BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC, N-14 8C, 1999-07-23

BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC
N-14 8C, 1999-07-23

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<PAGE>

As filed with the Securities and Exchange Commission on July 23, 1999
Registration No. 333-
811-7354
- -------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_] Pre-Effective Amendment No. [_] Post-Effective Amendment No.
(Check Appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC. ("BKN")
Area Code and Telephone Number:
(212) 754-5560
Address of Principal Executive Offices:
345 Park Avenue
New York, New York 10154
Name and Address of Agent for Service:
Ralph L. Schlosstein, President
345 Park Avenue
New York, New York 10154
Copies to:
Richard T. Prins, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
--------------
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
--------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Securities Being Amount Being Offering Price Aggregate Amount of
Registered Registered Per Unit Offering Price Registration Fee
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($.01 par
value)................. 202,704 $14.80(1) $3,000,000 $ 834
- ------------------------------------------------------------------------------------------
Auction Rate Municipal
Preferred Stock, Series
W7, (liquidation
preference $25,000 per
share)................. 1 $25,000(2) $ 25,000 $7.00
- ------------------------------------------------------------------------------------------
Auction Rate Municipal
Preferred Stock, Series
W28, (liquidation
preference $25,000 per
share)................. 1 $25,000(2) $ 25,000 $7.00
- ------------------------------------------------------------------------------------------
Auction Rate Municipal
Preferred Stock, Series
F7, (liquidation
preference $25,000 per
share)................. 1 $25,000(2) $ 25,000 $7.00
- ------------------------------------------------------------------------------------------
Auction Rate Municipal
Preferred Stock, Series
M7, (liquidation
preference $25,000 per
share)................. 1 $25,000(2) $ 25,000 $7.00
- ------------------------------------------------------------------------------------------
Auction Rate Municipal
Preferred Stock, Series
M28, (liquidation
preference $25,000 per
share)................. 1 $25,000(2) $ 25,000 $7.00
- ------------------------------------------------------------------------------------------
Auction Rate Municipal
Preferred Stock, Series
T7, (liquidation
preference $25,000 per
share)................. 1 $25,000(2) $ 25,000 $7.00
- ------------------------------------------------------------------------------------------
Auction Rate Municipal
Preferred Stock, Series
T28, (liquidation
preference $25,000 per
share)................. 1 $25,000(2) $ 25,000 $7.00
- ------------------------------------------------------------------------------------------
Auction Rate Municipal
Preferred Stock, Series
R7, (liquidation
preference $25,000 per
share)................. 1 $25,000(2) $ 25,000 $7.00
- ------------------------------------------------------------------------------------------
Auction Rate Municipal
Preferred Stock, Series
R28, (liquidation
preference $25,000 per
share)................. 1 $25,000(2) $ 25,000 $7.00
- ------------------------------------------------------------------------------------------
Total.................. N/A N/A $3,225,000 $ 897
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1)For the common stock, estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(f) under the Securities Act of 1933, as
amended (the "1933 Act"), based upon the net asset value per common share of
BKN on July 9, 1999.
(2)For the preferred stock, estimated solely for the purpose of calculating
the registration fee pursuant to Rule 457(f) under the 1933 Act, based upon
$25,000, the liquidation preference, on July 9, 1999, of the preferred shares
of BKN.

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 this 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 date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>

CROSS-REFERENCE SHEET

ITEMS REQUIRED BY FORM N-14

PART A

<TABLE>
<CAPTION>
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
<C> <S> <C>
1 Beginning of Registration
Statement and Outside Front Cover Cover Page of Registration
Page of Prospectus............... Statement; Cross-Reference Sheet;
Front Cover Page of Combined
Prospectus/Proxy Statement
2 Beginning and Outside Back Cover
Page of Prospectus............... Table of Contents
3 Fee Table, Synopsis Information Summary--Comparison of the Trusts
and Risk Factors................. and BKN; Summary--Proposed
Mergers; Risks and Special
Considerations regarding the
Mergers
4 Information about the
Transaction...................... Summary--The Proposed Mergers
5 Information about the Comparison of the Trusts and BKN;
Registrant....................... Additional Information about BKN
6 Information about the Company Comparison of the Trusts and BKN;
being acquired................... Additional Information about the
Trusts
7 Voting Information............... Voting Matters
8 Interest of Certain Persons and Financial Statements; Legal
Experts.......................... Matters
9 Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters............... Not Applicable

PART B

<CAPTION>
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
<C> <S> <C>
10 Cover Page....................... Cover Page
11 Table of Contents................ Table of Contents
12 Additional Information about the Incorporation of Documents by
Registrants...................... Reference in Statement of
Additional Information
13 Additional Information about the
Companies being acquired......... Additional Information about the
Trusts
14 Financial Statements............. Exhibits to Statement of
Additional Information

PART C

15-17 Information required to be
included in Part C is set forth
under the appropriate Item, so
numbered, in Part C of this
Registration Statement.
</TABLE>
<PAGE>

IMPORTANT NOTICE: PLEASE COMPLETE THE
ENCLOSED PROXY(IES) AND RETURN IT OR THEM AS SOON AS POSSIBLE.

FOR YOUR CONVENIENCE, YOU MAY ALSO VOTE BY CALLING TOLL-FREE AT 1-800-
FROM 6:00 A.M. TO 8:00 P.M. EASTERN STANDARD TIME OR BY FAXING YOUR
PROXY(IES) TO AT 1-800-227-7BFM (7236). A CONFIRMATION OF YOUR
TELEPHONE OR TELEFACSIMILE VOTE WILL BE MAILED TO YOU.

THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC. ("BKN")
THE BLACKROCK MUNICIPAL TARGET TERM TRUST INC. ("BMN")
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC. ("BMT")
THE BLACKROCK INSURED MUNICIPAL 2008 TERM TRUST INC. ("BRM")
345 PARK AVENUE
NEW YORK, NEW YORK 10154

, 1999

To the Shareholders of BMN, BMT and BRM
(collectively, the "Trusts") and BKN:

On behalf of the Board of Directors of each Trust and BKN, we are pleased to
invite you to a special meeting of shareholders on , 1999 to be held at
. At the meeting, you will be asked to consider the proposed merger of each
Trust into BKN. In each of the proposed mergers, each outstanding common share
of each Trust would be exchanged on a net asset value for net asset value
basis for shares of common stock of BKN and each outstanding preferred share
of each Trust would be exchanged for one share of a substantially similar
series of preferred shares of BKN. THE DIRECTORS OF EACH TRUST AND BKN
RECOMMEND THAT YOU VOTE TO APPROVE THE PROPOSED MERGERS.

This proposal is being sent to you because the investment adviser and the
Boards of Directors of each Trust and BKN believe that the mergers would
benefit shareholders of the Trusts by unlocking value in the Trusts and would
also provide benefits to shareholders of BKN. The mergers may benefit
shareholders of the Trusts and BKN by providing (i) higher distribution rates
on their common shares, (ii) a special one-time tax-exempt dividend to
shareholders of the Trusts, (iii) a potential reduction in reinvestment risk
for shareholders of the Trusts and (iv) an enhanced likelihood that the common
shares of BKN will trade at a lower or no discount or premium to net asset
value.

The investment adviser and the Boards of Directors believe that these
potential benefits outweigh (i) the fact that shareholders of the Trusts will
no longer have the likelihood of receiving a specified distribution on such
Trust's scheduled termination date and instead will be dependent on trading
prices of BKN common shares available in the market for the sale of their
shares and (ii) the detriment to common shareholders of two of the Trusts of
higher expense ratios following the mergers.

These potential benefits and detriments, as well as other important
considerations, are described in more detail in the proxy statement
accompanying this notice.

1
<PAGE>

The mergers should benefit shareholders as follows:

Higher Distribution Rate. Common shareholders of the merging Trusts and BKN are
likely to be paid dividends at a higher distribution rate after the mergers,
because BKN is not required to retain a portion of its income each year to
enable it to return a fixed amount at the end of a specified term. Based on
market conditions as of April 30, 1999, we anticipate each Trust's and BKN's
distribution rate to increase by approximately 8.1% for BMN, 28.4% for BRM,
8.4% for BMT and 10.9% for BKN.

Special Dividend. Shareholders of each merging Trust would be paid a special
tax-exempt dividend immediately prior to its merger. The dividend will be paid
out of accumulated investment income of each Trust that, but for the merger,
would be retained by such Trust until the end of its term, to assure that such
Trust could return to its shareholders upon liquidation the initial offering
price of its shares. Based on the Trusts' financial statements as of April 30,
1999, these distributions are estimated to be: $0.3961 per share for BMN,
$0.4889 per share for BRM and $0.2273 per share for BMT.

Reduced Reinvestment Risk. Reduce the potential negative impact on shareholders
of the Trusts of portfolio securities of the Trusts being called by their
issuers would be reduced, because BKN would be able to reinvest the proceeds
from called portfolio securities in longer maturity securities with higher
rates of interest (rather than securities with shorter maturities and lower
rates of interest required by the limited term of the individual term Trusts).

Reduced Market Risk. The likelihood that the common shares of BKN will trade at
a lower or no discount or premium to net asset value would be improved due to
the higher distribution rate. The market value of common stocks issued by
closed-end municipal bond funds historically have had a high correlation with
the distribution rates on such stocks, and a higher distribution rate as a
result of the mergers may produce positive stock price performance.

In considering these proposals, you should note:

Comparison of Investment Policies. BKN and the Trusts invest substantially all
of their assets in municipal obligations. BKN invests at least 80% of its
assets in municipal obligations rated triple-B or higher, and the Trusts invest
at least 80% of their assets in municipal obligations rated triple-A or higher
or insured by a company with a triple-A claims paying ability. The primary
investment objective of BKN is to pay high current income, whereas the primary
investment objective of each Trust is to pay current income, in all cases
exempt from regular Federal income tax. The secondary investment objective of
BKN is preservation of capital but BKN does not have a stated termination date,
whereas the secondary investment objective of each Trust is to return to its
common shareholders the original issue price of the common shares at a stated
termination date. The other investment policies and restrictions of BKN and the
Trusts are substantially similar.

Moderate Increase to Expenses for Some Trusts. The anticipated expense ratio
for BKN after the mergers will be higher than the current expense ratio of BMN
and BRM. The expense ratio of BKN and BMT will be reduced as a result of the
mergers, which will benefit the current common shareholders of these funds.

2
<PAGE>

Indefinite Term. BMN, BRM and BMT currently are scheduled to terminate on
December 31 of 2006, 2008 and 2010, respectively. As part of each such
Trust's investment objective, it seeks to distribute to its common
shareholders $10, $15, and $10 per common share, respectively, in
connection with its termination. BKN has no scheduled termination date and,
if the merger of any Trust is completed, common shareholders of such Trust
will be dependent on the trading prices available in the market for the
sale of their shares if they wish to dispose of their shares.

Same Net Asset Value of Shares. The total net asset value of BKN common and
preferred shares that the common and preferred shareholders of the merging
Trusts receive in the mergers will be the same as the total net asset value
of the Trust common and preferred shares that such shareholders own
immediately before the mergers. Holders of preferred shares of the Trusts
will receive preferred shares of BKN, and holders of common shares of the
Trusts will receive common shares of BKN.

Market Value of Shares. While the total net asset value of shares owned by
each shareholder after the mergers will be the same, the market value of
the common shares that shareholders of the merging Trusts receive in the
merger may be more or less than the market value of the common shares that
such shareholders own immediately before the merger. There will be no
difference in the pre-merger and post-merger value of preferred shares.

Similar Investment Management Arrangements. Shareholders of the Trusts will
enjoy access to investment management arrangements that are substantially
similar to the Trusts' current arrangements.

The proposed mergers and the reasons for the recommendation of the Boards of
each Trust and BKN are discussed in detail in the enclosed materials, which you
should read carefully. If you have any questions about the mergers, please do
not hesitate to call BlackRock at (800) 227-7BFM(7236)).

Very truly yours,

LAURENCE D. FINK
Chairman and Chief Executive Officer

RALPH L. SCHLOSSTEIN
President

New York, New York
, 1999

3
<PAGE>

NOTICE OF SPECIAL SHAREHOLDERS MEETING

TO BE HELD ON , 1999

To the Shareholders of BMN, BMT and BRM (collectively, the "Trusts") and BKN:

NOTICE IS HEREBY GIVEN THAT a combined Special Meeting of the Shareholders of
each Trust and BKN will be held at on , 1999 at a.m. eastern
standard time for the purpose of considering and voting upon:

ITEM 1. A proposal to approve an Agreement and Plan of Merger providing for
the merger of each Trust whose shareholders approve such merger into BKN in
exchange for newly issued common and preferred shares of BKN.

ITEM 2. Such other business as may properly come before the Special Meeting or
any adjournment(s).

We encourage you to contact BlackRock at (800) 227-7BFM (7236) if you have any
questions.

The stock transfer books will not be closed, but in lieu thereof, the
respective Boards of Directors have fixed the close of business on , 1999
as the record date for the determination of stockholders entitled to notice
of, and to vote at, the meeting.

By order of the respective Boards of
Directors
Karen H. Sabath, Secretary

New York, New York , 1999

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN PERSON OR
BY PROXY; IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE APPROPRIATE ENCLOSED PROXY OR PROXIES IN THE
ACCOMPANYING ENVELOPE PROVIDED FOR YOUR CONVENIENCE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This prospectus shall not constitute an offer to sell or +
+the solicitation of an offer to buy nor shall there be any sale of these +
+securities in any state in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such state. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion -- Dated July 23, 1999

COMBINED PROXY STATEMENT/PROSPECTUS

BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC. ("BKN")
THE BLACKROCK MUNICIPAL TARGET TERM TRUST INC. ("BMN")
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC. ("BMT")
THE BLACKROCK INSURED MUNICIPAL 2008 TERM TRUST INC. ("BRM")

This Combined Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Boards of Directors of BMN, BMT, BRM
(collectively, the "Trusts") and BKN in connection with a combined special
meeting of shareholders to be held at a.m. eastern standard time on , 1999
at . At the meeting, shareholders of each Trust and BKN will be asked to
consider the proposed merger of each Trust into BKN.

Each Trust whose shareholders approve the merger will be merged into BKN in
exchange for newly issued common and preferred shares of BKN. The number of BKN
common shares to be issued in respect of each common share of each Trust that
approves the merger will be that number having an aggregate net asset value
equal to the net asset value of a single common share of the merging Trust.
Preferred shares of BKN will be issued to the shareholders of each merging
Trust on the basis of one newly issued preferred share of BKN for each
outstanding preferred share of such Trusts. If all of the mergers are approved,
BKN will issue approximately 78,906,415 common shares and 22,440 preferred
shares to the common shareholders and preferred shareholders, respectively, of
the Trusts, based on the number of shares outstanding and net asset value per
share for each Trust and BKN on April 30, 1999. A copy of the merger agreement
is attached hereto as Appendix I.

The Trusts and BKN are closed-end, diversified investment companies that
invest in tax-exempt portfolios of municipal obligations.

The principal executive office of each Trust and BKN is located at 345 Park
Avenue, New York, New York 10154, and the telephone number of BKN and each
Trust is (212) 754-5560.

This Combined Proxy Statement/Prospectus sets forth concisely the information
that a shareholder should know before voting, and should be retained for future
reference. A Statement of Additional Information, dated , 1999, relating to
this Combined Proxy Statement/Prospectus has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated herein by reference. Copies of
the Statement of Additional Information may be obtained without charge by
calling or writing BKN or the Trusts at the telephone number or address shown
above. In addition, BKN and each Trust will furnish, without charge, a copy of
its most recent annual report and subsequent semi-annual report, if any, to a
shareholder upon request.

The common stock of BKN and the Trusts are listed on the New York Stock
Exchange (the "NYSE") under the symbols BKN, BMN, BMT and BRM. Subsequent to
the mergers, the common stock of BKN will continue to be listed on the NYSE
under the symbol "BKN." Reports, proxy materials and other information
concerning BKN and each Trust may be inspected at the offices of the NYSE, 11
Wall Street, New York, New York 10005.

THE SECURITIES OF BKN OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS COMBINED PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUSTS OR THEIR SPONSORS
AND DISTRIBUTORS.

The Date Of This Combined Proxy Statement/prospectus Is , 1999.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.................................................................... 4
Special Meetings......................................................... 4
Proposed Mergers......................................................... 4
Reasons for the Mergers.................................................. 5
Comparison of the Trusts and BKN......................................... 7

RISKS AND SPECIAL CONSIDERATIONS REGARDING THE MERGERS..................... 12

THE PROPOSED MERGERS....................................................... 17
Description of the Mergers............................................... 17
Surrender and Exchange of Trust Share Certificates....................... 19
Appraisal Rights......................................................... 20
Reasons for the Mergers; Board Consideration............................. 21

CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 25

VOTING MATTERS............................................................. 26
General.................................................................. 26
Voting Requirements of the Trusts........................................ 28
Voting Requirement of BKN................................................ 28
Quorum................................................................... 28

DESCRIPTION OF COMMON SHARES OF BKN AND THE TRUSTS......................... 29
General.................................................................. 29
Distributions............................................................ 29
Comparison of Rights of Holders of Common Shares of BKN and the Trusts... 30
Certain Provisions in BKN's and the Trusts' Charter...................... 30
Dividend Reinvestment Plan............................................... 31

DESCRIPTION OF PREFERRED SHARES OF BKN AND THE TRUSTS...................... 32
General.................................................................. 32
Dividends and Dividend Periods........................................... 34
Voting Rights............................................................ 35
Redemption............................................................... 35
Liquidation.............................................................. 36
Auctions................................................................. 36
Rating Agency Guidelines................................................. 36
Additional Preferred Shares.............................................. 37

COMPARISON OF THE TRUSTS AND BKN........................................... 38
General.................................................................. 38
Investment Objectives and Policies....................................... 38

SERVICE PROVIDERS FOR THE TRUSTS AND BKN................................... 42

MANAGEMENT OF THE TRUSTS AND BKN........................................... 43
Boards of Directors and Officers......................................... 43
The Investment Adviser................................................... 47

ADDITIONAL INFORMATION ABOUT BKN........................................... 49

ADDITIONAL INFORMATION ABOUT THE TRUSTS.................................... 49

FINANCIAL STATEMENTS....................................................... 49

LEGAL MATTERS.............................................................. 50

</TABLE>

2
<PAGE>

<TABLE>
<S> <C>
OTHER BUSINESS............................................................. 50
STATEMENT OF ADDITIONAL INFORMATION........................................ 50

SHAREHOLDER INQUIRIES...................................................... 51

UNAUDITED PRO FORMA FINANCIAL STATEMENTS FOR BKN........................... F-1
Portfolio of Investments................................................. F-1
Statement of Assets and Liabilities...................................... F-18
Statement of Operations.................................................. F-19
CERTAIN PRO FORMA FINANCIAL INFORMATION.................................... F-21
COMPARATIVE PERFORMANCE INFORMATION........................................ F-22
CAPITALIZATION............................................................. F-23
Capitalization as of April 30, 1999...................................... F-23
Pro Forma Capitalization................................................. F-24

APPENDIX I--AGREEMENT AND PLAN OF MERGER
</TABLE>

3
<PAGE>

SUMMARY

The following is a summary of certain information relating to the proposed
mergers, and is qualified by reference to the more complete information
contained elsewhere in this Combined Proxy Statement/Prospectus and the
Appendix attached hereto.

Special Meetings This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of
proxies by the Board of Directors of each Trust and BKN
for a combined Special Meeting of Shareholders to be
held at on , 1999 at a.m. eastern standard
time. The special meeting and any adjournment(s)
thereof are referred to as the "Meeting". At the
Meeting, shareholders of each Trust and BKN will be
asked to consider the proposed merger of such Trust
into BKN, as described below. Only shareholders of
record at the close of business on , 1999 will be
entitled to vote at the Meeting. Each share of common
stock and preferred stock of each Trust and BKN is
entitled to one vote. Shares represented by a properly
executed proxy will be voted in accordance with the
instructions thereon or, if no specification is made,
the persons named as proxies will vote in favor of each
proposal properly brought before the Meeting. Proxies
may be revoked at any time before they are exercised by
submitting to the applicable Trust or BKN, as
applicable, a written notice of revocation or a
subsequently executed proxy or by attending the Meeting
and voting in person.

Proposed Mergers The Directors of BKN and each of the Trusts are
proposing the issuance of approximately 78,906,415
common shares and 22,440 preferred shares of BKN
pursuant to an Agreement and Plan of Merger, dated as
of , 1999, by and between each of the Trusts and BKN
(the "Merger Agreement"), based on the number of shares
outstanding and net asset value per share of each Trust
and BKN as of April 30, 1999. A copy of the Merger
Agreement is attached hereto as Appendix I. The Merger
Agreement provides for the merger (each, a "Merger") of
each Trust whose shareholders approve such Merger into
BKN in exchange for newly issued common and preferred
shares of BKN. The number of BKN common shares to be
issued in respect of each common share of each Trust
that approves the Merger Agreement would be that number
having an aggregate net asset value equal to the net
asset value of a single common share of the merging
Trust. Preferred shares of BKN would be issued to the
preferred shareholders of each Trust that approves the
Merger Agreement on the basis of one newly issued BKN
preferred share for each outstanding preferred share of
the Trust. For this purpose, the value of each Trust's

4
<PAGE>

and BKN's net assets will be calculated net of the
liquidation preference (including accumulated and
unpaid dividends) of all its outstanding preferred
shares.

Each Merger is subject to a number of conditions,
including shareholder approval and confirmation of the
Aaa rating assigned by Moody's Investors Service, Inc.
("Moody's"), to the shares of BKN Preferred. None of
the Mergers is conditioned on the occurrence of any of
the other Mergers. The Merger Agreement provides that
each Merger may be abandoned at any time prior to the
completion thereof (the "Closing") in the discretion of
BKN. For further information, see "The Proposed
Mergers."

Reasons for the The Mergers should benefit shareholders by having a:
Mergers

Higher Distribution Rate. Common shareholders of the
merging Trusts and BKN are likely to be paid dividends
at a higher distribution rate after the Mergers,
because BKN is not required to retain a portion of its
income each year to enable it to return a fixed amount
at the end of a specified term. Based on market
conditions as of April 30, 1999, we anticipate each
Trust's and BKN's distribution rate to increase by
approximately 8.1% for BMN; 28.4% for BRM, 8.4% for BMT
and 10.9% for BKN.

Special Dividend. Shareholders of each merging Trust
would be paid a special tax-exempt dividend immediately
prior to its merger. The dividend will be paid out of
accumulated investment income of each Trust that, but
for the merger, would be retained by the Trust until
the end of its term, to assure that the Trust could
return to its shareholders upon liquidation the initial
offering price of its shares. Based on the Trusts'
financial statements as of April 30, 1999, these
distributions are estimated to be: $0.3961 per share
for BMN, $0.4889 per share for BRM and $0.2273 per
share for BMT.

Reduced Reinvestment Risk. The potential negative
income impact on shareholders of the Trusts of
portfolio securities of the Trusts are called by their
issuers would be reduced, because BKN would be able to
reinvest the proceeds from called portfolio securities
in longer maturity securities with higher rates of
interest (rather than securities with shorter
maturities and lower rates of interest required by the
limited term of the individual term Trusts).

Reduced Market Risk. The likelihood that the common
shares of BKN will trade at a lower or no discount to
net asset value would be improved due to the higher
distribution rate. The market value of common stocks
issued by closed-end municipal bond funds historically
have had a high correlation with the distribution rates
on

5
<PAGE>

such stocks, and a higher distribution rate as a result
of the mergers may produce positive stock price
performance.

In considering these proposals, you should note:

Comparison of Investment Policies. BKN and the Trusts
invest substantially all of their assets in municipal
obligations. BKN invests at least 80% of its total
assets in municipal obligations rated triple-B or
higher and the Trusts invest at least 80% of their
total assets in municipal obligations rated triple-A or
higher or insured by a company with a triple-A claims
paying ability. The primary investment objective of BKN
is to pay high current income, whereas the primary
investment objective of each Trust is to pay current
income, in all cases exempt from regular Federal income
tax. The secondary investment objective of BKN is
preservation of capital without a stated termination
date, whereas the secondary investment objective of
each Trust is to return to its common shareholders the
original issue price of the common shares at a stated
termination date. The other investment policies and
restrictions of BKN and the Trusts are substantially
similar.

Moderate Increase to Expenses. The anticipated expense
ratio for BKN after the mergers will be higher than the
current expense ratio of BMN and BRM. The expense ratio
of BKN and BMT will be reduced as a result of the
Mergers, which will benefit the current common
shareholders of these funds.

Indefinite Term. BMN, BRM and BMT currently are
scheduled to terminate on December 31 of 2006, 2008 and
2010, respectively. As part of each such Trust's
investment objective, it seeks to distribute to its
common shareholders $10, $15, and $10 per common share,
respectively, in connection with its termination. BKN
has no scheduled termination date and, if the merger of
any Trust is completed, common shareholders of such
Trust will be dependent on the trading prices available
in the market for the sale of their shares if they wish
to dispose of their shares.

Same Net Asset Value of Shares. The total net asset
value of BKN common and preferred shares that the
common and preferred shareholders of the merging Trusts
receive in the Mergers will be the same as the total
net asset value of the Trust common and preferred
shares that such shareholders own immediately before
the Mergers. Holders of preferred shares of the Trusts
will receive preferred shares
of BKN, and holders of common shares of the Trusts will
receive common shares of BKN.

6
<PAGE>

Market Value of Shares. While the total net asset value
of shares owned by each shareholder after the mergers
will be the same, the
market value of the common shares that shareholders of
the merging Trusts receive in the merger may be more or
less than the market value of the common shares that
such shareholders own immediately before the merger.
There will be no difference in the pre-merger and post-
merger value of preferred shares.

Similar Investment Management
Arrangements. Shareholders of the merging Trusts and
BKN will enjoy access to investment management
arrangements that are substantially similar to the
Trusts' current arrangements.

Appraisal Rights. It is anticipated that holders of
common shares of the Trusts and BKN will not have
appraisal rights with respect to any of their shares in
any of the Mergers. Holders of preferred shares of the
Trust will have appraisal rights.

