
the Trust has filed electronically with the SEC, including proxy statements
and reports filed under the Securities Exchange Act of 1934.



                                    40
<PAGE>

<TABLE>
<CAPTION>

                            TABLE OF CONTENTS OF
                    STATEMENT OF ADDITIONAL INFORMATION

                                                                                                              Page
<S>                                                                                                              <C>
USE OF PROCEEDS ............................................................................................   B-2
INVESTMENT OBJECTIVE AND POLICIES ..........................................................................   B-2
INVESTMENT POLICIES AND TECHNIQUES .........................................................................   B-4
OTHER INVESTMENT POLICIES AND TECHNIQUES ...................................................................  B-12
MANAGEMENT OF THE TRUST ....................................................................................  B-15
PORTFOLIO TRANSACTIONS AND BROKERAGE .......................................................................  B-21
ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR PREFERRED SHARES ........................................  B-22
DESCRIPTION OF COMMON SHARES ...............................................................................  B-24
OTHER SHARES ...............................................................................................  B-24
REPURCHASE OF COMMON SHARES ................................................................................  B-24
TAX MATTERS ................................................................................................  B-25
EXPERTS ....................................................................................................  B-29
ADDITIONAL INFORMATION .....................................................................................  B-29
INDEPENDENT AUDITORS' REPORT ...............................................................................   F-1
FINANCIAL STATEMENTS .......................................................................................   F-2
APPENDIX A Statement of Preferences of Municipal Auction Rate Cumulative Preferred Shares ..................  AA-1
APPENDIX B Ratings of Investments ..........................................................................  BB-1
APPENDIX C General Characteristics and Risks of Strategic Transactions .....................................  CC-1
</TABLE>



                                    41
<PAGE>


                                 APPENDIX A

                       TAXABLE EQUIVALENT YIELD TABLE

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

<TABLE>
<CAPTION>

               2002-2003 FEDERAL TAXABLE VS. TAX-FREE YIELDS


                     JOINT RETURN        FEDERAL                            TAXABLE EQUIVALENT
SINGLE RETURN        BRACKET             TAX RATE                         ESTIMATE CURRENT RETURN
--------------       -------             --------

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


                                    A-1

<PAGE>



                                 $---------

                  BlackRock Insured Municipal Income Trust

             Municipal Auction Rate Cumulative Preferred Shares
                           [ ] Shares, Series [ ]
                           [ ] Shares, Series [ ]
                           [ ] Shares, Series [ ]

                                 PROSPECTUS

                                         , 2002



<PAGE>

                  BlackRock Insured Municipal IncomeTrust

                    STATEMENT OF ADDITIONAL INFORMATION

         BlackRock Insured Municipal Income Trust (the "Trust") is a
recently organized, diversified, closed-end management investment company.
This Statement of Additional Information relating to Preferred Shares does
not constitute a prospectus, but should be read in conjunction with the
prospectus relating hereto dated , 2002. This Statement of Additional
Information, which is not a prospectus, does not include all information
that a prospective investor should consider before purchasing Preferred
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 or the Statement attached as Appendix A.

<TABLE>
<CAPTION>

                             TABLE OF CONTENTS


                                                                                                              Page
<S>                                                                                                              <C>
USE OF PROCEEDS ............................................................................................   B-2
INVESTMENT OBJECTIVE AND POLICIES ..........................................................................   B-2
INVESTMENT POLICIES AND TECHNIQUES .........................................................................   B-4
OTHER INVESTMENT POLICIES AND TECHNIQUES ...................................................................  B-12
MANAGEMENT OF THE TRUST ....................................................................................  B-15
PORTFOLIO TRANSACTIONS AND BROKERAGE .......................................................................  B-21
ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR Preferred Shares ........................................  B-22
DESCRIPTION OF COMMON SHARES ...............................................................................  B-24
OTHER SHARES ...............................................................................................  B-24
REPURCHASE OF COMMON SHARES ................................................................................  B-24
TAX MATTERS ................................................................................................  B-25
EXPERTS ....................................................................................................  B-29
ADDITIONAL INFORMATION .....................................................................................  B-29
INDEPENDENT AUDITORS' REPORT ...............................................................................   F-1
FINANCIAL STATEMENTS .......................................................................................   F-2
APPENDIX A Statement of Preferences of Municipal Auction Rate Cumulative Preferred Shares .................   AA-1
APPENDIX B Ratings of Investments ..........................................................................  BB-1
APPENDIX C General Characteristics and Risks of Strategic Transactions .....................................  CC-1

                             This Statement of Additional Information is dated , 2002.
</TABLE>


                                    B-1
<PAGE>


                              USE OF PROCEEDS

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

                     INVESTMENT OBJECTIVE AND POLICIES

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

                                    B-2
<PAGE>

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

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

         Under the Investment Company Act, the Trust may invest up to 10%
of its total assets in the aggregate in shares of other investment
companies and up to 5% of its total assets in any one investment company,
provided the investment does not represent more than 3% of the voting stock
of the acquired investment company at the time such shares are purchased.
As a shareholder in any investment company, the Trust will bear its ratable
share of that investment company's expenses, and will remain subject to
payment of the Trust's advisory fees and other expenses with respect to
assets so invested. Holders of Preferred 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

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

                                    B-3
<PAGE>

         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 and no investment represents ownership of 10% or more of the
voting securities of such 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
Preferred 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")
and/or by S&P ("AAA"), but no assurance can be given that such ratings will
be obtained, or if obtained, maintained. 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 increase the
recipient's liability for the AMT. For corporate shareholders, the Trust'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 Trust 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.

                                    B-4
<PAGE>

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

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

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

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

                                    B-5
<PAGE>

         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
Trust 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 Trust. Any income derived
from the ownership or operation of such assets may not be tax-exempt. In
addition, the Trust'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 Trust may exercise its rights by
taking possession of such assets, because as a regulated investment
company, the Trust 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 B 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 of 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 time period
has lapsed (which may be 30 days or more after it has been noticed 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.

                                    B-6
<PAGE>

         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 Advisors, 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 nor the Advisors have 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.

         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.

                                    B-7
<PAGE>

          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 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 Tennessee
         Valley Authority, whose securities are supported by the right of
         the agency to borrow from the U.S. Treasury; (c) the Federal
         National Mortgage Association, whose securities are supported by
         the discretionary authority of the U.S. Government to purchase
         certain obligations of the agency or instrumentality; and (d) the
         Student Loan Marketing Association, whose securities are supported
         only by its credit. While the U.S. Government provides financial
         support to such U.S. Government-sponsored agencies or
         instrumentalities, no assurance can be given that it always will
         do so since it is not so obligated by law. The U.S. Government,
         its agencies and instrumentalities do not guarantee the market
         value of their securities. Consequently, the value of such
         securities may fluctuate.

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

                  (3) Repurchase agreements, which involve purchases of
         debt securities. At the time the Trust purchases securities
         pursuant to a repurchase agreement, it simultaneously agrees to
         resell and redeliver such securities to the seller, who also
         simultaneously agrees to buy back the securities at a fixed price
         and time. This assures a predetermined yield for the Trust during
         its holding period, since the resale price is always greater than
         the purchase price and reflects an agreed-upon market rate. Such
         actions afford an opportunity for the Trust to invest temporarily
         available cash. The Trust may enter into repurchase agreements
         only with respect to obligations of the U.S. Government, its
         agencies or instrumentalities; certificates of deposit; or
         bankers' acceptances in which the Trust may invest. Repurchase
         agreements may be considered loans to the seller, collateralized
         by the underlying securities. The risk to the Trust is limited to
         the ability of the seller to pay the agreed-upon sum on the
         repurchase date; in the event of default, the repurchase agreement
         provides that the Trust is entitled to sell the underlying
         collateral. If the value of the collateral declines after the
         agreement is entered into, and if the seller defaults under a

                                    B-8
<PAGE>

         repurchase agreement when the value of the underlying collateral
         is less than the repurchase price, the Trust could incur a loss of
         both principal and interest. BlackRock monitors the value of the
         collateral at the time the action is entered into and at all times
         during the term of the repurchase agreement. BlackRock does so in
         an effort to determine that the value of the collateral always
         equals or exceeds the agreed-upon repurchase price to be paid to
         the Trust. If the seller were to be subject to a Federal
         bankruptcy proceeding, the ability of the Trust to liquidate the
         collateral could be delayed or impaired because of certain
         provisions of the bankruptcy laws.

