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<SEC-DOCUMENT>0000950130-01-503252.txt : 20010726
<SEC-HEADER>0000950130-01-503252.hdr.sgml : 20010726
ACCESSION NUMBER:		0000950130-01-503252
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		4
FILED AS OF DATE:		20010725

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BLACKROCK NEW YORK MUNICIPAL INCOME TRUST
		CENTRAL INDEX KEY:			0001137390
		STANDARD INDUSTRIAL CLASSIFICATION:	 []

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		
		SEC FILE NUMBER:	333-58222
		FILM NUMBER:		1689188

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		
		SEC FILE NUMBER:	811-10337
		FILM NUMBER:		1689189

	BUSINESS ADDRESS:	
		STREET 1:		345 PARK AVE
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10154
		BUSINESS PHONE:		2127545567

	MAIL ADDRESS:	
		STREET 1:		345 PARK AVE
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10154
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>dn2a.txt
<DESCRIPTION>BLACKROCK NEW YORK MUNICIPAL INCOME TRUST
<TEXT>

<PAGE>


   As filed with the Securities and Exchange Commission on July 25, 2001


                                       Securities Act Registration No. 333-58222
                                   Investment Company Registration No. 811-10337

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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM N-2

            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933          [X]

                                                                             [X]
                       Pre-Effective Amendment No. 3

                          Post-Effective Amendment No.                       [_]
                                     and/or
                          REGISTRATION STATEMENT UNDER
                       THE INVESTMENT COMPANY ACT OF 1940                    [X]

                                                                             [X]
                              AMENDMENT NO. 3


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

                   BlackRock New York 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)

                        Ralph L. Schlosstein, President
                   BlackRock New York Municipal Income Trust
                                345 Park Avenue
                            New York, New York 10154
                    (Name and Address of Agent for Service)

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

                                   Copies to:

      Michael K. Hoffman, Esq.                   Cynthia G. Cobden, Esq.
Skadden, Arps, Slate, Meagher & Flom           Simpson Thacher & Bartlett
                 LLP                              425 Lexington Avenue
          Four Times Square                     New York, New York 10017
      New York, New York 10036

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


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

        CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<TABLE>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<CAPTION>
                                                Proposed         Proposed       Amount of
  Title of Securities       Amount Being    Maximum Offering Maximum Aggregate Registration
    Being Registered         Registered      Price per Unit   Offering Price       Fee
- ---------------------------------------------------------------------------------------------
<S>                       <C>               <C>              <C>               <C>
Common Shares, $.001 par
 value..................  12,666,666 shares      $15.00        $190,000,000      $47,500(/1/)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>




(/1/)$15,000 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(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section
8(a), may determine.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

                   BLACKROCK NEW YORK MUNICIPAL INCOME TRUST

                             CROSS REFERENCE SHEET

                               Part A--Prospectus


<TABLE>
<CAPTION>
             Items in Part A of Form N-2                  Location in Prospectus
             ---------------------------                  ----------------------
 <C>         <S>                                          <C>
 Item 1.      Outside Front Cover......................   Cover Page

 Item 2.      Inside Front and Outside Back
              Cover Page...............................   Cover Page

 Item 3.      Fee Table and Synopsis...................   Prospectus Summary;
                                                          Summary of Trust
                                                          Expenses

 Item 4.      Financial Highlights.....................   Not Applicable

 Item 5.      Plan of Distribution.....................   Cover Page; Prospectus
                                                          Summary; Underwriting

 Item 6.      Selling Shareholders.....................   Not Applicable

 Item 7.      Use of Proceeds..........................   Use of Proceeds; The
                                                          Trust's Investments

 Item 8.      General Description of the
              Registrant...............................   The Trust; The Trust's
                                                          Investments; Risks;
                                                          Description of Shares;
                                                          Certain Provisions in
                                                          the Declaration of
                                                          Trust

 Item 9.      Management...............................   Management of the
                                                          Trust; Custodian and
                                                          Transfer Agent
 Item 10.     Capital Stock, long-term
              Debt, and Other Securities...............   Description of Shares;
                                                          Distributions;
                                                          Dividend Reinvestment
                                                          Plan; Certain
                                                          Provisions in the
                                                          Declaration of Trust;
                                                          Tax Matters
 Item 11.     Defaults and Arrears on
              Senior Securities........................   Not Applicable

 Item 12.     Legal Proceedings........................   Legal Opinions

 Item 13.     Table of Contents of the
              Statement of 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;
                                                          Portfolio Transactions

 Item 18.     Management...............................   Management of the
                                                          Trust; Portfolio
                                                          Transactions

 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

 Item 22.     Tax Status...............................   Tax Matters;
                                                          Distributions

 Item 23.     Financial Statements.....................   Report of Independent
                                                          Auditors

                           Part C--Other Information

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


                                       1
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Prospectus is not complete and may be changed. We may +
+not sell these securities until the Registration Statement filed with the     +
+Securities and Exchange Commission is effective. This Prospectus is not an    +
+offer to sell these securities and is not soliciting an offer to buy these    +
+securities in any state where the offer or sale is not permitted.             +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

                SUBJECT TO COMPLETION, DATED JULY 25, 2001


PROSPECTUS
                                                             [LOGO OF BLACKROCK]
                                4,000,000 Shares

                   BlackRock New York Municipal Income Trust

                                 Common Shares

                                $15.00 per share

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

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

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


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

                                   --------

  Investing in the common shares involves certain risks. See "Risks" on page 18
of this prospectus.

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

                                   --------
<TABLE>
<CAPTION>
                                                                 Per Share Total
                                                                 --------- -----
       <S>                                                       <C>       <C>
       Public Offering Price....................................  $15.00   $
       Sales Load...............................................  $ 0.675  $
       Proceeds, before expenses, to the Trust..................  $14.325  $
</TABLE>

  The underwriters expect to deliver the common shares to purchasers on or
about July  , 2001.

                                   --------

Salomon Smith Barney                                         Merrill Lynch & Co.
A.G. Edwards & Sons, Inc.                                  Prudential Securities
                                  UBS Warburg
Gruntal & Co., L.L.C.                                              Raymond James


July  , 2001.
<PAGE>

   You should read the prospectus, which contains important information about
the Trust, before deciding whether to invest and retain it for future
reference. A Statement of Additional Information, dated July  , 2001,
containing additional information about the Trust, has been filed with the
Securities and Exchange Commission and is incorporated by reference in its
entirety into this prospectus. You may request a free copy of the Statement of
Additional Information, the table of contents of which is on page 37 of this
prospectus, by calling (888) 825-2257 or by writing to the Trust, or obtain a
copy (and other information regarding the Trust) from the Securities and
Exchange Commission web site (http://www.sec.gov).

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

   The underwriters named in this prospectus may purchase up to     additional
common shares at the public offering price within 45 days from the date of this
prospectus to cover over-allotments.

                                       2
<PAGE>

   You should rely only on the information contained or incorporated by
reference in this prospectus. The Trust has not authorized anyone to provide
you with different information. The Trust is 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 than the date on the front of this prospectus.

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

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Prospectus Summary.........................................................   4
Summary of Trust Expenses .................................................  10
The Trust..................................................................  12
Use of Proceeds ...........................................................  12
The Trust's Investments ...................................................  12
Preferred Shares and Leverage .............................................  16
Risks .....................................................................  18
How the Trust Manages Risk ................................................  21
Management of the Trust ...................................................  22
Net Asset Value ...........................................................  25
Distributions .............................................................  26
Dividend Reinvestment Plan ................................................  26
Description of Shares .....................................................  28
Certain Provisions in the Agreement and Declaration of Trust ..............  30
Closed-End Trust Structure.................................................  31
Repurchase of Shares ......................................................  32
Tax Matters ...............................................................  32
Underwriting ..............................................................  34
Custodian and Transfer Agent...............................................  36
Legal Opinions.............................................................  36
Table of Contents for the Statement of Additional Information .............  37
</TABLE>


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

   Until August  , 2001 (25 days after the date of this prospectus), all
dealers that buy, sell or trade the common shares, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.

                        PRIVACY PRINCIPLES OF THE TRUST

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


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


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


                                       3
<PAGE>

                               PROSPECTUS SUMMARY

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

The Trust...............  BlackRock New York Municipal Income Trust is a newly
                          organized, non-diversified, closed-end management
                          investment company. Throughout the prospectus, we
                          refer to BlackRock New York Municipal Income Trust
                          simply as the "Trust" or as "we," "us" or "our." The
                          Trust is designed to provide tax benefits to
                          investors who are residents of New York. See "The
                          Trust."


The Offering............
                          The Trust is offering    common shares of beneficial
                          interest at $15.00 per share through a group of
                          underwriters (the "Underwriters") led by Salomon
                          Smith Barney Inc., Merrill Lynch, Pierce, Fenner &
                          Smith Incorporated, A.G. Edwards & Sons, Inc.,
                          Prudential Securities Incorporated, UBS Warburg LLC,
                          Gruntal & Co., L.L.C. and Raymond James & Associates,
                          Inc. The common shares of beneficial interest are
                          called "common shares" in the rest of this
                          prospectus. You must purchase at least 100 common
                          shares ($1,500). The Trust has given the Underwriters
                          an option to purchase up to    additional common
                          shares to cover orders in excess of    common shares.
                          BlackRock Advisors, Inc. has agreed to pay
                          organizational expenses and offering costs (other
                          than sales load) that exceed $0.03 per share. See
                          "Underwriting."


Investment Objective....  The Trust's investment objective is to provide
                          current income exempt from regular Federal income tax
                          and New York State and New York City personal income
                          taxes.

Investment Policies.....  The Trust will invest primarily in municipal bonds
                          that pay interest that is exempt from regular Federal
                          income tax and New York State and New York City
                          personal income taxes. The Trust will invest in
                          municipal bonds that, in the opinion of BlackRock
                          Advisors, Inc. ("BlackRock Advisors" or the
                          "Advisor") and BlackRock Financial Management, Inc.
                          ("BlackRock Financial Management" or the "Sub-
                          Advisor"), are underrated or undervalued. Underrated
                          municipal bonds are those whose ratings do not, in
                          the Advisor's or Sub-Advisor's opinion, reflect their
                          true creditworthiness. Undervalued municipal bonds
                          are bonds that, in the Advisor's or Sub-Advisor's
                          opinion, are worth more than the value assigned to
                          them in the marketplace. Under normal market
                          conditions, the Trust expects to be fully invested in
                          these tax-exempt municipal bonds. The Trust will
                          invest at least 80% of its total assets in municipal
                          bonds that at the time of investment are investment
                          grade quality. Investment grade quality bonds are
                          bonds rated within the four highest grades (Baa or
                          BBB or better by Moody's, S&P or Fitch) or bonds that
                          are unrated but judged to be of comparable quality by
                          the Advisor and the Sub-Advisor. The Trust may invest
                          up to 20% of its total assets in municipal bonds that
                          at the time of investment are rated Ba/BB or B by
                          Moody's, S&P or Fitch or bonds that are unrated but
                          judged to be of comparable quality by the Advisor and
                          the Sub-Advisor. Bonds of below

                                       4
<PAGE>

                          investment grade quality are regarded as having
                          predominately speculative characteristics with
                          respect to the issuer's capacity to pay interest and
                          repay principal, and are commonly referred to as
                          "junk bonds." The Trust intends to invest primarily
                          in long-term bonds and expects bonds in its portfolio
                          to have a dollar weighted average maturity of 15
                          years or more under current market conditions. The
                          Trust cannot ensure that it will achieve its
                          investment objective. See "The Trust's Investments."

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

Proposed Offering of
 Preferred Shares.......  Approximately one to three months after completion of
                          this offering of the common shares (subject to market
                          conditions), the Trust intends to offer preferred
                          shares of beneficial interest ("Preferred Shares")
                          that will represent approximately 38% of the Trust's
                          capital after their issuance. The issuance of
                          Preferred Shares will leverage the common shares.
                          Leverage involves greater risks. The Trust's
                          leveraging strategy may not be successful. See
                          "Risks--Leverage Risk." The money the Trust obtains
                          by selling the Preferred Shares will be invested in
                          long-term municipal bonds that will generally pay
                          fixed rates of interest over the life of the bonds.
                          The Preferred Shares will pay adjustable rate
                          dividends based on shorter-term interest rates. The
                          adjustment period could be as short as a day or as
                          long as a year or more. If the rate of return, after
                          the payment of applicable expenses of the Trust, on
                          the long-term bonds purchased by the Trust is greater
                          than the dividends paid by the Trust on the Preferred
                          Shares, the Trust will generate more income by
                          investing the proceeds of the Preferred Shares than
                          it will need to pay dividends on the Preferred
                          Shares. If so, the excess income will be used to pay
                          higher dividends to holders of common shares.
                          However, the Trust cannot assure you that the
                          issuance of Preferred Shares will result in a higher
                          yield on the common shares. Once Preferred Shares are
                          issued, the net asset value and market price of the
                          common shares and the yield to holders of common
                          shares will be more volatile. See "Preferred Shares
                          and Leverage" and "Description of Shares--Preferred
                          Shares."

Investment Advisor......  BlackRock Advisors will be the Trust's investment
                          advisor and BlackRock Advisors' affiliate, BlackRock
                          Financial Management, will provide certain day-to-day
                          investment management services to the Trust.
                          Throughout the prospectus, we sometimes refer to
                          BlackRock Advisors and BlackRock Financial Management
                          collectively as "BlackRock." BlackRock Advisors will
                          receive an annual fee, payable monthly, in a maximum
                          amount equal to 0.60% of the average weekly value of
                          the Trust's Managed Assets. "Managed Assets" means
                          the total assets of the

                                       5
<PAGE>

                          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 investment
                          management fee or other expenses of the Trust in the
                          amount of 0.25% of the average weekly values of the
                          Trust's Managed Assets for the first five years of
                          the Trust's operations (through July 31, 2006), and
                          for a declining amount for an additional four years
                          (through July 31, 2010). See "Management of the
                          Trust."

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

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


Listing.................  The common shares have been approved for listing on
                          the New York Stock Exchange, subject to notice of
                          issuance, under the trading or "ticker" symbol "BNY".
                          See "Description of Shares--Common Shares."

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

Market Price of           Shares of closed-end investment companies frequently
Shares..................  trade at prices lower than their net asset value.
                          Shares of closed-end investment companies like the
                          Trust that invest predominately in investment grade
                          municipal bonds have during some periods traded at
                          prices higher than their net asset value and during
                          other periods traded at prices lower than their net
                          asset value. The Trust cannot assure you that its
                          common shares will trade at a price higher than or
                          equal to net asset value. The Trust's net asset value
                          will be reduced immediately following this offering
                          by the sales load and the amount of the organization
                          and offering expenses paid by the Trust. See "Use of
                          Proceeds." In addition to net asset value,

                                       6
<PAGE>

                          the market price of the Trust's common shares may be
                          affected by such factors as dividend levels, which
                          are in turn affected by expenses, call protection for
                          portfolio securities, dividend stability, portfolio
                          credit quality, liquidity and market supply and
                          demand. See "Preferred Shares and Leverage," "Risks,"
                          "Description of Shares" and the section of the
                          Statement of Additional Information with the heading
                          "Repurchase of Common Shares." The common shares are
                          designed primarily for long-term investors and you
                          should not purchase common shares of the Trust if you
                          intend to sell them shortly after purchase.

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

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

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

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

                          Concentration in New York Issuers. The Trust's policy
                          of investing primarily in municipal obligations of
                          issuers located in New York makes the Trust more
                          susceptible to adverse economic, political or
                          regulatory occurrences affecting those issuers. The
                          New York state economy has a comparatively large
                          share of the nation's finance, insurance,
                          transportation, communications and services
                          employment. To the extent that a particular industry
                          sector represents a larger portion of the state's

                                       7
<PAGE>


                          total economy, the greater the impact that a downturn
                          in such sector is likely to have on the state's
                          economy. The combined state and local taxes of
                          residents of the state of New York, and particularly
                          of residents of New York City, are among the highest
                          in the country, which may limit the ability of the
                          state and its localities to raise additional revenue.
                          In addition, the combined state and local debt per
                          capita is above the national average and debt service
                          expenditures have represented an increasing claim on
                          state and local budgets. For a discussion of economic
                          and other conditions in New York, see "The Trust's
                          Investments--Municipal Bonds--Economic and Other
                          Conditions in New York."


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

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

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

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

                          Municipal Bond Market Risk. The amount of public
                          information available about the municipal bonds in
                          the Trust's portfolio is generally less than that for
                          corporate equities or bonds and the investment
                          performance of the Trust may therefore be more
                          dependent on the analytical abilities of BlackRock
                          than would be a stock fund or taxable bond fund. The
                          secondary market for municipal bonds, particularly
                          the

                                       8
<PAGE>

                          below investment grade bonds in which the Trust may
                          invest, also tends to be less well-developed or
                          liquid than many other securities markets, which may
                          adversely affect the Trust's ability to sell its
                          bonds at attractive prices.

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

                          Non-Diversification. The Trust has registered as a
                          "non-diversified" investment company under the
                          Investment Company Act of 1940, as amended (the
                          "Investment Company Act"). For Federal income tax
                          purposes, the Trust, with respect to up to 50% of its
                          total assets, will be able to invest more than 5%
                          (but not more than 25%) of the value of its total
                          assets in the obligations of any single issuer. To
                          the extent the Trust invests a relatively high
                          percentage of its assets in the obligations of a
                          limited number of issuers, the Trust may be more
                          susceptible than a more widely diversified investment
                          company to any single economic, political or
                          regulatory occurrence.

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


                                       9
<PAGE>

                           SUMMARY OF TRUST EXPENSES

   The following table shows Trust expenses as a percentage of net assets
attributable to common shares.

<TABLE>
<S>                                                          <C>
Shareholder Transaction Expenses
  Sales Load Paid by You (as a percentage of offering
   price)...................................................        4.50%
  Dividend Reinvestment Plan Fees...........................        None*
<CAPTION>
                                                             Percentage of Net
                                                                   Assets
                                                                Attributable
                                                             to Common Shares**
                                                             ------------------
<S>                                                          <C>
Annual Expenses
Management Fees.............................................        0.97%
Fee and Expense Waiver Years 1-5............................       (0.40%)***
                                                                   ------
Net Management Fees Years 1-5...............................        0.57%***
Other Expenses..............................................        0.40%
                                                                   ------
Total Annual Expenses Years 1-5.............................        0.97%***
                                                                   ======
</TABLE>
- --------

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

**  Stated as a percentage of the Trust's total Managed Assets assuming the
    issuance of Preferred Shares in an amount equal to 38% of the Trust's
    capital (after their issuance), the Trust's expenses would be estimated as
    set out in the table below. "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.

<TABLE>
<CAPTION>
                                                             Percentage of Total
                                                               Managed Assets
                                                             -------------------
   <S>                                                       <C>
   Annual Expenses
   Management Fees..........................................        0.60%
   Fee and Expense Waiver Years 1-5.........................       (0.25%)***
                                                                   ------
   Net Management Fees Years 1-5............................        0.35%***
   Other Expenses...........................................        0.25%
                                                                   ------
   Total Net Annual Expenses Years 1-5......................        0.60%***
                                                                   ======
</TABLE>

***  BlackRock Advisors has voluntarily agreed to waive receipt of a portion
     of the management fee or other expenses of the Trust in the amount of
     0.40% of average weekly net assets attributable to common shares (0.25%
     of average weekly Managed Assets) for the first 5 years of the Trust's
     operations, 0.32% (0.20%) in year 6, 0.24% (0.15%) in year 7, 0.16%
     (0.10%) in year 8 and 0.08% (0.05%) in year 9. Without the waiver, "Total
     Net Annual Expenses Years 1-5" would be estimated to be 1.37% of average
     weekly net net assets attributable to common shares and 0.85 % of average
     weekly Managed Assets. BlackRock Advisors has agreed to pay all
     organizational expenses and offering costs (other than sales load) that
     exceed $0.03 per common share (0.20% of the offering price).


   The purpose of the table above and the example below is to help you
understand all fees and expenses that you, as a holder of common shares, would
bear directly or indirectly. The expenses shown in the table under "Other
Expenses" and "Total Annual Expenses Years 1-5" are based on estimated amounts
for the Trust's first year of operations and assume that the Trust issues
12,666,666 common shares. If the Trust issues fewer common shares, all other
things being equal, these expenses would increase. See "Management of the
Trust" and "Dividend Reinvestment Plan."



                                      10
<PAGE>

   The following example illustrates the expenses (including the sales load of
$45) that you would pay on a $1,000 investment in common shares, assuming (1)
total net annual expenses of 0.97% of net assets attributable to common shares
in years 1 through 5, increasing to 1.37% in year 10 and (2) a 5% annual
return:(/1/)

<TABLE>
<CAPTION>
                                            1 Year 3 Years 5 Years 10 Years(/2/)
                                            ------ ------- ------- -------------
<S>                                         <C>    <C>     <C>     <C>
Total Expenses Incurred....................  $55     $76     $99       $185
</TABLE>
- --------
(/1/)The example should not be considered a representation of future expenses.
     The example assumes that the estimated "Other Expenses" set forth in the
     Annual Expenses table are accurate, that fees and expenses increase as
     described in note 2 below and that all dividends and distributions are
     reinvested at net asset value. Actual expenses may be greater or less than
     those assumed. Moreover, the Trust's actual rate of return may be greater
     or less than the hypothetical 5% return shown in the example.
(/2/)Assumes waiver of fees and expenses of 0.32% of average weekly net assets
     attributable to common shares in year 6 (0.20% of average weekly Managed
     Assets), 0.24% (0.15%) in year 7, 0.16% (0.10%) in year 8 and 0.08%
     (0.05%) in year 9 and assumes that Preferred Shares remain 38% of the
     Trust's capital throughout the periods reflected. BlackRock Advisors has
     not agreed to waive any portion of its fees and expenses beyond July 31,
     2010. See "Management of the Fund--Investment Management Agreement."