Comparison of the
Trusts and BKN The Trusts and BKN are diversified closed-end
management investment companies that invest in tax-
exempt investment portfolios. The common shares of the
Trusts and BKN are listed and trade on the NYSE under
the symbols BMN, BMT, BRM and BKN. Each Trust and BKN
is incorporated under the laws of the State of
Maryland. The common shares of each Trust and BKN have
equal voting rights and equal rights with respect to
the payment of dividends and distribution of assets
upon liquidation and have no preemptive, conversion or
exchange rights or rights to cumulative voting. All
preferred shares of the Trusts are rated Aaa by Moody's
and AAA by Standard & Poor's a division of The McGraw-
Hill Companies, Inc. ("Standard & Poor's") and all of
the preferred shares of BKN are rated Aaa by Moody's.
The common shares and preferred shares of BKN to be
issued pursuant to the Mergers will have rights and
preferences, including liquidation preferences, that
are substantially similar to those of the common shares
and preferred shares of the Trusts, except that BKN
does not have a fixed term.

Except as noted below, the investment objectives,
policies and restrictions of BKN are substantially
similar to those of the Trusts.

BKN's investment objective is to provide high current
income exempt from regular Federal income tax
consistent with the preservation of
capital. Each Trust's investment objective is to
provide current income exempt from regular Federal
income tax and to return $10 per common share to
holders of common shares on or about December 31,

7
<PAGE>

2006 in the case of BMN, $15 per common share to
holders of common shares on or about December 31, 2008
in the case of BRM and $10 per common share to holders
of common shares on or about December 31, 2010 in the
case of BMT. Unlike the Trusts, BKN does not have any
term to its existence and does not seek to return any
particular amount of money to its common shareholders
at any time.

In seeking to provide income exempt from regular
Federal income tax, BKN invests substantially all of
its assets in a diversified portfolio of investment
grade municipal obligations and actively manages its
assets in relation to market conditions and interest
rate changes. BMT and BRM, on the other hand, invest
substantially all of their assets in municipal
obligations insured by insurers with claims-paying
abilities rated Aaa by Moody's or AAA by Standard &
Poor's or the equivalent of such ratings. BMN invests
substantially all its assets in municipal obligations
rated Aaa by Moody's or AAA by Standard & Poor's,
guaranteed by an entity with such rating or insured by
an entity whose claims-paying ability has such rating
or BlackRock Financial Management, Inc. (the
"Investment Adviser") considers the issuer, guarantor
or insurer to be of equivalent credit quality. For
further information on the differences in the
investment objectives and certain significant
investment policies and restrictions of the Trusts and
BKN, see "Comparison of the Trusts and BKN" below.

As discussed under "Comparison of Trusts and BKN--
Investment Adviser and Other Service Providers," the
Investment Adviser currently serves as the investment
adviser to each Trust and BKN, and will continue to
serve as the investment adviser to BKN after the
Mergers. The following Table shows the actual and pro
forma investment advisory fees and other expenses paid
by the Trusts and BKN during their latest fiscal year
(October 31, 1998 for BKN and December 31, 1998 for
each Trust) and the pro forma investment advisory fees
and other expenses that would be paid by BKN after
consummation of all of the Mergers.

8
<PAGE>

COMPARATIVE EXPENSE TABLE

<TABLE>
<CAPTION>
BKN
Pro Forma
for the
BKN BMN BMT BRM Mergers
---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
Annual Expenses
(as a percentage of net assets attributable to
common shares)
Management Fees.................................. 0.53 0.51 0.51 0.51 0.56
Other Expenses................................... 0.55 0.35 0.44 0.41 0.38
Total Annual Expenses............................ 1.08 0.86 0.95 0.92 0.94
</TABLE>

Example:*

The following table illustrates the expenses on a $10,000 investment based upon
the fees and expenses shown above and assuming a 5% annual return.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
BKN....................................... $ $ $ $
BMN.......................................
BMT.......................................
BRM.......................................
BKN Pro Forma for all of the Mergers......
</TABLE>
- --------
* Pro forma comparative expense information for potential merger combinations
assuming that not all of the Trusts merge with BKN is set forth in the
financial information beginning at page F- of this Prospectus.

The purpose of the comparative expense table is to assist shareholders in
understanding the various costs and expenses of investing in shares of the
Trusts and BKN. The information in the table is based upon annualized expenses
for the fiscal year of each Trust and BKN ended in 1998. The figures in the
Example are not necessarily indicative of past or future expenses, and actual
expenses may be greater or less than those shown. The actual rate of return of
the Trusts and BKN may be greater or less than the hypothetical 5% annual
return above in the Example.

The administrators for each Trust and BKN and the fees charged by each
administrator currently are as follows:

<TABLE>
<CAPTION>
Fund Administrator Fee*
---- ------------- -----
<C> <S> <C>
BKN Princeton Administrators, L.P.................................. 0.15%
BMN Prudential Investment Funds Management LLC..................... 0.07%
BMT Mitchell Hutchins Asset Management, Inc........................ 0.10%
BRM Princeton Administrators, L.P.................................. 0.10%
</TABLE>
- --------
* Payable monthly at an annual rate expressed as a percentage of average
weekly net investment assets.

After consummation of the Mergers, BlackRock Financial Management, Inc. and
Princeton Administrators, L.P. will act as co-administrators of BKN and receive
an aggregate fee equal to [ ]% of BKN's weekly net assets.

9
<PAGE>

Dividends and
Distributions The Trusts and BKN have identical dividend policies
with respect to the payment of dividends on their
common shares. The present policy of each Trust and
BKN, which may be changed by its Board, is to make
regular monthly cash distributions to holders of its
common shares at a rate that reflects past and
projected performance and that may be changed by the
Board of Directors at any time. Each of the Trusts has
experienced a marginally lower distribution rate as a
percentage of net asset value attributable to common
shares than BKN due to the requirement that each of the
Trusts retain income sufficient over the life of the
Trust to return the initial offering price of its
common shares at the end of its term and due to the
fact that each of the Trusts also expects that its
distribution rate will decline over time as its
termination date becomes closer and it shortens the
maturities of its portfolio investments. Accordingly,
the Investment Adviser expects BKN's level of monthly
distributions to increase due to advantages gained from
the Mergers and to be higher than the current
distribution rates of the Trusts and BKN as a
percentage of net asset value.

The dividend rates on the preferred shares of each
Trust and BKN, including the BKN preferred shares to be
issued pursuant to the Merger, are determined on the
basis of auctions, which typically are held weekly or
monthly. See ("Description of Preferred Shares of BKN--
Auction Procedures") and the Statement of Additional
Information.

Certain Federal
Income Tax Each Merger is conditioned upon, among other things,
Consequences the receipt by BKN and the relevant Trust of an opinion
as of the closing of the Mergers (the "Closing") from
Skadden, Arps, Slate, Meagher & Flom LLP and its
affiliates to the effect that, on the basis of facts,
representations and assumptions set forth in such
opinion, the Merger will be treated for Federal income
tax purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and BKN and the Trust will each
be a party to such reorganization within the meaning of
Section 368(b) of the Code. Accordingly, (i) no gain or
loss will be recognized by the BKN or the Trust as a
result of the Merger, and (ii) no gain or loss will be
recognized by a shareholder of the Trust who receives
BKN Shares (as defined herein) for shares of the Trust
exchanged therefor (except with respect to any cash
received in lieu of a fractional interest in BKN
Shares). For additional Federal income tax

10
<PAGE>

consequences of the Mergers, see "Certain Federal
Income Tax Consequences."

Board Consideration In reviewing the proposed Mergers, the Board of
Directors of each Trust and BKN considered the
potential impact of the relevant Merger on its
shareholders, including but not limited to: (i) the
terms and conditions of the Merger Agreement; (ii) the
capabilities, practices and resources of the
organizations that provide investment advisory and
certain other services to the Trusts and BKN and of the
organizations that would provide such services to BKN
after the Mergers, and the terms on which these
services are and would be provided; (iii) the
investment objectives, policies and restrictions of the
Trusts and BKN and their compatibility; (iv) the
historical investment performance of the Trusts and BKN
and anticipated future influences on such investment
performance with and without the Mergers; (v) the
historical and projected operating expenses of the
Trusts and BKN and the projected pro forma operating
expenses of BKN; (vi) the terms of the preferred shares
of the Trusts and BKN; (vii) the anticipated tax
consequences of each Merger; (viii) the shift on the
part of the Trusts' shareholders to a perpetual fund
rather than one having a stated term; (ix) the trading
history of the common shares of the Trusts and BKN and
the anticipated impact of the Mergers on the market
price of such common shares; and (x) the costs
associated with the Mergers. See "The Proposed Merger--
Reasons for the Merger; Board Consideration."

Based upon their evaluations of the information
presented to them, and in light of their fiduciary
duties under Federal and state law, the Board of
Directors of each Trust and BKN, including the non-
interested members of such Boards, have determined the
proposed Mergers are advisable and have directed the
proposed Mergers to be submitted for consideration by
the shareholders of BKN and the Trusts at the meeting.

Voting Matters In order for each of the proposed Mergers to be
completed, the Merger Agreement must be approved by (i)
a majority of the outstanding common shares of the
relevant Trust voting as a separate class, (ii) a
majority of the outstanding preferred shares of the
relevant Trust voting as a separate class and (iii) a
majority of the outstanding common shares and
outstanding preferred shares of BKN voting together as
a single class. For additional information, see "The
Proposed Mergers--Votes Required For the Mergers."

11
<PAGE>

RISKS AND SPECIAL CONSIDERATIONS REGARDING THE MERGERS

The following risks and special considerations should be considered by
shareholders of each Trust and BKN in their evaluation of the Merger.

The market prices of the municipal obligations that the Trusts invest in are
inversely affected by changes in interest rates and, therefore, are subject to
the risk of market price fluctuations. The values of fixed income municipal
obligations with longer remaining maturities typically fluctuate more than
those of similarly rated fixed income municipal obligations with shorter
remaining maturities. The market prices of zero coupon municipal obligations
of any particular maturity tend to be more volatile than current pay
obligations of the same maturity. The values of fixed income municipal
obligations also may be affected by changes in the credit ratings or financial
conditions of the issuing entities. The Trusts and BKN may also invest in
floating rate municipal obligations the yields of which will vary in
accordance with prevailing interest rates. The market value of floating rate
municipal obligations tends to be affected by changes in prevailing interest
rates to a lesser extent than fixed rate municipal obligations.

Effective duration reflects the sensitivity of a portfolio to interest rate
fluctuations. A portfolio with a longer effective duration reacts more
strongly to interest rate changes than a portfolio with a shorter effective
duration. Duration is the weighted present value of principal and interest
payments expressed in years. Duration may more accurately measure a
portfolio's sensitivity to incremental changes in interest rates than weighted
average maturity. For example, a portfolio with a duration of 5.0 years should
have half the interest rate sensitivity of a portfolio with a duration of 10.0
years, because the portfolio with the shorter duration will receive payments
(and can reinvest at prevailing interest rates) twice as quickly.

The following table sets forth the nominal yield and duration of BKN's and
each Trust's portfolio of municipal obligations as of April 30, 1999 and for
BKN on a pro forma basis assuming all the Mergers had occurred on such date.

<TABLE>
<CAPTION>
BMN BMT BRM BKN Pro Forma BKN
---- ---- ---- ----- -------------
<S> <C> <C> <C> <C> <C>
Nominal Yield*........................... 3.59% 3.60% 3.88% 4.49% [3.83%]
Effective Duration**..................... 4.68 5.56 7.30 10.90 6.72
</TABLE>
- --------
* The nominal yield provided for each Trust and BKN represents the
portfolio's internal rate of return given the weighted average price of
portfolio securities and expected cash flows.
**Expressed in years.

12
<PAGE>

The following tables set forth the high and low market price, net asset value
and premium/discount to net asset value for BKN and for each Trust for the
periods indicated.

PER SHARE DATA FOR BKN COMMON STOCK*
TRADED ON THE NEW YORK STOCK EXCHANGE

<TABLE>
<CAPTION>
Premium
(Discount) to
Market Price** Net Asset Value Net Asset Value
--------------------- --------------- ----------------
Period High Low High Low High Low
------ ------- ------- --------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
First Quarter 1997...... 13 12 13/32 14.850 14.320 (11.32) (13.30)
Second Quarter.......... 13 1/4 12 1/4 14.970 14.180 (11.32) (14.04)
Third Quarter........... 13 3/4 13 3/16 15.310 14.970 (9.05) (11.54)
Fourth Quarter.......... 13 7/8 13 5/16 15.460 15.070 (10.19) (12.70)
First Quarter 1998...... 14 7/16 13 3/4 15.680 15.330 (7.26) (10.60)
Second Quarter.......... 14 11/16 13 9/16 15.550 15.260 (5.95) (10.89)
Third Quarter........... 15 3/8 14 9/16 15.830 15.430 (2.55) (6.45)
Fourth Quarter.......... 16 15 1/8 16.050 15.490 2.63 (4.63)
First Quarter 1999...... 15 7/8 14 15/16 15.700 15.400 2.56 (3.85)
Second Quarter 1999..... 15 6/16 14 7/16 15.530 15.700 (0.42) (3.31)
July 1, 1999 through
[July 16], 1999........ 14 11/16 14 1/4 14.760 14.820 (0.76) (2.58)
</TABLE>

PER SHARE DATA FOR BMN COMMON STOCK*
TRADED ON THE NEW YORK STOCK EXCHANGE

<TABLE>
<CAPTION>
Premium
Net (Discount) to
Market Price** Asset Value Net Asset Value
--------------------- ------------- ----------------
Period High Low High Low High Low
------ ------- ------- ------ ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
First Quarter 1997...... 10 1/2 10 1/8 11.070 10.810 (5.18) (7.70)
Second Quarter.......... 10 3/4 10 1/8 11.030 10.730 (2.25) (5.00)
Third Quarter........... 11 10 9/16 11.190 11.030 (1.11) (5.18)
Fourth Quarter.......... 11 10 9/16 11.220 11.070 (1.99) (4.37)
First Quarter 1998...... 11 3/8 10 7/16 11.320 11.130 .09 (6.56)
Second Quarter.......... 11 10 5/16 11.190 11.050 (1.17) (6.53)
Third Quarter........... 11 15/16 10 3/4 11.250 11.080 (.20) (3.33)
Fourth Quarter.......... 11 3/4 11 13/16 11.350 11.190 3.98 (.47)
First Quarter 1999...... 11 3/8 10 13/16 11.300 11.110 1.47 (4.31)
Second Quarter 1999..... 11 1/8 10 1/4 11.160 10.820 (1.430) (5.510)
July 1, 1999 through
[July 16], 1999........ 10 7/8 10 10/16 10.860 10.840 0.140 (2.07)
</TABLE>
- --------
* Calculations are based on common shares outstanding on the last day of each
period indicated.
**As reported in the consolidated transaction system.

13
<PAGE>

PER SHARE DATA FOR BMT COMMON STOCK*
TRADED ON THE NEW YORK STOCK EXCHANGE

<TABLE>
<CAPTION>
Premium
(Discount) To
Market Price** Net Asset Value Net Asset Value
----------------- --------------- ----------------
Period High Low High Low High Low
------ -------- -------- --------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
First Quarter 1997........ 10 1/2 10 10.990 10.720 (3.76) (7.58)
Second Quarter............ 10 5/8 10 1/8 10.970 10.630 (3.54) (6.16)
Third Quarter............. 10 15/16 10 3/8 10.875 10.438 (1.32) (5.97)
Fourth Quarter............ 11 10 9/16 11 10.625 (1.79) (4.28)
First Quarter 1998........ 11 5/16 10 9/16 11.330 11.150 .02 (5.44)
Second Quarter............ 11 3/16 10 5/8 11.210 11.080 (.31) (4.54)
Third Quarter............. 11 3/8 11 1/16 11.270 11.110 .90 (1.32)
Fourth Quarter............ 11 7/8 11 1/8 11.370 11.200 5.37 (1.81)
First Quarter 1999........ 11 5/8 10 13/16 11.320 11.150 3.70 (4.48)
Second Quarter 1999....... 11 5/8 10 5/8 11.200 10.830 4.17 (2.63)
July 1, 1999 through [July
16], 1999................ 10 7/8 10 7/16 10.860 10.880 (0.62) (3.40)
</TABLE>

PER SHARE DATA FOR BRM COMMON STOCK *
TRADED ON THE NEW YORK STOCK EXCHANGE

<TABLE>
<CAPTION>
Premium
(Discount) To
Market Price** Net Asset Value Net Asset Value
----------------- --------------- -----------------
Period High Low High Low High Low
------ -------- -------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
First Quarter 1997....... 14 5/8 14 16.150 15.660 (7.32) (11.05)
Second Quarter........... 14 13/16 14 1/8 16.210 15.520 (7.23) (9.70)
Third Quarter............ 15 3/16 14 13/16 16.570 16.220 (7.11) (9.90)
Fourth Quarter........... 15 1/4 14 7/8 16.800 16.360 (7.84) (10.29)
First Quarter 1998....... 15 3/4 15 1/8 17.030 16.650 (6.80) (9.44)
Second Quarter........... 15 9/16 14 7/8 16.820 16.560 (7.52) (10.07)
Third Quarter............ 16 15 7/16 17.080 16.680 (5.95) (7.79)
Fourth Quarter........... 16 3/8 15 13/16 17.290 16.960 (5.15) (7.10)
First Quarter 1999....... 16 15 1/2 17.270 16.940 (5.48) (9.89)
Second Quarter 1999...... 15 7/8 15 1/8 17.030 16.330 (5.85) (9.17)
July 1, 1999 through
[July 16], 1999......... 15 7/8 15 13/16 16.460 16.380 (3.55) (6.74)
</TABLE>
- --------
* Calculations are based on common shares outstanding on the last day of each
period indicated.
**As reported in the consolidated transaction system.

14
<PAGE>

Each of BMN, BRM and BMT currently is scheduled to terminate on December 31 of
2006, 2008 or 2010, respectively, whereas BKN has no scheduled termination
date and intends to continue operating indefinitely. If the Merger of any of
the Trusts is completed, the shareholders of that Trust will no longer have a
likelihood of receiving a specified distribution of either $10 or $15 on that
Trust's scheduled termination date. BKN has no scheduled termination date and,
if the Merger of any Trust is completed, common shareholders of such Trust
will be dependent on the trading prices of BKN common shares available in the
market for the sale of their shares. Such market prices may be at, above or
below the amount they would have received upon termination of their Trust.

Each of the Trusts and BKN utilizes a leveraged capital structure through the
issuance of perpetual preferred stock whose dividend rates are reset weekly or
monthly by auction in relation to prevailing short-term municipal rates.
Utilization of leverage through the issuance of preferred stock is a
speculative investment technique and involves certain risks to the holders of
common stock. These include the possibility of higher volatility of the net
asset value of the common stock, potentially more volatility in the market
value of the common stock and fluctuations in the dividend rate on the
preferred stock that may affect the yield to holders of common stock. So long
as a Trust or BKN is able to realize a higher net return on its investment
portfolio than the then current dividend rate of any preferred stock together
with other related expenses, the effect of the leverage will be to cause
holders of common stock to realize a higher current net investment income than
if such Trust or BKN were not so leveraged. On the other hand, to the extent
that the then current dividend rate on any preferred stock approaches the net
return on a Trust's or BKN's investment portfolio, the benefit of leverage to
holders of common stock will be reduced, and if the then current dividend rate
on any preferred stock were to exceed the net return on such Trust's or BKN's
portfolio, the leveraged capital structure would result in a lower rate of
return to holders of common stock than if such Trust or BKN were not so
leveraged. Similarly, since any decline in the net asset value of the
investments will be borne entirely by holders of common stock, the effect of
leverage in a declining market would be a greater decrease in net asset value
applicable to the common stock than if the Trust or BKN were not leveraged.
Any such decrease would likely be reflected in a decline in the market price
of the common stock. If the Trust's or BKN's current investment income were
not sufficient to meet dividend requirements on any preferred stock, it could
be necessary for the Trust or BKN to liquidate certain of its investments,
thereby reducing the net asset value attributable to the common stock.
Moreover, while dividends on preferred stock, which will be cumulative, are
unpaid, no dividends would be permitted to be paid on common stock until the
Trust became current in its payments of dividends on the preferred stock.

With respect to the outstanding preferred shares of each Trust and BKN, as of
April 30, 1999, the asset coverage was 298.2% for BKN, 324.3% for BMN, 322.1%
for BMT and 323.8% for BRM. If the Mergers had occurred as of that date, the
asset coverage of BKN would have been 313.2%, which significantly exceeds the
minimum asset coverage required by the Investment Company Act of 1940, as
amended (the "1940 Act") and rating agency guidelines. If the BKN issues
additional preferred shares of BKN after the completion of the Mergers, as
currently is contemplated, BKN anticipates that its asset coverage would be
approximately 265.5% immediately after such issuance. See "Description of
Preferred Shares of RAA and the Trusts--Additional Preferred Shares."

15
<PAGE>

The following table sets forth for BKN and each Trust as of April 30, 1999 and
for BKN on a pro forma basis assuming all of the Mergers are completed the
percentage of its portfolio invested in securities rated in the four highest
rating categories by Moody's and Standard & Poor's.

<TABLE>
<CAPTION>
Pro Forma
Ratings BMN BMT BRM BKN BKN
------- --- --- --- ----- ---------
<S> <C> <C> <C> <C> <C>
Aaa/AAA....................................... 100 100%* 100%* 63.10** 93.59**
Aa/AA......................................... 0 0 0 11.90 2.07
A/A........................................... 0 0 0 17.86 3.10
Baa/BBB....................................... 0 0 0 7.14 1.24
</TABLE>
- --------
* Represents the claims paying ability of the insurance companies that insure
the municipal obligations in which BMT and BRM invest.
** Includes unrated securities deemed by the Adviser to have a credit quality
equivalent to Aaa/AAA, and short-term securities rated A-1/P-1. As of April
30, 1999, unrated securities comprised 11.91% of BKN's portfolio and short-
term securities comprised 2.38% of BKN's portfolio.

See "Comparison of The Trusts and BKN--Investment Objectives and Policies" for
a discussion of the credit quality of the portfolio securities of the Trusts
and BKN, and see Annex A to the Statement of Additional Information for a
general description of Moody's and Standard & Poor's ratings of municipal
obligations.

From time to time BKN and each Trust may invest in municipal obligations the
interest on which would be subject to the alternative minimum tax ("AMT"). BKN
and each Trust expects that no more than 20% of its respective assets will be
invested in municipal obligations subject to such tax at any time. As of April
30, 1999, approximately 15.9% of BKN's portfolio securities were subject to
the AMT. As of April 30, 1999, none of BMN's, BMT's and BRM's respective
portfolio securities were subject to the AMT. Based on the foregoing,
approximately 4.0% of BKN's portfolio securities would have been subject to
the AMT on a pro forma basis, assuming all of the Mergers were completed on
such date. BKN may not be a suitable investment for investors who are subject
to the AMT.

The Trusts and BKN may purchase securities as to which no liquid trading
market exists. Such illiquid securities may include unrated securities and
securities such as lease obligations and small issues for which market
quotations are not readily available. Should a Trust or BKN desire to sell
such securities, such Trust or BKN would be subject to the risk that it may
not be able to find a ready buyer at the price which such Trust or BKN
believes reflects the value of these securities, as dealers may not maintain
daily markets in these securities and retail secondary markets may not exist.
In that case, the Trust or BKN may be forced to withdraw such securities from
sale or accept a price which, in its opinion, does not reflect the value of
these securities. The value of such Trust's net assets could be adversely
affected as a result. To the extent a Trust invests in newer types of
municipal obligation products, it may be subject to the risk that such assets
may become illiquid even though they were considered to be liquid at the time
of investment.

From time to time, any of the Trusts' and BKN's investments may include
securities as to which such Trust or BKN, by itself or together with other
funds or accounts managed by the Investment Adviser, holds a major portion or
all of an issue of municipal obligations. Because relatively few potential
purchasers may be available for these investments and, in some cases,
contractual restrictions may

16
<PAGE>

apply on resales, such Trust or BKN may find it more difficult to sell these
securities at a time when the Investment Adviser believes it is desirable to
do so.

The charter (the "Charter") of each of the Trusts and BKN includes provisions
that could have the effect of limiting the ability of other entities or
persons to acquire control of the Trusts or BKN and which will require the
vote of 75% of the shares of Common Stock in addition to the favorable vote
(which may entail approval of a majority or up to 75%) of any other class of
stock to convert the Trust to open-end status.

THE PROPOSED MERGERS

The terms and conditions of the Mergers are set forth in the Merger Agreement.
Significant provisions of the Merger Agreement are summarized below; however,
this summary is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached as Appendix I to this Combined Proxy
Statement/Prospectus.

Description of the Mergers. The Merger Agreement provides for the merger of
each of the Trusts into BKN. As a consequence, the separate existence of each
Trust participating in a Merger would cease, BKN would by operation of law own
all of the assets and be subject to all of the liabilities of such Trust, each
shareholder of such Trust would become a shareholder of BKN on the terms
described below and the Charter, bylaws, directors and officers of BKN
immediately prior to the closing of such Merger would remain the Charter,
bylaws, directors and officers of BKN as the surviving company after such
Merger.

Upon completion of any Merger, (i) each of the outstanding common shares of
the Trust participating in such Merger will, without any action on the part of
the holder thereof, be converted into and exchangeable for that number of
shares of common stock, par value $.01 per share, of BKN ("BKN Common") having
the same aggregate net asset value on the last business day prior to the date
of completion of such Merger as such share of common stock of such Trust and
(ii) each of the outstanding preferred shares of such Trust will, without any
action on the part of the holder thereof, be converted into one share of a
series of preferred stock, liquidation value $25,000 per share, of BKN ("BKN
Preferred" and together with the BKN Common, the "BKN Shares") having the same
terms, including auction dates, dividend periods and dividend payment dates,
as such series of preferred stock of such Trust, except that (x) the initial
dividend rate of the newly issued shares of BKN Preferred will be the same as
that established in the most recent auction of the corresponding series of
preferred shares of the merging Trust, (y) dividends on the newly issued
shares of BKN Preferred will, in effect, accrue from the beginning of the
dividend period for the corresponding series of preferred shares of the
merging Trust to and including the last day of the dividend period for the
corresponding series of preferred shares of the merging Trust and (z) the
initial auction for newly issued shares of BKN Preferred will be held on the
day on which the auction next succeeding the date of such Merger would have
been held for the corresponding series of preferred shares of the merging
Trust, but for the Merger.

