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<SEC-DOCUMENT>0001047469-02-006036.txt : 20021206
<SEC-HEADER>0001047469-02-006036.hdr.sgml : 20021206
<ACCEPTANCE-DATETIME>20021206154334
ACCESSION NUMBER:		0001047469-02-006036
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		8
FILED AS OF DATE:		20021206

FILER:

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

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-100951
		FILM NUMBER:		02851071

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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	BLACKROCK MUNICIPAL INCOME TRUST III
		DATE OF NAME CHANGE:	20020819

FILER:

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

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-21178
		FILM NUMBER:		02851072

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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	BLACKROCK MUNICIPAL INCOME TRUST III
		DATE OF NAME CHANGE:	20020819
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>a2095632zn-2a.txt
<DESCRIPTION>N-2/A
<TEXT>
<Page>

    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 2002


                                      SECURITIES ACT REGISTRATION NO. 333-100951
                                   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. 2 /X/

                          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)
                            ------------------------

                                   COPIES TO:

<Table>
<S>                                            <C>
          MICHAEL K. HOFFMAN, ESQ.                        CYNTHIA G. COBDEN, ESQ.
  Skadden, Arps, Slate, Meagher & Flom LLP              Simpson Thacher & Bartlett
              Four Times Square                            425 Lexington Avenue
          New York, New York 10036                       New York, New York 10017
</Table>

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

                 APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
                            ------------------------

        CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<Table>
<Caption>
                                                            PROPOSED MAXIMUM     PROPOSED MAXIMUM
                                         AMOUNT BEING      OFFERING PRICE PER   AGGREGATE OFFERING        AMOUNT OF
TITLE OF SECURITIES BEING REGISTERED      REGISTERED              UNIT                 PRICE          REGISTRATION FEE
<S>                                   <C>                  <C>                  <C>                  <C>
Preferred Shares, $.001 par value            9,159               $25,000           $228,975,000          $21,066(1)
</Table>


(1)  Previously paid.


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

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

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST

                             CROSS REFERENCE SHEET

                               PART A--PROSPECTUS

<Table>
<Caption>
ITEMS IN PART A OF FORM N-2                                  LOCATION IN PROSPECTUS
- ---------------------------                         ----------------------------------------
<S>       <C>                                       <C>
Item 1.   Outside Front Cover.....................  Cover page
Item 2.   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, and Other
            Securities............................  Description of Preferred Shares;
                                                    Description of 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.......................  Not Applicable
Item 13.  Table of Contents of the Statement of
            Additional Information................  Table of Contents for the Statement of
                                                      Additional Information

                        PART B--STATEMENT OF ADDITIONAL INFORMATION
Item 14.  Cover Page..............................  Cover Page
Item 15.  Table of Contents.......................  Cover Page
Item 16.  General Information and History.........  Not Applicable
Item 17.  Investment Objective and Policies.......  Investment Objective and Policies;
                                                      Investment Policies and Techniques;
                                                      Other Investment Policies and
                                                      Techniques; Portfolio Transactions and
                                                      Brokerage
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....................  Independent Auditors' Report; Financial
                                                      Highlights (unaudited)
</Table>

                           PART C--OTHER INFORMATION

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

PROSPECTUS

                                                                [BLACKROCK LOGO]
                                  $228,975,000
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
               MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES
                              ("PREFERRED SHARES")
                            3,053 SHARES, SERIES M7
                            3,053 SHARES, SERIES R7
                            3,053 SHARES, SERIES F7

                    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 19. 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.
                                 --------------

<Table>
<Caption>
                                                              PER SHARE(2)            TOTAL
                                                              ------------         ------------
<S>                                                           <C>                  <C>
Public Offering Price                                          $25,000.00          $228,975,000
Sales Load                                                     $                   $
Estimated Offering Expenses                                    $                   $
Proceeds, after expenses, to the Trust(1)                      $                   $
</Table>

(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.
                                 --------------

SALOMON SMITH BARNEY                                         MERRILL LYNCH & CO.
                             PRUDENTIAL SECURITIES

        , 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 SEC 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 45 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 SEC 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 3,053 shares of Series M7 Municipal Auction Rate
Cumulative Preferred Shares, 3,053 shares of Series R7 Municipal Auction Rate
Cumulative Preferred Shares and 3,053 shares of Series F7 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 M7, % for Series R7 and     % for Series F7. The initial rate period is
from the date of issuance through       , 2002 for Series M7,       , 2002 for
Series R7 and       , 2002 for Series F7. 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 in each taxable year, 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

<Table>
<Caption>
                                                    PAGE
                                                    ----
<S>                                                 <C>
Prospectus Summary................................    4
Financial Highlights (Unaudited)..................    9
The Trust.........................................   10
Use of Proceeds...................................   10
Capitalization (Unaudited)........................   11
Portfolio Composition.............................   12
The Trust's Investments...........................   12
Risks.............................................   19
Management of the Trust...........................   22
Description of Preferred Shares...................   25
The Auction.......................................   34
Description of Common Shares......................   39
Certain Provisions in the Agreement and
  Declaration of Trust............................   39
Repurchase of Common Shares.......................   41
Tax Matters.......................................   41
Underwriting......................................   43
Custodian, Transfer Agent and Auction Agent.......   44
Legal Opinions....................................   44
Available Information.............................   44
Table of Contents of Statement of Additional
  Information.....................................   45
</Table>

                        PRIVACY PRINCIPLES OF THE TRUST

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

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

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

                                       3
<Page>
                               PROSPECTUS SUMMARY

    THIS IS ONLY A SUMMARY. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION
THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR 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>
<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 November 29, 2002, the
                                                    Trust had 24,008,028 common shares outstanding and
                                                    net assets of $340,392,161.

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:
                                                    -  that pay interest that is exempt from Federal
                                                       income tax, including the alternative minimum
                                                       tax;
                                                    -  insured as to timely payment of principal and
                                                       interest; and
                                                    -  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,
</Table>

                                       4
<Page>

<Table>
<S>                                                 <C>
                                                       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."
</Table>

                                       5
<Page>

<Table>
<S>                                                 <C>
THE OFFERING......................................  The Trust is offering 3,053 shares of Series M7
                                                    Preferred Shares, 3,053 shares of Series R7
                                                    Preferred Shares and 3,053 shares of Series F7
                                                    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:
                                                    -  if an auction fails you may not be able to sell
                                                       some or all of your shares;
                                                    -  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;
                                                    -  a rating agency could suspend, withdraw or
                                                       downgrade the rating assigned to the Preferred
                                                       Shares, which could affect liquidity;
                                                    -  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;
                                                    -  in extraordinary circumstances, the Trust may
                                                       not earn sufficient income from its investments
                                                       to pay dividends;
                                                    -  if interest rates rise, the value of the
                                                       Trust's investment portfolio will decline,
                                                       reducing the asset coverage for the Preferred
                                                       Shares;
                                                    -  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
                                                    -  the Trust may invest up to 20% of its Managed
                                                       Assets in securities that are rated as low as
                                                       the fourth category of investment grade, 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
                                                    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.
</Table>

                                       6
<Page>

<Table>
<S>                                                 <C>
                                                    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.
</Table>

<Table>
<Caption>
                                       SERIES    FIRST AUCTION DATE*  SUBSEQUENT AUCTION DATE
                                     ----------  -------------------  -----------------------
<S>                                  <C>         <C>                  <C>
                                     M7
                                     R7
                                     F7
</Table>

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

  *  All Dates are 2002.

<Table>
<S>                                                 <C>
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."
</Table>

<Table>
<Caption>
                                                                        DIVIDEND
                                              DATE OF                   PAYMENT           SUBSEQUENT    NUMBER
                            INITIAL         ACCUMULATION                DATE FOR           DIVIDEND     OF DAYS
                            DIVIDEND         AT INITIAL               INITIAL RATE         PAYMENT    OF INITIAL
 SERIES                       RATE             RATE*                    PERIOD*              DAY      RATE PERIOD
 ------                     --------  ------------------------  ------------------------  ----------  -----------
 <S>                        <C>       <C>                       <C>                       <C>         <C>
 M7
 R7
 F7
</Table>

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

  *  All Dates are 2002.

                                       7
<Page>

<Table>
<S>                                                 <C>
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 Federal income tax, including the alternative
                                                    minimum tax, the income you receive will
                                                    ordinarily be exempt from Federal income tax.
                                                    Taxable income or gain earned by the Trust will be
                                                    allocated for each taxable year 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>

                                       8
<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 October 31, 2002 through November 19, 2002. Since the Trust was
recently organized and commenced investment operations on October 31, 2002, the
table covers less than three 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
                                                    OCTOBER 31, 2002(1)
                                                          THROUGH
                                                     NOVEMBER 19, 2002
                                                    -------------------
<S>                                                 <C>
PER COMMON SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(2)...........        $  14.33
                                                          --------
Investment operations:
  Net investment income(3)........................            0.03
  Net realized and unrealized loss on
    investments(3)................................            0.06
                                                          --------
Net increase from investment operations...........            0.09
                                                          --------
Capital charges with respect to issuance of:
  Common shares...................................           (0.03)
                                                          --------
Net asset value, end of period(2).................        $  14.39
                                                          ========
Market value, end of period(2)....................        $  15.00
                                                          ========
TOTAL INVESTMENT RETURN(3)........................            0.00%
                                                          ========
RATIOS TO AVERAGE NET ASSETS OF COMMON
  SHAREHOLDERS:(4),(5)
Expenses after fee waiver.........................            0.54%
Expenses before fee waiver........................            0.74%
Net investment income after fee waiver............            3.48%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (000)...        $361,632
Portfolio turnover................................               2%
Net assets of common shareholders, end of period
  (000)...........................................        $345,301
</Table>


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

(1)  Commencement of investment operations. This information includes the
     initial investment by an affiliate of BlackRock Advisors, Inc. The Trust's
     net asset value per share immediately after the closing of the initial
     public offering was $14.30.
(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 invesment return does not reflect brokerage commissions. The total
     investment return, which is for less than a full year, is not annualized.
     Past performance is not a guarantee of future results.
(4)  Annualized.
(5)  These ratios are not indicative of future expense ratios, due to the short
     operating history of the Trust. Please refer to the Trust's common shares
     prospectus for the estimated expense ratio.

    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.

                                       9
<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 31, 2002, the Trust
issued an aggregate of 24,000,000 common shares of beneficial interest, par
value $.001 per share, pursuant to the initial public offering and commenced its
investment operations. The Trust granted to the underwriters in connection with
the common share offering an option, exercisable through December 12, 2002, to
purchase up to 3,600,000 additional common shares for net proceeds, after
expenses, to the Trust of approximately $51,462,000. The underwriters of the
common share offering may exercise such option, in whole or in part, solely for
the purpose of covering over-allotments, if any, in connection with the common
share offering. On December 3, 2002, underwriters notified the Trust of their
intention to partially exercise their over-allotment option to purchase an
additional 2,000,000 common shares for net proceeds, after expenses, to the
Trust of approximately $28,590,000, although we cannot assure you that such
additional common shares will be issued. 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 November 29, 2002:

<Table>
<Caption>
                                                  AMOUNT HELD BY
                                       AMOUNT    THE TRUST OR FOR      AMOUNT
          TITLE OF CLASS             AUTHORIZED    ITS ACCOUNT      OUTSTANDING
          --------------             ----------  ----------------  --------------
<S>                                  <C>         <C>               <C>
           Common Shares             Unlimited          0            24,008,028
         Preferred Shares            Unlimited          0                     0
             Series M7                   4,539          0                     0
             Series R7                   4,539          0                     0
             Series F7                   4,539          0                     0
</Table>

                                USE OF PROCEEDS

    The net proceeds of this offering will be approximately $226,369,837 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.

                                       10
<Page>
                           CAPITALIZATION (UNAUDITED)

    The following table sets forth the capitalization of the Trust as of
November 29, 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; 9,159 shares issued, as
        adjusted).......................  $         --  $228,975,000
      Common shares, $.001 par value per
        share; unlimited shares
        authorized, 24,008,028 shares
        outstanding*....................        24,008        24,008
Paid-in surplus.........................   343,185,993   340,580,830
Balance of undistributed net investment
  income................................     1,196,697     1,196,697
        Accumulated net realized
          gain/loss from investment
          transactions..................        45,310        45,310
        Net unrealized
          appreciation/depreciation of
          investments...................    (4,059,847)   (4,059,847)
        Net assets......................   340,392,161   566,761,998
</Table>

- ---------

  *  None of these outstanding shares are held by or for the account of the
     Trust.

                                       11
<Page>
                             PORTFOLIO COMPOSITION

    As of November 29, 2002, approximately 98.90% of the market value of the
Trust's portfolio was invested in long-term municipal securities and
approximately 1.10% 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 November 29, 2002, based on the highest rating assigned.

<Table>
<Caption>
                                           VALUE
CREDIT RATING                              (000)   PERCENT
- -------------                             -------  -------
<S>                                       <C>      <C>
AAA/Aaa*................................  240,590   65.90%**
AA/Aa...................................
A/A.....................................   19,437    5.32%
BBB/Baa.................................   91,663   25.11%
BB/Ba...................................    9,366    2.57%
Short-Term..............................    4,003    1.10%
TOTAL...................................  365,059  100.00%
</Table>

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

  *  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.
 **  The Trust anticipates that at least 80% of its Managed Assets will be rated
     AAA/Aaa upon the investment of the proceeds of this offering.
  +  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."

                            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 value 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

                                       12
<Page>
in obligations rated below Aaa or AAA (but not lower than BBB or Baa) and
comparable unrated obligations and/or municipal bonds that are uninsured.
Accordingly, the Trust does not intend to invest any of its assets in municipal
bonds rated below investment grade or in comparable unrated bonds. These credit
quality policies apply only at the time a security is purchased, and the Trust
is not required to dispose of a security if a rating agency downgrades its
assessment of the credit characteristics of a particular issuer 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

                                       13
<Page>
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.

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

                                       14
<Page>
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.

    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

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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.

    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.

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    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 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.

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    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 invests in

                                       18
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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.

                                       19
<Page>
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 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

                                       20
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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.

    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.

                                       21
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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.

                            MANAGEMENT OF THE TRUST

TRUSTEES AND OFFICERS

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

INVESTMENT ADVISOR AND SUB-ADVISOR

    BlackRock Advisors acts as the Trust's investment advisor. BlackRock
Financial Management acts as the Trust's sub-advisor. BlackRock Advisors,
located at 100 Bellevue Parkway, Wilmington, Delaware 19809, and BlackRock
Financial Management, located at 40 East 52nd Street, New York, New York 10022,
are wholly owned subsidiaries of BlackRock, Inc., which is one of the largest
publicly traded investment management firms in the United States with
approximately $246 billion of assets under management as of September 30, 2002.
BlackRock manages assets on behalf of institutional and individual investors
worldwide through a variety of equity, fixed income, liquidity and alternative
investment products, including the BLACKROCK FUNDS-SM- 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 advised a closed-end family of 40 funds with
approximately $10.4 billion in assets as of September 30, 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,

                                       22
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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 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 September 30,
2002. As of September 30, 2002, the team managed 31 closed-end municipal funds,
with over $7.6 billion in assets under management.

    BLACKROCK'S INVESTMENT PROCESS. BlackRock has in-depth expertise in the
fixed income market. BlackRock applies the same risk-controlled, active sector
rotation style to the management process for all of its fixed income portfolios.
BlackRock believes that it is unique in its integration of taxable and municipal
bond specialists. Both taxable and municipal bond portfolio managers share the
same trading floor and interact frequently for determining the firm's overall
investment strategy. This interaction

                                       23
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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
September 30, 2002.

    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.

    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

                                       24
<Page>
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>
October 31, 2003**         0.20%
October 31, 2004           0.20%
October 31, 2005           0.20%
October 31, 2006           0.20%
October 31, 2007           0.20%
October 31, 2008           0.15%
October 31, 2009           0.10%
October 31, 2010           0.05%
</Table>

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

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

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

                        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.

                                       25
<Page>
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 4,539 Preferred Shares, Series M7, 4,539
Preferred Shares, Series R7 and 4,539 Preferred Shares, Series F7. 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:

<Table>
<Caption>
SERIES                                              INITIAL RATE PERIOD
- ------                                              -------------------
<S>                                                 <C>
M7................................................
R7................................................
F7................................................
</Table>

    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 by 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>
M7......................................                          Tuesday
R7......................................                          Friday
F7......................................                          Monday
</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.

    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

                                       26
<Page>
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 once each of the requirements of the Statement are satisfied, 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:

                      APPLICABLE PERCENTAGE PAYMENT TABLE

<Table>
<Caption>
                                                                                   APPLICABLE PERCENTAGE TABLE
                             CREDIT RATINGS                               ----------------------------------------------
- ------------------------------------------------------------------------  APPLICABLE PERCENTAGE:  APPLICABLE PERCENTAGE:
              MOODY'S                                S&P                     NO NOTIFICATION           NOTIFICATION
- -----------------------------------  -----------------------------------  ----------------------  ----------------------
<S>                                  <C>                                  <C>                     <C>
          "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>

                                       27
<Page>
    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>       <C>
28 days or less                                       Greater of:
                                                   -  AA Composite Commercial Paper Rate
                                                   -  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:

                   "AA" COMPOSITE COMMERCIAL PAPER RATE TABLE

<Table>
<Caption>
MINIMUM RATE PERIOD            SPECIAL RATE PERIOD              "AA" COMPOSITE COMMERCIAL PAPER RATE*
- -------------------  ----------------------------------------  ----------------------------------------
<C>                  <S>                                       <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
</Table>

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

  *  Rates stated on a discount basis

    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.

                                       28
<Page>
    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:

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

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

    -  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.

    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.

    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:

    -  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);

    -  any additional dividends required to be paid on or before the date of
       such transaction have been paid;

    -  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

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

                                       29
<Page>
    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. Upon declaring 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 purposes of (a) above 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 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.

                                       30
<Page>
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:

    -  the sale of all or substantially all the property or business of the
       Trust;
    -  the merger or consolidation of the Trust into or with any other business
       trust or corporation; or
    -  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 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 November 29, 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 $2,605,163, would have been
computed as follows:

<Table>
<S>                             <C><C>          <C><C>
  Value of Trust assets less
         liabilities
   not constituting senior
          securities            =  566,671,998  =  248%
- ------------------------------     -----------
Senior securities representing     228,975,000
         indebtedness
             plus
   liquidation value of the
       preferred shares
</Table>

                                       31
<Page>
    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 accordance with the requirements of the rating agency or agencies
then rating the Preferred Shares or the Investment Company Act, as the case may
be. 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.

    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

                                       32
<Page>
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; or

    (d) 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.

    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

                                       33
<Page>
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.

                                       34
<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.

                                       35
<Page>
    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 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:

    -  (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

    -  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

                                       36
<Page>
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, (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 M7 will normally be held every Monday, and each
subsequent dividend period will normally begin on the following Tuesday. The
auctions for Series R7 will normally be held every Thursday, and each subsequent
dividend period will normally begin on the following Friday. The auctions for
Series F7 will normally be held every Friday, and each subsequent dividend
period will normally begin on the following Monday.

    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

                                       37
<Page>
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:

         (i)  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;

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

        (iii)  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. 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:

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

    -  to a Broker-Dealer; or

    -  to such other persons as may be permitted by the Trust;

    provided, however, that:

    -  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

                                       38
<Page>
    -  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.

    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:

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

                                       39
<Page>
    -  the issuance of any securities of the Trust to any Principal Shareholder
       for cash, except pursuant to any automatic dividend reinvestment plan;

    -  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

    -  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 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,

                                       40
<Page>
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 an 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. The Trust further
expects that substantially all of the dividends it distributes will generally be
exempt from the alternative minimum 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 for each taxable year in
proportion to total dividends paid to each class for the taxable 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-

                                       41
<Page>
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 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.

                                       42
<Page>
                                  UNDERWRITING

    Salomon Smith Barney Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated are acting as representatives 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.

<Table>
<Caption>
                                                 NUMBER OF SHARES
                                       -------------------------------------
UNDERWRITER                            SERIES M7     SERIES R7     SERIES F7
- -----------                            ---------     ---------     ---------
<S>                                    <C>          <C>            <C>
Salomon Smith Barney Inc...........
Merrill Lynch, Pierce, Fenner &
  Smith
           Incorporated............
Prudential Securities
  Incorporated.....................
    Total..........................
</Table>

    The underwriting agreement provides that the obligations of the Underwriters
to purchase the Preferred 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   % 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 underwriting agreement provides that it may be terminated in the
absolute discretion of the representatives without liability on the part of the
Underwriters to the Trust, BlackRock Advisors or BlackRock Financial Management
by notice to the Trust, BlackRock Advisors or BlackRock Financial Management if,
prior to delivery of and payment for the Preferred Shares, (1) trading in the
Trust's common shares shall have been suspended by the Securities and Exchange
Commission or the American Stock Exchange or trading in securities generally on
the New York Stock Exchange or the American Stock Exchange shall have been
suspended or limited or minimum prices shall have been established on either of
such Exchanges, (2) a commercial banking moratorium shall have been declared by
either federal or New York state authorities, or (3) there shall have occurred
any outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war, or other calamity or crisis the effect of which on
financial markets in the United States is such as to make it, in the sole
judgment of the representatives, impracticable or inadvisable to proceed with
the offering or delivery of the Preferred Shares as contemplated by this
prospectus (exclusive of any supplement thereto).

                                       43
<Page>
    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 Salomon Smith Barney Inc. is 388 Greenwich
Street, New York, New York 10013. The principal business address of Merrill
Lynch, Pierce, Fenner & Smith Incorporated is 4 World Financial Center, New
York, New York 10080.

                  CUSTODIAN, 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.

                                 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 Simpson Thacher & Bartlett, New
York, New York. Simpson Thacher & Bartlett, New York, New York 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.

                                       44
<Page>
            TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

<Table>
<Caption>
                                                    PAGE
                                                    ----
<S>                                                 <C>
Use of Proceeds...................................   B-2
Investment Objective and Policies.................   B-2
Investment Policies and Techniques................   B-5
Other Investment Policies and Techniques..........  B-14
Management of the Trust...........................  B-17
Portfolio Transactions and Brokerage..............  B-25
Additional Information Concerning the Auctions For
  Preferred Shares................................  B-26
Description of Common Shares......................  B-27
Other Shares......................................  B-27
Repurchase of Common Shares.......................  B-27
Tax Matters.......................................  B-29
Experts...........................................  B-33
Additional Information............................  B-33
Independent Auditors' Report......................   F-1
Financial Statements..............................   F-2
APPENDIX A Statement of Preferences of Municipal
  Auction Rate Cumulative Preferred Shares........   A-1
APPENDIX B Ratings of Investments.................   B-1
APPENDIX C General Characteristics and Risks of
  Strategic Transactions..........................   C-1
</Table>

                                       45
<Page>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                  $228,975,000

                               BLACKROCK INSURED
                             MUNICIPAL INCOME TRUST

               MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES
                            3,053 SHARES, SERIES M7
                            3,053 SHARES, SERIES R7
                            3,053 SHARES, SERIES F7

                                     ------

                                   PROSPECTUS

                                          , 2002

                                   ---------

                              SALOMON SMITH BARNEY
                              MERRILL LYNCH & CO.
                             PRUDENTIAL SECURITIES

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Page>

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST


                      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 OF CONTENTS

<Table>
<Caption>
                                                    PAGE
                                                    ----
<S>                                                 <C>
Use of Proceeds...................................   B-2
Investment Objective and Policies.................   B-2
Investment Policies and Techniques................   B-5
Other Investment Policies and Techniques..........  B-14
Management of the Trust...........................  B-17
Portfolio Transactions and Brokerage..............  B-25
Additional Information Concerning the Auctions for
  Preferred Shares................................  B-26
Description of Common Shares......................  B-27
Other Shares......................................  B-27
Repurchase of Common Shares.......................  B-27
Tax Matters.......................................  B-29
Experts...........................................  B-33
Additional Information............................  B-33
Independent Auditors' Report......................   F-1
Financial Statements..............................   F-2

APPENDIX A Statement of Preferences of Municipal
  Auction Rate Cumulative Preferred Shares........   A-1

APPENDIX B Ratings of Investments.................   B-1

APPENDIX C General Characteristics and Risks of
  Strategic Transactions..........................   C-1
</Table>

         THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED           , 2002

                                      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.

                                      B-2
<Page>
    When used with respect to particular shares of the Trust, "majority of the
outstanding" means (i) 67% or more of the shares present at a meeting, if the
holders of more than 50% of the shares are present or represented by proxy, or
(ii) more than 50% of the shares, whichever is less.

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

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

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

                                      B-3
<Page>
    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.

    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.

                                      B-4
<Page>
                       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 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: (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 alternative minimum tax. 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
alternative minimum tax 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.

    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

                                      B-5
<Page>
quality, short-term securities which may be either tax-exempt or taxable and
securities of other open- or closed-end investment companies that invest
primarily in municipal bonds of the type in which the Trust may invest directly.
The Trust intends to invest in taxable short-term investments only in the event
that suitable tax-exempt temporary investments are not available at reasonable
prices and yields. Tax-exempt temporary investments include various obligations
issued by state and local governmental issuers, such as tax-exempt notes (bond
anticipation notes, tax anticipation notes and revenue anticipation notes or
other such municipal bonds maturing in three years or less from the date of
issuance) and municipal commercial paper. The Trust will invest only in taxable
temporary investments which are U.S. Government securities or securities rated
within the highest grade by Moody's, S&P or Fitch, and which mature within one
year from the date of purchase or carry a variable or floating rate of interest.
Taxable temporary investments of the Trust may include certificates of deposit
issued by U.S. banks with assets of at least $1 billion, commercial paper or
corporate notes, bonds or debentures with a remaining maturity of one year or
less, or repurchase agreements. See "Other Investment Policies and
Techniques--Repurchase Agreements." To the extent the Trust invests in taxable
investments, the Trust will not at such times be in a position to achieve its
investment objective of tax-exempt income.

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

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

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

                                      B-6
<Page>
    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.

    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

                                      B-7
<Page>
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

                                      B-8
<Page>
"AAA"/"Aaa" by Moody's and S&P respectively. As of December 31, 2001 XL Capital
Ltd had assets of approximately $6.9 billion.

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

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

SHORT-TERM TAXABLE FIXED INCOME SECURITIES

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

        (1)  U.S. Government securities, including bills, notes and bonds
    differing as to maturity and rates of interest that are either issued or
    guaranteed by the U.S. Treasury or by U.S. Government agencies or
    instrumentalities. U.S. Government securities include securities issued by
    (a) the Federal Housing Administration, Farmers Home Administration,
    Export-Import Bank of the United States, Small Business Administration and
    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,

                                      B-9
<Page>
    since the resale price is always greater than the purchase price and
    reflects an agreed-upon market rate. Such actions afford an opportunity for
    the Trust to invest temporarily available cash. The Trust may enter into
    repurchase agreements only with respect to obligations of the U.S.
    Government, its agencies or instrumentalities; certificates of deposit; or
    bankers' acceptances in which the Trust may invest. Repurchase agreements
    may be considered loans to the seller, collateralized by the underlying
    securities. The risk to the Trust is limited to the ability of the seller to
    pay the agreed-upon sum on the repurchase date; in the event of default, the
    repurchase agreement provides that the Trust is entitled to sell the
    underlying collateral. If the value of the collateral declines after the
    agreement is entered into, and if the seller defaults under a repurchase
    agreement when the value of the underlying collateral is less than the
    repurchase price, the Trust could incur a loss of both principal and
    interest. BlackRock monitors the value of the collateral at the time the
    action is entered into and at all times during the term of the repurchase
    agreement. BlackRock does so in an effort to determine that the value of the
    collateral always equals or exceeds the agreed-upon repurchase price to be
    paid to the Trust. If the seller were to be subject to a Federal bankruptcy
    proceeding, the ability of the Trust to liquidate the collateral could be
    delayed or impaired because of certain provisions of the bankruptcy laws.

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

SHORT-TERM TAX-EXEMPT FIXED INCOME SECURITIES

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

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

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

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

                                      B-10
<Page>
received, be used to meet other obligations could affect the ability of the
issuer to pay the principal and interest on RANs.

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

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

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

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

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

DURATION MANAGEMENT AND OTHER MANAGEMENT TECHNIQUES

    The Trust may use a variety of other investment management techniques and
instruments. The Trust may purchase and sell futures contracts, enter into
various interest rate transactions and may purchase and sell exchange-listed and
over-the-counter put and call options on securities, financial indices and
futures contracts (collectively, "Strategic Transactions"). These Strategic
Transactions may be used for duration management and other risk management
techniques in an attempt to protect against possible changes in the market value
of the Trust's portfolio resulting from trends in the debt securities markets
and changes in interest rates, to protect the Trust's unrealized gains in the
value of its portfolio securities, to facilitate the sale of such securities for
investment purposes, to establish a position in the securities markets as a
temporary substitute for purchasing particular securities and to enhance income
or gain. There is no particular strategy that requires use of one technique
rather than another as the decision to use any particular strategy or instrument
is a function of market conditions 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."

                                      B-11
<Page>
    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
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.

                                      B-12
<Page>
    PUTS ON SECURITIES, INDICES AND FUTURES CONTRACTS. The Trust may purchase
put options ("puts") that relate to municipal bonds (whether or not it holds
such securities in its portfolio), indices or futures contracts. The Trust may
also sell puts on municipal bonds, indices or futures contracts on such
securities if the Trust's contingent obligations on such puts are secured by
segregated assets consisting of cash or liquid high grade debt securities having
a value not less than the exercise price. The Trust will not sell puts if, as a
result, more than 50% of the Trust's total assets would be required to cover its
potential obligations under its hedging and other investment transactions. In
selling puts, there is a risk that the Trust may be required to buy the
underlying security at a price higher than the current market price.

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

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

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

SHORT SALES

    The Trust may make short sales of 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

                                      B-13
<Page>
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 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

                                      B-14
<Page>
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
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

                                      B-15
<Page>
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.

                                      B-16
<Page>
RESIDUAL INTEREST MUNICIPAL BONDS

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

                                      B-17
<Page>
    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).

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

                                      B-18
<Page>
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.

<Table>
<Caption>
                                                                          NUMBER OF
                                                                        PORTFOLIOS IN
                                                                        FUND COMPLEX
                           TERM OF                                       OVERSEEN BY
NAME, ADDRESS, AGE       OFFICE AND    PRINCIPAL OCCUPATION DURING THE   TRUSTEE OR
AND POSITION(S)           LENGTH OF       PAST FIVE YEARS AND OTHER      NOMINEE FOR        OTHER DIRECTORSHIPS
HELD WITH REGISTRANT     TIME SERVED            AFFILIATIONS               TRUSTEE            HELD BY TRUSTEE
- --------------------    -------------  -------------------------------  -------------  ------------------------------
<S>                     <C>            <C>                              <C>            <C>
INDEPENDENT
TRUSTEES:
Andrew F. Brimmer       3 years(1)(2)  President of Brimmer &                44        Director of CarrAmerica Realty
P.O. Box 4546                          Company, Inc., a Washington,                    Corporation and Borg-Warner
New York, NY 10163                     D.C.- based economic and                        Automotive. Formerly Director
Age: 76                                financial consulting firm.                      of AirBorne Express,
Trustee                                Wilmer D. Barrett Professor of                  BankAmerica Corporation (Bank
                                       Economics, University of                        of America), Bell South
                                       Massachusetts -- Amherst.                       Corporation, College
                                       Formerly member of the Board of                 Retirement Equities Fund
                                       Governors of the Federal                        (Trustee), Commodity
                                       Reserve System. Former                          Exchange, Inc. (Public
                                       Chairman, District of Columbia                  Governor) Connecticut Mutual
                                       Financial Control Board. Lead                   Life Insurance Company, E.I.
                                       Trustee and Chairman of the                     Dupont de Nemours & Company,
                                       Audit Committee of each of the                  Equitable Life Assurance
                                       closed-end trusts of which                      Society of the United States,
                                       BlackRock Advisors Inc. acts as                 Gannett Company, Mercedes-Benz
                                       investment advisor.                             of North America, MNC
                                                                                       Financial Corporation
                                                                                       (American Security Bank), NMC
                                                                                       Capital Management, Navistar
                                                                                       International Corporation, PHH
                                                                                       Corp. and UAL Corporation
                                                                                       (United Airlines).
</Table>

                                      B-19
<Page>
<Table>
<Caption>
                                                                          NUMBER OF
                                                                        PORTFOLIOS IN
                                                                        FUND COMPLEX
                           TERM OF                                       OVERSEEN BY
NAME, ADDRESS, AGE       OFFICE AND    PRINCIPAL OCCUPATION DURING THE   TRUSTEE OR
AND POSITION(S)           LENGTH OF       PAST FIVE YEARS AND OTHER      NOMINEE FOR        OTHER DIRECTORSHIPS
HELD WITH REGISTRANT     TIME SERVED            AFFILIATIONS               TRUSTEE            HELD BY TRUSTEE
- --------------------    -------------  -------------------------------  -------------  ------------------------------
<S>                     <C>            <C>                              <C>            <C>
Richard E. Cavanagh     3 years(1)(2)  President and Chief Executive         44        Trustee Emeritus, Wesleyan
P.O. Box 4546                          Officer of The Conference                       University, Trustee: Drucker
New York, NY 10163                     Board, Inc., a leading global                   Foundation, Airplanes Group,
Age: 56                                business membership                             Aircraft Finance Trust (AFT)
Trustee                                organization, from                              and Education Testing Service
                                       1995-present. Former Executive                  (ETS). Director, Arch
                                       Dean of the John F. Kennedy                     Chemicals, Fremont Group and
                                       School of Government at Harvard                 The Guardian Life Insurance
                                       University from 1988-1995.                      Company of America.
                                       Acting Director, Harvard Center
                                       for Business and
                                       Government(1991-1993). Formerly
                                       Partner (principal) of
                                       McKinsey & Company, Inc.
                                       (1980-1988). Former Executive
                                       Director of Federal Cash
                                       Management, White House Office
                                       of Management and Budget
                                       (1977-1979). Co-author, THE
                                       WINNING PERFORMANCE (best
                                       selling management book
                                       published in 13 national
                                       editions).

Kent Dixon              3 years(1)(2)  Consultant/Investor. Former           44        Former Director of ISFA (the
P.O. Box 4546                          President and Chief Executive                   owner of INVEST, a national
New York, NY 10163                     Officer of Empire Federal                       securities brokerage service
Age: 64                                Savings Bank of America and                     designed for banks and thrift
Trustee                                Banc PLUS Savings Association,                  institutions).
                                       former Chairman of the Board,
                                       President and Chief Executive
                                       Officer of Northeast Savings.

Frank J. Fabozzi        3 years(1)(2)  Consultant. Editor of THE             44        Director, Guardian Mutual
P.O. Box 4546                          JOURNAL OF PORTFOLIO MANAGEMENT                 Funds Group.
New York, NY 10163                     and Adjunct Professor of
Age: 54                                Finance at the School of
Trustee                                Management at Yale University.
                                       Author and editor of several
                                       books on fixed income portfolio
                                       management. Visiting Professor
                                       of Finance and Accounting at
                                       the Sloan School of Management,
                                       Massachusetts Institute of
                                       Technology from 1986 to August
                                       1992.

James Clayburn          3 years(1)(2)  Dean Emeritus of The John E.          44        Director, Jacobs Engineering
LaForce, Jr.                           Anderson Graduate School of                     Group, Inc., Payden & Rygel
P.O. Box 4546                          Management, University of                       Investment Trust, Provident
New York, NY 10163                     California since July 1, 1993.                  Investment Counsel Funds,
Age: 73                                Acting Dean of The School of                    Timken Company and Trust for
Trustee                                Business, Hong Kong University                  Investment Managers.
                                       of Science and Technology
                                       1990-1993. from 1978 to
                                       September 1993, Dean of The
                                       John E. Anderson Graduate
                                       School of Management,
                                       University of California.

Walter F. Mondale       3 years(1)(2)  Partner, Dorsey & Whitney, a          44        Director, Northwest Airlines
P.O. Box 4546                          law firm (December                              Corp., UnitedHealth Group,
New York, NY 10163                     1996-present, September                         Formerly, Director, RBC Dain
Age: 74                                1987-August 1993). Formerly                     Rauscher, Inc.
Trustee                                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.
</Table>

                                      B-20
<Page>
<Table>
<Caption>
                                                                          NUMBER OF
                                                                        PORTFOLIOS IN
                                                                        FUND COMPLEX
                           TERM OF                                       OVERSEEN BY
NAME, ADDRESS, AGE       OFFICE AND    PRINCIPAL OCCUPATION DURING THE   TRUSTEE OR
AND POSITION(S)           LENGTH OF       PAST FIVE YEARS AND OTHER      NOMINEE FOR        OTHER DIRECTORSHIPS
HELD WITH REGISTRANT     TIME SERVED            AFFILIATIONS               TRUSTEE            HELD BY TRUSTEE
- --------------------    -------------  -------------------------------  -------------  ------------------------------
<S>                     <C>            <C>                              <C>            <C>
INTERESTED
TRUSTEES
Robert S. Kapito*       3 years(1)(2)  Vice Chairman of                      44        President of the Board of
Age: 45                                BlackRock, Inc. Head of                         Directors of Periwinkle
Trustee and President                  BlackRock's Portfolio                           National Theatre, a national
                                       Management Group, a member of                   non- profit effort to help
                                       the Management Committee, the                   disadvantaged youth, and
                                       Investment Strategy Group, the                  Chairman of the Hope &
                                       Fixed Income and Global Equity                  Heroes/Babies & Children's
                                       Investment Strategy Group.                      Cancer Fund.
                                       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. Schlosstein*   3 years(1)(2)  Director since 1999 and               44        Chairman and President of the
Age: 51                                President of BlackRock, Inc.                    BlackRock Provident
Trustee and President                  since its formation in 1998 and                 Institutional Funds. Director
                                       of BlackRock, Inc.'s                            of several of BlackRock's
                                       predecessor entities since                      alternative investment
                                       1988. Member of BlackRock's                     vehicles. Currently, a Member
                                       Management Committee and                        of the Visiting Board of
                                       Investment Strategy Group.                      Overseers of the John F.
                                       Formerly, Managing Director of                  Kennedy School of Government
                                       Lehman Brothers, Inc. and                       at Harvard University, the
                                       Co-head of its Mortgage and                     Financial Institutions Center
                                       Savings Institutions Group.                     Board of the Wharton School of
                                       Currently, Chairman and Trustee                 the University of
                                       of each of the closed-end                       Pennsylvania, a trustee of
                                       trusts which BlackRock                          Trinity School in New York
                                       Advisors, Inc. acts as                          City and a Trustee of New
                                       investment advisor.                             Visions for Public Education
                                                                                       in New York Council. Formerly,
                                                                                       a Director of Pulte
                                                                                       Corporation and a Member of
                                                                                       Fannie Mae's Advisory Council.
</Table>

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

  *  "Interested person" of the Trust as defined in the Investment Company Act.
     Messrs. Kapito and Schlosstein are interested persons due to their
     employment with the investment advisor.
(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

                                      B-21
<Page>
(2)  Each trustee, except for Mr. Mondale, has served in such capacity since the
     Trust's inception. Mr. Mondale was appointed as trustee upon the Trust's
     organization but resigned effective October 31, 2002. He was renominated as
     Trustee by the Independent Trustees and re-elected by the full board of
     trustees on November 12, 2002.

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

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

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

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

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

<Table>
<Caption>
                                                                  AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES
                                          DOLLAR RANGE OF EQUITY    IN ALL REGISTERED INVESTMENT COMPANIES
                                            SECURITIES IN THE         OVERSEEN BY DIRECTORS IN THE FAMILY
NAME OF DIRECTOR                                 TRUST(*)                   INVESTMENT COMPANIES(*)
- ----------------                          ----------------------  -------------------------------------------
<S>                                       <C>                     <C>
Andrew F. Brimmer.......................         $      0                         $1-$10,000
Richard E. Cavanagh.....................         $      0                      $50,001-$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
</Table>

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


(*)  As of December 31, 2001. As of that date the trustees did not own shares in
     the Trust as it is a recently formed closed-end investment company.

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


                                      B-22
<Page>

Trust's calendar year ending December 31, 2002, assuming the Trust had been in
existence for the full calendar year.



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



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



(1)  Represents the total compensation earned by such person during the calendar
     year ended December 31, 2001 from the closed-end funds advised by the
     Advisor (the "Fund Complex").
(2)  Of these amounts it is anticipated that Messrs. Brimmer, Cavanagh, Dixon,
     Fabozzi, La Force and Mondale may voluntarily defer $0, $0, $0, $0, $2,000
     and $0, respectively, pursuant to the Fund Complex's deferred compensation
     plan in the calendar year ended December 31, 2002.
(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 is compensated in the amount of $40,000 per annum by the Fund
     Complex .
(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.

    At a meeting of the Governance Committee of the board of trustees of the
BlackRock closed-end trusts held on November 25, 2002, the Independent Trustees
approved a change to their compensation to become effective January 1, 2003.
Under this revised compensation plan, each Independent Trustee will receive 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 $190,000 per annum, except that
Dr. Brimmer will receive an additional $40,000 per annum from the Fund Complex
for acting as the lead trustee for each board of trustees/directors in the Fund
Complex and Messrs. Brimmer, Cavanagh and Dixon will receive an additional
$20,000 per annum from the Fund Complex for their service on the audit committee
of the Fund Complex. This additional compensation to Messrs. Brimmer, Cavanagh
and Dixon will be allocated among the funds/trusts in the Fund Complex based on
their relative net assets.



    In the event that the $190,000 cap is met with respect to an Independent
Trustee, the amount of the Independent Trustee's fee borne by each fund/trust in
the Fund Complex is reduced by reference to the net assets of the Trust relative
to the other funds/trusts in the Fund Complex. In addition, the attendance fees
of each Independent Trustee 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 (excluding
the per annum audit committee fee) held on a single day does not exceed $23,750
for any Independent Trustee.



    Certain of the above fees paid to the Independent Trustees will be subject
to mandatory deferals pursuant to the Fund Complex's deferred compensation plan.
The Independent Trustees have agreed that at least $30,000 of their $190,000
base fee will be mandatorily deferred pursuant to the Fund Complex's deferred
compensation plan. Also, members of the audit committee of the Fund Complex will
be required to defer all of the $20,000 per annum fee they will receive for
their services on the audit committee pursuant to the Fund Complex's deferred
compensation plan. Under the deferred compensation plan, deferred amounts earn a
return for the Independent Trustees as though equivalent dollar amounts had been
invested in common shares of certain other funds/trusts in the Fund Complex
selected by the Independent Trustees. This has the same economic effect for the
Independent Trustees as if they had invested the deferred amounts in such other
fund/trusts. The deferred compensation plan


                                      B-23
<Page>

is not funded and obligations thereunder represent general unsecured claims
against the general assets of a fund/trust. A fund/trust may, however, elect to
invest in common shares of those funds/trusts selected by the Independent
Trustee in order to match its deferred compensation obligations.


    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.

    The Governance Committee consists of Messrs. Brimmer, Cavanagh, Dixon,
Fabozzi, La Force, Jr. and Mondale. 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 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.

    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

                                      B-24
<Page>
management as of September 30, 2002. BlackRock manages assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, liquidity and alternative investment products, including the
BlackRock Funds-SM- 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 advised a closed-end family of 40 funds with
approximately $10.4 billion in assets as of September 30, 2002. BlackRock has 35
leveraged municipal closed-end funds and six open-end municipal funds under
management. 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. 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

                                      B-25
<Page>
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 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.

                                      B-26
<Page>
    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 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

                                      B-27
<Page>
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 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.

                                      B-28
<Page>
    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.

    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

                                      B-29
<Page>
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 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

                                      B-30
<Page>
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 (defined below) 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." 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. 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 an amount at least 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 Investment Company
Act Preferred Shares Asset Coverage, the Trust will be required to redeem
Preferred Shares in order to

                                      B-31
<Page>
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 a
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.

- -------------------
*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-32
<Page>
    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 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 October 21, 2002
and statement of operations for the period then ended appearing in this
Statement of Additional Information has been audited by Deloitte & Touche LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and is included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing. Deloitte & Touche LLP, located
at 200 Berkeley Street, Boston Massachusetts 02116, provides accounting and
auditing services to the Trust.

                             ADDITIONAL INFORMATION

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

                                      B-33
<Page>
                         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 October 21, 2002
and the related statements of operations and changes in net assets for the
period from August 19, 2002 (date of inception) to October 21, 2002. These
financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

    In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Trust at October 21, 2002 and the
results of its operations and changes in its net assets for the period then
ended, in conformity with accounting principles generally accepted in the United
States of America.


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


                                      F-1
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                      STATEMENT OF ASSETS AND LIABILITIES
                                OCTOBER 21, 2002

<Table>
<S>                                                 <C>
ASSETS:
Cash..............................................  $115,001
LIABILITIES:
Payable for organization costs....................    15,000
                                                    --------
Net Assets........................................  $100,001
                                                    ========
NET ASSETS WERE COMPRISED OF:
  Common stock at par (Note 1)....................  $      8
  Paid-in capital in excess of par................   114,993
                                                    --------
                                                     115,001
  Accumulated net investment loss.................   (15,000)
                                                    --------
Net assets, October 21, 2002......................  $100,001
                                                    ========
NET ASSET VALUE PER SHARE:
Equivalent to 8,028 shares of common stock issued
  and outstanding, par value $0.001, unlimited
  shares authorized...............................  $  12.46
                                                    ========
</Table>

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

<Table>
<S>                                                 <C>
Investment Income.................................  $     --
Expenses
  Organization expenses...........................    15,000
                                                    --------
Net investment loss...............................  $(15,000)
                                                    ========
</Table>

                                      F-2
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                       STATEMENT OF CHANGES IN NET ASSETS
     FOR THE PERIOD AUGUST 19, 2002 (DATE OF INCEPTION) TO OCTOBER 21, 2002

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

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                         NOTES TO FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

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

NOTE 2. AGREEMENTS

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

NOTE 3. ORGANIZATION EXPENSES AND OFFERING COSTS

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

NOTE 4. CASH & CASH EQUIVALENTS

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

                                      F-3
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                      STATEMENT OF ASSETS AND LIABILITIES
                         NOVEMBER 19, 2002 (UNAUDITED)

<Table>
<S>                                                 <C>
ASSETS

Investments, at value (cost $361,615,761) (Note
  1)..............................................  $362,913,610
Cash..............................................       369,765
Receivable from investment sold...................     7,134,304
Interest receivable...............................     3,121,071
                                                    ------------
                                                     373,538,750
                                                    ------------
LIABILITIES
Payable for investments purchased.................    27,432,040
Investment advisory fee payable (Note 2)..........        62,759
Other accrued expenses............................       742,856
                                                    ------------
                                                      28,237,655
                                                    ------------
NET ASSETS........................................  $345,301,095
                                                    ============
Net assets were comprised of:
  Common shares of beneficial interest:
    Par value (Note 4)............................  $     24,008
    Paid in capital in excess of par..............   343,185,993
                                                    ------------
                                                     343,210,001
                                                    ------------
Undistributed net investment income (Note 1)......       690,137
Accumulated net realized capital gain (Note 1)....       103,108
Net unrealized appreciation (Note 1)..............     1,297,849
                                                    ------------
Net assets, November 19, 2002.....................  $345,301,095
                                                    ============
Net asset value per common share of beneficial
  interest:
  ($345,301,095/24,008,028) common shares of
    beneficial interest issued and outstanding)...        $14.38
                                                    ============
</Table>

                       See Notes to Financial Statements

                                      F-4
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                            STATEMENT OF OPERATIONS
 FOR THE PERIOD OCTOBER 31, 2002* (DATE OF INCEPTION) THROUGH NOVEMBER 19, 2002
                                  (UNAUDITED)

<Table>
<S>                                                 <C>
NET INVESTMENT INCOME

Income
  Interest (Note 1)...............................  $ 797,348
                                                    ---------
Expenses
  Investment advisory.............................    108,985
  Organization expense............................     15,000
  Custodian.......................................      5,786
  Reports to shareholders.........................      3,970
  Trustees........................................      2,359
  Independent accountants.........................      2,186
  Registration....................................      1,812
  Legal...........................................      1,438
  Transfer agent..................................      1,294
  Miscellaneous...................................      4,012
                                                    ---------
    Total expenses................................    146,842
Less fees waived by Advisor (Note 2)..............    (39,631)
                                                    ---------
Net expenses......................................    107,211
                                                    ---------
Net investment income.............................    690,137
                                                    ---------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS
NET REALIZED GAIN ON INVESTMENTS..................    103,108
NET CHANGE IN UNREALIZED APPRECIATION ON
  INVESTMENTS.....................................  1,297,849
                                                    ---------
NET GAIN ON INVESTMENTS...........................  1,400,957
                                                    ---------

NET INCREASE IN NET ASSETS RESULTING FROM
  OPERATIONS......................................  $2,091,094
                                                    =========
</Table>

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

  *  Commencement of investment operations (Note 1).

                       See Notes to Financial Statements

                                      F-5
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                       STATEMENT OF CHANGES IN NET ASSETS
                                  (UNAUDITED)

<Table>
<Caption>
                                                       FOR THE PERIOD
                                                    OCTOBER 31, 2002(1)
                                                          THROUGH
                                                     NOVEMBER 19, 2002
                                                    --------------------
<S>                                                 <C>
INCREASE IN NET ASSETS
OPERATIONS:
  Net investment income...........................      $    690,137
  Net realized gain on investments................           103,108
  Net change in unrealized appreciation on
    investments...................................         1,297,849
                                                        ------------
    Net increase in net assets resulting from
      operations..................................         2,091,094
                                                        ------------
CAPITAL SHARE TRANSACTIONS:
  Net proceeds from the issuance of common
    shares........................................       343,210,001
                                                        ------------
    Total increase................................       345,301,095
                                                        ------------
NET ASSETS
Beginning of period...............................                --
                                                        ------------
End of period (including undistributed net
  investment income of $690,137)..................      $345,301,095
                                                        ============
</Table>

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

(1)  Commencement of investment operations. This information includes the
     initial investment by an affiliate of BlackRock Advisors, Inc. (Note 1)

                       See Notes to Financial Statements

                                      F-6
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                              FINANCIAL HIGHLIGHTS
                                  (UNAUDITED)

<Table>
<Caption>
                                                       FOR THE PERIOD
                                                    OCTOBER 31, 2002(1)
                                                          THROUGH
                                                     NOVEMBER 19, 2002
                                                    --------------------
<S>                                                 <C>
PER COMMON SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(2)...........        $  14.33
                                                          --------
Investment operations:
  Net investment income(3)........................            0.03
  Net realized and unrealized gain on
    investments(3)................................            0.06
                                                          --------
Net increase from investment operations...........            0.09
                                                          --------
Capital charges with respect to issuance of:
  Common shares...................................           (0.03)
                                                          --------
Net asset value, end of period(2).................        $  14.39
                                                          ========
Market value, end of period(2)....................        $  15.00
                                                          ========
TOTAL INVESTMENT RETURN(3)........................            0.00%
                                                          ========
RATIOS TO AVERAGE NET ASSETS OF COMMON
  SHAREHOLDERS:(4),(5)
Expenses after fee waiver.........................            0.54%
Expenses before fee waiver........................            0.74%
Net investment income after fee waiver............            3.48%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (000)...        $361,632
Portfolio turnover................................               2%
Net assets of common shareholders, end of period
  (000)...........................................        $345,301
</Table>

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

(1)  Commencement of investment operations. This information includes the
     initial investment by an affiliate of BlackRock Advisors, Inc. (Note 1) The
     Trust's net assets value per share immediately after the closing of the
     initial public offering was $14.30.
(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 invesment return does not reflect brokerage commissions. The total
     investment return, which is for less than a full year, is not annualized.
     Past performance is not a guarantee of future results.
(4)  Annualized.
(5)  These ratios are not indicative of future expense ratios, due to the short
     operating history of the Trust. Please refer to the Trust's common shares
     prospectus for the estimated expense ratio.

    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.

                       See Notes to Financial Statements

                                      F-7
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 1. ORGANIZATION & ACCOUNTING POLICIES

    The BlackRock Insured Municipal Income Trust (the "Trust") was organized as
a Delaware business trust on August 19, 2002, and is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940. The Trust had no other transactions other than when it sold
8,028 common shares for $115,001 ($14.325 per share) to an affiliate of
BlackRock Advisors, Inc. Investment operations commenced on October 31, 2002.
The Trust's investment objective is to provide current income exempt from
Federal income tax, including the alternative minimum tax. The ability of
issuers of debt securities held by the Trust to meet their obligations may be
affected by economic developments in states, a specific industry or region. No
assurance can be given that the Trust's investment objective will be achieved.

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

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

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

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

SEGREGATION: In cases in which the Investment Company Act of 1940, As amended,
and the interpretive positions of the Securities and Exchange Commission ("SEC")
require that each Trust segregate assets in connection with certain investments
(e.g., when issued securities, reverse repurchase agreements or future
contracts), each Trust will, consistent with certain interpretive letters issued
by the SEC, designate on its books and records cash or other liquid debt
securities having a market value at least equal to the amount that would
otherwise be required to be physically segregated.

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

                                      F-8
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (UNAUDITED) (CONTINUED)

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

DEFERRED COMPENSATION PLAN: Under a deferred compensation plan approved by the
Board of Trustees on September 20, 2002, non-interested Trustees may elect to
defer receipt of all or a portion of their annual compensation.