                                       11
<PAGE>

                                   THE TRUST

   The Trust is a newly organized, non-diversified, closed-end management
investment company registered under the Investment Company Act. The Trust was
organized as a Delaware business trust on March 30, 2001, pursuant to an
Agreement and Declaration of Trust, as later amended and restated, governed by
the laws of the State of Delaware. As a newly organized entity, the Trust has
no operating history. The Trust's principal office is located at 100 Bellevue
Parkway, Wilmington, Delaware 19809, and its telephone number is (888) 825-
2257. The Trust is designed to provide tax benefits to investors who are
residents of New York for tax purposes.

                                USE OF PROCEEDS

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


                            THE TRUST'S INVESTMENTS

Investment Objective and Policies

   The Trust's investment objective is to provide current income exempt from
regular Federal income tax and New York State and New York City personal income
taxes.

   The Trust will invest primarily in municipal bonds that pay interest that is
exempt from regular Federal income tax and New York State and New York City
personal income taxes. Under normal market conditions, the Trust expects to be
fully invested (at least 95% of its net assets) in tax-exempt municipal bonds,
in which the Trust generally will invest at least 80% of its total assets.
Under normal market conditions, the Trust will invest at least 80% of its total
assets in investment grade quality municipal bonds. Investment grade quality
means that such bonds are rated, at the time of investment, within the four
highest grades (Baa or BBB or better by Moody's, S&P or Fitch) or are unrated
but judged to be of comparable quality by BlackRock. Municipal bonds rated Baa
by Moody's are investment grade, but Moody's considers municipal bonds rated
Baa to have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity for
municipal bonds that are rated BBB or Baa (or that have equivalent ratings) to
make principal and interest payments than is the case for higher grade
municipal bonds. The Trust may invest up to 20% of its total assets in
municipal bonds that are rated, at the time of investment, Ba/BB or B by
Moody's, S&P or Fitch or that are unrated but judged to be of comparable
quality by BlackRock. Bonds of below investment grade quality (Ba/BB or below)
are commonly referred to as "junk bonds." Bonds of below investment grade
quality are regarded as having predominantly speculative characteristics with
respect to the issuer's capacity to pay interest and repay principal. These
credit quality policies apply only at the time a security is purchased, and the
Trust is not required to dispose of a security if a rating agency downgrades
its assessment of the credit characteristics of a particular issue. In
determining whether to retain or sell a security that a rating agency has
downgraded, BlackRock may consider such factors as BlackRock's assessment of
the credit quality of the issuer of the security, the price at which the
security could be sold and the rating, if any, assigned to the security by
other rating agencies. Appendix A to the Statement of Additional Information
contains a general description of Moody's, S&P's and Fitch's ratings of
municipal bonds. See "Risks" below for a general description of the economic
and credit characteristics of municipal issuers in New York. 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


                                       12
<PAGE>


dividends exempt from regular Federal income tax. Subject to the Trust's policy
of investing at least 80% of its total assets in municipal bonds exempt from
New York State and New York City personal income taxes, the Trust may invest in
securities that pay interest that is not exempt from New York State and New
York City personal income taxes when, in the judgment of BlackRock, the return
to the shareholders after payment of applicable New York State and New York
City personal income taxes would be higher than the return available from
comparable securities that pay interest that is, or make other distributions
that are, exempt from New York State and New York City personal income taxes.
See "--Other Investment Companies," "--Tax-Exempt Preferred Shares" 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, 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, 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 tax.


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

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

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


                                       13
<PAGE>

Municipal Bonds

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

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


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

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

   Economic and Other Conditions in New York. Except during temporary periods,
the Trust invests substantially all of its assets in New York municipal
obligations. The Trust is therefore susceptible to political, economic,
regulatory or other factors affecting issuers of New York municipal
obligations. In addition, the specific New York municipal obligations in which
the Trust invests are expected to change from time to time.

   The following information constitutes only a brief summary of some of the
complex factors which may have an impact on the financial situation of issuers
of New York municipal obligations, does not purport to be a complete or
exhaustive description of all adverse conditions to which issuers of New York
municipal obligations may be subject and is not applicable to "conduit"
obligations, such as industrial development revenue bonds, with respect to
which the public issuer itself has no financial responsibility. Investors
should obtain a copy of the Statement of Additional Information for the more
detailed discussion of such factors. Such information is derived from certain
official statements of the State of New York published in connection with the
issuance of specific State of New York obligations, as well as from other
publicly available documents. Such information has not been independently
verified by the Trust and may not apply to all New York municipal obligations
acquired by the Trust. Neither BlackRock nor the Trust assumes any
responsibility for the completeness or accuracy of such information.


                                       14
<PAGE>

   Investors should be aware of certain factors that might affect the financial
condition of the issuers of New York municipal bonds. The State of New York has
historically been one of the wealthiest states in the nation. For decades,
however, the economy of the State of New York has grown more slowly than that
of the nation as a whole, and the result has been a gradual erosion of the
State's relative economic affluence. New York City, for example, has faced
greater competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in New York City.

   The State of New York has for many years had a very high state and local tax
burden. The burden of state and local taxation, in combination with the many
other causes of regional economic dislocations, has contributed to the
decisions of some businesses and individuals to relocate outside, or not locate
within, the State of New York. There can be no assurance that the State of New
York and its political subdivisions will not face substantial potential budget
gaps in future years resulting from a significant disparity between tax
revenues projected from a lower recurring receipts base and the spending
required to maintain programs at current levels. To address any potential
budgetary imbalance, the State of New York and such subdivisions may need to
take significant actions to align recurring receipts and disbursements in
future fiscal years.

   Although revenue obligations of the State of New York or its political
subdivisions may be payable from a specific project or source, including lease
rentals, there can be no assurance that future economic difficulties and the
resulting impact on State and local government finances will not adversely
affect the market value of the portfolio of the Trust or the ability of the
respective obligors to make timely payments of principal and interest on such
obligations.

   For more information, see "Investment Policies and Techniques--Factors
Pertaining to New York" in the Statement of Additional Information.

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. A separate
account of the Trust will be established with its custodian consisting of cash,
or other liquid high grade debt securities having a market value at all times,
at least equal to the amount of the commitment.

Other Investment Companies

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

                                       15
<PAGE>


shareholders will tend to fluctuate more than the yield generated by
unleveraged shares. Investment companies may have investment policies that
differ from those of the Trust. In addition, to the extent the Trust invests in
other investment companies, the Trust will be dependent upon the investment and
research abilities of persons other than BlackRock. The Trust treats its
investments in such open- or closed-end investment companies as investments in
municipal bonds.


Tax-Exempt Preferred Shares

   The Trust may also invest up to 10% of its total assets in preferred
interests of other investment funds that pay dividends that are exempt from
regular Federal income tax. A portion of such dividends may be capital gain
distributions subject to Federal capital gains tax. Such funds in turn invest
in municipal bonds and other assets that generally pay interest or make
distributions that are exempt from regular Federal income tax, such as revenue
bonds issued by state or local agencies to fund the development of low-income,
multi-family housing. Investment 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.
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
associated with municipal bonds generally, 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.

Initial Portfolio Composition

   If current market conditions persist, the Trust expects that approximately
100% of its initial portfolio will consist of investment grade quality
municipal bonds, rated as such at the time of investment, meaning that such
bonds are rated by national rating agencies within the four highest grades or
are unrated but judged to be of comparable quality by BlackRock (approximately
55% in Aaa/AAA; 15% in A; and 30% in Baa/BBB). BlackRock generally expects to
select obligations that may not be redeemed at the option of the issuer for
approximately ten years from the date of purchase by the Trust. See "--
Investment Objective and Policies."

                         PREFERRED SHARES AND LEVERAGE

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


                                       16
<PAGE>

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

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


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

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

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

   Assuming that the Preferred Shares will represent approximately 38% of the
Trust's capital and pay dividends at an annual average rate of 3.25%, the
income generated by the Trust's portfolio (net of estimated

                                       17
<PAGE>

expenses) must exceed 1.24% in order to cover the dividend payments and other
expenses specifically related to the Preferred Shares. Of course, these numbers
are merely estimates used for illustration. Actual Preferred Share dividend
rates will vary frequently and may be significantly higher or lower than the
rate estimated above.

   The following table is furnished in response to requirements of the
Securities and Exchange Commission. It is designed to illustrate the effect of
leverage on common share total return, assuming investment portfolio total
returns (comprised of income and changes in the value of bonds held in the
Trust's portfolio) of -10%, -5%, 0%, 5% and 10% . These assumed investment
portfolio returns are hypothetical figures and are not necessarily indicative
of the investment portfolio returns experienced or expected to be experienced
by the Trust. See "Risks." The table further reflects the issuance of Preferred
Shares representing 38% of the Trust's total capital, a 5.46% yield on the
Trust investment portfolio, net of expenses, and the Trust's currently
projected annual Preferred Share dividend rate of 3.25%.


<TABLE>
<S>                                     <C>      <C>      <C>     <C>   <C>
Assumed Portfolio Total Return (Net of
 Expenses).............................    (10)%     (5)%     0%     5%    10%
Common Share Total Return.............. (18.12)% (10.06)% (1.99)% 6.07% 14.14%
</TABLE>

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

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

                                     RISKS

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

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

   Market Discount Risk. As with any stock, the price of the Trust's shares
will fluctuate with market conditions and other factors. If shares are sold,
the price received may be more or less than the original investment. Net asset
value will be reduced immediately following the initial offering by the amount
of the sales load and organizational and selling expenses paid by the Trust.
Common shares are designed for long-term investors and should not be treated as
trading vehicles. Shares of closed-end management investment companies
frequently trade at a discount from their net asset value. The Trust's shares
may trade at a price that is less than the initial offering price. This risk
may be greater for investors who sell their shares in a relatively short period
of time after completion of the initial offer. The Trust's initial net asset
value will be reduced by a 4.5% sales load charge.

   Interest Rate Risk. Interest rate risk is the risk that bonds, and the
Trust's net assets, will decline in value because of changes in interest rates.
Generally, municipal bonds will decrease in value when interest rates rise and
increase in value when interest rates decline. This means that the net asset
value of the common shares will fluctuate with interest rate changes and the
corresponding changes in the value of the Trust's municipal bond

                                       18
<PAGE>

holdings. The value of the longer-term bonds in which the Trust generally
invests fluctuates more in response to changes in interest rates than does the
value of shorter-term bonds. Because the Trust will invest primarily in long-
term bonds, the net asset value and market price per share of the common shares
will fluctuate more in response to changes in market interest rates than if the
Trust invested primarily in shorter-term bonds. The Trust's use of leverage, as
described below, will tend to increase common share interest rate risk.

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

   State Concentration Risk. Because the Trust primarily purchases municipal
bonds issued by the State of New York or county or local government
municipalities or their agencies, districts, political subdivisions or other
entities, shareholders may be exposed to additional risks. In particular, the
Trust is susceptible to political, economic or regulatory factors affecting
issuers of New York municipal bonds. There can be no assurance that New York
will not experience a decline in economic conditions or that the New York
municipal bonds purchased by the Trust will not be affected by such a decline.

   For a discussion of economic and other conditions in New York, see "The
Trust's Investments--Municipal Bonds--Economic and Other Conditions in New
York."

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

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

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

                                       19
<PAGE>

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

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

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

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

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

   Economic Sector Risk. The Trust may invest 25% or more of its total assets
in municipal obligations of issuers in the same economic sector, including
without limitation the following: lease rental obligations of state and local
authorities; obligations dependent on annual appropriations by a state's
legislature for payment; obligations of state and local housing finance
authorities, municipal utilities systems or public housing authorities;
obligations of hospitals or life care facilities; and industrial development or
pollution control bonds

                                       20
<PAGE>


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 economic sector. For
example, health care related issuers are susceptible to Medicare, Medicaid and
other third party payor reimbursement policies, and national and state health
care legislation. As concentration increases, so does the potential for
fluctuation in the net asset value of the Trust's common shares.


   Non-Diversification. The Trust has registered as a "non-diversified"
investment company under the Investment Company Act. For Federal income tax
purposes, the Trust, with respect to up to 50% of its total assets, will be
able to invest more than 5% (but not more than 25%) of the value of its total
assets in the obligations of any single issuer. To the extent the Trust invests
a relatively high percentage of its assets in the obligations of a limited
number of issuers, the Trust may be more susceptible than a more widely
diversified investment company to any single economic, political or regulatory
occurrence.

                           HOW THE TRUST MANAGES RISK

Investment Limitations

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

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

Quality Investments

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

Limited Issuance of Preferred Shares

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

                                       21
<PAGE>

Management of Investment Portfolio and Capital Structure to Limit Leverage Risk

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

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

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

Hedging Strategies

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

                            MANAGEMENT OF THE TRUST

Trustees and Officers

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

Investment Advisor and Sub-Advisor

   BlackRock Advisors, Inc. acts as the Trust's investment advisor. BlackRock
Financial Management, Inc. acts as the Trust's sub-advisor. BlackRock Advisors
and BlackRock Financial Management both are wholly owned subsidiaries of
BlackRock, Inc., which is one of the largest publicly traded investment
management firms in the United States with $213 billion of assets under
management as of June 30, 2001. BlackRock, Inc. and its affiliates manage
assets on behalf of more than 3,300 institutions and 200,000 individuals
worldwide, including nine of the 10 largest companies in the U.S. as determined
by Fortune Magazine, through a variety of equity, fixed income, liquidity and
alternative investment separate accounts and mutual funds, including the
company's flagship fund families, BlackRock Funds and BlackRock Provident
Institutional Funds. BlackRock, Inc. is the nation's 26th largest asset
management firm according to Pensions & Investments, May 14, 2001.


   The BlackRock organization has over 12 years of experience managing closed-
end products and currently advises a closed-end family of 20 funds. BlackRock
has 13 leveraged municipal closed-end funds and six open-end municipal funds
under management and approximately $16 billion in municipal assets firm-wide.
Clients are


                                       22
<PAGE>

served from the company's headquarters in New York City, as well as offices in
Wilmington, Delaware, San Francisco, California, Hong Kong, Edinburgh, Scotland
and Tokyo, Japan. BlackRock, Inc. is a member of The PNC Financial Services
Group, Inc. ("PNC"), one of the largest diversified financial services
organizations in the United States, and is majority-owned by PNC and by
BlackRock employees.

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

   BlackRock uses a relative value strategy that evaluates the trade-off
between risk and return to seek to achieve the Trust's investment objective of
generating current income exempt from regular Federal income tax and New York
State and New York City personal income taxes. 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 to 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 five portfolio managers with an
average experience of 14 years and five credit research analysts with an
average experience of 11 years. Kevin M. Klingert, a managing director, senior
portfolio manager and head of municipal bonds at BlackRock, leads the team, a
position he has held since joining BlackRock in 1991. Mr. Klingert has over 17
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 Craig Kasap, James McGinley, F. Howard Downs and Anthony
Pino. Mr. Kasap, CFA, has been a portfolio manager at BlackRock for over four
years and is a member of BlackRock's Investment Strategy Group. Prior to
joining BlackRock in 1997, Mr. Kasap spent the previous three years as a
municipal bond trader with Keystone Investments Inc. in Boston where he was
involved in formulating the firm's municipal bond investment strategies. 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 municipals
bonds. Anthony Pino has been a portfolio manager since joining BlackRock in
1999. Prior to joining BlackRock in 1999, he was a Brokerage Coordinator at CPI
Capital. From 1996 to 1999, Mr. Pino was an Assistant Vice President and trader
in the Municipal Strategy Group at Prudential Securities Incorporated.


   BlackRock's municipal bond portfolio managers are responsible for over 70
municipal bond portfolios, valued at approximately $12 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 14 municipal liquidity
accounts valued at approximately $4.2 billion. Currently, the team manages 13
closed-end municipal funds with approximately $3.5 billion in managed assets as
of March 31, 2001.


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

                                       23
<PAGE>

   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 the $12 billion in municipal bonds managed by BlackRock.

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

   Dr. Heide initiated the Disclosure Task Force of the National Federation of
Municipal Analysts in 1988 and was co-chairperson of this committee from its
inception through the completion of the Disclosure Handbook for Municipal
Securities--1992 Update, published in January 1993. As a result of these
efforts, the SEC implemented primary and secondary disclosure regulations for
municipal bonds in July 1995. Dr. Heide has authored a number of articles on
municipal finance and edited The Handbook of Municipal Bonds published in the
fall of 1994. Dr. Heide was selected by the Bond Buyer as a first team All-
American Municipal Analyst in 1990 and was recognized in subsequent years.

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


Investment Management Agreement

   Pursuant to an investment management agreement between BlackRock Advisors
and the Trust and certain waivers relating thereto, 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 0.60% of
the average weekly value of the Trust's Managed Assets (the "management fee").
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 0.25% of the
average weekly value of the Trust's Managed Assets for the first five years of
the Trust's operations (through July 31, 2006), and for a declining amount for
an additional four years (through July 31,

                                       24
<PAGE>

2010). The Trust will also reimburse BlackRock Advisors for all out-of-pocket
expenses BlackRock Advisors incurs in connection with performing administrative
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 or the operations of other
investment companies advised by the Advisor 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, rating agency
fees, 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 nine years of the Trust's operation, BlackRock Advisors has
undertaken to waive its management fee and expenses payable by the Trust in the
amounts, and for the time periods, set forth below:

<TABLE>
<CAPTION>
                                                              Percentage Waived
       Twelve Month                                           (as a percentage
       Period Ending                                          of average weekly
          July 31                                             Managed Assets*)
       -------------                                          -----------------
      <S>                                                     <C>
         2002**..............................................       0.25%
         2003................................................       0.25%
         2004................................................       0.25%
         2005................................................       0.25%
         2006................................................       0.25%
         2007................................................       0.20%
         2008................................................       0.15%
         2009................................................       0.10%
         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 July 31, 2010 or after termination of the investment
management agreement.

                                NET ASSET VALUE

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

                                       25
<PAGE>

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

                                 DISTRIBUTIONS

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

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

                           DIVIDEND REINVESTMENT PLAN

   Unless you elect to receive cash by contacting the Plan Agent, all dividends
declared for your common shares of the Trust will be automatically reinvested
by EquiServe Trust Company, N.A. (the "Plan Agent"), agent for shareholders in
administering the Trust's Dividend Reinvestment Plan (the "Plan"), in
additional common shares of the Trust. If you elect not to participate in the
Plan, you will receive all dividends in cash paid by check mailed directly to
you (or, if the shares are held in street or other nominee name, then to such
nominee) by EquiServe Trust Company, N.A., as dividend disbursing agent. You
may elect not to participate in the Plan and to receive all dividends in cash
by sending written instructions or by contacting EquiServe Trust Company, N.A.,
as dividend disbursing agent, at the address set forth below. Participation in
the Plan is completely voluntary and may be terminated or resumed at any time
without penalty by contacting the Plan Agent before the dividend record date;
otherwise such termination or resumption will be effective with respect to any
subsequently declared dividend or other distribution.


   The Plan Agent will open an account for each common shareholder under the
Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Trust declares a dividend or other capital gain
distribution (together, a "dividend") payable in cash, non-participants in the
Plan will receive


                                       26
<PAGE>

cash and participants in the Plan will receive the equivalent in common shares.
The common shares will be acquired by the Plan Agent for the participants'
accounts, depending upon the circumstances described below, either (i) through
receipt of additional unissued but authorized common shares from the Trust
("newly issued common shares") or (ii) by purchase of outstanding common shares
on the open market ("open-market purchases") on the New York Stock Exchange, or
elsewhere. If, on the payment date for any dividend, the net asset value per
common share is equal to or less than the market price per common share, the
Plan Agent will invest the dividend amount in newly issued common shares on
behalf of the participants. The number of newly issued common shares to be
credited to each participant's account will be determined by dividing the
dollar amount of the dividend by the net asset value per common share on the
date the common shares are issued. If, on the payment date for any dividend,
the net asset value per common share is greater than the market value, the Plan
Agent will invest the dividend amount in common shares acquired on behalf of
the participants in open-market purchases. In the event of a market discount on
the payment date for any dividend, the Plan Agent will have until the last
business day before the next date on which the common shares trade on an "ex-
dividend" basis or 30 days after the payment date for such dividend, whichever
is sooner (the "last purchase date"), to invest the dividend amount in common
shares acquired in open-market purchases. It is contemplated that the Trust
will pay monthly income dividends. Therefore, the period during which open-
market purchases can be made will exist only from the payment date of each
dividend through the date before the next "ex-dividend" date which typically
will be approximately ten days. If, before the Plan Agent has completed its
open-market purchases, the market price per common share exceeds the net asset
value per common share, the average per common share purchase price paid by the
Plan Agent may exceed the net asset value of the common shares, resulting in
the acquisition of fewer common shares than if the dividend had been paid in
newly issued common shares on the dividend payment date. Because of the
foregoing difficulty with respect to open-market purchases, the Plan provides
that if the Plan Agent is unable to invest the full dividend amount in open-
market purchases during the purchase period or if the market discount shifts to
a market premium during the purchase period, the Plan Agent may cease making
open-market purchases and may invest the uninvested portion of the dividend
amount in newly issued common shares at the net asset value per common share at
the close of business on the last purchase date.