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In addition, each Trust participating in a Merger will declare a special
dividend (each a "Special Dividend"), payable to holders of record of its
common shares immediately prior to such Merger, in an amount at least equal to
the amount necessary for each Trust to satisfy the requirements of Section
852(a)(1) of the Code, the compliance with which is necessary for each Trust
to qualify as a regulated investment company for Federal income tax purposes
for its taxable year ending on the day on which the Closing occurs. Although
the precise amount of each such special dividend will not be known until the
time of the corresponding Merger, it is currently anticipated that the amount
of such dividend will be approximately $0.3961 per share in the case of BMN,
$0.4889 per share in the case of BRM and $0.2273 per share in the case of BMT.
Such dividends will reduce the net asset value per common share of each Trust
for purposes of determining the number of shares of BKN Common issuable in
respect of such common shares. Such dividends will be payable in the form of
additional shares of common stock of each respective Trust (which will convert
into common shares of BKN by operation of the Mergers) or in cash, at the
election of the stockholder. Such dividends will be paid on or before ,
1999 in shares of BKN Common, unless a holder of common shares of a Trust
elects to receive cash on or before , 1999. Such election may be made by
shareholders on a form that will be mailed to them at least days prior to
the election deadline or within 15 days after merger.

The net asset value per share of the common stock of the Trusts and BKN Common
shall be computed as of the close of business on the last business day prior
to the date on which the Merger is completed by dividing the value of each
respective Trusts' and BKN's total assets, less liabilities and less the
aggregate liquidation preference of all of their respective outstanding
preferred shares and any accumulated and unpaid dividends thereon, by the
number of their respective common shares outstanding. In determining the value
of the Trusts' and BKN's assets, State Street Bank & Trust Company will
utilize the valuations of portfolio securities furnished by a pricing service
approved by the Boards of Directors of the Trusts and BKN pursuant to
procedures utilized by BKN to value its own assets and to determine its own
liabilities, which procedures are substantially similar to those currently
used by each Trust. The pricing service values portfolio securities at the
mean between the quoted bid and asked price or the yield equivalent when
quotations are readily available. Securities for which quotations are not
readily available (which constitute a majority of the securities held by the
Trusts) are valued at fair value as determined by the pricing service using
methods which include consideration of yields or prices of municipal bonds of
comparable quality, type of issue, coupon, maturity and rating, indications as
to value from dealers, and general market conditions. The pricing service may
employ electronic data processing techniques or a matrix system, or both, to
determine valuations. The procedures of the pricing service and its valuations
are reviewed periodically by the officers of each Trust and BKN under the
general supervision of the Board of Directors of the relevant Trust or BKN.

No fractional shares of BKN Common will be issued. In lieu thereof, BKNs's
transfer agent will aggregate all fractional shares of BKN Common and sell the
resulting whole shares of BKN Common on the NYSE for the account of all
shareholders of fractional interests, and each such shareholder will be
entitled to his or her pro rata share of the proceeds of such sale upon
surrender of his or her Trust common share certificates.

Following each Merger, each preferred shareholder of the merging Trust will
own the same number of shares of BKN Preferred as he or she held of preferred
shares of such Trust, and the BKN Preferred

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shares will have rights and preferences the same as those of the preferred
shares of such Trust. The "Initial Dividend Period" for newly issued shares of
BKN Preferred will be the same dividend period in effect for the corresponding
series of preferred shares of the merging Trust in effect immediately prior to
the Merger. The dividend rate for newly issued shares of BKN Preferred for
such Initial Dividend Period thereof will be the dividend rate in effect
immediately prior to the Merger for the corresponding series of preferred
shares of the merging Trust. The initial auction for the newly issued shares
of BKN Preferred issued pursuant to the Mergers will be held on the day on
which the auction next succeeding the Merger would have been held for the
preferred shares of the corresponding series of preferred shares of the
merging Trust but for the Merger.

Under the terms of the Merger Agreement, each Merger is conditioned upon (i)
approval by the shareholders of the relevant Trust and BKN, as described under
"Votes Required for the Mergers" below, (ii) such Trust's and BKN's receipt of
written advice from Moody's (a) confirming that consummation of the Merger
will not impair the Aaa ratings assigned to the outstanding preferred shares
of BKN and (b) assigning Aaa ratings to the shares of BKN Preferred to be
issued pursuant to the Merger, (iii) such Trust's and BKN's receipt of an
opinion to the effect that the Merger will qualify as a tax-free
reorganization under the Code, (iv) such Trust's and BKN's receipt of certain
routine certificates and legal opinions, (v) such Trust not owning any assets
or being subject to any liabilities that BKN is prohibited from acquiring or
assuming and (vi) the SEC not taking any action to prohibit the Merger. None
of the Mergers is conditioned on the occurrence of any of the other Mergers
and accordingly one or more of the proposed Mergers may occur while one or
more of the other proposed Mergers may not occur. Assuming satisfaction of the
conditions in the Merger Agreement, the Closing will be effective on November
30, 1999 or such other date as agreed to by the parties.

The Merger Agreement may be terminated as to any of the Mergers and such
Merger may be abandoned, whether before or after approval by shareholders of
any Trust or BKN, at any time prior to the Closing (i) by BKN in its sole
discretion, (ii) by any Trust if any condition to that Trust's obligations
under the Merger Agreement has not been satisfied or waived, (iii) by the
mutual consent of the parties or (iv) by any party to a Merger if the Merger
has not occurred by December 31, 1999. The Merger Agreement provides further
that at any time before or (to the extent permitted by law) after approval of
the Merger Agreement by the shareholders of the Trusts (x) the parties may, by
written agreement authorized by their respective Boards of Directors and with
or without the approval of their shareholders, amend any of the provisions of
the Merger Agreement provided that such amendment does not materially
adversely affect the shareholders of the parties and (y) any party may waive
any default by another party or the failure to satisfy any of the conditions
to its obligations (the waiver to be in writing and authorized by the Board of
Directors of the waiving party with or without the approval of such party's
shareholders) if in the judgment of the Boards of Directors such action or
waiver would not have a material adverse effect on the benefits intended under
this Agreement.

Surrender and Exchange of Trust Share Certificates. After the Closing, each
holder of an outstanding certificate or certificates formerly representing
common shares of each merging Trust will be entitled to receive, upon
surrender of his or her certificates, a certificate or certificates
representing (i) the number of BKN Common shares exchangeable for such
holder's common shares of the merging Trust, (ii) the number of BKN Common
shares payable as the special dividend declared by such Trust prior to the
Merger, unless the shareholder has elected to receive cash in which case the
shareholder shall receive such dividend in cash and (iii) cash in lieu of any
fractional BKN Common shares.

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<PAGE>

Promptly after the Closing, the Transfer Agent will mail to each holder of
certificates formerly representing Trust shares a letter of transmittal for
use in surrendering his or her certificates for certificates representing BKN
Common shares and cash in lieu of any fractional BKN Common shares.

After the Closing, each holder of an outstanding certificate or certificates
formerly representing preferred shares of a Trust will be entitled to receive,
upon surrender of his or her certificate or certificates, a certificate or
certificates representing the number of shares of BKN Preferred distributable
with respect to such holder's preferred shares of such Trust. Promptly after
the Closing, the transfer agent for the BKN Preferred will mail to each holder
of certificates formerly representing preferred shares of a Trust a letter of
transmittal for use in surrendering his or her certificates for certificates
representing preferred shares of such Trust.

Shareholders should not send in any share certificates at this time. Upon
consummation of the Mergers, holders of Trust shares will be furnished
instructions for exchanging their Trust share certificates for BKN share
certificates and, if applicable, cash in lieu of fractional BKN Common shares.

From and after the Closing, certificates formerly representing Trust shares
will be deemed for all purposes to evidence ownership of the number of BKN
Shares distributable with respect to such Trust shares in the Mergers,
provided that until such Trust share certificates have been so surrendered, no
dividends payable to the holders of record of BKN Shares as of any date
subsequent to 30 days after a Merger are required to be paid to the holders of
such outstanding Trust share certificates. Unpaid dividends on BKN shares to
holders of record as of any date after such 30th day and prior to the exchange
of certificates by any Trust shareholder will be paid to such shareholder,
without interest, at the time such shareholder surrenders in proper form his
or her Trust share certificates for exchange.

From and after the Closing, there will be no transfers on the record transfer
books of the Trusts. If, after the Closing, certificates representing Trust
shares are presented to the Trusts, they will be cancelled and exchanged for
certificates representing BKN shares and, if applicable, the cash in lieu of
fractional BKN common shares distributable with respect to such fractional BKN
shares.

Appraisal Rights. Under Maryland law, stockholders of an investment company
whose shares are traded publicly on a national securities exchange, such as
each Trust, are not entitled to demand the fair value of their shares in
connection with the Merger of their Trust; therefore, the common shareholders
of each Trust will be bound by the terms of the Mergers, if approved at the
special shareholders meetings. However, any common shareholder of a Trust may
sell his or her common shares at any time on the NYSE. Conversely, since the
preferred shares of each Trust are not traded publicly on a national
securities exchange, such preferred shareholders will be entitled to demand
and receive payment of the fair value of such preferred shareholder's shares
upon the consummation of the Mergers. As shareholders of the corporation
acquiring the Trusts, neither holders of BKN Common nor holders of BKN
Preferred are entitled to appraisal rights under Maryland law.

Under Maryland law, a preferred shareholder of a Trust desiring to receive
payment of the fair value of his or her stock (an "objecting stockholder") (i)
must file with the Trust a written objection to the Merger at or before the
Meeting, (ii) must not vote in favor of the Merger and (iii) must make written
demand on BKN for payment of his or her stock stating the number and class of
shares for which he

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<PAGE>

or she demands payment, within 20 days after the Maryland Department of
Assessments and Taxation accepts for filing the Articles of Transfer with
respect to the Merger (BKN is required promptly to give written notice to all
objecting stockholders of the date that the Articles of Transfer are accepted
for record). An objecting stockholder who fails to adhere to this procedure
will be bound by the terms of the Merger. An objecting stockholder ceases to
have any rights of a stockholder except the right to receive fair value for
his or her shares and has no right to receive any dividends or distributions
payable to such holders on a record date after the close of business on the
date on which fair value is to be determined, which, for these purposes will
be the date of the Meetings. A demand for payment of fair market value may not
be withdrawn, except upon the consent of BKN. Within 50 days after the
Articles of Transfer have been accepted for filing, an objecting shareholder
who has not received payment for his or her shares may petition a court
located in Baltimore, Maryland for an appraisal to determine the fair market
value of his or her stock.

Reasons for the Mergers; Board Consideration. At the August 12, 1998 meeting
of the Boards of Directors of the Trusts and BKN, each Board was advised that
the Investment Adviser was studying whether mergers of the Trusts with BKN
would be in the best interests of the shareholders. Following that meeting,
the Investment Adviser completed its studies and at a meeting of the Boards of
Directors of the Trusts held on May 13, 1999, the Investment Adviser presented
a preliminary proposal for the Mergers. The preliminary proposal was discussed
by the Boards at such meeting, after which the Boards requested additional
information from the Investment Adviser. This additional information was
considered in depth by the Boards of Directors of each Trust and BKN at a
meeting held on July 12, 1999. At that meeting, the Boards of Directors of
each Trust and BKN (the "Boards"), which consist of the same individuals,
concluded that each Merger is in the best interests of the shareholders of
each respective Trust and BKN, approved the Merger Agreement and approved the
submission of the Merger Agreement to each Trust's and BKN's shareholders for
approval.

Also on July 12, 1999, the Board of Directors of BKN approved the filing of
amended Articles Supplementary to BKN's Charter setting forth the designation
of and establishing the number of shares, powers, rights and preferences of
each series of BKN Preferred that may be issued to holders of preferred shares
of the Trusts as part of each Merger.

The Boards of Directors of each of the Trusts and BKN recommended that the
Shareholders of each of the Trust and BKN vote FOR the proposal relating to
the Merger Agreement.

In reviewing the proposed Mergers, the Board of Directors of each Trust and
BKN considered the potential impact of the relevant Merger or Mergers on its
shareholders, including but not limited to (i) the terms and conditions of the
Merger Agreement, (ii) the capabilities, practices and resources of the
organizations that provide investment advisory and certain other services to
the Trusts and BKN and of the organizations that would provide such services
to BKN after the Mergers, and the terms on which these services are and would
be provided; (iii) the investment objectives, policies and restrictions of the
Trusts and BKN and their compatibility; (iv) the historical investment
performance of the Trusts and BKN and anticipated future influences on such
investment performance with and without the Mergers; (v) the historical and
projected operating expenses of the Trusts and BKN and the projected pro forma
operating expenses of BKN; (vi) the terms of the preferred shares of any of
the Trusts and BKN; (vii) the anticipated tax consequences of each Merger;
(viii) the shift on the part

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<PAGE>

of the Trusts' shareholders to a perpetual fund rather than one having a
stated term; (ix) the trading history of the common shares of the Trusts and
BKN and the anticipated impact of the Mergers on the market price of such
common shares; and (x) the costs associated with the Mergers.

In approving the Mergers, the Boards identified certain benefits that are
likely to result from merging the Trusts with BKN, including: higher
distribution rates; the payment of a special dividend to the common
shareholders of each participating Trust immediately prior to the Merger;
reducing the impact on shareholders of the Trusts of having portfolio
securities being called by their issuers, because BKN would be able to
reinvest the proceeds from called portfolio securities in securities with
longer maturities and higher rates of interest (rather than securities with
shorter maturities and lower rates of interest required by the limited term of
the Trusts); increased possibility of trading at a lower or at no discount
from or at a premium to net asset value; and a more liquid trading market for
common shares of the Trusts after being merged with BKN. The Boards also
considered the possible adverse effects and estimated costs of merging the
Trusts with BKN. See "Risks and Special Considerations Regarding the Mergers."

Higher Distribution Rate. Based on data presented by the Investment Adviser
regarding each Trust's and BKN's current distribution rate and the absence for
BKN of the requirement to retain income in order to be able to meet an
objective of distributing a specified amount at a specified termination time,
the Board of Directors of each of the Trusts and BKN anticipates that the
monthly distribution rate of BKN will be higher per dollar of net assets
attributable to a share of common stock than would be the case for any of the
Trusts by itself and for BKN by itself.

Special Dividend. Each Trust, as part of its investment objective, seeks to
return to its common shareholders the initial offering price of its common
shares upon the expiration of the Trust. In order to assure that a Trust will
be able to achieve this portion of its investment objective, the Trust retains
each year a portion of its net investment income and holds such income until
the expiration of the Trust. In connection with the Mergers, each merging
Trust will pay its common shareholders immediately prior to its Merger a
special dividend out of such retained income. As of April 30, 1999, the
Investment Adviser estimates these distributions to be: $0.3961 per share for
BMN, $0.4889 per share for BRM and $0.2273 per share for BMT. These
distributions will be exempt from regular Federal income tax.

Reduced Reinvestment Risk. The terms of municipal obligations often give
their issuers the right periodically to "call" or repay their municipal
obligations. Issuers will exercise call rights when interest rates decline and
they can refinance their municipal obligations at lower interest rates. At the
time the Trusts were formed, most of the municipal obligations available in
the market were subject to call provisions. Because interest rates have
declined, the Investment Adviser believes that many of the municipal
obligations owned by the Trusts will be called prior to the termination of the
Trusts. The Investment Adviser would then reinvest the proceeds from the
called securities in other municipal obligations but, because the Trusts have
a limited term, would be required to reinvest in municipal obligations
maturing prior to the expiration of each respective Trust's term. The
relatively short term remaining for each Trust would require the Investment
Adviser to reinvest in shorter term municipal obligations with relatively
lower interest rates. The Mergers would result in the Investment Adviser being
able to reinvest the proceeds from called portfolio securities in municipal
obligations with longer maturities and relatively higher interest rates,
because BKN has an indefinite term.

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<PAGE>

Potential for Improved Stock Price Performance. Based on data presented by
the Investment Adviser regarding the trading patterns of the Trusts and BKN,
as well as other leveraged municipal bond funds, and regarding the potential
impact of higher distribution rates, the Board of Directors of each of the
Trusts and BKN believe that the common shares of BKN may trade at a lower or
no discount from net asset value following the Mergers. In this connection,
the Boards of Directors noted that the market value of common stocks issued by
closed-end municipal bond funds historically have had a high correlation with
the distribution rates on such stock, and that a higher distribution rate as a
result of the Mergers may produce positive stock price performance.

Increased Liquidity. The Mergers would result in BKN having a significantly
larger number of common shares outstanding, and a significantly larger number
of common shareholders, than any individual Trust or than BKN prior to the
Mergers. Market prices of common shares of smaller trusts are likely to
experience greater spreads between their bid and offer prices than market
prices of common shares of larger trusts, and that increasing the size of BKN
by merging one or more of the Trusts with BKN should result in a higher
average daily trading volume, a narrower average spread between bid and offer
prices and reduced price volatility for its common shares. There can be no
assurance that the Mergers will produce these anticipated benefits. However,
the Boards of the Trusts and BKN believe that these results, if obtained,
would benefit holders of common shares by affording them a more liquid trading
market for their shares and the opportunity for more favorable price execution
in trading the common shares.

In approving the Mergers, the respective Boards of the Trusts and BKN also
considered a report of the Investment Adviser indicating that the Mergers
should have a beneficial overall effect on the financial status and ongoing
performance of BKN, and considered such measures as nominal yield, annual net
earnings, annual dividends, dividend rates as a percentage of market price,
management fees and undistributed net investment income balances. The Boards
of the Trusts and BKN also examined the relative credit strength, maturity
characteristics, preferred share asset coverages and mix of type of securities
of the Trust's and BKN's portfolios of municipal obligations and the costs
involved in the Mergers. The Boards noted the many similarities between the
Trusts and BKN. Based on these factors, the Boards determined that the Mergers
are likely to provide benefits to the shareholders of each Trust, as discussed
above, that outweigh the possible adverse effects and the costs (including
legal, accounting and administrative costs, some of which have already been
incurred in evaluating and analyzing the Mergers) presented by the Mergers.

Expense Ratios. In evaluating the Mergers, the Boards of Directors of each
Trust considered the increase in expense ratios that will be experienced by
common shareholders of BMN and BRM. The average aggregate expense ratios for
each Trust's latest three fiscal years was 0.86% for BMN, 0.95% for BMT and
0.92% for BRM. The anticipated aggregate pro forma expense ratio for BKN,
assuming that all of the Mergers are completed, is 0.94%. Because the
dividends paid to the preferred shares of the Trusts are not affected by the
increase in expenses, the common shareholders of the Trusts will bear the
entire impact of the increase in expense ratios. The Boards of Directors also
considered that the anticipated aggregate pro forma expense ratio for BKN will
be [less than/approximately the same as] the average aggregate expense ratio
for closed-end national municipal bond funds as reported in information
prepared by Lipper and presented to the Boards by the Investment Adviser. In
recommending that the common shareholders of each Trust approve such Trust's
Merger into BKN,

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<PAGE>

the Boards of Directors concluded that the anticipated benefits of higher
distribution rates on the common shares, the special dividend to be paid to
common shareholders of the Trusts prior to the Mergers, the potential
reduction in reinvestment risk and the enhanced likelihood that the common
shares of BKN will trade at a lower or no discount to net asset value after
the Mergers outweighed the detriment of higher expense ratios. The aggregate
expense ratio of BKN will be reduced as a result of the Mergers, which will
benefit the current shareholders of BKN.

Indefinite Term. Each of BMN, BRM and BMT currently is scheduled to terminate
on December 31 of 2006, 2008 and 2010, respectively. As part of each such
Trust's investment objective, it seeks to distribute to its common
shareholders $10, $15 and $10 per common share, respectively, in connection
with its termination. BKN has no scheduled termination date and, if the Merger
of any Trust is completed, common shareholders of such Trust will be dependent
on the trading prices available in the market for the sale of their shares.
Such market prices may be at, above or below the amount they would have
received upon termination of their Trust. In recommending that the common
shareholders of each Trust approve such Trust's Merger into BKN, the Boards of
Directors determined that the Mergers are likely to provide benefits to the
shareholders of each Trust, as discussed above, that outweigh the possible
market risks associated with the disposition of their common shares following
the Mergers.

Expenses of the Mergers. In evaluating the Merger, the Investment Adviser
estimated the amount of expenses the Trusts and BKN would incur to be
approximately $1,380,000, which includes additional stock exchange listing
fees, SEC registration fees, legal and accounting fees and proxy and
distribution costs. These estimates were based on information provided by the
Trusts' and BKN's service providers. The Merger Agreement provides that the
Trusts and BKN will each be responsible for that portion of the expenses of
the Mergers equal to the proportion its total assets bears to the combined
total assets of the Trusts and BKN.

In approving the Mergers, the respective Boards of Directors determined that
the Mergers should result in no dilution of the interests of the respective
Trusts' and BKN's existing shareholders.

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CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The consummation of each of the Mergers is conditioned upon, among other
things, the receipt by BKN and the relevant Trust of an opinion as of the
Closing from Skadden, Arps, Slate, Meagher & Flom LLP to the effect that, on
the basis of facts, representations and assumptions set forth in such opinion,
the Merger will be treated as a reorganization within the meaning of Section
368(a) of the Code, and BKN and the relevant Trust will each be a party to
such reorganization within the meaning of Section 368(b) of the Code.
Accordingly, no gain or loss will be recognized by BKN or a Trust as a result
of the Merger, and no gain or loss will be recognized by a shareholder of a
Trust who receives BKN Shares (as defined herein) for shares of such Trust
exchanged therefor (except with respect to any cash received in lieu of a
fractional interest in BKN Shares and the Special Dividend). The opinion
referred to above has been filed as an exhibit to the Registration Statement
of which this Combined Proxy Statement/Prospectus is a part.

The aggregate tax basis of the BKN Shares to be received by shareholders of a
Trust will be the same as the aggregate tax basis in the shares of such Trust
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received), and the holding period
of the BKN Shares to be received by shareholders of a Trust in connection with
the Merger will include the holding period of the shares of such Trust
surrendered in exchange therefor, provided that the shares in such Trust are
held as a capital asset at the Closing.

Cash received in lieu of a fractional BKN Share will be treated as received in
redemption for such fractional interest, and gain or loss will be recognized,
measured by the difference between the amount received and the portion of the
tax basis of a Shareholder's shares in a Trust allocable to such fractional
interest. Such gain or loss generally will constitute capital gain or loss if
the shares of such Trust are held as a capital asset at the Closing, and will
be long-term capital gain or loss if the holding period of such shares is
greater than one year at the Closing.

It is intended that each Special Dividend constitute a distribution from the
relevant Trust. As such, each distribution will be treated as ordinary income
(except to the extent eligible for designation by the relevant Trust as an
exempt-interest dividend or a capital gain dividend), whether a shareholder
receives the Special Dividend in stock or elects to receive cash in lieu of
stock.

No tax ruling has been or will be received from the Internal Revenue Service
("IRS") in connection with the Mergers. An opinion of counsel is not binding
on the IRS, and there can be no assurance that the IRS would not adopt a
contrary position or that the IRS position would not be sustained by a court.
THE ABOVE DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF HOLDERS OF
SHARES OF A TRUST SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS
[PREFERRED SHAREHOLDERS OF A TRUST WHO ELECT APPRAISAL RIGHTS,] FOREIGN
HOLDERS OR HOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE EXERCISE OF AN
EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION. SHAREHOLDERS OF THE TRUSTS
ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE SPECIFIC TAX
CONSEQUENCES OF THE MERGERS TO THEM, INCLUDING ANY STATE, LOCAL OR OTHER TAX
CONSEQUENCES OF THE MERGERS.

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VOTING MATTERS

General. This Combined Proxy Statement/Prospectus is furnished in connection
with the solicitation by the Board of Directors of each Trust and BKN of
proxies to be voted at the Meeting and at any adjournments thereof, for the
purposes set forth in the accompanying Notice of Special Shareholders Meeting.
Any such adjournment will require the affirmative vote of a majority of the
shares present in person or by proxy to be voted at the Meeting. The persons
named as proxies will vote in favor of any such adjournment those proxies
which instruct them to vote in favor of any of the proposals. Conversely, they
will vote against any such adjournment any proxies which instruct them to vote
against the proposals.

The Meeting is scheduled as a joint meeting of the respective shareholders of
the Trusts and BKN because the shareholders of all of the Trusts and BKN are
expected to consider and vote on similar matters. The Board of each Trust and
BKN has determined that the use of a joint proxy statement/prospectus for the
Meeting is in the best interest of each of the Trusts' and BKN's shareholders.
In the event that any shareholder present at the Meeting objects to the
holding of a joint meeting and moves for an adjournment of his or her Trust's
meeting to a time immediately after the Meeting so that his or her Trust's
meeting may be held separately, the persons named as proxies will vote in
favor of such adjournment. Shareholders of each Trust and BKN will vote
separately on the proposal.

The cost of soliciting proxies will be borne by each of the Trusts and BKN in
proportion to the amount of proxies solicited on behalf of each Trust and BKN.
In addition, certain officers, directors and employees of each of the Trusts,
BKN, the Investment Adviser and the administrator of each Trust and BKN (none
of whom will receive additional compensation therefor) may solicit proxies in
person or by telephone, telegraph or mail. In addition, certain of the Trusts
and BKN may employ Shareholder Communications Corporation pursuant to its
standard contract as proxy solicitor, the cost of which will be borne
proportionately by each of the Trusts and BKN and is estimated to be
approximately $3,500 per Trust.

All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon or otherwise as
provided therein. Abstentions will be counted as present but not voting with
respect to those proposals from which a shareholder abstains. Broker non-votes
will be treated as shares that are not present. Unless instructions to the
contrary are marked, shares represented by all properly executed proxies will
be voted "FOR" all the proposals. Any proxy may be revoked at any time prior
to the exercise thereof by submitting another proxy bearing a later date or by
giving written notice to the Secretary at the address indicated above or by
voting in person at the Meeting.

The Board of each Trust and BKN knows of no business other than that
specifically mentioned in the Notice of Meeting which will be presented for
consideration at the Meeting. If any other matters are properly presented, it
is the intention of the persons named in the enclosed proxy to vote thereon in
accordance with their best judgment.

26
<PAGE>

The Board of each Trust and BKN has fixed the close of business on , 1999,
as the record date for the determination of stockholders of each Trust and BKN
entitled to notice of and to vote at the Meeting or any adjournment thereof.