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

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

NOTE 2. AGREEMENTS

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

    The investment advisory fee paid to the Advisor is computed weekly and
payable monthly at an annual rate of 0.55% of the Trust's average weekly 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 Advisor has voluntarily agreed to waive receipt of a portion of the
investment advisory fee or other expenses of the Trust in the amount of 0.20% of
average weekly managed assets for the first 5 years of the Trust's operations,
0.15% in year 6, 0.10% in year 7, and 0.05% in year 8.

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

NOTE 3. PORTFOLIO SECURITIES

    Purchases and sales of investment securities, other than short-term
investments, for the period ended November 19, 2002, aggregated $184,304,694 and
$7,121,665, respectively.

                                      F-9
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (UNAUDITED) (CONTINUED)

    The Federal income tax cost basis the cost of the Trust's investments at
November 19, 2002, was $361,615,761and accordingly, net unrealized appreciation
was $1,297,849 (gross unrealized appreciation -- $1,998,068 gross unrealized
depreciation -- $700,219).

NOTE 4. CAPITAL

    There are an unlimited number of $.001 par value common shares of beneficial
interest authorized. Of the 24,008,028 common shares outstanding at
November 19, 2002, the Advisor owned 8,028 shares.

    Transactions in common shares of beneficial interest for the period October
31, 2002 (commencement of investment operations) to November 19, 2002, were as
follows:

<Table>
<S>                                                 <C>
Shares Issued in connection with initial public
  offering........................................  24,008,028
                                                    ----------
Net increase in shares outstanding................  24,008,028
                                                    ==========
</Table>

    Offering costs of $705,000 incurred in connection with the Trust's offering
of common shares have been charged to paid-in capital in excess of par of the
common shares.

                                      F-10
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                            PORTFOLIO OF INVESTMENTS
                         NOVEMBER 19, 2002 (UNAUDITED)

<Table>
<Caption>
         PRINCIPAL
          AMOUNT                                     OPTION CALL       VALUE
RATING*    (000)             DESCRIPTION             PROVISIONS+      (NOTE 1)
<S>      <C>        <C>                             <C>             <C>

- --------------------------------------------------------------------------------
                    LONG-TERM INVESTMENTS -- 101.9%
                    ALABAMA -- 11.4%
                    Jefferson Cnty. Swr. Rev. Cap. Impt., Ser. D, FGIC
AAA       $20,000   5.00%, 2/1/38.................     08/12 @ 100  $ 19,680,200
AAA        20,000   5.00%, 2/1/42.................     08/12 @ 100    19,569,400
                                                                    ------------
                                                                      39,249,600
                                                                    ------------
                    CALIFORNIA -- 10.3%
A3         14,000   California St. Dept. of Wtr.
                      Res., Pwr. Supply Rev., Ser.
                      A, 5.375%, 5/1/22...........     05/12 @ 101    14,166,180
                                                                    ------------
                    San Joaquin Hills Trans. Corridor Agcy. Toll Road Rev.,
                      Ser. A, MBIA
AAA        53,000   Zero Coupon, 1/15/31..........             N/A    11,477,150
AAA        48,690   Zero Coupon, 1/15/32..........             N/A     9,985,832
                                                                    ------------
                                                                      35,629,162
                                                                    ------------
                    FLORIDA -- 2.3%
A-          8,000   Highlands Cnty. Hlth. Facs.
                      Auth. Rev., Adventist Hlth.,
                      Ser. B, 5.25%, 11/15/23.....     11/12 @ 100     7,840,160
                                                                    ------------
                    GEORGIA -- 3.7%
                    Atlanta Wtr. & Waste Wtr. Rev., Ser. A,
AAA         8,200   5.00%, 11/1/39, MBIA..........     05/12 @ 100     8,148,422
AAA         4,760   5.00%, 11/1/38, FGIC..........     05/09 @ 101     4,738,104
                                                                    ------------
                                                                      12,886,526
                                                                    ------------
                    ILLINOIS -- 11.5%
AAA         9,400   Chicago Wtr. Rev., 5.00%,
                      11/1/31, AMBAC..............     11/11 @ 100     9,373,680
                                                                    ------------
                    Met. Pier & Exposition Auth., Dedicated St. Tax Rev.,
                      McCormick Place Expansion Proj., MBIA,
AAA        15,000   Zero Coupon, 6/15/28..........             N/A     3,700,650
AAA        10,000   Ser. A, Zero Coupon,
                      12/15/25....................             N/A     2,829,400
AAA         5,000   Ser. A, Zero Coupon,
                      12/15/29....................             N/A     1,142,150
AAA        25,000   Ser. A, Zero Coupon,
                      6/15/35.....................             N/A     4,133,750
AAA        18,000   Ser. A, 5.25%, 6/15/42........     06/12 @ 101    18,446,760
                                                                    ------------
                                                                      39,626,390
                                                                    ------------
                    MICHIGAN -- 10.3%
AAA         6,500   Anchor Bay Sch. Dist., GO,
                      5.00%, 5/1/29...............     05/11 @ 100     6,482,190
AAA         4,345   Constantine Pub. Sch., GO,
                      5.00%, 5/1/25...............     11/12 @ 100     4,342,784
AAA         5,000   Detroit City Sch. Dist., Ser.
                      A, GO, 5.125%, 5/1/31,
                      FSA.........................     05/12 @ 100     5,051,450
AA-        20,000   Michigan St. Hosp. Fin. Auth.
                      Rev., Trinity Hlth., Ser. C,
                      5.375%, 12/1/30.............     12/12 @ 100    19,763,800
                                                                    ------------
                                                                      35,640,224
                                                                    ------------
                    NEW JERSEY -- 5.5%
A1         20,000   Tobacco Settlement Fin. Corp.,
                      6.125%, 6/1/42..............     06/12 @ 100    19,136,600
                                                                    ------------
</Table>

                                      F-11
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                            PORTFOLIO OF INVESTMENTS
                   NOVEMBER 19, 2002 (UNAUDITED) (CONTINUED)

<Table>
<Caption>
         PRINCIPAL
          AMOUNT                                     OPTION CALL       VALUE
RATING*   (000)              DESCRIPTION             PROVISIONS+     (NOTE 1)
<S>      <C>        <C>                             <C>             <C>

- --------------------------------------------------------------------------------
                    NEVADA -- 4.4%
                    Truckee Meadows Wtr. Auth., Wtr. Rev., Ser. A, FSA
AAA        10,000   5.00%, 7/1/25.................     07/11 @ 100  $ 10,042,600
AAA         5,000   5.25%, 7/1/34.................     07/11 @ 100     5,083,550
                                                                    ------------
                                                                      15,126,150
                                                                    ------------
                    NEW YORK -- 3.2%
AAA        11,000   Triborough Brdg. & Tunl. Auth.
                      Rev., Ser. E, 5.00%,
                      11/15/32, MBIA..............     11/12 @ 100    11,020,460
                                                                    ------------
                    OHIO -- 0.8%
BBB         2,500   Cuyahoga Cnty. Hosp. Facs.
                      Rev., Canton Inc. Proj.,
                      7.50%, 1/1/30...............     07/10 @ 101     2,740,675
                                                                    ------------
                    PENNSYLVANIA -- 5.9%
AAA         5,000   Pennsylvania St. Tpk. Comm.
                      Rev., 5.00%, 7/15/41,
                      AMBAC.......................     07/11 @ 101     4,976,450
AAA        15,200   Philadelphia Gas Wks. Rev.,
                      Third Ser., 5.125%, 8/1/31,
                      FSA.........................     08/11 @ 100    15,291,200
                                                                    ------------
                                                                      20,267,650
                                                                    ------------
                    RHODE ISLAND -- 6.1%
A1         21,995   Tobacco Settlement Fin. Corp.,
                      Tobacco Settlement Rev.,
                      Ser. A. 6.25%, 6/1/42.......     06/12 @ 100    20,928,462
                                                                    ------------
                    SOUTH CAROLINA -- 1.5%
AAA         5,000   So. Carolina St. Pub. Svc.
                      Auth. Rev., Ser. B, 5.50%,
                      1/1/36, FSA.................     01/12 @ 100     5,253,050
                                                                    ------------
                    SOUTH DAKOTA -- 1.2%
A1          4,165   Ed. Enhancement Funding Corp.
                      Rev., Ser. B, 6.50%,
                      6/1/32......................     06/12 @ 101     4,127,265
                                                                    ------------
                    TEXAS -- 14.7%
                    Harris Cnty., MBIA
AAA         7,485   GO, Zero Coupon, 8/15/25......             N/A     2,180,904
AAA        10,915   GO, Zero Coupon, 8/15/28......             N/A     2,668,281
AAA         5,785   Houston Sports Auth. Rev. Cap.
                      Apprec., Jr. Lien, Ser. H,
                      Zero Coupon, 11/15/38.......   11/31 @ 64.91       774,322
AAA         6,160   Houston Sports Auth. Rev. Cap.
                      Apprec., Jr. Lien, Ser. H,
                      Zero Coupon, 11/15/39.......  11/31 @ 60.976       774,066
AAA        41,800   Texas St. Tpke. Auth. Central
                      Texas Tpke. Sys. Rev., First
                      Tier, Ser. A, 5.00%,
                      8/15/42, AMBAC..............     08/12 @ 100    41,387,853
Baa1        3,000   Tyler Hlth. Facs. Dev. Corp.
                      Hosp. Rev., Mother Frances
                      Hosp. Regl. Hlth., 6.00%,
                      7/1/31......................     07/12 @ 100     2,967,960
                                                                    ------------
                                                                      50,753,386
                                                                    ------------
                    VIRGINIA -- 2.1%
                    Chesterfield Cnty. Indl. Dev. Auth. PCR, Ser. A,
A3          4,000   Ser. B, 5.875%, 6/1/17........     11/10 @ 102     4,088,360
A3          3,000   Ser. A, 5.875%, 6/1/17........     11/10 @ 102     3,066,270
                                                                    ------------
                                                                       7,154,630
                                                                    ------------
</Table>

                                      F-12
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                            PORTFOLIO OF INVESTMENTS
                   NOVEMBER 19, 2002 (UNAUDITED) (CONTINUED)

<Table>
<Caption>
         PRINCIPAL
          AMOUNT                                     OPTION CALL       VALUE
RATING*   (000)              DESCRIPTION             PROVISIONS+     (NOTE 1)
<S>      <C>        <C>                             <C>             <C>

- --------------------------------------------------------------------------------
                    WASHINGTON -- 7.0%
A1         18,150   Tobacco Settlement Auth.,
                      Tobacco Settlement Rev.,
                      6.625%, 6/1/32..............     06/13 @ 100  $ 17,952,710
AAA         6,380   Washington St., GO, Ser. A,
                      5.00%, 7/1/25, FSA..........     07/11 @ 100     6,380,510
                                                                    ------------
                                                                      24,333,220
                                                                    ------------
                    TOTAL LONG-TERM INVESTMENTS
                      (COST $350,415,761).........                   351,713,610
                                                                    ------------
                    SHORT-TERM INVESTMENTS -- 3.2%
NR          5,000   AIM Tax Free Investment Co.
                      Cash Reserve Portfolio......             N/A     5,000,000
A-1         6,200   Burke Cnty. Dev. Auth. PCR,
                      Pwr. Co Plant., 1.25%,
                      11/20/02, FRDD**............             N/A     6,200,000
                                                                    ------------
                    TOTAL SHORT-TERM INVESTMENTS (COST
                      $11,200,000)................................    11,200,000
                                                                    ------------
                    TOTAL INVESTMENTS -- 105.1% (COST
                      $361,615,761)...............................  $362,913,610
                    Liabilities in excess of other assets --
                    (5.1)%........................................   (17,612,515)
                                                                    ------------
                    NET ASSETS APPLICABLE TO COMMON
                    SHAREHOLDERS -- 100%..........................  $345,301,095
                                                                    ============
</Table>

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

  *  Using the higher of Standard & Poor's, Moody's or Fitch's rating.
  +  Date (month/year) and price of the earliest optional call or redemption.
     There may be other call provisions at varying prices at later dates.
 **  For purposes of amortized cost valuation, the maturity date of this
     instrument is considered to be the earlier of the next date on which the
     security can be redemed at par, or the next date on which the rate of
     interest is adjusted.

             KEY TO ABBREVIATIONS
AMBAC  --  American Municipal Bond Assurance
FGIC    --  Financial Guaranty Insurance Company
FRDD   --  Floating Rate Daily Demand
FSA     --  Financial Security Assurance
GO      --  General Obligation
MBIA    --  Municipal Bond Insurance Association
PCR     --  Pollution Control Revenue

                                      F-13
<Page>
                                   APPENDIX A

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

                                      A-1
<Page>
                               TABLE OF CONTENTS

<Table>
<Caption>
                                               PAGE
                                               ----
<C>  <S>                                       <C>
DEFINITIONS..................................   A-3
PART I.......................................  A-16
 1.  Number of Authorized Shares.............  A-16
 2.  Dividends...............................  A-16
 3.  Gross-Up Payments.......................  A-20
 4.  Designation of Special Rate Periods.....  A-20
 5.  Voting Rights...........................  A-22
 6.  Investment Company Act Preferred Shares
     Asset Coverage..........................  A-26
 7.  Preferred Shares Basic Maintenance
     Amount..................................  A-26
 8.  Reserved................................  A-28
 9.  Restrictions on Dividends and Other
     Distributions...........................  A-28
10.  Rating Agency Restrictions..............  A-29
11.  Redemption..............................  A-30
12.  Liquidation Rights......................  A-34
13.  Miscellaneous...........................  A-35
PART II......................................  A-36
 1.  Orders..................................  A-36
 2.  Submission of Orders by Broker-Dealers
     to Auction Agent........................  A-37
 3.  Determination of Sufficient Clearing
     Bids, Winning Bids Rate and Applicable
     Rate....................................  A-39
 4.  Acceptance and Rejection of Submitted
     Bids and Submitted Sell Orders and
     Allocation of Shares....................  A-40
 5.  Notification of Allocations.............  A-43
 6.  Auction Agent...........................  A-43
 7.  Transfer of Preferred Shares............  A-43
 8.  Global Certificate......................  A-44
 9.  Force Majeure...........................  A-44
APPENDIX A...................................  AA-1
</Table>

                                      A-2
<Page>
    BLACKROCK INSURED MUNICIPAL INCOME TRUST, a Delaware statutory trust (the
"Trust"), certifies that:

    First: Pursuant to authority expressly vested in the Board of Trustees of
the Trust by Article VI of the Trust's Amended and Restated Agreement and
Declaration of Trust, (which, as hereafter restated or amended from time to time
is, together with this Statement, herein called the "Declaration"), the Board of
Trustees has, by resolution, authorized the issuance of shares of the Trust's
authorized Preferred Shares, liquidation preference $25,000 per share, having
such designation or designations as to series as is set forth in Section 1 of
Appendix A hereto and such number of shares per such series as is set forth in
Section 2 of Appendix A hereto.

    Second: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the shares
of each series of Preferred Shares now or hereafter described in Section 1 of
Appendix A hereto are as follows (each such series being referred to herein as a
series of Preferred Shares, and shares of all such series being referred to
collectively as Preferred Shares).

                                  DEFINITIONS

    Except as otherwise specifically provided in Section 3 of Appendix A hereto,
as used in Parts I and II of this Statement, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:

      (1) "AA" COMPOSITE COMMERCIAL PAPER RATE, on any date for any Rate Period
of shares of a series of Preferred Shares, shall mean (i) (A) in the case of any
Minimum Rate Period or any Special Rate Period of fewer than 49 Rate Period
Days, the interest equivalent of the 30-day rate; provided, however, that if
such Rate Period is a Minimum Rate Period and the "AA" Composite Commercial
Paper Rate is being used to determine the Applicable Rate for shares of such
series when all of the Outstanding shares of such series are subject to
Submitted Hold Orders, then the interest equivalent of the seven-day rate, and
(B) in the case of any Special Rate Period of (1) 49 or more but fewer than 70
Rate Period Days, the interest equivalent of the 60-day rate; (2) 70 or more but
fewer than 85 Rate Period Days, the arithmetic average of the interest
equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99 Rate
Period Days, the interest equivalent of the 90-day rate; (4) 99 or more but
fewer than 120 Rate Period Days, the arithmetic average of the interest
equivalent of the 90-day and 120-day rates; (5) 120 or more but fewer than 141
Rate Period Days, the interest equivalent of the 120-day rate; (6) 141 or more
but fewer than 162 Rate Period Days, the arithmetic average of the 120-day and
180-day rates; and (7) 162 or more but fewer than 183 Rate Period Days, the
interest equivalent of the 180-day rate, in each case on commercial paper placed
on behalf of issuers whose corporate bonds are rated "AA" by S&P or the
equivalent of such rating by S&P or another rating agency, as made available on
a discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day next preceding such date; or (ii) in the event that the Federal
Reserve Bank of New York does not make available any such rate, then the
arithmetic average of such rates, as quoted on a discount basis or otherwise, by
the Commercial Paper Dealers to the Auction Agent for the close of business on
the Business Day next preceding such date. If any Commercial Paper Dealer does
not quote a rate required to determine the "AA" Composite Commercial Paper Rate,
the "AA" Composite Commercial Paper Rate shall be determined on the basis of the
quotation or quotations furnished by the remaining Commercial Paper Dealer or
Commercial Paper Dealers and any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Trust to provide such rate
or rates not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers, as the case may be, or, if the Trust does not select any such
Substitute Commercial Paper

                                      A-3
<Page>
Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper
Dealer or Commercial Paper Dealers. For purposes of this definition, the
"interest equivalent" of a rate stated on a discount basis (a "discount rate")
for commercial paper of a given days' maturity shall be equal to the quotient
(rounded upwards to the next higher one-thousandth (.001) of 1%) of (A) the
discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction,
the numerator of which shall be the product of the discount rate times the
number of days in which such commercial paper matures and the denominator of
which shall be 360.

      (2) "ACCOUNTANT'S CONFIRMATION" shall have the meaning specified in
paragraph (c) of Section 7 of Part I of this Statement.

      (3) "AFFILIATE" shall mean, for purposes of the definition of
"Outstanding," any Person known to the Auction Agent to be controlled by, in
control of or under common control with the Trust; provided, however, that no
Broker-Dealer controlled by, in control of or under common control with the
Trust shall be deemed to be an Affiliate nor shall any corporation or any Person
controlled by, in control of or under common control with such corporation, one
of the trustees, directors or executive officers of which is a trustee of the
Trust, be deemed to be an Affiliate solely because such trustee, director or
executive officer is also a trustee of the Trust.

      (4) "AGENT MEMBER" shall mean a member of or participant in the Securities
Depository that will act on behalf of a Bidder.

      (5) "ANTICIPATION NOTES" shall mean Tax Anticipation Notes (TANs), Revenue
Anticipation Notes (RANs), Tax and Revenue Anticipation Notes (TRANs), Grant
Anticipation Notes (GANs) that are rated by S&P and Bond Anticipation Notes
(BANs) that are rated by S&P.

      (6) "APPLICABLE RATE" shall have the meaning specified in
subparagraph (e) (i) of Section 2 of Part I of this Statement.

      (7) "AUCTION" shall mean each periodic implementation of the Auction
Procedures.

      (8) "AUCTION AGENCY AGREEMENT" shall mean the agreement between the Trust
and the Auction Agent which provides, among other things, that the Auction Agent
will follow the Auction Procedures for purposes of determining the Applicable
Rate for shares of a series of Preferred Shares so long as the Applicable Rate
for shares of such series is to be based on the results of an Auction.

      (9) "AUCTION AGENT" shall mean the entity appointed as such by a
resolution of the Board of Trustees or the Executive Committee of the Board of
Trustees in accordance with Section 6 of Part II of this Statement.

     (10) "AUCTION DATE," with respect to any Rate Period, shall mean the
Business Day next preceding the first day of such Rate Period.

     (11) "AUCTION PROCEDURES" shall mean the procedures for conducting Auctions
set forth in Part II of this Statement.

     (12) "AVAILABLE PREFERRED SHARES" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.

     (13) "BENCHMARK RATE" shall have the meaning specified in Section 12 of
Appendix A hereto.

                                      A-4
<Page>
     (14) "BENEFICIAL OWNER," with respect to shares of a series of Preferred
Shares, means a customer of a Broker-Dealer who is listed on the records of that
Broker-Dealer (or, if applicable, the Auction Agent) as a holder of shares of
such series.

     (15) "BID" and "BIDS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.

     (16) "BIDDER" and "BIDDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement; provided, however, that
neither the Trust nor any affiliate thereof shall be permitted to be a Bidder in
an Auction, except that any Broker-Dealer that is an affiliate of the Trust may
be a Bidder in an Auction, but only if the Orders placed by such Broker-Dealer
are not for its own account.

     (17) "BOARD OF TRUSTEES" shall mean the Board of Trustees of the Trust or
any duly authorized committee thereof.

     (18) "BROKER-DEALER" shall mean any broker-dealer, commercial bank or other
entity permitted by law to perform the functions required of a Broker-Dealer in
Part II of this Statement, that is a member of, or a participant in, the
Securities Depository or is an affiliate of such member or participant, has been
selected by the Trust and has entered into a Broker-Dealer Agreement that
remains effective.

     (19) "BROKER-DEALER AGREEMENT" shall mean an agreement among the Trust, the
Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to
follow the procedures specified in Part II of this Statement.

     (20) "BUSINESS DAY" shall mean a day on which the New York Stock Exchange
is open for trading and which is neither a Saturday, Sunday nor any other day on
which banks in The City of New York, New York, are authorized by law to close.

     (21) "CODE" means the Internal Revenue Code of 1986, as amended.

     (22) "COMMERCIAL PAPER DEALERS" shall mean Lehman Commercial Paper
Incorporated, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and any other commercial paper dealer selected by the Trust as to
which Moody's, S&P or any substitute rating agency then rating the Preferred
Shares shall not have objected or, in lieu of any thereof, their respective
affiliates or successors, if such entity is a commercial paper dealer.

     (23) "COMMON SHARES" shall mean the common shares of beneficial interest,
par value $.001 per share, of the Trust.

     (24) "CURE DATE" shall mean the Preferred Shares Basic Maintenance Cure
Date or the Investment Company Act Cure Date, as the case may be.

     (25) "DATE OF ORIGINAL ISSUE," with respect to shares of a series of
Preferred Shares, shall mean the date on which the Trust initially issued such
shares.

     (26) "DECLARATION" shall have the meaning specified in the First paragraph
of this Statement.

     (27) "DEPOSIT SECURITIES" shall mean cash and Municipal Obligations rated
at least P-1, MIG-1 or VMIG-1 by Moody's, or A-1+ or SP-1+ by S&P.

                                      A-5
<Page>
     (28) "DISCOUNTED VALUE," as of any Valuation Date, shall mean, (i)(a) with
respect to a Moody's Eligible Asset that is not currently callable as of such
Valuation Date at the option of the issuer thereof, the lesser of the Market
Value or the par value thereof divided by the applicable Moody's Discount
Factor, or (b) with respect to a Moody's Eligible Asset that is currently
callable as of such Valuation Date at the option of the issuer thereof, the
quotient of (1) the lesser of the Market Value or call price thereof, including
any call premium, divided by (2) the applicable Moody's Discount Factor, and
(ii) with respect to a S&P Eligible Asset, the quotient of the Market Value
thereof divided by the applicable S&P Discount Factor.

     (29) "DIVIDEND PAYMENT DATE," with respect to shares of a series of
Preferred Shares, shall mean any date on which dividends are payable on shares
of such series pursuant to the provisions of paragraph (d) of Section 2 of
Part I of this Statement.

     (30) "DIVIDEND PERIOD," with respect to shares of a series of Preferred
Shares, shall mean the period from and including the Date of Original Issue of
shares of such series to, but excluding, the initial Dividend Payment Date for
shares of such series and any period thereafter from, and including, one
Dividend Payment Date for shares of such series to, but excluding, the next
succeeding Dividend Payment Date for shares of such series.

     (31) "EXISTING HOLDER," with respect to shares of a series of Preferred
Shares, shall mean a Broker-Dealer (or any such other Person as may be permitted
by the Trust) that is listed on the records of the Auction Agent as a holder of
shares of such series.

     (32) "FAILURE TO DEPOSIT," with respect to shares of a series of Preferred
Shares, shall mean a failure by the Trust to pay to the Auction Agent, not later
than 12:00 noon, New York City time, (A) on any Dividend Payment Date for shares
of such series, in funds available on such Dividend Payment Date in The City of
New York, New York, the full amount of any dividend (whether or not earned or
declared) to be paid on such Dividend Payment Date on any share of such series
or (B) on the Business Day next preceding any redemption date in funds available
on such redemption date for shares of such series in The City of New York, New
York, the Redemption Price to be paid on such redemption date for any share of
such series after notice of redemption is mailed pursuant to paragraph (c) of
Section 11 of Part I of this Statement; provided, however, that the foregoing
clause (B) shall not apply to the Trust's failure to pay the Redemption Price in
respect of Preferred Shares when the related Notice of Redemption provides that
redemption of such shares is subject to one or more conditions precedent and any
such condition precedent shall not have been satisfied at the time or times and
in the manner specified in such Notice of Redemption.

     (33) "FEDERAL TAX RATE INCREASE" shall have the meaning specified in the
definition of "Moody's Volatility Factor."

     (34) "GROSS-UP PAYMENT" shall have the meaning specified in Section 4 of
Appendix A hereto.

     (35) "HOLDER," with respect to shares of a series of Preferred Shares,
shall mean the registered holder of such shares as the same appears on the
record books of the Trust.

     (36) "HOLD ORDER" and "HOLD ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.

     (37) "INDEPENDENT ACCOUNTANT" shall mean a nationally recognized
accountant, or firm of accountants, that is, with respect to the Trust, an
independent public accountant or firm of independent public accountants under
the Securities Act of 1933, as amended from time to time.

                                      A-6
<Page>
     (38) "INITIAL RATE PERIOD," with respect to shares of a series of Preferred
Shares, shall have the meaning specified with respect to shares of such series
in Section 5 of Appendix A hereto.

     (39) "INTEREST EQUIVALENT" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.

     (40) "INVESTMENT COMPANY ACT" shall mean the Investment Company Act of
1940, as amended from time to time.

     (41) "INVESTMENT COMPANY ACT CURE DATE," with respect to the failure by the
Trust to maintain the Investment Company Act Preferred Shares Asset Coverage (as
required by Section 6 of Part I of this Statement) as of the last Business Day
of each month, shall mean the last Business Day of the following month.

     (42) "INVESTMENT COMPANY ACT PREFERRED SHARES ASSET COVERAGE" shall mean
asset coverage, as defined in Section 18(h) of the Investment Company Act, of at
least 200% with respect to all outstanding senior securities of the Trust which
are shares of beneficial interest including all outstanding Preferred Shares (or
such other asset coverage as may in the future be specified in or under the
Investment Company Act as the minimum asset coverage for senior securities which
are shares or stock of a closed-end investment company as a condition of
declaring dividends on its common shares or stock).

     (43) "KENNY INDEX" shall have the meaning specified in the definition of
'Taxable Equivalent of the Short-Term Municipal Bond Rate.

     (44) "LATE CHARGE" shall have the meaning specified in
subparagraph (e) (i) (B) of Section 2 of Part I of this Statement.

     (45) "LIQUIDATION PREFERENCE," with respect to a given number of Preferred
shares, means $25,000 times that number.

     (46) "MARKET VALUE" of any asset of the Trust shall be the market value
thereof determined by FT Interactive Data Corporation Evaluation services or any
other pricing service or services designated by the Board of Trustees of the
Trust, provided that the Trust obtains written assurance from Moody's and S&P,
if Moody's and S&P are then rating the Preferred Shares, and from any substitute
rating agency then rating the Preferred Shares that such designation will not
impair the rating then assigned by Moody's, S&P or such substitute rating agency
to the Preferred Shares (the "Pricing Service"). Market Value of any asset shall
include any interest accrued thereon. The Pricing Service shall value portfolio
securities at the lower of the quoted bid price or the mean between the quoted
bid and ask price or the yield equivalent when quotations are not readily
available. Securities for which quotations are not readily available shall be
valued at fair value as determined by the Pricing Service using methods which
include consideration of: yields or prices of municipal obligations of
comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. The Pricing Service may
employ electronic data processing techniques and/or a matrix system to determine
valuations. If the Pricing Service fails to provide the Market Value of any
Municipal Obligation, such Municipal Obligation shall be valued at the lower of
two bid quotations (one of which shall be in writing) obtained by the Trust from
two dealers who are members of the National Association of Securities
Dealers, Inc. and are making a market in such Municipal Obligations. Futures
contracts and options are valued at closing prices for such instruments
established by the exchange or board of trade on which they are traded, or if
market quotations are not readily available, are valued at fair value as
determined by the Pricing Service or if the Pricing Service is not able to

                                      A-7
<Page>
value such instruments they shall be valued at fair value on a consistent basis
using methods determined in good faith by the Board of Trustees.

     (47) "MAXIMUM POTENTIAL GROSS-UP PAYMENT LIABILITY," as of any Valuation
Date, shall mean the aggregate amount of Gross-up Payments that would be due if
the Trust were to make Taxable Allocations, with respect to any taxable year,
estimated based upon dividends paid and the amount of undistributed realized net
capital gains and other taxable income earned by the Trust, as of the end of the
calendar month immediately preceding such Valuation Date, and assuming such
Gross-up Payments are fully taxable.

     (48) "MAXIMUM RATE," for shares of a series of Preferred Shares on any
Auction Date for shares of such series, shall mean:

          (1) in the case of any Auction Date which is not the Auction Date
    immediately prior to the first day of any proposed Special Rate Period
    designated by the Trust pursuant to Section 4 of Part I of this Statement,
    the product of (A) the Reference Rate on such Auction Date for the next Rate
    Period of shares of such series and (B) the Rate Multiple on such Auction
    Date, unless shares of such series have or had a Special Rate Period (other
    than a Special Rate Period of 28 Rate Period Days or fewer) and an Auction
    at which Sufficient Clearing Bids existed has not yet occurred for a Minimum
    Rate Period of shares of such series after such Special Rate Period, in
    which case the higher of:

             (1) the dividend rate on shares of such series for the then-ending
       Rate Period; and

             (2) the product of (1) the higher of (x) the Reference Rate on such
       Auction Date for a Rate Period equal in length to the then-ending Rate
       Period of shares of such series, if such then-ending Rate Period was 364
       Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date
       for a Rate Period equal in length to the then-ending Rate Period of
       shares of such series, if such then-ending Rate Period was more than 364
       Rate Period Days, and (y) the Reference Rate on such Auction Date for a
       Rate Period equal in length to such Special Rate Period of shares of such
       series, if such Special Rate Period was 364 Rate Period Days or fewer, or
       the Treasury Note Rate on such Auction Date for a Rate Period equal in
       length to such Special Rate Period, if such Special Rate Period was more
       than 364 Rate Period Days and (2) the Rate Multiple on such Auction Date;
       or

          (2) in the case of any Auction Date which is the Auction Date
    immediately prior to the first day of any proposed Special Rate Period
    designated by the Trust pursuant to Section 4 of Part I of this Statement,
    the product of (A) the highest of (1) the Reference Rate on such Auction
    Date for a Rate Period equal in length to the then-ending Rate Period of
    shares of such series, if such then-ending Rate Period was 364 Rate Period
    Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate
    Period equal in length to the then-ending Rate Period of shares of such
    series, if such then-ending Rate Period was more than 364 Rate Period Days,
    (2) the Reference Rate on such Auction Date for the Special Rate Period for
    which the Auction is being held if such Special Rate Period is 364 Rate
    Period Days or fewer or the Treasury Note Rate on such Auction Date for the
    Special Rate Period for which the Auction is being held if such Special Rate
    Period is more than 364 Rate Period Days, and (3) the Reference Rate on such
    Auction Date for Minimum Rate Periods and (B) the Rate Multiple on such
    Auction Date.

     (49) "MINIMUM RATE PERIOD" shall mean any Rate Period consisting of 7 Rate
Period Days.

                                      A-8
<Page>
     (50) "MOODY'S" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.

     (51) "MOODY'S DISCOUNT FACTOR" shall have the meaning specified in
Section 4 of Appendix A hereto.

     (52) "MOODY'S ELIGIBLE ASSET" shall have the meaning specified in
Section 4 of Appendix A hereto.

     (53) "MOODY'S EXPOSURE PERIOD" shall mean the period commencing on a given
Valuation Date and ending 56 days thereafter.

     (54) "MOODY'S VOLATILITY FACTOR" shall mean, as of any Valuation Date,
(i) in the case of any Minimum Rate Period, any Special Rate Period of 28 Rate
Period Days or fewer, or any Special Rate Period of 57 Rate Period Days or more,
a multiplicative factor equal to 275%, except as otherwise provided in the last
sentence of this definition; (ii) in the case of any Special Rate Period of more
than 28 but fewer than 36 Rate Period Days, a multiplicative factor equal to
203%; (iii) in the case of any Special Rate Period of more than 35 but fewer
than 43 Rate Period Days, a multiplicative factor equal to 217%; (iv) in the
case of any Special Rate Period of more than 42 but fewer than 50 Rate Period
Days, a multiplicative factor equal to 226%; and (v) in the case of any Special
Rate Period of more than 49 but fewer than 57 Rate Period Days, a multiplicative
factor equal to 235%. If, as a result of the enactment of changes to the Code,
the greater of the maximum marginal Federal individual income tax rate
applicable to ordinary income and the maximum marginal Federal corporate income
tax rate applicable to ordinary income will increase, such increase being
rounded up to the next five percentage points (the "Federal Tax Rate Increase"),
until the effective date of such increase, the Moody's Volatility Factor in the
case of any Rate Period described in (i) above in this definition instead shall
be determined by reference to the following table:

<Table>
<Caption>
                                                    VOLATILITY
FEDERAL TAX RATE INCREASE                             FACTOR
- -------------------------                           ----------
<S>                                                 <C>
5%................................................    295%
10%...............................................    317%
15%...............................................    341%
20%...............................................    369%
25%...............................................    400%
30%...............................................    436%
35%...............................................    477%
40%...............................................    525%
</Table>

     (55) "MUNICIPAL OBLIGATIONS" shall mean any and all instruments that pay
interest or make other distributions that are exempt from regular Federal income
tax and in which the Trust may invest consistent with the investment policies
and restrictions contained in its registration statement on Form N-2
(333-100951), ( "Registration Statement"), as the same may be amended from time
to time.

     (56) "NOTICE OF REDEMPTION" shall mean any notice with respect to the
redemption of Preferred Shares pursuant to paragraph (c) of Section 11 of Part I
of this Statement.

     (57) "NOTICE OF SPECIAL RATE PERIOD" shall mean any notice with respect to
a Special Rate Period of Preferred Shares pursuant to subparagraph (d)(i) of
Section 4 of Part I of this Statement.

                                      A-9
<Page>
     (58) "ORDER" and "ORDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.

     (59) "ORIGINAL ISSUE INSURANCE" means insurance purchased with respect to a
particular issue of Municipal Obligations at the time of initial issuance. Under
this insurance, the insurer unconditionally guarantees the holder of the
Municipal Obligation timely payment of principal and interest, generally with
certain exceptions for default and acceleration events.

     (60) "OUTSTANDING" shall mean, as of any Auction Date with respect to
shares of a series of Preferred Shares, the number of shares of such series
theretofore issued by the Trust except, without duplication, (i) any shares of
such series theretofore cancelled or delivered to the Auction Agent for
cancellation or redeemed by the Trust, (ii) any shares of such series as to
which the Trust or any Affiliate thereof shall be an Existing Holder and
(iii) any shares of such series represented by any certificate in lieu of which
a new certificate has been executed and delivered by the Trust.

     (61) "PERMANENT INSURANCE" means an option generally pursuant to a
Portfolio Insurance policy to purchase an irrevocable commitment by the insurer
to insure a Municipal Obligation sold by the Trust. Such options generally only
are exercised to increase the value of a Municipal Obligation on sale if it is
determined that the increased value will exceed the additional Permanent
Insurance premium.

     (62) "PERSON" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.

     (63) "PORTFOLIO INSURANCE" means an insurance policy guaranteeing the
payment of principal and interest on specified eligible Municipal Obligations
purchased by and presently held the Trust. Portfolio Insurance generally
provides the same type of coverage as Original Issue Insurance or Secondary
Market Insurance.

     (64) "POTENTIAL BENEFICIAL OWNER," with respect to shares of a series of
Preferred Shares, shall mean a customer of a Broker-Dealer that is not a
Beneficial Owner of shares of such series but that wishes to purchase shares of
such series, or that is a Beneficial Owner of shares of such series that wishes
to purchase additional shares of such series.

     (65) "POTENTIAL HOLDER," with respect to shares of a series of Preferred
Shares, shall mean a Broker-Dealer (or any such other person as may be permitted
by the Trust) that is not an Existing Holder of shares of such series or that is
an Existing Holder of shares of such series that wishes to become the Existing
Holder of additional shares of such series.

     (66) "PREFERRED SHARES" shall have the meaning set forth on the first
page of this Statement.

     (67) "PREFERRED SHARES BASIC MAINTENANCE AMOUNT," as of any Valuation Date,
shall mean the dollar amount equal to the sum of (i)(A) the product of the
number of Preferred Shares outstanding on such date multiplied by $25,000 (plus
the product of the number of shares of any other series of preferred shares
outstanding on such date multiplied by the liquidation preference of such
shares), plus any redemption premium applicable to the Preferred Shares (or
other preferred shares) then subject to redemption; (B) the aggregate amount of
dividends that will have accumulated at the respective Applicable Rates (whether
or not earned or declared) to (but not including) the first respective Dividend
Payment Date for the Preferred Shares outstanding that follows such Valuation
Date (plus the aggregate amount of dividends, whether or not earned or declared,
that will have

                                      A-10
<Page>
accumulated in respect of other outstanding preferred shares to, but not
including, the first respective dividend payment date for such other shares that
follows such Valuation Date); (C) the aggregate amount of dividends that would
accumulate on shares of each series of the Preferred Shares outstanding from
such first respective Dividend Payment Date therefor through the 56th day after
such Valuation Date, at the Maximum Rate (calculated as if such Valuation Date
were the Auction Date for the Rate Period commencing on such Dividend Payment
Date) for a Minimum Rate Period of shares of such series to commence on such
Dividend Payment Date, assuming, solely for purposes of the foregoing, that if
on such Valuation Date the Trust shall have delivered a Notice of Special Rate
Period to the Auction Agent pursuant to Section 4(d)(i) of this Part I with
respect to shares of such series, such Maximum Rate shall be the higher of
(a) the Maximum Rate for the Special Rate Period of shares of such series to
commence on such Dividend Payment Date and (b) the Maximum Rate for a Minimum
Rate Period of shares of such series to commence on such Dividend Payment Date,
multiplied by the Volatility Factor applicable to a Minimum Rate Period, or, in
the event the Trust shall have delivered a Notice of Special Rate Period to the
Auction Agent pursuant to section 4(d)(i) of this Part I with respect to shares
of such series designating a Special Rate Period consisting of 56 Rate Period
Days or more, the Volatility Factor applicable to a special Rate Period of that
length (plus the aggregate amount of dividends that would accumulate at the
maximum dividend rate or rates on any other preferred shares outstanding from
such respective dividend payment dates through the 56th day after such Valuation
Date, as established by or pursuant to the respective statements establishing
and fixing the rights and preferences of such other preferred shares) (except
that (1) if such Valuation Date occurs at a time when a Failure to Deposit (or,
in the case of preferred shares other than the Preferred Shares, a failure
similar to a Failure to Deposit) has occurred that has not been cured, the
dividend for purposes of calculation would accumulate at the current dividend
rate then applicable to the shares in respect of which such failure has occurred
and (2) for those days during the period described in this subparagraph (C) in
respect of which the Applicable Rate in effect immediately prior to such
Dividend Payment Date will remain in effect (or, in the case of preferred shares
other than the Preferred Shares, in respect of which the dividend rate or rates
in effect immediately prior to such respective dividend payment dates will
remain in effect), the dividend for purposes of calculation would accumulate at
such Applicable Rate (or other rate or rates, as the case may be) in respect of
those days); (D) the amount of anticipated expenses of the Trust for the 90 days
subsequent to such Valuation Date; (E) the amount of the Trust's Maximum
Potential Gross-up Payment Liability in respect of Preferred Shares (and similar
amounts payable in respect of other preferred shares pursuant to provisions
similar to those contained in Section 3 of Part I of this Statement) as of such
Valuation Date; (F) the amount of any indebtedness or obligations of the Trust
senior in right of payment to the Preferred Shares; and (G) any current
liabilities as of such Valuation Date to the extent not reflected in any of
(i)(A) through (i)(F) (including, without limitation, any payables for Municipal
Obligations purchased as of such Valuation Date and any liabilities incurred for
the purpose of clearing securities transactions) less (ii) the value (i.e., for
purposes of current Moody's guidelines, the face value of cash, short-term
Municipal Obligations rated MIG-1, VMIG-1 or P-1, and short-term securities that
are the direct obligation of the U.S. government, provided in each case that
such securities mature on or prior to the date upon which any of
(i) (A) through (i) (G) become payable, otherwise the Moody's Discounted Value)
(i.e., for the purposes of the current S&P guidelines, the face value of cash,
short-term Municipal Obligations rate SP-1 or A-1 or Municipal Obligations rated
A, provided in each case that such securities mature on or prior to the date
upon which any of (i)(A) through (i)(G) becomes payable, otherwise the S&P
Discounted Value) of any of the Trust's assets irrevocably deposited by the
Trust for the payment of any of (i)(A) through (i)(G).

     (68) "PREFERRED SHARES BASIC MAINTENANCE CURE DATE," with respect to the
failure by the Trust to satisfy the Preferred Shares Basic Maintenance Amount
(as required by paragraph (a) of Section 7 of Part I of this Statement) as of a
given Valuation Date, shall mean the seventh Business Day following such
Valuation Date.

                                      A-11
<Page>
     (69) "PREFERRED SHARES BASIC MAINTENANCE REPORT" shall mean a report signed
by the President, Treasurer or any Senior Vice President or Vice President of
the Trust which sets forth, as of the related Valuation Date, the assets of the
Trust, the Market Value and the Discounted Value thereof (seriatim and in
aggregate), and the Preferred Shares Basic Maintenance Amount.

     (70) "QUARTERLY VALUATION DATE" shall mean the last Business Day of each
January, April, July and October of each year, commencing on the date set forth
in Section 6 of Appendix A hereto.

     (71) "RATE MULTIPLE" shall have the meaning specified in Section 4 of
Appendix A hereto.

     (72) "RATE PERIOD," with respect to shares of a series of Preferred Shares,
shall mean the Initial Rate Period of shares of such series and any Subsequent
Rate Period, including any Special Rate Period, of shares of such series.

     (73) "RATE PERIOD DAYS," for any Rate Period or Dividend Period, means the
number of days that would constitute such Rate Period or Dividend Period but for
the application of paragraph (d) of Section 2 of Part I of this Statement or
paragraph (b) of Section 4 of Part I of this Statement.

     (74) "RECEIVABLES FOR MUNICIPAL OBLIGATIONS SOLD" shall mean (A) for
purposes of calculation of Moody's Eligible Assets as of any Valuation Date, no
more than the aggregate of the following: (i) the book value of receivables for
Municipal Obligations sold as of or prior to such Valuation Date if such
receivables are due within five business days of such Valuation Date and if the
trades which generated such receivables are (x) settled through clearing house
firms with respect to which the Trust has received prior written authorization
from Moody's or (y) with counterparties having a Moody's long-term debt rating
of at least Baa3; and (ii) the Moody's Discounted Value of Municipal Obligations
sold as of or prior to such Valuation Date which generated receivables, if such
receivables are due within five business days of such Valuation Date but do not
comply with either of the conditions specified in (i) above, and (B) for
purposes of calculation of S&P Eligible Assets as of any Valuation Date, the
book value of receivables for Municipal Obligations sold as of or prior to such
Valuation Date if such receivables are due within five business days of such
Valuation Date.

     (75) "REDEMPTION PRICE" shall mean the applicable redemption price
specified in paragraph (a) or (b) of Section 11 of Part I of this Statement.

     (76) "REFERENCE RATE" shall mean (i) the higher of the Taxable Equivalent
of the Short-Term Municipal Bond Rate and the "AA" Composite Commercial Paper
Rate in the case of Minimum Rate Periods and Special Rate Periods of 28 Rate
Period Days or fewer; (ii) the "AA" Composite Commercial Paper Rate in the case
of Special Rate Periods of more than 28 Rate Period Days but fewer than 183 Rate
Period Days; and (iii) the Treasury Bill Rate in the case of Special Rate
Periods of more than 182 Rate Period Days but fewer than 365 Rate Period Days.

     (77) "REGISTRATION STATEMENT" has the meaning specified in the definition
of "Municipal Obligations."

     (78) "S&P" shall mean Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, and its successors.

     (79) "S&P DISCOUNT FACTOR" shall have the meaning specified in Section 4 of
Appendix A hereto.

                                      A-12
<Page>
     (80) "S&P ELIGIBLE ASSET" shall have the meaning specified in Section 4 of
Appendix A hereto.

     (81) "S&P EXPOSURE PERIOD" shall mean the maximum period of time following
a Valuation Date that the Trust has under this Statement to cure any failure to
maintain, as of such Valuation Date, the Discounted Value for its portfolio at
least equal to the Preferred Shares Basic Maintenance Amount (as described in
paragraph (a) of Section 7 of Part I of this Statement).

     (82) "S&P VOLATILITY FACTOR" shall mean, as of any Valuation Date, a
multiplicative factor equal to (i) 305% in the case of any Minimum Rate Period
or any Special Rate Period of 28 Rate Period Days or fewer, (ii) 268% in the
case of any Special Rate Period of more than 28 Rate Period Days but fewer than
183 Rate Period Days; and (iii) 204% in the case of any Special Rate Period of
more than 182 Rate Period Days.

     (83) "SECONDARY MARKET INSURANCE" means insurance with respect to a
Municipal Obligation purchase after the time or original issue. Secondary Market
Insurance generally provides the same type of coverage as Original Issue
Insurance.

     (84) "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
its successors and assigns or any other securities depository selected by the
Trust which agrees to follow the procedures required to be followed by such
securities depository in connection with the Preferred Shares.

     (85) "SELL ORDER" and "SELL ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.

     (86) "SPECIAL RATE PERIOD," with respect to shares of a series of Preferred
Shares, shall have the meaning specified in paragraph (a) of Section 4 of
Part I of this Statement.

     (87) "SPECIAL REDEMPTION PROVISIONS" shall have the meaning specified in
subparagraph (a)(i) of Section 11 of Part I of this Statement.

     (88) "SUBMISSION DEADLINE" shall mean 1:30 P.M., New York City time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers are
required to submit Orders to the Auction Agent as specified by the Auction Agent
from time to time.

     (89) "SUBMITTED BID" and "SUBMITTED BIDS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this Statement.

     (90) "SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.

     (91) "SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this Statement.

     (92) "SUBMITTED SELL ORDER" and "SUBMITTED SELL ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.

     (93) "SUBSEQUENT RATE PERIOD," with respect to shares of a series of
Preferred Shares, shall mean the period from and including the first day
following the Initial Rate Period of shares of such series to but excluding the
next Dividend Payment Date for shares of such series and any period thereafter
from and including one Dividend Payment Date for shares of such series to but
excluding

                                      A-13
<Page>
the next succeeding Dividend Payment Date for shares of such series; provided,
however, that if any Subsequent Rate Period is also a Special Rate Period, such
term shall mean the period commencing on the first day of such Special Rate
Period and ending on the last day of the last Dividend Period thereof.

     (94) "SUBSTITUTE COMMERCIAL PAPER DEALER" shall mean any commercial paper
dealer selected by the Trust as to which Moody's, S&P or any substitute rating
agency then rating the Preferred Shares shall not have objected; provided,
however, that none of such entities shall be a Commercial Paper Dealer.

     (95) "SUBSTITUTE U.S. GOVERNMENT SECURITIES DEALER" any U.S. Government
securities dealer selected by the Trust as to which Moody's, S&P or any
substitute rating agency then rating the Preferred Shares shall not have
objected; provided, however, that none of such entities shall be a U.S.
Government Securities Dealer.

     (96) "SUFFICIENT CLEARING BIDS" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.

     (97) "TAXABLE ALLOCATION" shall have the meaning specified in Section 3 of
Part I of this Statement.

     (98) "TAXABLE EQUIVALENT OF THE SHORT-TERM MUNICIPAL BOND RATE," on any
date for any Minimum Rate Period or Special Rate Period of 28 Rate Period Days
or fewer, shall mean 90% of the quotient of (A) the per annum rate expressed on
an interest equivalent basis equal to the Kenny S&P 30 day High Grade Index or
any successor index (the "Kenny Index") (provided, however, that any such
successor index must be approved by Moody's (if Moody's is then rating the
Preferred Shares)), made available for the Business Day immediately preceding
such date but in any event not later than 8:30 A.M., New York City time, on such
date by Kenny S&P Evaluation Services or any successor thereto, based upon
30-day yield evaluations at par of short-term bonds the interest on which is
excludable for regular Federal income tax purposes under the Code of "high
grade" component issuers selected by Kenny S&P Evaluation Services or any such
successor from time to time in its discretion, which component issuers shall
include, without limitation, issuers of general obligation bonds, but shall
exclude any bonds the interest on which constitutes an item of tax preference
under Section 57 (a)(5) of the Code, or successor provisions, for purposes of
the "alternative minimum tax," divided by (B) 1.00 minus 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 (in each case expressed as a decimal), whichever is greater;
provided, however, that if the Kenny Index is not made so available by
8:30 A.M., New York City time, on such date by Kenny S&P Evaluation Services or
any successor, the Taxable Equivalent of the Short-Term Municipal Bond Rate
shall mean the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the most recent Kenny Index so made available for any
preceding Business Day, divided by (B) 1.00 minus 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
(in each case expressed as a decimal), whichever is greater.

     (99) "TAXABLE INCOME" shall have the meaning specified in Section 12 of
Appendix A hereto.

    (100) "TREASURY BILL" shall mean a direct obligation of the U.S. Government
having a maturity at the time of issuance of 364 days or less.

                                      A-14
<Page>
    (101) "TREASURY BILL RATE," on any date for any Rate Period, shall mean
(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 from the U.S.
Government Securities Dealers to the Auction Agent. If any U.S. Government
Securities Dealer does not quote a rate required to determine the Treasury Bill
Rate, the Treasury Bill Rate shall be determined on the basis of the quotation
or quotations furnished by the remaining U.S. Government Securities Dealer or
U.S. Government Securities Dealers and any substitute U.S. Government Securities
Dealers selected by the Trust to provide such rate or rates not being supplied
by any U.S. Government Securities Dealer or U.S. Government Securities Dealers,
as the case may be, or, if the Trust does not select any such Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers,
by the remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers.

    (102) "TREASURY NOTE" shall mean a direct obligation of the U.S. Government
having a maturity at the time of issuance of five years or less but more than
364 days.

    (103) "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 from the U.S. Government Securities Dealers to the Auction
Agent. If any U.S. Government Securities Dealer does not quote a rate required
to determine the Treasury Note Rate, the Treasury Note Rate shall be determined
on the basis of the quotation or quotations furnished by the remaining U.S.
Government Securities Dealer or U.S. Government Securities Dealers and any
substitute U.S. Government Securities Dealers selected by the Trust to provide
such rate or rates not being supplied by any U.S. Governmental Securities Dealer
or U.S. Government Securities Dealers, as the case may be, or, if the Trust does
not select any such Substitute U.S. Government Securities Dealer or Substitute
U.S. Government Securities Dealers, by the remaining U.S. Government Securities
Dealer or U.S. Government Securities Dealers.

    (104) "TRUST" shall mean the entity named on the first page of this
statement, which is the issuer of the Preferred Shares.

    (105) "U.S. GOVERNMENT SECURITIES DEALER" shall mean Lehman Government
Securities Incorporated, Goldman, Sachs & Co., Salomon Brothers Inc., J.P.
Morgan Chase & Co. and any other U.S. Government securities dealer selected by
the Trust as to which Moody's (if Moody's is then rating the Preferred Shares)
and S&P (if S&P is then rating the Preferred Shares) shall not have objected or
their respective affiliates or successors, if such entity is a U.S. Government
securities dealer.

                                      A-15
<Page>
    (106) "VALUATION DATE" shall mean, for purposes of determining whether the
Trust is maintaining the Preferred Shares Basic Maintenance Amount, each Friday
that is a Business Day, or for any Friday that is not a Business Day, the
immediately preceding Business Day, and the Date of Original Issue.

    (107) "VOLATILITY FACTOR" shall mean, as of any Valuation Date, the Moody's
Volatility Factor and the S&P Volatility Factor.

    (108) "VOTING PERIOD" shall have the meaning specified in paragraph (b) of
Section 5 of Part I of this Statement.

    (109) "WINNING BID RATE" shall have the meaning specified in paragraph (a)
of Section 3 of Part II of this Statement.

    Any additional definitions specifically set forth in Section 8 of Appendix A
hereto shall be incorporated herein and made part hereof by reference thereto.

                                    PART I.

1. NUMBER OF AUTHORIZED SHARES.

    The number of authorized shares constituting a series of the Preferred
Shares shall be as set forth with respect to such series in Section 2 of
Appendix A hereto.