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


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


   There will be no brokerage charges with respect to common shares issued
directly by the Trust. However, each participant will pay a pro rata share of
brokerage commissions incurred in connection with open-market purchases. The
automatic reinvestment of dividends will not relieve participants of any
Federal, state or local income tax that may be payable (or required to be
withheld) on such dividends. See "Tax Matters."

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


   All correspondence concerning the Plan should be directed to the Plan Agent
at 150 Royall Street, Canton, Massachusetts 02021.


                                       27
<PAGE>

                             DESCRIPTION OF SHARES

Common Shares

   The Trust is an unincorporated business trust organized under the laws of
Delaware pursuant to an Agreement and Declaration of Trust dated as of March
30, 2001, as later amended and restated. The Trust is authorized to issue an
unlimited number of common shares of beneficial interest, par value $.001 per
share. Each common share has one vote and, when issued and paid for in
accordance with the terms of this offering, will be fully paid and non-
assessable except that the trustees shall have the power to cause shareholders
to pay expenses of the Trust by setting off charges due from shareholders from
declared but unpaid dividends or distributions owed the shareholders and/or by
reducing the number of common shares owned by each respective shareholder.
Whenever Preferred Shares are outstanding, the holders of common shares will
not be entitled to receive any distributions from the Trust unless all accrued
dividends on Preferred Shares have been paid, unless asset coverage (as defined
in the Investment Company Act) with respect to Preferred Shares would be at
least 200% after giving effect to the distributions and unless certain other
requirements imposed by any rating agencies rating the Preferred Shares have
been met. See "--Preferred Shares" below. All common shares are equal as to
dividends, assets and voting privileges and have no conversion, preemptive or
other subscription rights. The Trust will send annual and semi-annual reports,
including financial statements, to all holders of its shares.


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

   The Trust has been approved for listing, subject to official notice of
issuance, of the common shares on the New York Stock Exchange under the symbol
"BNY".


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

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


Preferred Shares

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

                                       28
<PAGE>


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


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

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

   It is presently required that in connection with the election of the Trust's
trustees, on and after the issuance of any Preferred Shares, the holders of all
outstanding Preferred Shares, voting as a separate class, would be entitled to
elect two trustees of the Trust, and the remaining trustees would be elected by
holders of common shares and Preferred Shares, voting together as a single
class.

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

                                       29
<PAGE>

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

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

          CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST

   The Agreement and Declaration of Trust, as amended and restated, 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 majority of the remaining trustees or 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, as amended and
restated, 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;

  . the issuance of any securities of the Trust to any Principal Shareholder
    for cash, except pursuant to the 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.

                                       30
<PAGE>


   To convert the Trust to an open-end investment company, the Trust's
Agreement and Declaration of Trust, as amended and restated, 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 all
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 intends to reserve the right to pay redemption requests in a
combination of cash or securities. If such partial payment in securities were
made, investors may incur brokerage costs in converting such securities to
cash. If the Trust were converted to an open-end fund, it is likely that new
shares would be sold at net asset value plus a sales load. The board of
trustees believes, however, that the closed-end structure is desirable in light
of the Trust's investment objective and policies. Therefore, you should assume
that it is not likely that the board of trustees would vote to convert the
Trust to an open-end fund.


   To liquidate the Trust, the Trust's Agreement and Declaration of Trust, as
amended and restated, 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 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.


   For the purposes of calculating "a majority of the outstanding voting
securities" under the Trust's Agreement and Declaration of Trust, as amended
and restated, each class or series of the Trust shall vote together as a single
class, except to the extent required by the 1940 Act or the Trust's Agreement
and Declaration of Trust, as amended and restated, with respect to any class or
series of shares. If a separate class vote is required, the applicable
proportion of shares of the class or series voting as a separate class, 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, as amended and restated, on file with the Securities and
Exchange Commission for the full text of these provisions.

                           CLOSED-END TRUST STRUCTURE

   The Trust is a newly organized, non-diversified, closed-end management
investment company (commonly referred to as a closed-end fund). Closed-end
funds differ from open-end funds (which are generally referred to as mutual
funds) in that closed-end funds generally list their shares for trading on a
stock exchange and do not redeem their shares at the request of the
shareholder. This means that if you wish to sell your shares of a closed-end
fund you must trade them on the market like any other stock at the prevailing
market price at that time. In a mutual fund, if the shareholder wishes to sell
shares of the fund, the mutual fund will redeem or buy

                                       31
<PAGE>

back the shares at "net asset value." Also, mutual funds generally offer new
shares on a continuous basis to new investors, and closed-end funds generally
do not. The continuous inflows and outflows of assets in a mutual fund can make
it difficult to manage the fund's investments. By comparison, closed-end funds
are generally able to stay more fully invested in securities that are
consistent with their investment objectives, and also have greater flexibility
to make certain types of investments, and to use certain investment strategies,
such as financial leverage and investments in illiquid securities.

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

                              REPURCHASE OF SHARES

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

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

                                  TAX MATTERS

Federal Income Tax Matters

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

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

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

                                       32
<PAGE>

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

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

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

   The Trust may be required to withhold on certain of your dividends if you
have not provided the Trust with your correct taxpayer identification number
(if you are an individual, normally your Social Security number), or if you are
otherwise subject to backup withholding. If you receive Social Security
benefits, you should be aware that tax-free income is taken into account in
calculating the amount of these benefits that may be subject to Federal income
tax. If you borrow money to buy Trust shares, you may not deduct the interest
on that loan. Under Federal income tax rules, Trust shares may be treated as
having been bought with borrowed money even if the purchase of the Trust shares
cannot be traced directly to borrowed money.


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

New York Tax Matters

   The discussion under this heading applies only to shareholders of the Trust
that are residents of New York for New York tax purposes. Individual
shareholders will not be subject to New York State or New York City personal
income tax on distributions attributable to interest on New York municipal
bonds. Individual shareholders will be subject to New York State or New York
City personal income tax on distributions attributable to other income of the
Trust (including net capital gain), and gain on the sale of shares of the
Trust. Corporations should note that all or a part of any distribution from the
Trust, and gain on the sale of shares of the Trust, may be subject to the New
York State corporate franchise tax and the New York City general corporation
tax.


   Under currently applicable New York State law, the highest marginal New York
State income tax rate imposed on individuals for taxable years beginning after
1996 is 6.85%. The highest marginal New York City income tax rate currently
imposed on individuals is 3.78%. In addition, individual taxpayers with New
York adjusted gross income in excess of $100,000 must pay a supplemental tax to
recognize the benefit of graduated tax rates. Shareholders subject to taxation
in a state other than New York will realize a lower after-tax rate of return if
distributions from the Trust are not exempt from taxation in such other state.

   The foregoing is a general and abbreviated summary of the applicable
provisions of the Code, Treasury Regulations and New York State and New York
City tax laws presently in effect. For the complete provisions, reference
should be made to the pertinent Code sections and the Treasury Regulations
promulgated thereunder. The Code and the Treasury Regulations, as well as the
New York State and New York City tax laws, are subject to change by
legislative, judicial or administrative action either prospectively or
retroactively.

   Shareholders are urged to consult their tax advisors regarding specific
questions as to Federal, foreign, state or local tax consequences of an
investment in the Trust.

                                       33
<PAGE>

                                  UNDERWRITING

   Subject to the terms and conditions stated in the underwriting agreement
dated the date of this prospectus, each Underwriter named below has agreed to
purchase, and the Trust has agreed to sell to such Underwriter, the number of
common shares set forth opposite the name of such Underwriter.

<TABLE>
<CAPTION>
                                                                         Number
                                                                           of
     Underwriters                                                        Shares
     ------------                                                        -------
     <S>                                                                 <C>
     Salomon Smith Barney Inc. .........................................
     Merrill Lynch, Pierce, Fenner & Smith
              Incorporated..............................................
     A.G. Edwards & Sons, Inc. .........................................
     Prudential Securities Incorporated.................................
     UBS Warburg LLC....................................................
     Gruntal & Co., L.L.C. .............................................
     Raymond James & Associates, Inc. ..................................
                                                                         -------
       Total............................................................
                                                                         =======
</TABLE>

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

   The Underwriters, for whom Salomon Smith Barney Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, A.G. Edwards & Sons, Inc., Prudential Securities
Incorporated, UBS Warburg LLC, Gruntal & Co., L.L.C. and Raymond James &
Associates, Inc. are acting as representatives, propose to offer some of the
common shares directly to the public at the public offering price set forth on
the cover page of this prospectus and some of the common shares to certain
dealers at the public offering price less a concession not in excess of $0.
per common share. The sales load the Trust will pay of $0.675 per common share
is equal to 4.5% of the initial offering price. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $0.  per common share
on sales to certain other dealers. If all of the common shares are not sold at
the initial offering price, the representatives may change the public offering
price and other selling terms. The representatives have advised the Trust that
the Underwriters do not intend to confirm any sales to any accounts over which
they exercise discretionary authority. Investors must pay for any common shares
purchased on or before July  , 2001.


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

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

   Prior to this offering, there has been no public market for the common
shares. Consequently, the initial public offering price for the common shares
was determined by negotiation among the Trust, BlackRock and the
representatives. There can be no assurance, however, that the price at which
the common shares will sell in the public market after this offering will not
be lower than the price at which they are sold by the Underwriters

                                       34
<PAGE>

or that an active trading market in the common shares will develop and continue
after this offering. The common shares have been approved for listing on the
New York Stock Exchange, subject to official notice of issuance, under the
trading or "ticker" symbol "BNY".

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

   The Trust has agreed to pay the Underwriters $50,000 as partial
reimbursement of expenses incurred in connection with the offering. BlackRock
Advisors has agreed to pay organizational expenses and offering costs (other
than sales load) that exceed $0.03 per share.

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

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

   The underwriting agreement provides that it may be terminated in the
absolute discretion of the representatives without liability on the part of any
Underwriter to the Trust, BlackRock Advisors or BlackRock Financial Management
by notice to the Trust, BlackRock Advisors or BlackRock Financial Management
if, prior to delivery of and payment for the common shares, (1) trading in the
common shares or securities generally on the New York Stock Exchange, American
Stock Exchange, Nasdaq National Market or the Nasdaq Stock Market shall have
been suspended or materially limited, (2) additional material governmental
restrictions not in force on the date of the underwriting agreement have been
imposed upon trading in securities generally or a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or state authorities, or (3) any outbreak or material escalation of
hostilities or other international or

                                       35
<PAGE>

domestic calamity, crisis or change in political, financial or economic
conditions, occurs, the effect of which is such as to make it, in the judgment
of the representatives, impracticable or inadvisable to commence or continue
the offering of the common shares at the offering price to the public set forth
on the cover page of this prospectus or to enforce contracts for the resale of
the common shares by the Underwriters.

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

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

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

                          CUSTODIAN AND TRANSFER AGENT

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

                                 LEGAL OPINIONS

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


                                       36
<PAGE>

                           TABLE OF CONTENTS FOR THE
                      STATEMENT OF ADDITIONAL INFORMATION


<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Use of Proceeds ...........................................................  B-2
Investment Objective and Policies .........................................  B-2
Investment Policies and Techniques ........................................  B-4
Other Investment Policies and Techniques .................................. B-13
Management of the Trust.................................................... B-17
Portfolio Transactions and Brokerage ...................................... B-22
Description of Shares...................................................... B-23
Repurchase of Common Shares ............................................... B-24
Tax Matters................................................................ B-26
Performance Related and Comparative Information ........................... B-30
Experts.................................................................... B-33
Additional Information .................................................... B-33
Financial Statements ......................................................  F-1
Report of Independent Auditors ............................................  F-1
APPENDIX A Ratings of Investments..........................................  A-1
APPENDIX B Taxable Equivalent Yield Table .................................  B-1
APPENDIX C General Characteristics and Risks of Hedging Strategies ........  C-1
</TABLE>


                                       37
<PAGE>

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

                                4,000,000 Shares

                               BlackRock New York

                             Municipal Income Trust

                                 Common Shares

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

                                   PROSPECTUS

                                  July  , 2001

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

                              Salomon Smith Barney

                              Merrill Lynch & Co.

                           A.G. Edwards & Sons, Inc.

                             Prudential Securities

                                  UBS Warburg

                             Gruntal & Co., L.L.C.

                                 Raymond James

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                                                                     NY-PRO-6-01
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Statement of Additional Information is not complete   +
+and may be changed. We may not sell these securities until the Registration   +
+Statement filed with the Securities and Exchange Commission is effective.     +
+This Statement of Additional Information is not an offer to sell these        +
+securities and it is not soliciting an offer to buy these securities in any   +
+state where the offer or sale is not permitted.                               +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

                SUBJECT TO COMPLETION, DATED JULY 25, 2001


                   BlackRock New York Municipal Income Trust

                      STATEMENT OF ADDITIONAL INFORMATION

  BlackRock New York Municipal Income Trust (the "Trust") is a newly organized,
non-diversified, closed-end management investment company. This Statement of
Additional Information relating to common shares does not constitute a
prospectus, but should be read in conjunction with the prospectus relating
thereto dated July  , 2001. This Statement of Additional Information does not
include all information that a prospective investor should consider before
purchasing common shares, and investors should obtain and read the prospectus
prior to purchasing such shares. A copy of the prospectus may be obtained
without charge by calling (888) 825-2257. You may also obtain a copy of the
prospectus on the Securities and Exchange Commission's web site
(http://www.sec.gov). Capitalized terms used but not defined in this Statement
of Additional Information have the meanings ascribed to them in the prospectus.

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Use of Proceeds ...........................................................  B-2
Investment Objective and Policies .........................................  B-2
Investment Policies and Techniques ........................................  B-4
Other Investment Policies and Techniques .................................. B-13
Management of the Trust.................................................... B-16
Portfolio Transactions and Brokerage ...................................... B-22
Description of Shares ..................................................... B-23
Repurchase of Common Shares ............................................... B-24
Tax Matters ............................................................... B-25
Performance Related and Comparative Information ........................... B-28
Experts ................................................................... B-31
Additional Information .................................................... B-31
Financial Statements ......................................................  F-1
Report of Independent Auditors ............................................  F-1
APPENDIX A Ratings of Investments .........................................  A-1
APPENDIX B Taxable Equivalent Yield Table..................................  B-1
APPENDIX C General Characteristics and Risks of Hedging Strategies ........  C-1
</TABLE>


        This Statement of Additional Information is dated July  , 2001.
                                       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 New York State and New York City personal income
taxes and securities of other open- or closed-end investment companies that
invest primarily in municipal bonds of the type in which the Trust may invest
directly.

                       INVESTMENT OBJECTIVE AND POLICIES

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

Investment Restrictions

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

  (1) invest 25% or more of the value of its total 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) 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;

  (3) 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;

  (4) 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;

  (5) 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

  (6) 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 total 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 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 would remain subject to payment of the Trust's,
advisory fees and other expenses with respect to assets so invested. Holders of
common shares would 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.

   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 total 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;



                                      B-3
<PAGE>

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

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

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

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

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

                       INVESTMENT POLICIES AND TECHNIQUES

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

Portfolio Investments

   The Trust will invest primarily in a portfolio of investment grade municipal
bonds that are exempt from regular Federal income tax and New York State and
New York City personal income taxes.

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

                                      B-4
<PAGE>

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

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

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

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

   Obligations of issuers of municipal bonds are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Bankruptcy Reform Act of 1978. In addition, the
obligations of such issuers may become subject to the laws enacted in the
future by Congress, state legislatures or referenda extending the time for
payment of principal or interest, or both, or imposing other

                                      B-5
<PAGE>

constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its municipal bonds may be materially affected.

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


Short-Term Taxable Fixed-Income Securities

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

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

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

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

                                      B-6
<PAGE>

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

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

Short-Term Tax-Exempt Fixed Income Securities

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

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

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

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

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

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

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

                                      B-7
<PAGE>

   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.

Factors Pertaining to New York

   As described in the prospectus, except during temporary periods, the Trust
will invest primarily in New York municipal bonds. In addition, the specific
New York municipal bonds in which the Trust will invest will change from time
to time. The Trust is therefore susceptible to political, economic, regulatory
or other factors affecting issuers of New York municipal bonds. The following
information constitutes only a brief summary of a number of the complex factors
which may impact issuers of New York municipal bonds and does not purport to be
a complete or exhaustive description of all adverse conditions to which issuers
of New York municipal bonds may be subject. Such information is derived from
official statements utilized in connection with the issuance of New York
municipal bonds, as well as from other publicly available documents. Such
information has not been independently verified by the Trust, and the Trust
assumes no responsibility for the completeness or accuracy of such information.
The summary below does not include all of the information pertaining to the
budget, receipts and disbursements of the State of New York that would
ordinarily be included in various public documents issued thereby, such as an
Official Statement prepared in connection with the issuance of general
obligation bonds of the State of New York. Such an Official Statement, together
with any updates or supplements thereto, may generally be obtained upon request
to the Budget Office of the State of New York.

   The New York State Economy. New York is the third most populous state in the
nation and has a relatively high level of personal wealth. The state's economy
is diverse, with a comparatively large share of the nation's finance,
insurance, transportation, communications and services employment, and a very
small share of the nation's farming and mining activity. Travel and tourism
constitute an important part of the state's economy. As in most states, New
York has a declining proportion of its workforce engaged in manufacturing, and
an increasing proportion engaged in service industries. To the extent that a
particular industry sector represents a larger portion of the state's total
economy, the greater impact that a downturn in such sector is likely to have on
the state's economy.

   The service sector, which includes entertainment, personal services, such as
health care and auto repairs, and business-related services, such as
information processing, law and accounting, is the state's leading economic
sector. The services sector accounts for more than three of every ten
nonagricultural jobs in New York and has a noticeably higher proportion of
total jobs than does the rest of the nation. In recent years, many industries
in the services sector, especially high-technology firms, have been prospering.
Manufacturing employment continues to decline in importance in New York, as in
most other states, and New York's economy is less reliant on this sector than
in the past. However, it remains an important sector of the state economy,
particularly for the upstate economy, as high concentrations of manufacturing
industries for transportation equipment, optics and imaging, materials
processing, and refrigeration, heating and electrical equipment products are
located in the upstate region. Wholesale and retail trade is the second largest
sector in terms of nonagricultural jobs in New York but is considerably smaller
when measured by income share. Trade consists of wholesale businesses and
retail businesses, such as department stores and eating and drinking
establishments.

   New York City is the nation's leading center of banking and finance and, as
a result, this is a far more important sector in the state than in the nation
as a whole. Although the sector accounts for under one-tenth of all
nonagricultural jobs in the state, it contributes about one-fifth of total
wages. Farming is an important part of the economy in rural areas, although it
constitutes a very minor part of total state output. Principal agricultural
products of the state include milk and dairy products, greenhouse and nursery
products, apples and other fruits, and fresh vegetables. New York ranks among
the nation's leaders in the production of these commodities.

                                      B-8
<PAGE>

   Federal, state and local government together are the third largest sector in
terms of nonagricultural jobs, with the bulk of the employment accounted for by
local governments. Public education is the source of nearly one-half of total
state and local government employment.

   State Budgetary Outlook. State law requires the Governor to propose a
balanced budget each year. Preliminary analysis by the Division of the Budget
indicates that the state will have a 2001-02 budget gap of approximately $2
billion, which is comparable with gaps projected following enactment of recent
budgets. This estimate includes the projected costs of new collective
bargaining agreements, no assumed operating efficiencies, and the planned
application of approximately $1.2 billion of the School Tax Reduction Fund.
Despite recent budgetary surpluses recorded by the state, actions affecting the
level of receipts and disbursements, the relative strength of the state and
regional economy, and actions by the Federal government could impact projected
budget gaps for the state. These gaps would result from a disparity between
recurring revenues and the cost of increasing the level of support for state
programs. To address a potential imbalance in any given fiscal year, the state
would be required to take actions to increase receipts and/or reduce
disbursements as it enacts the budget for that year. There can be no assurance,
however, that the Legislature will enact the Governor's proposals or that the
state's actions will be sufficient to preserve budgetary balance in a given
fiscal year or to align recurring receipts and disbursements in future fiscal
years.


   Many uncertainties exist in forecasts of both the national and state
economies, including consumer attitudes toward spending, the extent of
corporate and governmental restructuring, the condition of the financial
sector, Federal fiscal and monetary policies, the level of interest rates, and
the condition of the world economy, which could have an adverse effect on the
state. There can be no assurance that the state economy will not experience
results in the current fiscal year that are worse than predicted, with
corresponding material and adverse effects on the state's projections of
receipts and disbursements.

   Over the long-term, uncertainties with regard to the economy present the
largest potential risk to future budget balance in New York state. The
securities industry is more important to the New York economy than the national
economy as a whole, potentially amplifying the impact of an economic downturn
in the financial markets. A large change in stock market performance during the
forecast horizon could result in wage, bonus, and unemployment levels that are
significantly different from those embodied in the 2000-01 Financial Plan
forecast. Merging and downsizing by firms, as a consequence of deregulation or
continued foreign competition, may also have more significant adverse effects
on employment than expected.

   An ongoing risk to the 2000-01 Financial Plan arises from the potential
impact of certain litigation and Federal disallowances now pending against the
state, which could produce adverse effects on the state's projections of
receipts and disbursements. The 2000-01 Financial Plan contains projected
reserves of $150 million in 2000-01 for such events, but assumes no significant
Federal disallowances or other Federal actions that could affect state
finances.