At the close of business on April 30, 1999, BKN and each Trust had outstanding
the number of common shares and preferred shares set forth below:

<TABLE>
<CAPTION>
Amount Held Amount Outstanding
by Fund for Exclusive of
Amount its Own Amount Shown in
Fund Designation Authorized Account Previous Column
- ---- ----------- ----------- ----------- ------------------
<S> <C> <C> <C> <C>
BKN...................... Common 199,994,800 0 16,707,093
Preferred:
T7 2,600 0 2,600
T28 2,600 0 2,600
BMN...................... Common 199,991,000 0 45,410,639
Preferred:
W7 3,000 0 3,000
W28 3,000 0 3,000
F7 3,000 0 3,000
BMT...................... Common 199,994,800 0 25,985,639
Preferred:
M7 2,600 0 2,600
M28 2,600 0 2,600
BRM...................... Common 199,991,760 0 27,207,093
Preferred:
T7 2,060 0 2,060
T28 2,060 0 2,060
R7 2,060 0 2,060
R28 2,060 0 2,060
</TABLE>

For each Trust and BKN, the class or classes of shares listed above are the
only authorized class or classes of shares.

The principal executive offices of BRM and BKN are located at 800 Scudders
Mill Road, Plainsboro, New Jersey 08536, the principal executive offices of
BMN are located at Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102, and the principal executive offices of BMT are located at 1285
Avenue of the Americas, New York, New York 10019. The enclosed proxy or
proxies and this proxy statement are first being sent to the Trusts' and BKN's
shareholders on or about , 1999.

Each Trust and BKN will furnish, without charge, a copy of such Trust's most
recent Annual Report and the most recent Semi-Annual Report succeeding the
Annual Report, if any, to any shareholder upon request, provided such Annual
or Semi-Annual Report is not enclosed herein. Requests should be directed to
345 Park Avenue, New York, New York 10154 (telephone number
(800) 227-7BFM(7236)).

As of April 30, 1999, to the knowledge of each Trust and BKN, no person
beneficially owned more than 5% of the common shares or preferred shares of
any Trust or BKN.

All proxies received will be voted in favor of the proposal, unless otherwise
directed therein.

27
<PAGE>

If the accompanying proxy is or the accompanying proxies are executed and
returned in time for the Meeting, the shares covered thereby will be voted in
accordance with the proxy or proxies on all matters that may properly come
before the Meeting.

Voting Requirements Of The Trusts

Votes of Common Shareholders as a Separate Class. Common shareholders of each
Trust are being asked to approve the Merger Agreement pursuant to Maryland law
and under the Charter of the respective Trust. Because of the separate class
vote with respect to the preferred stock of each Trust described below, the
Charter of each Trust requires the common stock of each Trust to vote as a
separate class with respect to the Merger and the related Merger Agreement.
The affirmative vote of shareholders representing at least a majority of the
outstanding common shares of a Trust is required to approve the Trust's Merger
and the related Merger Agreement.

Votes of Preferred Shareholders as a Separate Class. Preferred shareholders
of each Trust are being asked to approve the Merger Agreement pursuant to the
Articles Supplementary pertaining to each series of preferred shares, Maryland
law and as a "plan of reorganization" under the 1940 Act. Section 18(a)(2)(D)
of the 1940 Act provides that the terms of preferred shares issued by a
registered closed-end investment company must contain provisions requiring
approval by the vote of a majority of such shares, voting as a separate class,
of any plan of reorganization adversely affecting such shares. The 1940 Act
makes no distinction between a plan of reorganization that has an adverse
effect as opposed to a materially adverse effect. While the Board of Directors
of each Trust does not believe that the holders of preferred shares of any
Trust would be materially adversely affected by the Merger, it is possible
that there may be insignificant adverse effects (such as where the asset
coverage with respect to the shares of BKN Preferred issued pursuant to the
Merger is slightly more or less than the asset coverage with respect to the
preferred shares of Trusts for which they are exchanged or such as the absence
of a fixed termination date for BKN). Accordingly, each Trust is seeking
approval of the Merger Agreement by the holders of preferred shares of each
Trust. Accordingly, the affirmative vote of shareholders representing at least
a majority of the outstanding preferred shares of a Trust, with all the series
of preferred shares of such Trust voting together as a single class, is
required to approve such Trust's Merger and the related Merger Agreement.
Please note that the asset coverage tests applicable to the BKN Preferred
under the 1940 Act and required by the rating agencies will be satisfied
following completion of any and all of the Mergers.

Voting Requirement of BKN

Combined vote of common and preferred shareholders. A combined vote of the
common and preferred shareholders of BKN is required to approve each Merger.
Maryland law requires shareholder approval to effect the Merger. The
affirmative vote of shareholders representing at least a majority of the
outstanding shares of BKN Common and BKN Preferred, voting together as a
single class, is required to approve each Merger and the related Merger
Agreement.

Quorum

A quorum is constituted with respect to BKN and each Trust by the presence in
person or by proxy of the holders of more than 50% of the outstanding shares
of BKN or the respective Trust entitled to

28
<PAGE>

vote at the Meeting and with respect to a class vote of the preferred shares
or common shares of a Trust by the presence in person or by proxy of the
holders of more than 50% of the outstanding shares of such class entitled to
vote at the Meeting. For purposes of determining the presence of a quorum for
transacting business at the Meeting, abstentions will be treated as shares
that are present at the Meeting but which have not been voted. Abstentions
will have the effect of a "no" vote for purposes of obtaining the requisite
approvals. Broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the
beneficial owners or other persons entitled to vote shares on a particular
matter with respect to which the brokers or nominees do not have discretionary
power) will not be treated as shares that are present at the Meeting and,
accordingly, could make it more difficult to obtain the requisite approvals.

In the event that a quorum is not present at the Meeting, or in the event that
a quorum is present at the Meeting but sufficient votes to approve the Merger
Agreement are not received with respect to BKN or any of the Trusts, the
persons named as proxies may propose one or more adjournments of the Meeting
or a portion thereof to permit further solicitation of proxies. Any such
adjournment(s) will require the affirmative vote of a majority of those shares
affected by the adjournment(s) that are represented at the Meeting at that
time in person or by proxy. If a quorum is not present on a particular matter,
the persons named as proxies will vote those proxies in favor of adjournment
except to the extent the proxy expressly states otherwise. If a quorum is
present on a particular matter, the persons named as proxies will vote in
favor of such adjournment(s) all proxies other than those proxies required to
be voted AGAINST such proposal, which will be voted against any
adjournment(s). A shareholder vote may be taken with respect to BKN or a Trust
on some or all matters before any such adjournment(s) if sufficient votes have
been received for approval.

DESCRIPTION OF COMMON SHARES OF BKN AND THE TRUSTS

General. The Charter of BKN authorizes the issuance of 200,000,000 common
shares in a single class, par value $.01 per share. As of April 30, 1999,
there were issued and outstanding [ ] shares of BKN Common. If any of the
Mergers are approved, at the closing BKN will issue a number of additional
shares of BKN Common that, as described above, will be based on the relative
aggregate per share net asset values of BKN and the merging Trusts, in each
case as of the close of business on the last business day prior to the
closing. Based on the relative per share net asset values as of April 30,
1999, BKN would have issued a maximum of approximately 95,613,509 additional
shares of BKN Common if all of the Mergers had occurred as of the next
business day, assuming that all common shareholders of the Trusts elect to
receive the special dividend paid to them in connection with the Mergers in
additional common shares of the Trusts. Shares of BKN Common will be, when
issued in the Mergers or against receipt of consideration therefor, at least
equal to the par value thereof, fully paid and nonassessable and will have one
vote per share in all matters on which such shares are entitled to vote.

The common shares of each Trust and BKN have equal voting rights and equal
rights with respect to the payment of dividends and distribution of assets
upon liquidation and have no preemptive, conversion or exchange rights or
rights to cumulative voting.

Distributions. The common shares of BKN and each Trust have equal rights with
respect to the payment of dividends and the distribution of assets upon
liquidation. Neither BKN nor any Trust will

29
<PAGE>

be permitted to declare, pay or set apart for payment any dividend or
distribution on common shares (other than in additional common shares), unless
(a) cumulative dividends on its respective outstanding preferred shares have
been paid in full and (b) it meets the asset coverage tests applicable to its
preferred shares. This latter limitation on BKN's and each Trust's ability to
make distributions on common shares could under certain circumstances impair
their ability to maintain their qualification for taxation as a regulated
investment company under the Code.

BKN currently distributes monthly all or a portion of its net investment
income to holders of BKN Common. Monthly distributions to holders of BKN
Common consist of net investment income remaining after the payment of
dividends on outstanding preferred shares. For Federal income tax purposes,
however, if BKN realizes net capital gains, a portion of BKN's distributions
will be required to be allocated pro rata among the holders of BKN Common and
holders of BKN Preferred.

Comparison of Rights of Holders of Common Shares of BKN and the Trusts. The
provisions of the Charter of BKN are substantially the same as the provisions
of the Charter of the Trusts in all respects, except as described in this
paragraph. The full text of each Trust's and BKN's Charter is on file with the
SEC and may be obtained as described under "Available Information." The
Charter of each Trust provides for termination of its existence on a specific
date, which is December 31, 2006 in the case of BMN, December 31, 2008 in the
case of BRM and December 31, 2010 in the case of BMT, whereas BKN's Charter
provides for its perpetual existence. The Charter of each Trust provides that
the specific termination provision of its Charter may not be amended or
repealed without the affirmative vote of at least 75% of the outstanding
shares entitled to vote thereon and the 1940 Act would require separate
approval of any such amendment or repeal by a majority of the outstanding
preferred shares of a Trust or, if less, at least two-thirds of the preferred
shares voting thereon if at least 50% of the preferred shares are present and
voting. BKN has no termination provision and accordingly no provision
requiring a supermajority vote for amendment or repeal of such a provision.

Certain Provisions in BKN's and the Trusts' Charter. Each Trust and BKN has in
its Charter and by-laws ("By-Laws") certain substantially similar provisions
commonly referred to as "antitakeover" provisions, which may have the effect
of limiting the ability of other entities or persons to acquire control of the
Trusts or BKN, to cause them to engage in certain transactions or to modify
their structure.

First, a director may be removed from office only for cause by the vote of at
least 75% of the shares entitled to be voted on the matter. Second, the
affirmative vote of the holders of at least 75% of the shares will be required
to authorize any Trust's or BKN's conversion from a closed-end to an open-end
investment company, which conversion would result in delisting from the NYSE.
Third, the present board is classified into three classes, each with a term of
three years with only one class of directors standing for election in any
year. Such classification may prevent replacement of a majority of the
directors for up to a two year period. The affirmative vote of at least 75% of
the shares of capital stock will be required to amend the Charter or By-Laws
to change any of the foregoing provisions.

In addition, under each Trust's and BKN's Charter, each Trust and BKN has
elected to be subject to provisions of the Maryland General Corporation Law
that generally provide that, unless an exemption is available, certain
mergers, consolidations, share exchanges, asset sales, stock issuances,
liquidations or dissolutions, recapitalizations, and other transactions
("Business Combinations"), with a beneficial owner of 10% or more of the
voting power of a Maryland corporation (an "Interested Shareholder")

30
<PAGE>

or any affiliate of an Interested Shareholder are prohibited for a period of
five years following the most recent date on which the Interested Shareholder
became an Interested Shareholder. Thereafter, such a Business Combination must
be recommended by the board of directors and approved by the affirmative vote
of at least (i) 80% of the votes entitled to be cast by outstanding shares of
voting stock of the corporation and (ii) 66 2/3% of the votes entitled to be
cast by holders of voting stock other than voting stock held by the Interested
Shareholder who is (or whose affiliate is) a party to the Business Combination
or an affiliate or associate of the Interested Shareholder (with dissenting
stockholders having certain appraisal rights), unless certain value and other
standards are satisfied or some other statutory exemption is available. The
vote specified in the preceding sentence will be required for any amendment to
the Charter to change the provisions subjecting the Trusts and BKN to the
provisions of the Maryland General Corporation Law discussed above.

The percentage of votes required under these provisions, which are greater
than the minimum requirements under Maryland law absent the elections
described above or in the 1940 Act, will make more difficult a change in the
Trust's or BKN's business or management and may have the effect of depriving
shareholders of an opportunity to sell shares at a premium over prevailing
market prices by discouraging a third party from seeking to obtain control of
a Trust or BKN in a tender offer or similar transaction. Reference should be
made to BKN's Charter on file with the SEC for the full text of these
provisions.

Dividend Reinvestment Plan. Pursuant to BKN's Dividend Reinvestment Plan (the
"Plan"), each BKN shareholder automatically has all distributions of dividends
and capital gains reinvested by State Street Bank & Trust Company (the "Plan
Agent") in shares of BKN pursuant to the Plan, unless an election is made to
receive cash. Pursuant to each Trust's Plan, each shareholder of a Trust
automatically has all distributions of dividends and capital gains paid in
cash, unless the shareholder elects to have such distributions reinvested by
the Plan Agent in shares of the respective Trust. Shareholders of each Trust
that is merged with BKN will have their election to receive dividends paid in
cash or reinvested in shares preserved following its merger into BKN.

The Plan Agent effects purchases of shares under the Plans in the open market.
Shareholders who do not participate in the Plans receive all distributions in
cash paid by check in U.S. dollars mailed directly to the shareholder of
record (or if the shares are held in street or other nominee name, then to the
nominee) by the custodian, as dividend disbursing agent.

The Plan Agent serves as agent for the stockholders in administering the
Plans. After each Trust or BKN declares a dividend or determines to make a
capital gain distribution, the Plan Agent, as agent for the participants,
receives the cash payment and uses it to buy shares in the open market, on the
NYSE or elsewhere, for the participants' accounts. New shares are not issued
in connection with the Plan.

Participants in the Plans may withdraw from the Plans upon written notice to
the Plan Agent. When a participant withdraws from a Plan or upon termination
of such Plan as provided below, certificates for whole shares credited to his
or her account under the Plan will be issued and a cash payment will be made
for any fraction of a share credited to such account.

The Plan Agent maintains each shareholder's account in each Plan and furnishes
monthly written confirmations of all transactions in the accounts, including
information needed by shareholders for

31
<PAGE>

personal and tax records. Shares in the account of each Plan participant are
held by the Plan Agent in non-certificated form in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to such Plan.

Shareholders whose common shares are held in the name of a broker or nominee
should contact such broker or nominee to determine whether and how they may
participate in a Plan.

In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are the beneficial owners, the Plan Agent administers
the Plans on the basis of the number of shares certified from time to time by
the record shareholder as representing the total amount registered in the
record shareholder's name and held for the account of beneficial owners who
are participants in a Plan.

The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions are paid by each Trust and BKN, as applicable. However, each
participant pays a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions. There are no other charges to
participants for reinvesting dividends or capital gain distributions, except
for certain brokerage commissions, as described above.

The automatic reinvestment of dividends and distributions does not relieve
participants of any Federal income tax that may be payable or required to be
withheld on such dividends or distributions.

Experience under the Plans may indicate that changes are desirable.
Accordingly, the Trusts and BKN reserve the right to amend the Plans as
applied to any dividend or distribution paid subsequent to written notice of
the change sent to all participants in the Plans at least 90 days before the
record date for the dividend or distribution. The Plans also may be amended by
the Plan Agent by at least 90 days' written notice to all participants in the
Plan. The Plans may be terminated by the Plan Agent or any Trust or BKN upon
at least 30 days' written notice to the participants in the Plan. All
correspondence concerning the Plan should be directed to the Plan Agent at
P.O. Box 366, Boston, Massachusetts 02101.

In connection with the Mergers, a common shareholder of a Trust might receive
a number of BKN common shares in the Merger which consists of or includes an
"odd lot" (i.e., less than 100 shares). Such odd lot holders may participate
in BKN's Dividend Reinvestment Plan for the limited purpose of purchasing a
sufficient number of BKN common shares to bring their odd lot shares up to a
100-share "round lot." Each such odd lot holder would send in the certificates
representing his or her odd lot shares and direct the Plan Agent to reinvest
dividends only until a sufficient number of shares of BKN common shares have
been acquired to form a round lot. When this is accomplished, (a) certificates
representing the round lot of BKN common shares would be issued to the holder,
(b) any excess BKN common shares or fractional BKN common shares would be sold
and a check for the sale issued to the holder, and (c) dividend reinvestment
on behalf of such holder would be discontinued.

DESCRIPTION OF PREFERRED SHARES OF BKN AND THE TRUSTS

General. BKN and each Trust utilize a leveraged capital structure through the
issuance of perpetual preferred stock whose dividend rates are reset weekly or
monthly by auction in relation to prevailing short-term municipal rates. As of
the date of this Combined Proxy Statement/Prospectus, BKN had

32
<PAGE>

outstanding two series of BKN Preferred with the designations, dividend
periods, auction dates and annual dividend rate as of April 30, 1999 set forth
below:

<TABLE>
<CAPTION>
Annual
Dividend Rate
(as of
Designation Dividend Period Auction Date April 30, 1999)
----------- --------------- ------------ ---------------
<S> <C> <C> <C>
T7............................... 7 days Tuesday 3.60%
T28.............................. 28 days Tuesday 3.68
</TABLE>

As of the date of this Combined Proxy Statement/Prospectus, the Trusts had
issued and outstanding the following series of preferred shares with the
designations, dividend periods, auction dates and annual dividend rate as of
April 30, 1999 set forth below:
<TABLE>
<CAPTION>
Annual
Dividend Rate
Dividend (as of
Trust Designation Period Auction Date April 30, 1999)
----- ----------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
BMN........................... W7 7 days Wednesday 3.70%
W28 28 days Wednesday 3.35
F7 7 days Friday 3.28
BMT........................... M7 7 days Monday 2.95
M28 28 days Monday 3.24
BRM........................... T7 7 days Tuesday 3.15
T28 28 days Tuesday 3.15
R7 7 days Thursday 3.60
R28 28 days Thursday 3.35
</TABLE>

In connection with the Mergers, the Board of Directors of BKN classified up to
22,440 authorized and unissued shares of BKN common shares as new shares of
BKN Preferred, which may be issued in one or more series. Upon completion of
any Merger, each outstanding preferred share of each series of a merging Trust
will, without any action on the part of the holder thereof, be converted into
and exchangeable for one share of a series of BKN Preferred having the same
terms, including the same auction dates, dividend periods and dividend payment
dates, as the shares of each respective series of preferred stock of the
merging Trust, except that the initial dividend rate of the new series of BKN
Preferred will be the same as that established in the most recent auction of
the corresponding series of the merging Trust and dividends on the new series
of BKN Preferred will accrue from the date of such merger to and including the
last day of the dividend period for the corresponding series of the merging
Trust. After the initial dividend period, the dividend rate for each series of
BKN Preferred will be the dividend rate for such series that results from the
auction relating to such series.

Under the 1940 Act, BKN is permitted to have outstanding more than one series
of preferred shares as long as no single series has priority over another
series as to the distribution of assets or the payment of dividends. All
outstanding shares of BKN Preferred and all shares of BKN Preferred issued
pursuant to the Mergers will rank on a parity with each other as to the
payment of dividends and the distribution of assets upon liquidation. Shares
of BKN Preferred issued pursuant to the Mergers will be, when issued, fully
paid and nonassessable and have no preemptive, conversion or exchange rights
or rights to cumulative voting.

None of the BKN Preferred or any preferred shares of the Trusts are traded on
any stock exchange or over-the-counter. Shares of BKN Preferred and the
preferred shares of each Trust can be purchased at

33
<PAGE>

auctions as described herein or through broker-dealers, if any, who maintain a
secondary market in such shares.

Dividends and Dividend Periods. The dividends and distributions policy of each
share of BKN Preferred issued in connection with the Mergers will be the same
as those of the outstanding shares of BKN Preferred and those of the
outstanding preferred shares of the Trusts.

Holders of BKN Preferred and holders of preferred shares of the Trusts are
entitled to receive, when, as and if declared by the Board of Directors of BKN
or the respective Trust, as the case may be, out of funds legally available
therefore, cumulative cash dividends on their shares. Dividends on BKN
Preferred and on preferred shares of the Trusts so declared and payable (i)
are in preference to and have priority over any dividends so declared and
payable on BKN Common or common shares of the Trusts, as the case may be, and
(ii) to the extent permitted under the Code and to the extent available, out
of net tax-exempt income earned on BKN's or the respective Trust's
investments. The dividend rate per annum for each series of BKN Preferred and
each series of preferred shares of the Trusts may vary from dividend period to
dividend period and is determined for each dividend period through an auction
of all of the outstanding shares of such series by an agent (the "Auction
Agent") of BKN or the respective Trust, as the case may be. Dividends on the
BKN Preferred and on the preferred shares of each Trust are paid through The
Depository Trust Company ("DTC") (or a successor securities depository) on
each dividend payment date. DTC's normal procedures provide for it to
distribute dividends in same-day funds to agent members, who in turn are
expected to distribute such dividends to the person for whom they are acting
as agent in accordance with the instructions of such person. Prior to each
dividend payment date, BKN and each Trust is required to deposit with the
Auction Agent sufficient funds for the payment of such declared dividends.
None of BKN or any Trust has established a reserve for the payment of
dividends, and no interest is payable by BKN or any Trust in respect of any
dividend payment or payment on BKN Preferred or preferred shares of the Trusts
which may be in arrears.

Dividends paid by BKN and each Trust, to the extent paid from tax-exempt
income earned on municipal obligations, are exempt from Federal income taxes,
subject to the possible application of the alternative minimum tax. However,
BKN and each Trust is required to allocate net capital gains and other income
subject to regular Federal income taxes, if any, proportionally between shares
of its common stock and shares of its preferred stock in accordance with the
current position of the IRS. BKN and the Trusts notify the Auction Agent of
the amounts of any such dividends. The Auction Agent in turn notifies each
broker-dealer whenever it receives any such notice from BKN or a Trust, and
each broker-dealer then notifies its customers who are holders of the BKN
Preferred or the preferred shares of a Trust. BKN and the Trusts also may
include such income in a dividend on their preferred shares without giving
advance notice thereof if it increases the dividend by an additional amount to
offset the tax effect thereof.

If BKN or a Trust retroactively allocates any net capital gains or other
income subject to regular Federal income taxes to shares of its preferred
stock without having given advance notice thereof as described above, which
only may happen when such allocation is made as a result of the redemption of
all or a portion of the outstanding shares of BKN Preferred or all of the
preferred shares of a Trust or the liquidation of BKN or a Trust, BKN or the
respective Trust will make certain payments to

34
<PAGE>

holders of shares of its preferred stock to which such allocation was made to
offset substantially the tax effect thereof. In no other instances will BKN or
a Trust be required to make payments to holders of shares of its preferred
stock to offset the tax effect of any reallocation of net capital gains or
other taxable income.

None of BKN or any Trust is permitted to declare, pay or set apart for payment
any dividend or distribution on its common shares (other than in additional
common shares), unless (a) cumulative dividends on all its respective
outstanding shares of preferred stock have been paid in full and (b) BKN or
the respective Trust meets the asset coverage tests required by the rating
agencies and the 1940 Act. This latter limitation on BKN's and the Trusts'
ability to make distributions on common shares could under certain
circumstances impair the ability of BKN or a Trust to maintain its
qualification for taxation as a regulated investment company under the Code.

Voting Rights. The voting rights of the BKN Preferred to be issued in
connection with the Mergers will be substantially similar to those of the
outstanding shares of BKN Preferred and the outstanding preferred shares of
the Trusts.

The provisions of the Charter of BKN are substantially the same as the
provisions of the Charters of the Trusts in all respects, except that the
Charters of the Trusts provide for a finite term. The 1940 Act requires
separate approval of any plan of reorganization that may adversely affect
preferred shares by a majority of the outstanding preferred shares of BKN or a
Trust or, if less, at least two-thirds of the preferred shares voting thereon
if at least 50% of the preferred shares are present and voting. The 1940 Act
requires that the holders of BKN Preferred and the holders of preferred shares
of the Trusts and any other preferred stock issued by BKN or the Trusts,
voting as a separate class, have the right to elect at least two directors at
all times and to elect a majority of the directors at any time when two years'
dividends on the preferred shares or any other preferred stock are unpaid. The
holders of BKN Preferred and the holders of preferred shares of the Trusts
also vote as a separate class on certain other matters as required under their
Charter, the 1940 Act and Maryland law.

Redemption. The redemption rights of the BKN Preferred to be issued in
connection with the Mergers will be substantially similar to those of the
outstanding shares of BKN Preferred and the outstanding preferred shares of
each Trust.

If a series of BKN Preferred or a series of preferred shares of a Trust fails
to meet the asset coverage tests required by the rating agencies and the 1940
Act, the BKN Preferred or the preferred shares of a Trust would be subject to
mandatory redemption, out of funds legally available therefor, at the
redemption price of $25,000 per share plus an amount equal to dividends
thereon (whether or not earned or declared) accumulated but unpaid to the date
fixed for redemption plus any premiums thereon. Any such redemption would be
limited to the number of preferred shares necessary to satisfy the asset
coverage tests applicable to the respective series of BKN Preferred or the
respective series of preferred shares of a Trust. The ability of BKN and the
Trusts to make such a mandatory redemption may be restricted by the provisions
of the 1940 Act. In addition, holders of preferred shares may be entitled to
receive additional dividends in the event of a mandatory redemption of such
preferred shares.

35
<PAGE>

Shares of BKN Preferred and the preferred shares of the Trusts are redeemable
at the option of BKN or the respective Trust, in whole or in part, on any
dividend payment date (except during certain excluded periods) for such
series, at the redemption price of $25,000 per share, plus an amount equal to
dividends thereon accumulated but unpaid to the date fixed for redemption
(whether or not earned or declared) plus any applicable premium. In addition,
holders of preferred shares may be entitled to receive additional dividends in
the event of an optional redemption of such preferred shares.

Liquidation. The terms of the liquidation preferences of the BKN Preferred to
be issued in connection with the Mergers will be substantially similar to the
liquidation preference of the outstanding shares of BKN Preferred and the
outstanding preferred shares of each Trust.

The liquidation preference of each share of BKN Preferred and each preferred
share of the Trusts is $25,000, plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) plus any premium applicable
thereto. In addition, holders of BKN Preferred and holders preferred shares of
the Trusts may be entitled to receive additional dividends in the event of
redemption of such preferred shares.