2. DIVIDENDS.

      (a) RANKING. The shares of a series of the Preferred Shares shall rank on
a parity with each other, with shares of any other series of the Preferred
Shares and with shares of any other series of preferred shares as to the payment
of dividends by the Trust.

     (b) CUMULATIVE CASH DIVIDENDS. The Holders of any series of Preferred
Shares shall be entitled to receive, when, as and if declared by the Board of
Trustees, out of funds legally available therefor in accordance with the
Declaration and applicable law, cumulative cash dividends at the Applicable Rate
for shares of such series, determined as set forth in paragraph (e) of this
Section 2, and no more (except to the extent set forth in Section 3 of this
Part I), payable on the Dividend Payment Dates with respect to shares of such
series determined pursuant to paragraph (d) of this Section 2. Holders of
Preferred Shares shall not be entitled to any dividend, whether payable in cash,
property or shares, in excess of full cumulative dividends, as herein provided,
on Preferred Shares. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on Preferred Shares which
may be in arrears, and, except to the extent set forth in subparagraph (e)(i) of
this Section 2, no additional sum of money shall be payable in respect of any
such arrearage.

      (c) DIVIDENDS CUMULATIVE FROM DATE OF ORIGINAL ISSUE Dividends on any
series of Preferred Shares shall accumulate at the Applicable Rate for shares of
such series from the Date of Original Issue thereof.

     (d) DIVIDEND PAYMENT DATES AND ADJUSTMENT THEREOF. The Dividend Payment
Dates with respect to shares of a series of Preferred Shares shall be as set
forth with respect to shares of such series in Section 9 of Appendix A hereto;
provided, however, that:

          (i) if the day on which dividends would otherwise be payable on shares
    of such series is not a Business Day, then such dividends shall be payable
    on such shares on the first Business Day that falls after such day; and

                                      A-16
<Page>
         (ii) notwithstanding Section 9 of Appendix A hereto, the Trust in its
    discretion may establish the Dividend Payment Dates in respect of any
    Special Rate Period of shares of a series of Preferred Shares consisting of
    more than 28 Rate Period Days; provided, however, that such dates shall be
    set forth in the Notice of Special Rate Period relating to such Special Rate
    Period, as delivered to the Auction Agent, which Notice of Special Rate
    Period shall be filed with the Secretary of the Trust; and further provided
    that (1) any such Dividend Payment Date shall be a Business Day and (2) the
    last Dividend Payment in respect of such Special Rate Period shall be the
    Business Day immediately following the last day thereof, as such last day is
    determined in accordance with paragraph (b) of Section 4 of this Part I.

      (e) DIVIDEND RATES AND CALCULATION OF DIVIDENDS.

          (i) DIVIDEND RATES. The dividend rate on Preferred Shares of any
    series during the period from and after the Date of Original Issue of shares
    of such series to and including the last day of the Initial Rate Period of
    shares of such series shall be equal to the rate per annum set forth with
    respect to shares of such series under "Designation as to Series" in
    Section 1 of Appendix A hereto. For each Subsequent Rate Period of shares of
    such series thereafter, the dividend rate on shares of such series shall be
    equal to the rate per annum that results from an Auction for shares of such
    series on the Auction Date next preceding such Subsequent Rate Period;
    provided, however, that if:

            (A) an Auction for any such Subsequent Rate Period is not held for
       any reason other than as described below, the dividend rate on shares of
       such series for such Subsequent Rate Period will be the Maximum Rate for
       shares of such series on the Auction Date therefor;

            (B) any Failure to Deposit shall have occurred with respect to
       shares of such series during any Rate Period thereof (other than any
       Special Rate Period consisting of more than 364 Rate Period Days or any
       Rate Period succeeding any Special Rate Period consisting of more than
       364 Rate Period Days during which a Failure to Deposit occurred that has
       not been cured), but, prior to 12:00 Noon, New York City time, on the
       third Business Day next succeeding the date on which such Failure to
       Deposit occurred, such Failure to Deposit shall have been cured in
       accordance with paragraph (f) of this Section 2 and the Trust shall have
       paid to the Auction Agent a late charge ( "Late Charge") equal to the sum
       of (1) if such Failure to Deposit consisted of the failure timely to pay
       to the Auction Agent the full amount of dividends with respect to any
       Dividend Period of the shares of such series, an amount computed by
       multiplying (x) 200% of the Reference Rate for the Rate Period during
       which such Failure to Deposit occurs on the Dividend Payment Date for
       such Dividend Period by (y) a fraction, the numerator of which shall be
       the number of days for which such Failure to Deposit has not been cured
       in accordance with paragraph (f) of this Section 2 (including the day
       such Failure to Deposit occurs and excluding the day such Failure to
       Deposit is cured) and the denominator of which shall be 360, and applying
       the rate obtained against the aggregate Liquidation Preference of the
       outstanding shares of such series and (2) if such Failure to Deposit
       consisted of the failure timely to pay to the Auction Agent the
       Redemption Price of the shares, if any, of such series for which Notice
       of Redemption has been mailed by the Trust pursuant to paragraph (c) of
       Section 11 of this Part I, an amount computed by multiplying (x) 200% of
       the Reference Rate for the Rate Period during which such Failure to
       Deposit occurs on the redemption date by (y) a fraction, the numerator of
       which shall be the number of days for which such Failure to Deposit is
       not cured in accordance with paragraph (f) of this Section 2 (including
       the day such Failure to Deposit occurs and excluding the day such Failure
       to Deposit is cured) and the denominator of which shall be 360, and
       applying the rate obtained against the aggregate Liquidation Preference
       of the outstanding shares of such series to be redeemed, no Auction will
       be held in respect of shares of such series for the Subsequent

                                      A-17
<Page>
       Rate Period thereof and the dividend rate for shares of such series for
       such Subsequent Rate Period will be the Maximum Rate for shares of such
       series on the Auction Date for such Subsequent Rate Period;

            (C) any Failure to Deposit shall have occurred with respect to
       shares of such series during any Rate Period thereof (other than any
       Special Rate Period consisting of more than 364 Rate Period Days or any
       Rate Period succeeding any Special Rate Period consisting of more than
       364 Rate Period Days during which a Failure to Deposit occurred that has
       not been cured), and, prior to 12:00 Noon, New York City time, on the
       third Business Day next succeeding the date on which such Failure to
       Deposit occurred, such Failure to Deposit shall not have been cured in
       accordance with paragraph (f) of this Section 2 or the Trust shall not
       have paid the applicable Late Charge to the Auction Agent, no Auction
       will be held in respect of shares of such series for the first Subsequent
       Rate Period thereof thereafter (or for any Rate Period thereof thereafter
       to and including the Rate Period during which (1) such Failure to Deposit
       is cured in accordance with paragraph (f) of this Section 2 and (2) the
       Trust pays the applicable Late Charge to the Auction Agent (the condition
       set forth in this clause (2) to apply only in the event Moody's is rating
       such shares at the time the Trust cures such Failure to Deposit), in each
       case no later than 12:00 Noon, New York City time, on the fourth Business
       Day prior to the end of such Rate Period), and the dividend rate for
       shares of such series for each such Subsequent Rate Period shall be a
       rate per annum equal to the Maximum Rate for shares of such series on the
       Auction Date for such Subsequent Rate Period (but with the prevailing
       rating for shares of such series, for purposes of determining such
       Maximum Rate, being deemed to be below Ba3/BB); or

            (D) any Failure to Deposit shall have occurred with respect to
       shares of such series during a Special Rate Period thereof consisting of
       more than 364 Rate Period Days, or during any Rate Period thereof
       succeeding any Special Rate Period consisting of more than 364 Rate
       Period Days during which a Failure to Deposit occurred that has not been
       cured, and, prior to 12:00 Noon, New York City time, on the fourth
       Business Day preceding the Auction Date for the Rate Period subsequent to
       such Rate Period, such Failure to Deposit shall not have been cured in
       accordance with paragraph (f) of this Section 2 or, in the event Moody's
       is then rating such shares, the Trust shall not have paid the applicable
       Late Charge to the Auction Agent (such Late Charge, for purposes of this
       subparagraph (D), to be calculated by using, as the Reference Rate, the
       Reference Rate applicable to a Rate Period (x) consisting of more than
       182 Rate Period Days but fewer than 365 Rate Period Days and
       (y) commencing on the date on which the Rate Period during which Failure
       to Deposit occurs commenced), no Auction will be held in respect of
       shares of such series for such Subsequent Rate Period (or for any Rate
       Period thereof thereafter to and including the Rate Period during which
       (1) such Failure to Deposit is cured in accordance with paragraph (f) of
       this Section 2 and (2) the Trust pays the applicable Late Charge to the
       Auction Agent (the condition set forth in this clause (2) to apply only
       in the event Moody's is rating such shares at the time the Trust cures
       such Failure to Deposit), in each case no later than 12:00 Noon, New York
       City time, on the fourth Business Day prior to the end of such Rate
       Period), and the dividend rate for shares of such series for each such
       Subsequent Rate Period shall be a rate per annum equal to the Maximum
       Rate for shares of such series on the Auction Date for such Subsequent
       Rate Period (but with the prevailing rating for shares of such series,
       for purposes of determining such Maximum Rate, being deemed to be below
       Ba3/BB) (the rate per annum at which dividends are payable on shares of a
       series of Preferred Shares for any Rate Period thereof being herein
       referred to as the "Applicable Rate" for shares of such series).

         (ii) CALCULATION OF DIVIDENDS. The amount of dividends per share
    payable on shares of a series of Preferred Shares on any date on which
    dividends shall be payable on shares of such series

                                      A-18
<Page>
    shall be computed by multiplying the Applicable Rate for shares of such
    series in effect for such Dividend Period or Dividend Periods or part
    thereof for which dividends have not been paid by a fraction, the numerator
    of which shall be the number of days in such Dividend Period or Dividend
    Periods or part thereof and the denominator of which shall be 365 if such
    Dividend Period consists of 7 Rate Period Days and 360 for all other
    Dividend Periods, and applying the rate obtained against $25,000.

      (f) CURING A FAILURE TO DEPOSIT. A Failure to Deposit with respect to
shares of a series of Preferred Shares shall have been cured (if such Failure to
Deposit is not solely due to the willful failure of the Trust to make the
required payment to the Auction Agent) with respect to any Rate Period of shares
of such series if, within the respective time periods described in
subparagraph (e)(i) of this Section 2, the Trust shall have paid to the Auction
Agent (A) all accumulated and unpaid dividends on shares of such series and
(B) without duplication, the Redemption Price for shares, if any, of such series
for which Notice of Redemption has been mailed by the Trust pursuant to
paragraph (c) of Section 11 of Part I of this Statement; provided, however, that
the foregoing clause (B) shall not apply to the Trust's failure to pay the
Redemption Price in respect of Preferred Shares when the related Redemption
Notice provides that redemption of such shares is subject to one or more
conditions precedent and any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.

      (g) DIVIDEND PAYMENTS BY TRUST TO AUCTION AGENT. The Trust shall pay to
the Auction Agent, not later than 12:00 Noon, New York City time, on each
Dividend Payment Date for shares of a series of Preferred Shares, an aggregate
amount of funds available on the next Business Day in The City of New York, New
York, equal to the dividends to be paid to all Holders of shares of such series
on such Dividend Payment Date.

     (h) AUCTION AGENT AS TRUSTEE OF DIVIDEND PAYMENTS BY TRUST. All moneys paid
to the Auction Agent for the payment of dividends (or for the payment of any
Late Charge) shall be held in trust for the payment of such dividends (and any
such Late Charge) by the Auction Agent for the benefit of the Holders specified
in paragraph (i) of this Section 2. Any moneys paid to the Auction Agent in
accordance with the foregoing but not applied by the Auction Agent to the
payment of dividends (and any such Late Charge) will, to the extent permitted by
law, be repaid to the Trust at the end of 90 days from the date on which such
moneys were so to have been applied.

      (i) DIVIDENDS PAID TO HOLDERS. Each dividend on Preferred Shares shall be
paid on the Dividend Payment Date therefor to the Holders thereof as their names
appear on the record books of the Trust on the Business Day next preceding such
Dividend Payment Date.

      (j) DIVIDENDS CREDITED AGAINST EARLIEST ACCUMULATED BUT UNPAID DIVIDENDS.
Any dividend payment made on Preferred Shares shall first be credited against
the earliest accumulated but unpaid dividends due with respect to such shares.
Dividends in arrears for any past Dividend Period may be declared and paid at
any time, without reference to any regular Dividend Payment Date, to the Holders
as their names appear on the record books of the Trust on such date, not
exceeding 15 days preceding the payment date thereof, as may be fixed by the
Board of Trustees.

     (k) DIVIDENDS DESIGNATED AS EXEMPT-INTEREST DIVIDENDS. Dividends on
Preferred Shares shall be designated as exempt-interest dividends up to the
amount of tax-exempt income of the Trust, to the extent permitted by, and for
purposes of, Section 852 of the Code.

                                      A-19
<Page>
3. GROSS-UP PAYMENTS.

    Holders of Preferred Shares shall be entitled to receive, when, as and if
declared by the Board of Trustees, out of funds legally available therefor in
accordance with the Declaration and applicable law, dividends in an amount equal
to the aggregate Gross-up Payments as follows:

      (a) TAXABLE ALLOCATION WITHOUT NOTICE. If, but only 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 given advance
notice thereof to the Auction Agent as provided in Section 5 of Part II of this
Statement (such allocation being referred to herein as a "Taxable Allocation"),
whether or not by reason of the fact that such allocation is made retroactively
as a result of the redemption of all or a portion of the outstanding Preferred
Shares or the liquidation of the Trust, the Trust shall, during the Trust's
fiscal year in which the Taxable Allocation was made or within 90 days after the
end of such fiscal year, provide notice thereof to the Auction Agent and direct
the Trust's dividend disbursing agent to send such notice and a Gross-up Payment
to each Holder of such shares that was entitled to such dividend payment during
such fiscal year at such Holder's address as the same appears or last appeared
on the record books of the Trust.

     (b) RESERVED.

      (c) NO GROSS-UP PAYMENTS IN THE EVENT OF A REALLOCATION. Notwithstanding
paragraph (a) above, the Trust shall not be required to make Gross-up Payments
with respect to any 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.

4. DESIGNATION OF SPECIAL RATE PERIODS.

      (a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The Trust, at its
option, may designate any succeeding Subsequent Rate Period of shares of a
series of Preferred Shares as a Special Rate Period consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820,
subject to adjustment as provided in paragraph (b) of this Section 4 (a "Special
Rate Period"); provided, however, that such Special Rate Period may consist of a
number of Rate Period Days not evenly divisible by seven if all shares of such
series of Preferred Shares are to be redeemed at the end of such Special Rate
Period. A designation of a Special Rate Period shall be effective only if
(A) notice thereof shall have been given in accordance with paragraph (c) and
subparagraph (d)(i) of this Section 4, (B) an Auction for shares of such series
shall have been held on the Auction Date immediately preceding the first day of
such proposed Special Rate Period and Sufficient Clearing Bids for shares of
such series shall have existed in such Auction, and (C) if any Notice of
Redemption shall have been mailed by the Trust pursuant to paragraph (c) of
Section 11 of this Part I with respect to any shares of such series, the
Redemption Price with respect to such shares shall have been deposited with the
Auction Agent. In the event the Trust wishes to designate any succeeding
Subsequent Rate Period for shares of a series of Preferred Shares as a Special
Rate Period consisting of more than 28 Rate Period Days, the Trust shall notify
Moody's (if Moody's is then rating such series) and S&P (if S&P is then rating
such series) in advance of the commencement of such Subsequent Rate Period that
the Trust wishes to designate such Subsequent Rate Period as a Special Rate
Period and shall provide Moody's (if Moody's is then rating such series) and S&P
(if S&P is then rating such series) with such documents as it may request.

     (b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. If the Trust wishes to
designate a Subsequent Rate Period as a Special Rate Period, but the day
following what would otherwise be the last day of such Special Rate Period is
not a Tuesday that is a Business Day in the case of a series of Preferred Shares
designated as "Series M7 Preferred Shares" in Section 1 of Appendix A hereto,
then the Trust

                                      A-20
<Page>
shall designate such Subsequent Rate Period as a Special Rate Period consisting
of the period commencing on the first day following the end of the immediately
preceding Rate Period and ending on the first Monday that is followed by a
Tuesday that is a Business Day preceding what would otherwise be such last day.


    If the Trust wishes to designate a Subsequent Rate Period as a Special Rate
Period, but the day following what would otherwise be the last day of such
Special Rate Period is not a Friday that is a Business Day in the case of a
series of Preferred Shares designated as "Series R7 Preferred Shares" in
Section 1 of Appendix A hereto, then the Trust shall designate such Subsequent
Rate Period as a Special Rate Period consisting of the period commencing on the
first day following the end of the immediately preceding Rate Period and ending
on the first Thursday that is followed by a Friday that is a Business Day
preceding what would otherwise be such last day.


    If the Trust wishes to designate a Subsequent Rate Period as a Special Rate
Period, but the day following what would otherwise be the last day of such
Special Rate Period is not a Monday that is a Business Day in the case of a
series of Preferred Shares designated as "Series F7 Preferred Shares" in
Section 1 of Appendix A hereto, then the Trust shall designate such Subsequent
Rate Period as a Special Rate Period consisting of the period commencing on the
first day following the end of the immediately preceding Rate Period and ending
on the first Friday that is followed by a Monday that is a Business Day
preceding what would otherwise be such last day.

      (c) NOTICE OF PROPOSED SPECIAL RATE PERIOD. If the Trust proposes to
designate any succeeding Subsequent Rate Period of shares of a series of
Preferred Shares as a Special Rate Period pursuant to paragraph (a) of this
Section 4, not less than 20 (or such lesser number of days as may be agreed to
from time to time by the Auction Agent) nor more than 30 days prior to the date
the Trust proposes to designate as the first day of such Special Rate Period
(which shall be such day that would otherwise be the first day of a Minimum Rate
Period), notice shall be (i) published or caused to be published by the Trust in
a newspaper of general circulation to the financial community in The City of New
York, New York, which carries financial news, and (ii) mailed by the Trust by
first-class mail, postage prepaid, to the Holders of shares of such series. Each
such notice shall state (A) that the Trust may exercise its option to designate
a succeeding Subsequent Rate Period of shares of such series as a Special Rate
Period, specifying the first day thereof and (B) that the Trust will, by
11:00 A.M., New York City time, on the second Business Day next preceding such
date (or by such later time or date, or both, as may be agreed to by the Auction
Agent) notify the Auction Agent of either (x) its determination, subject to
certain conditions, to exercise such option, in which case the Trust shall
specify the Special Rate Period designated, or (y) its determination not to
exercise such option.

     (d) NOTICE OF SPECIAL RATE PERIOD. No later than 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of any proposed
Special Rate Period of shares of a series of Preferred Shares as to which notice
has been given as set forth in paragraph (c) of this Section 4 (or such later
time or date, or both, as may be agreed to by the Auction Agent), the Trust
shall deliver to the Auction Agent either:

          (i) a notice ("Notice of Special Rate Period") stating (A) that the
    Trust has determined to designate the next succeeding Rate Period of shares
    of such series as a Special Rate Period, specifying the same and the first
    day thereof, (B) the Auction Date immediately prior to the first day of such
    Special Rate Period, (C) that such Special Rate Period shall not commence if
    (1) an Auction for shares of such series shall not be held on such Auction
    Date for any reason or (2) an Auction for shares of such series shall be
    held on such Auction Date but Sufficient Clearing Bids for shares of such
    series shall not exist in such Auction, (D) the scheduled Dividend Payment
    Dates for shares of such series during such Special Rate Period and (E) the
    Special Redemption Provisions, if any, applicable to shares of such series
    in respect of such Special Rate Period, such

                                      A-21
<Page>
    notice to be accompanied by a Preferred Shares Basic Maintenance Report
    showing that, as of the third Business Day next preceding such proposed
    Special Rate Period, Moody's Eligible Assets (if Moody's is then rating such
    series) and S&P Eligible Assets (if S&P is then rating such series) each
    have an aggregate Discounted Value at least equal to the Preferred Shares
    Basic Maintenance Amount as of such Business Day (assuming for purposes of
    the foregoing calculation that (a) the Maximum Rate is the Maximum Rate on
    such Business Day as if such Business Day were the Auction Date for the
    proposed Special Rate Period, and (b) the Moody's Discount Factors
    applicable to Moody's Eligible Assets are determined by reference to the
    first Exposure Period longer than the Exposure Period then applicable to the
    Trust, as described in the definition of Moody's Discount Factor herein); or

         (ii) a notice stating that the Trust has determined not to exercise its
    option to designate a Special Rate Period of shares of such series and that
    the next succeeding Rate Period of shares of such series shall be a Minimum
    Rate Period.

      (e) FAILURE TO DELIVER NOTICE OF SPECIAL RATE PERIOD. If the Trust fails
to deliver either of the notices described in subparagraphs (d)(i) or (d)(ii) of
this Section 4 (and, in the case of the notice described in
subparagraph (d)(i) of this Section 4, a Preferred Shares Basic Maintenance
Report to the effect set forth in such subparagraph (if either Moody's or S&P is
then rating the series in question)) with respect to any designation of any
proposed Special Rate Period to the Auction Agent by 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of such proposed
Special Rate Period (or by such later time or date, or both, as may be agreed to
by the Auction Agent), the Trust shall be deemed to have delivered a notice to
the Auction Agent with respect to such Special Rate Period to the effect set
forth in subparagraph (d)(ii) of this Section 4. In the event the Trust delivers
to the Auction Agent a notice described in subparagraph (d)(i) of this
Section 4, it shall file a copy of such notice with the Secretary of the Trust,
and the contents of such notice shall be binding on the Trust. In the event the
Trust delivers to the Auction Agent a notice described in subparagraph (d)(ii)
of this Section 4, the Trust will provide Moody's (if Moody's is then rating the
series in question) and S&P (if S&P is then rating the series in question) a
copy of such notice.

5. VOTING RIGHTS.

      (a) ONE VOTE PER SHARE OF PREFERRED SHARES. Except as otherwise provided
in the Declaration or as otherwise required by law, (i) each Holder of Preferred
Shares shall be entitled to one vote for each share of Preferred Shares held by
such Holder on each matter submitted to a vote of shareholders of the Trust, and
(ii) the holders of outstanding preferred shares, including each share of the
Preferred Shares, and of Common Shares shall vote together as a single class;
provided, however, that, at any meeting of the shareholders of the Trust held
for the election of trustees, the holders of outstanding preferred shares,
including the Preferred Shares, represented in person or by proxy at said
meeting, shall be entitled, as a class, to the exclusion of the holders of all
other securities and classes of shares of beneficial interest of the Trust, to
elect two trustees of the Trust, each of the Preferred Shares entitling the
holder thereof to one vote. Subject to paragraph (b) of this Section 5, the
holders of outstanding Common Shares and Preferred Shares voting together as a
single class, shall elect the balance of the trustees.

     (b) Voting For Additional Trustees.

          (i) VOTING PERIOD. Except as otherwise provided in the Declaration or
    as otherwise required by law, during any period in which any one or more of
    the conditions described in subparagraph (A) or (B) of this
    subparagraph (b)(i) shall exist (such period being referred to herein as a
    "Voting Period"), the number of trustees constituting the Board of Trustees
    shall be automatically

                                      A-22
<Page>
    increased by the smallest number that, when added to the two trustees
    elected exclusively by the holders of preferred shares, including the
    Preferred Shares, would constitute a majority of the Board of Trustees as so
    increased by such smallest number, and the holders of preferred shares,
    including the Preferred Shares, shall be entitled, voting as a class on a
    one-vote-per-share basis (to the exclusion of the holders of all other
    securities and classes of shares of beneficial interest of the Trust), to
    elect such smallest number of additional trustees, together with the two
    trustees that such holders are in any event entitled to elect. A Voting
    Period shall commence:

            (A) if at the close of business on any dividend payment date
       accumulated dividends (whether or not earned or declared) on any
       outstanding Preferred Shares, equal to at least two full years' dividends
       shall be due and unpaid and sufficient cash or specified securities shall
       not have been deposited with the Auction Agent for the payment of such
       accumulated dividends; or

            (B) if at any time holders of preferred shares, including the
       Preferred Shares, are entitled under the Investment Company Act to elect
       a majority of the trustees of the Trust.

        Upon the termination of a Voting Period, the voting rights described in
    this subparagraph (b)(i) shall cease, subject always, however, to the
    revesting of such voting rights in the Holders upon the further occurrence
    of any of the events described in this subparagraph (b)(i).

         (ii) NOTICE OF SPECIAL MEETING. As soon as practicable after the
    accrual of any right of the holders of preferred shares, including the
    Preferred Shares, to elect additional trustees as described in
    subparagraph (b)(i) of this Section 5, the Trust shall notify the Auction
    Agent and the Auction Agent shall call a special meeting of such holders, by
    mailing a notice of such special meeting to such holders, such meeting to be
    held not less than 10 nor more than 20 days after the date of mailing of
    such notice. If the Trust fails to send such notice to the Auction Agent or
    if the Auction Agent does not call such a special meeting, it may be called
    by any such holder on like notice. The record date for determining the
    holders entitled to notice of and to vote at such special meeting shall be
    the close of business on the fifth Business Day preceding the day on which
    such notice is mailed. At any such special meeting and at each meeting of
    holders of preferred shares, including the Preferred Shares, held during a
    Voting Period at which trustees are to be elected, such holders, voting
    together as a class (to the exclusion of the holders of all other securities
    and classes of shares of beneficial interest of the Trust), shall be
    entitled to elect the number of trustees prescribed in subparagraph (b)(i)
    of this Section 5 on a one-vote-per-share basis.

         (iii) TERMS OF OFFICE OF EXISTING TRUSTEES. The terms of office of all
    persons who are trustees of the Trust at the time of a special meeting of
    Holders and holders of other preferred shares to elect trustees shall
    continue, notwithstanding the election at such meeting by the Holders and
    such other holders of the number of trustees that they are entitled to
    elect, and the persons so elected by the Holders and such other holders,
    together with the two incumbent trustees elected by the Holders and such
    other holders of preferred shares and the remaining incumbent trustees
    elected by the holders of the Common Shares and Preferred Shares, shall
    constitute the duly elected trustees of the Trust.

         (iv) TERMS OF OFFICE OF CERTAIN TRUSTEES TO TERMINATE UPON TERMINATION
    OF VOTING PERIOD. Simultaneously with the termination of a Voting Period,
    the terms of office of the additional trustees elected by the Holders and
    holders of other Preferred Shares pursuant to subparagraph (b)(i) of this
    Section 5 shall terminate, the remaining trustees shall constitute the
    trustees of the Trust and the voting rights of the Holders and such other
    holders to elect additional trustees pursuant to subparagraph (b)(i) of this
    Section 5 shall cease, subject to the provisions of the last sentence of
    subparagraph (b)(i) of this Section 5.

                                      A-23
<Page>
      (c) Holders of Preferred Shares to Vote on Certain Other Matters.

          (i) INCREASES IN CAPITALIZATION. So long as any Preferred Shares are
    outstanding, the Trust shall not, without the affirmative vote or consent of
    the Holders of at least a majority 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: (A) authorize, create or issue any class or series of
    shares ranking prior to or on a parity with the Preferred Shares with
    respect to the payment of dividends or the distribution of assets upon
    dissolution, liquidation or winding up of the affairs of the Trust, or
    authorize, create or issue additional shares of any series of Preferred
    Shares (except that, notwithstanding the foregoing, but subject to the
    provisions of paragraph (c) of Section 10 of this Part I, the Board of
    Trustees, without the vote or consent of the Holders of Preferred Shares,
    may from time to time authorize and create, and the Trust may from time to
    time issue, additional shares of any series of Preferred Shares or classes
    or series of other preferred shares ranking on a parity with 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; provided, however, that if Moody's or S&P is not then rating the
    Preferred Shares, the aggregate liquidation preference of all preferred
    shares of the Trust outstanding after any such issuance, exclusive of
    accumulated and unpaid dividends, may not exceed the amount set forth in
    Section 10 of Appendix A hereto) or (B) amend, alter or repeal the
    provisions of the Declaration or this Statement, whether by merger,
    consolidation or otherwise, so as to adversely affect any preference, right
    or power of such Preferred Shares or the Holders thereof; 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. 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. If any action set forth above would adversely
    affect the rights of one or more series (the "Affected Series") of Preferred
    Shares in a manner different from any other series of Preferred Shares, the
    Trust will not approve any such action without the affirmative vote or
    consent of the Holders of at least a majority of the shares of each such
    Affected Series outstanding at the time, in person or by proxy, either in
    writing or at a meeting (each such Affected Series voting as a separate
    class).

         (ii) INVESTMENT COMPANY ACT MATTERS. Unless a higher percentage is
    provided for in the Declaration, (A) the affirmative vote of the Holders of
    at least a majority of the Preferred Shares outstanding at the time, voting
    as a separate class, shall be required to approve any conversion of the
    Trust from a closed-end to an open-end investment company and (B) the
    affirmative vote of the Holders of a "majority of the outstanding Preferred
    Shares," voting as a separate class, shall be required to approve any plan
    of reorganization (as such term is used in the Investment Company Act)
    adversely affecting such shares. The affirmative vote of the holders of a
    "majority of the outstanding Preferred Shares," voting as a separate class,
    shall be required to approve any action not described in the first sentence
    of this Section 5(c)(ii) requiring a vote of security holders of the Trust
    under section 13(a) of the Investment Company Act. For purposes of the
    foregoing, "majority of the outstanding Preferred Shares" means (i) 67% or
    more of such shares present at a

                                      A-24
<Page>
    meeting, if the Holders of more than 50% of such shares are present or
    represented by proxy, or (ii) more than 50% of such shares, whichever is
    less. In the event a vote of Holders of Preferred Shares is required
    pursuant to the provisions of section 13(a) of the Investment Company Act,
    the Trust shall, not later than ten Business Days prior to the date on which
    such vote is to be taken, notify Moody's (if Moody's is then rating the
    Preferred Shares) and S&P (if S&P is then rating the Preferred Shares) that
    such vote is to be taken and the nature of the action with respect to which
    such vote is to be taken. The Trust shall, not later than ten Business Days
    after the date on which such vote is taken, notify Moody's (if Moody's is
    then rating the Preferred Shares) and S&P (if S&P is then rating the
    Preferred Shares) of the results of such vote.

     (d) BOARD MAY TAKE CERTAIN ACTIONS WITHOUT SHAREHOLDER APPROVAL. The Board
of Trustees, without the vote or consent of the shareholders of the Trust, may
from time to time amend, alter or repeal any or all of the definitions of the
terms listed below, or any provision of this Statement viewed by Moody's or S&P
as a predicate for any such definition, and any such amendment, alteration or
repeal will not be deemed to affect the preferences, rights or powers of
Preferred Shares or the Holders thereof; provided, however, that the Board of
Trustees receives written confirmation from Moody's or S&P (such confirmation
being required to be obtained only in the event Moody's or S&P is rating the
Preferred Shares and in no event being required to be obtained in the case of
the definitions of (x) Deposit Securities, Discounted Value and Receivables for
Municipal Obligations Sold as such terms apply to S&P Eligible Assets and
(y) S&P Discount Factor, S&P Eligible Asset, S&P Exposure Period and S&P
Volatility Factor) and S&P (such confirmation being required to be obtained only
in the event S&P is rating the Preferred Shares and in no event being required
to be obtained in the case of the definitions of (x) Discounted Value and
Receivables for Municipal Obligations Sold as such terms apply to Moody's
Eligible Assets, and (y) Moody's Discount Factor, Moody's Eligible Asset,
Moody's Exposure Period and Moody's Volatility Factor) that any such amendment,
alteration or repeal would not impair the ratings then assigned by Moody's or
S&P, as the case may be, to the Preferred Shares:

<Table>
<S>                                                 <C>
Deposit Securities................................  Preferred Shares Basic Maintenance Amount
Discounted Value..................................  Preferred Shares Basic Maintenance Cure Date
Escrowed Bonds....................................  Preferred Shares Basic Maintenance Report
Market Value......................................  Quarterly Valuation Date
Maximum Potential Gross-up Payment Liability......  Receivables for Municipal Obligations Sold
Moody's Discount Factor...........................  S&P Discount Factor
Moody's Eligible Asset............................  S&P Eligible Asset
Moody's Exposure Period...........................  S&P Exposure Period
Moody's Volatility Factor.........................  S&P Volatility Factor
1940 Act Cure Date................................  Valuation Date
1940 Act Preferred Asset Coverage.................  Volatility Factor
</Table>

      (e) VOTING RIGHTS SET FORTH HEREIN ARE SOLE VOTING RIGHTS. Unless
otherwise required by law, the Holders of Preferred Shares shall not have any
relative rights or preferences or other special rights other than those
specifically set forth herein.

      (f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders of Preferred
Shares shall have no preemptive rights or rights to cumulative voting.

      (g) VOTING FOR TRUSTEES SOLE REMEDY FOR TRUST'S FAILURE TO PAY DIVIDENDS.
In the event that the Trust fails to pay any dividends on the Preferred Shares,
the exclusive remedy of the Holders shall be the right to vote for trustees
pursuant to the provisions of this Section 5.

     (h) HOLDERS ENTITLED TO VOTE. For purposes of determining any rights of the
Holders to vote on any matter, whether such right is created by this Statement,
by the other provisions of the Declaration,

                                      A-25
<Page>
by statute or otherwise, no Holder shall be entitled to vote any Preferred Share
and no Preferred Share shall be deemed to be "outstanding" for the purpose of
voting or determining the number of shares required to constitute a quorum if,
prior to or concurrently with the time of determination of shares entitled to
vote or shares deemed outstanding for quorum purposes, as the case may be, the
requisite Notice of Redemption with respect to such shares shall have been
mailed as provided in paragraph (c) of Section 11 of this Part I and the
Redemption Price for the redemption of such shares shall have been deposited in
trust with the Auction Agent for that purpose. No Preferred Share held by the
Trust or any affiliate of the Trust (except for shares held by a Broker-Dealer
that is an affiliate of the Trust for the account of its customers) shall have
any voting rights or be deemed to be outstanding for voting or other purposes.

6. INVESTMENT COMPANY ACT PREFERRED SHARES ASSET COVERAGE.

    The Trust shall maintain, as of the last Business Day of each month in which
any Preferred Shares are outstanding, the Investment Company Act Preferred
Shares Asset Coverage.

7. PREFERRED SHARES BASIC MAINTENANCE AMOUNT.

      (a) So long as Preferred Shares are outstanding, the Trust shall maintain,
on each Valuation Date, and shall verify to its satisfaction that it is
maintaining on such Valuation Date (i) Moody's Eligible Assets having an
aggregate Discounted Value equal to or greater than the Preferred Shares Basic
Maintenance Amount (if Moody's is then rating the Preferred Shares) and S&P
Eligible Assets having an aggregate Discounted Value equal to or greater than
the Preferred Shares Basic Maintenance Amount (if S&P is then rating the
Preferred Shares).

     (b) On or before 5:00 P.M., New York City time, on the third Business Day
after a Valuation Date on which the Trust fails to satisfy the Preferred Shares
Basic Maintenance Amount, and on the third Business Day after the Preferred
Shares Basic Maintenance Cure Date with respect to such Valuation Date, the
Trust shall complete and deliver to Moody's (if Moody's is then rating the
Preferred Shares), S&P (if S&P is then rating the Preferred Shares) and the
Auction Agent (if either Moody's or S&P is then rating the Preferred Shares) a
Preferred Shares Basic Maintenance Report as of the date of such failure or such
Preferred Shares Basic Maintenance Cure Date, as the case may be, which will be
deemed to have been delivered to the Auction Agent if the Auction Agent receives
a copy or telecopy, telex or other electronic transcription thereof and on the
same day the Trust mails to the Auction Agent for delivery on the next Business
Day the full Preferred Shares Basic Maintenance Report. The Trust shall also
deliver a Preferred Shares Basic Maintenance Report to (i) the Auction Agent (if
either Moody's or S&P is then rating the Preferred Shares) as of (A) the
fifteenth day of each month (or, if such day is not a Business Day, the next
succeeding Business Day) and (B) the last Business Day of each month,
(ii) Moody's (if Moody's is then rating the Preferred Shares) and S&P (if S&P is
then rating the Preferred Shares) as of any Quarterly Valuation Date, in each
case on or before the third Business Day after such day, and S&P, if and when
requested for any Valuation Date, on or before the third Business Day after such
request. A failure by the Trust to deliver a Preferred Shares Basic Maintenance
Report pursuant to the preceding sentence shall be deemed to be delivery of a
Preferred Shares Basic Maintenance Report indicating the Discounted Value for
all assets of the Trust is less than the Preferred Shares Basic Maintenance
Amount, as of the relevant Valuation Date.

      (c) Within ten Business Days after the date of delivery of a Preferred
Shares Basic Maintenance Report in accordance with paragraph (b) of this
Section 7 relating to a Quarterly Valuation Date, the Trust shall cause the
Independent Accountant to confirm in writing to Moody's (if Moody's is then
rating the Preferred Shares), S&P (if S&P is then rating the Preferred Shares)
and the Auction Agent (if either Moody's or S&P is then rating the Preferred
Shares) (i) the mathematical accuracy of the calculations reflected in such
Report (and in any other Preferred Shares Basic Maintenance Report,

                                      A-26
<Page>
randomly selected by the Independent Accountant, that was prepared by the Trust
during the quarter ending on such Quarterly Valuation Date), (ii) that, in such
Report (and in such randomly selected Report), the Trust determined in
accordance with this Statement whether the Trust had, at such Quarterly
Valuation Date (and at the Valuation Date addressed in such randomly selected
Report), Moody's Eligible Assets (if Moody's is then rating the Preferred
Shares) and S&P Eligible Assets (if S&P is then rating the Preferred Shares) of
an aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount (such confirmation being herein called the "Accountant's
Confirmation"), (iii) with respect to the S&P ratings on Municipal Obligations,
the issuer name, issue size and coupon rate listed in such Report, that the
Independent Accountant has sought to verify by reference to Bloomberg Financial
Services or another independent source approved in writing by S&P, and the
Independent Accountant shall provide a listing in its letter of any differences,
(iv) with respect to the Moody's ratings on Municipal Obligations, the issuer
name, issue size and coupon rate listed in such Report, that the Independent
Accountant has sought to verify by reference to Bloomberg Financial Services or
another independent source approved in writing by Moody's, and the Independent
Accountant shall provide a listing in its letter of any differences, (v) with
respect to the bid or mean price (or such alternative permissible factor used in
calculating the Market Value) provided by the custodian of the Trust's assets to
the Trust for purposes of valuing securities in the Trust's portfolio, the
Independent Accountant has traced the price used in such Report to the bid or
mean price listed in such Report as provided to the Trust and verified that such
information agrees (in the event such information does not agree, the
Independent Accountant will provide a listing in its letter of such differences)
and (vi) with respect to such confirmation to Moody's and S&P, that the Trust
has satisfied the requirements of Section 13 of Appendix A to this Statement
(such information is herein called the "Accountant's Confirmation").

     (d) Within ten Business Days after the date of delivery of a Preferred
Shares Basic Maintenance Report in accordance with paragraph (b) of this
Section 7 relating to any Valuation Date on which the Trust failed to satisfy
the Preferred Shares Basic Maintenance Amount, and relating to the Preferred
Shares Basic Maintenance Cure Date with respect to such failure to satisfy the
Preferred Shares Basic Maintenance Amount, the Trust shall cause the Independent
Accountant to provide to Moody's (if Moody's is then rating the Preferred
Shares), S&P (if S&P is then rating the Preferred Shares) and the Auction Agent
(if either Moody's or S&P is then rating the Preferred Shares) an Accountant's
Confirmation as to such Preferred Shares Basic Maintenance Report.

      (e) If any Accountant's Confirmation delivered pursuant to paragraph (c)
or (d) of this Section 7 shows that an error was made in the Preferred Shares
Basic Maintenance Report for a particular Valuation Date for which such
Accountant's Confirmation was required to be delivered, or shows that a lower
aggregate Discounted Value for the aggregate of all Moody's Eligible Assets (if
Moody's is then rating the Preferred Shares) or S&P Eligible Assets (if S&P is
then rating the Preferred Shares), as the case may be, of the Trust was
determined by the Independent Accountant, the calculation or determination made
by such Independent Accountant shall be final and conclusive and shall be
binding on the Trust, and the Trust shall accordingly amend and deliver the
Preferred Shares Basic Maintenance Report to Moody's (if Moody's is then rating
the Preferred Shares), S&P (if S&P is then rating the Preferred Shares) and the
Auction Agent (if either Moody's or S&P is then rating the Preferred Shares)
promptly following receipt by the Trust of such Accountant's Confirmation.

      (f) On or before 5:00 P.M., New York City time, on the first Business Day
after the Date of Original Issue of any Preferred Shares, the Trust shall
complete and deliver to Moody's (if Moody's is then rating the Preferred Shares)
and S&P (if S&P is then rating the Preferred Shares) a Preferred Shares Basic
Maintenance Report as of the close of business on such Date of Original Issue.
Within five Business Days of such Date of Original Issue, the Trust shall cause
the Independent Accountant to confirm in writing to S&P (if S&P is then rating
the Preferred Shares) (i) the mathematical accuracy of

                                      A-27
<Page>
the calculations reflected in such Report and (ii) that the Discounted Value of
S&P Eligible Assets reflected thereon equals or exceeds the Preferred Shares
Basic Maintenance Amount reflected thereon.

      (g) On or before 5:00 P.M., New York City time, on the third Business Day
after either (i) the Trust shall have redeemed Common Shares or (ii) the ratio
of the Discounted Value of Moody's Eligible Assets or the S&P Eligible Assets to
the Preferred Shares Basic Maintenance Amount is less than or equal to 105%, or
(iii) whenever requested by Moody's (if Moody's is then rating the Preferred
Shares) or S&P (if S&P is then rating the Preferred Shares) , the Trust shall
complete and deliver to Moody's (if Moody's is then rating the Preferred Shares)
or S&P (if S&P is then rating the Preferred Shares), as the case may be, a
Preferred Shares Basic Maintenance Report as of the date of such event.

8. RESERVED.

9. RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS.

      (a) DIVIDENDS ON SHARES OTHER THAN THE PREFERRED SHARES. Except as set
forth in the next sentence, no dividends shall be declared or paid or set apart
for payment on the shares of any class or series of shares of beneficial
interest of the Trust ranking, as to the payment of dividends, on a parity with
the Preferred Shares for any period unless full cumulative dividends have been
or contemporaneously are declared and paid on the shares of each series of the
Preferred Shares through its most recent Dividend Payment Date. When dividends
are not paid in full upon the shares of each series of the Preferred Shares
through its most recent Dividend Payment Date or upon the shares of any other
class or series of shares of beneficial interest of the Trust ranking on a
parity as to the payment of dividends with the Preferred Shares through their
most recent respective dividend payment dates, all dividends declared upon the
Preferred Shares and any other such class or series of shares of beneficial
interest ranking on a parity as to the payment of dividends with Preferred
Shares shall be declared pro rata so that the amount of dividends declared per
share on Preferred Shares and such other class or series of shares of beneficial
interest shall 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 of beneficial interest bear to each other (for purposes of this sentence,
the amount of dividends declared per share of Preferred Shares shall be based on
the Applicable Rate for such share for the Dividend Periods during which
dividends were not paid in full).

     (b) DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO COMMON SHARES UNDER
THE INVESTMENT COMPANY ACT. The Board of Trustees shall not declare any dividend
(except a dividend payable in Common Shares), or declare any other distribution,
upon the Common Shares, or purchase Common Shares, unless in every such case the
Preferred Shares have, at the time of any such declaration or purchase, an asset
coverage (as defined in and determined pursuant to the Investment Company Act)
of at least 200% (or such other asset coverage as may in the future be specified
in or under the Investment Company Act as the minimum asset coverage for senior
securities which are shares or stock of a closed-end investment company as a
condition of declaring dividends on its common shares or stock) after deducting
the amount of such dividend, distribution or purchase price, as the case may be.

      (c) OTHER RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. For so long
as any Preferred Shares are outstanding, and except as set forth in
paragraph (a) of this Section 9 and paragraph (c) of Section 12 of this Part I,
(A) the Trust shall not declare, pay or set apart for payment any dividend or
other distribution (other than a dividend or distribution paid in shares of, or
in options, warrants or rights to subscribe for or purchase, Common Shares or
other shares, if any, ranking junior to the Preferred Shares as to the payment
of dividends and the distribution of assets upon dissolution, liquidation or
winding up) in respect of the Common Shares or any other shares of the Trust
ranking junior to or on a parity with the Preferred Shares as to the payment of
dividends or the distribution of assets upon dissolution, liquidation or winding
up, or call for redemption, redeem, purchase or

                                      A-28
<Page>
otherwise acquire for consideration any Common Shares or any other such junior
shares (except by conversion into or exchange for shares of the Trust ranking
junior to the Preferred Shares as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), or any such
parity shares (except by conversion into or exchange for shares of the Trust
ranking junior to or on a parity with Preferred Shares as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up), unless (i) full cumulative dividends on shares of each series of
Preferred Shares through its most recently ended Dividend Period shall have been
paid or shall have been declared and sufficient funds for the payment thereof
deposited with the Auction Agent and, (ii) the Trust has redeemed the full
number of Preferred Shares required to be redeemed by any provision for
mandatory redemption pertaining thereto, and (iii) any Gross Up Payment required
to be paid on or before the date of such transaction has been paid and (B) the
Trust shall not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares of, or in
options, warrants or rights to subscribe for or purchase, Common Shares or other
shares, if any, ranking junior to Preferred Shares as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up) in respect of Common Shares or any other shares of the Trust ranking
junior to Preferred Shares as to the payment of dividends or the distribution of
assets upon dissolution, liquidation or winding up, or call for redemption,
redeem, purchase or otherwise acquire for consideration any Common Shares or any
other such junior shares (except by conversion into or exchange for shares of
the Trust ranking junior to Preferred Shares as to the payment of dividends and
the distribution of assets upon dissolution, liquidation or winding up), unless
immediately after such transaction the Discounted Value of Moody's Eligible
Assets (if Moody's is then rating the Preferred Shares) and S&P Eligible Assets
(if S&P is then rating the Preferred Shares) would at least equal the Preferred
Shares Basic Maintenance Amount.

10. RATING AGENCY RESTRICTIONS.

    Except as expressly permitted in Section 13 of Appendix A hereto or as
otherwise permitted by the then-current guidelines of S&P (if S&P is then rating
the Preferred Shares) and Moody's (if Moody's is then rating the Preferred
Shares), for so long as any Preferred Shares are outstanding and Moody's or S&P
or both is rating such shares, the Trust will not, unless it has received
written confirmation from Moody's or S&P, or both, as applicable, that any such
action would not impair the rating then assigned by such rating agency to such
shares, engage in any one or more of the following transactions:

      (a) buy or sell futures or write put or call options;

     (b) borrow money, except that the Trust may, without obtaining the written
confirmation described above, borrow money for the purpose of clearing
securities transactions if (i) the Preferred Shares Basic Maintenance Amount
would continue to be satisfied after giving effect to such borrowing and
(ii) such borrowing (A) is privately arranged with a bank or other person and is
evidenced by a promissory note or other evidence of indebtedness that is not
intended to be publicly distributed or (B) is for "temporary purposes," is
evidenced by a promissory note or other evidence of indebtedness and is in an
amount not exceeding 5 per centum of the value of the total assets of the Trust
at the time of the borrowing; for purposes of the foregoing, "temporary purpose"
means that the borrowing is to be repaid within sixty days and is not to be
extended or renewed;

      (c) issue additional shares of any series of Preferred Shares or any class
or series of shares ranking prior to or on a parity with Preferred Shares with
respect to the payment of dividends or the distribution of assets upon
dissolutions, liquidation or winding up of the Trust, or reissue any Preferred
Shares previously purchased or redeemed by the Trust;

     (d) engage in any short sales of securities;

                                      A-29
<Page>
      (e) lend securities;

      (f) merge or consolidate into or with any other corporation;

      (g) change the pricing service (currently FT Interactive Data Corporation)
referred to in the definition of Market Value;

     (h) enter into reverse repurchase agreements; or

      (i) engage in interest rate swaps, caps and floors, except that the Trust
may, without obtaining the written consent described above, engage in swaps,
caps and floors if; (i) the unsecured senior debt or claims paying ability of
the counterparty to the swap, cap or floor is rated A or A-1 or better by S&P
and Aaa3 or better by Moody's; (ii) the swap, collar or floor is
marked-to-market daily by the counterparty; (iii) a swap, collar or floor that
is "in the money" is valued at 95% of the accrued net excess of the Trust's
entitlements under such instrument over its obligations under such instrument
for purposes of calculating the Discounted Value of S&P Eligible Assets (if S&P
is then rating the Preferred Shares) and the Discounted Value of the Moody's
Eligible Assets (if Moody's is then rating the Preferred Shares); (iv) for
swaps, caps and floors that are "out of the money", 100% of any accrued net
excess of the Trust's obligations under such instrument over its entitlements
under such instrument, which excess is included as a liability of the Trust for
the purposes of calculating the Discounted Value of S&P Eligible Assets (if S&P
is then rating the Preferred Shares) and the Discounted Value of Moody's
Eligible Assets (if Moody's is then rating the Preferred Shares); (v) the swap,
cap or floor will be terminated if the Trust fails to maintain S&P Eligible
Assets having an aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount (if S&P is then rating the Preferred
Shares) and Moody's Eligible Assets having an aggregate Discounted Value equal
to or greater than the Preferred Shares Basic Maintenance Amount (if Moody's is
then rating the Preferred Shares) on any two consecutive Valuation Dates; and
(vi) the Trust provides S&P (if S&P is then rating the Preferred Shares) and
Moody's (if Moody's is then rating the Preferred Shares) subsequent notice of
entering into the swap, cap or floor.

    In the event any Preferred Shares are outstanding and another rating agency
is rating such shares in addition to or in lieu of Moody's or S&P, the Trust
shall comply with any restrictions imposed by such rating agency, which
restrictions may be more restrictive than those imposed by Moody's or S&P.

11. REDEMPTION.

      (a) Optional Redemption.

          (i) Subject to the provisions of subparagraph (v) of this
    paragraph (a), Preferred Shares of any series may be redeemed, at the option
    of the Trust, as a whole or from time to time in part, on any Dividend
    Payment Date for shares of such series, out of funds legally available
    therefor, at a redemption price per share equal to the sum of $25,000 plus
    an amount equal to accumulated but unpaid dividends thereon (whether or not
    earned or declared) to (but not including) the date fixed for redemption;
    provided, however, that (1) shares of a series of Preferred Shares may not
    be redeemed in part if after such partial redemption fewer than 300 shares
    of such series remain outstanding; (2) unless otherwise provided in
    Section 11 of Appendix A hereto, shares of a series of Preferred Shares are
    redeemable by the Trust during the Initial Rate Period thereof only on the
    second Business Day next preceding the last Dividend Payment Date for such
    Initial Rate Period; and (3) subject to subparagraph (ii) of this
    paragraph (a), the Notice of Special Rate Period relating to a Special Rate
    Period of shares of a series of Preferred Shares, as delivered to the
    Auction Agent and filed with the Secretary of the Trust, may provide that
    shares of such series shall not be redeemable during the whole or any part
    of such Special Rate Period (except as

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    provided in subparagraph (iv) of this paragraph (a)) or shall be redeemable
    during the whole or any part of such Special Rate Period only upon payment
    of such redemption premium or premiums as shall be specified therein
    ("Special Redemption Provisions").

         (ii) A Notice of Special Rate Period relating to shares of a series of
    Preferred Shares for a Special Rate Period thereof may contain Special
    Redemption Provisions only if the Trust's Board of Trustees, after
    consultation with the Broker-Dealer or Broker-Dealers for such Special Rate
    Period of shares of such series, determines that such Special Redemption
    Provisions are in the best interest of the Trust.

         (iii) If fewer than all of the outstanding shares of a series of
    Preferred Shares are to be redeemed pursuant to subparagraph (i) of this
    paragraph (a), the number of shares of such series to be redeemed shall be
    determined by the Board of Trustees, and such shares shall be redeemed pro
    rata from the Holders of shares of such series in proportion to the number
    of shares of such series held by such Holders.

         (iv) Subject to the provisions of subparagraph (v) of this
    paragraph (a), shares of any series of Preferred Shares may be redeemed, at
    the option of the Trust, as a whole but not in part, out of funds legally
    available therefor, on the first day following any Dividend Period thereof
    included in a Rate Period consisting of more than 364 Rate Period Days if,
    on the date of determination of the Applicable Rate for shares of such
    series for such Rate Period, such Applicable Rate equaled or exceeded on
    such date of determination the Treasury Note Rate for such Rate Period, at a
    redemption price per share equal to the sum of $25,000 plus an amount equal
    to accumulated but unpaid dividends thereon (whether or not earned or
    declared) to (but not including) the date fixed for redemption.