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

Short-Term Tax-Exempt Fixed Income Securities

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

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

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

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

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

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

         Tax-Exempt Commercial Paper ("municipal paper") represents very
short-term unsecured, negotiable promissory notes, issued by states,
municipalities and their agencies. Payment of principal and interest on
issues of municipal paper may be made from various sources, to the extent
the funds are available therefrom. Maturities on municipal paper generally

                                    B-9
<PAGE>

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 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 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

                                   B-10
<PAGE>

statistical rating organization at the time of entering into such
transaction. If there is a default by the other party to such a
transaction, the Trust will have contractual remedies pursuant to the
agreements related to the transaction.

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

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

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

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

         Appendix C contains further information about the characteristics,
risks and possible benefits of 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)

                                   B-11
<PAGE>

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

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

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

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

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

                  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

                                   B-12
<PAGE>

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

Borrowing

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

Reverse Repurchase Agreements

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

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

Repurchase Agreements

         As temporary investments, the Trust may invest in repurchase
agreements. A repurchase agreement is a contractual agreement whereby the
seller of securities (U.S. Government securities or municipal bonds) agrees
to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed-upon repurchase price determines the
yield during the Trust's holding period. Repurchase agreements are
considered to be loans collateralized by the underlying security that is
the subject of the repurchase contract. Income generated from transactions
in repurchase agreements will be taxable. See "Tax Matters" for information
relating to the allocation of taxable income between common shares and
Preferred Shares. 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

                                   B-13
<PAGE>

the time the transaction is entered into always equals or exceeds the
agreed-upon repurchase price, if the value of the collateral declines there
is a risk of loss of both principal and interest. In the event of default,
the collateral may be sold but the Trust might incur a loss if the value of
the collateral declines, and might incur disposition costs or experience
delays in connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the
security, realization upon the collateral by the Trust may be delayed or
limited. BlackRock will monitor the value of the collateral at the time the
transaction is entered into and at all times subsequent during the term of
the repurchase agreement in an effort to determine that such value always
equals or exceeds the agreed-upon repurchase price. In the event the value
of the collateral declines below the repurchase price, BlackRock will
demand additional collateral from the issuer to increase the value of the
collateral to at least that of the repurchase price, including interest.

Zero Coupon Bonds

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

Lending of Securities

         The Trust may lend its portfolio securities to banks or dealers
which meet the creditworthiness standards established by the board of
trustees of the Trust ("Qualified Institutions"). By lending its portfolio
securities, the Trust attempts to increase its income through the receipt
of interest on the loan. Any gain or loss in the market price of the
securities loaned that may occur during the term of the loan will be for
the account of the Trust. The Trust may lend its portfolio securities so
long as the terms and the structure of such loans are not inconsistent with
the 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 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 value of such loans exceeds 33-1/3% of the value of
the Trust's total assets (including such loans). Loan arrangements made by
the Trust will comply with all other applicable regulatory requirements,
including the rules of the New York Stock Exchange, which rules presently
require the borrower, after notice, to redeliver the securities within the
normal settlement time of five business days. All relevant facts and
circumstances, including the creditworthiness of the Qualified Institution,
will be monitored by BlackRock and will be considered in making decisions
with respect to lending of securities, subject to review by the Trust's
board of trustees.

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

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

                                   B-14
<PAGE>

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

                          MANAGEMENT OF THE TRUST

Investment Management Agreement

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

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

         The investment management agreement and certain scheduled waivers
of investment advisory fees were approved by the Trust's board of trustees
at an in-person meeting of the board of trustees held on 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 of BlackRock Advisors of its relationship with the Trust,
economies of scale and comparative fees and expense ratios.

         The investment management agreement and the waivers of management
fees were approved by the sole common shareholder of the Trust as of
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 (as such term is defined in the Investment Company Act) and (2)
by the vote of a majority of the trustees who are not parties to the
investment management agreement or interested persons (as such term is
defined in the Investment Company Act) of any such party, cast in person at
a meeting called for the purpose of voting on such approval. The investment
management agreement may be terminated as a whole at any time by the Trust,
without the payment of any penalty, upon the vote of a majority of the
Trust's board of trustees or a majority of the outstanding voting
securities of the Trust or by BlackRock Advisors, on 60 days' written
notice by either party to the other. The investment management agreement
will terminate automatically in the event of its assignment (as such term
is defined in the Investment Company Act and the rules thereunder).

                                   B-15
<PAGE>

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 Trust, or BlackRock Financial Management, on 60 days'
written notice by any party to the other (which may be waived by the
non-terminating party). The sub-investment advisory agreement will also
terminate automatically in the event of its assignment (as such term is
defined in the Investment Company Act and the rules thereunder).

Trustees and Officers

         The officers of the Trust manage its day-to-day operations. The
officers are directly responsible to the Trust's board of trustees which
sets broad policies for the Trust and chooses its officers. 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.

                                   B-16
<PAGE>

<TABLE>
<CAPTION>

                                                                     Number of
                                                                   Portfolios in
                                                                   Fund Complex
Name, Address, Age     Term of     Principal Occupation During The  Overseen by
and Position(s)       Office and      Past Five Years and Other     Trustee or
Held with             Length of             Affiliations            Nominee for         Other Directorships
Registrant           Time Served                                      Trustee             held by Trustee

INDEPENDENT
TRUSTEES:
<S>                 <C>                                               <C>
Andrew F. Brimmer   3 years(1)(2)  President of Brimmer &               44
P.O. Box 4546                      Company, Inc., a Washington,                  Director of CarrAmerica Realty
New York, NY 10163                 D.C.-based economic and                       Corporation and Borg-Warner
Age: 76                            financial consulting firm.                    Automotive. Formerly Director of
Trustee                            Wilmer D. Barrett Professor of                AirBorne Express, BankAmerica
                                   Economics, University of                      Corporation (Bank of America),
                                   Massachusetts - Amherst.                      Bell South Corporation, College
                                   Formerly member of the Board                  Retirement Equities Fund
                                   of Governors of the Federal                   (Trustee), Commodity Exchange,
                                   Reserve System.  Former                       Inc. (Public Governor)
                                   Chairman, District of Columbia                Connecticut Mutual Life Insurance
                                   Financial Control Board.  Lead                Company, E.I. Dupont de Nemours &
                                   Trustee and Chairman of the                   Company, Equitable Life Assurance
                                   Audit Committee of each of the                Society of the United States,
                                   closed-end trusts of which                    Gannett Company, Mercedes-Benz of
                                   BlackRock Advisors Inc. acts                  North America, MNC Financial
                                   as investment advisor.                        Corporation (American Security
                                                                                 Bank), NMC Capital Management,
                                                                                 Navistar International
                                                                                 Corporation, PHH Corp. and UAL
                                                                                 Corporation (United Airlines).
Richard E. Cavanagh 3 years(1)(2)                                       44       Trustee Emeritus, Wesleyan
P.O. Box 4546                      President and Chief Executive                 University, Trustee: Drucker
New York, NY 10163                 Officer of The Conference                     Foundation, Airplanes Group,
Age: 56                            Board, Inc., a leading global                 Aircraft Finance Trust (AFT) and
Trustee                            business membership                           Education Testing Service (ETS).
                                   organization, from                            Director, Arch Chemicals, Fremont
                                   1995-present. Former Executive                Group and The Guardian Life
                                   Dean of the John F. Kennedy                   Insurance Company of America.
                                   School of Government at
                                   Harvard University from
                                   1988-1995. Acting Director,
                                   Harvard Center for Business
                                   and Government(1991-1993).
                                   Formerly Partner (principal)
                                   of McKinsey & Company, Inc.
                                   (1980-1988). Former Executive
                                   Director of Federal Cash
                                   Management, White House Office
                                   of Management and Budget
                                   (1977-1979). Co-author, THE
                                   WINNING PERFORMANCE (best
                                   selling management book
                                   published in 13 national
                                   editions).
Kent Dixon          3 years(1)(2)                                       44       Former Director of ISFA (the
P.O. Box 4546                      Consultant/Investor. Former                   owner of INVEST, a national
New York, NY 10163                 President and Chief Executive                 securities brokerage service
Age: 64                            Officer of Empire Federal                     designed for banks and thrift
Trustee                            Savings Bank of America and                   institutions).
                                   Banc PLUS Savings Association, former
                                   Chairman of the Board, President and
                                   Chief Executive Officer of Northeast
                                   Savings.
Frank J. Fabozzi    3 years(1)(2)                                       44       Director, Guardian Mutual Funds
P.O. Box 4546                      Consultant. Editor of THE                     Group.
New York, NY 10163                 JOURNAL OF PORTFOLIO
Age: 54                            MANAGEMENT and Adjunct
Trustee                            Professor of Finance at the
                                   School 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.