Upon any liquidation, dissolution or winding up of BKN or a Trust, whether
voluntary or involuntary, the holders of shares of BKN Preferred or the
Trust's preferred shares would be entitled to receive $25,000 per share
together with the amount of any dividends accumulated but unpaid (whether or
not earned or declared) thereon to the date of distribution such amount would
be paid out of the assets of BKN or the respective Trust available for
distribution to stockholders, before any distribution or payment is made upon
any shares of BKN Common or common shares of such Trust or any other capital
stock of BKN or such Trust ranking junior in right of payment upon liquidation
to the BKN Preferred or the Trust's preferred shares. If the assets of BKN or
the Trust are insufficient to make the full liquidation payment on its
preferred stock and liquidation payments on any other outstanding class or
series of preferred stock of BKN or the Trust ranking on a parity with the BKN
Preferred or the Trust's preferred shares as to payment upon liquidation, then
such assets will be distributed among the holders of shares of BKN Preferred
or the Trust's preferred shares and the holders of shares of such other class
or series ratably in proportion to the respective preferential amounts to
which they are entitled. After payment of the full amount of any liquidation
distribution to which they are entitled, the holders of shares of BKN
Preferred or the Trust's preferred shares would not be entitled to any further
participation in any distribution of assets by BKN or the Trust except for any
additional dividends. A consolidation, merger or share exchange of BKN or a
Trust with or into any other entity or entities or a sale, whether for cash,
shares of stock, securities or properties, of all or substantially all or any
part of the assets of BKN or a Trust shall not be deemed or construed to be a
liquidation, dissolution or winding up of BKN or such Trust.

Auctions. The dividend rate per annum for each series of BKN Preferred and for
each series of preferred shares of the Trusts is determined for each dividend
period through an auction of all of the outstanding shares of such series by
the Auction Agent. The Auction Agent for each series of BKN and for each
series of preferred shares of the Trusts is Bankers Trust Company. Separate
auctions will be conducted for each series of BKN Preferred, but the auction
dates for two or more series of BKN Preferred may from time to time occur on
the same date.

Rating Agency Guidelines. The rating agency guidelines applicable to the BKN
Preferred and the preferred shares of each Trust are substantially similar,
except the preferred shares of each Trust are

36
<PAGE>

rated by both Moody's and Standard & Poor's and the BKN Preferred are rated
only by Moody's. BKN intends that, so long as shares of BKN Preferred are
outstanding, the composition of its portfolio will reflect guidelines
established by Moody's in connection with BKN's receipt of a rating for such
shares on their date of original issue of "Aaa" from Moody's. Each Merger is
conditioned upon BKN and the respective Trust receiving written advice from
Moody's (i) confirming that consummation of the Merger will not impair the Aaa
ratings assigned to the outstanding shares of BKN Preferred and (ii) assigning
Aaa ratings to the shares of BKN Preferred to be issued pursuant to the
Merger.

Moody's and Standard & Poor's, which are nationally recognized statistical
rating organizations, issue ratings for various securities reflecting the
perceived creditworthiness of such securities. The guidelines for rating BKN
Preferred and the preferred shares of each Trust have been developed by
Moody's and S&P in connection with issuances of asset-backed and similar
securities, including debt obligation and variable rate preferred stocks,
generally on a case-by-case basis through discussions with the issuers of
these securities. The guidelines are designed to ensure that assets underlying
outstanding debt or preferred stock will be varied sufficiently and will be of
sufficient quality and amount to justify investment-grade ratings. The
guidelines do not have the force of law but have been adopted by BKN and each
Trust in order to satisfy current requirements necessary for Moody's to issue
the above-described ratings for shares of BKN Preferred, which ratings
generally are relied upon by institutional investors in purchasing such
securities and the preferred shares of BKN and each Trust. The guidelines
provide a set of tests for portfolio composition and asset coverage that
supplement (and in some cases are more restrictive than) the applicable
requirements under the 1940 Act.

BKN and each Trust may, but is not required to, adopt modifications to these
guidelines that hereafter may be established by Moody's or Standard & Poor's.
Failure to adopt any such modifications, however, may result in a change in
the ratings described above or a withdrawal of the ratings altogether. In
addition, any rating agency providing a rating for the shares of BKN Preferred
and the preferred shares of the Trusts, at any time, may change or withdraw
any such rating. As set forth in the Articles Supplementary of BKN and each
Trust, the boards of directors, without stockholder approval, may modify
certain definitions or restrictions that have been adopted by BKN and each
Trust pursuant to the rating agency guidelines, provided the boards of
directors have obtained written confirmation from Moody's and Standard &
Poor's that any such change would not impair the ratings then assigned by
Moody's and Standard & Poor's to the BKN Preferred or the preferred shares of
the respective Trust.

For so long as any shares of BKN Preferred or the preferred shares of the
Trusts are rated by Moody's or Standard & Poor's, as the case may be, BKN's
and the Trusts' use of options and financial futures contracts and options
thereon will be subject to certain limitations mandated by the rating
agencies.

Additional Preferred Shares of BKN. The BKN Preferred represented
approximately 38% of BKN's total assets immediately after BKN initially issued
the BKN Preferred. If the Mergers are completed, BKN anticipates that the BKN
Preferred will represent approximately % of BKN's total assets. BKN's Board
of Directors has indicated its intention to authorize an offering of
additional shares of BKN Preferred such that, immediately after the offering
of the additional preferred, the BKN Preferred would once again represent
approximately 38% of BKN's total assets.

So long as BKN is able to realize a higher net return on its investment
portfolio than the dividend rate paid on the BKN Preferred, the effect of the
additional BKN Preferred will be to enhance the

37
<PAGE>

benefits of the Mergers to the holders of common shares of BKN each of the
Trusts, particularly the benefits of a higher distribution rate and a greater
likelihood of trading at little or no discount to net asset value. On the
other hand, to the extent that the then current dividend rate on the
additional BKN Preferred approaches the net return on BKN's investment
portfolio, the benefit of additional leverage will be reduced, and if the then
current dividend rate on any additional BKN Preferred were to exceed the net
return on BKN's portfolio, the additional leverage would reduce the benefits
of the Merger to holders of common shares of BKN and each of the Trusts.

The offering of additional shares of BKN Preferred will be subject to market
conditions and to the Board of Director's continuing belief that adding
additional leverage to BKN's capital structure through the issuance of
additional BKN Preferred is likely to achieve the intended benefits for
holders of BKN's common shares. The Board of Directors reserves the right to
change the foregoing percentage limitation and may issue the additional BKN
Preferred to the extent that the aggregate liquidation preference of all
outstanding shares of BKN Preferred does not exceed 50% of the value of BKN's
total assets. Although the terms of any additional shares of BKN Preferred
will be determined by BKN's Board of Directors at the time of issuance, BKN
anticipates that such shares will be additional shares of an existing series
of BKN Preferred or a series of BKN Preferred to be issued in connection with
the Mergers, in each case as described in this Proxy Statement/Prospectus.

The discussion above describes the present intention of BKN's Board of
Directors with respect to a potential offering of additional shares of BKN
Preferred. If the Board of Directors determines to proceed with such an
offering, the terms of the additional BKN Preferred may be the same as, or
different from, the terms described above, subject to applicable law and BKN's
Charter. The Board of Directors, without the approval of the holders of BKN
Common, may authorize an offering of BKN Preferred or may determine not to
authorize such an offering, and may fix the terms of the BKN Preferred to be
offered. We cannot assure you that any additional shares of BKN Preferred will
be issued.

COMPARISON OF THE TRUSTS AND BKN

General. The Trusts and BKN are diversified closed-end management investment
companies that invest in tax-exempt investment portfolios. The common shares
of BKN and the Trusts are listed and trade on the NYSE under the symbols BKN,
BMN, BMT and BRM. BKN and each Trust are incorporated under the laws of the
State of Maryland.

Investment Objectives and Policies. Except as noted below, the investment
objectives, policies and restrictions of BKN are similar to those of the
Trusts. BKN's investment objective is to provide high current income exempt
from regular Federal income tax consistent with the preservation of capital.
In seeking to provide income exempt from regular Federal income tax, BKN
invests substantially all of its assets in a diversified portfolio of
investment grade municipal obligations and actively manages its assets in
relation to market conditions and interest rate changes. Under normal
circumstances, at least 80% of BKN's assets are invested in securities rated
investment grade by Moody's (at least Baa, MIG or P-1), Standard & Poor's (at
least BBB, SP-2 or A-1), Fitch (at least BBB or F-1) or another nationally
recognized statistical rating agency. Up to 20% of BKN's assets may be
invested in unrated

38
<PAGE>

securities that are deemed by the Investment Adviser to be of equivalent
credit quality. BKN does not expect to invest more than 25% of its total
assets (taken at market value) in municipal obligations whose issuers are
located in the same state. BKN emphasizes investments in municipal obligations
with long-term maturities and maintains an average portfolio maturity of 20-30
years, but the average maturity may be shortened from time to time depending
on market conditions.

In addition, BKN may utilize certain options, futures, interest rate swaps and
related transactions for hedging purposes. To the extent BKN utilizes such
hedging strategies or invests in taxable securities, BKN's ability to achieve
its investment objective of providing high current income exempt from regular
Federal income tax may be limited. Accordingly, under normal circumstances,
BKN's use of such practices is not significant.

For purposes of enhancing liquidity and/or preserving capital, on a temporary
defensive basis, BKN may invest without limit in securities issued by the U.S.
Government or its agencies or instrumentalities, repurchase agreements
collateralized by such securities, or certificates of deposit, time deposits
or bankers' acceptances. BKN also may invest in municipal obligations with
maturities of less than one year, other debt obligations of corporate issuers,
such as interest-paying corporate bonds, commercial paper and certificates of
deposit, bankers' acceptances and interest-bearing savings accounts of banks
having assets greater than $1 billion and which are members of the Federal
Deposit Insurance Corporation. During temporary defensive periods, the current
dividend rate on any preferred shares will be more likely to approximate or
exceed the net rate of return on BKN's investment portfolio, with the result
that the leverage resulting from the preferred shares may become less
beneficial or adverse to the holders of shares of BKN Common.

BMN's investment objective is to provide current income exempt from regular
Federal income tax and to return $10 per common share to holders of common
shares on or about December 31, 2006. BMN seeks to achieve its objective of
providing current income exempt from regular Federal income tax by investing
substantially all of its assets under normal circumstances in a diversified
portfolio of tax-exempt municipal obligations that are either rated Aaa by
Moody's or AAA by Standard & Poor's or, in the alternative, are guaranteed as
to the timely payment of both principal and interest by an entity with a Aaa
or AAA rating or are covered by insurance guaranteeing the timely payment of
both principal and interest. Such insurance is issued by insurers with claims-
paying ability rated either Aaa by Moody's or AAA by Standard & Poor's at the
time of purchase. BMN also invests in municipal obligations that the
Investment Adviser views to be of comparable credit quality to the foregoing
standards if such municipal obligations are not rated or that are guaranteed
or insured by an entity that is not rated if the Investment Adviser determines
that the insurer or guarantor is of comparable credit quality to the foregoing
standards. In determining whether to purchase a particular municipal
obligation which is covered by insurance or a guarantee, BMN considers the
credit quality of the underlying issuer (among other factors such as price and
yield and maturity), although such credit quality will not necessarily be the
determinative factor in making the investment decision.

BRM's investment objective is to provide current income exempt from regular
Federal income tax and to return $15 per share to investors on or about
December 31, 2008. In seeking to provide income exempt from regular Federal
income tax, BRM invests at least 80% of its total assets in a diversified
portfolio of municipal obligations insured as to the timely payment of both
principal and interest by insurers with claims-paying abilities rated at the
time of investment Aaa by Moody's or AAA by

39
<PAGE>

Standard & Poors or which are determined by the Investment Adviser to have
equivalent claims-paying abilities. BRM may invest up to 20% of its total
assets in uninsured municipal obligations which are (i) rated at the time of
investment Aaa by Moody's or AAA by Standard & Poors, (ii) guaranteed by an
entity with a Aaa or AAA rating, (iii) backed by an escrow or trust account
containing sufficient U.S. Government or U.S. Government agency securities to
ensure timely payment of principal and interest, or (iv) determined by the
Investment Adviser to be of triple-A credit quality at the time of investment.
Generally, municipal obligations which are covered by insurance or a guarantee
would not be rated Aaa or AAA, and might not be considered to be of investment
grade credit quality, in the absence of such insurance or guarantee. In
determining whether to purchase a particular municipal obligation which is
covered by insurance or a guarantee, BRM considers the credit quality of the
underlying issuer (among other factors such as price and yield and maturity),
although such credit quality is not necessarily the determinative factor in
making the investment decision.

The investment objectives, policies and restrictions of BMT are identical to
those of BRM, except that BMT seeks to return $10 per share to its investors
on or about December 31, 2010.

The investment objective of BKN and each Trust and the following investment
restrictions are fundamental and cannot be changed without the approval of the
holders of a majority of BKN's and each Trust's outstanding voting securities
(defined in the 1940 Act as the lesser of (i) more than 50% of the outstanding
shares or (ii) 67% or more of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented). All other investment
policies or practices are considered by BKN and each Trust not to be
fundamental and accordingly may be changed without stockholder approval. If a
percentage restriction on investment or use of assets set forth below is
adhered to at that time a transaction is effected, later changes in percentage
resulting from changing market values will not be considered a deviation from
policy. BKN and each Trust may not:

(1) with respect to 75% of its total assets, invest more than 5% of the
value of its total assets (taken at market value at time of purchase) in
the outstanding securities of any one issuer or own more than 10% of the
outstanding voting securities of any one issuer, in each case other than
securities issued or guaranteed by the U.S. Government or any agency or
instrumentality thereof or other investment companies;

(2) invest 25% or more of the value of its total assets in any one industry
provided that such limitation shall not be applicable to municipal
obligations other than those municipal obligations backed only by assets
and revenues of non-governmental users;

(3) issue senior securities other than (a) preferred stock not in excess of
50% of its total assets over any senior securities described in clause (b)
below that are outstanding, (b) senior securities other than preferred
stock (including borrowing money, including on margin if margin securities
are owned and through entering into reverse repurchase agreements) not in
excess of 33 1/3% of its total assets, and (c) borrowing up to 5% of its
total assets for temporary purposes without regard to the amount of senior
securities outstanding under clauses (a) and (b) above; provided, however,
that BKN's and each Trust's obligations under interest rate swaps, when
issued and forward commitment transactions and similar transactions are not
treated as senior securities if covering assets are appropriately
segregated; 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. For purposes of
clauses (a), (b) and

40
<PAGE>

(c) above, "total assets" shall be calculated after giving effect to the
net proceeds of any such issuance and net of any liabilities and
indebtedness that do not constitute senior securities except for such
liabilities and indebtedness as are excluded from treatment as senior
securities by the proviso to this item (3);

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

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

(6) invest for purpose of exercising control over any issuer;

(7) purchase or sell real estate or interests therein other than municipal
obligations secured by real estate or interests therein;

(8) purchase or sell commodities or commodity contracts except for hedging
purposes; or

(9) make any short sale of securities except in conformity with applicable
laws, rules and regulations and unless, giving effect to such sale, the
market value of all securities sold short does not exceed 25% of the value
of BKN's and each Trust's total assets and BKN's and each Trust's aggregate
short sales of a particular class of securities does not exceed 25% of the
then outstanding securities of that class.

Additional information with respect to the investment policies and
restrictions of the Trusts and BKN is included in their respective
Prospectuses, which have been filed with the Securities and Exchange
Commission and may be obtained therefrom as provided under "Additional
Information."

41
<PAGE>

SERVICE PROVIDERS FOR THE TRUSTS AND BKN

The service providers for the Trusts and BKN are as set forth in the following
table.

<TABLE>
<S> <C>
Administrator..................... BMN--Prudential Fund Management, Inc.
BKN* and BRM--Princeton Administrators L.P.
BMT--Mitchell Hutchins Asset Management
Registrar/Transfer Agent/
Distributor/Custodian............ State Street Bank & Trust Company
One Heritage Drive, P2N
North Quincy, MA 02171
Independent Auditors.............. Deloitte & Touche LLP
</TABLE>
- --------
* After the Mergers, BlackRock Financial Management, Inc. will be a co-
administrator of BKN.

The locations of the Administrators are as follows: Prudential Fund
Management, Inc., One Seaport Plaza, New York, New York 10292; Middlesex
Administrators L.P., P.O. Box 9011, Princeton, New Jersey 08543; and Mitchell
Hutchins Asset Management, LLP. State Street Bank & Trust Company, which
serves as registrar, transfer agent, distributor and custodian, maintains
offices at 225 Franklin Street, Boston, Massachusetts 02110. Deloitte &
Touche, the independent auditors, maintains offices at Two World Financial
Center, New York, New York 10281.

Currently, for its services as administrator to BKN, Princeton Administrators,
L.P. receives a fee payable monthly at an annual rate of 0.15% of BKN's
average weekly net investment assets. After consummation of the Mergers,
BlackRock Financial Management, Inc. and Princeton Administrators, L.P. will
act as co-Administrators of BKN and will receive an aggregate fee in the
amount of [ ]% of BKN's weekly net assets. Under the Administration
Agreements with Blackrock Financial Management and Princeton Administrators
(the "Administration Agreements"), the Administrators will administer BKN's
corporate affairs subject to the supervision of BKN's Board of Directors and
in connection therewith furnish BKN with office facilities together with such
ordinary clerical and bookkeeping services (e.g., preparation of annual and
other reports to stockholders and the SEC and filing of federal, state and
local income tax returns) as are not being furnished by the Custodian. The
Administrators also may facilitate bank or other borrowing by BKN when the
Investment Adviser determines that leverage may be in the best interests of
BKN's shareholders. In connection with its administration of the corporate
affairs of BKN, each Administrator will bear the following expenses:

(a)salaries and expenses of all personnel of such Administrator; and

(b) all expenses incurred by such Administrator or by BKN in connection
with administering the ordinary course of BKN's business, other than those
assumed by BKN, as described below.

The Administration Agreements were approved by BKN's Board of Directors on ,
1999 and are effective until terminated. Each terminates automatically if it
is assigned (as defined in the Investment Company Act and the rules
thereunder) and is otherwise terminable on 60 days' notice by either party to
the other.

42
<PAGE>

MANAGEMENT OF THE TRUSTS AND BKN

Boards of Directors and Officers. The following individuals are the current
Directors for the Trusts and BKN and have served in such capacity since each
of the Trusts and BKN commenced their respective operations except that
Richard E. Cavanagh has served as Director since his appointment by each of
the Boards on August 11, 1994 to fill a vacancy and, with respect to BMN and
BMT, James Clayburn La Force, Jr. has served as Director since his election at
the Trusts' annual meeting of stockholders on June 19, 1992 and Walter F.
Mondale, who was previously a Director of each of the Trusts from inception to
August 12, 1993, has served as Director since his election at the Trusts'
annual meeting of stockholders on April 15, 1997. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. The "interested" Directors (as defined by Section
2(a)(19) of the 1940 Act) are indicated by an asterisk(*). Unless specified
otherwise below, the business address of the Directors and officer of each of
the Trust, BKN and the Investment Adviser is 345 Park Avenue, New York, New
York 10154.

<TABLE>
<CAPTION>
% Of
Principal Occupations Or Shares Shares
Name And Age Employment In Past 5 Years Owned Outstanding
------------ -------------------------- ------- -----------
<C> <S> <C> <C>
Andrew F. Brimmer President of Brimmer & Company, BKN 10 (1)
4400 MacArthur Blvd Inc., a Washington, D.C.-based BMN 10
N.W. Suite 302 economic and financial BMT 10
Washington, DC 20007 consulting firm. Formerly member BRM 10
Age: 72 of the Board of Governors of the
Federal Reserve System.
Director, Airborne Express, Borg
Warner Automotive and
CarrAmerica Realty Corporation.

Richard E. Cavanagh President and Chief Executive BKN 500 (1)
845 Third Avenue Officer of The Conference Board, BMN 100
New York, NY 10022 Inc., a leading global business BMT 100
Age: 52 membership organization. Former BRM 100
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 (best
selling management book
published in 13 national
editions). Trustee, Wesleyan
University, Drucker Foundation
and Educational Testing Service
(ETS). Director, Archer
Chemicals (chemicals), Fremont
Group (investments) and The
Guardian Life Insurance Company
of America (insurance).

Kent Dixon Consultant/Investor. Former BKN 100 (1)
9495 Blind Pass Road President and Chief Executive BMN 100
Unit #602 Officer of Empire Federal BMT 100
St. Petersburg, FL 33706 Savings Bank of America and Banc BRM 100
Age: 61 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).
</TABLE>

43
<PAGE>

<TABLE>
<CAPTION>
% Of
Principal Occupations Or Shares Shares
Name And Age Employment In Past 5 Years Owned Outstanding
------------ -------------------------- ------ -----------
<C> <S> <C> <C>
Frank J. Fabozzi Consultant. Editor of THE JOURNAL BKN 10 (1)
858 Tower View Circle OF PORTFOLIO MANAGEMENT and BMN 10
New Hope, PA 18938 Adjunct Professor of Finance at BMT 10
Age: 50 the School of Management at Yale BRM 10
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* Chairman and Chief Executive BKN 10 (1)
Age: 46 Officer of BlackRock Financial BMN 10
Management, Inc., the Investment BMT 10
Adviser. Formerly, a Managing BRM 10
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 and
Director of each of BlackRock's
Trusts and Anthracite Capital,
Inc. and as Director of BlackRock
Fund Investors I, BlackRock Fund
Investors II, BlackRock Fund
Investors III, BlackRock Asset
Investors (collectively, "BAI")
and BlackRock MQE Investors,
Trustee of New York University
Medical Center, Dwight-Englewood
School, National Outdoor
Leadership School and Phoenix
House. A Director of VIMRx
Pharmaceuticals, Inc. and Innovir
Laboratories, Inc.

James Grosfeld Consultant/Investor. Director of BKN 10 (1)
20500 Civic Center Drive BAI and Copart, Inc. (retail BMN 10
Suite 3000 automobile). Formerly Chairman of BMT 10
Southfield, MI 48076 the Board and Chief Executive BRM 10
Age: 61 Officer of Pulte Corporation
(homebuilding and mortgage
banking and finance) from May
1974-April 1990.

James Clayburn LaForce, Dean Emeritus of The John E. BKN 10 (1)
Jr. Anderson Graduate School of BMN 10
P.O. Box 1595 Management, University of BMT 10
Pauma Valley, CA 92061 California since July 1, 1993. BRM 10
Age: 70 Director, Eli Lilly and Company
(pharmaceuticals), Imperial
Credit Industries (mortgage
banking), Jacobs Engineering
Group, Inc., Rockwell
International Corporation, Payden
& Rygel Investment Trust (mutual
fund), Provident Investment
Counsel Funds (investment
companies), Timken Company
(roller bearing and steel) and
Motor Cargo Industries
(transportation). 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>

44
<PAGE>

<TABLE>
<CAPTION>
% Of
Principal Occupations Or Shares Shares
Name And Age Employment In Past 5 Years Owned Outstanding
------------ -------------------------- ------- -----------
<C> <S> <C> <C>
Walter F. Mondale Partner, Dorsey & Whitney, a law BKN 20 (1)
220 South Sixth firm (December 1996-present, BMN 20
Street Minneapolis, September 1987-August 1993). BMT 20
MN 55402 Formerly, U.S. Ambassador to Japan BRM 20
Age: 71 (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.

Ralph L. Schlosstein* President of BlackRock Financial BKN 100 (1)
Age: 48 Management, the Investment BMN 100
Adviser. Formerly, a Managing BMT 100
Director of Lehman Brothers, Inc. BRM 100
and co-head of its Mortgage and
Savings Institutional Group.
Currently, President of each of
BlackRock's Trusts. Trustee of
Denison University and New Visions
for Public Education in New York
City. A Director of the Pulte
Corporation and a member of the
Visiting Board of Overseers of the
John F. Kennedy School of
Government at Harvard University.
</TABLE>
- --------
(1) Less than 1%.

All Directors and officers as a group owned less than 1% of the shares of each
of the Trusts and BKN as of February 26, 1999. Each Trust and BKN has an
executive committee composed of Messrs. Fink and Schlosstein.

None of the Trusts or BKN has a compensation or nominating committee of the
Board of Directors, or committees performing similar functions. Each of the
Trusts and BKN has an audit committee composed of all the Directors who are
not interested persons of such Trust or BKN or the Investment Adviser which is
charged with recommending a firm of independent accountants to its respective
Trust or BKN and reviewing accounting matters with the accountants. With
respect to BRM, BMN and BMT, there was one meeting of each of the audit
committees held between January 1, 1998 and December 31, 1998. With respect to
BKN, there were two meetings of the audit committee held between November 1,
1997 and October 31, 1998. With respect to each of the Trusts and BKN, all
members attended at least 75% of the meetings.

Four meetings of the Board of Directors of BKN were held between November 1,
1997 and October 31, 1998. Four meetings of the Boards of Directors of BRM,
BMN and BMT were held between January 1, 1998 and December 31, 1998. With
respect to each of the Trusts and BKN, all Directors attended at least 75% of
the meetings.

45
<PAGE>

In addition to Messrs. Fink and Schlosstein, all the executive officers hold
the same position with each of the Trusts and BKN.

<TABLE>
<CAPTION>
NAME AND AGE TITLE OTHER PRINCIPAL OCCUPATIONS IN PAST 5 YEARS
------------ ----- -------------------------------------------
<C> <C> <S>
Keith T. Anderson Vice President Managing Director of the Investment
Age: 39 Adviser. From February 1987 to April 1988,
Vice President at The First Boston
Corporation in the Fixed Income Research
Department. Previously Vice President and
Senior Portfolio Manager at Criterion
Investment Management Company (now
Nicholas-Applegate).

Henry Gabbay Treasurer Managing Director of the Investment
Age: 51 Adviser. From September 1984 to February
1989, Vice President at The First Boston
Corporation.

Michael C. Huebsch Vice President Managing Director of the Investment
Age: 40 Adviser. From July 1985 to January 1989,
Vice President at The First Boston
Corporation in the Fixed Income Research
Department.

Robert S. Kapito Vice President Managing Director and Vice Chairman of the
Age: 42 Investment Adviser. From December 1985 to
March 1988, Vice President at The First
Boston Corporation in the Mortgage Products
Group.

Kevin Klingert Vice President Managing Director of the Investment
Age: 36 Adviser. From March 1985 to October 1991,
Assistant Vice President at Merrill Lynch,
Pierce, Fenner & Smith in the Unit
Investment Trust Department.