          (v) The Trust may not on any date mail a Notice of Redemption pursuant
    to paragraph (c) of this Section 11 in respect of a redemption contemplated
    to be effected pursuant to this paragraph (a) unless on such date the Trust
    has available liquid securities having a value not less than the amount
    (including any applicable premium) due to Holders of Preferred Shares by
    reason of redemption of such shares or such redemption date, and (b) the
    Discounted Value of Moody's Eligible Assets (if Moody's is then rating the
    Preferred Shares) and S&P Eligible Assets (if S&P is then rating the
    Preferred Shares) each at least equals the Preferred Shares Basic
    Maintenance Amount, and would at least equal the Preferred Shares Basic
    Maintenance Amount immediately subsequent to such redemption if such
    redemption were to occur on such date. For purposes of determining in clause
    (b) of the preceding sentence whether the Discounted Value of Moody's
    Eligible Assets at least equals the Preferred Shares Basic Maintenance
    Amount, the Moody's Discount Factors applicable to Moody's Eligible Assets
    shall be determined by reference to the first Exposure Period longer than
    the Exposure Period then applicable to the Trust, as described in the
    definition of Moody's Discount Factor herein.

     (b) MANDATORY REDEMPTION. The Trust shall redeem, at a redemption price
equal to $25,000 per share plus accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed by the
Board of Trustees for redemption, certain of the Preferred Shares, if the Trust
fails to have either Moody's Eligible Assets or S&P Eligible Assets with a
Discounted Value greater than or equal to the Preferred Shares Basic Maintenance
Amount or fails to maintain the Investment Company Act Preferred Shares Asset
Coverage, in accordance with the requirements of the rating agency or agencies
then rating the Preferred Shares, and such failure is not cured on or before the
Preferred Shares Basic Maintenance Cure Date or the Investment Company Act Cure
Date, as the case may be. The number of Preferred Shares to be redeemed shall be
equal to the lesser of (i) the minimum number of Preferred Shares, together with
all other preferred shares subject to redemption or retirement, the redemption
of which, if deemed to have occurred immediately prior to the opening

                                      A-31
<Page>
of business on the Cure Date, would have resulted in the Trust's having Moody's
Eligible Assets and S&P Eligible Assets with a Discounted Value greater than or
equal to the Preferred Shares Basic Maintenance Amount or maintaining the
Investment Company Act Preferred Shares Asset Coverage, as the case may be, on
such Cure Date (provided, however, that if there is no such minimum number of
Preferred Shares and other preferred shares the redemption or retirement of
which would have had such result, all Preferred Shares and other Preferred
Shares then outstanding shall be redeemed), and (ii) the maximum number of
Preferred Shares, together with all other Preferred Shares subject to redemption
or retirement, that can be redeemed out of funds expected to be legally
available therefor in accordance with the Declaration and applicable law. In
determining the Preferred Shares required to be redeemed in accordance with the
foregoing, the Trust shall allocate the number required to be redeemed to
satisfy the Preferred Shares Basic Maintenance Amount or the Investment Company
Act Preferred Shares Asset Coverage, as the case may be, pro rata among
Preferred Shares and other preferred shares (and, then, pro rata among each
series of Preferred Shares) subject to redemption or retirement. The Trust shall
effect such redemption on the date fixed by the Trust therefor, which date shall
not be earlier than 20 days nor later than 40 days after such Cure Date, except
that if the Trust does not have funds legally available for the redemption of
all of the required number of the Preferred Shares and other preferred shares
which are subject to redemption or retirement or the Trust otherwise is unable
to effect such redemption on or prior to 40 days after such Cure Date, the Trust
shall redeem those Preferred Shares and other preferred shares which it was
unable to redeem on the earliest practicable date on which it is able to effect
such redemption. If fewer than all of the outstanding shares of a series of
Preferred Shares are to be redeemed pursuant to this paragraph (b), the number
of shares of such series to be redeemed shall be redeemed pro rata from the
Holders of shares of such series in proportion to the number of shares of such
series held by such Holders.

      (c) NOTICE OF REDEMPTION. If the Trust shall determine or be required to
redeem shares of a series of Preferred Shares pursuant to paragraph (a) or (b)
of this Section 11, it shall mail a Notice of Redemption with respect to such
redemption by first-class mail, postage prepaid, to (i) each Holder of the
shares of such series to be redeemed, at such Holder's address as the same
appears on the record books of the Trust on the record date established by the
Board of Trustees and (ii) to S&P, if S&P is then rating the Preferred Shares
and to Moody's, if Moody's is then rating the Preferred Shares. Such Notice of
Redemption shall be so mailed not less than 20 nor more than 45 days prior to
the date fixed for redemption. Each such Notice of Redemption shall state:
(i) the redemption date; (ii) the number of Preferred Shares to be redeemed and
the series thereof; (iii) the CUSIP number for shares of such series; (iv) the
Redemption Price; (v) the place or places where the certificate(s) for such
shares (properly endorsed or assigned for transfer, if the Board of Trustees
shall so require and the Notice of Redemption shall so state) are to be
surrendered for payment of the Redemption Price; (vi) that dividends on the
shares to be redeemed will cease to accumulate on such redemption date; and
(vii) that the holders of any shares of a series of Preferred Shares being so
redeemed shall not participate in the Auction, if any, immediately preceding the
redemption date; and (viii) the provisions of this Section 11 under which such
redemption is made. If fewer than all shares of a series of Preferred Shares
held by any Holder are to be redeemed, the Notice of Redemption mailed to such
Holder shall also specify the number of shares of such series to be redeemed
from such Holder. The Trust may provide in any Notice of Redemption relating to
a redemption contemplated to be effected pursuant to paragraph (a) of this
Section 11 that such redemption is subject to one or more conditions precedent
and that the Trust shall not be required to effect such redemption unless each
such condition shall have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.

     (d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding the
provisions of paragraph (a) or (b) of this Section 11, if any dividends on
shares of a series of Preferred Shares (whether or not earned or declared) are
in arrears, no shares of such series shall be redeemed unless all outstanding
shares of such series are simultaneously redeemed, and the Trust shall not
purchase or

                                      A-32
<Page>
otherwise acquire any shares of such series; provided, however, that the
foregoing shall not prevent the purchase or acquisition of all outstanding
shares of such series pursuant to the successful completion of an otherwise
lawful purchase or exchange offer made on the same terms to, and accepted by,
Holders of all outstanding shares of such series.

      (e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent that any
redemption for which Notice of Redemption has been mailed is not made by reason
of the absence of legally available funds therefor in accordance with the
Declaration and applicable law, such redemption shall be made as soon as
practicable to the extent such funds become available. Failure to redeem
Preferred Shares shall be deemed to exist at any time after the date specified
for redemption in a Notice of Redemption when the Trust shall have failed, for
any reason whatsoever, to deposit in trust with the Auction Agent the Redemption
Price with respect to any shares for which such Notice of Redemption has been
mailed; provided, however, that the foregoing shall not apply in the case of the
Trust's failure to deposit in trust with the Auction Agent the Redemption Price
with respect to any shares where (1) the Notice of Redemption relating to such
redemption provided that such redemption was subject to one or more conditions
precedent and (2) any such condition precedent shall not have been satisfied at
the time or times and in the manner specified in such Notice of Redemption.
Notwithstanding the fact that the Trust may not have redeemed Preferred Shares
for which a Notice of Redemption has been mailed, dividends may be declared and
paid on Preferred Shares and shall include those Preferred Shares for which a
Notice of Redemption has been mailed.

      (f) AUCTION AGENT AS TRUSTEE OF REDEMPTION PAYMENTS BY TRUST. All moneys
paid to the Auction Agent for payment of the Redemption Price of Preferred
Shares called for redemption shall be held in trust by the Auction Agent for the
benefit of Holders of shares so to be redeemed.

      (g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE NO LONGER
OUTSTANDING. Provided a Notice of Redemption has been mailed pursuant to
paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on
the Business Day next preceding the date fixed for redemption thereby, in funds
available on the next Business Day in The City of New York, New York) of funds
sufficient to redeem the Preferred Shares that are the subject of such notice,
dividends on such shares shall cease to accumulate and such shares shall no
longer be deemed to be outstanding for any purpose, and all rights of the
Holders of the shares so called for redemption shall cease and terminate, except
the right of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in subparagraph
(e)(i) of Section 2 of this Part I and in Section 3 of this Part I. Upon
surrender in accordance with the Notice of Redemption of the certificates for
any shares so redeemed (properly endorsed or assigned for transfer, if the Board
of Trustees shall so require and the Notice of Redemption shall so state), the
Redemption Price shall be paid by the Auction Agent to the Holders of Preferred
Shares subject to redemption. In the case that fewer than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued, representing the unredeemed shares, without cost to the Holder thereof.
The Trust shall be entitled to receive from the Auction Agent, promptly after
the date fixed for redemption, any cash deposited with the Auction Agent in
excess of (i) the aggregate Redemption Price of the Preferred Shares called for
redemption on such date and (ii) all other amounts to which Holders of Preferred
Shares called for redemption may be entitled. Any funds so deposited that are
unclaimed at the end of 90 days from such redemption date shall, to the extent
permitted by law, be repaid to the Trust, after which time the Holders of
Preferred Shares so called for redemption may look only to the Trust for payment
of the Redemption Price and all other amounts to which they may be entitled.

     (h) COMPLIANCE WITH APPLICABLE LAW. In effecting any redemption pursuant to
this Section 11, the Trust shall use its best efforts to comply with all
applicable conditions precedent to effecting such redemption under the
Investment Company Act and any applicable Delaware law, but shall effect no
redemption except in accordance with the Investment Company Act and any
applicable Delaware law.

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<Page>
      (i) ONLY WHOLE PREFERRED SHARES MAY BE REDEEMED. In the case of any
redemption pursuant to this Section 11, only whole Preferred Shares shall be
redeemed, and in the event that any provision of the Declaration would require
redemption of a fractional share, the Auction Agent shall be authorized to round
up so that only whole shares are redeemed.

      (j) MODIFICATION OF REDEMPTION PROCEDURES. Notwithstanding any of the
foregoing provisions of this Section 11, the Trust may modify any or all of the
requirements relating to the Notice of Redemption provided that (i) any such
modification does not materially and adversely affect any Holder of the relevant
series of Preferred Shares, and (ii) the Trust receives written notice from
Moody's (if Moody's is then rating the Preferred Shares) and S&P (if S&P is then
rating the Preferred Shares) that such modification would not impair the ratings
assigned by Moody's and S&P to shares of Preferred Shares.

12. LIQUIDATION RIGHTS

      (a) RANKING. The shares of a series of Preferred Shares shall rank on a
parity with each other, with shares of any other series of preferred shares and
with shares of any other series of Preferred Shares as to the distribution of
assets upon dissolution, liquidation or winding up of the affairs of the Trust.

     (b) DISTRIBUTIONS UPON LIQUIDATION. Upon the dissolution, liquidation or
winding up of the affairs of the Trust, whether voluntary or involuntary, the
Holders of Preferred Shares then outstanding shall be entitled to receive and to
be paid out of the assets of the Trust available for distribution to its
shareholders, before any payment or distribution shall be made on the Common
Shares or on any other class of shares of the Trust ranking junior to the
Preferred Shares upon dissolution, liquidation or winding up, an amount equal to
the Liquidation Preference with respect to such shares plus an amount equal to
all dividends thereon (whether or not earned or declared) accumulated but unpaid
to (but not including) the date of final distribution in same day funds,
together with any payments required to be made pursuant to Section 3 of this
Part I in connection with the liquidation of the Trust. After the payment to the
Holders of the Preferred Shares of the full preferential amounts provided for in
this paragraph (b), the Holders of Preferred Shares as such shall have no right
or claim to any of the remaining assets of the Trust.

      (c) PRO RATA DISTRIBUTIONS. In the event the assets of the Trust available
for distribution to the Holders of Preferred Shares upon any dissolution,
liquidation, or winding up of the affairs of the Trust, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
Holders are entitled pursuant to paragraph (b) of this Section 12, no such
distribution shall be made on account of any shares of any other class or series
of preferred shares ranking on a parity with the Preferred Shares with respect
to the distribution of assets upon such dissolution, liquidation or winding up
unless proportionate distributive amounts shall be paid on account of the
Preferred Shares, ratably, in proportion to the full distributable amounts for
which holders of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.

     (d) RIGHTS OF JUNIOR SHARES. Subject to the rights of the holders of shares
of any series or class or classes of shares ranking on a parity with the
Preferred Shares with respect to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Trust, after payment shall have
been made in full to the Holders of the Preferred Shares as provided in
paragraph (b) of this Section 12, but not prior thereto, any other series or
class or classes of shares ranking junior to the Preferred Shares with respect
to the distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Trust shall, subject to the respective terms and provisions (if
any) applying thereto, be entitled to receive any and all assets remaining to be
paid or distributed, and the Holders of the Preferred Shares shall not be
entitled to share therein.

                                      A-34
<Page>
      (e) CERTAIN EVENTS NOT CONSTITUTING LIQUIDATION. Neither the sale of all
or substantially all the property or business of the Trust, nor the merger or
consolidation of the Trust into or with any business trust or corporation nor
the merger or consolidation of any business trust or corporation into or with
the Trust shall be a dissolution, liquidation or winding up, whether voluntary
or involuntary, for the purposes of this Section 12.

13. MISCELLANEOUS.

      (a) AMENDMENT OF APPENDIX A TO ADD ADDITIONAL SERIES. Subject to the
provisions of paragraph (c) of Section 10 of this Part I, the Board of Trustees
may, by resolution duly adopted, without shareholder approval (except as
otherwise provided by this Statement or required by applicable law), amend
Appendix A hereto to (1) reflect any amendments hereto which the Board of
Trustees is entitled to adopt pursuant to the terms of this Statement without
shareholder approval or (2) add additional series of Preferred Shares or
additional shares of a series of Preferred Shares (and terms relating thereto)
to the series and Preferred Shares theretofore described thereon. Each such
additional series and all such additional shares shall be governed by the terms
of this statement.

     (b) APPENDIX A INCORPORATED BY REFERENCE. Appendix A hereto is incorporated
in and made a part of this Statement by reference thereto.

      (c) NO FRACTIONAL SHARES. No fractional shares of Preferred Shares shall
be issued.

     (d) STATUS OF PREFERRED SHARES REDEEMED, EXCHANGED OR OTHER WISE ACQUIRED
BY THE TRUST. Preferred Shares which are redeemed, exchanged or otherwise
acquired by the Trust shall return to the status of authorized and unissued
preferred shares without designation as to series.

      (e) BOARD MAY RESOLVE AMBIGUITIES. To the extent permitted by applicable
law, the Board of Trustees may interpret or adjust the provisions of this
Statement to resolve any inconsistency or ambiguity or to remedy any formal
defect, and may amend this Statement with respect to any series of Preferred
Shares prior to the issuance of shares of such series.

      (f) HEADINGS NOT DETERMINATIVE. The headings contained in this Statement
are for convenience of reference only and shall not affect the meaning or
interpretation of this statement.

      (g) NOTICES. All notices or communications, unless otherwise specified in
the By-Laws of the Trust or this Statement, shall be sufficiently given if in
writing and delivered in person or mailed by first-class mail, postage prepaid.

                                      A-35
<Page>
                                    PART II.

1. ORDERS.

      (a) Prior to the Submission Deadline on each Auction Date for shares of a
series of Preferred Shares:

          (i) each Beneficial Owner of shares of such series may submit to its
    Broker-Dealer by telephone or otherwise information as to:

            (A) the number of Outstanding shares, if any, of such series held by
       such Beneficial Owner which such Beneficial Owner desires to continue to
       hold without regard to the Applicable Rate for shares of such series for
       the next succeeding Rate Period of such shares;

            (B) the number of Outstanding shares, if any, of such series held by
       such Beneficial Owner which such Beneficial Owner offers to sell if the
       Applicable Rate for shares of such series for the next succeeding Rate
       Period of shares of such series shall be less than the rate per annum
       specified by such Beneficial Owner; and/or

            (C) the number of Outstanding shares, if any, of such series held by
       such Beneficial Owner which such Beneficial Owner offers to sell without
       regard to the Applicable Rate for shares of such series for the next
       succeeding Rate Period of shares of such series;

                 and

         (ii) one or more Broker-Dealers, using lists of Potential Beneficial
    Owners, shall in good faith for the purpose of conducting a competitive
    Auction in a commercially reasonable manner, contact Potential Beneficial
    Owners (by telephone or otherwise), including Persons that are not
    Beneficial Owners, on such lists to determine the number of shares, if any,
    of such series which each such Potential Beneficial Owner offers to purchase
    if the Applicable Rate for shares of such series for the next succeeding
    Rate Period of shares of such series shall not be less than the rate per
    annum specified by such Potential Beneficial Owner.

        For the purposes hereof, the communication by a Beneficial Owner or
    Potential Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the
    Auction Agent, of information referred to in clause (i) (A), (i) (B),
    (i) (C) or (ii) of this paragraph (a) is hereinafter referred to as an
    "Order" and collectively as "Orders" and each Beneficial Owner and each
    Potential Beneficial Owner placing an Order with a Broker-Dealer, and such
    Broker-Dealer placing an order with the Auction Agent, is hereinafter
    referred to as a "Bidder" and collectively as "Bidders"; an Order containing
    the information referred to in clause (i)(A) of this paragraph (a) is
    hereinafter referred to as a "Hold Order" and collectively as "Hold Orders";
    an Order containing the information referred to in clause (i)(B) or (ii) of
    this paragraph (a) is hereinafter referred to as a "Bid" and collectively as
    "Bids"; and an Order containing the information referred to in
    clause (i)(C) of this paragraph (a) is hereinafter referred to as a "Sell
    Order" and collectively as "Sell Orders."

     (b) (i) A Bid by a Beneficial Owner or an Existing Holder of shares of a
series of Preferred Shares subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:

            (A) the number of Outstanding shares of such series specified in
       such Bid if the Applicable Rate for shares of such series determined on
       such Auction Date shall be less than the rate specified therein;

                                      A-36
<Page>
            (B) such number or a lesser number of Outstanding shares of such
       series to be determined as set forth in clause (iv) of paragraph (a) of
       Section 4 of this Part II if the Applicable Rate for shares of such
       series determined on such Auction Date shall be equal to the rate
       specified therein; or

            (C) the number of Outstanding shares of such series specified in
       such Bid if the rate specified therein shall be higher than the Maximum
       Rate for shares of such series, or such number or a lesser number of
       Outstanding shares of such series to be determined as set forth in
       clause (iii) of paragraph (b) of Section 4 of this Part II if the rate
       specified therein shall be higher than the Maximum Rate for shares of
       such series and Sufficient Clearing Bids for shares of such series do not
       exist.

         (ii) A Sell Order by a Beneficial Owner or an Existing Holder of shares
    of a series of Preferred Shares subject to an Auction on any Auction Date
    shall constitute an irrevocable offer to sell:

            (A) the number of Outstanding shares of such series specified in
       such Sell Order; or

            (B) such number or a lesser number of Outstanding shares of such
       series as set forth in clause (iii) of paragraph (b) of Section 4 of this
       Part II if Sufficient Clearing Bids for shares of such series do not
       exist; provided, however, that a Broker-Dealer that is an Existing Holder
       with respect to shares of a series of Preferred Shares shall not be
       liable to any Person for failing to sell such shares pursuant to a Sell
       Order described in the proviso to paragraph (c) of Section 2 of this
       Part II if (1) such shares were transferred by the Beneficial Owner
       thereof without compliance by such Beneficial Owner or its transferee
       Broker-Dealer (or other transferee person, if permitted by the Trust)
       with the provisions of Section 7 of this Part II or (2) such
       Broker-Dealer has informed the Auction Agent pursuant to the terms of its
       Broker-Dealer Agreement that, according to such Broker-Dealer's records,
       such Broker-Dealer believes it is not the Existing Holder of such shares.

         (iii) A Bid by a Potential Beneficial Holder or a Potential Holder of
    shares of a series of Preferred Shares subject to an Auction on any Auction
    Date shall constitute an irrevocable offer to purchase:

            (A) the number of Outstanding shares of such series specified in
       such Bid if the Applicable Rate for shares of such series determined on
       such Auction Date shall be higher than the rate specified therein; or

            (B) such number or a lesser number of Outstanding shares of such
       series as set forth in clause (v) of paragraph (a) of Section 4 of this
       Part II if the Applicable Rate for shares of such series determined on
       such Auction Date shall be equal to the rate specified therein.

      (c) No Order for any number of Preferred Shares other than whole shares
shall be valid.

     (d) A Bid by a Potential Beneficial Holder or a Potential Holder specifying
a rate higher than the Maximum Rate for Preferred Shares on the Auction Date
will not be accepted.

2. SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.

      (a) Each Broker-Dealer shall submit in writing to the Auction Agent prior
to the Submission Deadline on each Auction Date all Orders for Preferred Shares
of a series subject to an Auction on such Auction Date obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by

                                      A-37
<Page>
the Trust) as an Existing Holder in respect of shares subject to Orders
submitted or deemed submitted to it by Beneficial Owners and as a Potential
Holder in respect of shares subject to Orders submitted to it by Potential
Beneficial Owners, and shall specify with respect to each Order for such shares:

          (i) the name of the Bidder placing such Order (which shall be the
    Broker-Dealer unless otherwise permitted by the Trust);

         (ii) the aggregate number of shares of such series that are the subject
    of such Order;

         (iii) to the extent that such Bidder is an Existing Holder of shares of
    such series:

            (A) the number of shares, if any, of such series subject to any Hold
       Order of such Existing Holder;

            (B) the number of shares, if any, of such series subject to any Bid
       of such Existing Holder and the rate specified in such Bid; and

            (C) the number of shares, if any, of such series subject to any Sell
       Order of such Existing Holder; and

         (iv) to the extent such Bidder is a Potential Holder of shares of such
    series, the rate and number of shares of such series specified in such
    Potential Holder's Bid.

     (b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next highest one-thousandth (.001) of 1%.

      (c) If an Order or Orders covering all of the outstanding Preferred Shares
of a series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline, the Auction Agent shall deem a Hold Order to
have been submitted by or on behalf of such Existing Holder covering the number
of Outstanding shares of such series held by such Existing Holder and not
subject to Orders submitted to the Auction Agent; provided, however, that if an
Order or Orders covering all of the Outstanding shares of such series held by
any Existing Holder is not submitted to the Auction Agent prior to the
Submission Deadline for an Auction relating to a Special Rate Period consisting
of more than 28 Rate Period Days, the Auction Agent shall deem a Sell order to
have been submitted by or on behalf of such Existing Holder covering the number
of outstanding shares of such series held by such Existing Holder and not
subject to Orders submitted to the Auction Agent.

     (d) If one or more Orders of an Existing Holder is submitted to the Auction
Agent covering in the aggregate more than the number of Outstanding Preferred
Shares of a series subject to an Auction held by such Existing Holder, such
Orders shall be considered valid in the following order of priority:

          (i) all Hold Orders for shares of such series shall be considered
    valid, but only up to and including in the aggregate the number of
    Outstanding shares of such series held by such Existing Holder, and if the
    number of shares of such series subject to such Hold Orders exceeds the
    number of Outstanding shares of such series held by such Existing Holder,
    the number of shares subject to each such Hold Order shall be reduced pro
    rata to cover the number of Outstanding shares of such series held by such
    Existing Holder;

         (ii) (A) any Bid for shares of such series shall be considered valid up
    to and including the excess of the number of Outstanding shares of such
    series held by such Existing Holder over the number of shares of such series
    subject to any Hold Orders referred to in clause (i) above;

                                      A-38
<Page>
            (B) subject to subclause (A), if more than one Bid of an Existing
       Holder for shares of such series is submitted to the Auction Agent with
       the same rate and the number of Outstanding shares of such series subject
       to such Bids is greater than such excess, such Bids shall be considered
       valid up to and including the amount of such excess, and the number of
       shares of such series subject to each Bid with the same rate shall be
       reduced pro rata to cover the number of shares of such series equal to
       such excess;

            (C) subject to subclauses (A) and (B), if more than one Bid of an
       Existing Holder for shares of such series is submitted to the Auction
       Agent with different rates, such Bids shall be considered valid in the
       ascending order of their respective rates up to and including the amount
       of such excess; and

            (D) in any such event, the number, if any, of such Outstanding
       shares of such series subject to any portion of Bids considered not valid
       in whole or in part under this clause (ii) shall be treated as the
       subject of a Bid for shares of such series by or on behalf of a Potential
       Holder at the rate therein specified; and

         (iii) all Sell Orders for shares of such series shall be considered
    valid up to and including the excess of the number of Outstanding shares of
    such series held by such Existing Holder over the sum of shares of such
    series subject to valid Hold Orders referred to in clause (i) above and
    valid Bids referred to in clause (ii) above.

      (e) If more than one Bid for one or more shares of a series of Preferred
Shares is submitted to the Auction Agent by or on behalf of any Potential
Holder, each such Bid submitted shall be a separate Bid with the rate and number
of shares therein specified.

      (f) Any Order submitted by a Beneficial Owner or a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date, shall be irrevocable.

3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BIDS RATE AND APPLICABLE
RATE.

      (a) Not earlier than the Submission Deadline on each Auction Date for
shares of a series of Preferred Shares, the Auction Agent shall assemble all
valid Orders submitted or deemed submitted to it by the Broker-Dealers in
respect of shares of such series (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually as a
"Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the
case may be, or as a "Submitted Order" and collectively as "Submitted Hold
Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as
"Submitted Orders") and shall determine for such series:

          (i) the excess of the number of Outstanding shares of such series over
    the number of Outstanding shares of such series subject to Submitted Hold
    Orders (such excess being hereinafter referred to as the "Available
    Preferred Shares" of such series);

         (ii) from the Submitted Orders for shares of such series whether:

            (A) the number of Outstanding shares of such series subject to
       Submitted Bids of Potential Holders specifying one or more rates equal to
       or lower than the Maximum Rate for shares of such series;

                 exceeds or is equal to the sum of:

            (B) the number of Outstanding shares of such series subject to
       Submitted Bids of Existing Holders specifying one or more rates higher
       than the Maximum Rate for shares of such series; and

                                      A-39
<Page>
            (C) the number of Outstanding shares of such series subject to
       Submitted Sell Orders (in the event such excess or such equality exists
       (other than because the number of shares of such series in
       subclauses (B) and (C) above is zero because all of the Outstanding
       shares of such series are subject to Submitted Hold Orders), such
       Submitted Bids in subclause (A) above being hereinafter referred to
       collectively as "Sufficient Clearing Bids" for shares of such series);
       and

         (iii) if Sufficient Clearing Bids for shares of such series exist, the
    lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for
    shares of such series) which if:

            (A) (I) each such Submitted Bid of Existing Holders specifying such
       lowest rate and (II) all other such Submitted Bids of Existing Holders
       specifying lower rates were rejected, thus entitling such Existing
       Holders to continue to hold the shares of such series that are subject to
       such Submitted Bids; and

            (B) (I) each such Submitted Bid of Potential Holders specifying such
       lowest rate and (II) all other such Submitted Bids of Potential Holders
       specifying lower rates were accepted;

would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such series
which, when added to the number of Outstanding shares of such series to be
purchased by such Potential Holders described in subclause (B) above, would
equal not less than the Available Preferred Shares of such series.

     (b) Promptly after the Auction Agent has made the determinations pursuant
to paragraph (a) of this Section 3, the Auction Agent shall advise the Trust of
the Maximum Rate for shares of the series of Preferred Shares for which an
Auction is being held on the Auction Date and, based on such determination the
Applicable Rate for shares of such series for the next succeeding Rate Period
thereof as follows:

          (i) if Sufficient Clearing Bids for shares of such series exist, that
    the Applicable Rate for all shares of such series for the next Succeeding
    Rate Period thereof shall be equal to the Winning Bid Rate for shares of
    such series so determined;

         (ii) if sufficient Clearing Bids for shares of such series do not exist
    (other than because all of the Outstanding shares of such series are subject
    to Submitted Hold Orders), that the Applicable Rate for all shares of such
    series for the next succeeding Rate Period thereof shall be equal to the
    Maximum Rate for shares of such series; or

         (iii) if all of the Outstanding shares of such series are subject to
    Submitted Hold Orders, that the Applicable Rate for all shares of such
    series for the next succeeding Rate Period thereof shall be as set forth in
    Section 12 of Appendix A hereto.

4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS AND
ALLOCATION OF SHARES.

    Existing Holders shall continue to hold the Preferred Shares that are
subject to Submitted Hold Orders, and, based on the determinations made pursuant
to paragraph (a) of Section 3 of this Part II, the Submitted Bids and Submitted
Sell Orders shall be accepted or rejected by the Auction Agent and the Auction
Agent shall take such other action as set forth below:

      (a) If Sufficient Clearing Bids for shares of a series of Preferred Shares
have been made, all Submitted Sell Orders with respect to shares of such series
shall be accepted and, subject to the provisions of paragraphs (d) and (e) of
this Section 4, Submitted Bids with respect to shares of such

                                      A-40
<Page>
series shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids with respect to shares of such series
shall be rejected:

          (i) Existing Holders' Submitted Bids for shares of such series
    specifying any rate that is higher than the Winning Bid Rate for shares of
    such series shall be accepted, thus requiring each such Existing Holder to
    sell the Preferred Shares subject to such Submitted Bids;

         (ii) Existing Holders' Submitted Bids for shares of such series
    specifying any rate that is lower than the Winning Bid Rate for shares of
    such series shall be rejected, thus entitling each such Existing Holder to
    continue to hold the Preferred Shares subject to such Submitted Bids;

         (iii) Potential Holders' Submitted Bids for shares of such series
    specifying any rate that is lower than the Winning Bid Rate for shares of
    such series shall be accepted;

         (iv) each Existing Holder's Submitted Bid for shares of such series
    specifying a rate that is equal to the Winning Bid Rate for shares of such
    series shall be rejected, thus entitling such Existing Holder to continue to
    hold the Preferred Shares subject to such Submitted Bid, unless the number
    of Outstanding Preferred Shares subject to all such Submitted Bids shall be
    greater than the number of Preferred Shares ("remaining shares") in the
    excess of the Available Preferred Shares of such series over the number of
    Preferred Shares subject to Submitted Bids described in clauses (ii) and
    (iii) of this paragraph (a), in which event such Submitted Bid of such
    Existing Holder shall be rejected in part, and such Existing Holder shall be
    entitled to continue to hold Preferred Shares subject to such Submitted Bid,
    but only in an amount equal to the number of Preferred Shares of such series
    obtained by multiplying the number of remaining shares by a fraction, the
    numerator of which shall be the number of Outstanding Preferred Shares held
    by such Existing Holder subject to such Submitted Bid and the denominator of
    which shall be the aggregate number of Outstanding Preferred Shares subject
    to such Submitted Bids made by all such Existing Holders that specified a
    rate equal to the Winning Bid Rate for shares of such series; and

          (v) each Potential Holder's Submitted Bid for shares of such series
    specifying a rate that is equal to the Winning Bid Rate for shares of such
    series shall be accepted but only in an amount equal to the number of shares
    of such series obtained by multiplying the number of shares in the excess of
    the Available Preferred Shares of such series over the number of Preferred
    Shares subject to Submitted Bids described in clauses (ii) through (iv) of
    this paragraph (a) by a fraction, the numerator of which shall be the number
    of Outstanding Preferred Shares subject to such Submitted Bid and the
    denominator of which shall be the aggregate number of Outstanding Preferred
    Shares subject to such Submitted Bids made by all such Potential Holders
    that specified a rate equal to the Winning Bid Rate for shares of such
    series.

     (b) If Sufficient Clearing Bids for shares of a series of Preferred Shares
have not been made (other than because all of the Outstanding shares of such
series are subject to Submitted Hold Orders), subject to the provisions of
paragraph (d) of this Section 4, Submitted Orders for shares of such series
shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids for shares of such series shall be rejected:

          (i) Existing Holders' Submitted Bids for shares of such series
    specifying any rate that is equal to or lower than the Maximum Rate for
    shares of such series shall be rejected, thus entitling such Existing
    Holders to continue to hold the Preferred Shares subject to such Submitted
    Bids;

         (ii) Potential Holders' Submitted Bids for shares of such series
    specifying any rate that is equal to or lower than the Maximum Rate for
    shares of such series shall be accepted; and

                                      A-41
<Page>
         (iii) Each Existing Holder's Submitted Bid for shares of such series
    specifying any rate that is higher than the Maximum Rate for shares of such
    series and the Submitted Sell Orders for shares of such series of each
    Existing Holder shall be accepted, thus entitling each Existing Holder that
    submitted or on whose behalf was submitted any such Submitted Bid or
    Submitted Sell Order to sell the shares of such series subject to such
    Submitted Bid or Submitted Sell Order, but in both cases only in an amount
    equal to the number of shares of such series obtained by multiplying the
    number of shares of such series subject to Submitted Bids described in
    clause (ii) of this paragraph (b) by a fraction, the numerator of which
    shall be the number of Outstanding shares of such series held by such
    Existing Holder subject to such Submitted Bid or Submitted Sell Order and
    the denominator of which shall be the aggregate number of Outstanding shares
    of such series subject to all such Submitted Bids and Submitted Sell Orders.

      (c) If all of the Outstanding shares of a series of Preferred Shares are
subject to Submitted Hold Orders, all Submitted Bids for shares of such series
shall be rejected.

     (d) If, as a result of the procedures described in clause (iv) or (v) of
paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing
Holder would be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a share of a series of Preferred
Shares on any Auction Date, the Auction Agent shall, in such manner as it shall
determine in its sole discretion, round up or down the number of Preferred
Shares of such series to be purchased or sold by any Existing Holder or
Potential Holder on such Auction Date as a result of such procedures so that the
number of shares so purchased or sold by each Existing Holder or Potential
Holder on such Auction Date shall be whole Preferred Shares.

      (e) If, as a result of the procedures described in clause (v) of
paragraph (a) of this Section 4, any Potential Holder would be entitled or
required to purchase less than a whole share of a series of Preferred Shares on
any Auction Date, the Auction Agent shall, in such manner as it shall determine
in its sole discretion, allocate Preferred Shares of such series for purchase
among Potential Holders so that only whole shares of Preferred Shares of such
series are purchased on such Auction Date as a result of such procedures by any
Potential Holder, even if such allocation results in one or more Potential
Holders not purchasing Preferred Shares of such series on such Auction Date.

      (f) Based on the results of each Auction for shares of a series of
Preferred Shares, the Auction Agent shall determine the aggregate number of
shares of such series to be purchased and the aggregate number of shares of such
series to be sold by Potential Holders and Existing Holders and, with respect to
each Potential Holder and Existing Holder, to the extent that such aggregate
number of shares to be purchased and such aggregate number of shares to be sold
differ, determine to which other Potential Holder(s) or Existing Holder(s) they
shall deliver, or from which other Potential Holder(s) or Existing
Holder(s) they shall receive, as the case may be, Preferred Shares of such
series. Notwithstanding any provision of the Auction Procedures to the contrary,
in the event an Existing Holder or Beneficial Owner of a series of Preferred
Shares with respect to whom a Broker-Dealer submitted a Bid to the Auction Agent
for such shares that was accepted in whole or in part, or submitted or is deemed
to have submitted a Sell Order for such shares that was accepted in whole or in
part, fails to instruct its Agent Member to deliver such shares against payment
therefor, partial deliveries of Preferred Shares that have been made in respect
of Potential Holders' or Potential Beneficial Owners' submitted Bids for shares
of such series that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders and Potential Beneficial Owners.

      (g) Neither the Trust nor the Auction Agent nor any affiliate of either
shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder, a Beneficial Owner, a Potential Beneficial
Owner or its respective Agent Member to deliver Preferred

                                      A-42
<Page>
Shares of any series or to pay for Preferred Shares of any series sold or
purchased pursuant to the Auction Procedures or otherwise.

5. NOTIFICATION OF ALLOCATIONS.

    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, but shall not be required to, notify the Auction Agent of the amount
to be so included not later than the Dividend Payment Date next preceding the
Auction Date on which the Applicable Rate for such dividend is to be
established. 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, in accordance with its Broker-Dealer Agreement, will be required
to notify its Beneficial Owners and Potential Beneficial Owners of Preferred
Shares believed by it to be interested in submitting an Order in the Auction to
be held on such Auction Date.

6. AUCTION AGENT.

    For so long as any Preferred Shares are outstanding, the Auction Agent, duly
appointed by the Trust to so act, shall be in each case a commercial bank, trust
company or other financial institution independent of the Trust and its
affiliates (which however may engage or have engaged in business transactions
with the Trust or its affiliates) and at no time shall the Trust or any of its
affiliates act as the Auction Agent in connection with the Auction Procedures.
If the Auction Agent resigns or for any reason its appointment is terminated
during any period that any Preferred Shares are outstanding, the Board of
Trustees shall use its best efforts promptly thereafter to appoint another
qualified commercial bank, trust company or financial institution to act as the
Auction Agent. The Auction Agent's registry of Existing Holders of a series of
Preferred Shares shall be conclusive and binding on the Broker-Dealers. A
Broker-Dealer may inquire of the Auction Agent between 3:00 P.M. New York City
time on the Business Day preceding an Auction for a series of Preferred Shares
and 9:30 A.M. New York City time on the Auction Date for such Auction to
ascertain the number of shares of such series in respect of which the Auction
Agent has determined such Broker-Dealer to be an Existing Holder. If such
Broker-Dealer believes it is the Existing Holder of fewer shares of such series
than specified by the Auction Agent in response to such Broker-Dealer's inquiry,
such Broker-Dealer may so inform the Auction Agent of that belief. Such
Broker-Dealer shall not, in its capacity as Existing Holder of shares of such
series, submit Orders in such Auction in respect of shares of such series
covering in the aggregate more than the number of shares of such series
specified by the Auction Agent in response to such Broker-Dealer's inquiry.

7. TRANSFER OF PREFERRED SHARES.

    Unless otherwise permitted by the Trust, a Beneficial Owner or an Existing
Holder may sell, transfer or otherwise dispose of Preferred Shares only in whole
shares and only pursuant to a Bid or Sell Order placed with the Auction Agent in
accordance with the procedures described in this Part II or to a Broker-Dealer;
provided, however, that (a) 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 for purposes of this Section 7 if such Broker-Dealer remains
the Existing Holder of the shares so sold, transferred or disposed of
immediately after such sale, transfer or disposition and (b) 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 shall advise the
Auction Agent of such transfer.

                                      A-43
<Page>
8. GLOBAL CERTIFICATE.

    Prior to the commencement of a Voting Period, (i) all of the shares of a
series of Preferred Shares outstanding from time to time shall be represented by
one global certificate registered in the name of the Securities Depository or
its nominee and (ii) no registration of transfer of shares of a series of
Preferred Shares shall be made on the books of the Trust to any Person other
than the Securities Depository or its nominee.

9. FORCE MAJEURE.

      (a) Notwithstanding anything else set forth herein, 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 Auction Rate for the next Dividend Period shall be the Dividend Rate
determined on the previous Dividend Date.

     (b) Notwithstanding anything else set forth herein, 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:

          (i) the Dividend Payment Date for the affected Dividend Period shall
    be the next Business Day on which the Trust and its paying agent, if any,
    are able to cause the dividend to be paid using their reasonable best
    efforts;

         (ii) the affected Dividend Period shall end on the day it would have
    ended had such event not occurred and the Dividend Payment Date had remained
    the scheduled date; and

         (iii) the next Dividend Period will begin and end on the dates on which
    it would have begun and ended had such event not occurred and the Dividend
    Payment Date remained the scheduled date.

                                      A-44
<Page>
    IN WITNESS WHEREOF, BLACKROCK INSURED MUNICIPAL INCOME TRUST, has caused
these presents to be signed as of            , 2002 in its name and on its
behalf by its Vice President and attested by its Secretary. Said officers of the
Trust have executed this Statement as officers and not individually, and the
obligations and rights set forth in this Statement are not binding upon any such
officers, or the trustees or shareholders of the Trust, individually, but are
binding only upon the assets and property of the Trust.

                                          BLACKROCK INSURED
                                          MUNICIPAL INCOME TRUST

                                          By: ____________________________
                                          Name: Kevin Klingert
                                          Title: Vice President

ATTEST: _____________________
Name: Anne F. Ackerley
Title: Secretary

           , 2002

                                      A-45
<Page>
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST

                                   APPENDIX A

                                   SECTION 1
DESIGNATION AS TO SERIES.


    SERIES M7: A series of 3,053 Preferred Shares, liquidation preference
$25,000 per share, is hereby designated "Market Auction Rate Cumulative
Preferred Shares, Series M7." Each of the 3,053 shares of Series M7 Preferred
Shares issued on            , 2002 shall, for purposes hereof, be deemed to have
a Date of Original Issue of            , 2002; have an Applicable Rate for its
Initial Rate Period equal to    % per annum; have an initial Dividend Payment
Date of            , 2002; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Agreement and Declaration of Trust applicable to Preferred Shares
of the Trust, as set forth in Part I and Part II of this Statement. Any shares
of Series M7 Preferred Shares issued thereafter shall be issued on the first day
of a Rate Period of the then outstanding shares of Series M7 Preferred Shares,
shall have, for such Rate Period, an Applicable Rate equal to the Applicable
Rate for shares of such series established in the first Auction for shares of
such series preceding the date of such issuance; and shall have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Agreement and Declaration of
Trust applicable to Preferred Shares of the Trust, as set forth in Part I and
Part II of this Statement. The Series M7 Preferred Shares shall constitute a
separate series of Preferred Shares of the Trust, and each share of Series M7
Preferred Shares shall be identical except as provided in Section 11 of Part I
of this statement.



    SERIES R7: A series of 3,053 Preferred Shares, liquidation preference
$25,000 per share, is hereby designated "Market Auction Rate Cumulative
Preferred Shares, Series R7." Each of the 3053 shares of Series R7 Preferred
Shares issued on            , 2002 shall, for purposes hereof, be deemed to have
a Date of Original Issue of            , 2002; have an Applicable Rate for its
Initial Rate Period equal to    % per annum; have an initial Dividend Payment
Date of            , 2002; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Agreement and Declaration of Trust applicable to Preferred Shares
of the Trust, as set forth in Part I and Part II of this Statement. Any shares
of Series R7 Preferred Shares issued thereafter shall be issued on the first day
of a Rate Period of the then outstanding shares of Series R7 Preferred Shares,
shall have, for such Rate Period, an Applicable Rate equal to the Applicable
Rate for shares of such series established in the first Auction for shares of
such series preceding the date of such issuance; and shall have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Agreement and Declaration of
Trust applicable to Preferred Shares of the Trust, as set forth in Part I and
Part II of this Statement. The Series R7 Preferred Shares shall constitute a
separate series of Preferred Shares of the Trust, and each share of Series R7
Preferred Shares shall be identical except as provided in Section 11 of Part I
of this statement.



    SERIES F7: A series of 3,053 Preferred Shares, liquidation preference
$25,000 per share, is hereby designated "Market Auction Rate Cumulative
Preferred Shares, Series F7." Each of the 3,053 shares of Series F7 Preferred
Shares issued on            , 2002 shall, for purposes hereof, be deemed to have
a Date of Original Issue of            , 2002; have an Applicable Rate for its
Initial Rate Period equal to    % per annum; have an initial Dividend Payment
Date of            , 2002; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Agreement and Declaration of Trust, as amended and restated,
applicable to Preferred Shares of the Trust, as set forth in Part I and Part II
of this Statement. Any shares of Series F7 Preferred Shares issued thereafter
shall be issued on the first day of a Rate Period of the


                                      AA-1
<Page>

then outstanding shares of Series F7 Preferred Shares, shall have, for such Rate
Period, an Applicable Rate equal to the Applicable Rate for shares of such
series established in the first Auction for shares of such series preceding the
date of such issuance; and shall have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Agreement and Declaration of Trust applicable to Preferred Shares
of the Trust, as set forth in Part I and Part II of this Statement. The
Series F7 Preferred Shares shall constitute a separate series of Preferred
Shares of the Trust, and each share of Series F7 Preferred Shares shall be
identical except as provided in Section 11 of Part I of this statement.


                                   SECTION 2
NUMBER OF AUTHORIZED SHARES PER SERIES.


    The number of authorized shares constituting Series M7 Preferred Shares is
4,539.



    The number of authorized shares constituting Series R7 Preferred Shares is
4,539.



    The number of authorized shares constituting Series F7 Preferred Shares is
4,539.


                                   SECTION 3
EXCEPTIONS TO CERTAIN DEFINITIONS.

    Notwithstanding the definitions contained under the heading "Definitions" in
this Statement, the following terms shall have the following meanings for
purposes of this Statement:

    Not applicable.

                                   SECTION 4
CERTAIN DEFINITIONS.

    For purposes of this Statement, the following terms shall have the following
meanings (with terms defined in the singular having comparable meanings when
used in the plural and vice versa), unless the context otherwise requires:

    "ESCROWED BONDS" shall mean Municipal Obligations that (i) have been
determined to be legally defeased in accordance with S&P's legal defeasance
criteria, (ii) have been determined to be economically defeased in accordance
with S&P's economic defeasance criteria and assigned a rating of AAA by S&P,
(iii) are not rated by S&P but have been determined to be legally defeased by
Moody's or (iv) have been determined to be economically defeased by Moody's and
assigned a rating no lower than the rating that is Moody's equivalent of S&P's
AAA rating.

    "GROSS-UP PAYMENT" means payment to a Holder of Preferred Shares of an
amount which, when taken together with the aggregate amount of Taxable
Allocations made to such Holder to which such Gross-up Payment relates, would
cause such Holder's dividends in dollars (after Federal income tax consequences)
from the aggregate of such Taxable Allocations and the related Gross-up Payment
to be at least equal to the dollar amount of the dividends which would have been
received by such Holder if the amount of such aggregate Taxable Allocations had
been excludable from the gross income of such Holder. Such Gross-up Payment
shall be calculated (i) without consideration being given to the time value of
money; (ii) assuming that no Holder of Preferred Shares is subject to the
Federal alternative minimum tax with respect to dividends received from the
Trust; and (iii) assuming that each Taxable Allocation and each Gross-up Payment
(except to the extent such Gross-up Payment 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

                                      AA-2
<Page>
Federal individual income tax rate applicable to ordinary income or net capital
gain, 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 at the time such Gross-up Payment is made.

    "INVERSE FLOATER" shall mean trust certificates or other instruments
evidencing interests in one or more Municipal Obligations that qualify as S&P
Eligible Assets, the interest rates on which are adjusted at short-term
intervals on a basis that is inverse to the simultaneous readjustment of the
interest rates on corresponding floating rate trust certificates or other
instruments issued by the same issuer, provided that the ratio of the aggregate
dollar amount of floating rate instruments to inverse floating rate instruments
issued by the same issuer does not exceed one to one at their time of original
issuance unless the floating instruments have only one reset remaining until
maturity.

    "MONEY MARKET FUND" is a registered investment company eligible to price its
redeemable securities in accordance with Rule 2a-7 under the Investment Company
Act.

    "MOODY'S DISCOUNT FACTOR" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined by
reference to (i) (A) in the event such Municipal Obligation is covered by an
Original Issue Insurance policy or a Portfolio Insurance policy which does not
provide the Trust with the option to obtain Permanent Insurance with respect to
such Municipal Obligation, or is not covered by bond insurance, the Moody's or
S&P rating on such Municipal Obligation, (B) in the event such Municipal
Obligation is covered by a Secondary Market Insurance policy, the Moody's
insurance claims-paying ability rating of the issuer of the policy, or (C) in
the event such Municipal Obligation is covered by a Portfolio Insurance policy
which provides the Trust with the option to obtain Permanent Insurance with
respect to such Municipal Obligation, at the Trust's option, the Moody's or S&P
rating on such Municipal Obligation or the Moody's insurance claims-paying
ability rating of the issuer of the Portfolio Insurance policy and (ii) the
rating on such asset and the shortest Exposure Period set forth opposite such
rating that is the same length as or is longer than the Moody's Exposure Period,
in accordance with the table set forth below:

                                RATING CATEGORY

<Table>
<Caption>
EXPOSURE PERIOD            AAA*  AA*    A*   BAA*  OTHER**  (V)MIG-1***  SP-1+****  UNRATED*****
- ---------------            ----  ---    --   ----  -------  -----------  ---------  ------------
<S>                        <C>   <C>   <C>   <C>   <C>      <C>          <C>        <C>
7 weeks..................  151%  159%  166%  173%   187%       136%        148%         225%
8 weeks or less but
  greater than seven
  weeks..................  154   161   168   176    190        137         149          231
9 weeks or less but
  greater than eight
  weeks..................  156   163   170   177    192        138         150          240
</Table>

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

  *  Moody's rating.
 **  Municipal Obligations not rated by Moody's but rated BBB by S&P.
***  Municipal Obligations rated MIG-1 or VMIG-1, which do not mature or have a
     demand feature at par exercisable in 30 days and which do not have a
     long-term rating.
**** Municipal Obligations not rated by Moody's but rated SP-1+ by S&P, which do
     not mature or have a demand feature at par exercisable in 30 days and which
     do not have a long-term rating.
***** Municipal Obligations rated less than Baa3 by Moody's or less than BBB by
     S&P or not rated by Moody's or S&P.

    If the Moody's Discount Factor used to discount a particular Municipal
Obligation is determined by reference to the insurance claims-paying ability
rating of the insurer of such Municipal Obligation, such Moody's Discount Factor
will be increased by an amount equal to 50% of the difference between (i) the
percentage set forth in the above table under the applicable rating category and
(ii) the

                                      AA-3
<Page>
percentage set forth in the above table under the rating category that is one
rating category below the applicable rating category.

    Unrated securities may comprise no more than 10% of total Moody's Eligible
Assets.

    Notwithstanding the foregoing, (i) the Moody's Discount Factor for
short-term Municipal Obligations will be 115% so long as such Municipal
Obligations are rated at least MIG-1, VMIG-l or P-1 by Moody's and mature or
have a demand feature at par exercisable in 30 days or less, or 125% as long as
such Municipal Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and
mature or have a demand feature at par exercisable in 30 days or less and
(ii) no Moody's Discount Factor will be applied to cash or to Receivables for
Municipal Obligations Sold.

    No discount factors will be applied to Money Market Funds rated by Moody's.

    "MOODY'S ELIGIBLE ASSET" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash,
(ii) does not have its Moody's rating, as applicable, suspended by Moody's, and
(iii) is part of an issue of Municipal Obligations of at least $10 million.
Money Market Funds rated by Moody's are also included as Moody's Eligible
Assets. Municipal Obligations issued by any one issuer and rated BBB or lower by
S&P, Ba or B by Moody's or not rated by S&P and Moody's ("Other Securities") may
comprise no more than 4% of total Moody's Eligible Assets; such other
Securities, if any, together with any Municipal Obligations issued by the same
issuer and rated Baa by Moody's or A by S&P, may comprise no more than 6% of
total Moody's Eligible Assets; such Other Securities, Baa and A-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the same
issuer and rated A by Moody's or AA by S&P, may comprise no more than 10% of
total Moody's Eligible Assets; and such Baa, A and AA-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the same
issuer and rated Aa by Moody's or AAA by S&P, may comprise no more than 20% of
total Moody's Eligible Assets. For purposes of the foregoing sentence any
Municipal Obligation backed by the guaranty, letter of credit or insurance
issued by a third party shall be deemed to be issued by such third party if the
issuance of such third party credit is the sole determinant of the rating on
such Municipal Obligation. Other Securities issued by issuers located within a
single state or territory may comprise no more than 12% of total Moody's
Eligible Assets; such Other Securities, if any, together with any Municipal
Obligations issued by issuers located within the same state or territory and
rated Baa by Moody's or A by S&P, may comprise no more than 20% of total Moody's
Eligible Assets; such Other Securities, Baa and A-rated Municipal Obligations,
if any, together with any Municipal Obligations issued by issuers located within
the same state or territory and rated A by Moody's or AA by S&P, may comprise no
more than 40% of total Moody's Eligible Assets; and such Other Securities, Baa,
A and AA-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by issuers located within the same state or territory and
rated Aa by Moody's or AAA by S&P, may comprise no more than 60% of total
Moody's Eligible Assets. For purposes of applying the foregoing requirements, a
Municipal Obligation shall be deemed to be rated BBB by S&P if rated BBB-, BBB
or BBB+ by S&P, Moody's Eligible Assets shall be calculated without including
cash, and Municipal Obligations rated MIG-1, VMIG-1 or P-1 or, if not rated by
Moody's, rated A-1+/AA or SP-1+/AA by S&P, shall be considered to have a
long-term rating of A. When the Trust sells a Municipal Obligation and agrees to
repurchase such Municipal Obligation at a future date, such Municipal Obligation
shall be valued at its Discounted Value for purposes of determining Moody's
Eligible Assets, and the amount of the repurchase price of such Municipal
Obligation shall be included as a liability for purposes of calculating the
Preferred Shares Basic Maintenance Amount. When the Trust purchases a Moody's
Eligible Asset and agrees to sell it at a future date, such Eligible Asset shall
be valued at the amount of cash to be received by the Trust upon such future
date, provided that the counterparty to the transaction has a long-term debt
rating of at least A2 from Moody's and the transaction has a term of no more
than 30 days, otherwise, such

                                      AA-4
<Page>
Eligible Asset shall be valued at the Discounted Value of such Eligible Asset.
Moody's rated Rule 2a-7 eligible money market funds, are also included as
Moody's Eligible Assets.

    Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset to the extent it is (i) subject to any material lien, mortgage
pledge, security interest or security agreement of any kind (collectively,
"Liens"), except for (a) Liens which are being contested in good faith by
appropriate proceedings and which Moody's has indicated to the Trust will not
affect the status of such asset as a Moody's Eligible Asset, (b) Liens for taxes
that are not then due and payable or that can be paid thereafter without
penalty, (c) Liens to secure payment for services rendered or cash advanced to
the Trust by BlackRock Advisors, Inc., BlackRock Financial Management, Inc.,
State Street Bank and Trust or the Auction Agent and (d) Liens by virtue of any
repurchase agreement; or (ii) deposited irrevocably for the payment of any
liabilities for purposes of determining the Preferred Shares Basic Maintenance
Amount.