   Additional risks to the 2000-01 Financial Plan may arise from the enactment
of legislation by the U.S. Congress. The Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 created a new Temporary Assistance to
Needy Families Program (TANF) partially funded with a fixed Federal block grant
to states. Congress has recently debated proposals under which the Federal
government would take a portion of state reserves from the TANF block grant for
use in funding other Federal programs. It has also considered proposals that
would lower the state's share of mass transit operating assistance. Finally,
several proposals to alter Federal tax law that have surfaced in recent years
could adversely affect state revenues, since many state taxes depend on Federal
definitions of income. While Congress has not enacted these proposals, it may
do so in the future, or it may take other actions that could have an adverse
effect on state finances.

   New York City. New York City, with a population of approximately 8 million,
is an international center of business and culture. Its non-manufacturing
economy is broadly based, with the banking and securities, life insurance,
communications, publishing, fashion design, retailing and construction
industries accounting for a significant portion of the city's total employment
earnings. Additionally, the city is the nation's leading tourist destination.
Manufacturing activity in the city is conducted primarily in apparel and
printing.

                                      B-9
<PAGE>

   The fiscal health of the state may also be affected by the fiscal health of
New York City, which continues to receive significant financial assistance from
the state. State aid contributes to the city's ability to balance its budget
and meet its cash requirements. The state may also be affected by the ability
of the city and certain entities issuing debt for the benefit of the city to
market their securities successfully in the public credit markets. The city has
achieved balanced operating results for each of its fiscal years since 1981 as
measured by the GAAP standards in force at that time. The city prepares a four-
year financial plan annually and updates it periodically, and prepares a
comprehensive annual financial report each October describing its most recent
fiscal year.

   In response to the city's fiscal crisis in 1975, the state took action to
assist the city in returning to fiscal stability. Among those actions, the
state established the Municipal Assistance Corporation for the City of New York
to provide financing assistance to the city; the New York State Financial
Control Board (the Control Board) to oversee the city's financial affairs; and
the Office of the State Deputy Comptroller for the City of New York to assist
the Control Board in exercising its powers and responsibilities. A "control
period" existed from 1975 to 1986, during which the city was subject to certain
statutorily-prescribed fiscal controls. The Control Board terminated the
control period in 1986 when certain statutory conditions were met. State law
requires the Control Board to reimpose a control period upon the occurrence, or
"substantial likelihood and imminence" of the occurrence, of certain events,
including (but not limited to) a city operating budget deficit of more than
$100 million or impaired access to the public credit markets.

   To successfully implement its financial plan, the city and certain entities
issuing debt for the benefit of the city must market their securities
successfully. This debt is issued to finance the rehabilitation of the city's
infrastructure and other capital needs and to refinance existing debt, as well
as to finance seasonal needs. In the city's fiscal years 1997-98, 1998-99 and
1999-2000, the state constitutional debt limit would have prevented the city
from entering into new capital contracts. To prevent disruptions in the capital
program, two actions were taken to increase the city's capital financing
capacity: (i) the state legislature created the New York City Transitional
Finance Authority (TFA) in 1997, and (ii) in 1999, the city created TSASC,
Inc., a not-for-profit corporation empowered to issue tax-exempt debt backed by
tobacco settlement revenues. Despite these actions, the city, in order to
continue its capital program, will need additional financing capacity beginning
in the city's fiscal year 2000-01, which could be provided through increasing
the borrowing authority of the TFA or amending the state constitutional debt
limit for the city's fiscal year 2001-02 and thereafter.

   Other New York Risk Factors. When compared with the average ratings among
other states of full faith and credit state debt obligations, the credit risk
associated with obligations of the State of New York and its agencies and
authorities, including general obligation and revenue bonds, "moral obligation"
bonds, lease debt, appropriation debt and notes is somewhat higher than
average. Moreover, the credit quality of such obligations may be more volatile
insofar as the state's credit rating has historically been upgraded and
downgraded much more frequently than most other states.

   The combined state and local taxes of residents of the State of New York,
and particularly of residents of New York City, are among the highest in the
country, which may limit the ability of the state and its localities to raise
additional revenue. In addition, combined state and local debt per capita in
the state is significantly above the national average and debt service
expenditures have represented an increasing claim on state and local budgets.

   Additionally, many factors, including national, economic, social and
environmental policies and conditions, which are not within the control of such
issuers, could have an adverse impact on the financial conditions of such
issuers. The Trust cannot predict whether or to what extent such factors or
other factors may affect the issuers of New York municipal bonds, the market
value or marketability of such securities or the ability of the respective
issuers of such securities acquired by the Trust to pay interest on or
principal of such securities. The creditworthiness of obligations issued by
local New York issuers may be unrelated to the creditworthiness of obligations
issued by the State of New York, and there is no responsibility of the part of
the State of New York to make payments on such local obligations. There may be
specific factors that are

                                      B-10
<PAGE>

applicable in connection with investment in the obligations of particular
issuers located within New York, and it is possible the Trust will invest in
obligations of particular issuers as to which such specific factors are
applicable. However, the information set forth above is intended only as a
general summary and not a discussion of any specific factors that may affect
any particular issuer of New York municipal bonds.

Duration Management and Other Management Techniques

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

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

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

                                      B-11
<PAGE>

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

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

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


                                      B-12
<PAGE>

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

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

Short Sales

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

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

   The Trust's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other high grade liquid securities. The Trust will also be
required to segregate 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
total 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

                                      B-13
<PAGE>

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 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 take place at a later date. When-issued and forward
commitment securities may be sold prior to the settlement date, but the Trust
will enter into when-issued and forward commitment securities 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 can incur a gain or loss. At the time the Trust entered
into a transaction on a when-issued or forward commitment basis, it will
segregate with its custodian cash or other liquid high grade debt securities
with a value not less than 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 are not treated by the Trust as when-issued
or forward commitment transactions and accordingly are not subject to the
foregoing restrictions.


Borrowing

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


Reverse Repurchase Agreements

   The Trust may enter into reverse repurchase agreements with respect to its
portfolio investments subject to the investment restrictions set forth herein.
Reverse repurchase agreements involve the sale of securities held by the Trust
with an agreement by the Trust to repurchase the securities at an agreed upon
price, date and interest payment. At the time the Trust enters into a reverse
repurchase agreement, it may establish and maintain a segregated account with
the custodian containing 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.

                                      B-14
<PAGE>

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

Zero Coupon Bonds

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

Lending of Securities

   The Trust may lend its portfolio securities to brokers, dealers and other
financial institutions 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 (a)
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, (b) 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), (c) the loan be made subject to termination by
the Trust at any time and (d) 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. 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.


                                      B-15
<PAGE>

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

Residual Interest Municipal Bonds

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

                            MANAGEMENT OF THE TRUST

Investment Management Agreement

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

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


   The investment management agreement and certain waivers of the management
fees were approved by the Trust's board of trustees on May 24, 2001, 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 0.70% of the average weekly value of the Trust's Managed
Assets. A related waiver letter from BlackRock Advisors provided for a
temporary fee waiver of 0.30% of the average weekly value of the Trust's total
Managed Assets in each of the first five years of the Trust's operations
(through July 31, 2006) and for a declining amount for an additional


                                      B-16
<PAGE>


five years. Subsequently, BlackRock Advisors unilaterally agreed to permanently
waive a portion of the management fee to which it is entitled equal to 0.10% of
the average weekly value of the Trust's total Managed Assets and adjusted the
temporary fee waiver so that BlackRock Advisors would waive 0.25% of the
average weekly value of the Trust's total Managed Assets in each of the first
five years and would waive a declining amount for an additional four years as
set forth in the prospectus under "Management of the Trust--Investment
Management Agreement." The net effect of the permanent fee waiver and the
adjusted temporary fee waiver schedule was to reduce the management fee paid by
the Trust by 0.05% of the Trust's total Managed Assets in each of the first ten
years of the Trust's operations and to reduce the management fee paid by the
Trust by 0.10% of the Trust's total Managed Assets in each year thereafter.


   The investment management agreement and the waivers of the management fees
were approved by the sole common shareholder of the Trust as of July  , 2001.
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 fees 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 July 31, 2002, 38% of the monthly
management fees received by BlackRock Advisors; (ii) from August 1, 2002 to
July 31, 2003, 19% of the monthly management fees received by BlackRock
Advisors; and (iii) after July 31, 2003, 0% of the management fees received by
BlackRock Advisors; provided that thereafter 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 on May 24, 2001, 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). The sub-investment advisory
agreement was approved by the sole common shareholder of the Trust as of July
 , 2001. The sub-investment advisory

                                      B-17
<PAGE>


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 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, 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 or
BlackRock Financial Management, on 60 days' written notice by either party to
the other. 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 a brief statement of 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>
                                          Principal Occupation During the
     Name and Address       Title     Past Five Years and Other Affiliations
     ----------------       -----     --------------------------------------
 <C>                       <C>     <S>
 Andrew F. Brimmer........ Trustee President of Brimmer & Company, Inc., a
  4400 MacArthur Blvd N.W.         Washington, D.C.-based economic and
  Suite 302                        financial consulting firm. Director of
  Washington, DC 20007             CarrAmerica Realty Corporation and Borg-
  Age: 74                          Warner Automotive. Formerly member of the
                                   Board of Governors of the Federal Reserve
                                   System. Formerly Director of
                                   AirBorne Express, BankAmerica Corporation
                                   (Bank of America), Bell South Corporation,
                                   College Retirement Equities Fund (Trustee),
                                   Commodity Exchange, Inc. (Public Governor),
                                   Connecticut Mutual Life Insurance Company,
                                   E.I. Dupont de Nemours & Company, Equitable
                                   Life Assurance Society of the United States,
                                   Gannett Company, Mercedes-Benz of North
                                   America, MNC Financial Corporation (American
                                   Security Bank), NMC Capital Management,
                                   Navistar International Corporation, PHH
                                   Corp. and UAL Corporation (United Airlines).

 Richard E. Cavanagh...... Trustee President and Chief Executive Officer of The
  845 Third Avenue                 Conference Board, Inc., a leading global
  New York, NY 10022               business membership organization, from 1995-
  Age: 54                          present. Former Executive Dean of the John
                                   F. Kennedy School of Government at Harvard
                                   University from 1988-1995. Acting Director,
                                   Harvard Center for Business and Government
                                   (1991-1993). Formerly Partner (principal) of
                                   McKinsey & Company, Inc. (1980-1988). Former
                                   Executive Director of Federal Cash
                                   Management, White House Office of Management
                                   and Budget (1977-1979). Co-author, The
                                   Winning Performance
</TABLE>

                                      B-18
<PAGE>


<TABLE>
<CAPTION>
                                            Principal Occupation During the
        Name and Address         Title   Past Five Years and Other Affiliations
        ----------------         -----   --------------------------------------
 <C>                            <C>     <S>
                                        (best selling management book published
                                        in 13 national editions). Trustee
                                        Emeritus, Wesleyan University. Trustee,
                                        Drucker Foundation, Airplanes Group,
                                        Aircraft Finance Trust (AFT) and
                                        Educational Testing Service (ETS).
                                        Director, Arch Chemicals, Fremont Group
                                        and The Guardian Life Insurance Company
                                        of America.

 Kent Dixon.................... Trustee Consultant/Investor. Former President
  430 Sandy Hook Road                   and Chief Executive Officer of Empire
  St. Petersburg, FL 33706              Federal Savings Bank of America and
  Age: 63                               Banc PLUS Savings Association, former
                                        Chairman of the Board, President and
                                        Chief Executive Officer of Northeast
                                        Savings. Former Director of ISFA (the
                                        owner of INVEST, a national securities
                                        brokerage service designed for banks
                                        and thrift institutions).

 Frank J. Fabozzi.............. Trustee Consultant. Editor of The Journal of
  858 Tower View Circle                 Portfolio Management and Adjunct
  New Hope, PA 18938                    Professor of Finance at the School of
  Age: 52                               Management at Yale University.
                                        Director, Guardian Mutual Funds Group.
                                        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.

 Laurence D. Fink*............. Trustee Director, Chairman and Chief Executive
  Age: 48                               Officer of BlackRock, Inc. since its
                                        formation in 1998 and of BlackRock,
                                        Inc.'s predecessor entities since 1988.
                                        Chairman of the Management Committee of
                                        BlackRock, Inc. Formerly, Managing
                                        Director of the First Boston
                                        Corporation, Member of its Management
                                        Committee, Co-head of its Taxable Fixed
                                        Income Division and Head of its
                                        Mortgage and Real Estate Products
                                        Group. Currently, Chairman of the Board
                                        of each of the closed-end Trusts in
                                        which BlackRock Advisors, Inc. acts as
                                        investment advisor, President,
                                        Treasurer and a Trustee of the
                                        BlackRock Funds, Chairman of the Board
                                        and Director of Anthracite Capital,
                                        Inc., a Director of BlackRock's
                                        offshore funds and alternative products
                                        and Chairman of the Board of Nomura
                                        BlackRock Asset Management Co., Ltd.
                                        Currently, Vice Chairman of the Board
                                        of Trustees of Mount Sinai-New York
                                        University Medical Center and Health
                                        System and a Member of the Board of
                                        Phoenix House.

 James Clayburn LaForce, Jr. .. Trustee Dean Emeritus of The John E. Anderson
  P.O. Box 1595                         Graduate School of Management,
  Pauma Valley, CA 92061                University of California since July 1,
  Age: 72                               1993. Director, Jacobs Engineering
                                        Group, Inc., Payden & Rygel Investment
                                        Trust, Provident Investment Counsel
                                        Funds, Timken Company, Motor Cargo
                                        Industries and Trust for Investment
                                        Managers. Acting Dean of The School of
                                        Business, Hong Kong University of
                                        Science and Technology 1990-1993. From
                                        1978 to September 1993, Dean of The
                                        John E. Anderson Graduate School of
                                        Management, University of California.
</TABLE>


                                      B-19
<PAGE>


<TABLE>
<CAPTION>
                                            Principal Occupation During the
    Name and Address         Title       Past Five Years and Other Affiliations
    ----------------         -----       --------------------------------------
 <C>                     <C>            <S>
 Walter F. Mondale......    Trustee     Partner, Dorsey & Whitney, a law firm
  220 South Sixth Street                (December 1996-present, September 1987-
  Minneapolis, MN 55402                 August 1993). Formerly, U.S. Ambassador
  Age: 73                               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. Director, Northwest Airlines
                                        Corporation, NWA Inc., Northwest
                                        Airlines, Inc. and UnitedHealth Group
                                        Corporation.

 Ralph L. Schlosstein*..  Trustee and   Director since 1999 and President of
  Age: 50                  President    BlackRock, Inc. since its formation in
                                        1998 and of BlackRock, Inc.'s
                                        predecessor entities since 1988. Member
                                        of the Management Committee and
                                        Investment Strategy Group of BlackRock,
                                        Inc. Formerly, Managing Director of
                                        Lehman Brothers, Inc. and Co-head of
                                        its Mortgage and Savings Institutions
                                        Group. Currently, President of each of
                                        the closed-end Trusts in which
                                        BlackRock Advisors, Inc. acts as
                                        investment advisor and a Director and
                                        Officer of BlackRock's alternative
                                        products. Currently, a Member of the
                                        Visiting Board of Overseers of the John
                                        F. Kennedy School of Government at
                                        Harvard University, the Financial
                                        Institutions Center Board of the
                                        Wharton School of the University of
                                        Pennsylvania, and a Trustee of New
                                        Visions for Public Education in New
                                        York City. Formerly, a Director of
                                        Pulte Corporation and a Member of
                                        Fannie Mae's Advisory Council.

 Anne F. Ackerley.......   Secretary    Managing Director of BlackRock, Inc.
  Age: 39                               since 2000. Formerly First Vice
                                        President and Chief Operating Officer,
                                        Mergers and Acquisitions Group at
                                        Merrill Lynch & Co. from 1997 to 2000;
                                        First Vice President and Chief
                                        Operating Officer, Public Finance Group
                                        at Merrill Lynch & Co. from 1995 to
                                        1997; First Vice President, Emerging
                                        Markets Fixed Income Research at
                                        Merrill Lynch & Co. prior thereto.

 Henry Gabbay...........   Treasurer    Managing Director of BlackRock, Inc.
  Age: 53                               and its predecessor entities.

 Robert S. Kapito....... Vice President Vice Chairman of BlackRock, Inc. and
  Age: 44                               its predecessor entities.
 Kevin Klingert......... Vice President Managing Director of BlackRock, Inc.
  Age: 38                               and its predecessor entities.

 James Kong.............   Assistant    Managing Director of BlackRock, Inc.
  Age: 40                  Treasurer    and its predecessor entities.

 Richard Shea, Esq...... Vice President Managing Director of BlackRock, Inc.
  Age: 41                     /Tax      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>


                                      B-20
<PAGE>

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

   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, 2000, the
Independent Trustees/Directors earned the compensation set forth below in their
capacities as trustees/directors of the funds in the BlackRock Family of Funds.
It is estimated that the Independent Trustees will receive from the Trust the
amounts set forth below for the Trust's calendar year ending December 31, 2001
assuming the Trust had been in existence for the full calendar year.

<TABLE>
<CAPTION>
                                 Estimated          Total Compensation from the Trust and Fund
Name of Board Member      Compensation From Trust       Complex Paid to Board Member(/1/)
- --------------------      -----------------------   ------------------------------------------
<S>                       <C>                       <C>
Andrew R. Brimmer.......          $6,000(/2/)(/3/)                $160,000(/4/)
Richard E. Cavanagh.....          $6,000(/2/)                     $160,000(/4/)
Kent Dixon..............          $6,000(/2/)                     $160,000(/4/)
Frank J. Fabozzi........          $6,000(/2/)                     $160,000(/4/)
James Clayburn La Force,
 Jr.....................          $6,000(/2/)                     $160,000(/4/)
Walter F. Mondale.......          $6,000(/2/)                     $160,000(/4/)
</TABLE>
- --------

(/1/) Represents the total compensation earned by such persons during the
      calendar year ended December 31, 2000 from the twenty-two closed-end
      funds advised by the Advisor (the "Fund Complex"). Two of these funds,
      BlackRock Target Term Trust and the BlackRock 2001 Term Trust were
      terminated on December 29, 2000 and June 30, 2001 respectively.


(/2/) Of these amounts it is anticipated that Messrs. Brimmer, Cavanagh, La
      Force and Mondale will defer $1,500, $1,500, $3,750 and $1,500,
      respectively, pursuant to the Fund Complex's deferred compensation plan.

(/3/) At a meeting of the boards of directors/trustees of the Fund Complex held
      on August 24, 2000, Dr. Brimmer was appointed "lead director" for each
      board of trustees/directors in the Fund Complex. For his services as lead
      trustee/director, Dr. Brimmer will be compensated in the amount of
      $40,000 per annum by the Fund Complex to be allocated among the funds in
      the Fund Complex based on each fund's relative net assets.

(/4/) Of this amount, Messrs. Brimmer, Cavanagh, La Force and Mondale deferred
      $12,000, $12,000, $77,500 and $31,000, respectively, pursuant to the Fund
      Complex's deferred compensation plan.


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


Codes of Ethics

   The Trust, the Advisor, the Sub-Advisor and the Trust's principal
underwriters have adopted codes of ethics under Rule 17j-1 of the Investment
Company Act. These codes permit personnel subject to the codes to invest in
securities, including securities that may be purchased or held by the Trust.

Investment Advisor and Sub-Advisor

   BlackRock Advisors, Inc. acts as the Trust's investment advisor. BlackRock
Financial Management acts as the Trust's sub-advisor. BlackRock and BlackRock
Financial Management are both wholly owned subsidiaries


                                      B-21
<PAGE>


of BlackRock, Inc., which is one of the largest publicly traded investment
management firms in the United States with $213 billion of assets under
management as of June 30, 2001. BlackRock Advisors is one of the nation's
leading fixed income managers with over $122 billion of fixed income assets
under management. BlackRock, Inc. and its affiliates manage assets on behalf of
more than 3,300 institutions and 200,000 individuals worldwide, including nine
of the 10 largest companies in the U.S. as determined by Fortune Magazine,
through a variety of equity, fixed income, liquidity and alternative investment
separate accounts and mutual funds, including the company's flagship fund
families, BlackRock Funds and BlackRock Provident Institutional Funds.
BlackRock, Inc. is the nation's 26th largest asset management firm according to
Pensions & Investments, May 14, 2001.


   The BlackRock organization has over 12 years of experience managing closed-
end products and currently advises a closed-end family of 20 funds. BlackRock
has 13 leveraged municipal closed-end funds under management and approximately
$16 billion in municipal assets firm-wide. As of June 30, 2001, BlackRock
managed over $5.4 billion in closed-end products. In March 2001, a Fortune
Magazine article entitled "The Hidden Beauty of Bonds" by Andy Serwer called
BlackRock "perhaps the greatest success story on Wall Street in the past half-
decade." In addition, BlackRock provides risk management and investment system
services to a growing number of institutional investors under the BlackRock
Solutions name. In January 2001, Risk Magazine named BlackRock "Asset
Management Risk Manager of the Year." Clients are served from the company's
headquarters in New York City, as well as offices in Wilmington, Delaware, San
Francisco, California, Hong Kong, Edinburgh, Scotland and Tokyo, Japan.
BlackRock, Inc. is a member of The PNC Financial Services Group, Inc. ("PNC"),
one of the largest diversified financial services organizations in the United
States, and is majority-owned by PNC and by BlackRock employees.


                      PORTFOLIO TRANSACTIONS AND BROKERAGE

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


                                      B-22
<PAGE>


the Sub-Advisor, and does not reduce the Advisor's and/or the Sub-Advisor's
normal research activities in rendering investment advice under the investment
management agreement or the sub-investment advisory agreement. It is possible
that the Advisor's and/or the Sub-Advisor's expenses could be materially
increased if it attempted to purchase this type of information or generate it
through its own staff.