James Kong Assistant Managing Director of the Investment
Age: 38 Treasurer Adviser. From April 1987 to April 1989,
Assistant Vice President at The First
Boston Corporation in the CMO-ABO
Administration Department. Previously
affiliated with Deloitte, Haskins & Sells
(now Deloitte & Touche LLP).

Karen H. Sabath Secretary Managing Director of the Investment
Age: 33 Adviser. From June 1986 to July 1988,
Associate at The First Boston Corporation
in the Mortgage Finance Department. From
August 1988 to December 1992,
Associate/Vice President of the Investment
Adviser.

Richard Shea, Esq. Vice President/ Director of the Investment Adviser. From
Age: 39 Tax December 1988 to February 1993, Associate
Vice President and Tax Counsel at
Prudential Securities, Inc. From August
1984 to December 1988, Senior Tax
Specialist at Laventhol & Horwath.
</TABLE>

Officers of BKN and each Trust are elected by, and serve at the pleasure of,
the Board of Directors of each Trust. Officers receive no remuneration from
each issuer for their services in such capacities.

The Investment Adviser. The Investment Adviser to each Trust and BKN is
BlackRock Financial Management, Inc. The Investment Adviser is responsible for
the investment strategy of each Trust and BKN and focuses on investments in
municipal obligations. The Investment Adviser also provides portfolio
administration and other administrative services to each Trust and BKN. The
Investment Adviser is located at 345 Park Avenue, New York, New York 10154.
The investment professionals of the Investment Adviser who are responsible for
investment management are described below.

The Investment Adviser provides fixed income, liquidity, equity, alternative
investment, and risk management products for clients worldwide. The Investment
Adviser manages $80 billion in various fixed income sectors, including $10
billion in municipal securities. The Investment Adviser also manages
approximately $44 billion in cash or other short term, highly liquid
investments, including $4.4 billion in short term municipal securities. The
Investment Adviser has $62 billion in mutual fund

46
<PAGE>

assets under management, including two open-end mutual fund families,
BlackRock Funds and Provident Institutional Funds, 21 publicly traded closed-
end funds (including the Trusts and BKN) and several short-term investment
funds. Among these products, the Investment Adviser manages 11 closed-end, 6
open-end and 6 money market municipal funds. In addition to asset management
services, the Investment Adviser has become a significant provider of risk
management and advisory services that combine its capital markets expertise
with the firm's proprietary risk management systems and technology.

Investment Philosophy. The Investment Adviser'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 all other sectors
of the fixed income market.

The Investment Adviser uses a relative value strategy that determines the
trade-off between risk and return to achieve the Trusts' and BKN's investment
objectives. This strategy is combined with disciplined risk control techniques
and applied in every sector, sub-sector and individual security selection
decision. The Investment Adviser's extensive personnel and technology
resources are the key drivers of the investment philosophy.

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

The Investment Adviser's municipal bond team includes two portfolio managers
and six credit research analysts. The team is lead by Kevin Klingert, a
Managing Director and portfolio manager at the Investment Adviser. Mr.
Klingert has over 15 years of experience in the municipal market. Prior to
joining the Investment Adviser in 1991, Mr. Klingert was an Assistant Vice
President in the Unit Investment Trust ("UIT") Department at Merrill Lynch,
Pierce, Fenner & Smith. Mr. Klingert joined Merrill Lynch in 1985 and was
responsible for investing over $1 billion annually for municipal UITs and for
supervising over $21 billion of existing municipal UITs. The portfolio
management team also includes Craig Kasap, Associate.

The Investment Adviser's municipal bond portfolio managers are responsible for
25 municipal bond portfolios, valued at approximately $5.5 billion, plus an
additional $2.5 billion in municipal bonds held across portfolios with broader
investment mandates. The team is responsible for portfolios with a variety of
investment objectives and constraints, including national funds, state-
specific funds, and portfolios with various indices. Currently, the team
manages 11 closed-end municipal funds with over $2 billion in assets,
including the Trusts and BKN.

The Investment Adviser's Investment Process. The Investment Adviser has in-
depth expertise in all sectors of the fixed income market. The Investment
Adviser applies the same risk-controlled, active sector rotation style to the
management process for all of its fixed income portfolios. The Investment

47
<PAGE>

Adviser 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
leverage the combined experience and expertise of the entire portfolio
management group at the Investment Adviser.

The Investment Adviser's portfolio management process emphasizes research and
analysis of specific sectors and securities, not interest rate speculation.
The Investment Adviser believes that market-timing strategies can be highly
volatile and potentially produce inconsistent results. Instead, the Investment
Adviser 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, the Investment Adviser believes one of the most
important determinants of value is supply and demand. The Investment Adviser's
ability to monitor investor flows and frequency and seasonality of issuance is
helpful in anticipating which sectors will be most heavily impacted by the
supply/demand equation. The breadth and expertise of its municipal bond team
allows it to anticipate issuance flows, forecast which sectors will have the
most supply and plan its investment strategy accordingly.

The Investment Adviser also believes that over the long-term, intense credit
analysis will add substantial incremental value and avoid significant relative
performance impairments. The municipal credit team is led by Susan Heide,
Ph.D., who has been with the Investment Adviser since 1993 and is a managing
director responsible for our municipal credit research. She co-heads the
Credit Committee and Credit Research, and is assisted by five municipal
research analysts. The group averages 10 years of experience in municipal
credit research.

Given the nature of the municipal market (whereby supply is largely dependent
on new issues, as well as the secondary market; and each deal may be somewhat
unique), the credit analysts research potential new issues and closely monitor
our existing holdings. Diversification of sectors, issuers, geographic regions
and security structures is stressed. Communication and interaction with credit
resources throughout the Investment Adviser are facilitated in formal
investment strategy meetings and encouraged informally as well.

The Investment Adviser'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 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. The Investment
Adviser's analytic process focuses on anticipating change in credit trends
before market recognition. Credit research is a critical, independent element
of our municipal process.

The Investment Adviser is a wholly-owned subsidiary of BlackRock Advisors,
Inc. an indirect majority-owned subsidiary of PNC Bank N.A. ("PNC") and is a
global asset management firm with assets of $142 billion under management and
over 600 employees. The Investment Adviser currently is owned 80% by PNC and
20% by its senior professionals.

48
<PAGE>

The Investment Adviser has advised the Trusts and BKN that it is not aware of
any financial condition that would be reasonably likely to impair the
financial ability of the Investment Adviser to fulfill its commitments to the
Trusts under the investment advisory agreements of the Trusts or BKN.

As of 1999, none of the Trusts or BKN was aware of any beneficial or
record owner of 5% or more of any class of shares of a Trust or BKN.

ADDITIONAL INFORMATION ABOUT BKN

BKN is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and the 1940 Act, and in accordance therewith it
files reports, proxy materials and other information with the SEC. Reports and
other information filed by BKN can be inspected and copied at the Public
Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, these materials can be inspected and
copied at the SEC's Regional Offices at 7 World Trade Center, Suite 1300, New
York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates.

Information included in this Combined Proxy Statement/Prospectus concerning
BKN was provided by BKN.

ADDITIONAL INFORMATION ABOUT THE TRUSTS

Reports and other information filed by each Trust can be inspected and copied
at the Public Reference Facilities maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the offices of BlackRock listed above. In
addition, these materials can be inspected and copied at the SEC's Regional
Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also can be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed
rates.

Condensed financial information for BKN and the Trusts as of April 30, 1999
are attached to this Combined Prospectus/Proxy Statement beginning at page F-
.

Information included in this Combined Proxy Statement/Prospectus concerning
each Trust was provided by each Trust, respectively.

FINANCIAL STATEMENTS

The financial highlights included herein and the financial statements included
in the Statement of Additional Information, which is incorporated herein by
reference, with respect to BKN for the annual period ended October 31, 1998
have been audited by Deloitte & Touche LLP to the extent indicated in their
reports thereon and have been included herein or incorporated herein by
reference in reliance upon such reports given the authority of such firm in
accounting and auditing.

49
<PAGE>

The financial highlights included herein and the financial statements included
in the Statement of Additional Information, which is incorporated herein by
reference, with respect to each of BMN, BMT and BRM, in each case for the
annual period ended December 31, 1998, have been audited by Deloitte & Touche
LLP to the extent indicated in their reports thereon and have been included
herein or incorporated herein by reference in reliance upon such reports given
the authority of such firm in accounting and auditing.

The pro forma financial information included herein or incorporated herein by
reference has not been audited.

LEGAL MATTERS

Certain legal matters in connection with the shares of BKN Common and BKN
Preferred to be issued pursuant to the Merger will be passed upon by Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York ("Skadden Arps"). Skadden
Arps will rely as to certain matters of Maryland law on the opinion of Miles &
Stockbridge, Baltimore, Maryland.

OTHER BUSINESS

The Board of Directors of each Trust and BKN knows of no other business to be
brought before the Meeting. However, if any other matters come before the
Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.

STATEMENT OF ADDITIONAL INFORMATION

BKN has filed with the SEC a Statement of Additional Information, dated ,
1999, relating to this Combined Proxy Statement/Prospectus and which is
incorporated herein by reference. The Table of Contents of the Statement of
Additional Information is set forth below:

Statement of Additional Information
Table of Contents

<TABLE>
<CAPTION>
Page
----
<S> <C>
Audited Financial Statements for BKN for the annual period ended October
31, 1998................................................................
Unaudited Financial Statements for BKN for the six-month period ended
April 30, 1999..........................................................
Audited Financial Statements for BMN for the annual period ended December
31, 1998................................................................
Audited Financial Statements for BMT for the annual period ended December
31, 1998................................................................
Audited Financial Statements for BRM for the annual period ended December
31, 1998................................................................
Annex A: Description of Credit Ratings for Municipal Obligations.........
</TABLE>

BKN and the Trusts will provide, without charge, upon the written or oral
request of any person to whom this Combined Proxy Statement/Prospectus is
delivered, a copy of any and all documents that have been incorporated by
reference in the registration statement of which this Combined Proxy
Statement/Prospectus is a part.

50
<PAGE>

SHAREHOLDER INQUIRIES

Shareholder inquiries may be addressed to the Trusts and BKN in writing at the
appropriate address on the cover page of this Combined Proxy
Statement/Prospectus or by telephoning the Trusts at 1-800-227-7BFM (7236).

* * *

SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
MARK, SIGN AND DATE THE ENCLOSED PROXY OR PROXIES AND RETURN IT OR THEM IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SHAREHOLDERS ALSO MAY RETURN PROXIES BY TELEFAX OR VOTE BY TELEPHONE.

EACH TRUST AND BKN WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS 1998 ANNUAL
SHAREHOLDERS REPORT AND ITS MOST RECENT SEMI-ANNUAL SHAREHOLDERS REPORT TO ANY
SHAREHOLDER UPON REQUEST ADDRESSED TO 345 PARK AVENUE, NEW YORK, NEW YORK
10154 OR BY TELEPHONE AT 1-800-227-7BFM (7236).

51
<PAGE>

UNAUDITED PRO FORMA FINANCIAL STATEMENTS FOR BKN(1)

PORTFOLIO OF INVESTMENTS
(As of April 30, 1999)

Pro Forma Portfolio of Investments April 30, 1999 (unaudited)

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------- ----------
<C> <C> <S> <C> <C>
LONG-TERM INVESTMENTS 147.2%
Alabama--0.6%
Hoover Brd. of Ed. Spl. Tax.
Wts., G.O.,
AAA 1,700++ 6.50%, 2/01/01, AMBAC........... N/A 1,815,702
AAA 1,815++ 6.60%, 2/01/01, AMBAC........... N/A 1,941,578
AAA 1,025++ 6.625%, 2/01/01, AMBAC.......... N/A 1,096,904
AAA 3,000++ Mobile Cnty., G.O., 6.70%,
2/01/00, MBIA................... N/A 3,134,490
AAA 1,905 Mobile Impvt. Wt., Zero Coupon,
8/15/08, MBIA................... 8/02 @ 71.587 1,182,433
----------
9,171,107
----------
Alaska--1.0%
AAA 7,500 Anchorage Elec. Util. Rev.,
7.125%, 6/01/06, MBIA........... 6/99 @ 102 7,666,275
AAA 9,000 North Slope Boro., Ser. B, Zero
Coupon, 6/30/04, FSA............ No Opt. Call 7,308,810
----------
14,975,085
----------
Arizona--0.9%
AAA 4,000 Chandler, G.O., Zero Coupon,
7/01/08, FGIC................... No Opt. Call 2,685,200
Tucson Local Dev. Business Dev.
Fin., Corp. Lease Rev., FGIC
AAA 1,515++ 6.25%, 7/01/02.................. N/A 1,657,865
AAA 3,495 6.25%, 7/01/06.................. 7/02 @ 102 3,787,427
AAA 4,180 University of Arizona Med. Ctr.
Hosp. Rev., 6.25%, 7/01/10,
MBIA............................ 7/02 @ 102 4,531,036
----------
12,661,528
----------
California--6.1%
AAA 1,890 California Hlth. Fac. Fin. Auth.
Rev., Marin Gen. Hosp., Ser. A,
5.75%, 8/01/09, FSA............. 8/03 at 102 2,048,023
Aa2 1,220 California Hsg. Fin. Agcy. Rev.,
Home Mtg., Ser. C, 5.65%,
8/01/14......................... 2/04 @ 102 1,259,626
California St., G.O.,
A+ 5,770 5.00%, 10/01/14................. 10/07 @ 101 5,879,688
AAA 6,000 6.30%, 9/01/06, AMBAC........... No Opt. Call 6,844,200
</TABLE>
- -----
(1) Assumes that all of the Mergers are consummated.

F-1
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ ----------
<C> <C> <S> <C> <C>
California--(Continued)
AAA 4,355++ 6.80%, 11/01/04, FGIC........... N/A 5,084,158
AAA 145 6.80%, 11/01/10, FGIC........... 11/04 @ 102 167,060
California St. Pub. Wrks. Brd.
Rev.,
AAA 1,910++ Ser. A, 6.20%, 12/01/02, AMBAC.. N/A 2,114,771
AAA 3,400++ 6.60%, 12/01/02, AMBAC.......... N/A 3,809,768
AAA 6,100 Contra Costa Tran. Auth., 6.50%,
3/01/09, FGIC................... No Opt. Call 6,542,372
AAA 3,500 Eastern Mun. Wtr. Dist., 6.50%,
7/01/09, FGIC................... 7/01 @ 101 3,722,845
AAA 4,000 Glendale Hosp. Rev., Adventist
Hlth. Ctr., Ser. A, 6.50%,
3/01/07, MBIA................... 3/01 @ 102 4,265,040
Los Angeles Cnty. Leasing Corp.
Rev.,
AAA 15,460 5.95%, 12/01/07, AMBAC.......... No Opt. Call 17,465,935
AAA 3,065 6.05%, 12/01/10, AMBAC.......... No Opt. Call 3,518,835
Los Angeles Wst. Wtr. Sys. Rev.,
AAA 5,570 5.625%, 6/01/07, MBIA........... 6/03 @ 102 6,012,202
AAA 3,320++ Ser. D, 6.60%, 12/01/00, MBIA... N/A 3,554,790
AAA 3,000++ San Francisco Bay Area Rapid
Trans., Sales Tax Rev., 6.75%,
7/01/00, AMBAC.................. N/A 3,177,540
AAA 3,500 San Joaquin Hills Trans. Agcy.,
Toll Road Rev., Ser. A, Zero
Coupon, 1/15/07, MBIA........... No Opt. Call 2,528,050
AAA 3,500 Sonoma Cnty. Correct. Fac.,
C.O.P., 6.10%, 11/15/12, AMBAC.. 11/02 @ 102 3,818,605
Univ. of California Rev.,
Research Fac.,
A+ 2,000++ Ser. B, 6.10%, 9/01/03.......... N/A 2,231,800
A+ 3,305++ Ser. B, 6.20%, 9/01/03.......... N/A 3,701,170
A+ 2,000++ Ser. B, 6.25%, 9/01/03.......... N/A 2,243,700
----------
89,990,178
----------
Colorado--6.4%
Arapahoe Cnty. Cap. Impvt. Hwy.
Rev., Trust Fund, Ser. E,
Aaa 3,100 Zero Coupon, 8/31/04............ No Opt. Call 2,506,908
Aaa 2,250++ 6.90%, 8/31/05.................. N/A 2,659,522
Denver City & Cnty. Arpt. Rev.,
AAA 1,000 Ser. A, 5.60%, 11/15/20, MBIA... 11/05 @ 102 1,041,390
BBB+ 3,000 Ser. C, 6.50%, 11/15/06......... 11/02 @ 102 3,231,660
BBB+ 1,120 Ser. C, 6.65%, 11/15/05......... 11/02 @ 102 1,211,896
Aaa 3,705++ Ser. D, 7.00%, 11/15/01......... N/A 3,989,989
BBB+ 14,085 Ser. D, 7.00%, 11/15/25......... 11/01 @ 100 14,886,155
Denver City & Cnty. Wtr. Brd.,
C.O.P., FGIC,
AAA 2,025++ 6.50%, 11/15/01................. N/A 2,185,178
AAA 1,385 6.50%, 11/15/05................. 11/01 @ 101 1,485,856
AAA 1,110++ 6.60%, 11/15/01................. N/A 1,200,465
AAA 765 6.60%, 11/15/06................. 11/01 @ 101 821,572
</TABLE>

F-2
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ ----------
<C> <C> <S> <C> <C>
Colorado--(Continued)
AAA 2,295++ 6.625%, 11/15/01................ N/A 2,483,419
AAA 1,570 6.625%, 11/15/07, FGIC.......... 11/01 @ 101 1,681,156
AAA 5,000 E-470 Pub. Hwy. Auth. Co. Rev.,
Ser. B, Zero Coupon, 9/01/11,
MBIA............................ No Opt. Call 2,817,850
AAA 10,000 E-470 Pub. Hwy. Auth. Rev., Ser.
B, Zero Coupon, 9/01/18, MBIA... No Opt. Call 3,661,400
AAA 30,205++ Jefferson Cnty. Sch. Dist. North
R-001, G.O., 6.25%, 12/15/02,
AMBAC........................... N/A 33,092,296
AAA 13,285++ Univ. of Colorado, Hosp. Auth.
Rev., Ser. A, 6.25%, 11/15/02,
AMBAC........................... N/A 14,647,642
----------
93,604,354
----------
Connecticut--1.2%
AA- 8,750 Connecticut St., G.O., Ser. A,
5.50%, 11/15/08................. 11/03 @ 102 9,371,075
AAA 4,000 Connecticut St. Arpt. Rev.,
7.65%, 10/01/12, FGIC........... 10/04 @ 100 4,653,840
Baa3 3,000 Mashantucket Western Pequot
Tribe, Spec. Rev., Ser. A,
5.50%, 9/01/28.................. 9/09 @ 101 2,988,180
----------
17,013,095
----------
District of Columbia--2.9%
Dist. of Columbia, G.O.,
AAA 3,500++ 6.875%, 6/01/00, MBIA........... N/A 3,698,240
AAA 115++ Ser. E, 5.875%, 6/01/08, MBIA... N/A 125,619
AAA 2,955 Ser. E, 5.875%, 6/01/08, MBIA... 06/03 @ 102 3,162,737
AAA 1,060++ Ser. B, 5.90%, 6/01/04, MBIA.... N/A 1,169,964
AAA 7,190 Ser. B, 5.90%, 6/01/06, MBIA.... 6/04 @ 102 7,809,059
AAA 70++ Ser. E, 6.00%, 6/01/03, CAPMAC.. N/A 76,791
AAA 1,830 Ser. E, 6.00%, 6/01/09, CAPMAC.. 6/03 @ 102 1,960,699
AAA 17,950++ Ser. B, 6.30%, 6/01/02, MBIA.... N/A 19,580,757
AAA 3,000 Dist. of Columbia Conv. Ctr.
Auth., Ded. Tax Rev., 5.25%,
10/01/17, AMBAC................. 10/08 @ 101 3,052,860
AAA 2,000 Dist. of Columbia Hosp. Rev.,
Children's Hosp., Ser. A, 6.25%,
7/15/08, FGIC................... 7/02 @ 102 2,143,800
----------
42,780,526
----------
Florida--6.7%
AAA 10,750++ Broward Cnty. Sch. Bd., C.O.P.,
6.50%, 7/01/02, AMBAC........... N/A 11,843,167
AAA 1,740 Florida Hsg. Fin. Agcy. Rev.,
Sngl. Fam. Mtg., Ser. 1994-A,
6.55%, 7/01/14, GNMA............ 1/05 @ 102 1,847,271
AA+ 5,000 Florida St. Dept. of Trans.,
Right of Way, Ser. A, 4.75%, ,
7/01/24......................... 7/09 @ 101 4,726,650
Florida St. Div. Bd. Fin. Dept.
Rev., Nat. Res. & Pres.,
AAA 7,000++ 6.45%, 7/01/01, MBIA............ N/A 7,477,610
AAA 6,975++ Ser. 2000-A, 6.75%, 7/01/01,
AMBAC........................... N/A 7,558,528
AAA 2,190 Florida St. Sunshine Skyway Rev.,
6.60%, 7/01/07, MBIA............ 7/01 @ 101 2,327,839
Greater Orlando Aviation Auth.,
Arpt. Fac. Rev., Ser. B, FGIC,
AAA 4,760 6.55%, 10/01/06................. 10/02 @ 102 5,222,624
AAA 5,070 6.55%, 10/01/07................. 10/02 @ 102 5,554,236
</TABLE>

F-3
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ ----------
<C> <C> <S> <C> <C>
Florida--(Continued)
AAA 3,155 Gulf Breeze Local Gov't., Ln.
Pkg. Rev., 7.70%, 12/01/15,
FGIC........................... 12/99 @ 102 3,234,758
AAA 12,195 Jacksonville Excise Tax Rev.,
6.50%, 10/01/10, AMBAC......... 10/02 @ 102 13,324,257
AAA 2,650++ Jacksonville Hlth. Fac. Auth.
Rev., Mem. Med. Ctr., Ser. A,
6.625%, 11/01/01, MBIA......... N/A 2,854,554
AAA 7,500 Jacksonville Hosp. Rev., Univ.
Med. Ctr. Inc. Proj., 6.50%,
2/01/07, CONNIE LEE............ 2/02 @ 102 8,091,375
AAA 2,000++ North Broward Hosp. Rev., 6.50%,
1/01/02, MBIA.................. N/A 2,178,700
AAA 10,645 Orange Cnty. Tourist Dev. Tax
Rev., , Ser. A, 6.375%,
10/01/06, AMBAC................ 10/02 @ 102 11,603,050
BBB- 4,000 Santa Rosa Bay Bridge Auth. Rev.,
6.25%, 7/01/28................. 7/06 @ 102 4,356,120
AAA 2,570++ Tampa Auth. Rev., St. Joseph
Hlth. Ctr., 6.70%, 12/01/01,
MBIA........................... N/A 2,812,197
AAA 1,600 Tampa Util. Tax & Spec. Rev.,
6.80%, 10/01/06, AMBAC......... 10/01 @ 102 1,733,872
AAA 1,000 Volusia Cnty. Edl. Fac., 6.50%,
10/15/10, CONNIE LEE........... 10/02 @ 102 1,093,390
----------
97,840,198
----------
Georgia--1.4%
AAA 7,000++ Atlanta, Pretrial Det. Ctr.,
C.O.P., MBIA, 6.25%, 12/01/02.. N/A 7,724,710
Burke Cnty. Dev. Auth. P.C.R.,
A 3,000 Georgia Pwr. Co., 5.45%,
5/01/34........................ 5/04 @ 102 2,973,030
AAA 1,990 Oglethorpe Pwr. Corp., Ser. B,
6.45%, 1/01/05, MBIA........... 1/04 @ 101 2,187,289
AAA 920 Georgia St. Hsg. & Fin. Auth.
Rev., Sngl. Fam. Mtg., Ser. C,
7.00%, 12/01/15, FHA........... 6/99 @ 101 981,180
AAA 5,000 Henry Cnty. Hosp. Auth. Rev.,
6.375%, 7/01/09, FGIC.......... 7/02 @ 102 5,387,100
AAA 2,000 Macon-Bibb Cnty. Hosp. Auth. Rev,
6.75%, 8/01/99, FGIC........... N/A 2,056,260
----------
21,309,569
----------
Hawaii--0.6%
AAA 7,760 Honolulu, Cnty., G.O., Ser. A,
5.80%, 1/01/07, FGIC........... No Opt. Call 8,502,244
----------
Illinois--13.5%
AAA 4,930++ Alton Hlth. Fac. Rev., Christian
Hlth. Ctr., 7.00%, 2/15/01,
FGIC........................... N/A 5,308,328
AAA 2,120 Chicago, Res. Mtg. Rev., Zero
Coupon, 10/01/09, MBIA......... No Opt. Call 1,030,935
Chicago Cent. Pub. Library, G.O.,
AMBAC,
AAA 1,800++ Ser. A, 6.75%, 1/01/02.......... N/A 1,981,674
AAA 1,600++ Ser. C, 6.75%, 1/01/02.......... N/A 1,761,488
AAA 14,205 Chicago O'Hare Intl. Arprt. Rev.,
G.O., Ser. A, 6.25%, 1/01/08,
MBIA............................ 1/05 @ 102 15,749,226
Chicago Sch. Fin. Auth., G.O.,
FGIC,
AAA 13,000 6.25%, 6/01/07.................. 6/02 @ 102 13,992,940
AAA 9,150 6.25%, 6/01/09.................. 6/02 @ 102 9,821,335
AAA 2,500 Chicago Waste Wtr. Transm. Rev.,
5.125%, 1/01/25, FGIC........... 1/06 @ 102 2,446,025
AAA 5,050 Chicago Wtr. Rev., 5.25%,
11/01/23, FGIC.................. 11/07 @ 102 5,063,888
</TABLE>