    "RATE MULTIPLE," for shares of a series of Preferred Shares on any Auction
Date for shares of such series, shall mean the percentage, determined as set
forth in the columns below (depending on whether the trust has notified the
Auction Agent of its intent to allocate income taxable for Federal income tax
purposes to shares of such series prior to the Auction establishing the
Applicable Rate for shares of such series as provided in this statement) based
on the prevailing rating of shares of such series in effect at the close of
business on the Business Day next preceding such Auction Date:

<Table>
<Caption>
                                            APPLICABLE      APPLICABLE
                                            PERCENTAGE      PERCENTAGE
PREVAILING RATING                         NO NOTIFICATION  NOTIFICATION
- -----------------                         ---------------  ------------
<S>                                       <C>              <C>
"Aa3"/AA- or higher.....................       110%            150%
"A3"/A-.................................       125%            160%
"Baa3"/BBB-.............................       150%            250%
"Ba3"/BB-...............................       200%            275%
Below "Ba3"/BB-.........................       250%            300%
</Table>

    For purposes of this definition, the "prevailing rating" of shares of a
series of Preferred Shares shall be (i) "Aa3"/AA- or higher if such shares have
a rating of "Aa3" or better by Moody's and AA- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (ii) if not "Aa3"/AA-or
higher, then "A3"/A- if such shares have a rating of "A3" or better by Moody's
and A- or better by S&P or the equivalent of such ratings by such agencies or a
substitute rating agency or substitute rating agencies selected as provided
below, (iii) if not "Aa3"/AA- or higher or "A3"/A- then "Baa3"/BBB- if such
shares have a rating of "Baa3" or better by Moody's and BBB- or better by S&P or
the equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (iv) if not "Aa3"/AA- or
higher, "A3"/A- or "Baa3"/BBB-, then "Ba3"/BB- if such shares have a rating of
"Ba3" or better by Moody's and BB- or better by S&P or the equivalent of such
ratings by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, and (v) if not "Aa3"/AA- or higher,
"A3"/A-, "Baa3"/BBB-, or "Ba3"/BB-, then Below "Ba3"/BB-; provided, however,
that if such shares are rated by only one rating agency, the prevailing rating
will be determined without reference to the rating of any other rating agency.
The Trust shall take all reasonable action necessary to enable either S&P or
Moody's to provide a rating for the Preferred Shares. If neither S&P nor Moody's
shall make such a rating available, the party set forth in Section 7 of this
Appendix A or its successor shall select one nationally recognized statistical
rating organization (as that term is used in the rules and regulations of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended from time, to time) to act as a substitute rating agency in respect of
shares of the series of Preferred Shares set forth opposite such party's name in
Section 7 of

                                      AA-5
<Page>
this Appendix A and the Trust shall take all reasonable action to enable such
rating agency to provide a rating for such shares.

    "S&P DISCOUNT FACTOR" shall mean, for purposes of determining the Discounted
Value of any S&P Eligible Asset, the percentage determined by reference to
(a)(i) the rating by S&P or Moody's on such Municipal Obligation or (ii) in the
event the Municipal Obligation is covered by a Secondary Market Insurance
policy, the S&P insurance claims-paying ability rating of the issuer of the
policy or (iii) in the event the Municipal Obligation is covered by a Portfolio
Insurance policy which provides the Trust with the option to obtain Permanent
Insurance with respect to such Municipal Obligation, at the Trust's option, the
S&P or Moody's rating on such Municipal Obligation or the S&P insurance claims
paying ability of the insurer of the Portfolio Insurance policy and (b) the
rating on such asset and the shortest exposure period set forth opposite such
rating that is the same length as or is longer than the S&P Exposure Period, in
accordance with the table set forth below:

                                RATING CATEGORY

<Table>
<Caption>
EXPOSURE PERIOD            AAA*    AA*    A*    BBB*   HIGH YIELD
- ---------------            ----    ---    --    ----   ----------
<S>                        <C>    <C>    <C>    <C>    <C>
45 Business Days.........   190%   195%   210%   250%     220%
25 Business Days.........   170    175    190    230      220
10 Business Days.........   155    160    175    215      220
7 Business Days..........   150    155    170    210      220
3 Business Days..........   130    135    150    190      220
</Table>

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

  *  S&P rating.

    Notwithstanding the foregoing, (i) the S&P Discount Factor for shares of
Money Market Funds affiliated with the Trust and used as sweep vehicles for cash
management purposes shall be 111%, the S&P Discount Factor for shares of Money
Market Funds rated AAAm by S&P with an effective next day maturity will be 106%
and the S&P Discount Factor for short-term Municipal Obligations will be 115% so
long as such Municipal Obligations are rated A-1+ or SP-1+ by S&P and mature or
have a demand feature exercisable within 30 days or less, or 120% so long as
such Municipal Obligations are rated A-1 or SP-1 by S&P and mature or have a
demand feature exercisable in 30 days or less, or 125% if such Municipal
Obligations are not rated by S&P but are rated equivalent to A-1+ or SP-1+ by
another nationally recognized statistical rating organization, on a case by case
basis; provided, however, that any such non-S&P rated short-term Municipal
Obligations which have demand features exercisable within 30 days or less must
be backed by a letter of credit, liquidity facility or guarantee from a bank or
other financial institution with a short-term rating of at least A-1+ from S&P;
and further provided that such non-S&P rated short-term Municipal Obligations
may comprise no more than 50% of short-term Municipal Obligations that qualify
as S&P Eligible Assets; provided, however, that Municipal Obligations not rated
by S&P but rated equivalent to BBB or lower by another nationally recognized
statistical rating organization, rated BB+ or lower by S&P or non-rated (such
Municipal Obligations are hereinafter referred to as "High Yield Securities")
may comprise no more than 20% of the short-term Municipal Obligations that
qualify as S&P Eligible Assets; (ii) the S&P Discount Factor for Receivables for
Municipal Obligations Sold that are due in more than five Business Days from
such Valuation Date will be the S&P Discount Factor applicable to the Municipal
Obligations sold; (iii) no S&P Discount Factor will be applied to cash or to
Receivables for Municipal Obligations Sold if such receivables are due within
five Business Days of such Valuation Date; and (iv) except as set forth in
clause (i) above, in the case of any Municipal Obligation that is not rated by
S&P but qualifies as an S&P Eligible Asset pursuant to clause (iii) of that
definition, such Municipal Obligation will be deemed to have an S&P rating one
full rating category lower than the S&P rating category that is the equivalent
of the rating category in which such Municipal Obligation is placed by a
nationally recognized statistical rating organization. "Receivables for
Municipal Obligations Sold," for

                                      AA-6
<Page>
purposes of calculating S&P Eligible Assets as of any Valuation Date, means the
book value of receivables for Municipal Obligations sold as of or prior to such
Valuation Date. The Trust may adopt S&P Discount Factors for Municipal
Obligations other than Municipal Obligations provided that S&P advises the Trust
in writing that such action will not adversely affect its then current rating on
the Preferred Shares. For purposes of the foregoing, Anticipation Notes rated
SP-1+ or, if not rated by S&P, equivalent to A-1+ or SP-1+ by another nationally
recognized statistical rating organization, on a case by case basis, which do
not mature or have a demand feature at par exercisable in 30 days and which do
not have a long-term rating, shall be considered to be short-term Municipal
Obligations.

    "S&P ELIGIBLE ASSET" shall mean cash (excluding any cash irrevocably
deposited by the Trust for the payment of any liabilities within the meaning of
Preferred Shares Basic Maintenance Amount), Receivables for Municipal
Obligations Sold, shares of a Money Market Fund affiliated with the Trust and
used as a sweep vehicle for cash management purposes, shares of a Money Market
Fund rated AAAm by S&P, or a Municipal Obligation owned by the Trust that
(i) is interest bearing and pays interest at least semi-annually; (ii) is
payable with respect to principal and interest in U.S. Dollars; (iii) is
publicly rated BBB or higher by S&P or, if not rated by S&P but rated equivalent
or higher to an A by another nationally recognized statistical rating
organization, on a case by case basis; (iv) is not subject to a covered call or
put option written by the Trust; (v) except for Inverse Floaters, is not part of
a private placement of Municipal Obligations; and (vi) except for Inverse
Floaters, is part of an issue of Municipal Obligations with an original issue
size of at least $10 million. Any Municipal Obligation that is a part of an
original issue size of less than $10 million must carry a rating of at least A
by S&P or an equivalent rating by another nationally recognized statistical
rating organization and the Market Value of such Municipal Obligations may not
exceed 20% of the aggregate Market Value of S&P Eligible Assets. Solely for
purposes of this definition, the term "Municipal Obligation" means any
obligation the interest on which is exempt from regular Federal income taxation
and which is issued by any of the fifty United States, the District of Columbia
or any of the territories of the United States, their subdivisions, counties,
cities, towns, villages, school districts and agencies (including authorities
and special districts created by the states), and federally sponsored agencies
such as local housing authorities. Notwithstanding the foregoing limitations:

      (1) Municipal Obligations (excluding Escrowed Bonds) of any one issuer or
guarantor (excluding bond insurers) shall be considered S&P Eligible Assets only
to the extent the Market Value of such Municipal Obligations (including
short-term Municipal Obligations) does not exceed 10% of the aggregate Market
Value of S&P Eligible Assets, provided that 2% is added to the applicable S&P
Discount Factor for every 1% by which the Market Value of such Municipal
Obligations exceeds 5% of the aggregate Market Value of S&P Eligible Assets.
High Yield Securities of any one issuer shall be considered S&P Eligible Assets
only to the extent the Market Value of such Municipal Obligations does not
exceed 5% of the aggregate Market Value of S&P Eligible Assets;

      (2) Municipal Obligations not rated by S&P shall be considered S&P
Eligible Assets only to the extent the Market Value of such Municipal
Obligations does not exceed 50% of the aggregate Market Value of S&P Eligible
Assets; provided, however, that High Yield Securities shall be considered S&P
Eligible Assets only to the extent the Market Value of such Municipal
Obligations does not exceed 20% of the aggregate Market Value of S&P Eligible
Assets;

      (3) Municipal Obligations issued by issuers in any one state or territory
will be considered S&P Eligible Assets only to the extent the Market Value of
such Municipal Obligations does not exceed 25% of the aggregate Market Value of
S&P Eligible Assets; and

                                      AA-7
<Page>
                                   SECTION 5
INITIAL RATE PERIODS.

    The Initial Rate Period for shares of Series M7 Preferred Shares shall be
the period from and including the Date of Original Issue thereof to but
excluding            , 2002.


    The Initial Rate Period for shares of Series R7 Preferred Shares shall be
the period from and including the Date of Original Issue thereof to but
excluding            , 2002.


    The Initial Rate Period for shares of Series F7 Preferred Shares shall be
the period from and including the Date of Original Issue thereof to but
excluding            , 2002.

                                   SECTION 6
DATE FOR PURPOSES OF THE DEFINITION OF "QUARTERLY VALUATION DATE" CONTAINED
UNDER THE HEADING "DEFINITIONS" IN THIS STATEMENT.

    [           ], 2002

                                   SECTION 7
PARTY NAMED FOR PURPOSES OF THE DEFINITION OF "RATE MULTIPLE" IN THIS STATEMENT.


<Table>
<Caption>
PARTY:                                                   SERIES OF PREFERRED SHARES:
- ------                                                ---------------------------------
<S>                                                   <C>
[              ]..................................               Series M7
[              ]..................................               Series R7
[              ]..................................               Series F7
</Table>


                                   SECTION 8
ADDITIONAL DEFINITIONS.

    Not applicable.

                                   SECTION 9
DIVIDEND PAYMENT DATES.


    Except as otherwise provided in paragraph (d) of Section 2 of Part I of this
Statement, dividends shall be payable on shares of: Series M7 Preferred Shares,
for the Initial Rate Period on            , 2002, and on each thereafter,
Series R7 Preferred Shares, for the Initial Rate Period on            , 2002,
and on each            thereafter and Series F7 Preferred Shares, for the
Initial Rate Period on            , 2002, and on each            thereafter.


                                   SECTION 10
AMOUNT FOR PURPOSES OF SUBPARAGRAPH (c)(i) OF SECTION 5 OF PART I OF THIS
STATEMENT.

                                  [              ]

                                   SECTION 11
REDEMPTION PROVISIONS APPLICABLE TO INITIAL RATE PERIODS.

    Not applicable.

                                      AA-8
<Page>
                                   SECTION 12
APPLICABLE RATE FOR PURPOSES OF SUBPARAGRAPH (b)(iii) OF SECTION 3 OF PART II OF
THIS STATEMENT.

    For purposes of subparagraph (b)(iii) of Section 3 of Part II of this
Statement, the Applicable Rate for shares of such series for the next succeeding
Rate Period of shares of such series shall be equal to the lesser of the Kenny
Index (if such Rate Period consists of fewer than 183 Rate Period Days) or the
product of (A) (I) the "AA" Composite Commercial Paper Rate on such Auction Date
for such Rate Period, if such Rate Period consists of fewer than 183 Rate Period
Days; (II) the Treasury Bill Rate on such Auction Date for such Rate Period, if
such Rate Period consists of more than 182 but fewer than 365 Rate Period Days;
or (III) the Treasury Note Rate on such Auction Date for such Rate Period, if
such Rate Period is more than 364 Rate Period Days (the rate described in the
foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein
as the "Benchmark Rate") and (B) 1 minus 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; provided, however, that if the Trust has notified the
Auction Agent of its intent to allocate to shares of such series in such Rate
Period any net capital gains or other income taxable for Federal income tax
purposes ( "Taxable Income"), the Applicable Rate for shares of such series for
such Rate Period will be (i) if the Taxable Yield Rate (as defined below) 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 lesser of the Kenny Index (if such Rate Period consists of
fewer than 183 Rate Period Days) or the product of the Benchmark Rate multiplied
by the factor set forth in the preceding clause (B) 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
applicable to ordinary income, whichever is greater, multiplied by the Taxable
Yield Rate. For purposes of the foregoing, "Taxable Yield Rate" means the rate
determined by (a) dividing the amount of Taxable Income available for
distribution per such Preferred Shares by the number of days in the Dividend
Period in respect of which such Taxable Income is contemplated to be
distributed, (b) multiplying the amount determined in (a) above by 365 (in the
case of a Dividend Period of 7 Rate Period Days) or 360 (in the case of any
other Dividend Period), and (c) dividing the amount determined in (b) above by
$25,000.

                                   SECTION 13
CERTAIN OTHER RESTRICTIONS AND REQUIREMENTS.

      (a) For so long as any Preferred Shares are rated by Moody's, the Trust
will not buy or sell futures contracts, write, purchase or sell call options on
futures contracts or purchase put options on futures contracts or write call
options (except covered call options) on portfolio securities unless it receives
written confirmation from Moody's that engaging in such transactions would not
impair the ratings then assigned to the Preferred Shares by Moody's, except that
the Trust may purchase or sell exchange-traded futures contracts based on the
Bond Buyer Municipal Bond Index (the "Municipal Index") or United States
Treasury Bonds or Notes ("Treasury Bonds"), and purchase, write or sell
exchange-traded put options on such futures contracts and purchase, write or
sell exchange-traded call options on such futures contracts (collectively,
"Moody's Hedging Transactions"), subject to the following limitations:

          (i) the Trust will not engage in any Moody's Hedging Transaction based
    on the Municipal Index (other than transactions which terminate a futures
    contract or option held by the Trust by the Trust's taking an opposite
    position thereto ("Closing Transactions")) which would cause the Trust at
    the time of such transaction to own or have sold (A) outstanding futures
    contracts based on the Municipal Index exceeding in number 10% of the
    average number of daily traded futures contracts based on the Municipal
    Index in the 30 days preceding the time of effecting such transaction as
    reported by the Wall Street Journal or (B) outstanding futures contracts
    based on

                                      AA-9
<Page>
    the Municipal Index having a Market Value exceeding 50% of the Market Value
    of all Municipal Bonds constituting Moody's Eligible Assets owned by the
    Trust (other than Moody's Eligible Assets already subject to a Moody's
    Hedging Transaction);

         (ii) the Trust will not engage in any Moody's Hedging Transaction based
    on Treasury Bonds (other than Closing Transactions) which would cause the
    Trust at the time of such transaction to own or have sold (A) outstanding
    futures contracts based on Treasury Bonds having an aggregate Market Value
    exceeding 20% of the aggregate Market Value of Moody's Eligible Assets owned
    by the Trust and rated Aa by Moody's (or, if not rated by Moody's but rated
    by S&P, rated AAA by S&P) or (B) outstanding futures contracts based on
    Treasury Bonds having an aggregate Market Value exceeding 40% of the
    aggregate Market Value of all Municipal Bonds constituting Moody's Eligible
    Assets owned by the Trust (other than Moody's Eligible Assets already
    subject to a Moody's Hedging Transaction) and rated Baa or A by Moody's (or,
    if not rated by Moody's but rated by S&P, rated A or AA by S&P (for purpose
    of the foregoing clauses (i) and (ii), the Trust shall be deemed to own the
    number of futures contracts that underlie any outstanding options written by
    the Trust);

         (iii) the Trust will engage in Closing Transactions to close out any
    outstanding futures contract based on the Municipal Index if the amount of
    open interest in the Municipal Index as reported by The Wall Street Journal
    is less than 5,000;

         (iv) the Trust will engage in a Closing Transaction to close out any
    outstanding futures contract by no later than the fifth Business Day of the
    month in which such contract expires and will engage in a Closing
    Transaction to close out any outstanding option on a futures contract by no
    later than the first Business Day of the month in which such option expires;

          (v) the Trust will engage in Moody's Hedging Transaction only with
    respect to futures contracts or options thereon having the next settlement
    date of the settlement date immediately thereafter;

         (vi) the Trust will not engage in options and futures transactions for
    leveraging or speculative purposes and will not write any call options or
    sell any futures contracts for the purpose of hedging the anticipated
    purchase of an asset prior to completion of such purchase; and

         (vii) the Trust will not enter into an option of futures transaction
    unless, after giving effect thereto, the Trust would continue to have
    Moody's Eligible Assets with an aggregate Discounted Value equal to or
    greater than the Preferred Shares Basic Maintenance Amount.

    For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the Preferred Shares
Basic Maintenance Amount, the Discounted Value of Moody's Eligible Assets which
the Trust is obligated to deliver or receive pursuant to an outstanding futures
contract or option shall be as follows: (i) assets subject to call options
written by the Trust which are either exchange-traded and "readily reversible"
or which expire within 49 days after the date as of which such valuation is made
shall be valued at the lesser of (a) Discounted Value and (b) the exercise price
of the call option written by the Trust; (ii) assets subject to call options
written by the Trust not meeting the requirements of clause (i) of this sentence
shall have no value; (iii) assets subject to put options written by the Trust
shall be valued at the lesser of (A) the exercise price and (B) the Discounted
Value of the subject security; (iv) futures contracts shall be valued at the
lesser of (A) settlement price and (B) the Discounted Value of the subject
security, provided that, if a contract matures within 49 days after the date as
of which such valuation is made, where the Trust is the seller the contract may
be valued at the settlement price and where the Trust is the buyer the contract
may be valued at the Discounted Value of the subject securities; and (v) where
delivery may

                                     AA-10
<Page>
be made to the Trust with any security of a class of securities, the Trust shall
assume that it will take delivery of the security with the lowest Discounted
Value.

    For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the Preferred Shares
Basic Maintenance Amount, the following amounts shall be subtracted from the
aggregate Discounted Value of the Moody's Eligible Assets held by the Trust:
(i) 10% of the exercise price of a written call option; (ii) the exercise price
of any written put option; (iii) where the Trust is the seller under a futures
contract, 10% of the settlement price of the futures contract; (iv) where the
Trust is the purchaser under a futures contract, the settlement price of assets
purchased under such futures contract; (v) the settlement price of the
underlying futures contract if the Trust writes put options on a futures
contract; and (vi) 105% of the Market Value of the underlying futures contracts
if the Trust writes call options on a futures contract and does not own the
underlying contract.

     (b) For so long as any Preferred Shares are rated by Moody's, the Trust
will not enter into any contract to purchase securities for a fixed price at a
future date beyond customary settlement time (other than such contracts that
constitute Moody's Hedging Transactions that are permitted under
Section 13(a) of this Annex A to this Statement), except that the Trust may
enter into such contracts to purchase newly issued securities on the date such
securities are issued ("Forward Commitments"), subject to the following
limitation:

          (i) the Trust will maintain in a segregated account with its custodian
    cash, cash equivalents or short-term, fixed-income securities rated P-1,
    MTG-1 or MIG-1 by Moody's and maturing prior to the date of the Forward
    Commitment with a Market Value that equals or exceeds the amount of the
    Trust's obligations under any Forward Commitments to which it is from time
    to time a party, or long-term fixed income securities with a Discounted
    Value that equals or exceeds the amount of the Trust's obligations under any
    Forward Commitment to which it is from time to time a party; and

         (ii) the Trust will not enter into a Forward Commitment unless, after
    giving effect thereto, the Trust would continue to have Moody's Eligible
    Assets with an aggregate Discounted Value equal to or greater than the
    Preferred Shares Maintenance Amount.

    For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the Preferred Shares
Basic Maintenance Amount, the Discounted Value of all Forward Commitments to
which the Trust is a party and of all securities deliverable to the Trust
pursuant to such Forward Commitments shall be zero.

      (c) For so long as any Preferred Shares are rated by S&P, the Trust will
not purchase or sell futures contracts, write, purchase or sell options on
futures contracts, write put options (except covered put options) or call
options (except covered call options) on portfolio securities unless it receives
written confirmation from S&P that engaging in such transactions will not impair
the ratings then assigned to the Preferred Shares by S&P, except that the Trust
may purchase or sell futures contracts based on the Bond Buyer Municipal Bond
Index (the "Municipal Index") or United States Treasury Bonds or Notes
("Treasury Bonds") and write, purchase or sell put and call options on such
contracts (collectively, "S&P Hedging Transactions"), subject to the following
limitations:

          (i) the Trust will not engage in any S&P Hedging Transaction based on
    the Municipal Index (other than transactions which terminate a futures
    contract or option held by the fund by the Trust's taking an opposite
    position thereto), which would cause the Trust at the time of such
    transaction to own or have sold the least of (A) more than 1,000 outstanding
    futures contracts based on the Municipal Index, (B) outstanding futures
    contracts based on the Municipal Index

                                     AA-11
<Page>
    exceeding in number 25% of the quotient of the Market Value of the Trust's
    total assets divided by $1,000 or (C) outstanding futures contracts based on
    the Municipal Index exceeding in number 10% of the average number of daily
    traded futures contracts based on the Municipal Index in the 30 days
    preceding the time of effecting such transaction as reported by The Wall
    Street Journal;

         (ii) the Trust will not engage in any S&P Hedging Transaction based on
    Treasury Bonds (other than Closing Transactions) which would cause the Trust
    at the time of such transaction to own or have sold the lesser of
    (A) outstanding futures contracts based on Treasury Bonds exceeding in
    number 50% of the quotient of the Market Value of the Trust's total assets
    divided by $100,000 ($200,000 in the case of the two-year United States
    Treasury Note) or (B) outstanding futures contracts based on Treasury Bonds
    exceeding in number 10% of the average number of daily traded futures
    contracts based on Treasury Bonds in the 30 days preceding the time of
    effecting such transaction as reported by The Wall Street Journal.

         (iii) the Trust will engage in Closing Transactions to close out any
    outstanding futures contract which the Trust owns or has sold or any
    outstanding option thereon owned by the Trust in the event (A) the Trust
    does not have S&P Eligible Assets with an aggregate Discounted Value equal
    to or greater than the Preferred Shares Basic Maintenance Amount on two
    consecutive Valuation Dates and (B) the Trust is required to pay variation
    margin on the second such Valuation Date;

         (iv) the Trust will engage in a Closing Transaction to close out any
    outstanding futures contract or option thereon in the month prior to the
    delivery month under the terms of such futures contract or option thereon
    unless the Trust holds the securities deliverable under such terms; and

          (v) when the Trust writes a futures contract or option thereon, it
    will either maintain an amount of cash, cash equivalents or high grade
    (rated A or better by S&P), fixed-income securities in a segregated account
    with the Trust's custodian, so that the amount so segregated plus the amount
    of initial margin and variation margin held in the account of or on behalf
    of the Trust's broker with respect to such futures contract or option equals
    the Market Value of the futures contract or option, or, in the event the
    Trust writes a futures contract or option thereon which requires delivery of
    an underlying security, it shall hold such underlying security in its
    portfolio.

    For purposes of determining whether the Trust has S&P Eligible Assets with a
Discounted Value that equals or exceeds the Preferred Shares Basic Maintenance
Amount, the Discounted Value of cash or securities held for the payment of
initial margin or variation margin shall be zero and the aggregate Discounted
Value of S&P Eligible Assets shall be reduced by an amount equal to (i) 30% of
the aggregate settlement value, as marked to market, of any outstanding futures
contracts based on the Municipal Index which are owned by the Trust plus
(ii) 25% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on Treasury Bonds which contracts are owned
by the Trust.

                                     AA-12
<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

                                      B-1
<Page>
degree of speculation and "C" the highest. While such debt will likely have some
quality and protective characteristics these are outweighed by major
uncertainties or major exposures to adverse conditions.

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

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

 CCC  Debt rated "CCC" has a currently identifiable vulnerability to default,
      and is dependent upon favorable business, financial, and economic
      conditions to meet timely payment of interest and repayment of principal.
      In the event of adverse business, financial, or economic conditions, it is
      not likely to have the capacity to pay interest and repay principal. The
      "CCC" rating category is also used for debt subordinated to senior debt
      that is assigned an actual or implied "B" or "B" rating.

 CC   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

                                      B-2
<Page>
     closing of the insured institution or, in the event that the deposit is
     assumed by a successor insured institution, upon maturity.

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

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

MUNICIPAL NOTES

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

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

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

       Note rating symbols are as follows:

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

 SP-2  Satisfactory capacity to pay principal and interest.

 SP-3  Speculative capacity to pay principal and interest.

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

COMMERCIAL PAPER

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

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

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

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

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

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

                                      B-3
<Page>
 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 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.

                                      B-4
<Page>
 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.

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

                                      B-5
<Page>
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,
 CC, C   HIGH DEFAULT RISK. Default is a real possibility. Capacity for meeting
         financial commitments is solely reliant upon sustained, favorable
         business or economic developments. A "CC" rating indicates that default
         of some kind appears probable. "C" ratings signal imminent default.

                                      B-6
<Page>
 DDD,
 DD,
 and D  DEFAULT. The ratings of obligations in this category are based on their
        prospects for achieving partial or full recovery in a reorganization or
        liquidation of the obligor. While expected recovery values are highly
        speculative and cannot be estimated with any precision, the following
        serve as general guidelines. "DDD" obligations have the highest
        potential for recovery, around 90%-100% of outstanding amounts and
        accrued interest. "DD" indicates potential recoveries in the range of
        50%-90%, and "D" the lowest recovery potential, i.e., below 50%.

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

SHORT-TERM CREDIT RATINGS

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

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

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

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

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

 C   HIGH DEFAULT RISK. Default is a real possibility. Capacity for meeting
     financial commitments is solely reliant upon a sustained, favorable
     business and economic environment.

 D   DEFAULT. Denotes actual or imminent payment default.

Notes:

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

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

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

    RATING ALERT: RATINGS ARE PLACED ON RATING ALERT TO NOTIFY INVESTORS THAT
THERE IS A REASONABLE PROBABILITY OF A RATING CHANGE AND THE LIKELY DIRECTION OF
SUCH CHANGE. THESE ARE DESIGNATED AS "POSITIVE", INDICATING A POTENTIAL UPGRADE,
"NEGATIVE", FOR A POTENTIAL DOWNGRADE, OR "EVOLVING", IF RATINGS MAY BE RAISED,
LOWERED OR MAINTAINED. RATING ALERT IS TYPICALLY RESOLVED OVER A RELATIVELY
SHORT PERIOD.

                                      B-7
<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 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,

                                      C-1
<Page>
although outstanding options on that exchange that had been listed by the OCC as
a result of trades on that exchange would generally continue to be exercisable
in accordance with their terms. OTC Options are purchased from or sold to
dealers, financial institutions or other counterparties which have entered into
direct agreements with the Trust. With OTC Options, such variables as expiration
date, exercise price and premium will be agreed upon between the Trust and the
counterparty, without the intermediation of a third party such as the OCC. If
the counterparty fails to make or take delivery of the securities underlying an
option it has written, or otherwise settle the transaction in accordance with
the terms of that option as written, the Trust would lose the premium paid for
the option as well as any anticipated benefit of the transaction. As the Trust
must rely on the credit quality of the counterparty rather than the guarantee of
the OCC, it will only enter into OTC Options with counterparties with the
highest long-term credit ratings, and with primary United States government
securities dealers recognized by the Federal Reserve Bank of New York.

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

FUTURES CONTRACTS AND RELATED OPTIONS

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

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

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

                                      C-2
<Page>
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.

                                      C-3
<Page>
                                     PART C

                               OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(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)


<Table>
<S>  <C>       <C>
(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.(4)
     (e)       Dividend Reinvestment Plan.(2)
     (f)       Inapplicable.
     (g)(1)    Investment Management Agreement.(2)
     (g)(2)    Sub-Investment Advisory Agreement.(2)
     (g)(3)    Waiver Reliance Letter.(2)
     (h)       Form of Underwriting Agreement.(2)
     (i)       Deferred Compensation Plan for
               Independent Trustees.(2)
     (j)       Custodian Agreement.(2)
     (k)(1)    Transfer Agency Agreement.(2)
     (k)(2)    Auction Agency Agreement.(4)
     (k)(3)    Broker-Dealer Agreement.(4)
     (k)(4)    Form of DTC Agreement.(4)
     (l)       Opinion and Consent of Counsel to the
               Trust.(4)
     (m)       Inapplicable.
     (n)       Consent of Independent Public
               Accountants.(4)
     (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)
</Table>


                                    PART C-1
<Page>
<Table>
<S>  <C>       <C>
     (r)(3)    Code of Ethics of J.J.B. Hilliard, W.L.
               Lyons, Inc.(2)
     (s)       Powers of Attorney(2)
</Table>

- -------------------
(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)  Incorporated by reference to Appendix A to the Statement of Additional
     Information.


(4)  Filed herewith.


ITEM 25. MARKETING ARRANGEMENTS

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

ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

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

<Table>
<S>                                                 <C>
Registration fees.................................   21,066
Rating fees.......................................  160,283
Printing (other than certificates)................   12,677
Accounting fees and expenses......................    3,000
Legal fees and expenses...........................  112,387
Miscellaneous.....................................    6,000
                                                    -------
    Total.........................................  315,413
</Table>

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

<Table>
<Caption>
                                                      NUMBER OF
TITLE OF CLASS                                      RECORD HOLDERS
- --------------                                      --------------
<S>                                                 <C>
Common Shares of Beneficial Interest..............         1
Preferred Shares..................................         0
</Table>

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

                                    PART C-2
<Page>
capacity to any personal liability whatsoever to any Person, save only liability
to the Trust or its Shareholders arising from bad faith, willful misfeasance,
gross negligence or reckless disregard for his duty to such Person; and, subject
to the foregoing exception, all such Persons shall look solely to the Trust
Property for satisfaction of claims of any nature arising in connection with the
affairs of the Trust. If any Shareholder, Trustee or officer, as such, of the
Trust, is made a party to any suit or proceeding to enforce any such liability,
subject to the foregoing exception, he shall not, on account thereof, be held to
any personal liability. Any repeal or modification of this Section 5.1 shall not
adversely affect any right or protection of a Trustee or officer of the Trust
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.

    5.2  MANDATORY INDEMNIFICATION.  (a) The Trust hereby agrees to indemnify
each person who at any time serves as a Trustee or officer of the Trust (each
such person being an "indemnitee") against any liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and reasonable counsel fees reasonably incurred by such
indemnitee in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, before any court or administrative
or investigative body in which he may be or may have been involved as a party or
otherwise or with which he may be or may have been threatened, while acting in
any capacity set forth in this Article V by reason of his having acted in any
such capacity, except with respect to any matter as to which he shall not have
acted in good faith in the reasonable belief that his action was in the best
interest of the Trust or, in the case of any criminal proceeding, as to which he
shall have had reasonable cause to believe that the conduct was unlawful,
provided, however, that no indemnitee shall be indemnified hereunder against any
liability to any person or any expense of such indemnitee arising by reason of
(i) willful misfeasance, (ii) bad faith, (iii) gross negligence (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

                                    PART C-3
<Page>
necessary for indemnification have been met and a written undertaking to
reimburse the Trust unless it is subsequently determined that the indemnitee is
entitled to such indemnification and if a majority of the Trustees determine
that the applicable standards of conduct necessary for indemnification appear to
have been met. In addition, at least one of the following conditions must be
met: (i) the indemnitee shall provide adequate security for his undertaking,
(ii) the Trust shall be insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of the Disinterested Non-Party
Trustees, or if a majority vote of such quorum so direct, independent legal
counsel in a written opinion, shall conclude, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is
substantial reason to believe that the indemnitee ultimately will be found
entitled to indemnification.

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

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

    5.3  NO BOND REQUIRED OF TRUSTEES.  No Trustee shall, as such, be obligated
to give any bond or other security for the performance of any of his duties
hereunder.

    5.4  NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC.  No
purchaser, lender, transfer agent or other person dealing with the Trustees or
with any officer, employee or agent of the Trust shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent or be liable for the application
of money or property paid, loaned, or delivered to or on the order of the
Trustees or of said officer, employee or agent. Every obligation, contract,
undertaking, instrument, certificate, Share, other security of the Trust, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. 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

                                    PART C-4
<Page>
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 8 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

    (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.

                                    PART C-5
<Page>
      (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-6
<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 6th day of
December, 2002.


<Table>
<S>                                                   <C>
                                                                    /s/ ROBERT S. KAPITO
                                                      ------------------------------------------------
                                                                      Robert S. Kapito
                                                           PRESIDENT AND CHIEF EXECUTIVE OFFICER
</Table>


    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 6th day of December, 2002.


<Table>
<Caption>
                        NAME                                      TITLE
                        ----                                      -----
<C>                                                    <S>                          <C>
                /s/ ROBERT S. KAPITO
     -------------------------------------------       Trustee, President, and
                  Robert S. Kapito                       Chief Executive Officer

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

                          *
     -------------------------------------------       Trustee
                  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
</Table>

<Table>
<S>   <C>                                                    <C>                          <C>
*By:                  /s/ ROBERT S. KAPITO
             --------------------------------------
                        Robert S. Kapito
                        ATTORNEY-IN-FACT
</Table>

                                    PART C-7
<Page>
                               INDEX TO EXHIBITS


<Table>
<S>     <C>
(d)(2)  Form of Specimen Certificate
(h)     Form of Underwriting Agreement
(k)(2)  Auction Agency Agreement
(k)(3)  Broker-Dealer Agreement
(k)(4)  Form of DTC Agreement
(l)     Opinion and Consent of Counsel to the Trust
(n)     Consent of Independent Public Accountants
</Table>


                                    PART C-8

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(D)(2)
<SEQUENCE>3
<FILENAME>a2095632zex-99_d2.txt
<DESCRIPTION>EXHIBIT 99.(D)(2)
<TEXT>
<Page>


CERTIFICATE NO.                                                          SHARES
      1                                                                  3,053

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                Organized Under the Laws of The State of Delaware
         Municipal Auction Rate Cumulative Preferred Shares - Series M7
                            $.001 Par Value Per Share
                    $25,000 Liquidation Preference Per Share

                                                            Cusip No.092479 20 3

         This certifies that Cede & Co. is the owner of 3,053 fully paid and
non-assessable shares of Municipal Auction Rate Cumulative Preferred Shares -
Series M7, $.001 par value per share, $25,000 liquidation preference per share,
of BlackRock Insured Municipal Income Trust (the "Trust") transferable only on
the books of the Trust by the holder thereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid unless countersigned by the transfer agent and registrar.

         A statement in full, of all the designations, preferences,
qualifications, limitations, restrictions and special or relative rights of the
shares of each class authorized to be issued, will be furnished by the Trust to
any shareholders upon request and without charge.

         IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
by its duly authorized officers this 11th day of December 2002.

BANK OF NEW YORK                               BLACKROCK INSURED MUNICIPAL
As Transfer Agent and Registrar                INCOME TRUST


By:_____________________________               By:______________________________
   Authorized Signature                           Vice President

                                               Attest:__________________________
                                                      Secretary
<Page>


FOR VALUE RECEIVED,___________________________________ hereby sells, assigns and

transfers unto__________________________________________________________________

Shares represented by this Certificate, and do hereby irrevocably constitute and

appoint ______________________________________________ Attorney to transfer the

said Shares on the books of the within named Trust with full power of

substitution in the premises.

Dated___________________' _____________

In presence of

________________________________________________________________________________

         Shares of Municipal Auction Rate Cumulative Preferred Shares evidenced
         by this Certificate may be sold, transferred, or otherwise disposed of
         only pursuant to the provisions of the Trust's Amended and Restated
         Agreement and Declaration of Trust and the Trust's Statement of
         Preferences.

         The Trust will furnish to any shareholder, upon request and without
         charge, the Trust's Amended and Restated Agreement and Declaration
         of Trust and a full statement of the designations, preferences,
         limitations and relative rights of the shares of each class or
         series of capital stock of the Trust authorized to be issued, so far
         as they have been determined, and the authority of the Board of
         Trustees to determine the relative rights and preferences of
         subsequent classes or series. Any such request should be addressed
         to the Secretary of the Trust.

Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Trust or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

<Page>

CERTIFICATE NO.                                                           SHARES
    1                                                                     3,053

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                Organized Under the Laws of The State of Delaware
         Municipal Auction Rate Cumulative Preferred Shares - Series R7
                            $.001 Par Value Per Share
                    $25,000 Liquidation Preference Per Share

                                                           Cusip No. 092479 30 2

         This certifies that Cede & Co. is the owner of 3,053 fully paid and
non-assessable shares of Municipal Auction Rate Cumulative Preferred Shares -
Series R7, $.001 par value per share, $25,000 liquidation preference per share,
of BlackRock Insured Municipal Income Trust (the "Trust") transferable only on
the books of the Trust by the holder thereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid unless countersigned by the transfer agent and registrar.

         A statement in full, of all the designations, preferences,
qualifications, limitations, restrictions and special or relative rights of the
shares of each class authorized to be issued, will be furnished by the Trust to
any shareholders upon request and without charge.

         IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
by its duly authorized officers this 11th day of December 2002.

BANK OF NEW YORK                                    BLACKROCK INSURED MUNICIPAL
As Transfer Agent and Registrar                     INCOME TRUST


By:______________________________                   By:_________________________
   Authorized Signature                                Vice President

                                                    Attest:_____________________
                                                           Secretary
<Page>

FOR VALUE RECEIVED, __________________________________ hereby sells, assigns and

transfers unto _________________________________________________________________

Shares represented by this Certificate, and do hereby irrevocably constitute and

appoint ____________________________________________ Attorney to transfer the

said Shares on the books of the within named Trust with full power of

substitution in the premises.

Dated ____________________________, __________________

In presence of

_______________________________________  _______________________________________

         Shares of Municipal Auction Rate Cumulative Preferred Shares evidenced
         by this Certificate may be sold, transferred, or otherwise disposed of
         only pursuant to the provisions of the Trust's Amended and Restated
         Agreement and Declaration of Trust and the Trust's Statement of
         Preferences.

         The Trust will furnish to any shareholder, upon request and without
         charge, the Trust's Amended and Restated Agreement and Declaration
         of Trust and a full statement of the designations, preferences,
         limitations and relative rights of the shares of each class or
         series of capital stock of the Trust authorized to be issued, so far
         as they have been determined, and the authority of the Board of
         Trustees to determine the relative rights and preferences of
         subsequent classes or series. Any such request should be addressed
         to the Secretary of the Trust.

Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Trust or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

<Page>


CERTIFICATE NO.                                                          SHARES
    1                                                                    3,053

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                Organized Under the Laws of The State of Delaware
         Municipal Auction Rate Cumulative Preferred Shares - Series F7
                            $.001 Par Value Per Share
                    $25,000 Liquidation Preference Per Share

                                                            Cusip No.092479 40 1

         This certifies that Cede & Co. is the owner of 3,053 fully paid and
non-assessable shares of Municipal Auction Rate Cumulative Preferred Shares -
Series F7, $.001 par value per share, $25,000 liquidation preference per share,
of BlackRock Insured Municipal Income Trust (the "Trust") transferable only on
the books of the Trust by the holder thereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid unless countersigned by the transfer agent and registrar.

         A statement in full, of all the designations, preferences,
qualifications, limitations, restrictions and special or relative rights of the
shares of each class authorized to be issued, will be furnished by the Trust to
any shareholders upon request and without charge.

         IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
by its duly authorized officers this 11th day of December 2002.

BANK OF NEW YORK                                     BLACKROCK INSURED MUNICIPAL
As Transfer Agent and Registrar                      INCOME TRUST


By:____________________________                      By:________________________
   Authorized Signature                                 Vice President

                                                     Attest:____________________
                                                            Secretary
<Page>


FOR VALUE RECEIVED, __________________________________ hereby sells, assigns and

transfers unto__________________________________________________________________

Shares represented by this Certificate, and do hereby irrevocably constitute and

appoint _____________________________________ Attorney to transfer the said

Shares on the books of the within named Trust with full power of substitution

in the premises.

Dated __________________________________, ___________

In presence of

________________________________________  ______________________________________

         Shares of Municipal Auction Rate Cumulative Preferred Shares evidenced
         by this Certificate may be sold, transferred, or otherwise disposed of
         only pursuant to the provisions of the Trust's Amended and Restated
         Agreement and Declaration of Trust and the Trust's Statement of
         Preferences.

         The Trust will furnish to any shareholder, upon request and without
         charge, the Trust's Amended and Restated Agreement and Declaration
         of Trust and a full statement of the designations, preferences,
         limitations and relative rights of the shares of each class or
         series of capital stock of the Trust authorized to be issued, so far
         as they have been determined, and the authority of the Board of
         Trustees to determine the relative rights and preferences of
         subsequent classes or series. Any such request should be addressed
         to the Secretary of the Trust.

Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Trust or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.H
<SEQUENCE>4
<FILENAME>a2095632zex-99_h.txt
<DESCRIPTION>EXHIBIT 99.H
<TEXT>
<Page>


         Auction Rate Municipal Preferred Shares of Beneficial Interest

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST

                             3,053 Shares, Series M7
                             3,053 Shares, Series R7
                             3,053 Shares, Series F7

                    Liquidation Preference $25,000 Per Share

                             UNDERWRITING AGREEMENT

                                                                December 9, 2002

SALOMON SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
         INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED

c/o SALOMON SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

     BlackRock Insured Municipal Income Trust, a Delaware statutory trust (the
"Trust"), proposes, upon the terms and conditions set forth herein, to issue and
sell an aggregate of 3,053 shares of its Auction Rate Municipal Preferred Shares
of Beneficial Interest, Series M7, 3,053 shares of its Auction Rate Municipal
Preferred Shares of Beneficial Interest, Series R7 and 3,053 shares of its
Auction Rate Municipal Preferred Shares of Beneficial Interest, Series F7, each
with a liquidation preference of $25,000 per share (the "Shares"). The Shares
will be authorized by, and subject to the terms and conditions of, the Statement
of Preferences of Municipal Auction Rate Cumulative Preferred Shares of the
Trust, dated as of August 19, 2002 (the "Statement") and the Amended and
Restated Agreement and Declaration of Trust of the Trust dated as of __________,
2002 (the "Declaration"), in the forms filed as exhibits to the Registration
Statement referred to in Section 1 of this agreement, as the same may be amended
from time to time. The Trust, its investment adviser, BlackRock Advisors, Inc.
("BAI") and its investment sub-adviser, BlackRock Financial Management, Inc.
("BFM") (each, an "Adviser" and together, the "Advisers"), wish to confirm as
follows their agreement with Salomon Smith Barney Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Prudential Securities Incorporated (the
"Underwriters"), in connection with the purchase of the Shares by the
Underwriters.

     Collectively, the Investment Management Agreement dated as of October
22, 2002 between the Trust and BAI (the "Investment Management Agreement"),
the Sub-Investment Advisory Agreement dated as of October 22, 2002 among the
Trust, BAI and BFM (the "Sub-Advisory Agreement"), the Custodian Agreement
dated as of October 21, 2002 between the Trust and State Street Bank and
Trust Company, the Transfer Agent and Service

<Page>


Agreement dated as of October 31, 2002 between the Trust and EquiServe Trust
Company, N.A. and the Auction Agent Agreement to be dated December 11, 2002
between the Trust and The Bank of New York are hereinafter collectively
referred to as the "Trust Agreements." The Investment Management Agreement
and the Sub-Advisory Agreement are hereinafter collectively referred to as
the "Advisory Agreements." This Underwriting Agreement is hereinafter
referred to as the "Agreement."

     For purposes of this Agreement, references to a post-effective amendment to
the Registration Statement (defined below) shall only be deemed to refer to
those amendments which are filed with the Commission before the later of (i) one
year from the date of this Agreement or (ii) the date on which a prospectus
relating to the Shares is no longer required by the 1933 Act (defined below) to
be delivered in connection with any sales by any Underwriter or dealer.

     1. REGISTRATION STATEMENT AND PROSPECTUS. The Trust has prepared and filed
in accordance with the provisions of the Securities Act of 1933, as amended (the
"1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act"),
and the rules and regulations of the Securities and Exchange Commission (the
"Commission") promulgated under the 1933 Act (the "1933 Act Rules and
Regulations") and the 1940 Act (the "1940 Act Rules and Regulations" and,
together with the 1933 Act Rules and Regulations, the "Rules and Regulations"),
a registration statement on Form N-2, as amended by Pre-Effective Amendments
Nos. 1 and 2 (File Nos. 333-100951 and 811-21178) (the "registration
statement"), including a prospectus relating to the Shares. The Trust also has
filed a notification of registration of the Trust as an investment company under
the 1940 Act on Form N-8A (the "1940 Act Notification"). The term "Registration
Statement" as used in this Agreement means the registration statement (including
all financial schedules and exhibits), as amended at the time it becomes
effective under the 1933 Act or, if the registration statement became effective
under the 1933 Act prior to the execution of this Agreement, as amended or
supplemented at the time it became effective, prior to the execution of this
Agreement, and includes any information deemed to be included by Rule 430A under
the 1933 Act Rules and Regulations. If it is contemplated, at the time this
Agreement is executed, that a post-effective amendment to the registration
statement will be filed under the 1933 Act and must be declared effective before
the offering of the Shares may commence, the term "Registration Statement" as
used in this Agreement means the registration statement as amended by said
post-effective amendment. If the Trust has filed an abbreviated registration
statement to register an additional amount of Shares pursuant to Rule 462(b)
under the 1933 Act (the "Rule 462 Registration Statement"), then any reference
herein to the term "Registration Statement" shall include such Rule 462
Registration Statement. The term "Prospectus" as used in this Agreement means
the prospectus and statement of additional information in the forms included in
the Registration Statement or, if the prospectus and statement of additional
information included in the Registration Statement omit information in reliance
on Rule 430A under the 1933 Act Rules and Regulations and such information is
included in a prospectus and statement of additional information filed with the
Commission pursuant to Rule 497(h) under the 1933 Act, the term "Prospectus" as
used in this Agreement means the prospectus and statement of additional
information in the forms included in the Registration Statement as supplemented
by the addition of the information contained in the prospectus filed with the
Commission pursuant to Rule 497(h). The term "Prepricing Prospectus" as used in
this Agreement means the prospectus and statement of additional


                                       2
<Page>



information subject to completion in the forms included in the registration
statement at the time of filing of Pre-Effective Amendment No. 1 to the
registration statement with the Commission on December 5, 2002, and as such
prospectus and statement of additional information shall have been amended from
time to time prior to the date of the Prospectus. The terms "Registration
Statement," "Prospectus" and "Prepricing Prospectus" shall also include any
financial statements and other information incorporated by reference therein.

     The Trust has furnished you with copies of such registration statement,
each amendment to such registration statement filed with the Commission and each
Prepricing Prospectus.

     2. AGREEMENTS TO SELL AND PURCHASE. The Trust hereby agrees, subject to all
the terms and conditions set forth herein, to issue and sell to the Underwriters
and, upon the basis of the representations, warranties and agreements of the
Trust and the Advisers herein contained and subject to all the terms and
conditions set forth herein, each Underwriter agrees, severally and not jointly,
to purchase from the Trust, at a purchase price of $[ ] per share, the number of
Shares set forth opposite the name of such Underwriter in Schedule I hereto.

     3. TERMS OF PUBLIC OFFERING. The Trust and the Advisers have been advised
by you that the Underwriters propose to make a public offering of their
respective portion of the Shares as soon after the Registration Statement has
become effective and this Agreement has been executed and delivered as in your
judgment is advisable and initially to offer the Shares upon the terms set forth
in the Prospectus.

     4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment to the Trust for the Shares shall be made at the
office of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, NY
10036, or through the facilities of The Depository Trust Company or another
mutually agreeable facility, at 9:30 A.M., New York City time, on December 11,
2002 (the "Closing Date"). The place of closing for the Shares and the Closing
Date may be varied by agreement between you and the Trust.

     Certificates for the Shares purchased hereunder shall be registered in such
names and in such denominations as you shall request prior to 9:30 A.M., New
York City time, on the second business day preceding the Closing Date. Such
certificates shall be made available to you in New York City for inspection and
packaging not later than 9:30 A.M., New York City time, on the business day next
preceding the Closing Date. The certificates evidencing the Shares purchased
hereunder shall be delivered to you on the Closing Date, through the facilities
of The Depository Trust Company, against payment of the purchase price therefor
in immediately available funds to the order of the Trust.

     5. AGREEMENTS OF THE TRUST AND THE ADVISERS. The Trust and the Advisers,
jointly and severally, agree with the several Underwriters as follows:

     (a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment
thereto to be declared effective under the 1933 Act before the offering of
the Shares may commence, the Trust will use its reasonable best efforts to
cause the Registration Statement or such post-effective amendment to become

                                       3
<Page>



effective under the 1933 Act as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing when the
Registration Statement or such post-effective amendment has become effective.

     (b) Except as otherwise stated in (iii) below, for a period of five years
from the date hereof, the Trust (in the case of (i), (ii), (iii)(A) and (iv)
below) and the Advisers (in the case of (iii)(B) and (iv) below) will advise you
promptly and, if requested by you, will confirm such advice in writing: (i) of
any request made by the Commission for amendment of or a supplement to the
Registration Statement, any Prepricing Prospectus or the Prospectus (or any
amendment or supplement to any of the foregoing) or for additional information,
(ii) of the issuance by the Commission, the National Association of Securities
Dealers, Inc. (the "NASD"), any state securities commission, any national
securities exchange, any arbitrator, any court or any other governmental,
regulatory, self-regulatory or administrative agency or any official of any
order suspending the effectiveness of the Registration Statement, prohibiting or
suspending the use of the Prospectus or any Prepricing Prospectus, or any sales
material (as hereinafter defined), of any notice pursuant to Section 8(e) of the
1940 Act, of the suspension of qualification of the Shares for offering or sale
in any jurisdiction, or the initiation of any proceeding for any such purposes,
(iii) of receipt by the Trust, any affiliate of the Trust or any representative
or attorney of the Trust of any other material communication adverse to the
Trust from the Commission, the NASD, any state securities commission, any
national securities exchange, any arbitrator, any court or any other
governmental, regulatory, self-regulatory or administrative agency or any
official relating to the Trust (if such communication relating to the Trust is
received by such person within three years after the date of this Agreement),
the Registration Statement, the 1940 Act Notification, the Prospectus, any
Prepricing Prospectus, any sales material (as hereinafter defined) (or any
amendment or supplement to any of the foregoing) or this Agreement or any of the
Trust Agreements and (iv) within the period of time referred to in paragraph (f)
below, of any material adverse change in the condition (financial or other),
assets or results of operations of the Trust or any event which should
reasonably be expected to have a material adverse effect on the ability of
either Adviser to perform its respective obligations under this Agreement and
the Advisory Agreements to which it is a party (in either case, other than as a
result of changes in market conditions generally or the market for municipal
securities generally) or of the happening of any other event which makes any
statement of a material fact made in the Registration Statement or the
Prospectus, or any Prepricing Prospectus (or any amendment or supplement to any
of the foregoing) untrue or which requires the making of any additions to or
changes in the Registration Statement or the Prospectus, or any Prepricing
Prospectus (or any amendment or supplement to any of the foregoing) in order to
state a material fact required by the 1933 Act, the 1940 Act or the Rules and
Regulations to be stated therein or necessary in order to make the statements
therein (in the case of a prospectus, in light of the circumstances under which
they were made) not misleading, or of the necessity to amend or supplement the
Registration Statement, the Prospectus, or any Prepricing Prospectus (or any
amendment or supplement to any of the foregoing) to comply with the 1933 Act,
the 1940 Act, the Rules and Regulations or any other law or order of any court
or regulatory body. If at any time the Commission, the NASD, any state
securities commission, any national securities exchange, any arbitrator, any
court or any other governmental, regulatory, self-regulatory or administrative
agency or any official shall issue any order suspending the effectiveness of the
Registration Statement, prohibiting or suspending the use of the Prospectus, any
Preparing Prospectus or any sales material (as hereinafter defined) (or any
amendment or


                                       4
<Page>



supplement to any of the foregoing) or suspending the qualification of the
Shares for offering or sale in any jurisdiction, the Trust will use its
reasonable best efforts to obtain the withdrawal of such order at the earliest
possible time.