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

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

                             DESCRIPTION OF SHARES

Common Shares

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

Preferred Shares

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

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

Other Shares


   The board of trustees (subject to applicable law and the Trust's Agreement
and Declaration of Trust as amended and restated) 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.


                                      B-23
<PAGE>

                          REPURCHASE OF COMMON SHARES

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


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

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

   Although the decision to take action in response to a discount from net
asset value will be made by the board of trustees at the time it considers such
issue, it is the board's present policy, which may be changed by the board of
trustees, not to authorize repurchases of common shares or a tender offer for
such shares if: (1) such transactions, if consummated, would (a) result in the
delisting of the common shares from the New York Stock Exchange, or (b) impair
the Trust's status as a regulated investment company under the Code, (which
would make the Trust a taxable entity, causing the Trust's income to be taxed
at the corporate level in addition to the taxation of shareholders who receive
dividends from the Trust) or as a registered closed-end investment company
under the Investment Company Act; (2) the Trust would not be able to liquidate
portfolio securities in an orderly manner 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

                                      B-24
<PAGE>


repurchases or tender offers at or below net asset value will result in the
Trust's shares trading at a price equal to their net asset value. Nevertheless,
the fact that the Trust's shares may be the subject of repurchase or tender
offers from time to time, or that the Trust may be converted to an open-end
investment company, may reduce any spread between market price and net asset
value that might otherwise exist.


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

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

                                  TAX MATTERS

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

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

   As a regulated investment company, the Trust will not be subject to Federal
income tax on its income that it distributes each taxable year to its
shareholders, provided that in such taxable year it distributes at least 90% of
the sum of (i) its "investment company taxable income" (which includes
dividends, taxable interest, taxable original issue discount and market
discount income, income from securities lending, net short-term capital gain in
excess of long-term capital loss, and any other taxable income other than "net
capital gain" (as defined below) and is reduced by deductible expenses)
determined without regard to the deduction for dividends paid and (ii) its net
tax-exempt interest (the excess of its gross tax-exempt interest income over
certain disallowed deductions). The Trust may retain for investment its net
capital gain (which consists of the excess of its net long-term capital gain
over its net short-term capital loss). However, if the Trust retains any net
capital gain or any investment company taxable income, it will be subject to
tax at regular corporate rates on the amount retained. If the Trust retains any
net capital gain, it may designate the retained amount as undistributed capital
gains in a notice to its shareholders who, if subject to Federal income tax on
long-term capital gains, (i) will be


                                      B-25
<PAGE>


required to include in income for Federal income tax purposes, as long-term
capital gain, their share of such undistributed amount and (ii) will be
entitled to credit their proportionate shares of the tax paid by the Trust
against their Federal income tax liabilities, if any, and to claim refunds to
the extent the credit exceeds such liabilities. For Federal income tax
purposes, the tax basis of shares owned by a shareholder of the Trust will be
increased by the amount of undistributed capital gains included in the gross
income of the shareholder less the tax deemed paid by the shareholder under
clause (ii) of the preceding sentence. The Trust intends to distribute at least
annually to its shareholders all or substantially all of its net tax-exempt
interest and any investment company taxable income and net capital gain.


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

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


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


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

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

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

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

   The Internal Revenue Service's position in a published revenue ruling
indicates that the Trust is required to designate distributions paid with
respect to its common shares and its Preferred Shares as consisting of a

                                      B-26
<PAGE>


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


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

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


   Although exempt-interest dividends generally may be treated by holders of
common shares as items of interest excluded from their gross income, each
holder is advised to consult his tax advisor with respect to whether exempt-
interest dividends retain their exclusion if the shareholder would be treated
as a "substantial user," or a "related person" of a substantial user, of the
facilities financed with respect to any of the tax-exempt obligations held by
the Trust. "Substantial user" is defined under the Treasury Regulations to
include a non-exempt person who regularly uses in his trade or business a part
of the facilities financed with the tax-exempt obligations and whose gross
revenues derived from such facilities exceed 5% of the useable area of the
facilities or from whom the facilities or a part thereof were specifically
constructed, reconstructed or acquired. "Related persons" include certain
natural persons, affiliated corporations, a partnership and its partners and an
S corporation and its shareholders.

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

   The redemption, sale or exchange of common shares normally will result in
capital gain or loss to the holders of common shares who hold their shares as
capital assets. Generally, a shareholder's gain or loss will be long-term
capital gain or loss if the shares have been held for more than one year even
though the increase in value in such common shares is attributable to tax-
exempt interest income. In addition, gain realized by the Trust from the
disposition of a tax-exempt municipal obligation that is attributable to
accrued market discount will be treated as ordinary income rather than capital
gain, and thus may increase the amount of ordinary income dividends received by
holders of common shares. Present law taxes both long- and short-term capital
gains of corporations at the rates applicable to ordinary income. For non-
corporate taxpayers, however, long-term capital gains will be taxed at a
maximum rate of 20% (or 18% for capital assets that have been held for more
than five years and whose holding periods began after December 31, 2001), while
short-term capital gains and other ordinary income will currently be taxed at a
maximum rate of 39.1%.* Because of the limitations on itemized deductions and
the deduction for personal exemptions applicable to higher income taxpayers,
the effective tax rate may be higher in certain circumstances.

- --------
* The Economic Growth and Tax 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 rate 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.

                                      B-27
<PAGE>


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


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


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

   The Trust is required to withhold on of taxable dividends and certain other
payments paid to non-corporate shareholders who have not furnished to the Trust
their correct taxpayer identification number (in the case of individuals, their
Social Security number) and certain certifications, or who are otherwise
subject to backup withholding. Backup withholding is not an additional tax and
any amount withheld may be credited against the shareholder's federal income
tax liability.

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


                PERFORMANCE RELATED AND COMPARATIVE INFORMATION

   New York municipal bonds can provide double tax-free income (exempt from
both regular Federal and state income taxes) for investors who are residents of
New York for tax purposes. Because the Trust expects that a portion of its
investments will pay interest that is taxable under the Federal alternative
minimum tax, the Trust may not be a suitable investment for shareholders that
are subject to the Federal alternative minimum tax.

                                      B-28
<PAGE>

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

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

   Keep in mind, that on April 30, 2001, the Lehman Brothers Aggregate Bond
Index*, which is considered to be a common measure of the taxable bond market,
yielded 6.14%.

Municipal bonds have had the best after-tax return when compared to any other
major fixed income category.

                      Tax Adjusted Returns vs. Volatility
                              Fixed Income Classes
                          Last 10 Years Ending 4/30/01


<TABLE>
<CAPTION>
10 year Period
                                                                               High               Global
4/30/91 -- 4/30/01       Muni   Aggregate Treasury Agency Corporates Mortgages Yield  Eurodollar Treasury
<S>                      <C>    <C>       <C>      <C>    <C>        <C>       <C>    <C>        <C>
Annualized Return....... 11.55%   7.82%     7.69%   7.81%    8.27%     7.70%   9.19%     7.71%     6.53%
Annualized Standard
 Deviation..............  4.28    3.76      4.16    3.85     4.72      3.05    5.62      3.56      5.84
</TABLE>



   The chart above shows that over the past 10 years, on a tax-adjusted basis,
municipal bonds have had higher annualized returns when compared to any other
major fixed income category.

Source: Lehman Brothers**

- --------

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

** Past performance is no guarantee of future results. The tax equivalent
  return reflects an adjustment of 35% of the portion of the Lehman Brothers
  Municipal Index attributable to coupon payment (to adjust for an assumed tax
  bracket of 35%) and no adjustment to the portion of the Lehman Brothers
  Municipal Index attributable to principal appreciation. Standard deviation
  measures performance fluctuation; generally the higher the standard
  deviation, the greater the expected volatility of returns. Standard deviation
  is not a complete measure of risk and cannot predict future performance.
  Referenced Lehman Indices: Mortgage Back Securities, Euro-Aggregate Bond,
  Aggregate Bond, U.S. Agency, Credit Bond (Corporate), Global Treasury bond,
  Municipal Bond, High Yield and Treasury Bond.

                                      B-29
<PAGE>

       Municipal Bonds May Be Attractively Valued Relative To Treasuries

<TABLE>
<CAPTION>
                                                                      AAA
                                              AAA      30 Year   30 Year Muni/
Date                                      30 Year Muni Treasury 30 Year Treasury
- ----                                      ------------ -------- ----------------
<S>                                       <C>          <C>      <C>
2-Jan-90................................      6.80       8.03        84.70%
30-Mar-90...............................      7.10       8.67        81.92%
29-Jun-90...............................      7.00       8.43        83.04%
28-Sep-90...............................      7.40       8.95        82.65%
31-Dec-90...............................      6.90       8.26        83.57%
29-Mar-91...............................      6.80       8.27        82.25%
28-Jun-91...............................      6.90       8.45        81.64%
30-Sep-91...............................      6.30       7.85        80.28%
31-Dec-91...............................      6.20       7.45        83.19%
31-Mar-92...............................      6.50       7.99        81.37%
30-Jun-92...............................      6.30       7.81        80.66%
30-Sep-92...............................      6.20       7.43        83.45%
31-Dec-92...............................      6.10       7.43        82.11%
31-Mar-93...............................      5.65       7.00        80.68%
30-Jun-93...............................      5.40       6.70        80.55%
30-Sep-93...............................      5.10       6.21        82.07%
31-Dec-93...............................      5.20       6.49        80.12%
31-Mar-94...............................      6.00       7.24        82.83%
30-Jun-94...............................      6.15       7.68        80.05%
30-Sep-94...............................      6.30       7.93        79.48%
30-Dec-94...............................      6.60       7.92        83.37%
31-Mar-95...............................      5.90       7.48        78.89%
30-Jun-95...............................      5.90       6.66        88.59%
29-Sep-95...............................      5.90       6.59        89.47%
29-Dec-95...............................      5.35       6.00        89.10%
29-Mar-96...............................      5.75       6.76        85.00%
28-Jun-96...............................      5.90       6.95        84.88%
30-Sep-96...............................      5.65       6.97        81.03%
31-Dec-96...............................      5.55       6.69        83.00%
31-Mar-97...............................      5.80       7.15        81.15%
30-Jun-97...............................      5.45       6.82        79.88%
30-Sep-97...............................      5.25       6.44        81.50%
31-Dec-97...............................      5.15       5.98        86.16%
31-Mar-98...............................      5.15       5.97        86.29%
30-Jun-98...............................      5.15       5.68        90.65%
30-Sep-98...............................      4.82       5.11        94.28%
31-Dec-98...............................      4.94       5.19        95.27%
31-Mar-99...............................      5.04       5.72        88.15%
30-Jun-99...............................      5.33       6.09        87.57%
30-Sep-99...............................      5.70       6.18        92.22%
31-Dec-99...............................      5.93       6.59        90.00%
31-Mar-00...............................      5.69       5.97        95.24%
30-Jun-00...............................      5.72       6.05        94.62%
29-Sep-00...............................      5.61       5.97        94.04%
29-Dec-00...............................      5.16       5.51        93.65%
30-Mar-01...............................      5.13       5.56        92.23%
18-May-01...............................      5.28       5.78        91.35%
                                                                     ------
 10 year average percentage.............                             85.41%
                                                                     ======
</TABLE>

  The chart above shows that currently, municipal bonds are yielding over 90%
of what treasuries are yielding. Since yields move in the opposite direction of
price, BlackRock believes these higher yields are an indication that municipals
may be attractively valued relative to treasury securities.

Source: Municipal Market Data/Delphis Hanover/Bloomberg***

- --------
*** Past performance is no guarantee of future results. Chart shows the
   relationship between the 30 Year AAA Municipal Index and the 30 Year AAA
   Treasury Index. The yields quoted above are a simple unweighted average of
   the estimated yields of the bonds in this index, if those bonds were sold at
   par value. It is not possible to invest directly in an index. The Trusts
   have the ability to invest in securities rated below AAA, and do not intend
   to invest in a portfolio of securities equivalent to the 30 Year AAA
   Municipal Index.

                                      B-30
<PAGE>

                                    EXPERTS

   The Statement of Net Assets of the Trust as of July 16, 2001 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 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-31
<PAGE>


                       Independent Auditors' Report


The Board of Trustees and Shareholder of


The BlackRock New York Municipal Income Trust


   We have audited the accompanying statement of assets and liabilities of The
BlackRock New York Municipal Income Trust (the "Trust") as of July 16, 2001 and
the related statement of operations and changes in net assets for the period
March 30, 2001 (date of inception) to July 16, 2001. 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 presents fairly, in all material
respects, the financial position of the Trust at July 16, 2001 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.


Boston, Massachusetts


July 18, 2001


                                      F-1
<PAGE>

                 THE BLACKROCK NEW YORK MUNICIPAL INCOME TRUST

                      STATEMENT OF ASSETS AND LIABILITIES

                               July 16, 2001



<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
  Undistributed net investment loss.................................  (15,000)
                                                                     --------
Net assets, July 16, 2001........................................... $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
                                                                     ========

                 THE BLACKROCK NEW YORK MUNICIPAL INCOME TRUST

                            STATEMENT OF OPERATIONS

       For the period March 30, 2001 (date of inception) to July 16, 2001

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

                 THE BLACKROCK NEW YORK MUNICIPAL INCOME TRUST

                       STATEMENT OF CHANGES IN NET ASSETS

       For the period March 30, 2001 (date of inception) to July 16, 2001

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 year...................................................        0
                                                                     --------
End of year......................................................... $100,001
                                                                     ========
</TABLE>


                                      F-2
<PAGE>


NOTES TO FINANCIAL STATEMENTS


 Note 1. Organization


   The BlackRock New York Municipal Income Trust (the "Trust") was organized as
a Delaware business trust on March 30, 2001 and is registered as a non-
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 0.60% of the average weekly
value of the Trust's Managed Assets. BlackRock Advisors has voluntarily agreed
to waive receipt of a portion of the Investment Management Fee or other
expenses of the trust in the amount of 0.25% of average weekly Managed Assets
for the first 5 years of the Trust's operations, 0.20% in year 6, 0.15% in year
7, 0.10% in year 8 and 0.05% in year 9.


 Note 3. Organization Expenses and Offering Costs


   Organization expenses of $15,000 have been expensed. Offering costs,
estimated to be approximately $441,200 will be charged to paid-in capital at
the time shares of beneficial interest are sold.


 Note 4. Cash & Cash Equivalents


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


                                      F-3
<PAGE>

                                   APPENDIX A

Ratings of Investments

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

 Long-Term Debt

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

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

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

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

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

  2. Nature of and provisions of the obligation; and

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

 Investment Grade

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

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

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

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

 Speculative Grade Rating

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

BB   Debt rated "BB" has less near-term vulnerability to default than other
     speculative issues. However, it faces major ongoing uncertainties or
     exposure to adverse business, financial, or economic conditions

                                      A-1
<PAGE>

     which could lead to inadequate capacity to meet timely interest and
     principal payments. The "BB" rating category is also used for debt
     subordinated to senior debt that is assigned an actual or implied "BBB"
     rating.

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

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

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

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

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

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

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

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

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

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

                                      A-2
<PAGE>

 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
     deter mined to possess overwhelming safety characteristics will be given a
     plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest.

SP-3 Speculative capacity to pay principal and interest.

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

 Commercial Paper

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

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

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

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

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

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

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

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

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

                                      A-3
<PAGE>

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

 Municipal Bonds

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

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

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

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

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

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

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

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

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

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

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


                                      A-4
<PAGE>

 Short-Term Loans

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

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

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

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

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

 Commercial Paper

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

  -- Leading market positions in well-established industries.

  -- High rates of return on funds employed.

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

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

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

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

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

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

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

                                      A-5
<PAGE>

 Long-Term Credit Ratings

   Investment Grade

AAA     Highest credit quality. "AAA' ratings denote the lowest expectation of
        credit risk. They are assigned only in case of exceptionally 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 up on 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.

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.

                                      A-6
<PAGE>

 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. De notes 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.

                                      A-7
<PAGE>

                                   APPENDIX B

                         TAXABLE EQUIVALENT YIELD TABLE

   The taxable equivalent yield is the current yield you would need to earn on
a taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
Trust with taxable alternative investments, the table below presents the
taxable equivalent yields for a range of hypothetical tax-free yields assuming
the stated marginal Federal tax rates for 2001 listed below:

Tax-Free Yields


<TABLE>
<CAPTION>
      Tax Rate      4.00%       4.50%       5.00%       5.50%       6.00%       6.50%
      --------      -----       -----       -----       -----       -----       ------
      <S>           <C>         <C>         <C>         <C>         <C>         <C>
       15.0%        4.71%       5.29%       5.88%       6.47%       7.06%        7.65%
       27.5%        5.52%       6.21%       6.90%       7.59%       8.28%        8.97%
       30.5%        5.76%       6.47%       7.19%       7.91%       8.63%        9.35%
       35.5%        6.20%       6.98%       7.75%       8.53%       9.30%       10.08%
       39.1%        6.57%       7.39%       8.21%       9.03%       9.85%       10.67%
</TABLE>


   The following tables show the approximate taxable yields for individuals
that are equivalent to tax-free yields under combined Federal and New York
State and New York City taxes, using published 2001 marginal Federal tax rates
and marginal New York State and New York City tax rates currently available and
scheduled to be in effect.

                                   2001



<TABLE>
<CAPTION>
                                             Federal,            Taxable Equivalent Estimated
                                        State and Combined              Current Return
                                    -------------------------- -------------------------------------
                                            State and
                                      Tax   City Tax    Tax
  Single Return      Joint Return   Bracket  Bracket  Bracket* 4.0%  4.5%  5.0%  5.5%   6.0%   6.5%
  -------------      ------------   ------- --------- -------- ----  ----  ----  -----  -----  -----
<S>                <C>              <C>     <C>       <C>      <C>   <C>   <C>   <C>    <C>    <C>
$       0- 27,050  $      0- 45,200  15.00%  10.221%    23.7%  5.24% 5.90% 6.55%  7.21%  7.86%  8.52%
   27,050- 65,550    45,200-109,250  27.50   10.498     35.1   6.16  6.93  7.71   8.48   9.25  10.02
   65,550-136,750   109,250-166,500  30.50   10.498     37.8   6.43  7.23  8.04   8.84   9.65  10.45
  136,750-297,350   166,500-297,350  35.50   10.498     42.3   6.93  7.80  8.66   9.53  10.39  11.26
     Over 297,350      Over 297,350  39.10   10.498     45.5   7.34  8.26  9.17  10.09  11.01  11.93

                                   2002-2003

<CAPTION>
                                             Federal,            Taxable Equivalent Estimated
                                        State and Combined              Current Return
                                    -------------------------- -------------------------------------
                                            State and
                                      Tax   City Tax    Tax
  Single Return      Joint Return   Bracket  Bracket  Bracket* 4.0%  4.5%  5.0%  5.5%   6.0%   6.5%
  -------------      ------------   ------- --------- -------- ----  ----  ----  -----  -----  -----
<S>                <C>              <C>     <C>       <C>      <C>   <C>   <C>   <C>    <C>    <C>
$   6,000- 27,050  $ 12,000- 45,200  15.00%  10.221%    23.7%  5.24% 5.90% 6.55%  7.21%  7.86%  8.52%
   27,050- 65,550    45,200-109,250  27.00   10.498     34.7   6.12  6.89  7.65   8.42   9.18   9.95
   65,550-136,750   109,250-166,500  30.00   10.498     37.3   6.38  7.18  7.98   8.78   9.58  10.37
  136,750-297,350   166,500-297,350  35.00   10.498     41.8   6.88  7.74  8.59   9.45  10.31  11.17
     Over 297,350      Over 297,350  38.60   10.498     45.0   7.28  8.19  9.10  10.01  10.92  11.83

                                   2004-2005

<CAPTION>
                                             Federal,            Taxable Equivalent Estimated
                                        State and Combined              Current Return
                                    -------------------------- -------------------------------------
                                            State and
                                      Tax   City Tax    Tax
  Single Return      Joint Return   Bracket  Bracket  Bracket* 4.0%  4.5%  5.0%  5.5%   6.0%   6.5%
  -------------      ------------   ------- --------- -------- ----  ----  ----  -----  -----  -----
<S>                <C>              <C>     <C>       <C>      <C>   <C>   <C>   <C>    <C>    <C>
$   6,000- 27,050  $ 12,000- 45,200  15.00%  10.221%    23.7%  5.24  5.90% 6.55%  7.21%  7.86%  8.52%
   27,050- 65,550    45,200-109,250  26.00   10.498     33.8   6.04  6.79  7.55   8.30   9.06   9.81
   65,550-136,750   109,250-166,500  29.00   10.498     36.5   6.29  7.08  7.87   8.66   9.44  10.23
  136,750-297,350   166,500-297,350  34.00   10.498     40.9   6.77  7.62  8.46   9.31  10.16  11.00
     Over 297,350      Over 297,350  37.60   10.498     44.2   7.16  8.06  8.95   9.85  10.74  11.64
</TABLE>


                                      B-1
<PAGE>

                                      2006


<TABLE>
<CAPTION>
                                             Federal,           Taxable Equivalent Estimated
                                        State and Combined             Current Return
                                    -------------------------- ------------------------------------
                                            State and
                                      Tax   City Tax    Tax
  Single Return      Joint Return   Bracket  Bracket  Bracket* 4.0%  4.5%  5.0%  5.5%  6.0%   6.5%
  -------------      ------------   ------- --------- -------- ----  ----  ----  ----  -----  -----
<S>                <C>              <C>     <C>       <C>      <C>   <C>   <C>   <C>   <C>    <C>
$   6,000- 27,050  $ 12,000- 45,200  15.00%  10.221%    23.7%  5.24% 5.90% 6.55% 7.21%  7.86%  8.52%
   27,050- 65,550    45,200-109,250  25.00   10.498     32.9   5.96  6.70  7.45  8.19   8.94   9.68
   65,550-136,750   109,250-166,500  28.00   10.498     35.6   6.21  6.98  7.76  8.53   9.31  10.09
  136,750-297,350   166,500-297,350  33.00   10.498     40.0   6.67  7.50  8.34  9.17  10.01  10.84
     Over 297,350      Over 297,350  35.00   10.498     41.8   6.88  7.74  8.59  9.45  10.31  11.17
</TABLE>

- --------

* Combined Tax Bracket includes Federal, state and New York City income taxes.
  Please note that the table does not reflect (i) any Federal or state
  limitations on the amounts of allowable itemized deductions, phase-outs of
  personal or dependent exemption credits or other allowable credits, (ii) any
  local taxes imposed (other than New York City), or (iii) any taxes other than
  personal income taxes. The table assumes that Federal taxable income is equal
  to state income subject to tax, and in cases where more than one state rate
  falls within a Federal bracket, the highest state rate corresponding to the
  highest income within that Federal bracket is used. Further, the table does
  not reflect the New York State supplemental income tax based upon a
  taxpayer's New York State taxable income and New York State adjusted gross
  income. This supplemental tax results in an increased marginal State income
  tax rate to the extent a taxpayer's New York State adjusted gross income
  ranges between $100,000 and $150,000.