                                   B-17
<PAGE>

James Clayburn      3 years(1)(2)                                       44       Director, Jacobs Engineering
LaForce, Jr.                       Dean Emeritus of The John E.                  Group, Inc., Payden & Rygel
P.O. Box 4546                      Anderson Graduate School of                   Investment Trust, Provident
New York, NY 10163                 Management, University of                     Investment Counsel Funds, Timken
Age: 73                            California since July 1, 1993.                Company and Trust for Investment
Trustee                            Acting Dean of The School of                  Managers.
                                   Business, Hong Kong University
                                   of Science and Technology
                                   1990-1993. from 1978 to
                                   September 1993, Dean of The
                                   John E. Anderson Graduate
                                   School of Management,
                                   University of California.
Walter F. Mondale   3 years(1)(2)                                       44       Director, Northwest Airlines
P.O. Box 4546                      Partner, Dorsey & Whitney, a                  Corp., UnitedHealth Group,
New York, NY 10163                 law firm (December                            Formerly, Director, RBC Dain
Age: 74                            1996-present, September                       Rauscher, Inc.
Trustee                            1987-August 1993). Formerly
                                   U.S. Ambassador to Japan
                                   (1993-1996). Formerly, Vice
                                   President of the United
                                   States, U.S. Senator and
                                   Attorney General of the State
                                   of Minnesota. 1984 Democratic
                                   Nominee for President of the
                                   United States.
INTERESTED
TRUSTEES
Robert S. Kapito    3 years (1)(2)                                      44       President of the Board of
Age: 45                                                                          Directors of Periwinkle National
Trustee and                        Vice Chairman of BlackRock,                   Theatre, a national non-profit
President                          Inc. Head of BlackRock's                      effort to help disadvantaged
                                   Portfolio Management Group, a                 youth, and Chairman of the Hope &
                                   member of the Management                      Heroes/Babies & Children's Cancer
                                   Committee, the Investment                     Fund.
                                   Strategy Group, the Fixed
                                   Income and Global Equity
                                   Investment Strategy Group.
                                   Formerly, Vice President of
                                   the First Boston Corporation,
                                   head of its Mortgage Capital
                                   Markets Group.  Currently,
                                   President and Trustee of each
                                   of the closed-end trusts which
                                   BlackRock Advisors, Inc. acts
                                   as investment advisor.
Ralph L.            3 years(1)(2)  Director since 1999 and              44       Chairman and President of the
Schlosstein*                       President of BlackRock, Inc.                  BlackRock Provident Institutional
Age: 51                            since its formation in 1998                   Funds. Director of several of
Trustee and                        and of BlackRock, Inc.'s                      BlackRock's alternative
President                          predecessor entities since                    investment vehicles. Currently, a
                                   1988. Member of BlackRock's                   Member of the Visiting Board of
                                   Management Committee and                      Overseers of the John F. Kennedy
                                   Investment Strategy Group.                    School of Government at Harvard
                                   Formerly, Managing Director of                University, the Financial
                                   Lehman Brothers, Inc. and                     Institutions Center Board of the
                                   Co-head of its Mortgage and                   Wharton School of the University
                                   Savings Institutions Group.                   of Pennsylvania, a trustee of
                                   Currently, Chairman and                       Trinity School in New York City
                                   Trustee of each of the                        and a Trustee of New Visions for
                                   closed-end trusts  which                      Public Education in New York
                                   BlackRock Advisors, Inc. acts                 Council. Formerly, a Director of
                                   as investment advisor.                        Pulte Corporation and a Member of
                                                                                 Fannie Mae's Advisory
                                                                                 [               ].

(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.
</TABLE>


                                   B-18
<PAGE>


<TABLE>
<CAPTION>

                                                                Principal Occupation During the Past
Name and Age                       Title                          Five Years and Other Affiliations


OFFICERS:
<S>                      <C>                    <C>
Anne F. Ackerley          Secretary               Managing Director of BlackRock, Inc. since 2000. Formerly First
Age: 40                                           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 its predecessor
Age: 54                                           entities.

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

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

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



<TABLE>
<CAPTION>

                                                                   Aggregate Dollar Range of Equity Securities
                                                                     in all Registered Investment Companies
                                    Dollar Range of Equity             Overseen by Directors in the Family
Name of Director                  Securities in the Trust(*)                 Investment Companies(*)

<S>                                           <C>                                  <C>
Andrew F. Brimmer                             $0                                   $1-$10,000
Richard E. Cavanagh                           $0                                $50,001-$100,000
Kent Dixon                                    $0                                  over $100,000
Frank J. Fabozzi                              $0                                   $1-$10,000
James Clayburn La Force, Jr.                  $0                                $50,001-$100,000
Robert S. Kapito                              $0                                  over $100,000
Walter F. Mondale                             $0                                $50,001-$100,000
Ralph L. Schlosstein                          $0                                $50,001-$100,000

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

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-19
<PAGE>



<TABLE>
<CAPTION>

                                                                                    Total Compensation from the
                                                  Estimated Compensation From       Trust and Fund Complex Paid
Name of Board Member                                         Trust                      to Board Member(1)

<S>                                                        <C>                              <C>
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)

(1)      Represents the total compensation earned by such person during the
         calendar year ended December 31, 2001 from the 30 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, Andrew F. Brimmer will be compensated in the
         amount of $40,000 per annum by the Fund Complex to be allocated
         among the funds in the Fund Complex based on each fund's relative
         net assets.

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

(5)      In 2002, it is anticipated that Dr. Brimmer's compensation will be
         $200,000.
</TABLE>

         Each Independent Trustee 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. The total annual aggregate compensation for each
Independent Trustee 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 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, the amount of the Independent Trustee'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 of the funds in the Fund
Complex 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.

         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 L. Schlosstein and
Robert S. 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. Cavanagh, Brimmer and
Dixon. The Audit Committee acts according to the Audit Committee charter.
Dr. Andrew F. Brimmer has been appointed as Chairman of the Audit
Committee. The Audit Committee is responsible for reviewing and evaluating
issues related to the accounting and financial reporting policies of the
Trust, overseeing the quality and objectivity of the Trust's financial
statements and the audit thereof and to act as a liaison between the board
of trustees and the Trust's independent accountants.

                                   B-20
<PAGE>

         The Governance Committee consists of Messrs. Brimmer, Cavanagh,
Dixon, Fabozzi, La Force, Jr. and Mondale. The Governance Committee acts in
accordance with the Governance Committee charter. Dr. Andrew F. Brimmer has
been appointed as Chairman of the Governance Committee. The Governance
Committee consists of the Independent Trustees and performs those functions
enumerated in the Governance Committee Charter including, but not limited
to, making nominations for the appointment or election of independent
Trustees, reviewing Independent Trustee compensation, retirement policies
and personnel training policies and administrating the provisions of the
Code of Ethics applicable to the Independent Trustees.