F-4
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ -----------
<C> <C> <S> <C> <C>
Illinois--(Continued)
Cook Cnty.,
AAA 3,000++ Cap. Impvt., 5.875%, 11/15/06,
FGIC.......................... N/A 3,347,460
AAA 4,165 G.O., Ser. A, 5.20%, 11/15/08,
MBIA.......................... 11/07 @ 101 4,436,808
AAA 5,555++ G.O., Ser. A, 6.40%, 11/15/02,
MBIA.......................... N/A 6,142,386
AAA 7,000++ G.O., 6.50%, 11/15/02, MBIA... N/A 7,763,140
AAA 4,500++ G.O., 7.00%, 11/01/00, MBIA... N/A 4,818,825
AAA 1,775++ Cook Cnty. Cmnty. Sch. Dist.,
G.O., , Ser. A, 6.375%,
1/01/02, FGIC................. N/A 1,893,481
AAA 5,000 Cook Cnty. Community Sch.
Dist., 6.50%, 1/01/02, FGIC... N/A 5,349,400
Illinois Edl. Fac. Auth. Rev.,
Loyola Univ., FGIC
AAA 4,000++ 5.45%, 7/01/03................ N/A 4,230,440
AAA 10,000 5.70%, 7/01/03................ N/A 10,670,200
Illinois Hlth. Fac. Auth. Rev.,
AAA 11,000#++ Alexian Med. Ctr. Proj., Ser.
A, 6.35%, 1/01/02, MBIA....... N/A 11,926,860
AAA 1,750++ Carle Fndtn., Ser. C, 6.75%,
1/01/00, FGIC................. N/A 1,823,570
AAA 5,500 Carle Foundation, Ser. A,
6.75%, 1/01/10, FGIC.......... 1/00 @ 102 5,694,920
AAA 3,300 Elmhurst Mem. Hosp.,
6.60%,1/01/07, FGIC........... 1/02 @ 102 3,551,592
AAA 14,585 Sisters Svcs., Inc., Ser. C,
6.625%, 6/01/06, MBIA......... 6/02 @ 102 15,872,710
Illinois Regl. Trans. Auth.
Rev., Ser. A, FGIC
AAA 2,780++ 6.55%, 11/01/01............... N/A 3,022,333
AAA 6,125++ 6.625%, 11/01/01C............. N/A 6,669,757
AAA 8,725 Illinois St., G.O., 6.40%,
12/15/01, AMBAC............... 12/01 @ 102 9,480,323
Illinois St. Sales Tax Rev.,
Ser. O,
AAA 5,900 Zero Coupon, 6/15/07.......... No Opt. Call 4,154,249
AAA 2,065++ 6.50%, 6/15/01................ N/A 2,223,902
AAA 3,935 6.50%, 6/15/06................ 6/02 @ 101 4,216,903
AAA 5,635 Zero Coupon, 6/15/08.......... No Opt. Call 3,766,434
AAA 2,000++ 6.60%, 6/15/01................ N/A 2,157,920
AAA 7,980 Kendell Kane & Will Cnty. Sch.
Dist., 6.25%, 9/01/11, FGIC... 9/01 @ 100 8,335,988
AAA 10,170 Met. Pier & Expo. Auth., Ded.
St. Tax Rev., Ser. A, Zero
Coupon, 6/15/08, FGIC......... No Opt. Call 6,828,036
AAA 2,000 Will Cnty. Cmnty. Sch. Dist.
Rev., 7.05%, 12/01/08, AMBAC.. No Opt. Call 2,409,560
-----------
197,943,036
-----------
Indiana--2.9%
AAA 1,340 Columbus Sch. Bd., 6.625%,
7/01/11, AMBAC............... 7/02 @ 102 1,457,263
Indiana Hlth. Fac. Fin. Auth.
Hosp. Rev. & Impvt.,
AncillaSys. Inc. MBIA
AAA 5,665 Ser. A, 6.25%, 7/01/08........ 7/02 @ 102 6,020,592
AAA 4,350 Ser. B, 6.25%, 7/01/08........ 7/02 @ 102 4,669,551
AAA 3,750 Indiana St. Edl. Fac. Auth.
Rev., 6.60%, 1/01/11, MBIA... 1/02 @ 102 4,021,163
</TABLE>

F-5
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ ----------
<C> <C> <S> <C> <C>
Indiana--(Continued)
AAA 9,000 Indiana Univ. Rev., Student Fee,
Zero Coupon, 8/01/06, AMBAC.... No Opt. Call 6,612,570
Baa1 7,595 Indianapolis Arpt. Auth. Rev.,
Spl. Fac. Fed. Express Corp.
Proj., 7.10%, 1/15/17.......... 7/04 @ 102 8,501,919
AAA 3,000++ Monroe Cnty. Hosp. Auth. Rev.,
Bloomington Hosp., 6.65%,
5/01/02, MBIA.................. N/A 3,278,670
AAA 2,270 Noblesville West Indpt. Sch.
Bldg. Corp., G.O., 7.00%,
7/01/07, MBIA.................. 1/01 @ 102 2,414,349
AAA 5,000 Warsaw High Sch. Bldg. Corp.,
G.O., 6.90%, 7/01/05, MBIA..... 7/00 @ 102 5,258,500
----------
42,234,577
----------
Iowa--0.4%
AAA 1,300 Iowa Fin. Auth., Sngl. Fam. Mtge.
Rev., Ser. F, 6.35%, 7/01/09,
AMBAC.......................... 1/03 @ 102 1,364,545
AAA 4,195 Muscatine, Elec. Rev., 5.00%,
1/01/08, FSA................... 1/00 @ 100 4,198,272
----------
5,562,817
----------
Kentucky--2.5%
AAA 2,850 Boone Cnty. P.C.R., Cincinnati
Gas & Elec. Co., Ser. A, 5.50%,
1/01/24, MBIA.................. 1/04 @ 102 2,937,467
Danville Multi-City Lease Rev.,
Swr. & Drain Sys., MBIA
AAA 2,015++ 6.60%, 3/01/02.................. N/A 2,208,722
AAA 2,160++ 6.65%, 3/01/02.................. N/A 2,370,535
AAA 3,750++ Kentucky Dev. Fin. Auth. Rev.,
Sisters of Charity, 6.60%,
11/01/01, MBIA................. N/A 4,039,313
AAA 6,410 Kentucky St. Ppty. & Bldgs. Auth.
Rev., Proj. 53, 6.625%,
10/01/07, MBIA................. 10/01 @ 102 6,903,890
AAA 15,000 Kentucky St. Tpke. Auth., Econ.
Dev. Road Rev., 5.75%, 7/01/13,
AMBAC.......................... 7/03 @ 102 16,051,350
AAA 3,890 Owensboro, Elec. Lt. & Pwr. Rev.,
Ser. B, Zero Coupon, 1/01/09,
AMBAC.......................... No Opt. Call 2,512,123
----------
37,023,400
----------
Louisiana--5.3%
Jefferson Sales Tax Dist. Rev.,
FGIC
AAA 21,000++ Ser. A, 6.75%, 12/01/02......... N/A 22,924,451
AAA 4,000++ Ser. B, 6.75%, 12/01/02.......... N/A 4,396,160
Louisiana Pub. Fac. Auth. Hosp.
Rev.,
AAA 5,000++ Lafayette Gen. Med. Ctr. Proj.,
6.30%, 10/01/02., FSA........... N/A 5,490,300
AAA 14,400++ Our Lady of the Lake Regl. Med.
Ctr., 5.90%, 12/01/03, FSA...... N/A 15,893,856
Louisiana St., G.O., Ser. A,
AMBAC
AAA 14,385 6.50%, 5/01/02.................. N/A 15,768,262
AAA 3,500 6.50%, 5/01/07.................. 5/02 @ 102 3,836,560
AAA 2,860++ Louisiana Stadium & Expo Dist.,
Hotel Occupancy Tax, 6.00%,
7/01/06, FGIC................... N/A 3,221,418
AAA 5,250 New Orleans, G.O., , Zero Coupon,
9/01/06, AMBAC.................. No Opt. Call 3,843,683
AAA 2,905++ New Orleans Pub. Impt., G.O.,
6.60%, 9/01/02, FGIC............ N/A 3,164,939
----------
78,539,629
----------
</TABLE>

F-6
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ -----------
<C> <C> <S> <C> <C>
Maryland--1.0%
Aa2 9,940 Maryland St. Dept. Hsg. & Cmnty.
Dev. Admin., Sngl. Fam. Prog.,
Ser. 2, 6.55%, 4/01/26......... 4/05 @ 102 10,604,986
AAA 3,175 Northeast Waste Disp. Auth.
Rev., Solid Waste Montgomery
Cnty. Res. Rec. Proj., 6.30%,
7/01/16, MBIA.................. 7/03 @ 102 3,427,920
-----------
14,032,906
-----------
Massachusetts--6.8%
AAA 2,100++ Boston, G.O., Ser. A, 6.50%,
7/01/02, AMBAC................. N/A 2,285,871
AAA 4,465++ Chelsea, Sch. Proj. Loan, 6.00%,
6/15/04, AMBAC................. N/A 4,973,206
AAA 3,670++ Mansfield, G.O., 6.65%, 1/15/02,
AMBAC.......................... N/A 4,015,420
Massachusetts Bay Trans. Auth.
Rev., MBIA
AAA 200++ Ser. B, 6.00%, 3/01/03......... N/A 219,268
AAA 5,800 Ser. B, 6.00%, 3/01/10......... 3/03 @ 102 6,285,170
AAA 20,015++ Gen. Tran. Sys., Ser. A,
6.625%, 3/01/02................ N/A 21,465,888
AAA 6,500 Massachusetts St Hlth. & Edl.
Facs. Auth. Rev., Hallmark
Hlth. Sys., Ser. A, 5.00%,
7/01/21, FSA................... 7/08 @ 101 6,304,935
Massachusetts St., G.O.,
AAA 2,350++ Ser. D, 6.00%, 7/01/01, MBIA... N/A 2,466,068
AAA 7,865++ Ser. C, 6.70%, 11/01/04, FGIC.. N/A 9,015,728
AAA 780++ Ser. C, 6.75%, 8/01/01, AMBAC.. N/A 847,096
AAA 440 Ser. C, 6.75%, 8/01/09, AMBAC.. 8/01 @ 102 473,686
Massachusetts St. Hlth. & Edl.
Fac. Auth. Rev.,
AAA 2,000 Ser. C, 6.50%, 7/01/02, FGIC... N/A 2,203,380
AAA 5,000 6.50%, 7/01/10, MBIA........... 7/02 @ 102 5,441,000
AAA 3,250++ 7.25%, 7/01/00, MBIA........... N/A 3,452,930
Massachusetts St. Hsg. Fin.
Agcy.,
AAA 5,000 Ser. H, 6.75%, 11/15/12, FNMA.. 11/03 @ 102 5,401,050
AAA 10,000 Hsg. Proj., Ser. A, 5.95%,
10/01/08, AMBAC................ 4/03 @ 102 10,685,400
AAA 5,500 Residential Dev., Ser. A,
6.875%, 11/15/11, FNMA......... 5/02 @ 102 5,971,735
AAA 600 Residential Dev., Ser. C,
6.875%, 11/15/11, FNMA......... 5/02 @ 102 651,462
AAA 7,630 Massachusetts St. Wtr. Res.,
Ser. B, 6.25%, 11/01/10, MBIA.. 11/02 @ 102 8,319,371
-----------
100,478,664
-----------
Michigan--5.9%
AAA 2,375++ Chippewa Valley, Sch. Bldg. &
Site Rev., 6.375%, 5/01/01,
FGIC........................... N/A 2,531,204
Detroit Swr. Disp. Rev., FGIC
AAA 1,655++ 6.60%, 7/01/01................. N/A 1,788,360
AAA 1,765++ 6.65%, 7/01/01................. N/A 1,909,042
AAA 1,880++ 6.70%, 7/01/01................. N/A 2,035,363
AAA 3,750 Grand Rapids Wtr. Sply. Rev.,
6.625%, 1/01/08, FGIC.......... 1/01 @ 102 3,963,112
AAA 4,000 Greater Detroit Res. Rec. Auth.
Rev., , Ser. A, 6.25%,
12/13/08, AMBAC................ No Opt. Call 4,555,960
</TABLE>

F-7
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ ----------
<C> <C> <S> <C> <C>
Michigan--(Continued)
Lake Orion Cmnty. Sch. Dist.,
AMBAC
AAA 3,290++ 6.60%, 5/01/05.................. N/A 3,761,819
AAA 3,285++ 6.70%, 5/01/05.................. N/A 3,773,447
Michigan Mun. Bd. Auth. Rev.,
AAA 5,000 Ser. D, Zero Coupon, 5/15/06,
MBIA............................ No Opt. Call 3,709,250
AAA 2,040 6.45%, 11/01/07, AMBAC.......... 11/04 @ 102 2,329,986
AAA 900 Ser. A, 6.50%, 11/01/12, MBIA... 11/02 @ 102 983,943
AAA 2,050 6.65%, 11/01/09, AMBAC.......... 11/04 @ 102 2,361,497
AAA 1,840 Local Gov't. Loan Prog., 6.35%,
11/01/06, AMBAC................. 11/04 @ 102 2,092,540
Michigan St. Bldg. Auth. Rev.,
Fac. Proj.,
AAA 8,920++ Ser. IIA, 6.25%, 10/01/02,
AMBAC........................... N/A 9,810,751
AAA 3,850++ Ser. II, 6.75%, 10/01/01,
AMBAC........................... N/A 4,199,426
AAA 11,590 Ser. I, 6.75%, 10/01/07.........
AAA 11,940 Michigan St. Hosp. Fin. Auth.
Rev., Sparrow Oblig. Grp.,
6.60%, 11/15/07, MBIA........... 11/01 @ 102 12,814,366
AAA 5,000 River Rouge Sch. Dist., 5.625%,
5/01/22, FSA.................... 5/03 @ 101.5 5,247,350
AAA 3,000 Western Twnshp. Util. Auth. Swr.
Dist. Sys. Rev., 6.50%, 1/01/10,
FSA............................. 1/02 @ 100 3,161,430
AAA 3,400 Wyandotte Elec. Rev., 6.25%,
10/01/08, MBIA.................. No Opt. Call 3,836,730
----------
87,342,559
----------
Mississippi--0.1%
AAA 1,800 Harrison Cnty. Waste Wtr. Mgmt.,
6.75%, 2/01/11, FGIC............ 2/01 @ 102 1,908,288
----------
Missouri--0.8%
AAA 7,350 Kansas City Sch. Dist. Bldg.
Corp. Leasehold Rev., Cap.
Impvts. Proj., Ser. A, 6.50%,
2/01/08, FGIC................... 2/01 @ 102 7,764,246
Lake of the Ozarks Cmnty. Bridge
Corp., Bridge Sys. Rev.,
2,000 5.25%, 12/01/14................. 12/08 @ 102 1,994,920
2,500 5.25%, 12/01/26................. 12/08 @ 102 2,457,800
----------
12,216,966
----------
Nevada--4.4%
AAA 4,000++ Clark Cnty., G.O., 6.50%,
6/01/02, AMBAC.................. N/A 4,398,680
AAA 5,215++ Clark Cnty. Arpt., 6.25%,
6/01/01, FGIC................... N/A 5,493,742
AAA 6,490++ Clark Cnty. Fld Ctrl., 6.30%,
11/01/01, AMBAC................. N/A 6,966,171
AAA 6,210++ Clark Cnty. Flood Ctrl., 6.40%,
11/01/0, AMBAC.................. N/A 6,680,283
Clark Cnty. Sch. Dist., G.O.,
AAA 11,000 Ser. A, 6.70%, 3/01/06, MBIA,... 3/01 @ 101 11,594,550
AAA 4,185++ 6.75%, 12/15/04, FGIC........... N/A 4,818,944
AAA 1,500 Ser. A, 6.75%, 3/01/07, MBIA.... 3/01 @ 101 1,582,380
AAA 5,175++ 7.00%, 6/01/01, MBIA............ N/A 5,576,580
</TABLE>

F-8
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions Value
------- --------- ----------- ------------ -----------
<C> <C> <S> <C> <C>
Nevada--(Continued)
AAA 3,250++ Reno Hosp. Auth. Rev., St. Mary
Regl. Med. Ctr., 6.70%,
7/01/01, MBIA.................. N/A 3,518,580
Washoe Cnty. Arpt. Auth. Rev.,
Ser. B, MBIA
AAA 3,135 5.70%, 7/01/07................. 7/03 @ 102 3,346,330
AAA 2,645 5.75%, 7/01/08................. 7/03 @ 102 2,823,061
AAA 3,750 Arpt. Sys. Impvt., Ser. B,
5.80%, 7/01/09................. 7/03 @ 102 4,000,613
AAA 4,135++ Washoe Cnty. Sch. Dist., G.O.,
Ser. A, 6.20%, 10/01/02,
AMBAC.......................... N/A 4,504,793
-----------
65,304,707
-----------
New Hampshire--0.2%
AAA 2,310 New Hampshire High. Ed. Auth.
Rev., Elliot Hosp. of
Manchester, 6.70% 10/01/06,
AMBAC.......................... 10/02 @ 102 2,478,653
-----------
New Jersey--9.6%
AAA 10,500++ Elizabeth, G.O., 6.60%, 8/01/01,
MBIA........................... N/A 11,256,420
Howell Twp., G.O., FGIC
AAA 7,715 6.70%, 1/01/06................. 1/02 @ 102 8,360,977
AAA 2,925 6.75%, 1/01/07................. 1/02 @ 102 3,177,427
AAA 2,000 Hudson Cnty. Correctional Fac.,
C.O.P., 6.50%, 12/01/11, MBIA.. 6/02 @ 101.5 2,157,620
AAA 30,275 New Jersey Econ. Dev. Auth.,
Mkt. Trans. Fac. Rev., Ser. A,
5.80%, 7/01/08, MBIA........... 7/04 @ 102 32,992,787
AAA 24,495 New Jersey St., G.O., Ser. D,
6.00%, 2/15/09, MBIA........... 2/03 @ 102 26,294,648
New Jersey St. Hlth. Care Fac.
Fin. Auth. Rev., HackensackMed.
Ctr., FGIC
AAA 12,755++ 6.65%, 7/01/01................. N/A 13,795,936
AAA 3,735++ 6.70%, 7/01/01................. N/A 4,043,660
AAA 1,765 New Jersey St. Hwy. Auth. Rev.,
Garden St. Pkwy., 6.15%,
1/01/07, AMBAC................. 1/02 @ 102 1,881,208
AAA 30,000 New Jersey St. Tpk. Auth. Rev.,
Ser. C, 6.40%, 1/01/07, AMBAC.. 1/01 @ 101.5 31,576,500
North Jersey Dist. Wtr. Sply.
Cmnty. Rev., MBIA
AAA 2,525 Wanaque No. Proj., Ser. B,
6.50%, 11/15/06................ 11/01 @ 102 2,713,390
AAA 1,065 Wanaque So. Proj., 6.50%,
7/01/06........................ ETM 1,185,089
AAA 1,250 Warren Cnty. P.C.R., 6.55%,
12/01/06, MBIA................. 12/02 @ 102 1,351,938
-----------
140,787,600
-----------
New Mexico--0.3%
AAA 3,535 Gallup P.C.R., 6.50%, 8/15/07,
MBIA........................... 8/02 @ 102 3,829,359
-----------
New York--14.2%
AAA 5,400 Met. Trans. Auth. Commuter Fac.
Rev., Ser. A, 5.75%, 7/01/21,
MBIA........................... 7/07 @ 101.5 5,824,980
New York City, G.O.,
AAA 3,000 Ser. D, 5.60%, 11/01/05,
AMBAC.......................... No Opt. Call 3,246,810
AAA 5,000 Ser. G, 5.75%, 2/01/08, MBIA... 2/06 @ 101.5 5,491,550
A- 4,140 Ser. A, 6.00%, 8/01/05......... No Opt. Call 4,525,517
</TABLE>

F-9
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions Value
------- --------- ----------- ------------- -----------
<C> <C> <S> <C> <C>
New York--(Continued)
AAA 15,000 Ser. E, 6.125%, 8/01/06,
MBIA.......................... No Opt. Call 16,746,600
AAA 15,500 Ser. E, 6.20%, 8/01/07, MBIA.. No Opt. Call 17,481,520
A- 7,000 Ser. E, 6.50%, 2/15/06........ No Opt. Call 7,861,560
AAA 4,500 Ser. B, 6.95%, 8/15/04, MBIA.. N/A 5,194,665
AAA 13,000 Ser. A, 7.00%, 8/01/07, FSA... 8/06 @ 101.5 15,360,930
A- 6,160++ Ser. H, 7.20%, 2/01/02........ N/A 6,801,441
A- 840 Ser. H, 7.20%, 2/01/13........ 2/02 @ 101.5 915,272
New York City Ind. Dev. Agcy.
Spec. Fac. Rev., Term.
OneGroup Assoc. Proj.,
A 4,000 6.00%, 1/01/08................ 1/04 @ 102 4,293,480
A 1,000 6.00%, 1/01/15................ 1/04 @ 102 1,064,250
New York City Mun. Wtr. Fin.
Auth. Rev., Wtr. & Swr. Sys.,
Ser. A,
AAA 9,375 5.125%, 6/15/22, AMBAC........ 6/07 @ 101 9,366,094
AAA 11,100 6.15%, 6/15/07, FGIC.......... 6/02 at 101.5 11,894,427
AAA 1,090++ 6.75%, 6/15/01, FGIC.......... N/A 1,170,867
AAA 1,070 6.75%, 6/15/06, FGIC.......... 6/01 @ 101 1,139,229
AAA 1,340++ 7.00%, 6/15/01, FGIC.......... N/A 1,446,168
AAA 1,320 7.00%, 6/15/07, FGIC.......... 6/01 @ 101 1,409,258
AA 4,000 New York City Transitional Fin.
Auth. Rev., Ser. C, 4.75%,
5/01/23...................... 5/08 @ 102 3,739,440
AAA 3,000++ New York St. Dorm. Auth. Rev.,
St. Univ. Edl. Facs., , Ser.
B, 6.10%, 5/15/04............ N/A 3,353,910
New York St. Env. Fac. Corp.,
P.C.R.,
AAA 4,500 Ser. D, 6.40%, 5/15/06........ 11/04 @ 102 5,102,280
AAA 6,155 6.70%, 5/15/09................ 11/04 @ 102 7,013,499
AAA 4,965 6.80%, 5/15/10................ 11/04 @ 102 5,660,597
New York St. Environ. Fac.
Corp., P.C.R., Ser. D
AAA 5,945 6.50%, 5/15/07................ 11/04 @ 102 6,738,182
AAA 2,245 6.50%, 11/15/07............... 11/04 @ 102 2,544,528
New York St. Hsg. Fin. Agcy.
Rev., Ser. A
A- 1,955 Hlth. Facs. of New York City,
6.375%, 11/01/04............. No Opt. Call 2,155,036
AAA 9,830 Hsg. Proj. Mtge., 5.50%,
11/01/06, FSA................ 5/06 @ 102 10,488,905
New York St. Med. Care Fac.
Rev., AMBAC
AAA 9,715 6.60%, 2/15/05................ N/A 11,154,957
AAA 2,695 6.625%, 2/15/05............... N/A 3,097,903
AAA 5,000++ New York Hosp., Ser. A, 6.60%,
2/15/05, AMBAC............... N/A 5,741,100
AAA 5,550 New York St. Thrwy. Auth. Svc.
Contract Rev., Local Hwy. &
Bldg., Ser. B, 5.375%,
4/01/14, MBIA................ 4/08 @ 101 5,824,725
AAA 7,870 New York St. Urban Dev. Corp.
Rev., Correctional Fac., Ser.
A, 5.625%, 1/01/07, AMBAC.... 1/03 at 102 8,386,665
AAA 6,000 Triborough Brdg. & Tunl. Auth.
Rev., Ser. B, 6.70%, 1/01/08,
FGIC......................... 1/01 @ 102 6,364,020
-----------
208,600,365
-----------
</TABLE>

F-10
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions Value
------- --------- ----------- ------------ ----------
<C> <C> <S> <C> <C>
North Carolina--3.5%
AAA 1,000++ Cumberland Cnty. C.O.P., Civic
Ctr. Proj., Ser. A, 6.375%,
12/01/04, AMBAC................. N/A 1,140,060
North Carolina Eastn. Mun. Pwr.
Agcy. Sys. Rev., Ser. B
AAA 6,000 6.00%, 1/01/06, CAPMAC.......... No Opt. Call 6,595,260
AAA 13,500 6.125%, 1/01/09, FGIC........... No Opt. Call 15,151,185
AAA 10,000 7.00%, 1/01/08, CAPMAC.......... No Opt. Call 11,802,000
AAA 14,675 7.25%, 1/01/07, CAPMAC.......... No Opt. Call 17,348,932
----------
52,037,437
----------
North Dakota--0.5%
AAA 4,450++ Bismark Hosp. Rev., St. Alexius
Med. Ctr., 6.90%, 5/01/01,
AMBAC........................... N/A 4,816,814
AAA 2,035 Grand Forks Hlth. Care Fac. Rev.,
United Hosp. Oblig. Grp., 6.50%,
12/01/06, MBIA.................. 12/01 @ 102 2,175,720
----------
6,992,534
----------
Ohio--2.0%
AAA 2,410++ Cleveland, G.O., 6.40%, 11/15/04,
MBIA............................ N/A 2,748,485
Cleveland Wtrwks. Rev., First
Mtg., Ser. F, AMBAC
AAA 12,000 6.50%, 1/01/02.................. N/A 13,072,200
500 Cleveland Cuyahoga Cnty. Port
Auth. Rev., Port Dev. Proj.,
6.00%, 3/01/07.................. No Opt. Call 518,935
AAA 6,095 Hamilton City Elec. Sys. Rev.,
Ser. A, 6.125%, 10/15/08, FGIC.. 10/02 @ 102 6,601,738
AAA 3,900++ Lucas Cnty. Hosp. Impt. Rev., St.
Vincent Med. Ctr., 6.50%,
8/15/02, MBIA................... N/A 4,249,830
AAA 1,000 Ohio St. Bldg. Auth. Fac. Rev.,
Juvenille Correctional Proj.,
6.50%, 9/01/04, AMBAC........... 9/04 @ 102 1,142,860
AAA 1,220 Ohio St. Higher Edl. Fac. Comn.,
Univ. Dayton Proj., 5.35%,
12/01/17, AMBAC................. 12/07@101 1,266,592
----------
29,600,640
----------
Oklahoma--0.4%
AAA 5,725 Oklahoma City Wtr. Utils. Tr.
Wtr. & Swr. Rev., Ser. B,
6.375%, 7/01/12, MBIA........... 7/02 @ 100 6,120,483
----------
Oregon--0.4%
5,600 Klamath Falls Elec. Rev., Klamath
Cogen Proj., 5.50%, 1/01/07..... No Opt. Call 5,620,272
----------
Pennsylvania--11.2%
AAA 4,000 Allegheny Cnty. Hosp. Dev. Auth.
Rev., Magee Women's Hosp.,
6.25%, 10/01/08, FGIC........... 10/02 @ 102 4,330,920
AAA 6,200 Beaver Cnty. Hosp. Auth., 6.625%,
7/01/02, AMBAC.................. N/A 6,853,356
AAA 1,500++ Coatesville Sch. Dist., G.O.,
6.60%, 3/01/01, AMBAC........... N/A 1,581,600
Dauphin Cnty. Gen. Auth. Hosp.
Rev., HAPSCO-WesternPennsylvania
Hosp. Proj., MBIA
AAA 10,000 6.25%, 1/01/08.................. 7/02 @ 102 10,747,000
AAA 10,000 Ser.A, 6.25%, 7/01/08........... 7/02 @ 102 10,747,000
AAA 6,000 Delaware Valley Regl. Fin. Auth.,
Ser. A, 5.50%, 8/01/28, AMBAC... No Opt. Call 6,421,440
AAA 6,600 Erie Cnty. Hosp. Auth. Rev., St.
Vincent Hlth. Ctr. Proj., Ser.
A, 6.25%, 7/01/08, MBIA......... 7/02 @ 102 7,093,020
AAA 10,000++ Harrisburg Auth. Lease Rev.,
6.625%, 6/01/01, FSA............ N/A 10,701,700
</TABLE>