     (c) The Trust will furnish to you, without charge, three signed copies of
the Registration Statement as originally filed with the Commission and of each
amendment thereto, including financial statements and all exhibits thereto, and
will also furnish to you, without charge, such number of conformed copies of the
Registration Statement as originally filed and of each amendment thereto, but
without exhibits, as you may request.

     (d) The Trust will not (i) file any amendment to the Registration Statement
or make any amendment or supplement to the Prospectus, any Prepricing Prospectus
or any sales material (as hereinafter defined) (or any amendment or supplement
to any of the foregoing), of which you shall not previously have been advised or
to which you shall reasonably object after being so advised or (ii) so long as,
in the opinion of counsel for the Underwriters, a Prospectus is required to be
delivered in connection with sales by any Underwriter or any dealer, file any
information, documents or reports pursuant to the Securities Exchange Act of
1934, as amended (the "1934 Act"), without delivering a copy of such
information, documents or reports to you prior to or concurrently with such
filing.

     (e) Prior to the execution and delivery of this Agreement, the Trust has
delivered to you, without charge, in such quantities as you have requested,
copies of each form of the Prepricing Prospectus. The Trust consents to the use,
in accordance with the provisions of the 1933 Act and with the state securities
or blue sky laws of the jurisdictions in which the Shares are offered by the
several Underwriters and by dealers, prior to the date of the Prospectus, of
each Prepricing Prospectus so furnished by the Trust.

     (f) As soon after the execution and delivery of this Agreement as possible
and thereafter from time to time for such period as in the opinion of counsel
for the Underwriters a prospectus is required by the 1933 Act to be delivered in
connection with sales of Shares by any Underwriter or any dealer, the Trust will
promptly deliver to each Underwriter and each dealer, without charge, as many
copies of the Prospectus (and of any amendment or supplement thereto) as you may
reasonably request. The Trust consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the 1933
Act and with the state securities or blue sky laws of the jurisdictions in which
the Shares are offered by the several Underwriters and by all dealers to whom
Shares may be sold, both in connection with the offering or sale of the Shares
and for such period of time thereafter as the Prospectus is required by law to
be delivered in connection with sales of Shares by any Underwriter or any
dealer. If during such period of time any event shall occur that in the judgment
of the Trust or in the opinion of counsel for the Underwriters is required to be
set forth in the Registration Statement or the Prospectus (as then amended or
supplemented) or is required to be set forth therein in order to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, or if it is necessary to supplement
or amend the Registration Statement or the Prospectus to comply with the 1933
Act, the 1940 Act, the Rules and Regulations or any other federal law, rule or
regulation, or any State Securities or blue sky disclosure laws, rules or
regulations, the Trust will forthwith, prepare and, subject to the provisions of
paragraph (d) above, promptly file with the Commission an appropriate supplement


                                       5
<Page>


or amendment thereto, and will promptly furnish to the Underwriters and dealers,
without charge, a reasonable number of copies thereof. In the event that the
Trust and you agree that the Registration Statement or the Prospectus should be
amended or supplemented, the Trust (if, in the opinion of counsel to the
Underwriters, it is required by law) will promptly issue a press release
announcing or disclosing the matters to be covered by the proposed amendment or
supplement or will otherwise appropriately disseminate the required information.

     (g) The Trust will cooperate with you and with counsel for the Underwriters
in connection with the registration or qualification of the Shares for offering
and sale by the several Underwriters and by dealers under the securities or blue
sky laws of such jurisdictions as you may designate and will file such consents
to service of process or other documents necessary or appropriate in order to
effect such registration or qualification; provided that in no event shall the
Trust be obligated to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action which would subject it to service of
process in suits, other than those arising out of the offering or sale of the
Shares, in any jurisdiction where it is not now so subject.

     (h) The Trust will make generally available to its security holders an
earnings statement, which need not be audited, covering a twelve-month period
ending not later than 17 months after the effective date of the Registration
Statement as soon as practicable after the end of such period, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule
158 of the 1933 Act Rules and Regulations.

     (i) During the period of three years hereafter, the Trust will furnish to
you (i) as soon as available, a copy of each proxy statement, annual and
semi-annual report of the Trust mailed to shareholders or filed with the
Commission or furnished to the New York Stock Exchange (the "NYSE") other than
reports on Form N-SAR, and (ii) from time to time such other information
concerning the Trust as you may reasonably request.

     (j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 11 hereof or by notice given by you terminating this
Agreement pursuant to Section 12 hereof) or if this Agreement shall be
terminated by the Underwriters because of any failure or refusal on the part of
the Trust or the Advisers to comply with any material term or fulfill any
material condition of this Agreement required to be complied with or fulfilled
by them, the Trust and the Advisers agree, jointly and severally, to reimburse
the Underwriters for all out-of-pocket expenses (including reasonable fees and
expenses of counsel for the Underwriters) incurred by you in connection
herewith.

     (k) The Trust will apply the net proceeds from the sale of the Shares in
accordance with the description set forth in the Prospectus and in such a manner
as to comply with the investment objectives, policies and restrictions of the
Trust as described in the Prospectus, as the same may be amended from time to
time.

     (l) The Trust will file the requisite copies of the Prospectus with the
Commission in a timely fashion pursuant to Rule 497(c) or Rule 497(h) of the
1933 Act Rules and Regulations, whichever is applicable or, if applicable, will
file in a timely fashion the


                                       6
<Page>


certification permitted by Rule 497(j) of the 1933 Act Rules and Regulations and
will advise you of the time and manner of such filing.

     (m) Except as provided in this Agreement, the Trust will not sell, contract
to sell or otherwise dispose of any of its preferred shares of beneficial
interest of the same series as the Shares or any securities convertible into or
exercisable or exchangeable for its preferred shares of beneficial interest of
the same series as the Shares, or grant any options or warrants to purchase its
preferred shares of beneficial interest of the same series as the Shares, for a
period of 180 days after the date of the Prospectus, without the prior written
consent of Salomon Smith Barney Inc.

     (n) Except as stated in this Agreement and in the Prepricing Prospectus and
Prospectus, neither the Trust nor the Advisers have taken, nor will any of them
take, directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Shares or any other securities issued by the Trust to facilitate the sale or
resale of the Shares.

     (o) The Trust intends to direct the investment of the proceeds from the
offering of the Shares so as to comply with the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code") to qualify as a
regulated investment company under the Code.

     (p) The Trust and the Advisers will use their reasonable best efforts to
perform all of the agreements required of them by this Agreement and discharge
all conditions of theirs to closing as set forth in this Agreement.

     (q) The Adviser hereby agrees and covenants to waive receipt of a portion
of its fees or other payments from the Trust to which it is entitled in the
amounts and for the time periods set forth in the Prospectus.

     6. REPRESENTATIONS AND WARRANTIES OF THE TRUST AND THE ADVISERS. The Trust
and the Advisers, jointly and severally, represent and warrant to each
Underwriter that, as of the date hereof or at such other time or times
identified below:

     (a) Each Prepricing Prospectus complied when filed with the Commission in
all material respects with the provisions of the 1933 Act, the 1940 Act and the
Rules and Regulations, except that this representation and warranty does not
apply to statements in or omissions from the registration statement or the
Prospectus made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Trust in writing by or on behalf of any
Underwriter through you expressly for use therein. The Commission has not issued
any order preventing or suspending the use of any Prepricing Prospectus or the
Prospectus.

     (b) The registration statement in the form in which it became or becomes
effective and also in such form as it may be when any post-effective amendment
thereto shall become effective and the Prospectus and any supplement or
amendment thereto when filed with the Commission under Rule 497 of the 1933 Act
Rules and Regulations and the 1940 Act Notification when originally filed with
the Commission and any amendment or supplement


                                       7
<Page>


thereto when filed with the Commission, complied or will comply in all material
respects with the requirements of the 1933 Act, the 1940 Act and the Rules and
Regulations, as applicable, and did not or will not at any such times contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were made) not
misleading, except that this representation and warranty does not apply to
statements in or omissions from the registration statement or the Prospectus
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Trust in writing by or on behalf of any Underwriter
through you expressly for use therein.

     (c) All the shares of beneficial interest of the Trust outstanding as of
the date hereof have been duly authorized and validly issued, are fully paid and
nonassessable (except as provided in the last sentence of Section 3.8 of the
Declaration) and are free of any preemptive or similar rights; the Shares have
been duly authorized and, when issued and delivered to the Underwriters against
payment therefor in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable (except as provided in the last sentence of Section
3.8 of the Declaration) and free of any preemptive or similar rights that
entitle or will entitle any person to acquire any Shares upon the issuance
thereof by the Trust, and will conform in all material respects to the
description thereof in the Registration Statement and the Prospectus (and any
amendment or supplement to either of them); and the capitalization of the Trust
conforms in all material respects to the description thereof in the Registration
Statement and the Prospectus (and any amendment or supplement to either of
them).

     (d) The Trust is a statutory trust duly organized and validly existing in
good standing under the laws of the State of Delaware with full statutory trust
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus (and any
amendment or supplement to either of them), and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure to so register or
qualify does not have a material adverse effect on the condition (financial or
other), assets or results of operations of the Trust; and the Trust has no
subsidiaries.

     (e) There are no legal or governmental proceedings pending or, to the
knowledge of the Trust or the Advisers, threatened, against the Trust, or to
which the Trust or any of its properties is subject, that are required to be
described in the Registration Statement or the Prospectus (or any amendment or
supplement to either of them) but are not described as required, and there are
no agreements, contracts, indentures, leases or other instruments that are
required to be described in the Registration Statement or the Prospectus (and
any amendment or supplement to either of them) or to be filed as an exhibit to
the Registration Statement that are not described or filed as required by the
1933 Act, the 1940 Act or the Rules and Regulations.

     (f) The Trust is not in violation of the Statement, the Declaration or its
bylaws (the "Bylaws"), or other organizational documents or of any law,
ordinance, administrative or governmental rule or regulation applicable to the
Trust or of any decree of the Commission, the NASD, any state securities
commission, any national securities exchange, any arbitrator, any court or
governmental agency, body or official having jurisdiction over the Trust, or in
default in


                                       8
<Page>


the performance of any material obligation, agreement or condition contained in
any bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to which the Trust is a
party or by which it or any of its properties may be bound, except where such
violation or default does not have a material adverse effect on the condition
(financial or other), assets or results of operations of the Trust.

     (g) Neither the issuance and sale of the Shares, the execution, delivery or
performance of this Agreement or any of the Trust Agreements by the Trust, nor
the consummation by the Trust of the transactions contemplated hereby or thereby
(A) requires any consent, approval, authorization or other order of, or
registration or filing with, the Commission, the NASD, any state securities
commission, any national securities exchange, any arbitrator, any court,
regulatory body, administrative agency or other governmental body, agency or
official having jurisdiction over the Trust (except such as may have been
obtained prior to the date hereof and such as may be required for compliance
with the state securities or blue sky laws of various jurisdictions which have
been or will be effected in accordance with this Agreement) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
the Statement, the Declaration, the Bylaws or other organizational documents of
the Trust or (B) conflicts or will conflict with or constitutes or will
constitute a material breach of, or a default under, any material agreement,
indenture, lease or other instrument to which the Trust is a party or by which
it or any of its properties may be bound, or materially violates or will
materially violate any material statute, law, regulation or judgment,
injunction, order or decree applicable to the Trust or any of its properties, or
will result in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Trust pursuant to the terms of
any agreement or instrument to which it is a party or by which it may be bound
or to which any of its property or assets is subject. The Trust is not subject
to any order of any court or of any arbitrator, governmental authority or
administrative agency.

     (h) The accountants, Deloitte & Touche LLP, who have certified or shall
certify the financial statements included or incorporated by reference in the
Registration Statement and the Prospectus (or any amendment or supplement to
either of them) are independent public accountants as required by the 1933 Act,
the 1940 Act and the Rules and Regulations.

     (i) The financial statements, together with related schedules and notes,
included or incorporated by reference in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them), present fairly
the financial position of the Trust on the basis stated or incorporated by
reference in the Registration Statement at the respective dates or for the
respective periods to which they apply; such statements and related schedules
and notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein; and the other financial and statistical information and data
included in the Registration Statement and the Prospectus (and any amendment or
supplement to either of them) are accurately presented.

     (j) The execution and delivery of, and the performance by the Trust of its
obligations under, this Agreement and the Trust Agreements have been duly and
validly authorized by the Trust, and this Agreement and the Trust Agreements
have been duly executed and delivered by the Trust and, assuming due
authorization, execution and delivery by the other



                                       9
<Page>


parties thereto, each constitutes the valid and legally binding agreement of the
Trust, enforceable against the Trust in accordance with its terms, except as
rights to indemnity and contribution hereunder and thereunder may be limited by
federal or state securities laws, and subject to the qualification that the
enforceability of the Trust's obligations hereunder and thereunder may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights generally
and by general equitable principles whether enforcement is considered in a
proceeding in equity or at law.

     (k) Except as disclosed in or contemplated by the Registration Statement
and the Prospectus (or any amendment or supplement to either of them),
subsequent to the respective dates as of which such information is given in the
Registration Statement and the Prospectus (or any amendment or supplement to
either of them), the Trust has not incurred any material liability or material
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Trust, and there has not
been any change in the capitalization, or material increase in the short-term
debt or long-term debt, of the Trust, or any material adverse change, or any
development involving, or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial or other),
assets or results of operations of the Trust, whether or not arising in the
ordinary course of business (other than as a result of changes in market
conditions generally or the market for municipal securities generally).

     (l) The Trust has not distributed and, prior to the later to occur of (i)
the Closing Date and (ii) completion of the distribution of the Shares, will not
distribute any offering material in connection with the offering and sale of the
Shares other than the Registration Statement, the Prepricing Prospectus, the
Prospectus or other materials permitted by the 1933 Act, the 1940 Act or the
Rules and Regulations.

     (m) The Trust has such permits, licenses, franchises and authorizations of
governmental or regulatory authorities ("permits") as are necessary to own its
properties and to conduct its business in the manner described in the Prospectus
(and any amendment or supplement thereto), subject to such qualifications as may
be set forth in the Prospectus; the Trust has fulfilled and performed all its
material obligations with respect to such permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the rights of
the Trust under any such permit, subject in each case to such qualification as
may be set forth in the Prospectus (and any amendment or supplement thereto),
and except where the revocation, termination or impairment of the Trust's rights
under such permits should not reasonably be expected to have a material adverse
effect on the condition (financial or other), assets or results of operations of
the Trust; and, except as described in the Prospectus (and any amendment or
supplement thereto), none of such permits contains any restriction that should
reasonably be expected to have a material adverse effect on the condition
(financial or other), assets or results of operations of the Trust.

     (n) The Trust maintains a system of internal accounting controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization and with the
investment policies and restrictions of the Trust and the applicable
requirements of the 1940 Act, the 1940 Act Rules and


                                       10
<Page>


Regulations and the Code; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles, to calculate net asset value to maintain accountability
for assets and to maintain compliance with the books and records requirements
under the 1940 Act and the 1940 Act Rules and Regulations; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded account for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

     (o) No holder of any security of the Trust has any right to require
registration of any security of the Trust because of the filing of the
registration statement or consummation of the transactions contemplated by this
Agreement.

     (p) The Trust, subject to the registration statement having been declared
effective and the filing of the Prospectus under Rule 497 under the 1933 Act
Rules and Regulations, has taken all required action under the 1933 Act, the
1940 Act and the Rules and Regulations to make the public offering and
consummate the sale of the Shares as contemplated by this Agreement

     (q) The conduct by the Trust of its business (as described in the
Prospectus) does not require it to be the owner, possessor or licensee of any
patents, patent licenses, trademarks, service marks or trade names
(collectively, "Intellectual Property") which it does not own, possess or
license, except where the failure to own, possess or license such Intellectual
Property should not reasonably be expected to have a material adverse effect on
the condition (financial or other), assets or results of operations of the
Trust.

     (r) The Trust is duly registered under the 1940 Act and the 1940 Act Rules
and Regulations as a closed-end, diversified management investment company and
the 1940 Act Notification has been duly filed with the Commission and, at the
time of filing thereof and any amendment or supplement thereto, conformed in all
material respects with all applicable provisions of the 1940 Act and the 1940
Act Rules and Regulations; no order of suspension or revocation of such
registration under the 1940 Act and the 1940 Act Rules and Regulations has been
issued or proceedings therefor initiated or, to the knowledge of the Trust or
either of the Advisers, threatened by the Commission. The provisions of the
Statement, the Declaration and Bylaws, and the investment policies and
restrictions described in the Registration Statement and the Prospectus, comply
in all material respects with the requirements of the 1940 Act and the 1940 Act
Rules and Regulations. The Trust is, and at all times through the completion of
the transactions contemplated hereby, will be, in compliance in all material
respects with the terms and conditions of the 1933 Act and the 1940 Act. No
person serving or acting as an officer, trustee or investment adviser of the
Trust is prohibited from so serving or acting by, and the composition of the
Trust's Board of Trustees is in compliance with, the provisions of the 1940 Act
and the 1940 Act Rules and Regulations and the Investment Advisers Act of 1940,
as amended (the "Advisers Act"), and the rules and regulations of the Commission
promulgated under the Advisers Act (the "Advisers Act Rules and Regulations").

     (s) Except as stated in this Agreement and in the Prospectus (and any
amendment or supplement thereto), the Trust has not taken, nor will it take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in stabilization


                                       11
<Page>



or manipulation of the price of any securities issued by the Trust to facilitate
the sale or resale of the Shares, and the Trust is not aware of any such action
taken or to be taken by any affiliates of the Trust who are not underwriters or
dealers participating in the offering of the Shares.

     (t) All advertising, sales literature or other promotional material
(including "prospectus wrappers") intended for public distribution and
authorized in writing by or prepared by the Trust or the Advisers for use in
connection with the offering and sale of the Shares (collectively, "sales
material") complied and comply in all material respects with the applicable
requirements of the 1933 Act, the 1940 Act, the Rules and Regulations and the
rules and interpretations of the NASD and no such sales material, when read
together with the Prospectus, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. No advertising, sales
literature or other promotional material (including "broker kits," "road show
slides" and "road show scripts") not intended for public distribution and
authorized in writing by or prepared by the Trust or the Advisers for use in
connection with the offering and sale of the Shares was or is, when read
together with the Prospectus, materially false or misleading.

     (u) Each of the Trust Agreements and the Trust's and the Advisers'
obligations under this Agreement and each of the Trust Agreements to which it is
a party comply in all material respects with all applicable provisions of the
1933 Act, the 1940 Act, the Rules and Regulations, the Advisers Act and the
Advisers Act Rules and Regulations.

     (v) The Trust's common shares are duly listed on the NYSE.

     (w) The Shares have been, or prior to the Closing Date will be, assigned a
rating of `Aaa' by Moody's Investors Service, Inc. ("Moody's") and "AAA" by
Standard & Poor's Rating Services ("S&P").

     (x) Except as disclosed in the Registration Statement and the Prospectus
(or any amendment or supplement to either of them), no trustee of the Trust is
an "interested person" (as defined in the 1940 Act) of the Trust or an
"affiliated person" (as defined in the 1940 Act) of any Underwriter.

     7. REPRESENTATIONS AND WARRANTIES OF THE ADVISERS. BAI and BFM, jointly and
severally, represent and warrant to each Underwriter that, as of the date hereof
or at such other time or times identified below:

     (a) Each of the Advisers is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them), and each is duly
registered and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
to so register or to qualify does not have a material adverse effect on the
ability of such Adviser to perform its obligations under this Agreement and the
Advisory Agreements to which it is a party.


                                       12
<Page>



     (b) Each of the Advisers is duly registered with the Commission as an
investment adviser under the Advisers Act and is not prohibited by the Advisers
Act, the Advisers Act Rules and Regulations, the 1940 Act or the 1940 Act Rules
and Regulations from acting under the Advisory Agreements to which it is a party
for the Trust as contemplated by the Registration Statement and the Prospectus
(or any amendment or supplement thereto). There does not exist any proceeding
which should reasonably be expected to have a material adverse affect on the
registration of either Adviser with the Commission.

     (c) There are no legal or governmental proceedings pending or, to the
knowledge of each Adviser, threatened against such Adviser, that are required to
be described in the Registration Statement or the Prospectus (or any amendment
or supplement to either of them) but are not described as required or that
should reasonably be expected to have a material adverse effect on the ability
of such Adviser to perform its obligations under this Agreement and the Advisory
Agreements to which it is a party.

     (d) Neither the execution, delivery or performance of this Agreement or the
Advisory Agreements by each Adviser which is a party thereto, nor the
consummation by each Adviser of the transactions contemplated hereby or thereby
(A) requires either Adviser to obtain any consent, approval, authorization or
other order of, or registration or filing with, the Commission, the NASD, any
state securities commission, any national securities exchange, any arbitrator,
any court, regulatory body, administrative agency or other governmental body,
agency or official having jurisdiction over either Adviser or conflicts or will
conflict with or constitutes or will constitute a breach of or a default under,
the certificate of incorporation or bylaws, or other organizational documents,
of such Adviser or (B) conflicts or will conflict with or constitutes or will
constitute a material breach of or a default under, any material agreement,
indenture, lease or other instrument to which either Adviser is a party or by
which either Adviser or any of its properties may be bound, or materially
violates or will materially violate any material statute, law, regulation or
judgment, injunction, order or decree applicable to either Adviser or any of its
properties or will result in the creation or imposition of any material lien,
charge or encumbrance upon any property or assets of either Adviser pursuant to
the terms of any agreement or instrument to which it is a party or by which it
may be bound or to which any of the property or assets of either Adviser is
subject, except in any case under clause (A) or (B) as should not reasonably be
expected to have a material adverse effect on the ability of each Adviser to
perform its obligations under this Agreement and the Advisory Agreements to
which it is a party. Neither Adviser is subject to any order of any court or of
any arbitrator, governmental authority or administrative agency.

     (e) The execution and delivery of, and the performance by each Adviser of
its respective obligations under, this Agreement and the Advisory Agreements to
which it is a party have been duly and validly authorized by such Adviser, and
this Agreement and the Advisory Agreements have been duly executed and delivered
by such Adviser and, assuming due authorization, execution and delivery by the
other parties thereto, each constitutes the valid and legally binding agreement
of such Adviser, enforceable against such Adviser in accordance with its terms,
except as rights to indemnity and contribution hereunder may be limited by
federal or state securities laws, and subject to the qualification that the
enforceability of the Trust's obligations hereunder and thereunder may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights



                                       13
<Page>


generally and by general equitable principles whether enforcement is considered
in a proceeding in equity or at law.

     (f) Each Adviser has the financial resources necessary for the performance
of its services and obligations as contemplated in the Prospectus (or any
amendment or supplement thereto) and under this Agreement and the Advisory
Agreements to which it is a party.

     (g) The description of each Adviser in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them) complied and
comply in all material respects with the provisions of the 1933 Act, the 1940
Act, the Advisers Act, the Rules and Regulations and the Advisers Act Rules and
Regulations and did not and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading.

     (h) Each of the Advisory Agreements complies in all material respects with
all applicable provisions of the 1940 Act, the 1940 Act Rules and Regulations,
the Advisers Act and the Advisers Act Rules and Regulations.

     (i) Except as disclosed in the Registration Statement and the Prospectus
(or any amendment or supplement to either of them), subsequent to the respective
dates as of which such information is given in the Registration Statement and
the Prospectus (or any amendment or supplement to either of them), there has not
occurred any event which should reasonably be expected to have a material
adverse effect on the ability of either Adviser to perform its obligations under
this Agreement and the Advisory Agreements to which it is a party.

     (j) Each of the Advisers has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("permits") as are
necessary to own its properties and to conduct its business in the manner
described in the Prospectus (and any amendment or supplement thereto), except to
the extent that the failure to so have should not reasonably be expected to have
a material adverse effect on the ability of such Adviser to perform its
obligations under the Advisory Agreements to which it is a party; each of the
Advisers has fulfilled and performed all its material obligations with respect
to such permits and no event has occurred which allows, or after notice or lapse
of time would allow, revocation or termination thereof or results in any other
material impairment of the rights of either Adviser under any such permit,
except where the revocation, termination or impairment of such Adviser's rights
under such permits should not reasonably be expected to have a material adverse
effect on the ability of such Adviser to perform its obligations under the
Advisory Agreements to which it is a party.

     (k) Except as stated in this Agreement and in the Prospectus (and in any
amendment or supplement thereto), neither Adviser has taken, nor will it take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in or which will constitute stabilization or
manipulation of the price of any securities issued by the Trust to facilitate
the sale or resale of the Shares, and neither Adviser is aware of any such
action taken or to be taken by any affiliates of the Advisers who are not
underwriters or dealers participating in the offering of the Shares.



                                       14
<Page>


     8. INDEMNIFICATION AND CONTRIBUTION. (a) The Trust and the Advisers agree,
jointly and severally, to indemnify and hold harmless each of you and each other
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation), joint or several, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Prepricing Prospectus, the Registration Statement, the
Prospectus, any sales material or in any amendment or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with information relating
to any Underwriter furnished in writing to the Trust by or on behalf of any
Underwriter through you expressly for use in connection therewith; provided,
however, that the indemnification contained in this paragraph (a) with respect
to any Prepricing Prospectus shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) on account of any
such loss, claim, damage, liability or expense arising from the sale of the
Shares by such Underwriter to any person if a copy of the Prospectus shall not
have been delivered or sent to such person within the time required by the 1933
Act and the 1933 Act Rules and Regulations, and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
such Prepricing Prospectus was corrected in the Prospectus, provided that the
Trust has delivered the Prospectus to the several Underwriters in requisite
quantity on a timely basis to permit such delivery or sending. The foregoing
indemnity agreement shall be in addition to any liability which the Trust or the
Advisers may otherwise have.

     (b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Trust or the Advisers, such Underwriter or
such controlling person shall promptly notify the Trust or the Advisers, and the
Trust or the Advisers shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the Trust or the Adviser have agreed in
writing to pay such fees and expenses, (ii) the Trust and the Advisers have
failed to assume the defense and employ counsel, or (iii) the named parties to
any such action, suit or proceeding (including any impleaded parties) include
both such Underwriter or such controlling person and the Trust or the Advisers
and such Underwriter or such controlling person shall have been advised by its
counsel that representation of such indemnified party and the Trust or the
Advisers by the same counsel would be inappropriate under applicable standards
of professional conduct (whether or not such representation by the same counsel
has been proposed) due to actual or potential differing interests between them
(in which case the Trust and the Advisers shall not have the right to assume the
defense of such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the Trust and the Advisers
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of


                                       15
<Page>


only one separate firm of attorneys (in addition to any local counsel) at any
time for all such Underwriters and controlling persons not having actual or
potential differing interests with you or among themselves, which firm shall be
designated in writing by you, and that all such fees and expenses shall be
reimbursed promptly as they are incurred. The Trust and the Advisers shall not
be liable for any settlement of any such action, suit or proceeding effected
without their written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the Trust and the Advisers agree to indemnify and hold harmless any
Underwriter, to the extent provided in the preceding paragraph, and any such
controlling person from and against any loss, claim, damage, liability or
expense by reason of such settlement or judgment.

     (c) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Trust and the Advisers, their directors, trustees, any
officers who sign the Registration Statement, and any person who controls the
Trust or the Advisers within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, to the same extent as the foregoing indemnity from
the Trust and the Advisers to each Underwriter, but only with respect to
information relating to such Underwriter furnished in writing by or on behalf of
such Underwriter through you expressly for use in the Registration Statement,
the Prospectus or any Prepricing Prospectus, or any amendment or supplement
thereto. If any action, suit or proceeding shall be brought against the Trust or
the Advisers, any of their trustees, directors, any such officer, or any such
controlling person based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Underwriter pursuant to this paragraph
(c), such Underwriter shall have the rights and duties given to the Trust and
the Advisers by paragraph (b) above (except that if the Trust or the Advisers
shall have assumed the defense thereof such Underwriter shall not be required to
do so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at such
Underwriter's expense), and the Trust and the Advisers, their trustees,
directors, any such officer, and any such controlling person shall have the
rights and duties given to the Underwriters by paragraph (b) above. The
foregoing indemnity agreement shall be in addition to any liability which the
Underwriters may otherwise have.

     (d) If the indemnification provided for in this Section 8 is unavailable to
an indemnified party under paragraphs (a) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Trust and the
Advisers on the one hand (treated jointly for this purpose as one person) and
the Underwriters on the other hand from the offering of the Shares, or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Trust and the
Advisers on the one hand (treated jointly for this purpose as one person) and
the Underwriters on the other in connection with the statements or omissions
that resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative benefits received
by the Trust and the Advisers on the one hand (treated jointly for this purpose
as one person) and the Underwriters on the other hand shall be deemed to be in
the same


                                       16
<Page>


proportion as the total net proceeds from the offering (before deducting
expenses) received by the Trust bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The Trust and the Advisers agree that as
between the Trust, BAI and BFM (and solely for the purpose of allocating among
such parties the total amount to be contributed by each of them to one another
and without prejudice to the right of the Underwriters to receive contributions
from the Trust and the Advisers under this Section 8(d) on a joint and several
basis) the relative benefits received by the Trust, on the one hand, and BAI and
BFM on the other hand, shall be deemed to be in the same proportion that the
total net proceeds from the offering (before deducting expenses) received by the
Trust bear to the present value of the future revenue stream to be generated by
the advisory fee to be paid by the Trust to BAI pursuant to the Investment
Advisory Agreement. The relative fault of the Trust and the Advisers on the one
hand (treated jointly for this purpose as one person) and the Underwriters on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Trust and the Advisers on the one hand (treated jointly for this purpose as one
person) or by the Underwriters on the other hand and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

     (e) The Trust, the Advisers and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 8 were determined by
a pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages,
liabilities and expenses referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
any claim or defending any such action, suit or proceeding. Notwithstanding the
provisions of this Section 8, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price of the Shares
underwritten by it and distributed to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section 8 are several in proportion to the
respective number of Shares set forth opposite their names in Schedule I hereto
(or such numbers of Shares increased as set forth in Section 11 hereof) and not
joint.

     (f) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.

     (g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid


                                       17
<Page>


by the indemnifying party to the indemnified party as such losses, claims,
damages, liabilities or expenses are incurred. The indemnity and contribution
agreements contained in this Section 8 and the representations and warranties of
the Trust and the Advisers set forth in this Agreement shall remain operative
and in full force and effect, regardless of (i) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter, the Trust,
the Advisers, their trustees, directors or officers, or any person controlling
the Trust or the Advisers, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter or any person controlling any Underwriter, or to the Trust, the
Advisers, their trustees, directors or officers, or any person controlling the
Trust or the Adviser, shall be entitled to the benefits of the indemnity,
contribution, and reimbursement agreements contained in this Section 8.

     9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the
Underwriters to purchase the Shares hereunder are subject to the following
conditions:

     (a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 497 and 430A under the 1933 Act and the 1933
Act Rules and Regulations shall have been timely made; no stop order suspending
the effectiveness of the Registration Statement or order pursuant to Section
8(e) of the 1940 Act shall have been issued and no proceeding for those purposes
shall have been instituted or, to the knowledge of the Trust, the Advisers or
any Underwriter, threatened by the Commission, and any request of the Commission
for additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to your satisfaction.

     (b) Subsequent to the effective date of this Agreement, there shall not
have occurred (i) any change or any development involving a prospective change
in or affecting the condition (financial or other), business, properties, net
assets, or results of operations of the Trust or the Advisers not contemplated
by the Prospectus, which in your opinion, would materially adversely affect the
market for the Shares, or (ii) any event or development relating to or involving
the Trust or the Advisers or any officer or trustee of the Trust or the Advisers
which makes any statement made in the Prospectus untrue or which, in the opinion
of the Trust and its counsel or the Underwriters and their counsel, requires the
making of any addition to or change in the Prospectus in order to state a
material fact required by the 1933 Act, the 1940 Act or the Rules and
Regulations or any other law to be stated therein or necessary in order to make
the statements therein not misleading, if amending or supplementing the
Prospectus to reflect such event or development would, in your opinion,
materially adversely affect the market for the Shares.

     (c) You shall have received on the Closing Date an opinion of Skadden,
Arps, Slate, Meagher & Flom LLP, counsel for the Trust, dated the Closing Date
and addressed to you, in the form attached hereto as Exhibit A.


                                       18
<Page>



     (d) You shall have received on the Closing Date an opinion of Vincent
Tritto, Esq., counsel for the Advisers, dated the Closing Date and addressed to
you, in form and substance satisfactory to you and to the effect that:

          (i) Based on certificates of the Secretary of State of the State of
     Delaware, each of the Advisers is a corporation duly incorporated and
     validly existing in good standing under the laws of the State of Delaware,
     with all necessary corporate power and authority to own, lease and operate
     its properties and to conduct its business as described in the Registration
     Statement and the Prospectus (and any amendment or supplement to either of
     them). Based on certificates of the applicable secretaries of state, each
     Adviser is duly registered and qualified to conduct its business and is in
     good standing in each jurisdiction or place where the nature of its
     properties or the conduct of its business requires such registration or
     qualification, except where the failure to so register and qualify does not
     have a material adverse effect on the ability of such Adviser to perform
     its obligations under this Agreement and the Advisory Agreements to which
     it is a party;

          (ii) Each of the Advisers is duly registered with the Commission as an
     investment adviser under the Advisers Act and is not prohibited by the
     Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the
     1940 Act Rules and Regulations from acting under the Advisory Agreements to
     which it is a party for the Trust as contemplated by the Prospectus (or any
     amendment or supplement thereto); and, to the best knowledge of such
     counsel after reasonable inquiry, there does not exist any proceeding which
     should reasonably be expected to adversely affect the registration of
     either Adviser with the Commission;

          (iii) Each of the Advisers has corporate power and authority to enter
     into this Agreement and the Advisory Agreements to which it is a party, and
     this Agreement and the Advisory Agreements to which each Adviser is a party
     have been duly authorized, executed and delivered by each Adviser which is
     a party thereto and each Advisory Agreement is a valid and legally binding
     agreement of such Adviser, enforceable against such Adviser in accordance
     with its terms except as rights to indemnity and contribution hereunder and
     thereunder may be limited by Federal or state securities laws or principles
     of public policy and subject to the qualification that the enforceability
     of the Advisers' obligations thereunder may be limited by bankruptcy,
     fraudulent conveyance, insolvency, reorganization, moratorium, and other
     laws relating to or affecting creditors' rights generally and by general
     equitable principles whether enforcement is considered in a proceeding in
     equity or at law;

          (iv) Neither the execution, delivery or performance of this Agreement
     or the Advisory Agreements by each Adviser which is a party thereto, nor
     the consummation by each Adviser of the transactions contemplated hereby
     and thereby (A) conflicts or will conflict with, or constitutes or will
     constitute a breach of or default under, the certificate of incorporation
     or bylaws, or other organizational documents, of such Adviser or (B)
     conflicts or will conflict with, or constitutes or will constitute a
     material breach of or material default under any material agreement,
     indenture, lease or other instrument to which either Adviser is a party, or
     will result in the creation or


                                       19
<Page>

     imposition of any material lien, charge or encumbrance upon any material
     property or material assets of either Adviser, nor will any such action
     result in any material violation of any law of the State of New York, the
     Delaware General Corporation Law, the 1940 Act, the Advisers Act or any
     regulation or judgment, injunction, order or decree applicable to either
     Adviser or any of its properties;

          (v) No consent, approval, authorization or other order of, or
     registration or filing with, the Commission, any arbitrator, any court,
     regulatory body, administrative agency or other governmental body, agency,
     or official of the State of New York is required on the part of either
     Adviser for the execution, delivery and performance of this Agreement or
     the Advisory Agreements to which it is a party, or the consummation by such
     Adviser of the transactions contemplated hereby and thereby;

          (vi) To the best knowledge of such counsel after reasonable inquiry,
     there are no legal or governmental proceedings pending or threatened
     against either Adviser or to which either Adviser or any of its properties
     is subject, which are required to be described in the Registration
     Statement or the Prospectus (or any amendment or supplement to either of
     them) but are not described as required;

          (vii) Each of the Advisers has all material permits, licenses,
     franchises and authorizations of governmental or regulatory authorities as
     are necessary to own its properties and to conduct its business in the
     manner described in the Prospectus (and any amendment or supplement
     thereto), and to perform its obligations under the Advisory Agreements to
     which it is a party; and

          (viii) Such counsel shall also state that the description of each of
     the Advisers contained in the Registration Statement (and any amendment or
     supplement thereto), as of the Registration Statement's effective date,
     does not contain an untrue statement of a material fact or omit to state a
     material fact required to be stated therein or necessary to make the
     statements contained therein not misleading and that the description of the
     Advisers contained in the Prospectus or any amendment or supplement
     thereto, as of its issue date and as of the Closing Date does not contain
     an untrue statement of a material fact or omit to state a material fact
     required to be stated therein or necessary to make the statements contained
     therein, in the light of the circumstances under which they were made, not
     misleading.

     (e) Reserved.

     (f) You shall have received on the Closing Date an opinion of Simpson
Thacher & Bartlett, counsel for the Underwriters, dated the Closing Date and
addressed to you, with respect to such matters as you may reasonably request.

     (g) You shall have received letters addressed to you and dated the date
hereof and the Closing Date from Deloitte & Touche LLP, independent certified
public accountants, substantially in the forms heretofore approved by you.

     (h) (i) No order suspending the effectiveness of the Registration Statement
or prohibiting or suspending the use of the Prospectus (or any amendment or
supplement thereto) or


                                       20
<Page>

any Prepricing Prospectus or any sales material shall have been issued and no
proceedings for such purpose or for the purpose of commencing an enforcement
action against the Trust, the Advisers or with respect to the transactions
contemplated by the Prospectus (or any amendment or supplement thereto) and this
Agreement (other than enforcement actions against any Underwriter with respect
to the transactions contemplated by the Prospectus (or any amendment or
supplement thereto) and this Agreement) may be pending before or, to the
knowledge of the Trust, the Advisers or any Underwriter or in the reasonable
view of counsel to the Underwriters, shall be threatened by the Commission at or
prior to the Closing Date and that any request for additional information on the
part of the Commission (to be included in the Registration Statement, the
Prospectus or otherwise) be complied with to the reasonable satisfaction of the
Underwriters; (ii) there shall not have been any change in the capitalization of
the Trust nor any material increase in the short-term or long-term debt of the
Trust (other than in the ordinary course of business) from that set forth or
contemplated in the Registration Statement or the Prospectus (or any amendment
or supplement thereto); (iii) there shall not have been, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus (or any amendment or supplement to either of them), except as
may otherwise be stated in the Registration Statement and Prospectus (or any
amendment or supplement to either of them), any material adverse change (other
than as a result of changes in market conditions generally or the market for
municipal securities generally) in the condition (financial or other), assets or
results of operations of the Trust; (iv) the Trust shall not have any
liabilities or obligations, direct or contingent (whether or not in the ordinary
course of business), that are material to the Trust, other than those reflected
in or contemplated by the Registration Statement or the Prospectus (or any
amendment or supplement to either of them); and (v) all the representations and
warranties of the Trust and the Advisers contained in this Agreement that are
qualified by a materiality standard shall be true and correct, and all
representations and warranties of the Trust and the Advisers contained in this
Agreement that are not so qualified shall be true and correct in all material
respects, on and as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date, and you shall have received a certificate of
the Trust and the Advisers, dated the Closing Date and signed by the chief
executive officer and the chief financial officer of each of the Trust and the
Advisers (or such other officers as are reasonably acceptable to you), to the
effect set forth in this Section 9(h) and in Section 9(i) hereof.

     (i) Neither the Trust nor either of the Advisers shall have failed at or
prior to the Closing Date to have performed or complied in all material respects
with any of its agreements herein contained and required to be performed or
complied with by it hereunder at or prior to the Closing Date.

     (j) The Trust shall have delivered and you shall have received evidence
satisfactory to you that the Shares are rated `Aaa' by Moody's and `AAA' by S&P
as of the Closing Date, and there shall not have been given any notice of any
intended or potential downgrading, or of any review for a potential downgrading,
in the rating accorded to the Shares by Moody's or by S&P.

     (k) As of the Closing Date and assuming the receipt of the net proceeds
from the sale of the Shares, the 1940 Act Preferred Shares Asset Coverage and
the Preferred Shares


                                       21
<Page>



Basic Maintenance Amount (each as defined in Appendix A to the statement of
additional information contained in the Registration Statement) each will be
met.

     (l) The Trust and the Advisers shall have furnished or caused to be
furnished to you such further certificates and documents as you shall have
reasonably requested in order to verify the satisfaction of the conditions set
forth in this Section 9, including, without limitation, a certificate of the
secretary or assistant secretary of the Trust and the Advisers, an incumbency
certificate of the Trust and each Adviser and a certificate of the auction
agent.

     All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.

     Any certificate or document signed by any officer of the Trust or the
Advisers and delivered to you, or to your counsel, shall be deemed a
representation and warranty by the Trust or the Advisers, as applicable, to each
Underwriter as to the statements made therein.

     10. EXPENSES. The Trust agrees to pay the following costs and expenses and
all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, printing or reproduction, and filing
with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the 1940 Act
Notification, the Prospectus and each amendment or supplement to any of them
(including, without limitation, the filing fees prescribed by the 1933 Act, the
1940 Act and the Rules and Regulations); (ii) the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Registration Statement, each Prepricing
Prospectus, the Prospectus, any sales material and all amendments or supplements
to any of them as may be reasonably requested for use in connection with the
offering and sale of the Shares; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Shares, including
any stamp taxes in connection with the original issuance and sale of the Shares;
(iv) the reproduction and delivery of this Agreement, any dealer agreements and
all other agreements or documents reproduced and delivered in connection with
the offering of the Shares; (v) the registration or qualification of the Shares
for offer and sale under the securities or blue sky laws of the several states
as provided in Section 5(g) hereof (including the reasonable fees, expenses and
disbursements of counsel relating to the preparation, printing or reproduction,
and delivery of the preliminary and supplemental blue sky memoranda and such
registration and qualification); (vi) fees paid to Moody's and/or S&P; (vii) the
transportation and other expenses incurred by or on behalf of Trust
representatives in connection with presentations to prospective purchasers of
the Shares; and (viii) the fees and expenses of the Trust's accountants and the
fees and expenses of counsel (including local and special counsel) for the
Trust.

     11. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective: (i)
upon the execution and delivery hereof by the parties hereto; or (ii) if, at the
time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when the registration
statement or such post-effective amendment has become effective. Until


                                       22
<Page>



such time as this Agreement shall have become effective, it may be terminated by
the Trust, by notifying you, or by you, by notifying the Trust.

     If any one or more of the Underwriters shall fail or refuse to purchase
Shares which it or they are obligated to purchase hereunder on the Closing Date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters are obligated but fail or refuse to purchase is not more than
one-tenth of the aggregate number of Shares which the Underwriters are obligated
to purchase on the Closing Date, each non-defaulting Underwriter shall be
obligated, severally, in the proportion which the number of Shares set forth
opposite its name in Schedule I hereto bears to the aggregate number of Shares
set forth opposite the names of all non-defaulting Underwriters or in such other
proportion as you may specify, to purchase the Shares which such defaulting
Underwriter or Underwriters are obligated, but fail or refuse, to purchase. If
any one or more of the Underwriters shall fail or refuse to purchase Shares
which it or they are obligated to purchase on the Closing Date and the aggregate
number of Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Shares which the Underwriters are obligated
to purchase on the Closing Date and arrangements satisfactory to you and the
Trust for the purchase of such Shares by one or more non-defaulting Underwriters
or other party or parties approved by you and the Trust are not made within 36
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter, the Trust or the Advisers. In any such
case which does not result in termination of this Agreement, either you or the
Trust shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule I hereto who, with your approval and the approval of the Trust,
purchases Shares which a defaulting Underwriter agreed, but failed or refused,
to purchase.

     Any notice under this Section 11 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.

     12. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of the
Underwriter to the Trust or the Advisers, by notice given to the Trust or the
Advisers prior to delivery of and payment for the Shares, if at any time prior
to such time (i) trading in the Trust's common shares shall have been suspended
by the Commission or the NYSE or trading in securities generally on the NYSE or
the American Stock Exchange shall have been suspended or limited or minimum
prices for trading in securities generally shall have been established on either
of such Exchanges, (ii) a commercial banking moratorium shall have been declared
by either federal or New York state authorities, or (iii) there shall have
occurred any outbreak or escalation of hostilities, declaration by the United
States of a national emergency or war, or other calamity or crisis the effect of
which on financial markets in the United States is such as to make it, in your
sole judgment, impracticable or inadvisable to proceed with the offering or
delivery of the Shares as contemplated by the Prospectus (exclusive of any
supplement thereto). Notice of such


                                       23
<Page>



termination may be given to the Trust or the Advisers by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.

     13. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth in
the last paragraph on the cover page, and the statements in the first paragraph
and the table immediately thereafter, the third paragraph and the seventh
paragraph under the caption "Underwriting" in any Prepricing Prospectus and in
the Prospectus, constitute the only information furnished by or on behalf of the
Underwriters through you as such information is referred to in Sections 6(b) and
8 hereof.

     14. MISCELLANEOUS. Except as otherwise provided in Sections 5, 11 and 12
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Trust or the Advisers, at the
office of BlackRock Financial Management, Inc. at 40 East 52nd Street, New York,
New York 10022, Attention: Ralph L. Schlosstein; or (ii) if to you, to Salomon
Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention:
Manager, Investment Banking Division.

     This Agreement has been and is made solely for the benefit of the several
Underwriters, the Trust, the Advisers, their directors, trustees and officers,
and the other controlling persons referred to in Section 8 hereof and their
respective successors and assigns, to the extent provided herein, and no other
person shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from any Underwriter of any of the
Shares in his status as such purchaser.

     15. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

     This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.

     Please confirm that the foregoing correctly sets forth the agreement among
the Trust, the Advisers and the several Underwriters.

                                  Very truly yours,

                                  BLACKROCK INSURED MUNICIPAL INCOME TRUST


                                  By:
                                       ------------------------------
                                       Name:
                                       Title:





                                       24
<Page>


                                  BLACKROCK ADVISORS, INC.


                                  By:
                                       -----------------------------
                                       Name:
                                       Title:


                                  BLACKROCK FINANCIAL MANAGEMENT, INC.


                                  By:
                                       ------------------------------
                                       Name:
                                       Title:



                                       25
<Page>




Confirmed as of the date first above mentioned.

SALOMON SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
             INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED



By:      SALOMON SMITH BARNEY INC.

By:
     ----------------------------
     Name: Robert F. Bush, Jr.
     Title: Director



                                       26
<Page>






                                   SCHEDULE I

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST



                                                              Number of
                           UNDERWRITER                         SHARES
                           -----------                       -----------
                                                    Series      Series    Series
                                                      M7          R7        F7
                                                    --------  --------  --------
Salomon Smith Barney Inc.
Merrill Lynch, Pierce, Fenner & Smith
     Incorporated
Prudential Securities Incorporated


Total                                             3,053       3,053       3,053





<Page>





                                    EXHIBIT A

           FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K(2)
<SEQUENCE>5
<FILENAME>a2095632zex-99_k2.txt
<DESCRIPTION>EXHIBIT 99.K(2)
<TEXT>
<Page>

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                 -----------------------------------------------

                            AUCTION AGENCY AGREEMENT

                          dated as of December 11, 2002

                                   Relating to

               Municipal Auction Rate Cumulative Preferred Shares

                           Series , Series and Series

                                       of

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                 ----------------------------------------------
                              The Bank of New York,
                                as Auction Agent

                            AUCTION AGENCY AGREEMENT

     This Auction Agency Agreement (this "Agreement"), dated as of December 11,
2002, is between BlackRock Insured Municipal Income Trust (the "Trust") and The
Bank of New York, a New York banking corporation.

     The Trust proposes to issue an aggregate of preferred shares, par value
$0.001 per share, liquidation preference $25,000 per share, designated as
Municipal Auction Rate Cumulative Preferred Shares, Series , an aggregate of
preferred shares, par value $0.001 per share, liquidation preference $25,000 per
share, designated as Municipal Auction Rate Cumulative Preferred Shares, Series
and an aggregate of preferred shares, par value $0.001 per share, liquidation
preference $25,000 per share, designated as Municipal Auction Rate Cumulative
Preferred Shares, Series (together the "Preferred Shares"), pursuant to the
Statement of Preferences (as defined below).



     The Trust desires that The Bank of New York perform certain duties as agent
in connection with each Auction (as defined below) (in such capacity, the
"Auction Agent"), and as the transfer agent, registrar, dividend paying agent
and

<Page>


redemption agent with respect to the Preferred Shares (in such capacity, the
"Paying Agent"), upon the terms and conditions of this Agreement, and the Trust
hereby appoints The Bank of New York as said Auction Agent.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Trust and the Auction Agent agree as follows:

1.   Definitions and Rules of Construction.

          1.1  Terms Defined By Reference to Statement.

         Capitalized terms not defined herein shall have the respective meanings
specified in the Statement.

          1.2  Terms Defined Herein.

          As used herein and in the Settlement Procedures, the following terms
shall have the following meanings, unless the context otherwise requires:

               (1) "Agent Member" of any Person shall mean the member of, or
participant in, the Securities Depository that will act on behalf of a Bidder.

               (2) "Agreement" shall mean the Agreement relating to one or more
series of Preferred Shares.

               (3) "Auction" shall have the meaning specified in Section 2.1
hereof.

               (4) "Auction Procedures" shall mean the auction procedures
constituting Part II of the form of Statement as of the filing thereof.

               (5) "Authorized Officer" of the Auction Agent shall mean each
Vice President, Assistant Vice President and Assistant Treasurer of the Auction
Agent assigned to its Corporate Trust and Agency Group and every other officer
or employee of the Auction Agent designated as an "Authorized Officer" for
purposes hereof in a communication to the Trust.

               (6) "Broker-Dealer Agreement" shall mean each agreement between
the Auction Agent and a Broker-Dealer substantially in the form attached

<Page>


hereto as Exhibit A.

               (7) "Preferred Shares" shall mean the preferred shares, par
value$.001 per share, of the Trust designated as its "Municipal Auction Rate
Cumulative Preferred Shares" and bearing such further designation as to series
as the Board of Trustees, of the Trust or any committee thereof shall specify.

               (8) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit B.

               (9) "Statement" shall mean the Statement of Preferences of
Municipal Auction Rate Preferred Shares, as the same may be amended,
supplemented or modified from time to time.

               (10) "Trust Officer" shall mean the Chairman and Chief Executive
Officer, the President, each Vice President (whether or not designated by a
number or word or words added before or after the title "Vice President"), the
Secretary, the Treasurer, each Assistant Vice President, each Assistant
Secretary and each Assistant Treasurer of the Trust and every other officer or
employee of the Trust designated as a "Trust Officer" for purposes hereof in a
notice to the Auction Agent.

          1.3       Rules of Construction.

          Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of the Agreement:

               (1) Words importing the singular number shall include the plural
number and vice versa.

               (2) The captions and headings herein are solely for convenience
of reference and shall not constitute a part of the Agreement nor shall they
affect its meaning, construction or effect.

               (3) The words "hereof", "herein", "hereto" and other words of
similar import refer to the Agreement as a whole.

               (4) All references herein to a particular time of day shall be to
New York City time.

               (5) This Agreement shall apply separately but equally to all
series of Preferred Shares that may be issued. Sections 1 and 2 hereof shall be
read in conjunction with the Statement and in the event of any conflict with the
Statement, the Statement shall take precedence.


<Page>


2.       The Auction.

          2.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.

               (1) The Board of Trustees of the Trust has adopted a resolution
appointing Bank of New York as Auction Agent for purposes of the Auction
Procedures. The Auction Agent hereby accepts such appointment and agrees that,
on each Auction Date, it shall follow the procedures set forth in this Section 2
and the Auction Procedures for the purpose of determining the Applicable Rate
for any Subsequent Rate Period of any series of Preferred Shares for which the
Applicable Rate is to be determined by auction. Each periodic implementation of
such procedures is hereinafter referred to as an "Auction."

               (2) All of the provisions contained in the Auction Procedures and
the Settlement Procedures are incorporated herein by reference in their entirety
and shall be deemed to be a part hereof to the same extent as if such provisions
were fully set forth herein.

          2.2 Preparation for Each Auction; Maintenance of Registry of
Beneficial Owners.


               (1) Not later than seven days prior to the first Auction Date for
the first series of Preferred Shares subject to an Auction, the Trust shall
provide the Auction Agent with a list of the Broker-Dealers. Not later than
seven days prior to any Auction Date for any series of Preferred Shares for
which any change in such list of Broker-Dealers is to be effective, the Trust
will notify the Auction Agent in writing of such change and, if any such change
involves the addition of a Broker-Dealer to such list, shall cause to be
delivered to the Auction Agent for execution by the Auction Agent a
Broker-Dealer Agreement signed by such Broker-Dealer; provided, however, that if
the Trust proposes to designate any Special Rate Period of any series of
Preferred Shares pursuant to Section 4 of Part I of the Statement, not later
than 11:00 A.M. on the Business Day next preceding the Auction next preceding
the first day of such Rate Period or by such later time or date, or both, as may
be agreed to by the Auction Agent, the Trust shall provide the Auction Agent
with a list of the Broker-Dealers for such series and a manually signed copy of
each Broker-Dealer Agreement or a new Schedule A to a Broker-Dealer Agreement
(which Schedule A shall replace and supersede any previous Schedule A to such

<Page>


Broker-Dealer Agreement) with each Broker-Dealer for such series. The Auction
Agent and the Trust shall have entered into a Broker-Dealer Agreement with each
Broker-Dealer prior to the participation of any such Broker-Dealer in any
Auction.