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

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

Codes Of Ethics

         The Trust, the Advisor, the Sub-Advisor and the affiliate
underwriters have adopted codes of ethics under Rule 17j-1 of the
Investment Company Act. These codes permit personnel subject to the codes
to invest in securities, including securities that may be purchased or held
by the Trust. These codes can be reviewed and copied at the Securities 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 Securities and Exchange Commission at 1-202-942-8090. The code of
ethics are available on the EDGAR Database on the Securities and Exchange
Commission's web site (http://www.sec.gov), and copies of these codes may
be obtained, after paying a duplicating fee, by electronic request at the
following e-mail address: publicinfo@sec.gov, or by writing the Security
and Exchange Commission's Public Reference Section, 1100 L Street NW,
Washington, D.C. 20549-0102.

Investment Advisor And Sub-Advisor

         BlackRock Advisors acts as the Trust's investment advisor.
BlackRock Financial Management acts as the Trust's sub-advisor. BlackRock
Advisors, located at 100 Bellevue Parkway, Wilmington, Delaware 19809, and
BlackRock Financial Management, located at 40 East 52nd Street, New York,
New York 10022, are wholly owned subsidiaries of BlackRock, Inc., which is
one of the largest publicly traded investment management firms in the
United States with approximately $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 FundsSM and BlackRock Provident Institutional Funds. In addition,
BlackRock provides risk management and investment system services to
institutional investors under the BlackRock Solutions SM name.

         The BlackRock organization has over 13 years of experience
managing closed-end products and currently advises a closed-end family of
44 funds with approximately $11 billion in assets as of October 31, 2002.
BlackRock has 35 leveraged municipal closed-end funds and six open-end
municipal funds under management as of October 31, 2002. As of September
30, 2002, BlackRock managed 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 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.

                                   B-21
<PAGE>

Securities purchased in underwritten offerings generally include, in the
price, a fixed amount of compensation for the manager(s), underwriter(s)
and dealer(s). The Trust may also purchase certain money market instruments
directly from an issuer, in which case no commissions or discounts are
paid. Purchases and sales of debt securities on a stock exchange are
effected through brokers who charge a commission for their services.

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

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

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

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

                     ADDITIONAL INFORMATION CONCERNING
                     THE AUCTIONS FOR PREFERRED SHARES

General

         Securities Depository. The Depository Trust Company ("DTC") will
act as the Securities Depository with respect to each series of Preferred
Shares. One certificate for all of the shares of each series will be
registered in the name of The Bank of New York, as nominee of the
Securities Depository. Such certificate will bear a legend to the effect
that such certificate is issued subject to the provisions restricting
transfers of shares of Preferred Shares contained in the Statement. The
Trust will also issue stop-transfer instructions to the transfer agent for
Preferred Shares. Prior to the commencement of the right of holders of
Preferred Shares to elect a majority of the Trust's trustees, as described

                                   B-22
<PAGE>

under "Description of Preferred Shares - Voting Rights" in the prospectus,
The Bank of New York will be the holder of record of each series of
Preferred Shares and owners of such shares will not be entitled to receive
certificates representing their ownership interest in such shares.

         DTC, a New York-chartered limited purpose trust company, performs
services for its participants, some of whom (and/or their representatives)
own DTC. DTC maintains lists of its participants and will maintain the
positions (ownership interests) held by each such participant in shares of
Preferred Shares, whether for its own account or as a nominee for another
person. Additional information concerning DTC and the DTC depository system
is included as an Exhibit to the Registration Statement of which this
Statement of Additional Information forms a part.

Concerning the Auction Agent

         The auction agent will act as agent for the Trust in connection
with Auctions. In the absence of bad faith or negligence on its part, the
auction agent will not be liable for any action taken, suffered, or omitted
or for any error of judgment made by it in the performance of its duties
under the auction agency agreement between the Trust and the auction agent
and will not be liable for any error of judgment made in good faith unless
the auction agent will have been negligent in ascertaining the pertinent
facts.

         The auction agent may rely upon, as evidence of the identities of
the holders of Preferred Shares, the auction agent's registry of holders,
the results of auctions and notices from any Broker-Dealer (or other
person, if permitted by the Trust) with respect to transfers described
under "The Auction--Secondary Market Trading and Transfers of Preferred
Shares" in the prospectus and notices from the Trust. The auction agent is
not required to accept any such notice for an auction unless it is received
by the auction agent by 3:00 p.m., New York City time, on the business day
preceding such auction.

         The auction agent may terminate its auction agency agreement with
the Trust upon notice to the Trust on a date no earlier than 45 days after
such notice. If the auction agent should resign, the Trust will use its
best efforts to enter into an agreement with a successor auction agent
containing substantially the same terms and conditions as the auction
agency agreement. The Trust may remove the auction agent provided that
prior to such removal the Trust shall have entered into such an agreement
with a successor auction agent.

Broker-Dealers

         The auction agent after each auction for shares of each series of
Preferred Shares will pay to each Broker-Dealer, from funds provided by the
Trust, a service charge at the annual rate of 1/4 of 1% in the case of any
auction immediately preceding a dividend period of less than one year, or a
percentage agreed to by the Trust and the Broker-Dealers in the case of any
auction immediately preceding a dividend period of one year or longer, of
the purchase price of the series of Preferred Shares placed by such
Broker-Dealer at such auction. For the purposes of the preceding sentence,
Preferred Shares will be placed by a Broker-Dealer if such shares were (a)
the subject of hold orders deemed to have been submitted to the auction
agent by the Broker-Dealer and were acquired by such Broker-Dealer for its
own account or were acquired by such Broker-Dealer for its customers who
are beneficial owners or (b) the subject of an order submitted by such
Broker-Dealer that is (i) a submitted bid of an existing holder that
resulted in the existing holder continuing to hold such shares as a result
of the auction or (ii) a submitted bid of a potential holder that resulted
in the potential holder purchasing such shares as a result of the auction
or (iii) a valid hold order.

         The Trust may request the auction agent to terminate one or more
Broker-Dealer agreements at any time, provided that at least one
Broker-Dealer agreement is in effect after such termination.

         The Broker-Dealer agreement provides that a Broker-Dealer (other
than an affiliate of the Trust) may submit orders in auctions for its own
account, unless the Trust notifies all Broker-Dealers that they may no
longer do so, in which case Broker-Dealers may continue to submit hold
orders and sell orders for their own accounts. Any Broker-Dealer that is an
affiliate of the Trust may submit orders in auctions, but only if such
orders are not for its own account. If a Broker-Dealer submits an order for
its own account in any auction, it might have an advantage over other

                                   B-23
<PAGE>

bidders because it would have knowledge of all orders submitted by it in
that auction; such Broker-Dealer, however, would not have knowledge of
orders submitted by other Broker-Dealers in that auction.

                        DESCRIPTION OF COMMON SHARES

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

                                OTHER SHARES

         The board of trustees (subject to applicable law and the Trust's
Agreement and Declaration of Trust) may authorize an offering, without the
approval of the holders of either common shares or 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 common shares or to make a tender offer. Interest
on any borrowings to finance share repurchase transactions or the
accumulation of cash by the Trust in anticipation of share repurchases or
tenders will reduce the Trust's net income. Any share repurchase, tender
offer or borrowing that might be approved by the Trust's board of trustees
would have to comply with the Securities Exchange Act of 1934, as amended,
the Investment Company Act and the rules and regulations thereunder.

         Although the decision to take action in response to a discount
from net asset value will be made by the board of trustees at the time it
considers such issue, it is the board's present policy, which may be
changed by the board of trustees, not to authorize repurchases of common
shares or a tender offer for such shares if: (1) such transactions, if
consummated, would (a) result in the delisting of the common shares from
the 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 consistent with the Trust's

                                   B-24
<PAGE>

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 common shares trading at a price equal to their net asset
value. Nevertheless, the fact that the Trust's common 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
Preferred Shares of the Trust. The discussion reflects applicable tax laws
of the United States as of the date of this prospectus, which tax laws may
be changed or subject to new interpretations by the courts or the Internal
Revenue Service (the "IRS") retroactively or prospectively.