                                      B-2
<PAGE>

                                   APPENDIX C

                       GENERAL CHARACTERISTICS AND RISKS
                            OF HEDGING TRANSACTIONS

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


Put and Call Options on Securities and Indices

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


   The Trust's ability to close out its position as a purchaser or seller of an
exchange-listed put or call option is dependent upon the existence of a liquid
secondary market on option exchanges. Among the possible reasons for the
absence of a liquid secondary market on an exchange are: (i) insufficient
trading interest in certain options; (ii) restrictions on transactions imposed
by an exchange; (iii) trading halts, suspensions or other restrictions imposed
with respect to particular classes or series of options or underlying
securities; (iv) interruption of the normal operations on an exchange; (v)
inadequacy of the facilities of an exchange or OCC to handle current trading
volume; or (vi) a decision by one or more exchanges to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options on that exchange that had been
listed by the OCC as a result of trades on that exchange would generally
continue to be exercisable in accordance with their terms. OTC Options are
purchased from or sold to dealers, financial institutions or other
counterparties which have entered into direct agreements with the Trust. With
OTC Options, such variables as


                                      C-1
<PAGE>


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, a segregated account of cash
equivalents will be maintained and marked to market on a daily basis in an
amount equal to the market value of the contract. The Trust reserves the right
to comply with such different standard as may be established from time to time
by CFTC rules and regulations with respect to the purchase or sale of futures
contracts or options thereon.

   Segregation and Cover Requirements. Futures contracts, interest rate swaps,
caps, floors and collars, short sales, reverse repurchase agreements and dollar
rolls, and listed or OTC options on securities, indices and

                                      C-2
<PAGE>

futures contracts sold by the Trust, are generally subject to segregation and
coverage requirements of either the CFTC or the SEC, with the result that, if
the Trust does not hold the security or futures contract underlying the
instrument, the Trust will be required to segregate on an ongoing basis with
its custodian, 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 segregation requirement can result in the Trust maintaining
securities positions it would otherwise liquidate, segregating assets at a time
when it might be disadvantageous to do so, or otherwise restrict portfolio
management.

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

                                      C-3
<PAGE>

                                     PART C

                               OTHER INFORMATION

Item 24. Financial Statements and Exhibits

   (1) Financial Statements

     Part A-- None.




     Part B--Report of Independent Accountants.


     Statement of Assets and Liabilities.


   (2) Exhibits


<TABLE>
     <C>    <S>
     (a)    Amended and Restated Agreement and Declaration of Trust.(/3/)
     (b)    By-Laws.(/1/)
     (c)    Inapplicable.
     (d)    Form of Specimen Certificate.(/2/)
     (e)    Form of Dividend Reinvestment Plan.(/1/)
     (f)    Inapplicable.
     (g)(1) Form of Investment Management Agreement.(/2/)
     (g)(2) Form of Waiver Reliance Letter.(/2/)
     (g)(3) Form of Sub-Investment Advisory Agreement.(/2/)
     (h)    Form of Underwriting Agreement.(/2/)
     (i)    Form of Deferred Compensation Plan for Independent Trustees.(/2/)
     (j)    Form of Custodian Agreement.(/1/)
     (k)    Form of Transfer Agency Agreement.(/2/)
     (l)    Opinion and Consent of Counsel to the Trust.(/3/)
     (m)    Inapplicable.
     (n)    Consent of Independent Public Accountants.(/3/)
     (o)    Inapplicable.
     (p)    Form of Initial Subscription Agreement.(/1/)
     (q)    Inapplicable.
     (r)(1) Code of Ethics of Trust.(/1/)
     (r)(2) Code of Ethics of Advisor and Sub-Advisor.(/1/)
     (s)    Powers of Attorney(/2/)
</TABLE>

- --------
(1) Previously filed with the Registration Statement on April 3, 2001.
(2) Filed with Pre-effective Amendment No. 1 to the Registration Statement on
    June 4, 2001.
(3) Filed herewith.


Item 25. Marketing Arrangements

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

                                      C-1
<PAGE>

Item 26. Other Expenses of Issuance and Distribution

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


<TABLE>
<S>                                                                     <C>
Registration fees...................................................... $ 26,250
New York Stock Exchange listing fee....................................  100,000
Printing (other than certificates).....................................  128,244
Engraving and printing certificates....................................   21,126
Accounting fees and expenses...........................................    5,000
Legal fees and expenses................................................   72,137
NASD fee...............................................................   11,000
Miscellaneous..........................................................   93,814
                                                                        --------
  Total................................................................ $557,571
                                                                        ========
</TABLE>


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

   None

Item 28. Number of Holders of Shares


<TABLE>
<CAPTION>
                                                                    Number of
     Title of Class                                               Record Holders
     --------------                                               --------------
     <S>                                                          <C>
     Shares of Beneficial Interest...............................        1
</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 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

                                      C-2
<PAGE>


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


   (b) Notwithstanding the foregoing, no indemnification shall be made
hereunder unless there has been a determination (i) by a final decision on the
merits by a court or other body of competent jurisdiction before whom the issue
of entitlement to indemnification hereunder was brought that such indemnitee is
entitled to indemnification hereunder or, (ii) in the absence of such a
decision, by (1) a majority vote of a quorum of those Trustees who are neither
"interested persons" of the Trust (as defined in Section 2(a)(19) of the 1940
Act) nor parties to the proceeding ("Disinterested Non-Party Trustees"), that
the indemnitee is entitled to indemnification hereunder, or (2) if such quorum
is not obtainable or even if obtainable, if such majority so directs,
independent legal counsel in a written opinion concludes that the indemnitee
should be entitled to indemnification hereunder. All determinations to make
advance payments in connection with the expense of defending any proceeding
shall be authorized and made in accordance with the immediately succeeding
paragraph (c) below.

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

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


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

                                      C-3
<PAGE>

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

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


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


   Insofar as indemnification for liabilities arising under the Act, may be
permitted 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 attached as Exhibit (h), which is incorporated herein by
reference.

Item 30. Business and Other Connections of Investment Advisor

   Not Applicable

Item 31. Location of Accounts and Records

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

                                      C-4
<PAGE>

percent from its net asset value as of the effective date of the Registration
Statement or (b) the net asset value increases to an amount greater than its
net proceeds as stated in the prospectus.

   (2) Not Applicable

   (3) Not applicable

   (4) Not applicable

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

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

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

                                      C-5
<PAGE>

                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 24th
day of July, 2001.


                                                /s/ Ralph L. Schlosstein
                                          _____________________________________
                                                  Ralph L. Schlosstein
                                           President, Chief Executive Officer
                                               and Chief Financial Officer

   Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities set forth below on the 24th day of July, 2001.



<TABLE>
<CAPTION>
                   Name                                        Title
                   ----                                        -----

<S>                                         <C>
                     *                      Trustee and President, Chief Executive
___________________________________________  Officer and Chief Financial Officer
           Ralph L. Schlosstein

                     *                      Treasurer
___________________________________________
               Henry Gabbay

                     *                      Trustee
___________________________________________
             Andrew F. Brimmer

                     *                      Trustee
___________________________________________
            Richard E. Cavanagh

                     *                      Trustee
___________________________________________
                Kent Dixon

                     *                      Trustee
___________________________________________
             Frank J. Fabozzi

                     *                      Trustee
___________________________________________
             Laurence D. Fink

                     *                      Trustee
___________________________________________
       James Clayburn La Force, Jr.

                     *                      Trustee
___________________________________________
             Walter F. Mondale

        /s/ Ralph L. Schlosstein
*By: ______________________________________
           Ralph L. Schlosstein
             Attorney-in-fact
</TABLE>


                                      C-6
<PAGE>

                               INDEX TO EXHIBITS

(a)  Amended and Restated Declaration of Trust.


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


(n)  Consent of Independent Public Accountants.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(A)
<SEQUENCE>2
<FILENAME>dex99a.txt
<DESCRIPTION>AMENDED AND RESTATED AGREEMENT
<TEXT>

<PAGE>

                                                                   EXHIBIT 99(a)


                   BLACKROCK NEW YORK MUNICIPAL INCOME TRUST



                              AMENDED AND RESTATED
                       AGREEMENT AND DECLARATION OF TRUST



                            Dated as of May 31, 2001
<PAGE>

<TABLE>
<CAPTION>
                                      TABLE OF CONTENTS
                                      -----------------

                                                                               Page
                                                                               ----

<S>              <C>                                                           <C>
   ARTICLE I     The Trust...................................................     1

1.1              Name........................................................     1
1.2              Definitions.................................................     2


  ARTICLE II     Trustees....................................................     3

2.1              Number and Qualification....................................     3
2.2              Term and Election...........................................     4
2.3              Resignation and Removal.....................................     4
2.4              Vacancies...................................................     5
2.5              Meetings....................................................     5
2.6              Trustee Action by Written Consent...........................     6
2.7              Officers....................................................     6


  ARTICLE III    Powers and Duties of Trustees...............................     6

3.1              General.....................................................     6
3.2              Investments.................................................     7
3.3              Legal Title.................................................     7
3.4              Issuance and Repurchase of Shares...........................     7
3.5              Borrow Money or Utilize Leverage............................     8
3.6              Delegation; Committees......................................     8
3.7              Collection and Payment......................................     8
3.8              Expenses....................................................     9
3.9              By-Laws.....................................................     9
3.10             Miscellaneous Powers........................................     9
3.11             Further Powers..............................................    10


  ARTICLE IV     Advisory, Management and Distribution Arrangements..........    10

4.1              Advisory and Management Arrangements........................    10
4.2              Distribution Arrangements...................................    11
4.3              Parties to Contract.........................................    11
</TABLE>


                                       i
<PAGE>

<TABLE>
<S>              <C>                                                           <C>
   ARTICLE V     Limitations of Liabilityand Indemnification.................    11

5.1              No Personal Liability of Shareholders, Trustees, etc........    11
5.2              Mandatory Indemnification...................................    12
5.3              No Bond Required of Trustees................................    14
5.4              No Duty of Investigation; Notice in Trust Instruments, etc..    14
5.5              Reliance on Experts, etc....................................    15


  ARTICLE VI     Shares of Beneficial Interest...............................    15

6.1              Beneficial Interest.........................................    15
6.2              Other Securities............................................    15
6.3              Rights of Shareholders......................................    16
6.4              Trust Only..................................................    16
6.5              Issuance of Shares..........................................    16
6.6              Register of Shares..........................................    16
6.7              Transfer Agent and Registrar................................    17
6.8              Transfer of Shares..........................................    17
6.9              Notices.....................................................    17


  ARTICLE VII    Custodians..................................................    18

7.1              Appointment and Duties......................................    18
7.2              Central Certificate System..................................    19


 ARTICLE VIII    Redemption..................................................    19

8.1              Redemptions.................................................    19
8.2              Disclosure of Holding.......................................    19


  ARTICLE IX    Determination of Net Asset ValueNet Income and Distributions.    19

9.1              Net Asset Value.............................................    19
9.2              Distributions to Shareholders...............................    20
9.3              Power to Modify Foregoing Procedures........................    20
</TABLE>


                                       ii
<PAGE>

<TABLE>
<S>              <C>                                                           <C>
   ARTICLE X     Shareholders................................................    21

10.1             Meetings of Shareholders....................................    21
10.2             Voting......................................................    21
10.3             Notice of Meeting and Record Date...........................    21
10.4             Quorum and Required Vote....................................    22
10.5             Proxies, etc................................................    22
10.6             Reports.....................................................    23
10.7             Inspection of Records.......................................    23
10.8             Shareholder Action by Written Consent.......................    23


  ARTICLE XI     Duration; Termination of Trust;Amendment; Mergers, Etc......    24

11.1             Duration....................................................    24
11.2             Termination.................................................    24
11.3             Amendment Procedure.........................................    25
11.4             Merger, Consolidation and Sale of Assets....................    26
11.5             Subsidiaries................................................    26
11.6             Conversion..................................................    27
11.7             Certain Transactions........................................    27


  ARTICLE XII    Miscellaneous...............................................    29

12.1             Filing......................................................    29
12.2             Resident Agent..............................................    30
12.3             Governing Law...............................................    30
12.4             Counterparts................................................    30
12.5             Reliance by Third Parties...................................    30
12.6             Provisions in Conflict with Law or Regulation...............    30

</TABLE>

                                      iii
<PAGE>

                   BLACKROCK NEW YORK MUNICIPAL INCOME TRUST
                   -----------------------------------------

                             AMENDED AND RESTATED
                             --------------------
                      AGREEMENT AND DECLARATION OF TRUST
                      ----------------------------------


          AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made as of the
31st day of May, 2001, by the Trustees hereunder, and by the holders of shares
of beneficial interest issued hereunder as hereinafter provided.

          WHEREAS, this Trust has been formed to carry on business as set forth
more particularly hereinafter;

          WHEREAS, this Trust is authorized to issue an unlimited number of its
shares of beneficial interest all in accordance with the provisions hereinafter
set forth;

          WHEREAS, the Trustees have agreed to manage all property coming into
their hands as Trustees of a Delaware business trust in accordance with the
provisions hereinafter set forth; and

          WHEREAS, the parties hereto intend that the Trust created by this
Declaration and the Certificate of Trust filed with the Secretary of State of
the State of Delaware on March 30, 2001 shall constitute a business trust under
the Delaware Business Trust Act and that this Declaration shall constitute the
governing instrument of such business trust.

          NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities, and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust as hereinafter set forth.


                             ARTICLE I

                             The Trust
                             ---------

        1.1    Name.  This Trust shall be known as the "BlackRock New York
               ----
Municipal Income Trust" and the
<PAGE>

Trustees shall conduct the business of the Trust under that name or any other
name or names as they may from time to time determine.

        1.2    Definitions.  As used in this Declaration, the following terms
               -----------
shall have the following meanings:

        The "1940 Act" refers to the Investment Company Act of 1940 and the
             --------
rules and regulations promulgated thereunder and exemptions granted therefrom,
as amended from time to time.

        The terms "Affiliated Person", "Assignment", "Commission", "Interested
                   -----------------    ----------    ----------    ----------
Person" and "Principal Underwriter" shall have the meanings given them in the
- ------       ---------------------
1940 Act.

        "By-Laws" shall mean the By-Laws of the Trust as amended from time to
         -------
time by the Trustees.

        "Code" shall mean the Internal Revenue Code of 1986, as amended, and the
         ----
regulations promulgated thereunder.

        "Commission" shall mean the Securities and Exchange Commission.
         ----------

        "Declaration" shall mean this Amended and Restated Agreement and
         -----------
Declaration of Trust, as amended, supplemented or amended and restated from time
to time.

        "Delaware Business Trust Statute" shall mean the provisions of the
         -------------------------------
Delaware Business Trust Act, 12 Del. C. (S)3801, et. seq., as such Act may be
                                ---- --          --- ----
amended from time to time.

        "Delaware General Corporation Law" means the Delaware General
         --------------------------------
Corporation Law, 8 Del. C. (S)100, et. seq., as amended from time to time.
                   ---  -          --  ---

        "Fundamental Policies" shall mean the investment policies and
         --------------------
restrictions as set forth from time to time in any Prospectus or contained in
any current Registration Statement of the Trust filed with the Commission or as
otherwise adopted by the Trustees and the Shareholders in accordance with the
requirements of the 1940 Act and designated as fundamental policies therein as
they may be amended from time to time in accordance with the requirements of the
1940 Act.
<PAGE>

          "Majority Shareholder Vote" shall mean a vote of  "a majority of the
           -------------------------
outstanding voting securities" (as such term is defined in the 1940 Act) of the
Trust with each class and series of Shares voting together as a single class,
except to the extent otherwise required by the 1940 Act or this Declaration with
respect to any one or more classes or series of Shares, in which case the
applicable proportion of such classes or series of Shares voting as a separate
class or series, as case may be, also will be required.

          "Person" shall mean and include individuals, corporations,
           ------
partnerships, trusts, limited liability companies, associations, joint ventures
and other entities, whether or not legal entities, and governments and agencies
and political subdivisions thereof.

          "Prospectus" shall mean the Prospectus of the Trust, if any, as in
           ----------
effect from time to time under the Securities Act of 1933, as amended.

          "Shareholders" shall mean as of any particular time the holders of
           ------------
record of outstanding Shares of the Trust, at such time.

          "Shares" shall mean the transferable units of beneficial interest into
           ------
which the beneficial interest in the Trust shall be divided from time to time
and includes fractions of Shares as well as whole Shares.  In addition, Shares
also means any preferred shares or preferred units of beneficial interest which
may be issued from time to time, as described herein.  All references to Shares
shall be deemed to be Shares of any or all series or classes as the context may
require.

          "Trust" shall mean the trust established by this Declaration, as
           -----
amended from time to time, inclusive of each such amendment.

          "Trust Property" shall mean as of any particular time any and all
           --------------
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees in such capacity.

          "Trustees" shall mean the signatories to this Declaration, so long as
           --------
they shall continue in office in accordance with the terms hereof, and all other
persons

                                       3
<PAGE>

who at the time in question have been duly elected or appointed and have
qualified as trustees in accordance with the provisions hereof and are then in
office.

                                  ARTICLE II

                                   Trustees
                                   --------

        1.3    Number and Qualification.  Prior to a public offering of Shares
               ------------------------
there may be a sole Trustee. Thereafter, the number of Trustees shall be
determined by a written instrument signed by a majority of the Trustees then in
office, provided that the number of Trustees shall be no less than two or more
than nine. No reduction in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration of his term. An
individual nominated as a Trustee shall be at least 21 years of age and not
older than 80 years of age at the time of nomination and not under legal
disability. Trustees need not own Shares and may succeed themselves in office.

        1.4    Term and Election.  The Board of Trustees shall be divided into
               -----------------
three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
trustees constituting the entire Board of Trustees. Within the limits above
specified, the number of the Trustees in each class shall be determined by
resolution of the Board of Trustees. The term of office of the first class shall
expire on the date of the first annual meeting of Shareholders or special
meeting in lieu thereof following the effective date of the Registration
Statement relating to the Shares under the Securities Act of 1933, as amended.
The term of office of the second class shall expire on the date of the second
annual meeting of Shareholders or special meeting in lieu thereof following the
effective date of the Registration Statement relating to the Shares under the
Securities Act of 1933, as amended. The term of office of the third class shall
expire on the date of the third annual meeting of Shareholders or special
meeting in lieu thereof following the effective date of the Registration
Statement relating to the Shares under the Securities Act of 1933, as amended.
Upon expiration of the term of office of each class as set forth above, the
number of Trustees in such class, as determined by the Board of Trustees, shall
be elected for a term expiring on the

                                       4
<PAGE>

date of the third annual meeting of Shareholders or special meeting in lieu
thereof following such expiration to succeed the Trustees whose terms of office
expire. The Trustees shall be elected at an annual meeting of the Shareholders
or special meeting in lieu thereof called for that purpose, except as provided
in Section 2.3 of this Article and each Trustee elected shall hold office until
his or her successor shall have been elected and shall have qualified. The term
of office of a Trustee shall terminate and a vacancy shall occur in the event of
the death, resignation, removal, bankruptcy, adjudicated incompetence or other
incapacity to perform the duties of the office, or removal, of a Trustee.

        1.5    Resignation and Removal.  Any of the Trustees may resign their
               -----------------------
trust (without need for prior or subsequent accounting) by an instrument in
writing signed by such Trustee and delivered or mailed to the Trustees or the
Chairman, if any, the President or the Secretary and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (provided the aggregate number of
Trustees after such removal shall not be less than the minimum number required
by Section 2.1 hereof) for cause only, and not without cause, and only by action
taken by a majority of the remaining Trustees followed by the holders of at
least seventy-five percent (75%) of the Shares then entitled to vote in an
election of such Trustee. Upon the resignation or removal of a Trustee, each
such resigning or removed Trustee shall execute and deliver such documents as
the remaining Trustees shall require for the purpose of conveying to the Trust
or the remaining Trustees any Trust Property held in the name of such resigning
or removed Trustee. Upon the incapacity or death of any Trustee, such Trustee's
legal representative shall execute and deliver on such Trustee's behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.