               (2) In the event that any Auction Date for any series of
Preferred Shares shall be changed after the Auction Agent shall have given the
notice referred to in clause (vi) of paragraph (a) of the Settlement Procedures,
or after the notice referred to in Section 2.5(a) hereof, if applicable, the
Auction Agent, by such means as the Auction Agent deems practicable, shall give
notice of such change to the Broker-Dealers for such series not later than the
earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction
Date.

                              (a) (i) The Auction Agent shall maintain a
               registry of the beneficial owners of the Preferred Shares of each
               series who shall constitute Existing Holders of Preferred Shares
               of such series for purposes of Auctions and shall indicate
               thereon the identity of the respective Broker-Dealer of each
               Existing Holder, if any, on whose behalf such Broker-Dealer
               submitted the most recent Order in any Auction which resulted in
               such Existing Holder continuing to hold or purchasing Preferred
               Shares of such series. The Auction Agent shall keep such registry
               current and accurate based on the information provided to it from
               time to time by the Broker-Dealer. The Trust shall provide or
               cause to be provided to the Auction Agent at or prior to the Date
               of Original Issue of the Preferred Shares of each series a list
               of the initial Existing Holders of the shares of each such series
               of Preferred Shares, the number of shares purchased by each such
               Existing Holder and the respective Broker-Dealer of each such
               Existing Holder or the affiliate thereof through which each such
               Existing Holder purchased such shares. The Auction Agent may rely
               upon, as conclusive evidence of the identities of the Existing
               Holders of Preferred Shares of any series (A) such list, (B) the
               results of Auctions, (C) notices from any Broker-Dealer as
               described in the first sentence of Section 2.2(c)(iii) hereof and
               (D) the results of any procedures approved by the Trust that have
               been devised for the purpose of determining the identities of
               Existing Holders in situations where Preferred Shares may have
               been transferred without compliance with any restriction on the
               transfer thereof set forth in the Auction Procedures.



                              (1) In the event of any partial redemption of any
               series of Preferred Shares, the Auction Agent shall, at least two
               Business Days prior to the next Auction for such series, request
               each Broker-Dealer to provide the Auction Agent with a list of
               Persons who such Broker-Dealer believes should remain Existing
               Holders after such redemption based upon inquiries of those
               Persons such Broker-Dealer believes are Beneficial Owners as a
               result of the most recent Auction and with respect to each such
               Person, the number of

<Page>


               Preferred Shares of such series such Broker-Dealer believes are
               owned by such Person after such redemption. In the absence of
               receiving any such information from any Broker-Dealer, the
               Auction Agent may continue to treat the Persons listed in its
               registry of Existing Holders as the beneficial owner of the
               number of Preferred Shares of such series shown in such registry.

                              (2) The Auction Agent shall be required to
               register a transfer of Preferred Shares of any series from an
               Existing Holder of such Preferred Shares only if such transfer is
               to another Existing Holder, or other Person if permitted by the
               Trust, and only if such transfer is made (A) pursuant to an
               Auction, (B) the Auction Agent has been notified in writing (I)
               in a notice substantially in the form of Exhibit C to the
               Broker-Dealer Agreements by a Broker-Dealer of such transfer or
               (II) in a notice substantially in the form of Exhibit D to the
               Broker-Dealer Agreements by the Broker-Dealer of any Existing
               Holder, or other Person if permitted by the Trust, that purchased
               or sold such Preferred Shares in an Auction of the failure of
               such Preferred Shares to be transferred as a result of such
               Auction or (C) pursuant to procedures approved by the Trust that
               have been devised for the purpose of determining the identities
               of Existing Holders in situations where Preferred Shares may have
               been transferred without compliance with any restriction on the
               transfer thereof set forth in the Auction Procedures. The Auction
               Agent is not required to accept any such notice for an Auction
               unless it is received by the Auction Agent by 1:00 P.M. on the
               Business Day preceding such Auction.


               (3) The Auction Agent may, but shall have no obligation to,
request the Broker-Dealers, as set forth in the Broker-Dealer Agreements, to
provide the Auction Agent with a list of Persons who such Broker-Dealer believes
should be Existing Holders based upon inquiries of those Persons such
Broker-Dealer believes are Beneficial Owners as a result of the most recent
Auction and with respect to each such Person, the number of shares of such
series of Preferred Shares such Broker-Dealer believes to be owned by such
Person. The Auction Agent shall keep confidential such registry of Existing
Holders and shall not disclose the identities of the Existing Holders of such
Preferred Shares to any Person other than the Trust and the Broker-Dealer that
provided such information; provided, however, that the Auction Agent reserves
the right and is authorized to disclose any such information if (a) it is
ordered to do so by a court of competent jurisdiction or a regulatory body,
judicial or quasi-judicial agency or authority having the authority to compel
such disclosure, (b) it is advised by its counsel that its failure to do so
would be unlawful
<Page>


or (c) failure to do so would expose the Auction Agent to loss, liability,
claim, damage or expense for which it has not received indemnity or security
satisfactory to it.

               2.3   Auction Schedule.

               The Auction Agent shall conduct Auctions in accordance with the
schedule set forth below. Such schedule may be changed by the Auction Agent with
the consent of the Trust, which consent shall not be unreasonably withheld. The
Auction Agent shall give written notice of any such change to each
Broker-Dealer. Such notice shall be given prior to the close of business on the
Business Day next preceding the first Auction Date on which any such change
shall be effective.


<Table>
<Caption>
TIME                                                 EVENT
<S>                                                  <C>
By 9:30 A.M.                                         Auction Agent advises the Trust and
                                                     Broker-Dealers of the applicable Maximum Rate
                                                     and the Reference Rate(s) and Treasury Note
                                                     Rate(s), as the case may be, used in
                                                     determining such Maximum Rate as set forth in
                                                     Section 2.3(b)(i) hereof.

9:30 A.M. - 1:30 P.M.                                Auction Agent assembles information
                                                     communicated to it by Broker-Dealers as
                                                     provided in Section 2(a) of the Auction
                                                     Procedures.  Submission Deadline is 1:30 P.M.

Not earlier than 1:30 P.M.                           Auction Agent makes determinations pursuant to
                                                     Section 3(a) of the Auction Procedures.


By approximately 3:30 P.M.                           Auction Agent advises Trust of results of Auction
                                                     as provided in Section 3(b) of the Auction
                                                     Submitted Bids and Procedures. Submitted Sell
                                                     Orders are accepted and rejected and Preferred
                                                     Shares allocated as provided in Section 4 of the
                                                     Auction Procedures. Auction Agent gives notice of
                                                     Auction results as set forth in paragraph(a) of
                                                     the Settlement Procedures.
</Table>


The Auction Agent shall follow the notification procedures set forth in
paragraph (a) of the Settlement Procedures.

<Page>


          2.4 Notice of Auction Results.

               The Auction Agent will advise each Broker-Dealer who submitted a
Bid or Sell Order in an Auction whether such Bid or Sell Order was accepted or
rejected in whole or in part and of the Applicable Rate for the next Dividend
Period for the related Preferred Shares by telephone or through its Auction
Processing System as set forth in paragraph (a) of the Settlement Procedures.

          2.5 Broker-Dealers.

               (1) Not later than 12:00 Noon on each Auction Date for any series
of Preferred Shares, the Trust shall pay to the Auction Agent an amount in cash
equal to the aggregate fees payable to the Broker-Dealers for such series
pursuant to Section 2.8 of the Broker-Dealer Agreements for such series. The
Auction Agent shall apply such moneys as set forth in Section 2.8 of each such
Broker-Dealer Agreement.

               (2) The Trust shall obtain the consent of the Auction Agent prior
to selecting any Person to act as a Broker-Dealer, which consent shall not be
unreasonably withheld.

               (3) The Auction Agent shall terminate any Broker-Dealer Agreement
as set forth therein if so directed by the Trust, provided that at least one
Broker-Dealer Agreement would be in effect for each series of Preferred Shares
after such termination.

               (4) Subject to the Auction Agent's having consented to the
selection of the relevant Broker-Dealer pursuant to Section 2.5(b) hereof, the
Auction Agent shall from time to time enter into such Broker-Dealer Agreements
with one or more Broker-Dealers as the Trust shall request, and shall enter into
such schedules to any such Broker-Dealer Agreements as the Trust shall request,
which schedules, among other things, shall set forth the series of Preferred
Shares to which such Broker-Dealer Agreement relates.

          2.6 Information Concerning Rates.

               (1) The Rate Multiple on the date of the Agreement is that rate
as determined by the Trust and provided to the Auction Agent on the date even
herewith. If there is any change in the credit rating of Preferred Shares by the
rating

<Page>


agency (or substitute or successor rating agencies) referred to in the
definition of "Rate Multiple" resulting in any change in the Rate Multiple for
Preferred Shares after the date given herewith, the Trust shall notify the
Auction Agent in writing of such change in the Rate Multiple prior to 12:00 Noon
on the Business Day prior to the next Auction Date for any series of Preferred
Shares succeeding such change. If the Trust designates all or a portion of any
dividend on shares of any series of Preferred Shares to consist of net capital
gains or other income taxable for Federal income tax purposes, it may indicate,
in a notice in the form of Exhibit I hereto to the Auction Agent pursuant to
Section 2.6 hereof, the Rate Multiple for such series to be in effect for the
Auction Date on which the dividend rate for such dividend is to be fixed. In
determining the Maximum Rate for any series of Preferred Shares on any Auction
Date as set forth in 2.3(a)(i) hereof, the Auction Agent shall be entitled to
rely on the last Rate Multiple for Preferred Shares of which it has most
recently received notice from the Trust (or, in the absence of such notice, the
percentage determined by reference to the definition of Rate Multiple), except
that if the Trust shall have notified the Auction Agent of a Rate Multiple to be
in effect for an Auction Date in accordance with the preceding sentence, the
Rate Multiple in effect for the next succeeding Auction Date of any series of
Preferred Shares shall be, unless the Trust notifies the Auction Agent of a
change in the Rate Multiple for such succeeding Auction Date pursuant to this
Section 2.6(a), the Rate Multiple that was in effect on the first preceding
Auction Date for Preferred Shares with respect to which the dividend, the rate
for which was fixed on such Auction Date, did not include any net capital gain
or other income taxable for Federal income tax purposes.




               (1) On each Auction Date for any series of Preferred Shares, the
          Auction Agent shall determine the Maximum Rate for such series. The
          Maximum Rate for any series of Preferred Shares on any Auction Date
          shall be:

                    (1) in the case of any Auction Date which is not the Auction
               Date immediately prior to the first day of any proposed Special
               Rate Period designated by the Trust pursuant to Section 4 of Part
               I of the Statement, the product of (1) the Reference Rate on such
               Auction Date for the next Rate Period of such series and (2) the
               Rate Multiple on such Auction Date, unless such series has or had
               a Special Rate Period (other than a Special Rate Period of 28
               Rate Period Days or fewer) and an Auction at which Sufficient
               Clearing Bids existed has not yet occurred for a Minimum Rate
               Period of such series after such Special Rate Period, in which
               case the higher of:

                         (1) the dividend rate on shares of such series for the
                    then-ending Rate Period; and

<Page>



                         (2) the product of (x) the higher of (I) the Reference
                    Rate on such Auction Date for a Rate Period equal in length
                    to the then-ending Rate Period of such series, if such then
                    ending Rate Period was 364 Rate Period Days or fewer, or the
                    Treasury Note Rate on such Auction Date for a Rate Period
                    equal in length to the then-ending Rate Period of such
                    series, if such then ending Rate Period was more than 364
                    Rate Period Days, and (II) the Reference Rate on such
                    Auction Date for a Rate Period equal in length to such
                    Special Rate Period of such series, if such Special Rate
                    Period was 364 Rate Period Days or fewer, or the Treasury
                    Note Rate on such Auction Date for a Rate Period equal in
                    length to such Special Rate Period, if such Special Rate
                    Period was more than 364 Rate Period Days and (y) the Rate
                    Multiple on such Auction Date; or



                    (2) in the case of any Auction Date which is the Auction
               Date immediately prior to the first day of any proposed Special
               Rate Period designated by the Trust pursuant to Section 4 of Part
               I of the Statement, the product of (1) the highest of (x) the
               Reference Rate on such Auction Date for a Rate Period equal in
               length to the then-ending Rate Period of such series, if such
               then-ending Rate Period was 364 Rate Period Days or fewer, or the
               Treasury Note Rate on such Auction Date for a Rate Period equal
               in length to the then-ending Rate Period of such Rate Period, if
               such then-ending Rate Period was more than 364 Rate Period Days,
               (y) the Reference Rate on such Auction Date for the Special Rate
               Period for which the Auction is being held if such Special Rate
               Period is 364 Rate Period Days or fewer or the Treasury Note Rate
               on such Auction Date for the Special Rate Period for which the
               Auction is being held if such Special Rate Period is more than
               364 Rate Period Days, and (z) the Reference Rate on such Auction
               Date for Minimum Rate Periods and (2) the Rate Multiple on such
               Auction Date.

Not later than 9:30 A.M. on each Auction Date the Auction Agent shall notify the
Trust and the Broker-Dealers of the Maximum Rate and the "AA" Composite
Commercial Paper Rate(s), the Taxable Equivalent of the Short-Term Municipal
Bond Rate(s), Treasury Note Rate(s) and Treasury Bill Rate(s), as the case may
be, used to make such determination.

<Page>


               (2) From and after a Failure to Deposit by the Trust during any
Rate Period of any series of Preferred Shares, until such failure is cured and a
Late Charge is paid, in accordance with subparagraph (e)(i) of Section 2 of Part
I of the Statement, on the first day of each Rate Period of such series the
Auction Agent shall determine the Treasury Note Rate for such Rate Period of
more than 364 Rate Period Days and the Reference Rate for Rate Periods of 364
Rate Period Days or fewer. Not later than 9:30 A.M. on each such first day, the
Auction Agent shall notify the Trust of the applicable Reference Rate and
Treasury Note Rate.

               (3) If any "AA" Composite Commercial Paper Rate, Taxable
Equivalent of the Short-Term Municipal Bond Rate, Treasury Note Rate or Treasury
Bill Rate, as the case may be, is not quoted on an interest or bond equivalent,
as the case may be, basis, the Auction Agent shall convert the quoted rate to
the interest or bond equivalent thereof as set forth in the definition of such
rate in the Statement if the rate obtained by the Auction Agent is quoted on a
discount basis, or if such rate is quoted on a basis other than an interest or
bond equivalent or discount basis the Auction Agent shall convert the quoted
rate to an interest or bond equivalent rate after consultation with the Trust as
to the method of such conversion.



               (4) If any "AA" Composite Commercial Paper Rate is to be based on
rates supplied by Commercial Paper Dealers and one or more of the Commercial
Paper Dealers shall not provide a quotation for the determination of such "AA"
Composite Commercial Paper Rate, the Auction Agent shall immediately notify the
Trust so that the Trust can determine whether to select a Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers to provide the quotation or
quotations not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers. The Trust shall promptly advise the Auction Agent of any such
selection.

               (5) If any Treasury Note Rate or Treasury Bill Rate is to be
based on rates supplied by U.S. Government Securities Dealers and one or more of
the U.S. Government Securities Dealers shall not provide a quotation for the
determination of such Treasury Rate, the Auction Agent shall immediately notify
the Trust so that the Trust can determine whether to select a Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers to
provide the quotation or quotations not being supplied by any U.S. Government
Securities Dealer or U.S. Government Securities Dealers. The Trust shall
promptly advise the Auction Agent of any such selection.

          2.7 Designation of Special Rate Period.

<Page>


               (1) The Statement will provide that, subject to the Trust's
option to designate a Special Rate Period as referred to in paragraph (b) of
this Section 2.7, (i) each Rate Period of any series of Preferred Shares will be
a Minimum Rate Period (a duration of seven days, subject to certain exceptions)
and (ii) each Rate Period following a Rate Period of any series of Preferred
Shares that is other than a Minimum Rate Period will be a Minimum Rate Period.
Not less than 10 nor more than 20 days prior to the last day of any such Rate
Period that is not a Minimum Rate Period, (i) the Trust shall deliver to the
Auction Agent a notice of the Auction Date of the next succeeding Auction for
such series in the form of Exhibit C hereto and (ii) the Auction Agent shall
deliver such notice by first-class mail, postage prepaid, to each Existing
Holder of shares of such series at the address set forth for such Existing
Holder in the records of the Auction Agent and to the Broker-Dealers for such
series as promptly as practicable after its receipt of such notice from the
Trust.

               (2) Pursuant to the Statement, the Trust may, at its option,
designate a Special Rate Period for any series of Preferred Shares in the manner
described in Section 4 of Part I of the Statement.


          (1) If the Board of Trustees proposes to designate any succeeding
     Subsequent Rate Period of any series of Preferred Shares as a Special Rate
     Period, (A) the Trust shall deliver to the Auction Agent a notice of such
     proposed Special Rate Period in the form of Exhibit D hereto not less than
     20 nor more than 30 days prior to the first day of such proposed Special
     Rate Period and (B) the Auction Agent on behalf of the Trust shall deliver
     such notice by first-class mail, postage prepaid, to each Existing Holder
     of shares of such series of Preferred Shares at the address set forth for
     such Existing Holder in the records of the Auction Agent and to the
     Broker-Dealers for such series as promptly as practicable after its receipt
     of such notice from the Trust.

          (2) If the Board of Trustees determines to designate such succeeding
     Subsequent Rate Period as a Special Rate Period, (A) the Trust shall
     deliver to the Auction Agent a notice of such determination in the form of
     Exhibit E hereto not later than 11:00 A.M. on the second Business Day next
     preceding the first day of such proposed Special Rate Period and (B) the
     Auction Agent shall deliver such notice to the Broker-Dealers for such
     series not later than 3:00 P.M. on such second Business Day.

<Page>


          (3) If the Trust shall deliver to the Auction Agent a notice not later
     than 11:00 A.M. on the second Business Day next preceding the first day of
     such proposed Special Rate Period stating that the Trust has determined not
     to exercise its option to designate such succeeding Subsequent Rate Period
     as a Special Rate Period, in the form of Exhibit F hereto, or shall fail to
     timely deliver either such notice or a notice in the form of Exhibit E
     hereto, the Auction Agent shall deliver a notice in the form of Exhibit F
     hereto to the Broker-Dealers for such series not later than 3:00 P.M. on
     such second Business Day.

                  Such change in the length of any Rate Period shall not occur
if (1) an Auction for shares of such series shall not be held on such Auction
Date for any reason or (2) an Auction for shares of such series shall be held on
such Auction Date but Sufficient Clearing Bids for shares of such series shall
not exist in such Auction.

          2.8 Failure to Deposit.

               (1) If:


                    (1) any Failure to Deposit shall have occurred with respect
               to Preferred Shares during any Rate Period thereof (other than
               any Special Rate Period of more than 364 Rate Period Days or any
               Rate Period succeeding any Special Rate Period of more than 364
               Rate Period Days during which a Failure to Deposit occurred that
               has not been cured), but, prior to 12:00 Noon, New York City
               time, on the third Business Day next succeeding the date on which
               such Failure to Deposit occurred, such Failure to Deposit shall
               have been cured in accordance with Section 2.8(c) hereof and the
               Trust shall have paid to the Auction Agent a late charge (a "Late
               Charge") equal to the sum of (1) if such Failure to Deposit
               consisted of the failure timely to pay to the Auction Agent the
               full amount of dividends with respect to any Dividend Period on
               such shares, an amount computed by multiplying (x) 200% of the
               Reference Rate for the Rate Period during which such Failure to
               Deposit occurs on the Dividend Payment Date for such Dividend
               Period by (y) a fraction, the numerator of which shall be the
               number of days for which such Failure to Deposit has not been
               cured in accordance with Section 2.8(c) hereof (including the day
               such Failure to Deposit occurs and excluding the day such Failure
               to Deposit is cured) and the denominator of which shall be 360,
               and applying the rate obtained against the aggregate liquidation
               preference of the outstanding Preferred Shares and (2) if such
               Failure to Deposit consisted of the failure timely to pay to the
               Auction Agent the Redemption Price of the Preferred Shares, if
               any, for which Notice of Redemption has been given by the Trust,
               an amount computed by

<Page>


               multiplying (x) 200% of the Reference Rate for the Rate Period
               during which such Failure to Deposit occurs on the redemption
               date by (y) a fraction, the numerator of which shall be the
               number of days for which such Failure to Deposit is not cured in
               accordance with Section 2.8(c) hereof (including the day such
               Failure to Deposit occurs and excluding the day such Failure to
               Deposit is cured) and the denominator of which shall be 360, and
               applying the rate obtained against the aggregate liquidation
               preference of the outstanding Preferred Shares to the redeemed,

then the Auction Agent shall deliver a notice in the form of Exhibit G hereto by
first-class mail, postage prepaid, to the Broker-Dealers for such series not
later than one Business Day after its receipt of the payment from the Trust
curing such Failure to Deposit and such Late Charge.

               (2) If:



                    (1) any Failure to Deposit shall have occurred with respect
               to Preferred Shares during any Rate Period thereof (other than
               any Special Rate Period of more than 364 Rate Period Days or any
               Rate Period succeeding any Special Rate Period of more than 364
               Rate Period Days during which a Failure to Deposit occurred but
               has not been cured), and, prior to 12:00 Noon, New York City
               time, on the third Business Day next succeeding the date on which
               such Failure to Deposit occurred, such Failure to Deposit shall
               not have been cured in accordance with Section 2.8(c) hereof or
               the Trust shall not have paid the applicable Late Charge to the
               Auction Agent; or

                    (2) any Failure to Deposit shall have occurred with respect
               to Preferred Shares during a Special Rate Period thereof of more
               than 364 Rate Period Days, or during any Rate Period thereof
               succeeding any Special Rate Period of more than 364 Rate Period
               Days during which a Failure to Deposit occurred that has not been
               cured, and, prior to 12:00 noon, New York City time, on the
               fourth Business Day preceding the Auction Date for the Rate
               Period subsequent to such Rate Period, such Failure to Deposit
               shall not have been cured in accordance with Section 2.8(c)
               hereof or the Trust shall not have paid the applicable Late
               Charge to the Auction Agent in accordance with Section 2(e)(i)(d)
               of the Statement (such Late Charge, for purposes of this clause
               (b) (iii) of this Section 2.8, to be calculated by using, as the
               Reference Rate, the Reference Rate applicable to a Rate Period
               (x)

<Page>


               consisting of more than 182 Rate Period Days and (y) commencing
               on the date on which the Rate Period during which Failure to
               Deposit occurs commenced);

then the Auction Agent shall deliver a notice in the form of Exhibit H hereto to
the Broker-Dealers for such series not later than one Business Day after the
receipt of the payment from the Trust curing such Failure to Deposit and such
Late Charge.

               (3) A Failure to Deposit with respect to Preferred Shares shall
have been cured (if such Failure to Deposit is not solely due to the willful
failure to the Trust to make the required payment to the Auction Agent) with
respect to any Rate Period if, within the respective time periods described
immediately above, the Trust shall have paid to the Auction Agent (i) all
accumulated and unpaid dividends on the Preferred Shares and (ii) without
duplication, the Redemption Price for the Preferred Shares, if any, for which
Notice of Redemption has been mailed; provided, however, that the foregoing
clause (ii) shall not apply to the Trust's failure to pay the Redemption Price
in respect of Preferred Shares when the related Redemption Notice provides that
redemption of such shares is subject to one or more conditions precedent and
each such condition precedent shall not have been satisfied at the time or times
and in the manner specified in such Notice of Redemption.


          2.9 Ownership of Shares of Preferred Shares.

               The Trust shall notify the Auction Agent if the Trust or any
affiliate of the Trust acquires any Preferred Shares of any series. Neither the
Trust nor any affiliate of the Trust shall submit any Order in any Auction for
Preferred Shares, except as set forth in the next sentence. 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. For purposes of this Section 2.9, a
Broker-Dealer shall not be deemed to be an affiliate of the Trust solely because
one or more of the directors or executive officers of such Broker-Dealer or of
any Person controlled by, in control of or under common control with such
Broker-Dealer is also a director of the Trust. The Auction Agent shall have no
duty or liability with respect to enforcement of this Section 2.9.

          2.10 Allocation of Taxable Income.

               The Trust may designate all or a portion of any dividend on
shares of any series of Preferred Shares to consist of net capital gains or
other income taxable for Federal income tax purposes and may deliver to the
Auction Agent a notice in the form of Exhibit I hereto of such designation not
later than the Dividend Payment Date for such series next preceding the Auction
Date on which the dividend rate for such dividend is to be fixed. The Auction
Agent will deliver such notice, if given, to the Broker-Dealers for such series
on the Business Day following its receipt of such


<Page>


notice from the Trust. Within two Business Days after any Auction Date involving
the allocation of income taxable for Federal income tax purposes for which
notice has so been given by the Trust, the Auction Agent shall notify each
Broker-Dealer for the related series as to the dollar amount per share of such
taxable income and income exempt from Federal income taxation included in the
related dividend.

          2.11 Access to and Maintenance of Auction Records.


               The Auction Agent shall afford to the Trust, its agents,
independent public accountants and counsel and the Broker-Dealers, access at
reasonable times during normal business hours to review and make extracts or
copies of all books, records, documents and other information concerning the
conduct and results of Auctions (at no cost to the Auction Agent), provided that
any such agent, accountant, counsel or Broker-Dealer shall furnish the Auction
Agent with a letter from the Trust requesting that the Auction Agent afford such
person access. The Auction Agent shall maintain records relating to any Auction
for a period of six years after such Auction, and such records shall, in
reasonable detail, accurately and fairly reflect the actions taken by the
Auction Agent hereunder.

3.   The Auction Agent as Dividend and Redemption Price Disbursing Agent.

               The Auction Agent, as dividend and redemption price disbursing
agent, shall pay to the Holders of Preferred Shares of any series (i) on each
Dividend Payment Date for such series, dividends on the Preferred Shares of such
series, (ii) on any date fixed for redemption of Preferred Shares of any series,
the Redemption Price of any shares of such series called for redemption and
(iii) any Late Charge related to any payment of dividends or Redemption Price,
in each case after receipt of the necessary funds from the Trust with which to
pay such dividends, Redemption Price or Late Charge. The amount of dividends for
any Rate Period for any series of Preferred Shares to be paid by the Auction
Agent to the Holders of such shares of such series will be determined by the
Trust as set forth in Section 2 of Part I of the Statement with respect to such
series. The Redemption Price of any shares to be paid by the Auction Agent to
the Holders will be determined by the Trust as set forth in Section 11 of Part I
of the Statement with respect to such series. The Trust shall notify the Auction
Agent in writing of a decision to redeem shares of any series of Preferred
Shares at least five days prior to the date a notice of redemption is required
to be mailed to the Holders of the shares to be redeemed by paragraph (c) of
Section 11 of Part I of the Statement. Such notice by the Trust to the Auction
Agent shall contain the information required by paragraph (c) of Section 11 of
Part I of the

<Page>


Statement to be stated in the notice of redemption required to be mailed by the
Trust to such Holders.

4.   The Auction Agent as Transfer Agent and Registrar.

               4.1 Issue of Stock or Shares Certificates.

               Upon the Date of Original Issue of each series of Preferred
Shares, one or more certificates representing all of the shares of such series
issued on such date shall be issued by the Trust and, at the request of the
Trust, registered in the name of Cede & Co. and countersigned by the Auction
Agent.

               4.2 Registration of Transfer of Shares.

               Shares of each series of Preferred Shares shall be registered
solely in the name of the Securities Depository or its nominee.


               4.3 Removal of Legend on Restricted Shares.

               All requests for removal of legends on Preferred Shares of any
series indicating restrictions on transfer shall be accompanied by an opinion of
counsel stating that such legends may be removed and such shares freely
transferred, such opinion to be delivered under cover of a letter from a Trust
Officer authorizing the Auction Agent to remove the legend on the basis of said
opinion.

               4.4 Lost Stock or Share Certificates.

               The Auction Agent shall issue and register replacement
certificates for certificates represented to have been lost, stolen or destroyed
upon the fulfillment of such requirements as shall be deemed appropriate by the
Trust and the Auction Agent, subject at all times to provisions of law, the
By-Laws of the Trust governing such matters and resolutions adopted by the Board
of Trustees of the Trust with respect to lost securities. The Auction Agent may
issue new certificates in exchange for and upon the cancellation of mutilated
certificates. Any request by the Trust to the Auction Agent to issue a
replacement or new certificate pursuant to this Section 4.4 shall be deemed to
be a representation and warranty by the Trust to the Auction Agent that such
issuance will comply with such provisions of law and the By-Laws and resolutions
of the Board of Trustees of the Trust.

               4.5 Disposition of Cancelled Certificates; Record Retention.

               The Auction Agent shall retain all stock or share certificates
which have been cancelled in transfer or exchange and all accompanying
documentation in

<Page>


accordance with applicable rules and regulations of the Securities and Exchange
Commission for two calendar years. The Trust shall also undertake to furnish to
the Securities and Exchange Commission and to the Board of Governors of the
Federal Reserve System, upon demand, at either the principal office or at any
regional office, complete, correct and current hard copies of any and all such
records.

               4.6 Stock or Record Books.


               For so long as the Auction Agent is acting as the transfer agent
for any series of Preferred Shares pursuant to the Agreement, it shall maintain
a stock or record book containing a list of the Holders of the Preferred Shares
of each such series. In case of any request or demand for the inspection of the
stock or record books of the Trust or any other books in the possession of the
Auction Agent, the Auction Agent will notify the Trust and secure instructions
as to permitting or refusing such inspection. The Auction Agent reserves the
right, however, to exhibit the stock or record books or other books to any
Person if (a) it is ordered to do so by a court of competent jurisdiction or a
regulatory body, judicial or quasi-judicial agency or authority having the
authority to compel such disclosure, (b) it is advised by its counsel that its
failure to do so would be unlawful or (c) failure to do so would expose the
Auction Agent to loss, liability, claim, damage or expense for which it has not
received indemnity or security satisfactory to it.

               4.7 Return of Funds.

               Any funds deposited with the Auction Agent hereunder by the Trust
for any reason, including but not limited to redemption of Preferred Shares of
any series, that remain unpaid after ninety days shall be repaid to the Trust
upon the written request of the Trust.

5. Representations and Warranties.

               5.1 Representations and Warranties of the Trust

               The Trust represents and warrants to the Auction Agent that:

               (1) the Trust is duly organized and existing business trust in
good standing under the laws of the State of its incorporation or organization
and has full corporate power or all requisite power to execute and deliver the
Agreement and to authorize, create and issue the Preferred

<Page>


Shares of each series, and the Preferred Shares of each series when issued, will
be duly authorized, validly issued, fully paid and nonassessable;


               (2) the Agreement has been duly and validly authorized, executed
and delivered by the Trust and constitutes the legal, valid and binding
obligation of the Trust;

               (3) the form of the certificate evidencing the Preferred Shares
of each series complies or will comply with all applicable laws of the State of
its incorporation or organization;


               (b) when issued, the Preferred Shares of each series will have
been duly registered under the Securities Act of 1933, as amended, and no
further action by or before any governmental body or authority of the United
States or of any state thereof is required in connection with the execution and
delivery of the Agreement or will have been required in connection with the
issuance of Preferred Shares of each series;

               (4) the execution and delivery of the Agreement and the issuance
and delivery of the Preferred Shares of each series do not and will not conflict
with, violate or result in a breach of, the terms, conditions or provisions of,
or constitute a default under, the Agreement and Declaration of Trust (as
amended by one or more Statements) or the By-Laws of the Trust, any law or
regulation, any order or decree of any court or public authority having
jurisdiction, or any mortgage, indenture, contract, agreement or undertaking to
which the Trust is a party or by which it is bound the effect of which conflict,
violation, default or breach would be material to the Trust or the Trust and its
subsidiaries taken as a whole; and

               (5) no taxes are payable upon or in respect of the execution of
the Agreement or the issuance of the Preferred Shares of any series.

          5.2 Representations and Warranties of the Auction Agent.

          The Auction Agent represents and warrants to the Trust that:

               (1) The Auction Agent is duly organized and is validly existing
as a banking corporation in good standing under the laws of the State of New
York and has the corporate power to enter into and perform its obligations under
this Agreement; and

               (2) this Agreement has been duly and validly authorized, executed
and delivered by the Auction Agent and constitutes the legal, valid and binding
obligation of the Auction Agent, enforceable against the Auction Agent in
accordance with its terms, subject to bankruptcy, insolvency,

<Page>


     reorganization and other laws of general applicability relating to or
     affecting creditors' rights and to general equitable principles.

6. The Auction Agent.

          6.1 Duties and Responsibilities.

               (1) The Auction Agent is acting solely as agent for the Trust
hereunder and owes no fiduciary duties to any Person, other than the Trust, by
reason of this Agreement.


               (2) The Auction Agent undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Auction
Agent.


               (3) In the absence of bad faith or negligence on its part, the
Auction Agent shall 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 this
Agreement. The Auction Agent shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
the pertinent facts.

          6.2 Rights of the Auction Agent.

               (1) The Auction Agent may conclusively rely and shall be
protected in acting or refraining from acting upon any communication authorized
hereby and upon any written instruction, notice, request, direction, consent,
report, certificate, share certificate or other instrument, paper or document
believed in good faith by it to be genuine. The Auction Agent shall not be
liable for acting upon any telephone communication authorized hereby which the
Auction Agent believes in good faith to have been given by the Trust or by a
Broker-Dealer. The Auction Agent may record telephone communications with the
Trust or with the Broker-Dealers or both.

               (2) The Auction Agent may consult with counsel of its choice and
the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.

<Page>


               (3) The Auction Agent shall not be required to advance, expend or
risk its own Trusts or otherwise incur or become exposed to financial liability
in the performance of its duties hereunder.

               (4) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys and shall
not be responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it with due care hereunder.

               (5) The Auction Agent shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control, it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices in the banking
industry to resume performance as soon as practicable under the circumstances.

          6.3 Compensation, Expenses and Indemnification.

               (1) The Trust shall pay the Auction Agent an annual fee as
compensation for all services rendered by it under the Agreement and the
Broker-Dealer Agreements as the Trust and the Auction Agent have agreed to from
time to time.

               (2) The Trust shall reimburse the Auction Agent upon its request
for all reasonable out-of-pocket expenses, disbursements and advances incurred
or made by the Auction Agent in accordance with any provision of the Agreement
and the Broker-Dealer Agreements (including the compensation and the reasonable
expenses and disbursements of its agents and counsel), except any expense or
disbursement attributable to its negligence or bad faith. In no event shall the
Auction Agent be responsible or liable for special, indirect or consequential
loss or damage of any kind whatsoever (including, but not limited to, loss of
profit), even if the Auction Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action.

               (3) The Trust shall indemnify the Auction Agent for and hold it
harmless against any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with its agency under the
Agreement and the Broker-Dealer Agreements, including the costs and expenses of
defending

<Page>


itself against any such claim or liability in connection with its exercise or
performance of any of its duties hereunder and thereunder.

          6.4 Auction Agent's Disclaimer.

               The Auction Agent makes no representation as to the validity or
adequacy of this Agreement, the Broker-Dealer Agreements or the Preferred Shares
of any series except that the Auction Agent hereby represents that this
Agreement has been duly authorized, executed and delivered by the Auction Agent
and constitutes a legal and binding obligation of the Auction Agent.

7. Miscellaneous.

          7.1 Term of Agreement.

               (1) The term of the Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Trust may terminate the
Agreement at any time by so notifying the Auction Agent, provided that the Trust
has entered into an agreement in substantially the form of the Agreement with a
successor Auction Agent. The Auction Agent may terminate the Agreement upon
written notice to the Trust on the date specified in such notice, which date
shall be no earlier than 45 days after the date of delivery of such notice.

               (2) Except as otherwise provided in this paragraph (b), the
respective rights and duties of the Trust and the Auction Agent under the
Agreement with respect to any series of Preferred Shares shall cease upon
termination of the Agreement with respect to such series. The Trust's
representations, warranties, covenants and obligations to the Auction Agent
under Sections 5 and 6.3 hereof shall survive the termination of the Agreement
with respect to any series of Preferred Shares. Upon termination of the
Agreement with respect to any series of Preferred Shares, the Auction Agent
shall, at the Trust's request, promptly deliver to the Trust copies of all books
and records maintained by it with respect to Preferred Shares in connection with
its duties hereunder.

          7.2 Communications.

               Except for (i) communications authorized to be by telephone
pursuant to the Agreement or the Auction Procedures and (ii) communications in
connection with Auctions (other than those expressly required to be in writing),
all notices,

<Page>


requests and other communications to any party hereunder shall be in writing
(including telecopy or similar writing) and shall be given to such party,
addressed to it, at its address or telecopy number set forth below and, where
appropriate, reference the particular Auction to which such notice relates:

If to the Trust,              BlackRock Insured Municipal Income Trust
                              c/o BlackRock Financial Management, Inc.
                              40 East 52nd Street
                              New York, New York 10022 Attention:
                              Treasurer Telecopier No.: (212) 409-3200
                              Telephone No.: (212) 409-3210

If to the Auction Agent,      The Bank of New York
                              5 Penn Plaza
                              13th Floor
                              New York, New York 10001
                              Attention:   Dealing and Trading Group -
                                           Auction Desk
                              Telephone No.:  (212) 328-7676
                              Telecopier No.: (212) 328-8237
                                              (212) 328-8238
                                              (212) 328-8239

               Each such notice, request or communication shall be effective
when delivered at the address specified herein. Communications shall be given on
behalf of the Trust by a Trust Officer and on behalf of the Auction Agent by
telephone (confirmed by telecopy or in writing) by an Authorized Officer.

          7.3 Entire Agreement.

               This Agreement contains the entire agreement between the parties
relating to, and superseding any prior agreement between the parties relating
to, the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or implied,
between the parties relating to the subject matter hereof except for agreements
relating to the compensation of the Auction Agent.

          7.4 Benefits.

               Nothing herein, express or implied, shall give to any Person,
other

<Page>


than the Trust, the Auction Agent and their respective successors and assigns,
any benefit of any legal or equitable right, remedy or claim hereunder.

          7.5 Amendment; Waiver.

               (1) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part, except
by a written instrument signed by a duly authorized representative of the party
to be charged.

               (2) Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.

          7.6 Successors and Assigns.

               This Agreement shall be binding upon, inure to the benefit of,
and be enforceable by, the respective successors and assigns of each of the
Trust and the Auction Agent. This Agreement may not be assigned by any party
hereto absent the prior written consent of the other parties.

          7.7 Severability.

               If any clause, provision or section hereof shall be ruled invalid
or unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.

          7.8 Disclosure of Information.

               The Auction Agent agrees that it will not disclose or use any
"non-public personal information" about the Trust's shareholders other than such
uses or disclosures as are permitted by Regulation S-P under Section 504 of the
Gramm-Leach-Biley Act ("Regulation S-P"). "Nonpublic personal information" about
a shareholder shall mean: (i) personally identifiable financial information;
(ii) any list, description, or other grouping of consumers that is derived from
using any personally identifiable information that is not publically available;
and (iii) any other information that a Customer or the Transfer Agent is
prohibited from using or disclosing pursuant to Regulation S-P.

          7.9 Governing Law.

<Page>


               THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY PROVISIONS
THEREOF RELATING TO CONFLICTS OF LAW, OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF NEW YORK).
                                                  BLACKROCK INSURED MUNICIPAL
                                                  INCOME TRUST



                                                  -----------------------------
                                                  By:  Name  Anne F. Ackerley
                                                       Title Secretary

                                                  THE BANK OF NEW YORK



                                                  ------------------------------
                                                  By:  Name
                                                       Title





[Auction Agency Agreement]


<Page>





                                                                       EXHIBIT A

                                     FORM OF
                             BROKER-DEALER AGREEMENT





<Page>



                                                                       EXHIBIT B

                              SETTLEMENT PROCEDURES






<Page>




                                                                       EXHIBIT C


                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                           NOTICE OF AUCTION DATE FOR
                     MUNICIPAL AUCTION RATE PREFERRED SHARES
                              ("Preferred Shares")

                  NOTICE IS HEREBY GIVEN that the Auction Date of the next
Auction for Series ___ of the Trust's Preferred Shares is scheduled to be
_______________, 20___ and the next Dividend Payment Date for Series ___ of the
Trust's Preferred Shares will be __________________, 20___.

                  [A Failure to Deposit in respect of the Series ___ Preferred
Shares currently exists. If, prior to 12:00 noon, New York City time, on the
fourth Business Day preceding the next scheduled Auction Date of the Series ____
Preferred Shares, such Failure to Deposit is not cured or the applicable Late
Charge is not paid, the next Auction will not be held. Notice of the next
Auction for the Series ___ Preferred Shares will be delivered when such Failure
to Deposit is cured and the applicable Late Charge is paid.(1)]

                                  BLACKROCK INSURED MUNICIPAL
                                  INCOME TRUST


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

(1)   Include this language if a Failure to Deposit exists.



<Page>



                                                                       EXHIBIT D

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                          NOTICE OF PROPOSED CHANGE OF
                            LENGTH OF RATE PERIOD OF
                     MUNICIPAL AUCTION RATE PREFERRED SHARES
                              ("Preferred Shares")

                  BlackRock Insured Municipal Income Trust (the "Trust") may
exercise its option to designate the Rate Period of its Series ____ Preferred
Shares commencing [the first day of the Special Rate Period] as a Special Rate
Period.

                  By 11:00 A.M. on the second Business Day preceding the first
day of such proposed Special Rate Period, the Trust will notify
___________________ of either (a) its determination to exercise such option,
designating the length of such Special Rate Period for such series or (b) its
determination not to exercise such option.

                                           BLACKROCK INSURED MUNICIPAL
                                           INCOME TRUST


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


Dated:  __________, 20__


<Page>




                                                                       EXHIBIT E

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                    NOTICE OF CHANGE OF LENGTH OF RATE PERIOD
                     MUNICIPAL AUCTION RATE PREFERRED SHARES
                              ("Preferred Shares")

                  NOTICE IS HEREBY GIVEN that (the "Trust") has determined to
designate the Rate Period of its Series ____ Preferred Shares commencing on [the
first day of the Special Rate Period] as a Special Rate Period.

                  The Special Rate Period will be __________ [Rate Period Days].

                  The Auction Date for the Special Rate Period is [the Business
Day next preceding the first day of such Special Rate Period].

                  As a result of the Special Rate Period designation, the amount
of dividends payable on Series ____ Preferred Shares during the Special Rate
Period will be based on a 360-day year.

                  The Special Rate Period shall not commence if (a) an Auction
for Preferred Shares shall not be held on such Auction Date for any reason or
(b) an Auction for Preferred Shares shall be held on such Auction Date but
Sufficient Clearing Bids for such shares shall not exist in such Auction.

                  The scheduled Dividend Payment Dates for such series of
Preferred Shares during such Special Rate Period will be
_________________________.

                  [Special Redemption Provisions, if any]

                  Attached hereto is a Preferred Shares Basic Maintenance Report
showing that, as of the third Business Day next preceding such proposed Special
Rate Period, Moody's Eligible Assets (if Moody's is rating such Preferred
Shares) and S&P Eligible Assets (if S&P is rating such Preferred Shares) each
have an aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount as of such Business Day (assuming for purposes of the
foregoing calculation that (i) the Maximum Rate is the Maximum Rate on such
Business Day as if such Business Day were the Auction Date for the proposed
Special Rate Period, and (ii) the Moody's Discount Factors applicable to Moody's
Eligible Assets are determined by reference to the first Moody's Exposure Period
longer than the Moody's Exposure Period then applicable to the Trust).

                                  BLACKROCK INSURED MUNICIPAL
                                  INCOME TRUST


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

Dated:  __________, 20__


<Page>





                                                                       EXHIBIT F

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                      NOTICE OF DETERMINATION NOT TO CHANGE
                            LENGTH OF RATE PERIOD OF
               MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES
                              ("Preferred Shares")

                  NOTICE IS HEREBY GIVEN that BlackRock Insured Municipal Income
Trust (the "Trust") has determined not to exercise its option to designate a
Special Rate Period of its Series ___ Preferred Shares and the next succeeding
Rate Period of such series will be a Minimum Rate Period of ____ Rate Period
Days.

                                           BLACKROCK INSURED MUNICIPAL
                                           INCOME TRUST


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


Dated:  __________, 20___


<Page>





                                                                       EXHIBIT G

                    BLACKROCK INSURED MUNICIPAL INSURED TRUST
                     NOTICE OF CURE OF FAILURE TO DEPOSIT ON
                     MUNICIPAL AUCTION RATE PREFERRED SHARES
                              ("Preferred Shares")

                  NOTICE IS HEREBY GIVEN that BlackRock Insured Municipal Income
Trust (the "Trust") has cured its Failure to Deposit and paid the applicable
Late Charge with respect to its Series ___ Preferred Shares. The dividend rate
on the shares of Series ___ Preferred Shares for the current Dividend Period is
_____________% per annum, the Dividend Payment Date for the current Dividend
Period is scheduled to be _______________, 20___ and the next Auction Date is
scheduled to be _______________, 20___.


                                           BLACKROCK INSURED MUNICIPAL
                                           INCOME TRUST


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

Dated:  __________, 20___


<Page>



                                                                       EXHIBIT H

                    BLACKROCK INSURED MUNICIPAL INSURED TRUST
                 NOTICE OF CURE OF FAILURE TO DEPOSIT ON INCOME
                     MUNICIPAL AUCTION RATE PREFERRED SHARES
                              ("Preferred Shares ")

                  NOTICE IS HEREBY GIVEN that BlackRock Insured Municipal Income
Trust (the "Trust") has cured its Failure to Deposit and paid the applicable
Late Charge with respect to its Series ____ Preferred Shares. The next Auction
Date for the Series ____ Preferred Shares is scheduled to be on
_________________, 20___.

                                           BLACKROCK INSURED MUNICIPAL
                                           INCOME TRUST


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

Dated:  __________, 20___


<Page>



                                                                       EXHIBIT I

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
                                    NOTICE OF
               [CAPITAL GAINS] [AND] [TAXABLE ORDINARY INCOME](1)
                                  DIVIDEND FOR
                     MUNICIPAL AUCTION RATE PREFERRED SHARES
                              ("Preferred Shares ")

                  NOTICE IS HEREBY GIVEN that the amount of the dividend payable
on ________________, 20____ for Series ____ of the BlackRock Insured Municipal
Income Trust's Preferred Shares will be determined by the Auction to be held on
_______________, 20___. Up to [$ A ](2) [$ B ](3) per share of the dividend
payable on such date as determined by such Auction will consist of [capital
gains](2) [ordinary income taxable for Federal income tax purposes](3). If the
dividend amount payable on such date as determined by such Auction is less than
[$ A ](2) [$ B ](3) per share, the entire amount of the dividend will consist of
[capital gains](2) [ordinary income taxable for Federal income tax purposes](3).
[To the extent such dividend amount exceeds [$ A ] per share, any excess up to
[$ B ] per share will consist of ordinary income taxable for Federal income tax
purposes.](4) Accordingly, the aforementioned composition of the dividend
payable on _______________, 20___ should be considered in determining Orders to
be submitted with respect to the Auction to be held on ________________, 20__.
The Rate Multiple in effect for such Auction will be ____%.

                                                  BLACKROCK INSURED MUNICIPAL
                                                  INCOME TRUST

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

                  (1) Include language with respect to capital gains, taxable
ordinary income or both, depending on the character of the designation to be
made with respect to the dividend(s).

                  (2) Include bracketed material if a portion of the dividend
will be designated capital gains.

                  (3) Include bracketed material if a portion of the dividend
will be designated ordinary income taxable for Federal income tax purposes and
no portion of the dividend will be designated capital gains.

                  (4) Include bracketed material if a portion of the dividend
will be designated capital gains and a portion will be designated ordinary
income taxable for Federal income tax purposes.

<Page>



A = the maximum amount of capital gains allocated to such series of Preferred
Shares to be included in such dividend, divided by the number of Preferred
Shares.

B = the maximum amount of ordinary income taxable for Federal income tax
purposes allocated to such series of Preferred Shares to be included in such
dividend, divided by the number of shares in such series.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K(3)
<SEQUENCE>6
<FILENAME>a2095632zex-99_k3.txt
<DESCRIPTION>EXHIBIT 99.K(3)
<TEXT>
<Page>


                             BROKER-DEALER AGREEMENT

                                      AMONG

                              THE BANK OF NEW YORK
                                AS AUCTION AGENT

                      ------------------------------------
                                AS BROKER-DEALER


                          DATED AS OF DECEMBER 11, 2002


                                   RELATING TO

              MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES OF
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST




<Page>




     BROKER-DEALER AGREEMENT dated as of December 11, 2002 (this "Agreement"),
among (i) The Bank of New York, a New York banking corporation, as auction agent
(the "Auction Agent") (not in its individual capacity but solely as agent)
pursuant to authority granted to it in the Auction Agent Agreement, (ii)
BlackRock Insured Municipal Income Trust, a Delaware statutory trust (the
"Trust"), and (iii) each broker-dealer whose name appears on the signature page
hereof, as broker-dealer (together with its successors and assigns as such
hereinafter referred to as "BD").

     The Trust intends to issue shares of one or more series of Municipal
Auction Rate Cumulative Preferred Shares, liquidation preference $25,000 per
share (the "Preferred Shares"). The shares of each series of Preferred Shares
shall be issued in book-entry form through the facilities of the Securities
Depository. References to "Preferred Shares" in this Agreement shall refer only
to the beneficial interests in the Preferred Shares unless the context otherwise
requires.

     The Auction Procedures require the participation of a Broker-Dealer.

     NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Auction Agent, the Trust and BD
agree as follows:

               DEFINITIONS AND RULES OF CONSTRUCTION

TERMS DEFINED BY STATEMENT OF PREFERENCES. Capitalized terms not defined herein
shall have the respective meanings specified in the Statement.

TERMS DEFINED HEREIN. As used herein and in the Settlement Procedures, the
following terms shall have the following meanings, unless the context otherwise
requires:

               "Agent Member" of any Person shall mean the member of, or
participant in, the Securities Depositary that will act on behalf of a Bidder.

               "Agreement" with respect to the Trust shall mean this Agreement
as may be amended in writing with written consent of the Trust.

               "Auction" shall have the meaning specified in Section 2.1 hereof.

               "Auction" Procedures" shall mean the auction procedures
constituting Part II of the form of Statement as of the filing thereof.

               "Authorized Officer" of the Auction Agent shall mean each Senior
Vice President, Vice President, Assistant Vice President, Assistant Treasurer
and Assistant Secretary of the Auction Agent assigned to its Corporate Trust and
Agency Group and every other officer or employee of the Auction Agent designated
as an "Authorized Officer" for purposes hereof in a communication to the Trust.

               "Preferred Shares" shall mean the preferred shares, par value
$.001 per share, of the Trust designated as its "Municipal Auction Rate
Cumulative Preferred Shares" and bearing such further designation as to series
as the Board of Trustees of the Trust or any

<Page>


committee thereof shall specify.

               "Settlement Procedures" shall mean the Settlement Procedures
attached to the Auction Agency Agreement as Exhibit B.

               "Statement" shall mean the Statement of Preferences of Auction
Rate Municipal Preferred Shares, as the same may be amended, supplemented or
modified from time to time.

               "Trust Officer" shall mean the Chairman and Chief Executive
Officer, the President, each Vice President (whether or not designated by a
number or word or words added before or after the title "Vice President"), the
Secretary, the Treasurer, each Assistant Vice President, each Assistant
Secretary and each Assistant Treasurer of the Trust and every other officer or
employee of the Trust designated as a "Trust Officer" for purposes hereof in a
notice to the Auction Agent.

RULES OF CONSTRUCTION. Unless the context or use indicates another or different
meaning or intent, the following rules shall apply to the construction of this
Agreement:

               Words importing the singular number shall include the plural
number and vice versa.

               The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.

               The words "hereof," "herein," "hereto," and other words of
similar import refer to this Agreement as a whole.

               All references herein to a particular time of day shall be to New
York City time.

               This Agreement shall apply separately but equally to all series
of Preferred Shares that may be issued. Sections 1 and 2 hereof shall be read in
conjunction with the Statement and in the event of any conflict with the
Statement, the Statement shall take precedence.

WARRANTIES OF BD. BD hereby represents and warrants that this Broker-Dealer
Agreement has been duly authorized, executed and delivered by BD and that,
assuming the due authorization, execution and delivery hereof by the Auction
Agent, this Broker-Dealer Agreement constitutes a valid and binding agreement of
BD, enforceable against it in accordance with its terms. BD's representations
and warranties in this Section 1.4 shall survive the termination of this
Agreement.

               THE AUCTIONS

PURPOSE; INCORPORATION BY REFERENCE OF AUCTION PROCEDURES AND SETTLEMENT
PROCEDURES.