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

         In order to qualify to be taxed as a regulated investment company,
the Trust must satisfy certain requirements relating to the source of its
income, diversification of its assets, and distributions of its income to
its shareholders. First, the Trust must among other things: (a) derive at
least 90% of its annual gross income (including tax-exempt interest) from
dividends, interest, payments with respect to certain securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies, or other income (including but not limited to gains from
options, futures and forward contracts) derived with respect to its
business of investing in such stock, securities or currencies (the "90%
gross income test"), and (b) diversify its holdings so that, at the end of
each quarter of its taxable year (i) at least 50% of the market value of
its total assets is represented by cash, cash items, U.S. Government
securities, securities of other regulated investment companies, and other
securities, with these other securities limited, with respect to any one
issuer, to an amount not greater in value than 5% of the Trust's total
assets, and to not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the market value of the total
assets is invested in the securities of any one issuer (other than U.S.
Government securities or securities of other regulated investment
companies) or two or more issuers controlled by the Trust and engaged in
the same, similar or related trades or businesses. In meeting these
requirements of Subchapter M of the Code, the Trust may be restricted in
the utilization of certain of the investment techniques described above and
in the prospectus.

                                   B-25
<PAGE>

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

         If in any year the Trust should fail to qualify under Subchapter M
for tax treatment as a regulated investment company, the Trust would incur
a regular Federal corporate income tax upon its taxable income for that
year, and distributions to its shareholders would be taxable to such
holders as ordinary income to the extent of the earnings and profits of the
Trust. In addition, a regulated investment company that fails to
distribute, by the close of each calendar year, at least an amount equal to
the sum of (i) 98% of its ordinary taxable income for such year, (ii) 98%
of its capital gain net income (adjusted for certain ordinary losses) for a
one year period generally ending October 31 of such year, and (iii) 100% of
all ordinary income and capital gains for previous years that were not
distributed and on which the Trust paid no Federal income tax, is liable
for a nondeductible 4% excise tax on the portion of the undistributed
amount of such income that is less than the required amount for such
distributions. To avoid the imposition of this excise tax, the Trust
intends, to the extent possible, to make the required distributions of its
ordinary taxable income, if any, and its capital gain net income, by the
close of each calendar year.

         Certain of the Trust's investment practices are subject to special
provisions of the Code that, among other things, may defer the use of
certain deductions or losses of the Trust and affect the holding period of
securities held by the Trust and the character of the gains or losses
realized by the Trust. These provisions may also require the Trust to
recognize income or gain without receiving cash with which to make
distributions in the amounts necessary to satisfy the requirements for
maintaining regulated investment company status and for avoiding income and
excise taxes. The Trust will monitor its transactions and may make certain
tax elections in order to mitigate the effect of these rules and prevent
disqualification of the Trust as a regulated investment company.

         The Trust intends to invest a sufficient amount of its assets in
tax-exempt municipal bonds to permit payment of "exempt-interest"
dividends, as defined in the Code, on its common shares and Preferred
Shares. Under the Code, if at the close of each quarter of its taxable
year, at least 50% of the value of the total assets of the Trust consists
of municipal bonds, the Trust will be qualified to pay exempt-interest
dividends to its shareholders. Exempt-interest dividends are dividends or
any part thereof (other than a capital gain dividend) paid by the Trust
which are attributable to interest on municipal bonds and are so designated
by the Trust. Exempt-interest dividends will be exempt from Federal income
tax, subject to the possible application of the U.S. Federal alternative
minimum tax. Insurance proceeds received by the Trust under any insurance
policies in respect of scheduled interest payments on defaulted municipal
bonds, as described herein, will generally be excludable from gross income
under Section 103(a) of the Code. See "Investment Policies and Techniques"
above. Gains of the Trust that are attributable to accrued market discount
on certain municipal obligations are treated as ordinary income.
Distributions by the Trust of investment company taxable income, if any,
will be taxable to its shareholders as ordinary income whether received in
cash or additional shares. Distributions by the Trust of net capital gain,
if any, are taxable as long-term capital gain, regardless of the length of

                                   B-26
<PAGE>

time the shareholder has owned common shares or Preferred Shares and
whether such distributions are made in cash or additional shares. The
amount of taxable income allocable to the Trust's Preferred Shares will
depend upon the amount of such income realized by the Trust, but is not
generally expected to be significant. Except for dividends paid on
Preferred Shares which include an allocable portion of any net capital gain
or other taxable income, the Trust anticipates that all other dividends
paid on its Preferred Shares will constitute exempt-interest dividends for
U.S. Federal income tax purposes. Distributions, if any, in excess of the
Trust's earnings and profits will first reduce the adjusted tax basis of a
shareholder's shares, and after the basis has been reduced to zero, will
constitute capital gains to the shareholder (assuming the shares are held
as a capital asset). As long as the Trust qualifies as a regulated
investment company under the Code, no part of its distributions to
shareholders will qualify for the dividends received deduction for
corporations. The interest on private activity bonds in most instances is
not tax-exempt to a person who is a "substantial user" of a facility
financed by such bonds or a "related person" of such "substantial user." As
a result, the Trust may not be an appropriate investment for shareholders
who are considered either a "substantial user" or a "related person" within
the meaning of the Code. In general, a "substantial user" includes a
non-exempt person who regularly uses a part of such facility in his trade
or business. "Related persons" include certain natural persons, affiliated
corporations, a partnership and its partners and an S corporation and its
shareholders. The foregoing is not a complete description of all of the
provisions of the Code covering the definitions of "substantial user" and
"related person."

         U.S. Federal tax law imposes an alternative minimum tax with
respect to both corporations and individuals. Interest on certain municipal
obligations, such as bonds issued to make loans for housing purposes or to
private entities (but not to certain tax-exempt organizations such as
universities and non-profit hospitals) ("private activity bonds") is
included as an item of tax preference in determining the amount of a
taxpayer's alternative minimum taxable income. The Trust will not invest in
such "private activity bonds." For certain corporations, alternative
minimum taxable income is increased by 75% of the difference between an
alternative measure of income ("adjusted current earnings") and the amount
otherwise determined to be the alternative minimum taxable income. Interest
on municipal obligations, and therefore all exempt-interest dividends
received from the Trust, are included in calculating a corporation's
adjusted current earnings. Certain small corporations are not subject to
the alternative minimum tax.

         Tax-exempt income, including exempt-interest dividends paid by the
Trust, is taken into account in calculating the amount of Social Security
and railroad retirement benefits that may be subject to Federal income tax.

         The IRS requires that a regulated investment company that has two
or more classes of shares designate to each such class proportionate
amounts of each type of its income for each tax year based upon the
percentage of total dividends distributed to each class for such year. Each
year the Trust intends to allocate, to the fullest extent practicable, net
tax-exempt interest, net capital gain and other taxable income, if any,
between its common shares and preferred shares, including the Preferred
Shares, in proportion to the total dividends paid to each class with
respect to such year. To the extent permitted under applicable law, the
Trust reserves the right to make special allocations of income within a
class, consistent with the objectives of the Trust. The Trust may, at its
election, notify the auction agent of the amount of any net capital gain or
other income taxable for Federal income tax purposes to be included in any
dividend on shares of its Preferred Shares prior to the Auction
establishing the Applicable Rate for such dividend. If the Trust allocates
any net capital gain or other taxable income for U.S. Federal income tax
purposes to its Preferred Shares without having given advance notice
thereof as described above, the Trust generally will be required to make
payments to owners of its Preferred Shares to which such allocation was
made in order to offset the U.S. Federal income tax effect of the taxable
income so allocated as described under "Description of Preferred
Shares--Additional Dividends" in the prospectus.