        1.6    Vacancies.  Whenever a vacancy in the Board of Trustees shall
               ---------
occur, the remaining Trustees may fill such vacancy by appointing an individual
having the qualifications described in this Article by a written instrument
signed by a majority of the Trustees then in office or may leave such vacancy
unfilled or may reduce the number of Trustees; provided the aggregate number of
Trustees after such reduction shall not be less than the minimum number required
by Section 2.1 hereof; provided,

                                       5
<PAGE>

further, that if the Shareholders of any class or series of Shares are entitled
separately to elect one or more Trustees, a majority of the remaining Trustees
or the sole remaining Trustee elected by that class or series may fill any
vacancy among the number of Trustees elected by that class or series. Any
vacancy created by an increase in Trustees may be filled by the appointment of
an individual having the qualifications described in this Article made by a
written instrument signed by a majority of the Trustees then in office. No
vacancy shall operate to annul this Declaration or to revoke any existing agency
created pursuant to the terms of this Declaration. Whenever a vacancy in the
number of Trustees shall occur, until such vacancy is filled as provided herein,
the Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by this Declaration.

        1.7    Meetings.  Meetings of the Trustees shall be held from time to
               --------
time upon the call of the Chairman, if any, or the President or any two
Trustees. Regular meetings of the Trustees may be held without call or notice at
a time and place fixed by the By-Laws or by resolution of the Trustees. Notice
of any other meeting shall be given by the Secretary and shall be delivered to
the Trustees orally not less than 24 hours, or in writing not less than 72
hours, before the meeting, but may be waived in writing by any Trustee either
before or after such meeting. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Trustee attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting has not been properly called or convened. A
quorum for all meetings of the Trustees shall be one-third, but not less than
two, of the Trustees. Unless provided otherwise in this Declaration and except
as required under the 1940 Act, any action of the Trustees may be taken at a
meeting by vote of a majority of the Trustees present (a quorum being present)
or without a meeting by written consent of a majority of the Trustees.

          Any committee of the Trustees, including an executive committee, if
any, may act with or without a meeting.  A quorum for all meetings of any such
committee shall be one-third, but not less than two, of the members thereof.
Unless provided otherwise in this Declaration, any action of any such committee
may be taken at a

                                       6
<PAGE>

meeting by vote of a majority of the members present (a quorum being present) or
without a meeting by written consent of all of the members.

          With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons in any action to be taken may be
counted for quorum purposes under this Section and shall be entitled to vote to
the extent not prohibited by the 1940 Act.

          All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other; participation in a meeting pursuant to any such
communications system shall constitute presence in person at such meeting.

        1.8    Trustee Action by Written Consent.  Any action which may be taken
               ---------------------------------
by Trustees by vote may be taken without a meeting if that number of the
Trustees, or members of a committee, as the case may be, required for approval
of such action at a meeting of the Trustees or of such committee consent to the
action in writing and the written consents are filed with the records of the
meetings of Trustees. Such consent shall be treated for all purposes as a vote
taken at a meeting of Trustees.

        1.9    Officers.  The Trustees shall elect a President, a Secretary and
               --------
a Treasurer and may elect a Chairman who shall serve at the pleasure of the
Trustees or until their successors are elected. The Trustees may elect or
appoint or may authorize the Chairman, if any, or President to appoint such
other officers or agents with such powers as the Trustees may deem to be
advisable. A Chairman shall, and the President, Secretary and Treasurer may, but
need not, be a Trustee.


                                  ARTICLE III

                         Powers and Duties of Trustees
                         -----------------------------

        1.10    General.  The Trustees shall owe to the Trust and its
                -------
Shareholders the same fiduciary duties as owed by directors of corporations to
such corporations and their stockholders under the Delaware General Corporation
Law. The Trustees shall have exclusive and absolute control over the Trust
Property and over the

                                       7
<PAGE>

business of the Trust to the same extent as if the Trustees were the sole owners
of the Trust Property and business in their own right, but with such powers of
delegation as may be permitted by this Declaration. The Trustees may perform
such acts as in their sole discretion are proper for conducting the business of
the Trust. The enumeration of any specific power herein shall not be construed
as limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.

        1.11    Investments.  The Trustees shall have power, subject to the
                -----------
Fundamental Policies in effect from time to time with respect to the Trust to:

                (1)   manage, conduct, operate and carry on the business of an
investment company;

                (2)   subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of any and all sorts of property, tangible or
intangible, including but not limited to securities of any type whatsoever,
whether equity or non-equity, of any issuer, evidences of indebtedness of any
person and any other rights, interests, instruments or property of any sort and
to exercise any and all rights, powers and privileges of ownership or interest
in respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons to exercise any of
said rights, powers and privileges in respect of any of said investments. The
Trustees shall not be limited by any law limiting the investments which may be
made by fiduciaries.

        1.12    Legal Title.  Legal title to all the Trust Property shall be
                -----------
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person as nominee, custodian or pledgee, on such terms as the Trustees may
determine, provided that the interest of the Trust therein is appropriately
protected.

          The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each

                                       8
<PAGE>

person who may hereafter become a Trustee upon his due election and
qualification. Upon the ceasing of any person to be a Trustee for any reason,
such person shall automatically cease to have any right, title or interest in
any of the Trust Property, and the right, title and interest of such Trustee in
the Trust Property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered.

        1.13    Issuance and Repurchase of Shares.  The Trustees shall have the
                ---------------------------------
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in, Shares, including Shares
in fractional denominations, and, subject to the more detailed provisions set
forth in Articles VIII and IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
corporations formed under the Delaware General Corporation Law.

        1.14    Borrow Money or Utilize Leverage.  Subject to the Fundamental
                --------------------------------
Policies in effect from time to time with respect to the Trust, the Trustees
shall have the power to borrow money or otherwise obtain credit or utilize
leverage to the maximum extent permitted by law or regulation as such may be
needed from time to time and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee, or undertake the performance
of any obligation, contract or engagement of any other person, firm, association
or corporation.

        1.15    Delegation; Committees.  The Trustees shall have the power,
                ----------------------
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Trustees or otherwise as the Trustees may deem expedient, to at
least the same extent as such delegation is permitted to directors of
corporations formed under the Delaware General Corporation Law and is permitted
by the 1940 Act, as well as any further delegations the Trustees may determine
to be desirable,

                                       9
<PAGE>

expedient or necessary in order to effect the purpose hereof. The Trustees may
designate an executive committee which shall have all authority of the entire
Board of Trustees except such committee cannot declare dividends except to the
extent specifically delegated by the Board of Trustees and cannot authorize
removal of a trustee or any merger, consolidation or sale of substantially all
of the assets of the Trust.

        1.16    Collection and Payment.  The Trustees shall have power to
                ----------------------
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property or the Trust, the Trustees or any officer, employee
or agent of the Trust; to prosecute, defend, compromise or abandon any claims
relating to the Trust Property or the Trust, or the Trustees or any officer,
employee or agent of the Trust; to foreclose any security interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments. Except to the extent required
for a corporation formed under the Delaware General Corporation Law, the
Shareholders shall have no power to vote as to whether or not a court action,
legal proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders.

        1.17    Expenses.  The Trustees shall have power to incur and pay out of
                --------
the assets or income of the Trust any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of this
Declaration, and the business of the Trust, and to pay reasonable compensation
from the funds of the Trust to themselves as Trustees. The Trustees shall fix
the compensation of all officers, employees and Trustees. The Trustees may pay
themselves such compensation for special services, including legal,
underwriting, syndicating and brokerage services, as they in good faith may deem
reasonable and reimbursement for expenses reasonably incurred by themselves on
behalf of the Trust. The Trustees shall have the power, as frequently as they
may determine, to cause each Shareholder to pay directly, in advance or arrears,
for charges of distribution, of the custodian or transfer, Shareholder servicing
or similar agent, a pro rata amount as defined from time to time by the
Trustees, by setting off such charges due from such Shareholder from declared
but unpaid dividends or distributions owed such Shareholder and/or by reducing
the number of shares in the account of such Shareholder

                                       10
<PAGE>

by that number of full and/or fractional Shares which represents the outstanding
amount of such charges due from such Shareholder.

        1.18    By-Laws.  The Trustees shall have the exclusive authority to
                -------
adopt and from time to time amend or repeal By-Laws for the conduct of the
business of the Trust.

        1.19    Miscellaneous Powers.  The Trustees shall have the power to: (a)
                --------------------
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) purchase, and pay
for out of Trust Property, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisors, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (d) establish pension, profit-sharing, share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (e) make donations, irrespective of
benefit to the Trust, for charitable, religious, educational, scientific, civic
or similar purposes; (f) to the extent permitted by law, indemnify any Person
with whom the Trust has dealings, including without limitation any advisor,
administrator, manager, transfer agent, custodian, distributor or selected
dealer, or any other person as the Trustees may see fit to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the fiscal year of the Trust and the method
in which its accounts shall be kept; (i) notwithstanding the Fundamental
Policies of the Trust, convert the Trust to a master-feeder structure; provided,
however, the Trust obtains the approval of shareholders holding at least a
majority of the Trust's Shares present at a meeting of Shareholders at which a
quorum is present and (j) adopt a seal for the Trust but the absence of such
seal shall not impair the validity of any instrument executed on behalf of the
Trust.

        1.20    Further Powers.  The Trustees shall have the power to conduct
                --------------
the business of the Trust and

                                       11
<PAGE>

carry on its operations in any and all of its branches and maintain offices both
within and without the State of Delaware, in any and all states of the United
States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination as
to what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees. The Trustees
will not be required to obtain any court order to deal with the Trust Property.


                                  ARTICLE IV

              Advisory, Management and Distribution Arrangements
              --------------------------------------------------

        1.21    Advisory and Management Arrangements.  Subject to the
                ------------------------------------
requirements of applicable law as in effect from time to time, the Trustees may
in their discretion from time to time enter into advisory, administration or
management contracts (including, in each case, one or more sub-advisory, sub-
administration or sub-management contracts) whereby the other party to any such
contract shall undertake to furnish the Trustees such advisory, administrative
and management services, with respect to the Trust as the Trustees shall from
time to time consider desirable and all upon such terms and conditions as the
Trustees may in their discretion determine. Notwithstanding any provisions of
this Declaration, the Trustees may authorize any advisor, administrator or
manager (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect investment transactions with respect to the
assets on behalf of the Trustees to the full extent of the power of the Trustees
to effect such transactions or may authorize any officer, employee or Trustee to
effect such transactions pursuant to recommendations of any such advisor,
administrator or manager (and all without further action by the Trustees). Any
such investment transaction shall be deemed to have been authorized by all of
the Trustees.

                                       12
<PAGE>

        1.22    Distribution Arrangements.  Subject to compliance with the 1940
                -------------------------
Act, the Trustees may retain underwriters and/or placement agents to sell Trust
Shares. The Trustees may in their discretion from time to time enter into one or
more contracts, providing for the sale of the Shares of the Trust, whereby the
Trust may either agree to sell such Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article IV or
the By-Laws; and such contract may also provide for the repurchase or sale of
Shares of the Trust by such other party as principal or as agent of the Trust
and may provide that such other party may enter into selected dealer agreements
with registered securities dealers and brokers and servicing and similar
agreements with persons who are not registered securities dealers to further the
purposes of the distribution or repurchase of the Shares of the Trust.

        1.23    Parties to Contract.  Any contract of the character described in
                -------------------
Sections 4.1 and 4.2 of this Article IV or in Article VII hereof may be entered
into with any Person, although one or more of the Trustees, officers or
employees of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any Person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this Article IV
or the By-Laws.  The same Person may be the other party to contracts entered
into pursuant to Sections 4.1 and 4.2 above or Article VII, and any individual
may be financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts mentioned in this Section 4.3.

                                       13
<PAGE>

                                   ARTICLE V

                           Limitations of Liability
                              and Indemnification
                           -------------------------

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

        1.25    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

                                       14
<PAGE>

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

                (1)   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
1940 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

                                       15
<PAGE>

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.

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

                (3)   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.

                (4)   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.

                                       16
<PAGE>

        1.26    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.

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

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

                                  ARTICLE VI

                         Shares of Beneficial Interest
                         -----------------------------

                                       17
<PAGE>

        1.29    Beneficial Interest.  The interest of the beneficiaries
                -------------------
hereunder shall be divided into an unlimited number of transferable shares of
beneficial interest, par value $.001 per share. All Shares issued in accordance
with the terms hereof, including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully paid
and, except as provided in the last sentence of Section 3.8, nonassessable when
the consideration determined by the Trustees (if any) therefor shall have been
received by the Trust.

        1.30    Other Securities.  The Trustees may, subject to the Fundamental
                ----------------
Policies and the requirements of the 1940 Act, authorize and issue such other
securities of the Trust as they determine to be necessary, desirable or
appropriate, having such terms, rights, preferences, privileges, limitations and
restrictions as the Trustees see fit, including preferred interests, debt
securities or other senior securities. To the extent that the Trustees authorize
and issue preferred shares of any class or series, they are hereby authorized
and empowered to amend or supplement this Declaration as they deem necessary or
appropriate, including to comply with the requirements of the 1940 Act or
requirements imposed by the rating agencies or other Persons, all without the
approval of Shareholders. Any such supplement or amendment shall be filed as is
necessary. The Trustees are also authorized to take such actions and retain such
persons as they see fit to offer and sell such securities.

        1.31    Rights of Shareholders.  The Shares shall be personal property
                ----------------------
giving only the rights in this Declaration specifically set forth. The ownership
of the Trust Property of every description and the right to conduct any business
herein before described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to share or assume any losses of the Trust or,
subject to the right of the Trustees to charge certain expenses directly to
Shareholders, as provided in the last sentence of Section 3.8, suffer an
assessment of any kind by virtue of their ownership of Shares. The Shares shall
not entitle the holder to preference, preemptive, appraisal, conversion or
exchange

                                       18
<PAGE>

rights (except as specified in this Section 6.3, in Section 11.4 or as specified
by the Trustees when creating the Shares, as in preferred shares).

        1.32    Trust Only.  It is the intention of the Trustees to create only
                ----------
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.

        1.33    Issuance of Shares.  The Trustees, in their discretion, may from
                ------------------
time to time without vote of the Shareholders issue Shares including preferred
shares that may have been established pursuant to Section 6.2, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times, and on such terms as the Trustees may
determine, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. The Trustees may from time to time divide or
combine the Shares into a greater or lesser number without thereby changing the
proportionate beneficial interest in such Shares. Issuances and redemptions of
Shares may be made in whole Shares and/or l/l,000ths of a Share or multiples
thereof as the Trustees may determine.

        1.34    Register of Shares.  A register shall be kept at the offices of
                ------------------
the Trust or any transfer agent duly appointed by the Trustees under the
direction of the Trustees which shall contain the names and addresses of the
Shareholders and the number of Shares held by them respectively and a record of
all transfers thereof. Separate registers shall be established and maintained
for each class or series of Shares. Each such register shall be conclusive as to
who are the holders of the Shares of the applicable class or series of Shares
and who shall be entitled to receive dividends or distributions or otherwise to
exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled
to receive payment of any dividend or distribution, nor

                                       19
<PAGE>

to have notice given to him as herein provided, until he has given his address
to a transfer agent or such other officer or agent of the Trustees as shall keep
the register for entry thereon. It is not contemplated that certificates will be
issued for the Shares; however, the Trustees, in their discretion, may authorize
the issuance of share certificates and promulgate appropriate fees therefore and
rules and regulations as to their use.

        1.35    Transfer Agent and Registrar.  The Trustees shall have power to
                ----------------------------
employ a transfer agent or transfer agents, and a registrar or registrars, with
respect to the Shares. The transfer agent or transfer agents may keep the
applicable register and record therein, the original issues and transfers, if
any, of the said Shares. Any such transfer agents and/or registrars shall
perform the duties usually performed by transfer agents and registrars of
certificates of stock in a corporation, as modified by the Trustees.

        1.36    Transfer of Shares.  Shares shall be transferable on the records
                ------------------
of the Trust only by the record holder thereof or by its agent thereto duly
authorized in writing, upon delivery to the Trustees or a transfer agent of the
Trust of a duly executed instrument of transfer, together with such evidence of
the genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded on
the applicable register of the Trust. Until such record is made, the Shareholder
of record shall be deemed to be the holder of such Shares for all purposes
hereof and neither the Trustees nor any transfer agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any notice of the
proposed transfer.

          Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the applicable register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees or a
transfer agent of the Trust, but until such record is made, the Shareholder of
record shall be deemed to be the holder of such for all purposes hereof, and
neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.

                                       20
<PAGE>

        1.37    Notices.  Any and all notices to which any Shareholder hereunder
                -------
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the applicable register of the Trust.


                                  ARTICLE VII

                                  Custodians
                                  ----------

        1.38    Appointment and Duties.  The Trustees shall at all times employ
                ----------------------
a custodian or custodians, meeting the qualifications for custodians for
portfolio securities of investment companies contained in the 1940 Act, as
custodian with respect to the assets of the Trust. Any custodian shall have
authority as agent of the Trust with respect to which it is acting as determined
by the custodian agreement or agreements, but subject to such restrictions,
limitations and other requirements, if any, as may be contained in the By-Laws
of the Trust and the 1940 Act:

        (1)   to hold the securities owned by the Trust and deliver the same
     upon written order;

        (2)   to receive any receipt for any moneys due to the Trust and deposit
     the same in its own banking department (if a bank) or elsewhere as the
     Trustees may direct;

        (3)   to disburse such funds upon orders or vouchers;

        (4)   if authorized by the Trustees, to keep the books and accounts of
     the Trust and furnish clerical and accounting services; and

        (5)   if authorized to do so by the Trustees, to compute the net income
     or net asset value of the Trust;

all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian.

          The Trustees may also authorize each custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian

                                       21
<PAGE>

and upon such terms and conditions, as may be agreed upon between the custodian
and such sub-custodian and approved by the Trustees, provided that in every case
such sub-custodian shall meet the qualifications for custodians contained in the
1940 Act.

        1.39    Central Certificate System.  Subject to such rules, regulations
                --------------------------
and orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other Person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class of any issuer deposited within the
system are treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of such securities, provided that all such
deposits shall be subject to withdrawal only upon the order of the Trust.


                                 ARTICLE VIII

                                  Redemption
                                  ----------

        1.40    Redemptions.  The Shares of the Trust are not redeemable by the
                -----------
holders.

        1.41    Disclosure of Holding.  The holders of Shares or other
                ---------------------
securities of the Trust shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares or
other securities of the Trust as the Trustees deem necessary to comply with the
provisions of the Code, the 1940 or other applicable laws or regulations, or to
comply with the requirements of any other taxing or regulatory authority.


                                  ARTICLE IX

                       Determination of Net Asset Value
                         Net Income and Distributions
                       --------------------------------

        1.42    Net Asset Value.  The net asset value of each outstanding Share
                ---------------
of the Trust shall be

                                       22
<PAGE>

determined at such time or times on such days as the Trustees may determine, in
accordance with the 1940 Act. The method of determination of net asset value
shall be determined by the Trustees and shall be as set forth in the Prospectus
or as may otherwise be determined by the Trustees. The power and duty to make
the net asset value calculations may be delegated by the Trustees and shall be
as generally set forth in the Prospectus or as may otherwise be determined by
the Trustees.

        1.43    Distributions to Shareholders.  (a)  The Trustees shall from
                -----------------------------
time to time distribute ratably among the Shareholders of any class of Shares,
or any series of any such class, in accordance with the number of outstanding
full and fractional Shares of such class or any series of such class, such
proportion of the net profits, surplus (including paid-in surplus), capital, or
assets held by the Trustees as they may deem proper or as may otherwise be
determined in accordance with this Declaration. Any such distribution may be
made in cash or property (including without limitation any type of obligations
of the Trust or any assets thereof) or Shares of any class or series or any
combination thereof, and the Trustees may distribute ratably among the
Shareholders of any class of shares or series of any such class, in accordance
with the number of outstanding full and fractional Shares of such class or any
series of such class, additional Shares of any class or series in such manner,
at such times, and on such terms as the Trustees may deem proper or as may
otherwise be determined in accordance with this Declaration.

                (1)   Distributions pursuant to this Section 9.2 may be among
the Shareholders of record of the applicable class or series of Shares at the
time of declaring a distribution or among the Shareholders of record at such
later date as the Trustees shall determine and specify.

                (2)   The Trustees may always retain from the net profits such
amount as they may deem necessary to pay the debts or expenses of the Trust or
to meet obligations of the Trust, or as they otherwise may deem desirable to use
in the conduct of its affairs or to retain for future requirements or extensions
of the business.

                (3)   Inasmuch as the computation of net income and gains for
Federal income tax purposes may vary

                                       23
<PAGE>

from the computation thereof on the books, the above provisions shall be
interpreted to give the Trustees the power in their discretion to distribute for
any fiscal year as ordinary dividends and as capital gains distributions,
respectively, additional amounts sufficient to enable the Trust to avoid or
reduce liability for taxes.

        1.44    Power to Modify Foregoing Procedures.   Notwithstanding any of
                ------------------------------------
the foregoing provisions of this Article IX, the Trustees may prescribe, in
their absolute discretion except as may be required by the 1940 Act, such other
bases and times for determining the per share asset value of the Trust's Shares
or net income, or the declaration and payment of dividends and distributions as
they may deem necessary or desirable for any reason, including to enable the
Trust to comply with any provision of the 1940 Act, or any securities exchange
or association registered under the Securities Exchange Act of 1934, or any
order of exemption issued by the Commission, all as in effect now or hereafter
amended or modified.