               On each Auction Date, the provisions of the Auction Procedures
will be

<Page>


followed by the Auction Agent for the purpose of determining the Applicable Rate
for the Preferred Shares for the next Dividend Period. Each periodic
implementation of such procedures is hereinafter referred to as an "Auction."

               All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions were fully set forth herein.

               BD agrees to act as, and assumes the obligations of and
limitations and restrictions placed upon, a Broker-Dealer under this Agreement.

               BD acknowledges and agrees that each provision of the Auction
Procedures that requires BD to perform an obligation or procedure is hereby
incorporated herein by reference and that this Agreement shall constitute the
Trust's instruction, and BD hereby agrees, to perform such obligations and
procedures without further request by or instructions from the Trust.

               BD may participate in Auctions for its own account.

PREPARATION FOR EACH AUCTION.

               Not later than 9:30 a.m. on each Auction Date, the Auction Agent
shall advise BD by telephone or other electronic means, to be confirmed in
writing by the Auction Agent, of the Maximum Rate, Reference Rate(s) and
Treasury Note Rate(s).

               BD shall cause the Maximum Rate to be communicated as promptly as
practicable to its customers who hold or may be interested in acquiring
Preferred Shares.

               As promptly as practicable after determining each Auction Date,
but not later than 9:15 a.m. on the Business Day preceding such Auction Date,
the Auction Agent shall notify BD, by such means as the Auction Agent deems
practicable, of the scheduled date of such Auction Date. If the Auction Date for
any Auction shall be changed after the Auction Agent has given such notice or
the notice referred to in clause (vii) of paragraph (a) of the Settlement
Procedures, the Auction Agent, by such means as the Auction Agent deems
practicable, shall give notice of such change to BD not later than the earlier
of (x) 9:15 a.m. on the Business Day preceding the new Auction Date, and (y)
9:15 a.m. on the original Auction Date. Thereafter, BD shall promptly notify
customers of BD that are Existing Holders of such change in the Auction Date.

               If required by applicable law, or requested by the Auction Agent,
BD shall provide a list of Existing Holders based upon inquiries of those
Persons such Broker-Dealer believes are Beneficial Owners as a result of the
most recent Auction to the Auction Agent promptly after any date so requested by
the Auction Agent. The Auction Agent shall keep confidential any such
information, including information received as to the identity of Bidders in any
Auction, and shall not disclose any such information so provided to any Person
other than the other parties hereto, provided that the Auction Agent each
reserves the right to disclose any such information if (a) it is ordered to do
so by a court of competent jurisdiction or a regulatory, judicial or
quasi-judicial agency, (b) it is advised by its counsel that its failure to do
so would be

<Page>



unlawful or (c) failure to do so would expose the Auction Agent to loss,
liability, claim, damage or expense for which it has not received indemnity
satisfactory to it.

               BD agrees to maintain a list of customers relating to a series of
Preferred Shares and to use its best efforts, subject to existing laws and
regulations, to contact the customers on such list whom BD believes may be
interested in participating in the Auction on each Auction Date, as a Potential
Holder or a Potential Beneficial Owner, for the purposes set forth in the
Auction Procedures. Nothing herein shall require BD to submit an Order for any
customer in any Auction.

               The Auction Agent's registry of Existing Holders of shares of a
series of Preferred Shares shall be conclusive and binding on BD. BD may inquire
of the Auction Agent between 3:00 p.m. on the Business Day preceding an Auction
for shares of a series of Preferred Shares and 9:30 a.m. on the Auction Date for
such Auction to ascertain the number of shares of such series in respect of
which the Auction Agent has determined BD to be an Existing Holder. If BD
believes it is the Existing Holder of fewer shares of such series than specified
by the Auction Agent in response to BD's inquiry, BD may so inform the Auction
Agent of that belief. BD shall not, in its capacity as Existing Holder of shares
of such series, submit Orders in such Auction in respect of shares of such
series covering in the aggregate more than the number of shares of such series
specified by the Auction Agent in response to BD's inquiry.

AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.


               The Auction Agent shall conduct Auctions in accordance with the
schedule set forth below. Such schedule may be changed at any time by the
Auction Agent with the consent of the Trust, which consent shall not be
unreasonably withheld. The Auction Agent shall give written notice of any such
change to BD which shall have the right to review such change. Such notice shall
be received one Business Day prior to the first Auction Date on which any such
change shall be effective.



TIME                                         EVENT

By 9:30 a.m.                                 Auction Agent advises the Trust and
                                             the Broker-Dealer of the applicable
                                             Maximum Rate and the Reference
                                             Rate(s) and Treasury Note Rate(s)
                                             as set forth in Section 2.2(a)
                                             hereof.



9:30 a.m. - 1:30 p.m.                        Auction Agent assembles information
                                             communicated to it by Broker-Dealer
                                             as provided in Section 2(a) of the
                                             Auction Procedures. Submission
                                             Deadline is 1:30 p.m.

<Page>


Not earlier than                             Auction Agent makes determinations
1:30 p.m.                                    pursuant to 3(a) of the Auction
                                             Procedures.





By approximately                             Auction Agent advises the Trust of
3:30 p.m.                                    results of Auction as provided in
                                             Section 3(b) of the Auction
                                             Procedures. Submitted Bids and
                                             Submitted Sell Orders are accepted
                                             and rejected in whole or in part
                                             and Preferred Shares are allocated
                                             as provided in Section 4 of the
                                             Auction Procedures. Auction Agent
                                             gives notice of Auction results as
                                             set forth in paragraph (a) of the
                                             Settlement Procedures.


               BD may designate one or more individuals in its organization who
will coordinate its procedures in connection with Auctions and purchases and
sales of shares of any series of Preferred Shares.

               BD agrees to handle its customers' order in accordance with its
duties under applicable securities laws and rules.

               To the extent that pursuant to Section 4 of the Auction
Procedures of the Trust, BD continues to hold, sells or purchases a number of
shares that is fewer than the number of shares in an Order submitted by BD to
the Auction Agent in which BD designated itself as an Existing Holder or
Potential Holder in respect of customer Orders, BD shall make appropriate pro
rata allocations among its customers for which it submitted Orders of similar
tenor. If as a result of such allocations, any Beneficial Owner would be
entitled or required to sell, or any Beneficial Owner would be entitled or
required to purchase, a fraction of a Preferred Share on any Auction Date, BD
shall, in such manner as it shall determine in its sole discretion, round up or
down the number of Preferred Shares to be purchased or sold on such Auction Date
by any Beneficial Owner or Potential Beneficial Owner on whose behalf BD
submitted an Order so that the number of shares so purchased or sold by each
such Beneficial Owner or Potential Beneficial Owner on such Auction Date shall
be whole shares.

               BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit A. BD shall submit separate
Orders to the Auction Agent for each Potential Holder or Existing Holder on
whose behalf BD is submitting an Order and shall not net or aggregate the Orders
of Potential Holders or Existing Holders on whose behalf BD is submitting
Orders.

               BD shall deliver to the Auction Agent a written notice,
substantially in the form attached hereto as Exhibit B, of transfers of
Preferred Shares made through BD by an

<Page>


Existing Holder to another Person other than pursuant to an Auction and a
written notice, substantially in the form attached hereto as Exhibit C, of the
failure of any Preferred Shares to be transferred to or by any Person that
purchased or sold Preferred Shares through BD pursuant to an Auction. The
Auction Agent is not required to accept any notice delivered pursuant to the
terms of the foregoing sentence with respect to an Auction unless it is received
by the Auction Agent by 3:30 p.m. on the Business Day next preceding the
applicable Auction Date.

NOTICES.


               On each Auction Date, the Auction Agent shall notify BD by
telephone or facsimile (or other electronic means acceptable to both parties) of
the results of the Auction as set forth in paragraph (a) of the Settlement
Procedures. By approximately 11:30 a.m. on the Business Day next succeeding such
Auction Date, the Auction Agent shall notify BD in writing of the disposition of
all Orders submitted by BD in the Auction held on such Auction Date.

               (b) BD shall notify each Existing Holder or Potential Holder on
whose behalf BD has submitted an Order as set forth in paragraph (b) of the
Settlement Procedures and take such other action as is required of BD pursuant
to the Settlement Procedures.

DESIGNATION OF SPECIAL RATE PERIOD.


               If the Trust delivers to its Auction Agent a notice of the
Auction Date for any series of Preferred Shares of the Trust for a Rate Period
thereof that next succeeds a Rate period that is not a Minimum Rate Period in
the form of Exhibit C to the Auction Agency Agreement, and BD is a Broker-Dealer
of such series, the Auction Agent shall deliver such notice to BD as promptly as
practicable after its receipt of such notice from the Trust.

               If the Board of Trustees of the Trust proposes to designate any
succeeding Subsequent Rate Period of any series of Preferred Shares of the Trust
as a Special Rate Period and the Trust delivers to its Auction Agent a notice of
such proposed Special Rate Period in the form of Exhibit D to the Auction Agency
Agreement, and BD is a Broker-Dealer for such series, such Auction Agent shall
deliver such notice to BD as promptly as practicable after its receipt of such
notice from the Trust.

               If the Board of Trustees of the Trust determines to designate
such succeeding Subsequent Rate Period as a Special Rate Period, and the Trust
delivers to its Auction Agent a notice of such Special Rate Period in the form
of Exhibit E to the Auction Agency Agreement not later than 11:00 a.m. on the
second Business Day next preceding the first day of such Rate Period, and BD is
a Broker-Dealer for such series, such Auction Agent shall deliver such notice to
BD not later than 3:00 p.m. on such second Business Day.

               If the Trust shall deliver to its Auction Agent a notice not
later than 11:00 a.m. on the second Business Day next preceding the first day of
any Rate Period stating that the Trust has determined not to exercise its option
to designate such succeeding Subsequent Rate Period as a Special Rate Period, in
the form of Exhibit F to the Auction Agency Agreement, or shall fail to timely
deliver either such notice or a notice in the form of Exhibit E to the Auction
Agency Agreement, and BD is a Broker-Dealer for such series, such Auction Agent
shall deliver

<Page>


a notice in the form of Exhibit F to the Auction Agency Agreement to BD not
later than 3:00 p.m. on such second Business Day.

ALLOCATION OF TAXABLE INCOME.


               If the Trust delivers to its Auction Agent a notice in the form
of Exhibit I to the Auction Agency Agreement designating all or a portion of any
dividend on shares of any series of Preferred Shares of the Trust to consist of
net capital gains or other income taxable for Federal income tax purposes, and
BD is a Broker-Dealer for such series, such Auction Agent shall deliver such
notice to BD on the Business Day following its receipt of such notice from the
Trust. On or prior to the Auction Date referred to in such notice, BD will
contact each of its customers that is a Beneficial Owner of shares of such
series of Preferred Shares or a Potential Beneficial Owner of shares of such
series of Preferred Shares interested in submitting an Order in the Auction to
be held on such Auction Date, and BD will notify such Beneficial Owners and
Potential Beneficial Owners of the contents of such notice. BD will be deemed to
have notified such Beneficial Owners and Potential Beneficial Owners if, for
each of them, (i) BD makes a reasonable effort to contact such Beneficial Owner
or Potential Beneficial Owner by telephone, and (ii) upon failing to contact
such Beneficial Owner or Potential Beneficial Owner by telephone BD mails
written notification to such Beneficial Owner or Potential Beneficial Owner at
the mailing address indicated in the account records of BD.

               The Auction Agent for any series of Preferred Shares shall be
required to notify BD if it is a Broker-Dealer for such series within two
Business Days after each Auction of such series of the Auction Agent's receipt
of notice from the Trust that such Auction involves an allocation of income
taxable for Federal income tax purposes as to the dollar amount per share of
such taxable income and income exempt from Federal income taxation included in
the related dividend.

FAILURE TO DEPOSIT.


               If: (i) any Failure to Deposit shall have occurred with respect
to shares of any series of Preferred Shares of the Trust during any Rate Period
thereof (other than any Special Rate Period of Rate Period Days or any Rate
Period succeeding any Special Rate Period of more than 364 Rate Period Days
during which a Failure to Deposit occurred that has not been cured), but, prior
to 12:00 Noon, New York City time, on the third Business Day next succeeding the
date on which such Failure to Deposit occurred, such Failure to Deposit shall
have been cured in accordance with Section 2.8(c) of the Auction Agency
Agreement and the Trust shall have paid to the Auction Agent for such series the
applicable Late Charge as described in Section 2.8(a) of the Auction Agency
Agreement, then, if BD is a Broker-Dealer for such series, such Auction Agent
shall deliver a notice in the form of Exhibit G to the Auction Agency Agreement
by first-class mail, postage prepaid, to BD not later than one Business Day
after its receipt of the payment from the Trust curing such Failure to Deposit
and such Late Charge.

               If: (i) any Failure to Deposit shall have occurred with respect
to shares of any series of Preferred Shares of the Trust during any Rate Period
thereof (other than any Special Rate Period of more than 364 Rate Period Days or
any Rate Period succeeding any Special Rate Period of more than 364 Rate Period
Days during which a Failure to Deposit occurred but has

<Page>


not been cured), and, prior to 12:00 Noon, New York City time, on the third
Business Day next succeeding the date on which such Failure to Deposit occurred,
such Failure to Deposit shall not have been cured as described in Section 2.8(c)
of the Auction Agency Agreement or the Trust shall not have paid to the Auction
Agent for such series the applicable Late Charge described in Section 2.8(a) of
the Auction Agency Agreement; or (ii) any Failure to Deposit shall have occurred
with respect to shares of any series of Preferred Shares of the Trust during a
Special Rate Period thereof of more than 364 Rate Period Days, or during any
Rate Period thereof succeeding any Special Rate Period of more than 364 Rate
Period Days during which a Failure to Deposit occurred that has not been cured,
and, prior to 12:00 noon, New York City time, on the fourth Business Day
preceding the Auction Date for the Rate Period subsequent to such Rate Period,
such Failure to Deposit shall not have been cured as described in Section 2.8(c)
of the Auction Agency Agreement of the Trust shall not have paid to the Auction
Agent for such series the applicable Late Charge described in Section 2.8(a) of
the Auction Agency Agreement; then such Auction Agent shall deliver a notice in
the form of Exhibit H to the Auction Agency Agreement to the Broker-Dealers for
such series not later than one Business Day after the receipt of the payment
from the Trust curing such Failure to Deposit and Late Charge.

SERVICE CHARGE TO BE PAID TO BD.


               No later than 12:00 noon on each Dividend Payment Date, the
Auction Agent after each Auction will pay a service charge from funds provided
by the Trust to each Broker-Dealer on the basis of the purchase price of
Preferred Shares placed by such Broker-Dealer at such Auction. The service
charge shall be (i) in the case of any Auction Date immediately preceding a
seven-day Dividend Period, the product of (A) a fraction, the numerator of which
is the number of days in such Dividend Period (calculated by counting the date
of original issue of such shares to but excluding the next succeeding dividend
payment date of such shares) and the denominator of which is 365, times (B) 1/4
of 1%, times (C) $25,000, times (D) the sum of the aggregate number of shares of
outstanding Preferred Shares for which the Auction is conducted and (ii) in the
case of any Special Dividend Period the amount determined by mutual consent of
the Trust and any such Broker-Dealers and shall be based upon a selling
concession that would be applicable to an underwriting of fixed or variable rate
Preferred Shares with a similar final maturity or variable rate dividend period,
respectively, at the commencement of the Dividend Period with respect to such
Auction.

               If the Trust determines to change the rate at which the
Broker-Dealer Fee accrues, the Trust shall mail to the Auction Agent a notice
thereof within two Business Days of such change. Any change in the Broker-Dealer
Fee Rate shall be effective on the Auction Date next succeeding the Auction
Agent's receipt of notice of such change.

SETTLEMENT.


               If any Existing Holder selling Preferred Shares in an Auction
fails to deliver such Preferred Shares (by authorized book-entry), the BD of any
Person that was to have purchased Preferred Shares in such Auction may deliver
to such Person a number of Preferred Shares that is less than the number of
Preferred Shares that otherwise were to be purchased by such Person. In such
event, the number of Preferred Shares to be so delivered shall be



<Page>


determined by BD. Delivery of such lesser number of Preferred Shares shall
constitute good delivery. Upon the occurrence of any such failure to deliver
Preferred Shares, BD shall deliver to the Auction Agent the notice required by
Section 2.3(c)(ii) hereof. Notwithstanding the foregoing provisions of this
Section 2.9(a), any delivery or non delivery of Preferred Shares which
represents any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall
have been notified of such delivery or non-delivery in accordance with the terms
of Section 2.3(c)(ii) hereof. The Auction Agent shall have no duty or liability
with respect to enforcement of this Section 2.9(a).

               Neither the Auction Agent nor the Trust shall have any
responsibility or liability with respect to the failure of an Existing Holder, a
Potential Holder or an Agent Member or any of them to deliver Preferred Shares
or to pay for Preferred Shares sold or purchased pursuant to the Auction
Procedures or otherwise.

               Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event BD is an Existing Holder
with respect to shares of a series of Preferred Shares and the Auction
procedures provide that BD shall be deemed to have submitted a Sell Order in an
Auction with respect to such shares if BD fails to submit an Order in that
Auction with respect to such shares, BD shall have no liability to any Person
for failing to sell such shares pursuant to such a deemed Sell Order if (i) such
shares were transferred by the beneficial owner thereof without notification of
such transfer in compliance with the Auction Procedures or (ii) BD has indicated
to the Auction Agent pursuant to Section 2.2(f) of this Agreement that,
according to BD's records, BD is not the Existing Holder of such shares.

               Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event an Existing Holder or
Beneficial Owner of shares of a series of Preferred Shares with respect to whom
a Broker-Dealer submitted a Bid to the Auction Agent for such shares that was
accepted in whole or in part, or submitted or is deemed to have submitted a Sell
Order for such shares that was accepted in whole or in part, fails to instruct
its Agent Member to deliver such shares against payment therefore, partial
deliveries of Preferred Shares that have been made in respect of Potential
Holders' or Potential Beneficial Owners' Submitted Bids for shares of such
series that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders and Potential Beneficial Owners.

               THE AUCTION AGENT

DUTIES AND RESPONSIBILITIES.


               The Auction Agent is acting solely as agent for the Trust
hereunder and owes no duties, fiduciary or otherwise, to any other Person.

               The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement, the Auction Agent Agreement,
Auction Procedures or the Settlement Procedures against the Auction Agent.

               In the absence of bad faith or negligence on its part, the
Auction Agent shall

<Page>


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 this Agreement. The
Auction Agent shall not be liable for any error resulting from the use or
reliance on a source of information used in good faith and without negligence to
make any determination, calculation or declaration hereunder. The Auction Agent
shall not be liable for any error of judgment made in good faith unless the
Auction Agent shall have been negligent in ascertaining or failing to ascertain
the pertinent facts. In no event shall the Auction Agent be liable for special,
punitive, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Auction Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action.

               The Auction Agent shall not be: (i) required to, and does not,
make any representations or have any responsibilities as to the validity,
accuracy, value or genuineness of any signatures or endorsements, other than its
own; (ii) obligated to take any legal action hereunder that might, in its
judgment, involve any expense or liability, unless it has been furnished with
indemnity satisfactory to the Auction Agent; and (iii) responsible for or liable
in any respect on account of the identity, Trust or rights of any Person (other
than itself and its agents and attorneys) executing or delivering or purporting
to execute or deliver any document under this Agreement or any Broker-Dealer
Agreement.

               (e) The Auction Agent shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control; it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices in the banking
industry to resume performance as soon as practicable under the circumstances.

RIGHTS OF THE AUCTION AGENT.


               The Auction Agent may conclusively rely and shall be fully
protected in acting or refraining from acting upon any communication authorized
by this Agreement and upon any written instruction, notice, request, direction,
consent, report, certificate, share certificate or other instrument, paper or
document believed by it to be genuine. The Auction Agent shall not be liable for
acting upon any communication authorized by this Agreement (including, but not
limited to, any made by telephone, telecopier or other means of electronic
communication acceptable to the parties hereto) which the Auction Agent believes
in good faith to have been given by the Trust or by BD. The Auction Agent may
record telephone communications with BD.

               The Auction Agent may consult with counsel of its own choice, and
the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.

               The Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial liability
in the performance of its duties hereunder.

               The Auction Agent may perform its duties and exercise its rights
hereunder

<Page>


either directly or by or through agents or attorneys and shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it with due care.

               The Auction Agent shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control, it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices in the banking
industry to resume performance as soon as practicable under the circumstances.

AUCTION AGENT'S DISCLAIMER. The Auction Agent makes no representation as to, and
shall have no liability with respect to, the correctness of the recitals in, or
the validity, adequacy or accuracy of, this Agreement, the Auction Agent
Agreement, the Auction Procedures, the offering material used in connection with
the offer and sale of the Preferred Shares or any other agreement or instrument
executed in connection with the transactions contemplated herein or in any
thereof.

               MISCELLANEOUS

TERMINATION. Any party may terminate this Agreement at any time upon five (5)
days' written notice to the other parties, which notice may be given by
facsimile as provided in Section 4.4 hereof. This Agreement shall automatically
terminate upon the redemption of all outstanding Preferred Shares or upon
termination of the Auction Agent Agreement.

               BD represents that it (or if BD does not act as Agent Member, one
of its affiliates) shall make all dividend payments on the Preferred Shares
available in same-day funds on each Dividend Payment Date to customers that use
BD or affiliate as Agent Member.

AGENT MEMBER. BD is, and shall remain for the term of this Agreement, a member
of, or participant in, the Securities Depository (or an affiliate of such a
member or participant).

COMMUNICATIONS. Except for (i) communications authorized to be by telephone
pursuant to this Agreement or the Auction Procedures and (ii) communications in
connection with the Auctions (other than those expressly required to be in
writing), all notices, requests and other communications to any party hereunder
shall be in writing (for the purposes of this Agreement, telecopy or other means
of electronic communication acceptable to the parties shall be deemed to be in
writing) and shall be given to such party, addressed to it, at its address,
telecopy number set forth below and, where appropriate reference the particular
Auction to which such notice relates:

If to BD,                           _________________________
addressed:                          _________________________
                                    _________________________
                                    _________________________
                                    Attention:  _____________
                                    Telephone No.: __________
                                    Facsimile No.: __________
<Page>

If to the Auction           The Bank of New York
Agent, addressed:           5 Penn Plaza
                            13th Floor
                            New York, New York 10001
                            Attention: Dealing and Trading Group - Auction Desk
                            Telephone No.:  212-328-7676
                            Telecopier No.: 212-328-8237
                                            212-328-8238
                                            212-328-8239

If to the Trust,            BlackRock Insured Municipal Income Trust
addressed:                  c/o BlackRock Financial Management, Inc.
                            40 East 52nd Street
                            New York, New York   10022
                            Attention:  Treasurer
                            Telephone No.: 212-409-3200
                            Facsimile No.: 212-409-3210

or such other address or facsimile number as such party may hereafter specify
for such purpose by notice to the other parties. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer, on behalf of the
Auction Agent by an Authorized Officer and on behalf of the Trust by an
Authorized Trust Officer. Telephone communications may be recorded.

ENTIRE AGREEMENT. This Agreement contains the entire agreement between the
parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties relating to the subject matter hereof.

BENEFITS. Nothing in this Agreement, express or implied, shall give to any
person, other than the Auction Agent, the Trust and BD and their respective
successors and permitted assigns, any benefit of any legal or equitable right,
remedy or claim under this Agreement.

AMENDMENT; WAIVER.

               This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of each of the
parties hereto.

               Failure of any party to this Agreement to exercise any right or
remedy hereunder in the event of a breach of this Agreement by any other party
shall not constitute a waiver of any such right or remedy with respect to any
subsequent breach.

SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the respective successors and permitted
assigns of each of the parties hereto. This Agreement may not be assigned by any
party hereto absent the prior written consent of the other parties.

<Page>


SEVERABILITY. If any clause, provision or section of this Agreement shall be
ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any remaining clause, provision or section hereof.

EXECUTION IN COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY PROVISIONS
THEREOF RELATING TO CONFLICTS OF LAW, OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF NEW YORK).



<Page>



         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.

                              THE BANK OF NEW YORK
                                as Auction Agent

                              By:
                              Name: Joseph Panepinto
                              Title: Vice President



                              SALOMON SMITH BARNEY INCORPORATED
                                as Broker-Dealer

                              By:
                                   Name:
                                   Title:




<Page>



                                                                       Exhibit A
                                                                To BROKER-DEALER
                                                                       AGREEMENT

                                AUCTION BID FORM
                   (Submit only one Order on this Order Form)
                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
     Municipal Auction Rate Cumulative Preferred Shares ("Preferred Shares")

To:   The Bank of New York                            Date of Auction __________
      Corporate Trust Administration                  Series of Preferred Shares
      385 Rifle Camp Road- 1st Floor                  (indicate by
      West Patterson, New Jersey  07424               Number Designation)
      Attention:  Dealing and Trading Group           _______

The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:

               Name of Bidder: __________________________________

               Bidder placed the Order listed below covering the number of
               shares indicated (complete only one blank):

               _________________ number of Preferred Shares now held by

               Bidder (an Existing Holder), and the Order is a (check one):

                              |_|  Hold Order; or

                              |_|  Bid at a rate of ____%; or

                              |_|  Sell Order;

- -- or -

               _________________ number of Preferred Shares not now held by
               Bidder (a Potential Holder), and the Order is a Bid at a rate of
               ______%

Notes:

(1)            If submitting more than one Bid for one Bidder, use additional
               Order Forms.

(2)            If one or more Bids covering in the aggregate more than the
               outstanding number of Preferred Shares held by any Existing
               Holder are submitted, such Bids shall be considered valid in the
               order of priority set forth in the Auction Procedures.

(3)            A Hold or Sell Order may be placed only by an Existing Holder
               covering a number of Preferred Shares not greater than the number
               of Preferred Shares currently held by such Existing Holder.

(4)            Potential Holders may make Bids only, each of which must specify
               a rate. If more than one Bid is submitted on behalf of any
               Potential Holder, each Bid submitted shall be a separate Bid with
               the rate specified.

(5)            Bids may contain no more than three figures to the right of the
               decimal point (.001 of 1%).

(6)            An Order must be submitted in whole Preferred Shares with an
               aggregate liquidation preference of $25,000.

                                  Name of Broker-Dealer:     ___________________
                                  By:      __________________________


<Page>




                                                                       Exhibit B
                                                                To BROKER-DEALER
                                                                       AGREEMENT

                 (To be used only for transfers made other than
                             pursuant to an Auction)

                                  TRANSFER FORM

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
     Municipal Auction Rate Cumulative Preferred Shares ("Preferred Shares")

                          Series _____ Preferred Shares
                        (indicate by Number Designation)

We are (check one):

                  |_|      the Existing Holder named below; or

                  |_|      the Broker-Dealer for such Existing Holder; or

                  |_|      the Agent Member for such Existing Holder.

               We hereby notify you that such Existing Holder will transfer ___
Preferred Shares to_________________________



                                          BLACKROCK INSURED MUNICIPAL
                                          INCOME TRUST
                                          --------------------------------------
                                          By: _______________________________
                                               Name:
                                               Title:

                                          --------------------------------------
                                          (Name of Existing Holder)

                                          --------------------------------------
                                          (Name of Broker-Dealer)

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

                                          (Name of Agent Member)
                                          --------------------------------------
                                          By: _______________________________
                                               Name:
                                               Title:



<Page>




                                                                       Exhibit C
                                                                To BROKER-DEALER
                                                                       AGREEMENT

                    (To be used only for failures to deliver
                  Preferred Shares sold pursuant to an Auction)

                         NOTICE OF A FAILURE TO DELIVER

                    BLACKROCK INSURED MUNICIPAL INCOME TRUST
     Municipal Auction Rate Cumulative Preferred Shares ("Preferred Shares")

                          Series _____ Preferred Shares
                        (indicate by Number Designation)

Complete either I. or II.

I.             We are a Broker-Dealer for ______________ (the "Purchaser"),
               which purchased ____ Preferred Shares in the Auction held on
               __________________ from the seller of such Preferred Shares.

II.            We are a Broker-Dealer for _____________ (the "Seller"), which
               sold ____ Preferred Shares in the Auction held on
               ____________________ to the purchaser of such Preferred Shares.

We hereby notify you that (check one):

__________        the Seller failed to deliver such Preferred Shares to the
                  Purchaser; or

__________        the Purchaser failed to make payment to the Seller upon
                  delivery of such Preferred Shares.


                                      Name:  ________________________________
                                                (Name of Broker-Dealer)



                                      ------------------------------------------
                                      By:  __________________________________
                                             Printed Name:
                                             Title:




<Page>


     Capitalized terms used in this letter, unless otherwise defined herein,
shall have the meanings set forth in the Offering Documents.

                                              (Name of Purchaser)


                                              By: ______________________________
                                                   Name:
                                                   Title:

                                              Address: _________________________



Dated:


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(K)(4)
<SEQUENCE>7
<FILENAME>a2095632zex-99_k4.txt
<DESCRIPTION>EXHIBIT 99.(K)(4)
<TEXT>
<Page>

- --------------------------------------------------------------------------------
              BOOK-ENTRY-ONLY AUCTION-RATE/MONEY MARKET PREFERRED/
                       AND REMARKETED PREFERRED SECURITIES
- --------------------------------------------------------------------------------
                            LETTER OF REPRESENTATIONS

                  [To be Completed by Issuer and Trust Company]

                  ---------------------------------------------
                                [Name of Issuer]

                  ---------------------------------------------
                             [Name of Trust Company]

                                                                  --------------
                                                                      [Date]
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street 49th Floor
New York, NY 10041-0099

                  Re:

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

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

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

                  [Issue description, including CUSIP number (the "Securities")]
Ladies and Gentlemen:

     This letter sets forth our understanding with respect to certain matters
relating to the Securities. Trust Company shall act as transfer agent,
registrar, dividend disbursing agent, redemption agent or other such agent with
respect to the Securities. The Securities have been issued pursuant to a
prospectus, private placement memorandum, or other such document authorizing the
issuance of the Securities dated______________________________ (the "Document").
____________________ is distributing the Securities through the Depository Trust
   ["Underwriter/
  Placement Agent"]

<Page>

Company ("DTC").

     To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer and
Trust Company make the following representations to DTC:

     1. Prior to closing on the Securities on____________________ there shall be
deposited with DTC one or more Security certificates registered in the name of
DTC's nominee, Cede & Co., which represents 100% of the offering value of the
Securities. Said certificate(s) shall remain in DTC's custody as provided in the
Document. If, however, the aggregate principal amount of the Securities exceeds
$400 million, one certificate shall be issued with respect to each $400 million
of principal amount and an additional certificate shall be issued with respect
to any remaining principal amount. Each Security certificate shall bear the
following legend:

                    Unless this certificate is presented by an authorized
               representative of The Depository Trust Company, a New York
               corporation ("DTC"), to Issuer or its agent for registration of
               transfer, exchange, or payment, and any certificate issued is
               registered in the name of Cede & Co. or in such other name as is
               requested by an authorized representative of DTC (and any payment
               is made to Cede & Co. or to such other entity as is requested by
               an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR
               OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
               WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
               an interest herein.

     2. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its participants ("Participants") or to any person having an
interest in the Securities any information contained in the Security
certificate(s); and (b) acknowledges that neither DTC's Participants nor any
person having an interest in the Securities shall be deemed to have notice of
the provisions of the Security certificate(s) by virtue of submission of such
certificate(s) to DTC.

     3. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer shall establish a record date for such purposes (with
no provision for revocation of consents or votes by subsequent holders) and
shall send notice of such record date to DTC no fewer than 15 calendar days in
advance of such record date. Notices to DTC pursuant to this Paragraph by
telecopy shall be directed to DTC's Reorganization Department, Proxy Unit at
(212) 855-5181 or (212) 855-5182. If the party sending the notice does not
receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (212) 855-5202. Notices to DTC pursuant to
this Paragraph, by mail or by any other means, shall be sent to:
                           Supervisor, Proxy Unit
                           Reorganization Department
                           The Depository Trust Company
                           55 Water Street 50th Floor
                           New York, NY 10041-0099


                                      -2-

<Page>

     4. In the event of a full or partial redemption of the Secunities, Issuer
or Trust Company shall send a notice to DTC specifying: (a) the number of
Securities to be redeemed; and (b) the date such notice is to be distributed to
Security holders (the "Publication Date"). Such notice shall be sent to DTC by a
secure means (E.G., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before or, if
possible, two business days before the Publication Date. Issuer or Trust Company
shall forward such notice either in a separate secure transmission for each
CUSIP number or in a secure transmission for multiple CUSIP numbers (if
applicable) which includes a manifest or list of each CUSIP number submitted in
that transmission. (The party sending such notice shall have a method to verify
subsequently the use of such means and the timeliness of such notice.) The
Publication Date shall be no fewer than 30 days nor more than 60 days prior to
the redemption date. Notices to DTC pursuant to this Paragraph by telecopy shall
be directed to DTC's Call Notification Department at (516) 227-4164 or
(516) 227-4190. If the party sending the notice does not receive a telecopy
receipt from DTC confirming that the notice has been received, such party
shall telephone (516) 227-4070. Notices to DTC pursuant to this Paragraph, by
mail or by any other means, shall be sent to:

                     Manager, Call Notification Department
                     The Depository Trust Company
                     711 Stewart Avenue
                     Garden City, NY 11530-4719

     5. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust
Company to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions by telecopy shall be directed
to DTC's Reorganization Department at (212) 855-5488. If the party sending the
notice does not receive a telecopy receipt from DTC confirming that the notice
has been received, such party shall telephone (212) 855-5290. Notices to DTC
pursuant to this Paragraph, by mail or by any other means, shall be sent to:
                       Manager, Reorganization Department
                       Reorganization Window
                       The Depository Trust Company
                       55 Water Street 50th Floor
                       New York, NY 10041-0099

     6. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.

     7. The Document indicates that the dividend rate for the Securities may
vary from time to time. Absent other existing arrangements with DTC, Issuer or
Trust Company shall give DTC notice of each such change in the dividend rate, on
the same day that the new rate is determined, by telephoning DTC's Dividend
Announcement Section at (212) 855-4550, or by telecopy sent to (212) 855-4555.
Such verbal or telecopy notice shall be followed by prompt written confirmation
sent by

                                      -3-

<Page>

a secure means (E.G., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before or, if
possible, two business days before the Publication Date. Issuer or Agent shall
forward such notice either in a separate secure transmission for each CUSIP
number or in a secure transmission for multiple CUSIP numbers (if applicable)
which includes a manifest or list of each CUSIP number submitted in that
transmission. (The party sending such notice shall have a method to verify
subsequently the use and timeliness of such notice.) Notices to DTC pursuant to
this Paragraph, by mail or by any other means, shall be sent to:
                             Manager, Announcements
                             Dividend Department
                             The Depository Trust Company
                             55 Water Street 25th Floor
                             New York, NY 10041-0099

     8. The Document indicates that each purchaser of Securities must sign a
purchaser's letter which contains provisions restricting transfer of the
Securities purchased. Issuer and Trust Company acknowledge that as long as Cede
& Co. is the sole record owner of the Securities, Cede & Co. shall be entitled
to all voting rights applicable to the Securities and to receive the full amount
of all dividends, liquidation proceeds, and redemption proceeds payable with
respect to the Securities, even if the credits of Securities to the DTC accounts
of any DTC Participant result from transfers or failures to transfer in
violation of the provisions of the purchaser's letter. Issuer and Trust Company
acknowledge that DTC shall treat any Participant having Securities credited to
its DTC accounts as entitled to the full benefits of ownership of such
Securities. Without limiting the generality of the preceding sentence, Issuer
and Trust Company acknowledge that DTC shall treat any Participant having
Securities credited to its DTC accounts as entitled to receive dividends,
distributions, and voting rights, if any, in respect of Securities and, subject
to Paragraphs 12 and 13, to receive certificates evidencing Securities if such
certificates are to be issued in accordance with Issuer's certificate of
incorporation. (The treatment by DTC of the effects of the crediting by it of
Securities to the accounts of Participants described in the preceding two
sentences shall not affect the rights of Issuer, participants in auctions
relating to the Securities, purchasers, sellers, or holders of Securities
against any Participant.) DTC shall not have any responsibility to ascertain
whether any transfer of Securities is made in accordance with the provisions of
the purchaser's letter.

     9. Issuer or Trust Company shall provide a written notice of dividend
payment and distribution information to DTC as soon as the information is
available. Issuer or Trust Company shall provide this information to DTC
electronically, as previously arranged by Issuer or Trust Company and DTC, as
soon as the information is available. If electronic transmission has not been
arranged, absent any other arrangements between Issuer or Trust Company and DTC,
such information shall be sent by telecopy to DTC's Dividend Department at
(212) 855-4555 or (212) 855-4556, and receipt of such notices shall be
confirmed by telephoning (212) 855-4550. Notices to DTC pursuant to this
Paragraph, by mail or by any other means, shall be addressed as indicated in
Paragraph 7.

                                      -4-

<Page>

     10. Dividend payments and distributions shall be received by Cede & Co., as
nominee of DTC, or its registered assigns, in same-day funds no later than 2:30
p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m.
(Eastern Time) on the payment date, dividend and distribution payments due Trust
Company, or at such earlier time as may be required by Trust Company to
guarantee that DTC shall receive payment in same-day funds no later than 2:30
p.m. (Eastern Time) on the payment date. Absent any other arrangements between
Issuer or Trust Company and DTC, such funds shall be wired to the Dividend
Deposit Account number that will be stamped on the signature page hereof at the
time DTC executes this Letter of Representations.

     11. Issuer or Trust Company shall provide DTC, no later than 12:00 noon
(Eastern Time) on each payment date, automated notification of CUSIP-level
detail. If the circumstances prevent the funds paid to DTC from equaling the
dollar amount associated with the detail payments by 12:00 noon (Eastern
Time), Issuer or Trust Company must provide CUSIP-level reconciliation to DTC
no later than 2:30 p.m. (Eastern Time). Reconciliation must be provided by
either automated means or written format. Such reconciliation notice, if sent
by telecopy, shall be directed to DTC's Dividend Department at (212) 855-4633,
and receipt of such reconciliation notice shall be confirmed by telephoning
(212) 855-4430.

     12. Redemption payments shall be received by Cede & Co., as nominee of DTC,
or its registered assigns, in same-day funds no later than 2:30 p.m. (Eastern
Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time) on the
payment date all such redemption payments due Trust Company, or at such earlier
time as required by Trust Company to guarantee that DTC shall receive payment in
same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date.
Absent any other arrangements between Issuer or Trust Company and DTC, such
funds shall be wired to the Redemption Deposit Account number that will be
stamped on the signature page hereof at the time DTC executes this Letter of
Representations.

     13. Reorganization payments and CUSIP-level detail resulting from corporate
actions (such as tender offers, remarketings, or mergers) shall be received by
Cede & Co., as nominee of DTC, or its registered assigns, in same-day funds no
later than 2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by
1:00 p.m. (Eastern Time) on the payment date all such reorganization payments
due Trust Company, or at such earlier time as required by Trust Company to
guarantee that DTC shall receive payment in same-day funds no later than 2:30
p.m. (Eastern Time) on the payment date. Absent any other arrangements between
Issuer or Trust Company and DTC, such funds shall be wired to the Reorganization
Deposit Account number that will be stamped on the signature page hereof at the
time DTC executes this Letter of Representations.

     14. DTC may direct Issuer or Trust Company to use any other number or
address as the number or address to which notices or payments may be sent.

     15. In the event of a redemption acceleration, or any similar transaction
(E.G., tender made and accepted in response to Issuer's or Trust Company's
invitation) necessitating a reduction in the number of Securities outstanding,
or an advance refunding of part of the Securities outstanding DTC, in its
discretion: (a) may request Issuer or Trust Company to issue and authenticate a
new Security certificate; or (b) may make an appropriate notation on the
Security certificate indicating the date and amount of such reduction in the
number of Securities outstanding, except in the case of final

                                     -5-

<Page>

redemption, in which case the certificate will be presented to Issuer or Trust
Company prior to payment, if required

     16. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trust
Company shall notify DTC of the availability of certificates. In such event,
Issuer or Trust Company shall issue, transfer, and exchange certificates in
appropriate amounts, as required by DTC and others.

     17. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trust Company (at which time DTC will confirm with Issuer or Trust Company
the aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request, Issuer and Trust Company shall cooperate fully
with DTC by taking appropriate action to make available one or more separate
certificates evidencing Securities to any DTC Participant having Securities
credited to its DTC accounts.

     18. Issuer hereby authorizes DTC to provide to Trust Company listings of
Participants' holdings, known as Security Position Listings ("SPLs") with
respect to the Securities from time to time at the request of Trust Company.
Issuer also authorizes DTC, in the event of a partial redemption of Securities,
to provide Trust Company, upon request, with the names of those Participants
whose positions in Securities have been selected for redemption by DTC. DTC will
use its best efforts to notify Trust Company of those Participants whose
positions in Securities have been selected for redemption by DTC. Issuer
authorizes and instructs Trust Company to provide DTC with such signatures,
examples of signatures, and authorizations to act as may be deemed necessary or
appropriate by DTC to permit DTC to discharge its obligations to its
Participants and appropriate regulatory authorities. DTC charges a customary fee
for such SPLs. This authorization, unless revoked by Issuer, shall continue with
respect to the Securities while any Securities are on deposit at DTC, until and
unless Trust Company shall no longer be acting. In such event, Issuer shall
provide DTC with similar evidence, satisfactory to DTC, of the authorization of
any successor thereto so to act. Requests for SPLs shall be directed to the
Proxy Unit of DTC's Reorganization Department at (212) 855-5181 or
(212) 855-5182. Receipt of such requests shall be confirmed by telephoning
(212) 855-5202. Delivery by mail or by any other means, with respect to such
SPL request, shall be directed to the address indicated in Paragraph 3.

     19. Nothing herein shall be deemed to require Trust Company to advance
funds on behalf of Issuer.

     20. This Letter of Representations may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts together shall constitute but one and the same
instrument.

     21. This Letter of Representations shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
principles of conflicts of law.

     22. The sender of each notice delivered to DTC pursuant to this Letter of
Representations is responsible for confirming that such notice was properly
received by DTC.

                                      -6-

<Page>

     23. Issuer recognizes that DTC does not in any way undertake to, and shall
not have any responsibility to, monitor or ascertain the compliance of any
transactions in the Securities with the following, as amended from time to time:
(a) any exemptions from registration under the Securities Act of 1933; (b) the
Investment Company Act of 1940; (c) the Employee Retirement Income Security Act
of 1974; (d) the Internal Revenue Code of 1986; (e) any rules of any
self-regulatory organizations (as defined under the Securities Exchange Act of
1934); or (f) any other local, state, or federal laws or regulations thereunder.

     24. Issuer and Trust Company shall comply with the applicable requirements
stated in DTC's Operational Arrangements, as they may be amended from time to
time. DTC's Operational Arrangements are posted on DTC's website at
"www.DTC.org."

     25. The following rider(s), attached hereto, are hereby incorporated into
this Letter of Representations:

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

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

                                      -7-

<Page>

NOTES:

A. IF THERE IS A TRUST COMPANY (AS DEFINED IN THIS LETTER OF REPRESENTATIONS),
TRUST COMPANY, AS WELL AS ISSUER, MUST SIGN THIS LETTER. IF THERE IS NO TRUST
COMPANY, IN SIGNING THIS LETTER ISSUER ITSELF UNDERTAKES TO PERFORM ALL OF THE
OBLIGATIONS SET FORTH HEREIN.

B. SCHEDULE B CONTAINS STATEMENTS THAT DTC BELIEVES ACCURATELY DESCRIBE DTC, THE
METHOD OF EFFECTING BOOK-ENTRY TRANSFERS OF SECURITIES DISTRIBUTED THROUGH DTC,
AND CERTAIN RELATED MATTERS.

                         Very truly yours,


                         ------------------------------------------------------
                                               [Issuer]

                         By:

                         ------------------------------------------------------
                                    [Authorized Officer's Signature]
                         ------------------------------------------------------
                                           [Trust Company]

                         By:

                         ------------------------------------------------------
                                     [Authorized Officer's Signature]
Received and Accepted:
THE DEPOSITORY TRUST COMPANY


cc:     Underwriter
        Underwriter's Counsel


                                      -8-

<Page>

                                                                      SCHEDULE A
                                                                     -----------

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

- --------------------------------------------------------------------------------
                                [Describe Issue]


CUSIP Number                       Share Total                  Value ($Amount)
- ------------                       -----------                  ---------------


                                      -9-

<Page>

SCHEDULE B
- ----------

                        SAMPLE OFFERING DOCUMENT LANGUAGE
                       DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
                       -----------------------------------

(Prepared by DTC--bracketed material may be applicable only to certain issues)

     1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities will
be issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate will
be issued for [each issue of] the Securities, [each] in the aggregate principal
amount of such issue, and will be deposited with DTC. [If, however, the
aggregate principal amount of [any] issue exceeds $400 million, one certificate
will be issued with respect to each $400 million of principal amount and an
additional certificate will be issued with respect to any remaining principal
amount of such issue.]

     2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Direct Participants")
deposit with DTC. DTC also facilitates the settlement among Direct Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Direct
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks, and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The Rules
applicable to DTC and its Direct and Indirect Participants are on file with the
Securities and Exchange Commission.

     3. Purchases of Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Securities, except in the event that use of the book-entry system
for the Securities is discontinued.


                                      -10-

<Page>

     4. To facilitate subsequent transfers, all Securities deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or such other name as may be requested by an authorized
representative of DTC. The deposit of Securities with DTC and their registration
in the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Secunities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Securities are credited, which may or may
not be the Beneficial Owners. The Direct and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.

     5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. [Beneficial Owners of Securities may wish to
take certain steps to augment transmission to them of notices of significant
events with respect to the Securities, such as redemptions, tenders, defaults,
and proposed amendments to the security documents. Beneficial Owners of
Securities may wish to ascertain that the nominee holding the Securities for
their benefit has agreed to obtain and transmit notices to Beneficial Owners, or
in the alternative, Beneficial Owners may wish to provide their names and
addresses to the registrar and request that copies of the notices be provided
directly to them.]

     [6. Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.]

     7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or
vote with respect to the Securities. Under its usual procedures, DTC mails an
Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).

     8. Redemption proceeds, distributions, and dividend payments on the
Securities will be made to Cede & Co., or such other nominee as may be requested
by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts, upon DTC's receipt of funds and corresponding detail
information from Issuer or Agent on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of DTC, Agent, or Issuer, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, and dividends to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the
responsibility of Issuer or Agent, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.


                                      -11-

<Page>

     [9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to [Tender/Remarketing] Agent,
and shall effect delivery of such Securities by causing the Direct Participant
to transfer the Participant's interest in the Securities, on DTC's records, to
[Tender/Remarketing] Agent. The requirement for physical delivery of Securities
in connection with an optional tender or a mandatory purchase will be deemed
satisfied when the ownership rights in the Securities are transferred by Direct
Participants on DTC's records and followed by a book-entry credit of tendered
Securities to [Tender/Remarketing] Agent's DTC account.]

     10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Agent. Under such circumstances, in the event that a successor securities
depository is not obtained, Security certificates are required to be printed and
delivered.

     11. Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.

     12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.


                                      -12-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.L
<SEQUENCE>8
<FILENAME>a2095632zex-99_l.txt
<DESCRIPTION>EXHIBIT 99.L
<TEXT>

<Page>


                    SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
                                FOUR TIMES SQUARE
                             NEW YORK, NY 10036-6522

                                 (212) 735-3000

                                December 6, 2002


BlackRock Insured
Municipal Income Trust
40 East 52nd Street
New York, New York 10022

                           Re:      BlackRock Insured Municipal Income Trust
                                    REGISTRATION STATEMENT ON FORM N-2

Ladies and Gentlemen:

     We have acted as special counsel to BlackRock Insured Municipal Income
Trust, a statutory trust (the "Trust") created under the Delaware Statutory
Trust Act (the "Delaware Statutory Trust Act"), in connection with the public
offering by the Trust of up to 3,053 shares of the Trust's Series T7 Preferred
Shares of Beneficial Interest, 3,053 shares of the Trust's Series R7 Preferred
Shares of Beneficial Interest and 3,053 shares of the Trust's Series F7
Preferred Shares of Beneficial Interest, in each case having liquidation
preference $25,000 per share (individually, "Series of Preferred Shares" and
together, the "Preferred Shares").

     This opinion is being furnished in accordance with the requirements of Item
24 of the Form N-2 Registration Statement under the Securities Act of 1933, as
amended (the "1933 Act"), and the Investment Company Act of 1940, as amended
(the "1940 Act").


     In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Notification
of


<Page>


BlackRock Insured
Municipal Income Trust
December 6, 2002
Page 2

Registration of the Trust as an investment company under the 1940 Act, on
Form N-8A, dated August 19, 2002 as filed with the Securities and Exchange
Commission (the "Commission") on August 19, 2002, (ii) the Registration
Statement of the Trust on Form N-2 (File Nos. 333-100951 and 811-21178), as
filed with the Commission on November 1, 2002 under the 1933 Act and the 1940
Act, Pre-Effective Amendment No. 1 thereto, as filed with the Commission on
December 5, 2002, and Pre-Effective Amendment No. 2 to be filed with the
Commission on the date hereof, under the 1933 Act (such Registration
Statement, as so amended and proposed to be amended, being hereinafter
referred to as the "Registration Statement"); (iii) the form of the
Underwriting Agreement (the "Underwriting Agreement") proposed to be entered
into between the Trust, as issuer, BlackRock Advisors, Inc., as investment
adviser to the Trust, BlackRock Financial Management, Inc., as investment
sub-adviser to the Trust, and Salomon Smith Barney Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as representatives of the several
underwriters named therein (the "Underwriters"), filed as an exhibit to the
Registration Statement; (iv) a specimen certificate representing each Series
of Preferred Shares; (v) the Corrected Certificate of Trust, as filed with
the Secretary of State of Delaware, and the Amended and Restated Agreement
and Declaration of Trust of the Trust, as currently in effect; (vi) the
Statement of Preferences setting forth the rights, powers, terms and
preferences of each Series of Preferred Shares; (vii) the Amended and
Restated By-Laws of the Trust, as currently in effect; (viii) certain
resolutions of the Board of Trustees of the Trust relating to the creation,
issuance and sale of the Preferred Shares and related matters and (ix)
certain resolutions of the shareholders of the Trust relating to the creation
of each Series of Preferred Shares. We also have examined originals or
copies, certified or otherwise identified to our satisfaction, of such
records of the Trust and such agreements, certificates of public officials,
certificates of officers or other representatives of the Trust and others,
and such other documents, certificates and records as we have deemed
necessary or appropriate as a basis for the opinions set forth herein.

     In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such copies. In making our examination
of documents, we have assumed that the parties thereto, other than the Trust,
had or will have the power, corporate or other, to enter into and perform all
obligations

<Page>

BlackRock Insured
Municipal Income Trust
December 6, 2002
Page 3


thereunder and have also assumed the due authorization by all requisite
action, corporate or other, and execution and delivery by such parties of
such documents and the validity and binding effect thereof on such parties.
In rendering the opinion set forth below, we have assumed that the share
certificates representing each Series of Preferred Shares will conform to the
specimen examined by us and will have been manually signed by an authorized
officer of the transfer agent and registrar for the Preferred Shares and
registered by such transfer agent and registrar. We have also assumed that
the Underwriting Agreement will be executed in substantially the form
reviewed by us. As to any facts material to the opinions expressed herein
which we have not independently established or verified, we have relied upon
statements and representations of officers and other representatives of the
Trust and others.

     Members of our firm are admitted to the bar in the State of Delaware and we
do not express any opinion as to the laws of any jurisdiction other than the
Delaware Statutory Trust Act.

     Based upon and subject to the foregoing, we are of the opinion that when
(i) the Registration Statement becomes effective; (ii) the Underwriting
Agreement has been duly executed and delivered; (iii) certificates
representing the Preferred Shares in the form of the specimen certificate
examined by us have been manually signed by an authorized officer of the
transfer agent and registrar for the Preferred Shares and registered by such
transfer agent and registrar; and (iv) the Preferred Shares have been
delivered to and paid for by the Underwriters at a price per share not less
than the per share par value of the Preferred Shares as contemplated by the
Underwriting Agreement, the issuance and sale of the Preferred Shares will
have been duly authorized and the Preferred Shares will be validly issued,
fully paid and nonassessable (except as provided in the last sentence of
Section 3.8 of the Agreement and Declaration of Trust)

     We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. We also consent to the reference to our
firm under the caption "Legal Opinions" in the Registration Statement. In giving
this consent, we do not thereby admit that we are included in the category of
persons whose consent is required under Section 7 of the 1933 Act or the rules
and regulations of the Commission.

                                    Very truly yours,


                                    /s/ Skadden, Arps, Slate, Meagher & Flom LLP


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.N
<SEQUENCE>9
<FILENAME>a2095632zex-99_n.txt
<DESCRIPTION>EXHIBIT 99.N
<TEXT>

<Page>

               INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Pre-Effective Amendment No. 2 to the
Registration Statement of BlackRock Insured Municipal Income Trust
(Registration No. 333-100951) of our report dated October 25, 2002, relating
to the financial statements of BlackRock Insured Municipal Income Trust as of
October 21, 2002 and for the period then ended in the Statement of Additional
Information which is part of such registration statement.

We also consent to the reference to our Firm under the heading "Experts" in
the Registration Statement.

/s/ Deloitte & Touche LLP

Boston, Massachusetts
December 6, 2002

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