         If at any time when the Trust's Preferred Shares are outstanding,
the Trust fails to meet the Preferred Shares Basic Maintenance Amount or
the Investment Company Act Preferred Shares Asset Coverage, the Trust will
be required to suspend distributions to holders of its common shares until
such maintenance amount or asset coverage, as the case may be, is restored.
See "Description of Preferred Shares--Dividend and Dividend
Periods--Restrictions on Dividends and Other Distributions" in the
prospectus. This may prevent the Trust from distributing at least an amount
equal to the sum of 90% of its investment company taxable income
(determined without regard to the deduction for dividends paid) and 90% of
its net tax-exempt income, and may therefore jeopardize the Trust's
qualification for taxation as a regulated investment company or cause the
Trust to incur a tax liability or a non-deductible 4% excise tax on the
undistributed taxable income (including net capital gain), or both. Upon
failure to meet the Preferred Shares Basic Maintenance Amount or the

                                   B-27
<PAGE>

Investment Company Act Preferred Shares Asset Coverage, the Trust will be
required to redeem Preferred Shares in order to maintain or restore such
maintenance amount or asset coverage and avoid the adverse consequences to
the Trust and its shareholders of failing to qualify as a regulated
investment company. There can be no assurance, however, that any such
redemption would achieve such objectives.

         The Trust may, at its option, redeem Preferred Shares in whole or
in part, and is required to redeem Preferred Shares to the extent required
to maintain the Preferred Shares Basic Maintenance Amount and the
Investment Company Act Preferred Shares Asset Coverage. Gain or loss, if
any, resulting from a redemption of Preferred Shares will be taxed as gain
or loss from the sale or exchange of Preferred Shares under Section 302 of
the Code rather than as a dividend, but only if the redemption distribution
(a) is deemed not to be essentially equivalent to a dividend, (b) is in
complete redemption of an shareholder's interest in the Trust, (c) is
substantially disproportionate with respect to the shareholder, or (d) with
respect to a non-corporate shareholder, is in partial liquidation of the
shareholder's interest in the Trust. For purposes of (a), (b) and (c)
above, the common shares owned by a holder of Preferred Shares will be
taken into account.

         The Code provides that interest on indebtedness incurred or
continued to purchase or carry the Trust's shares to which exempt-interest
dividends are allocated is not deductible. Under rules used by the IRS for
determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase or ownership of
shares may be considered to have been made with borrowed funds even though
such funds are not directly used for the purchase or ownership of such
shares.

         Nonresident alien individuals and certain foreign corporations and
other entities ("foreign investors") generally are subject to U.S.
withholding tax at the rate of 30% (or possibly a lower rate provided by an
applicable tax treaty) on distributions of investment company taxable
income (determined without regard to the deduction for dividends paid). To
the extent received or deemed received by foreign investors,
exempt-interest dividends, distributions of net capital gain and gain from
the sale or other disposition of Preferred Shares generally are exempt from
Federal income taxation. Different tax consequences may result if the
shareholder is engaged in a trade or business in the United States or, in
the case of an individual, is present in the United States for 183 or more
days during a taxable year and certain other conditions are met.

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

         The sale or other disposition of common shares or Preferred Shares
of the Trust will result in capital gain or loss to shareholders who hold
their shares as capital assets. Generally, a shareholder gain or loss will
be long-term gain or loss if the shares have been held for more than one
year. Present law taxes both long-term and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, short-term capital gains and ordinary income will
currently be taxed at a maximum rate of 38.6% while long-term capital gains
generally will be taxed at a maximum rate of 20% (or 18% for capital assets
that have been held for more than five years, the holding period of which
began after December 31, 2000).* Because of the limitations on itemized
deductions and the deduction for personal exemptions applicable to higher
income taxpayers, the effective rate of tax may be higher in certain
circumstances.

         Losses realized by a shareholder on the sale or exchange of shares
of the Trust held for six months or less are disallowed to the extent of
any distribution of exempt-interest dividends received with respect to such
shares, and, if not disallowed, such losses are treated as long-term
capital losses to the extent of any distribution of net capital gain

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

*        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-28
<PAGE>

received (or amounts credited as undistributed capital gain) with respect
to such shares. Any loss realized on a sale or exchange of shares of the
Trust will be disallowed to the extent those shares of the Trust are
replaced by other substantially identical shares within a period of 61 days
beginning 30 days before and ending 30 days after the date of disposition
of the original shares. In that event, the basis of the replacement shares
of the Trust will be adjusted to reflect the disallowed loss.

         The Trust is required in certain circumstances to backup
withholding on taxable dividends and certain other payments paid to
non-corporate holders of the Trust's shares who do not furnish the Trust
with their correct taxpayer identification number (in the case of
individuals, their Social Security number) and certain certifications, or
who are otherwise subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld from payments made to a shareholder
may be refunded or credited against such shareholder's U.S. Federal income
tax liability, if any, provided that the required information is furnished
to the IRS.

         The foregoing is a general summary of the provisions of the Code
and the Treasury Regulations in effect as they directly govern the taxation
of the Trust and its shareholders. These provisions are subject to change
by legislative or administrative action, and any such change may be
retroactive. Shareholders are advised to consult their own tax advisers for
more detailed information concerning the U.S. Federal, state, local,
foreign and other income tax consequences to them of purchasing, holding
and disposing of Trust shares.

                                  EXPERTS

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

                           ADDITIONAL INFORMATION

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



                                   B-29
<PAGE>


                       PAGE INTENTIONALLY LEFT BLANK.






                                    C-1
<PAGE>





                       PAGE INTENTIONALLY LEFT BLANK.






                                    D-1
<PAGE>




                       PAGE INTENTIONALLY LEFT BLANK.






                                    E-1
<PAGE>



                        INDEPENDENT AUDITORS' REPORT


The Board of Trustees and Shareholders 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
, 2002 and the related statements of operations and changes in net assets
for the period from , 2002 (date of inception) to , 2002. These financial
statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.

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

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


                , 2002






                                    F-1
<PAGE>



                  BLACKROCK INSURED MUNICIPAL INCOME TRUST

                    STATEMENT OF ASSETS AND LIABILITIES

                                                            , 2002

                              [TO BE INSERTED]






                                    F-2
<PAGE>



                  BLACKROCK INSURED MUNICIPAL INCOME TRUST

                          STATEMENT OF OPERATIONS

         For the period     , 2002 (date of inception) to      , 2002

                              [TO BE INSERTED]







                                    F-3
<PAGE>



                  BLACKROCK INSURED MUNICIPAL INCOME TRUST

                     STATEMENT OF CHANGES IN NET ASSETS

         For the period        , 2002 (date of inception) to      , 2002

                              [TO BE INSERTED]








                                    F-4
<PAGE>



                  BLACKROCK INSURED MUNICIPAL INCOME TRUST

                       NOTES TO FINANCIAL STATEMENTS

                              [TO BE INSERTED]








                                    F-5
<PAGE>



                  BLACKROCK INSURED MUNICIPAL INCOME TRUST

                    STATEMENT OF ASSETS AND LIABILITIES

                                                               , 2002

                                (Unaudited)

                              [TO BE INSERTED]










                                    F-6
<PAGE>



                  BLACKROCK INSURED MUNICIPAL INCOME TRUST

                          STATEMENT OF OPERATIONS

         For the period     , 2002 (date of inception) to      , 2002

                              [TO BE INSERTED]









                                    F-7
<PAGE>



                  BLACKROCK INSURED MUNICIPAL INCOME TRUST

                     STATEMENT OF CHANGES IN NET ASSETS

                                (Unaudited)

                              [TO BE INSERTED]








                                    F-8
<PAGE>



                  BLACKROCK INSURED MUNICIPAL INCOME TRUST

                            FINANCIAL HIGHLIGHTS

                                (Unaudited)

                              [TO BE INSERTED]









                                    F-9
<PAGE>


                  BLACKROCK INSURED MUNICIPAL INCOME TRUST

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                (Unaudited)

                              [TO BE INSERTED]









                                   F-10
<PAGE>



                  BLACKROCK INSURED MUNICIPAL INCOME TRUST

                          PORTFOLIO OF INVESTMENTS

                                                                , 2002

                                (Unaudited)

                              [TO BE INSERTED]








                                   F-11
<PAGE>



                                 APPENDIX A

                  BLACKROCK INSURED MUNICIPAL INCOME TRUST
                        STATEMENT OF PREFERENCES OF
             MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES
                            ("Preferred Shares")

                              [TO BE INSERTED]







                                   AA-1
<PAGE>


                                 APPENDIX B

                           RATINGS OF INVESTMENTS

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

Long-Term Debt

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

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

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

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

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; Nature of and provisions of the obligation;
and 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.