                                   ARTICLE X

                                 Shareholders
                                 ------------

        1.45    Meetings of Shareholders.  The Trust shall hold annual meetings
                ------------------------
of the Shareholders. A special meeting of Shareholders may be called at any time
by a majority of the Trustees or the President and shall be called by any
Trustee for any proper purpose upon written request of Shareholders of the Trust
holding in the aggregate not less than 51% of the outstanding Shares of the
Trust or class or series of Shares having voting rights on the matter, such
request specifying the purpose or purposes for which such meeting is to be
called. Any shareholder meeting, including a Special Meeting, shall be held
within or without the State of Delaware on such day and at such time as the
Trustees shall designate.

        1.46    Voting.  Shareholders shall have no power to vote on any matter
                ------
except matters on which a vote of Shareholders is required by applicable law,
this Declaration or resolution of the Trustees. Except as otherwise provided
herein, any matter required to be submitted to Shareholders and affecting one or
more classes or series of Shares shall require approval by the required vote of
all the affected classes and series of

                                       24
<PAGE>

Shares voting together as a single class; provided, however, that as to any
matter with respect to which a separate vote of any class or series of Shares is
required by the 1940 Act, such requirement as to a separate vote by that class
or series of Shares shall apply in addition to a vote of all the affected
classes and series voting together as a single class. Shareholders of a
particular class or series of Shares shall not be entitled to vote on any matter
that affects only one or more other classes or series of Shares. There shall be
no cumulative voting in the election or removal of Trustees.

        1.47    Notice of Meeting and Record Date.  Notice of all meetings of
                ---------------------------------
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder of record entitled to vote
thereat at its registered address, mailed at least 10 days and not more than 90
days before the meeting or otherwise in compliance with applicable law.  Only
the business stated in the notice of the meeting shall be considered at such
meeting.  Any adjourned meeting may be held as adjourned one or more times
without further notice not later than 120 days after the record date.  For the
purposes of determining the Shareholders who are entitled to notice of and to
vote at any meeting the Trustees may, without closing the transfer books, fix a
date not more than 90 nor less than 10 days prior to the date of such meeting of
Shareholders as a record date for the determination of the Persons to be treated
as Shareholders of record for such purposes.

        1.48    Quorum and Required Vote.  (a)  The holders of a majority of the
                ------------------------
Shares entitled to vote on any matter at a meeting present in person or by proxy
shall constitute a quorum at such meeting of the Shareholders for purposes of
conducting business on such matter. The absence from any meeting, in person or
by proxy, of a quorum of Shareholders for action upon any given matter shall not
prevent action at such meeting upon any other matter or matters which may
properly come before the meeting, if there shall be present thereat, in person
or by proxy, a quorum of Shareholders in respect of such other matters.

                (1)   Subject to any provision of applicable law, this
Declaration or a resolution of the Trustees specifying a greater or a lesser
vote requirement for the transaction of any item of business

                                       25
<PAGE>

at any meeting of Shareholders, (i) the affirmative vote of a majority of the
Shares present in person or represented by proxy and entitled to vote on the
subject matter shall be the act of the Shareholders with respect to such matter,
and (ii) where a separate vote of one or more classes or series of Shares is
required on any matter, the affirmative vote of a majority of the Shares of such
class or series of Shares present in person or represented by proxy at the
meeting shall be the act of the Shareholders of such class or series with
respect to such matter.

        1.49    Proxies, etc.  At any meeting of Shareholders, any holder of
                -------------
Shares entitled to vote thereat may vote by properly executed proxy, provided
that no proxy shall be voted at any meeting unless it shall have been placed on
file with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote
shall be taken. Pursuant to a resolution of a majority of the Trustees, proxies
may be solicited in the name of one or more Trustees or one or more of the
officers or employees of the Trust. No proxy shall be valid after the expiration
of 11 months from the date thereof, unless otherwise provided in the proxy. Only
Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.

        1.50    Reports.  The Trustees shall cause to be prepared at least
                -------
annually and more frequently to the extent and in the form required by law,
regulation or any

                                       26
<PAGE>

exchange on which Trust Shares are listed a report of operations containing a
balance sheet and statement of income and undistributed income of the Trust
prepared in conformity with generally accepted accounting principles and an
opinion of an independent public accountant on such financial statements. Copies
of such reports shall be mailed to all Shareholders of record within the time
required by the 1940 Act, and in any event within a reasonable period preceding
the meeting of Shareholders. The Trustees shall, in addition, furnish to the
Shareholders at least semi-annually to the extent required by law, interim
reports containing an unaudited balance sheet of the Trust as of the end of such
period and an unaudited statement of income and surplus for the period from the
beginning of the current fiscal year to the end of such period.

        1.51    Inspection of Records.  The records of the Trust shall be open
                ---------------------
to inspection by Shareholders to the same extent as is permitted shareholders of
a corporation formed under the Delaware General Corporation Law.

        1.52    Shareholder Action by Written Consent.  Any action which may be
                -------------------------------------
taken by Shareholders by vote may be taken without a meeting if the holders
entitled to vote thereon of the proportion of Shares required for approval of
such action at a meeting of Shareholders pursuant to Section 10.4 consent to the
action in writing and the written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.

                                  ARTICLE XI

                        Duration; Termination of Trust;
                           Amendment; Mergers, Etc.
                        ------------------------------

        1.53    Duration.  Subject to possible termination in accordance with
                --------
the provisions of Section 11.2 hereof, the Trust created hereby shall have
perpetual existence.

        1.54    Termination.  (a)  The Trust may be dissolved, after a majority
                -----------
of the Trustees have approved a resolution therefor, upon approval by not less
than 75% of the Shares of each class or series outstanding and entitled to vote,
voting as separate classes or series,

                                       27
<PAGE>

unless such resolution has been approved by 80% of the Trustees, in which case
approval by a Majority Shareholder Vote shall be required. Upon the dissolution
of the Trust:

                (1)   The Trust shall carry on no business except for the
     purpose of winding up its affairs.

                (2)   The Trustees shall proceed to wind up the affairs of the
     Trust and all of the powers of the Trustees under this Declaration shall
     continue until the affairs of the Trust shall have been wound up, including
     the power to fulfill or discharge the contracts of the Trust, collect its
     assets, sell, convey, assign, exchange, merge where the Trust is not the
     survivor, transfer or otherwise dispose of all or any part of the remaining
     Trust Property to one or more Persons at public or private sale for
     consideration which may consist in whole or in part in cash, securities or
     other property of any kind, discharge or pay its liabilities, and do all
     other acts appropriate to liquidate its business; provided that any sale,
     conveyance, assignment, exchange, merger in which the Trust is not the
     survivor, transfer or other disposition of all or substantially all the
     Trust Property of the Trust shall require approval of the principal terms
     of the transaction and the nature and amount of the consideration by
     Shareholders with the same vote as required to open-end the Trust.

                (3)   After paying or adequately providing for the payment of
     all liabilities, and upon receipt of such releases, indemnities and
     refunding agreements, as they deem necessary for their protection, the
     Trustees may distribute the remaining Trust Property, in cash or in kind or
     partly each, among the Shareholders according to their respective rights.

        (2)   After the winding up and termination of the Trust and distribution
to the Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust an instrument in

                                       28
<PAGE>

writing setting forth the fact of such termination and shall execute and file a
certificate of cancellation with the Secretary of State of the State of
Delaware. Upon termination of the Trust, the Trustees shall thereupon be
discharged from all further liabilities and duties hereunder, and the rights and
interests of all Shareholders shall thereupon cease.

        1.55    Amendment Procedure.  (a)  Except as provided in subsection (b)
                -------------------
of this Section 11.3, this Declaration may be amended, after a majority of the
Trustees have approved a resolution therefor, by the affirmative vote of the
holders of not less than a majority of the affected Shares. The Trustees also
may amend this Declaration without any vote of Shareholders of any class of
series to divide the Shares of the Trust into one or more classes or additional
classes, or one or more series of any such class or classes, to change the name
of the Trust or any class or series of Shares, to make any change that does not
adversely affect the relative rights or preferences of any Shareholder, as they
may deem necessary, or to conform this Declaration to the requirements of the
1940 Act or any other applicable federal laws or regulations including pursuant
to Section 6.2 or the requirements of the regulated investment company
provisions of the Code, but the Trustees shall not be liable for failing to do
so.

                (1)   No amendment may be made to Section 2.1, Section 2.2,
Section 2.3, Section 3.9, Section 5.1, Section 5.2, Section 11.2(a), this
Section 11.3, Section 11.4, Section 11.6 or Section 11.7 of this Declaration and
no amendment may be made to this Declaration which would change any rights with
respect to any Shares of the Trust by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto (except that this provision shall not limit the ability of
the Trustees to authorize, and to cause the Trust to issue, other securities
pursuant to Section 6.2), except after a majority of the Trustees have approved
a resolution therefor, by the affirmative vote of the holders of not less than
seventy-five percent (75%) of the Shares of each affected class or series
outstanding, voting as separate classes or series, unless such amendment has
been approved by 80% of the Trustees, in which case approval by a Majority
Shareholder Vote shall be required. Nothing contained in this Declaration shall
permit the amendment of this Declaration to impair the

                                       29
<PAGE>

exemption from personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust or to permit assessments upon Shareholders.

                (2)   An amendment duly adopted by the requisite vote of the
Board of Trustees and, if required, the Shareholders as aforesaid, shall become
effective at the time of such adoption or at such other time as may be
designated by the Board of Trustees or Shareholders, as the case may be. A
certification in recordable form signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the Trustees and, if
required, the Shareholders as aforesaid, or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when lodged among the records of the
Trust or at such other time designated by the Board.

          Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of Shares of the Trust shall have become effective,
this Declaration may be terminated or amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.

        1.56    Merger, Consolidation and Sale of Assets.  Except as provided in
                ----------------------------------------
Section 11.7, the Trust may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of the Trust Property or the property, including its good
will, upon such terms and conditions and for such consideration when and as
authorized by two-thirds of the Trustees and approved by a Majority Shareholder
Vote and any such merger, consolidation, sale, lease or exchange shall be
determined for all purposes to have been accomplished under and pursuant to the
statutes of the State of Delaware.

        1.57    Subsidiaries.  Without approval by Shareholders, the Trustees
                ------------
may cause to be organized or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations to take over all of
the Trust Property or to carry on any business in which the Trust shall directly
or indirectly have any interest, and to sell, convey and transfer all

                                       30
<PAGE>

or a portion of the Trust Property to any such corporation, trust, limited
liability company, association or organization in exchange for the shares or
securities thereof, or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such corporation, trust,
limited liability company, partnership, association or organization, or any
corporation, partnership, trust, limited liability company, association or
organization in which the Trust holds or is about to acquire shares or any other
interests.

        1.58    Conversion.  Notwithstanding any other provisions of this
                ----------
Declaration or the By-Laws of the Trust, a favorable vote of a majority of the
Trustees then in office followed by the favorable vote of the holders of not
less than seventy-five percent (75%) of the Shares of each affected class or
series outstanding, voting as separate classes or series, shall be required to
approve, adopt or authorize an amendment to this Declaration that makes the
Shares a "redeemable security" as that term is defined in the 1940 Act, unless
such amendment has been approved by 80% of the Trustees, in which case approval
by a Majority Shareholder Vote shall be required. Upon the adoption of a
proposal to convert the Trust from a "closed-end company" to an "open-end
company" as those terms are defined by the 1940 Act and the necessary amendments
to this Declaration to permit such a conversion of the Trust's outstanding
Shares entitled to vote, the Trust shall, upon complying with any requirements
of the 1940 Act and state law, become an "open-end" investment company. Such
affirmative vote or consent shall be in addition to the vote or consent of the
holders of the Shares otherwise required by law, or any agreement between the
Trust and any national securities exchange.

        1.59    Certain Transactions.  (a)  Notwithstanding any other provision
                --------------------
of this Declaration and subject to the exceptions provided in paragraph (d) of
this Section, the types of transactions described in paragraph (c) of this
Section shall require the affirmative vote or consent of a majority of the
Trustees then in office followed by the affirmative vote of the holders of not
less than seventy-five percent (75%) of the Shares of each affected class or
series outstanding, voting as separate classes or series, when a Principal
Shareholder (as defined in paragraph (b) of this Section) is a party to the
transaction. Such affirmative vote or

                                       31
<PAGE>

consent shall be in addition to the vote or consent of the holders of Shares
otherwise required by law or by the terms of any class or series of preferred
stock, whether now or hereafter authorized, or any agreement between the Trust
and any national securities exchange.

                (1)   The term "Principal Shareholder" shall mean any
corporation, Person or other entity which is the beneficial owner, directly or
indirectly, of five percent (5%) or more of the outstanding Shares of any class
or series and shall include any affiliate or associate, as such terms are
defined in clause (ii) below, of a Principal Shareholder. For the purposes of
this Section, in addition to the Shares which a corporation, Person or other
entity beneficially owns directly, (a) any corporation, Person or other entity
shall be deemed to be the beneficial owner of any Shares (i) which it has the
right to acquire pursuant to any agreement or upon exercise of conversion rights
or warrants, or otherwise (but excluding share options granted by the Trust) or
(ii) which are beneficially owned, directly or indirectly (including Shares
deemed owned through application of clause (i) above), by any other corporation,
Person or entity with which its "affiliate" or "associate" (as defined below)
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of Shares, or which is its "affiliate" or
"associate" as those terms are defined in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, and (b) the outstanding
Shares shall include Shares deemed owned through application of clauses (i) and
(ii) above but shall not include any other Shares which may be issuable pursuant
to any agreement, or upon exercise of conversion rights or warrants, or
otherwise.

                (2)   This Section shall apply to the following transactions:

                        (1)   The merger or consolidation of the Trust or any
        subsidiary of the Trust with or into any Principal Shareholder.

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

                                       32
<PAGE>

                        (3)   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.)

                        (4)   The sale, lease or exchange to the Trust or any
        subsidiary thereof, 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 the purposes
        of such computation all assets sold, leased or exchanged in any series
        of similar transactions within a twelve-month period).

                (3)   The provisions of this Section shall not be applicable to
(i) any of the transactions described in paragraph (c) of this Section if 80% of
the Trustees shall by resolution have approved a memorandum of understanding
with such Principal Shareholder with respect to and substantially consistent
with such transaction, in which case approval by a Majority Shareholder Vote
shall be the only vote of Shareholders required by this Section, or (ii) any
such transaction with any entity of which a majority of the outstanding shares
of all classes and series of a stock normally entitled to vote in elections of
directors is owned of record or beneficially by the Trust and its subsidiaries.

                (4)   The Board of Trustees shall have the power and duty to
determine for the purposes of this Section on the basis of information known to
the Trust whether (i) a corporation, person or entity beneficially owns five
percent (5%) or more of the outstanding Shares of any class or series, (ii) a
corporation, person or entity is an "affiliate" or "associate" (as defined
above) of another, (iii) the assets being acquired or leased to or by the Trust
or any subsidiary thereof constitute a substantial part of the assets of the
Trust and have an aggregate fair market value of less than $1,000,000, and (iv)
the memorandum of understanding referred to in paragraph (d) hereof is
substantially consistent with the transaction covered thereby. Any such
determination shall be conclusive and binding for all purposes of this Section.

                                       33
<PAGE>

                                  ARTICLE XII

                                 Miscellaneous
                                 -------------

        1.60    Filing. (a)  This Declaration and any amendment or supplement
                ------
hereto shall be filed in such places as may be required or as the Trustees deem
appropriate. Each amendment or supplement shall be accompanied by a certificate
signed and acknowledged by a Trustee stating that such action was duly taken in
a manner provided herein, and shall, upon insertion in the Trust's minute book,
be conclusive evidence of all amendments contained therein. A restated
Declaration, containing the original Declaration and all amendments and
supplements theretofore made, may be executed from time to time by a majority of
the Trustees and shall, upon insertion in the Trust's minute book, be conclusive
evidence of all amendments and supplements contained therein and may thereafter
be referred to in lieu of the original Declaration and the various amendments
and supplements thereto.

                (1)   The Trustees hereby authorize and direct a Certificate of
Trust, in the form attached hereto as Exhibit A, to be executed and filed with
the Office of the Secretary of State of the State of Delaware in accordance with
the Delaware Business Trust Act.

        1.61    Resident Agent.  The Trust shall maintain a resident agent in
                --------------
the State of Delaware, which agent shall initially be The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801 The Trustees may
designate a successor resident agent, provided, however, that such appointment
shall not become effective until written notice thereof is delivered to the
office of the Secretary of the State.

        1.62    Governing Law.  This Declaration is executed by the Trustees and
                -------------
delivered in the State of Delaware and with reference to the laws thereof, and
the rights of all parties and the validity and construction of every provision
hereof shall be subject to and construed according to laws of said State and
reference shall be specifically made to the Delaware General Corporation Law as
to the construction of matters not specifically covered herein or as to which an
ambiguity exists, although such law shall not be viewed as limiting the powers
otherwise granted to the Trustees hereunder

                                       34
<PAGE>

and any ambiguity shall be viewed in favor of such powers.

        1.63    Counterparts.  This Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.

        1.64    Reliance by Third Parties.  Any certificate executed by an
                -------------------------
individual who, according to the records of the Trust, or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the name of the Trust, (c) the due authorization of the
execution of any instrument or writing, (d) the form of any vote passed at a
meeting of Trustees or Shareholders, (e) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (f) the form of any By Laws
adopted by or the identity of any officers elected by the Trustees, or (g) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any person dealing with the Trustees and their successors.

        1.65    Provisions in Conflict with Law or Regulation.  (a)  The
                ---------------------------------------------
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.

                (1)   If any provision of this Declaration shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any

                                       35
<PAGE>

other jurisdiction or any other provision of this Declaration in any
jurisdiction.

                                       36
<PAGE>

          IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.





Dr. Andrew F. Brimmer               Richard E. Cavanagh



Kent Dixon                          Frank J. Fabozzi



Laurence D. Fink                    James Clayburn La Force, Jr.



Walter F. Mondale                   Ralph L. Schlosstein

                                       37
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(L)
<SEQUENCE>3
<FILENAME>dex99l.txt
<DESCRIPTION>OPINION AND CONSENT OF COUNSEL TO THE TRUST
<TEXT>

<PAGE>

                                 July 25, 2001



BlackRock New York
Municipal Income Trust
345 Park Avenue
New York, New York 10154

               Re:  BlackRock New York Municipal Income Trust
                    Registration Statement on Form N-2
                    ----------------------------------

Ladies and Gentlemen:

          We have acted as special counsel to BlackRock New York Municipal
Income Trust, a business trust formed under the Delaware Business Trust Act (the
"Trust"), in connection with the initial public offering by the Trust of up to
12,666,666 shares (including shares subject to an over-allotment option) of the
Trust's common shares (the "Shares") of beneficial interest, par value $0.001
per share (the "Common 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 Registration of the Trust as an investment company under the 1940 Act, on
Form N-8A, dated April 3, 2001 as filed with the Securities and Exchange
Commission (the "Commission") on April 3, 2001, (ii) the Registration Statement
of the Trust on Form N-2 (File Nos. 333-58222 and 811-10337), as filed with the
Commission on April 3, 2001, and as amended by Pre-Effective Amendment No. 1 on
June 4, 2001, Pre-Effective Amendment No. 2 on June 19, 2001 and Pre-Effective
Amendment No. 3 on July 25 2001, under the 1933 Act (such Registration
Statement, as so amended and proposed to be amended, being hereinafter referred
to as the
<PAGE>

BlackRock New York
Municipal Income Trust
July 25, 2001
Page 2



"Registration Statement"); (iii) the form of the Underwriting Agreement (the
"Underwriting Agreement") proposed to be entered into between the Trust, as
issuer, 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 the Common Shares; (v) the Certificate of
Trust and Amended and Restated Agreement and Declaration of Trust of the Trust,
as amended to dated and currently in effect; (vi) the By-Laws of the Trust, as
currently in effect; (vii) certain resolutions of the Board of Trustees of the
Trust relating to the issuance and sale of the Shares and related matters and
(viii) certain resolutions of the shareholders of the Trust relating to the
Amended and Restated Declaration of Trust. 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 latter documents.  In making our
examination of documents, we have assumed that the parties thereto, other than
the Trust, its directors and officers, had or will have the power, corporate or
other, to enter into and perform all obligations 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 the 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 Common Shares and
registered by such transfer agent and registrar.  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.
<PAGE>

BlackRock New York
Municipal Income Trust
July 25, 2001
Page 3



          Members of our firm are admitted to the bar in the State of New York
and we do not express any opinion as to the laws of any jurisdiction other than
the Delaware Business 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 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 Shares and registered by such transfer agent and registrar; and (iv) the
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 Common Shares as contemplated
by the Underwriting Agreement, the issuance and sale of the Shares will have
been duly authorized, and the Shares will be validly issued, fully paid and
nonassessable (except as provided in the last sentence of Section 3.8 of the
Amended and Restated 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

                              SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(N)
<SEQUENCE>4
<FILENAME>dex99n.txt
<DESCRIPTION>CONSENT OF INDEPENDENT ACCOUNTANTS
<TEXT>

<PAGE>

                                                                     Exhibit (n)

INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation in this Pre-Effective Amendment No. 3 to the
Registration Statement of the BlackRock New York Municipal Income Trust
(Investment Company Registration No. 811-10337) of our report dated July 16,
2001, relating to the financial statements of the BlackRock New York Municipal
Income Trust as of July 16, 2001 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.



Deloitte & Touche LLP
Boston, Massachusetts
July 23, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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