                                    BB-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           Debt rated "CC" has a currently identifiable high
             vulnerability to default. It typically is applied to debt
             subordinated to senior debt that is assigned an actual or
             implied "CCC" debt rating.
C            Debt rated "C" is currently vulnerable to nonpayment and is
             dependent upon business, financial and economic conditions for
             the obligor to meet its financial commitment or obligation. It
             typically is applied to debt subordinated to senior debt which
             is assigned an actual or implied "CCC" debt rating. The "C"
             rating may be used to cover a situation where a bankruptcy
             petition has been filed, but debt service payments are
             continued.
CI           The rating "CI" is reserved for income bonds on which no interest
             is being paid.
D            Debt rated "D" is in payment default. The "D" rating category
             is used when interest payments or principal payments are not
             made on the date due even if the applicable grace period has
             not expired, unless S&P believes that such payments will be
             made during such grace period. The "D" rating also will be
             used upon the filing of a bankruptcy petition if debt service
             payments are jeopardized.

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

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

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

                                   BB-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 assigned to
            short-term debt obligations with currently high vulnerability
            for nonpayment.
D           Debt rated "D" is in payment default. The "D" rating category
            is used when interest payments or principal payments are not
            made on the date due, even if the applicable grace period has
            not expired, unless S&P believes that such payments will be
            made during such grace period.

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

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

Municipal Bonds

Aaa          Bonds which are rated Aaa are judged to be of the best
             quality. They carry the smallest degree of investment risk and
             are generally referred to as "gilt edge." Interest payments
             are protected by a large or by an exceptionally stable margin
             and principal is secure. While the various protective elements

                                    BB-3
<PAGE>

             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.
             Bonds for which the security depends upon the completion of
             some act or the fulfillment of some condition are rated
             conditionally. These are bonds secured by (a) earnings of
             projects under construction, (b) earnings of projects
             unseasoned in operation experience, (c) rentals which begin
             when facilities are completed, or (d) payments to which some
             other limiting condition attaches. Parenthetical rating
             denotes probable credit stature upon completion of
             construction or elimination of basis of condition.
Note:        Moody's applies numerical modifiers 1, 2 and 3 in each generic
             rating category from Aa to B in the public finance sectors.
             The modifier 1 indicates that the issuer is in the higher end
             of its letter rating category; the modifier 2 indicates a
             mid-range ranking; the modifier 3 indicates that the issuer is
             in the lower end of the letter ranking category.


Short-Term Loans

MIG 1/VMIG 1      This designation denotes superior credit quality. There
                  is present strong protection by established cash flows,
                  superior liquidity support or demonstrated broadbased
                  access to the market for refinancing.
MIG 2/VMIG 2      This designation denotes strong credit quality. Margins
                  of protection are ample although not so large as in the
                  preceding group.
MIG 3/VMIG 3      This designation denotes acceptable credit quality.
                  Liquidity and cash flow protection may be narrow and
                  market access for refinancing is likely to be less
                  well-established.
MIG 4/VMIG 4      This designation denotes adequate quality. Protection
                  commonly regarded as required of an investment security
                  is present and although not distinctly or predominantly
                  speculative, there is specific risk.
S.G.              This designation denotes speculative quality. Debt
                  instruments in this category lack margins of protection.

                                    BB-4
<PAGE>

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

Long-Term Credit Ratings

              Investment Grade
AAA           Highest credit quality. 'AAA' ratings denote the lowest
              expectation of credit risk. They are assigned only in case of
              exception ally strong capacity for timely payment of
              financial commitments. This capacity is highly unlikely to be
              adversely affected by foreseeable events.
AA            Very high credit quality. 'AA' ratings denote a very low
              expectation of credit risk. They indicate very strong
              capacity for timely payment of financial commitments. This
              capacity is not significantly vulnerable to foreseeable
              events.
A             High credit quality. 'A' ratings denote a low expectation of
              credit risk. The capacity for timely payment of financial
              commitments is considered strong. This capacity may,
              nevertheless, be more vulnerable to changes in circumstances
              or in economic conditions than is the case for higher
              ratings.
BBB           Good credit quality. 'BBB' ratings indicate that there is
              currently a low expectation of credit risk. The capacity for
              timely payment of financial commitments is considered
              adequate, but adverse changes in circumstances and in
              economic conditions are more likely to impair this capacity.
              This is the lowest investment-grade category.
              Speculative Grade
BB            Speculative. 'BB' ratings indicate that there is a
              possibility of credit risk developing, particularly as the
              result of adverse economic change over time; however,
              business or financial alternatives may be available to allow
              financial commitments to be met. Securities rated in this
              category are not investment grade.
B             Highly speculative. 'B' ratings indicate that significant
              credit risk is present, but a limited margin of safety
              remains. Financial commitments are currently being met;
              however, capacity for continued payment is contingent upon a
              sustained, favorable business and economic environment.

CCC,          High default risk. Default is a real possibility. Capacity

                                   BB-5
<PAGE>

CC, C         for meeting financial commitments is solely reliant upon
              sustained, favorable business or economic developments. A
              'CC' rating indicates that default of some kind appears
              probable. 'C' ratings signal imminent default.
DDD,          Default. The ratings of obligations in this category are
DD,           based on their prospects for achieving partial or full
and D         recovery in a reorganization or liquidation of the obligor.
              While expected recovery values are highly speculative and
              cannot be estimated with any precision, the following serve
              as general guidelines. 'DDD' obligations have the highest
              potential for recovery, around 90%-100% of outstanding
              amounts and accrued interest. 'DD' indicates potential
              recoveries in the range of 50%-90%, and 'D' the lowest
              recovery potential, i.e., below 50%. Entities rated in this
              category have defaulted on some or all of their obligations.
              Entities rated 'DDD' have the highest prospect for resumption
              of performance or continued operation with or without a
              formal reorganization process. Entities rated 'DD' and 'D'
              are generally undergoing a formal reorganization or
              liquidation process; those rated 'DD' are likely to satisfy a
              higher portion of their outstanding obligations, while
              entities rated 'D' have a poor prospect for repaying all
              obligations.

Short-Term Credit Ratings

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

F1           Highest credit quality. Indicates the strongest capacity for
             timely payment of financial commitments; may have an added "+"
             to denote any exceptionally strong credit feature.
F2           Good credit quality. A satisfactory capacity for timely
             payment of financial commitments, but the margin of safety is
             not as great as in the case of the higher ratings.
F3           Fair credit quality. The capacity for timely payment of
             financial commitments is adequate; however, near-term adverse
             changes could result in a reduction to non-investment grade.
B            Speculative. Minimal capacity for timely payment of financial
             commitments, plus vulnerability to near-term adverse changes
             in financial and economic conditions.
C            High default risk. Default is a real possibility. Capacity for
             meeting financial commitments is solely reliant upon a
             sustained, favorable business and economic environment.
D            Default. Denotes actual or imminent payment default.

Notes:

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

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

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

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


                                    BB-6
<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 Commodity Futures Trading Commission (the "CFTC"). Certain Strategic
Transactions 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

                                    CC-1
<PAGE>

issued by the Options Clearing Corporation ("OCC") which guarantees the
performance of the obligations of the parties to such options.

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

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

Futures Contracts and Related Options

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

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

                                   CC-2
<PAGE>


         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 Securities
Exchange Commission, with the result that, if the Trust does not hold the
security or futures contract underlying the instrument, the Trust will be
required to designate on its books and records an ongoing basis, cash, U.S.
Government securities, or other liquid high grade debt obligations in an
amount at least equal to the Trust's obligations with respect to such
instruments. Such amounts fluctuate as the obligations increase or
decrease. The earmarking requirement can result in the Trust maintaining
securities positions it would otherwise liquidate, segregating assets at a
time when it might be disadvantageous to do so or otherwise restrict
portfolio management.

         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 ongoing greater potential
financial risk than do options transactions, where the exposure is limited
to the cost of the initial premium. Losses due to the use of Strategic
Transactions will reduce net asset value.



                                    CC-3
<PAGE>

<TABLE>
<CAPTION>

                                   PART C

                             OTHER INFORMATION

Item 24. Financial Statements and Exhibits


<S>       <C>
(1)        Financial Statements
           Part A--Financial Highlights (unaudited).
           Part B--Report of Independent Accountants.
           Statement of Assets and Liabilities.
           Statement of Operations.
           Financial Statements (Unaudited)
(2)        Exhibits
           (a)            Amended and Restated Agreement and Declaration of Trust.(1)
           (b)            Amended and Restated By-Laws.(1)
           (c)            Inapplicable.
           (d)(1)         Statement of Preferences of Municipal Auction Rate Cumulative Preferred Shares.(3)
           (d)(2)         Form of Specimen Certificate.(3)
           (e)            Dividend Reinvestment Plan.(2)
           (f)            Inapplicable.
           (g)(1)         Investment Management Agreement.(2)
           (g)(2)         Sub-Investment Advisory Agreement.(2)
           (g)(3)         Waiver Reliance Letter.(2)
           (h)            Form of Underwriting Agreement.(3)
           (i)            Deferred Compensation Plan for Independent Trustees.(2)
           (j)            Custodian Agreement.(2)
           (k)(1)         Transfer Agency Agreement.(2)
           (k)(2)         Auction Agency Agreement.(3)
           (k)(3)         Broker-Dealer Agreement.(3)
           (k)(4)         Form of DTC Agreement.(3)
           (l)            Opinion and Consent of Counsel to the Trust.(3)
           (m)            Inapplicable.
           (n)            Consent of Independent Public Accountants.(3)
           (o)            Inapplicable.
           (p)            Initial Subscription Agreement.(2)
           (q)            Inapplicable.
           (r)(1)         Code of Ethics of Trust.(2)
           (r)(2)         Code of Ethics of Advisor and Sub-Advisor.(2)
           (r)(3)         Code of Ethics of J.J.B. Hilliard, W.L. Lyons, Inc.(2)
           (s)            Powers of Attorney(2)


(1) Previously filed as an exhibit to Pre-Effective Amendment No. 1 to the
Trust's Registration Statement relating to the Common Shares filed with the
Securities and Exchange Commission on September 5, 2002.

(2) Previously filed as an exhibit to Pre-Effective Amendment No. 3 to the Trust's Registration Statement
relating to the Common Shares on October 28, 2002.

(3)To be filed by Amendment.
</TABLE>


Item 25. Marketing Arrangements

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

                                 PART C-1
<PAGE>

Item 26. Other Expenses of Issuance and Distribution

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

Registration fees
Rating fees
Printing (other than certificates) Accounting fees and expenses Legal fees
and expenses Miscellaneous Total


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

None.

Item 28. Number of Holders of Shares

As of October 21, 2002

                                                                    Number of
Title of Class                                                   Record Holders
Common Shares of Beneficial Interest                                    1
Preferred Shares                                                        0


Item 29. Indemnification

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

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

5.2 Mandatory Indemnification. (a) The Trust hereby agrees to indemnify
each person who at any time serves as a Trustee or officer of the Trust
(each such person being an "indemnitee") against any liabilities and
expenses, including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and reasonable counsel fees
reasonably incurred by such indemnitee in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which
he may be or may have been involved as a party or otherwise or with which
he may be or may have been threatened, while acting in any capacity set
forth in this Article V by reason of his having acted in any such capacity,
except with respect to any matter as to which he shall not have acted in
good faith in the reasonable belief that his action was in the best
interest of the Trust or, in the case of any criminal proceeding, as to
which he shall have had reasonable cause to believe that the conduct was

                                 PART C-2
<PAGE>

unlawful, provided, however, that no indemnitee shall be indemnified
hereunder against any liability to any person or any expense of such
indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith,
(iii) gross negligence (negligence in the case of Affiliated Indemnitees),
or (iv) reckless disregard of the duties involved in the conduct of his
position (the conduct referred to in such clauses (i) through (iv) being
sometimes referred to herein as "disabling conduct"). Notwithstanding the
foregoing, with respect to any action, suit or other proceeding voluntarily
prosecuted by any indemnitee as plaintiff, indemnification shall be
mandatory only if the prosecution of such action, suit or other proceeding
by such indemnitee (1) was authorized by a majority of the Trustees or (2)
was instituted by the indemnitee to enforce his or her rights to
indemnification hereunder in a case in which the indemnitee is found to be
entitled to such indemnification. The rights to indemnification set forth
in this Declaration shall continue as to a person who has ceased to be a
Trustee or officer of the Trust and shall inure to the benefit of his or
her heirs, executors and personal and legal representatives. No amendment
or restatement of this Declaration or repeal of any of its provisions shall
limit or eliminate any of the benefits provided to any person who at any
time is or was a Trustee or officer of the Trust or otherwise entitled to
indemnification hereunder in respect of any act or omission that occurred
prior to such amendment, restatement or repeal.

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

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

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

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

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

5.4 No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, transfer agent or other person dealing with the Trustees
or with any officer, employee or agent of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be
made by the Trustees or by said officer, employee or agent or be liable for

                                 PART C-3
<PAGE>

the application of money or property paid, loaned, or delivered to or on
the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, undertaking, instrument, certificate, Share, other
security of the Trust, and every other act or thing whatsoever executed in
connection with the Trust shall be conclusively taken to have been executed
or done by the executors thereof only in their capacity as Trustees under
this Declaration or in their capacity as officers, employees or agents of
the Trust. Every written obligation, contract, undertaking, instrument,
certificate, Share, other security of the Trust made or issued by the
Trustees or by any officers, employees or agents of the Trust in their
capacity as such, shall contain an appropriate recital to the effect that
the Shareholders, Trustees, officers, employees or agents of the Trust
shall not personally be bound by or liable thereunder, nor shall resort be
had to their private property for the satisfaction of any obligation or
claim thereunder, and appropriate references shall be made therein to this
Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, Shareholders, officers,
employees or agents of the Trust. The Trustees may maintain insurance for
the protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to
cover possible tort liability, and such other insurance as the Trustees in
their sole judgment shall deem advisable or is required by the 1940 Act.

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

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


Item 30. Business and Other Connections of Investment Advisor

Not Applicable


Item 31. Location of Accounts and Records

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


Item 32. Management Services

Not Applicable

Item 33. Undertakings

                                 PART C-4
<PAGE>

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

(2) Not applicable

(3) Not applicable

(4) Not applicable

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

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

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



                                 PART C-5
<PAGE>


                                 SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York,
on the 1st day of November, 2002.


                                              /s/ Robert S. Kapito
                                   -------------------------------------------
                                                Robert S. Kapito
                                      President and Chief Executive Officer


         Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities set forth below on the 1st day of November, 2002.


         Name                                              Title

/s/ Robert S. Kapito                             Trustee, President and Chief
--------------------                             Executive Officer
Robert S. Kapito


/s/ Henry Gabbay                                 Treasurer and Principal
---------------------                            Financial Officer
Henry Gabbay


*
Andrew F. Brimmer                                Trustee


*
Richard E. Cavanagh                              Trustee


*
Kent Dixon                                       Trustee


*
Frank J. Fabozzi                                 Trustee


*
James Clayburn La Force, Jr.                     Trustee


*
Walter F. Mondale                                Trustee


*
Ralph L. Schlosstein                             Trustee


*By:  /s/ Robert S. Kapito
      --------------------
       Robert S. Kapito
       Attorney-in-fact



                                 PART C-6
<PAGE>


                             INDEX TO EXHIBITS

NONE





                                 PART C-7

</TEXT>
</DOCUMENT>