F-11
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions Value
------- --------- ----------- ------------ -----------
<C> <C> <S> <C> <C>
Pennsylvania--(Continued)
AAA 3,500 Indiana Cnty. Indl. Dev. Auth.
P.C.R., New York St. Elec. &
Gas Corp., Ser. A, 6.00%,
6/01/06, MBIA.................. No Opt. Call 3,886,575
AAA 10,100 Lehigh Cnty. Gen. Purpose Auth.
Rev., St. Lukes Hosp. Bethlehem
Proj., 5.50%, 11/15/13, AMBAC.. 11/03 @ 102 10,542,683
AAA 7,000 Montgomery Cnty. Higher Ed. &
Hlth. Auth. Rev., Holy
Redeemer, 5.25%, 10/01/23,
AMBAC.......................... 10/07 @ 101 7,080,500
AAA 6,500 Pennsylvania Hsg. Fin. Agcy.
Rev., Rental Hsg., Ser. C,
6.25%, 7/01/07, FNMA........... 7/02 @ 102 6,898,125
AAA 4,000 Pennsylvania Intergovern. Coop.
Auth. Spec. Tax Rev.,
Philadelphia Fdg. Prog., 5.50%,
6/15/20, FGIC.................. 6/06 @ 100 4,142,280
Pennsylvania St., G.O., FGIC
AAA 1,500 5.375%, 5/15/09................ 5/06 @ 101.5 1,601,325
AAA 14,900++ Ser. A, 6.50%, 11/01/01........ N/A 16,131,783
Pennsylvania St. Higher Edl.
Fac. Auth. Rev.,
AAA 1,445++ 6.75%, 7/01/01, MBIA........... N/A 1,565,889
A2 3,300 Univ. Pennsylvania, Ser. A,
5.75%, 1/01/17................. 1/06 @ 101 3,461,865
A1 2,750 Univ. Pennsylvania, Ser. A,
5.875%, 1/01/15................ 1/06 @ 101 2,894,567
AAA 4,500 Pennsylvania St. Tpk. Auth.
Rev., , Ser. O, 5.80%,
12/01/07, FGIC................. 12/02 @ 102 4,801,545
Philadelphia Mun. Auth., Justice
Lease Rev.,
AAA 1,550 Ser. A, 7.00%, 11/15/04, MBIA.. 11/01 @ 102 1,693,081
AAA 2,370++ Ser. B, 7.10%, 11/15/01, FGIC.. N/A 2,613,209
AAA 2,100 Philadelphia Wtr. & Waste Rev.,
5.625%, 6/15/08, AMBAC......... No Opt. Call 2,303,532
Pittsburgh, G.O., Ser. D, AMBAC
AAA 10,930++ 6.00%, 9/01/02................. N/A 11,916,323
AAA 6,005++ 6.00%, 9/01/02................. N/A 6,546,891
Pittsburgh & Allegheny Cntys.
Rev., AMBAC
AAA 1,015 Ser. A, 6.50%, 7/15/06......... 7/01 @ 100 1,067,070
AAA 900 Ser. B, 6.50%, 7/15/06......... 7/01 @ 100 946,170
AAA 3,000++ Pittsburgh Wtr. & Swr., 6.75%,
9/01/01, FGIC.................. N/A 3,265,170
AAA 3,000 Schuylkill Cnty. Redev. Auth.
Common Lease Rev., Ser. A,
7.00%, 6/01/07, FGIC........... 6/01 @ 101 3,224,310
AAA 1,665++ Scranton-Lackawanna Hlth. &
Welfare Auth. Rev., 6.90%,
1/01/00, MBIA.................. N/A 1,737,161
Westmoreland Cnty., G.O., AMBAC
AAA 7,800++ 6.70%, 8/01/01................. N/A 8,318,544
-----------
165,114,634
-----------
Rhode Island--2.1%
AAA 11,220++ Conv. Ctr. Auth. Rev., Ser. A,
6.60%, 5/15/01, MBIA.......... N/A 12,081,135
Rhode Island Clean Wtr. Protn.
Fin. Agcy., P.C.R., Revolving
Fd. Pooled LN., Issue A, MBIA
AAA 2,155++ 6.70%, 10/01/02................ N/A 2,397,287
AAA 235 6.70%, 10/01/10................ 10/02 @ 102 257,214
AA+ 3,430 Rhode Island Hsg. & Mtg. Fin.,
Homeownership Oppty., Ser. 15-
B, 6.75%, 10/01/17............ 4/04 @ 102 3,657,443
AAA 2,000 Rhode Island St. Hlth. & Edl.
Bldg. Corp. Rev., Hosp. Fin.,
5.50%, 5/15/16, MBIA.......... 5/07 @ 102 2,094,880
AAA 10,000++ Rhode Island St. Pub. Bldg.
Auth. Rev., St. Pub. Proj.,
Ser. A, 6.75%, 2/01/00,
AMBAC......................... N/A 10,448,100
-----------
30,936,059
-----------
</TABLE>

F-12
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ --------------
<C> <C> <S> <C> <C>
South Carolina--2.3%
Piedmont Mun. Pwr. Agcy.
Elec. Rev.,
AAA 14,925 6.30%, 1/01/11, MBIA........ 1/03 @ 102 $ 16,152,880
AAA 7,900 6.50%, 1/01/11, FGIC........ 1/01 @ 102 8,328,101
AAA 4,390 6.85%, 1/01/07, FGIC........ 1/01 @ 102 4,658,009
AAA 5,100 Rock Hill Util. Sys. Rev.,
6.50%, 1/01/07, FGIC....... 1/01 @ 102 5,383,101
--------------
34,522,091
--------------
Tennessee--0.8%
A 7,800 Maury Cnty. Ind. Dev. Brd.
P.C.R., Saturn Corp. Proj.,
6.50%, 9/01/24............. 9/04 @ 102 8,589,048
AAA 2,350 Met. Nashville Arpt. Rev.,
Ser. C, 6.625%, 7/01/07,
FGIC....................... 7/01 @ 102 2,509,589
--------------
11,098,637
--------------
Texas--16.3%
Austin Pub. Impvt., G.O.,
AAA 13,000++ 6.10%, 9/01/02, AMBAC....... N/A 13,983,060
Austin Util. Sys. Rev.,
AAA 11,515+ Ser. A, Zero Coupon,
11/15/08, MBIA............. No Opt. Call 7,542,440
AAA 5,000 Ser. A, Zero Coupon,
11/15/09, AMBAC............ No Opt. Call 3,097,800
AAA 5,000 Ser. A, Zero Coupon,
11/15/09, MBIA............. No Opt. Call 3,097,800
AAA 7,475++ Ser. A, 6.00%, 5/15/00,
FGIC....................... N/A 7,684,898
AAA 1,055 Ser. A, 6.00%, 5/15/10,
FGIC....................... 5/00 @ 100 1,074,001
AAA 7,000 6.25%, 11/15/08, AMBAC...... 11/02 @ 102 7,557,970
AAA 5,000 6.625%, 11/15/08, AMBAC..... No Opt. Call 5,864,700
AAA 2,000++ 6.875%, 5/15/01, AMBAC...... N/A 2,166,220
Baytown, G.O., AMBAC
AAA 2,385++ 6.40%, 2/01/02.............. N/A 2,553,667
AAA 2,840 6.40%, 2/01/08.............. 2/02 @ 100 3,010,400
AAA 9,930 Circle C Mun. Util. Dist.
North 3 Rev., 6.50%,
11/15/09, FGIC............. 11/01 @ 100 10,452,715
Coppell Indpt. Sch. Dist.,
MBIA
AAA 1,430 6.10%, 8/15/09.............. ETM 1,615,986
AAA 2,495 6.10%, 8/15/09.............. 8/02 @ 100 2,645,623
AAA 8,500 Cypress-Fairbanks Indpt. Sch.
Dist., G.O., Zero Coupon,
8/01/06, AMBAC............. No Opt. Call 6,218,600
AAA 1,580 Dallas Cnty. Road Imp., G.O.,
5.625%, 8/15/10............ 8/01 @ 100 1,632,472
AAA 2,500 Dallas Ft. Worth Regl. Arp.
Rev., Ser. A, 7.375%,
11/01/10, FGIC............. 5/04 @ 102 2,898,800
AAA 5,800 El Paso Cnty. Tax Rev., G.O.,
Ser. B, 6.40%, 2/15/07,
MBIA....................... 2/02 @ 100 6,140,170
AAA 8,000 El Paso Impt. Auth. Rev.,
Ser. A, 6.375%, 8/15/10,
FGIC....................... No Opt. Call 8,537,120
Ft. Bend Cnty., Tax. Perm.
Imprvt., G.O, FGIC
AAA 3,375++ 6.60%, 9/01/02.............. N/A 3,682,530
</TABLE>

F-13
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ -------------
<C> <C> <S> <C> <C>
Texas--(Continued)
Harris Cnty. Toll Road, Sr.
Lien, FGIC
AAA 2,585 Ser. B, Zero Coupon,
8/15/08..................... No Opt. Call $ 1,702,740
AAA 13,555++ Ser. A, 6.50%, 8/15/02....... N/A 14,973,667
AAA 6,310++ Ser. A, 6.50%, 8/15/02....... N/A 6,970,405
AAA 1,955 Ser. A, 6.50%, 8/15/06....... 8/02 @ 102 2,130,989
AAA 590 Ser. A, 6.50%, 8/15/07....... 8/02 @ 102 642,728
AAA 4,775 Ser. A, 6.50%, 8/15/11....... 8/02 @ 102 5,192,526
AAA 4,390 Houston Indpt. Sch. Dist.,
Zero Coupon, 8/15/09,
AMBAC....................... No Opt. Call 2,737,077
Houston Wtr. & Swr. Sys. Rev.,
AAA 10,440 Ser. C, Zero Coupon,
12/01/10, AMBAC............. No Opt. Call 6,126,923
AAA 1,775++ Ser. B, 6.75%, 12/01/01,
FGIC........................ N/A 1,944,441
AAA 13,225 Ser. B, 6.75%, 12/01/08,
FGIC........................ 12/01 @ 102 14,269,510
AAA 16,135 Jr. Lien, Ser. C, 6.25%,
12/01/09, MBIA.............. 12/02 @ 102 17,426,445
AAA 1,900 North Central Texas Hlth. Fac.
Dev. Corp. Rev., Childrens
Med. Ctr. of Dallas, 6.375%,
10/01/06, MBIA.............. 10/01 @ 102 2,024,754
North Texas Mun. Wtr. Dist.,
MBIA
AAA 1,550++ 6.40%, 6/01/03............... N/A 1,703,125
AAA 1,840++ 6.50%, 6/01/03............... N/A 2,028,655
AAA 3,000++ Round Rock Indpt. Sch. Dist.
G.O., 6.75%, 8/15/01, MBIA.. N/A 3,206,040
BBB+ 2,640 Sabine River Auth. P.C.R.,
Texas Utils. Elec. Proj.,
Ser. B, 8.25%, 10/01/20..... 10/00 @ 102 2,822,424
AAA 6,000 San Antonio Elec. & Gas Rev.,
Ser. B, Zero Coupon,
2/01/10, FGIC............... No Opt. Call 3,635,760
Texas Mun. Pwr. Agcy. Rev.,
AMBAC
AAA 15,000 Zero Coupon, 9/01/08......... No Opt. Call 9,915,000
AAA 16,175 Zero Coupon, 9/01/09......... No Opt. Call 10,115,198
AAA 1,500 Ser. A, 6.75%, 9/01/12....... 9/01 @ 102 1,613,685
AAA 15,000 Zero Coupon, 9/01/06......... No Opt. Call 10,950,450
AAA 3,745++ Texas St. Bldg. Fin. Auth.
Rev., 7.00%, 2/01/01, MBIA.. N/A 3,960,749
AAA 5,900 Texas St. Pub. Fin. Auth.
Bldg. Rev., Ser. B, 6.25%,
2/01/09, AMBAC.............. No Opt. Call 6,709,067
AAA 3,395 Tyler Cnty. Hlth. Fac. Dev.
Corp. Rev., Mother Francis
Hosp., 6.50%, 7/01/06,
FGIC........................ 7/02 @ 102 3,680,723
AAA 2,275 Ysleta Indpt. Sch. Dist. Rev.,
Zero Coupon, 8/15/08, PSFG.. No Opt. Call 1,498,543
-------------
239,438,596
-------------
Utah--1.0%
AAA 3,500 Intermountain Pwr. Agcy. Rev.,
Ser. B, 6.00%, 7/01/07,
MBIA........................ No Opt. Call 3,895,955
Intermountain Pwr. Agcy. Pwr.
Supply Rev.,
AAA 4,450 Ser. F, 5.00%, 7/01/13,
AMBAC....................... 6/99 @ 100 4,450,267
A+ 1,800 Ser. B, 5.00%, 7/01/16....... 6/99 @ 100 1,751,112
AAA 3,175 Salt Lake City Wtr.
Conservancy, Zero Coupon,
10/01/10, AMBAC............. No Opt. Call 1,888,172
</TABLE>

F-14
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ -------------
<C> <C> <S> <C> <C>
Utah--(Continued)
Salt Lake Cnty. Mun. Bldg.
Auth. Lease Rev., MBIA
AAA 1,550 Ser. A, 6.05%, 10/01/08...... 10/04 @ 101 $ 1,684,432
AAA 1,450 6.15%, 10/01/10.............. 10/04 @ 101 1,573,917
-------------
15,243,855
-------------
Virginia--0.7%
Peninsula Port Auth. Hlth.
Sys., Riverside Hlth. Sys.,
MBIA
AAA 6,000++ Proj. A, 6.625%, 7/01/02..... N/A 6,632,280
AAA 3,380 Proj. B, 6.625%, 7/01/10..... 7/02 @ 102 3,687,343
-------------
10,319,623
-------------
Washington--9.1%
AAA 12,850 King Cnty., G.O., Ser. D,
5.55%, 12/01/08, MBIA....... 12/07 @ 102 14,072,420
AAA 4,650++ Port of Seattle Rev., 6.60%,
8/01/02, MBIA............... N/A 5,146,341
Seattle, G.O.,
AAA 1,700 Ser. B, Zero Coupon,
12/15/07, MBIA.............. No Opt. Call 1,168,495
AAA 1,345 Ser. E, Zero Coupon,
12/15/08, MBIA.............. No Opt. Call 881,890
AA 6,900 5.40%, 1/01/08............... 1/03 @ 102 7,293,645
AA 2,650 Seattle Wtr. Sys. Rev., 5.50%,
6/01/18..................... 6/03 @ 102 2,702,708
AAA 1,250 Snohomish Cnty. Pub. Util.
Dist., Elec. Rev., 6.55%,
1/01/07, FGIC............... ETM 1,424,913
Snohomish Cnty. Sch. Dist.,
G.O., MBIA
AAA 2,235++ 6.10%, 12/01/03.............. N/A 2,490,438
AAA 1,765 6.10%, 12/01/08.............. 12/03@102 1,925,474
AAA 3,835 6.70%, 12/01/06.............. 12/01 @ 100 4,074,956
AAA 4,145 6.75%, 12/01/07.............. 12/01 @ 100 4,404,145
AA+ 4,000 Washington St., G.O., Ser. A,
5.375%, 7/01/21............. 7/06 @ 100 4,091,280
AAA 9,000 Washington St. Hlth. Care Fac.
Auth. Rev., Virginia Mason
Oblig. Group, 6.30%,
2/15/09, MBIA............... 2/03 @ 102 9,714,960
Washington St. Pub. Pwr.
Supply Sys. Rev.,
AAA 11,000 5.80%, 7/01/07, FSA.......... No Opt. Call 12,094,610
AAA 12,905 Zero Coupon, 7/01/10, MBIA... No Opt. Call 7,720,029
AAA 13,395 Nuclear Proj. No. 1, Ser. A,
5.75%, 7/01/11, MBIA........ 7/06 @ 102 14,466,868
AAA 12,875 Nuclear Proj. No. 2, Ser. A,
Zero Coupon, 7/01/06, MBIA.. No Opt. Call 9,466,472
AAA 2,000 Nuclear Proj. No. 2, 5.55%,
1/01/07, FGIC............... 7/03 @ 102 2,115,660
AAA 3,000 Nuclear Proj. No. 2, 5.55%,
7/01/10, FGIC............... 7/03 @ 102 3,173,490
AAA 13,635 Nuclear Proj. No. 2, Ser. A,
6.25%, 7/01/09, MBIA........ 7/02 @ 102 14,640,854
AAA 2,265++ Nuclear Proj. No. 2, Ser. A,
6.50%, 7/01/01, FGIC........ N/A 2,440,402
AAA 3,500++ Nuclear Proj. No. 2, Ser. A,
7.00%, 7/01/00, FGIC........ N/A 3,708,705
</TABLE>

F-15
<PAGE>

<TABLE>
<CAPTION>
Principal
Amount Option Call
Rating* (000) Description Provisions++ Value
------- --------- ----------- ------------ --------------
<C> <C> <S> <C> <C>
Washington--(Continued)
AAA 5,550 Nuclear Proj. No. 3, Zero
Coupon, 7/01/07, BIGI...... No Opt. Call $ 3,878,562
AAA 2,000 Nuclear Proj. No. 3, Zero
Coupon, 7/01/08, BIGI...... No Opt. Call 1,343,800
--------------
134,441,117
--------------
West Virginia--0.8%
AAA 11,600 West Virginia St. Pkwys.
Econ. Dev. & Tourism Auth.,
5.70%, 5/15/09, FGIC....... 5/03 @ 102 12,295,652
--------------
Wisconsin--0.4%
Wisconsin St. Hlth. & Ed.
Fac. Auth. Rev.,
AAA 2,850 Columbia Hosp. Rev., 6.50%,
11/15/06, MBIA............. 11/01 @ 102 3,064,064
AAA 2,000 Wausau Hosp. Inc., Ser. A,
6.625%, 2/15/01, AMBAC..... N/A 2,142,480
--------------
5,206,544
--------------
Total Long-Term Investments
(cost $1,981,849,830)...... 2,165,119,584
--------------
SHORT-TERM INVESTMENTS** 0.4%
Mississipi--0.2%
VMIGI 1,700 Jackson Cnty. P.C.R., Chevron
U.S.A. Inc. Proj., F.R.D.D,
4.25%, 5/03/99............. N/A 1,700,000
P1 100 Perry Cnty. P.C.R., F.R.D.D.,
4.25%, 5/03/99............. N/A 100,000
--------------
1,800,000
--------------
Washington--0.2%
Washington St. Hlth. Care
Fac. Auth. Rev., Sisters of
Providence,
VMIGI 3,100 F.R.D.D., 4.25%, 5/03/99.... N/A 3,100,000
--------------
Total Short-Term Investments
(cost $4,900,000).......... 4,900,000
--------------
Total Investments (cost
$1,986,749,830) 147.6%..... 2,170,019,584
Other assets in excess of
liabilities 12.9%.......... 189,180,564
Liquidation value of
preferred stock (60.4%).... (888,500,000)
--------------
Net Assets Applicable to
Common Shareholders 100%... $1,470,700,148
==============
</TABLE>

- ------
(a) The following abbreviations are used in portfolio descriptions:
AMBAC--American Municipal Bond Assurance Corporation
BIGI--Bond Investors Guaranty Insurance Company
C.O.P.--Certificate of Participation

F-16
<PAGE>

CONNIE LEE--College Construction Loan Insurance Association
ETM--Escrowed to maturity
FHA--Federal Housing Administration
FNMA--Federal National Mortgage Association
FGIC--Financial Guaranty Insurance Company
FSA--Financial Security Assurance
F.R.D.D.--Floating Rate Daily Demand**
G.O.--General Obligation Bond
MBIA--Municipal Bond Insurance Association
PSFG--Permanent School Fund Guaranty
* Rating using the higher of Standard & Poor's, Moody's or Fitch's rating.
** For purposes of amortized cost valuation, the maturity date of these
instruments is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
+ Option call provisions: date (month/year) and price of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
++ This bond is pre-refunded.

F-17
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES

The following table sets forth, as of April 30, 1999, (i) the Statement of
Assets and Liabilities of each of the Trusts; (ii) the Statement of Assets and
Liabilities of BKN; and (iii) the pro forma Statement of Assets and
Liabilities of BKN as adjusted to give effect to all of the Mergers. The
Statement of Assets and Liabilities of each Trust and BKN is likely to be
different at the Closing as a result of the effects of the Trusts' and BKN's
ongoing operations.
<TABLE>
<CAPTION>
April 30, 1999 Pro Forma
(Unaudited) BKN BMN BMT BRM Adjustments Pro Forma
- -------------- ------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments, at value
(cost $360,158,166,
$658,852,199,
$372,282,479,
$595,456,987 and
$1,986,749,830,
respectively)........... $384,048,030 $716,428,988 $411,112,289 $658,430,277 $2,170,019,584
Cash.................... 467,459 0 48,572 0 (516,031) 5 0
Receivable for
investments sold........ 0 2,891,700 7,871,528 0 10,763,228
Receivable for shares
sold.................... 0 0 0 0 197,500,000 3 197,500,000
Interest receivable..... 6,576,099 12,996,136 0 10,921,079 30,493,314
Other assets............ 9,515 11,452 31,545 22,811 75,323
------------ ------------ ------------ ------------ ------------ --------------
391,101,103 732,328,276 419,063,934 669,374,167 196,983,969 2,408,851,449
------------ ------------ ------------ ------------ ------------ --------------
Liabilities
Payable for investments
purchased............... 2,988,291 0 0 0 2,988,291
Dividends payable-common
stock................... 0 0 0 0 37,175,000 1 37,175,000
Preferred share issuance
cost payable............ 0 0 0 0 2,643,655 4 2,643,655
Merger cost payable..... 0 0 0 0 1,379,124 2 1,379,124
Due to custodian........ 0 2,174,324 0 1,885,590 (516,031) 5 3,543,883
Investment advisory fee
payable................. 112,527 249,479 121,757 193,274 677,037
Administration fee
payable................. 48,226 0 34,788 55,221 138,235
Dividends payable-
preferred stock......... 37,290 158,220 84,479 98,693 378,682
Other accrued expenses.. 224,300 192,534 154,000 166,560 727,394
------------ ------------ ------------ ------------ ------------ --------------
3,410,634 2,764,557 395,024 2,399,338 40,681,748 49,651,101
------------ ------------ ------------ ------------ ------------ --------------
Net Investment Assets... $387,690,469 $729,563,719 $418,668,910 $666,974,829 $156,302,221 $2,359,200,148
============ ============ ============ ============ ============ ==============
Net investment assets
were comprised of
Common Stock
Par value.............. $ 167,071 $ 454,106 $ 258,856 $ 272,071 (195,983) 6 $ 956,121
Paid-in capital in
excess of par.......... 232,077,765 421,119,385 239,833,688 378,448,786 (3,826,796) 2,4,6 1,267,652,828
Preferred stock........ 130,000,000 225,000,000 130,000,000 206,000,000 197,500,000 3 888,500,000
------------ ------------ ------------ ------------ ------------ --------------
362,244,836 646,573,491 370,092,544 584,720,857 193,477,221 2,157,108,949
Undistributed net
investment income...... 1,635,168 25,429,910 10,095,794 19,588,085 (37,175,000) 1 19,573,957
Accumulated net
realized loss.......... (79,399) (16,471) (349,238) (307,403) (752,511)
Net unrealized
appreciation........... 23,889,864 57,576,789 38,829,810 62,973,290 183,269,751
------------ ------------ ------------ ------------ ------------ --------------
Net investment assets,
April 30, 1999.......... $387,690,469 $729,563,719 $418,668,910 $666,974,829 $156,302,221 $2,359,200,148
============ ============ ============ ============ ============ ==============
Net assets applicable to
common shareholders..... $257,690,469 $504,563,719 $288,668,910 $460,974,829 $1,470,700,148
============ ============ ============ ============ ==============
Net Asset value per
common share............ $ 15.42 $ 11.11 $ 11.15 $ 16.94 $ 15.38
============ ============ ============ ============ ==============
COMMON SHARES
OUTSTANDING............. 16,707,093 45,410,519 25,885,619 27,207,090 95,612,121
Adjustment 1 Special
Dividend/1.........../.. 17,990,000 5,885,000 11,300,000 37,175,000
Adjustment 2 Merger
Cost/2.............../.. 240,982 155,025 413,645 264,183 1,379,124
Adjustment 3 New
Preferred
Issuance/3.........../.. 197,500,000
Adjustment 4 Preferred
Issuance Cost/4....../.. 2,643,655
Adjustment 5 Reclass Of
Cash To Due to
Custodian/5........../.. 516,031
Adjustment 6 Reclass
Between Par Value And
Paid-In Capital In
Excess Of Par/6....../.. 195,983
</TABLE>
/1/ Represents the special dividend to be declared by BMN, BMT and BRM prior
to the merger date.
/2/ Represents the estimated cost of the mergers. The cost of the mergers will
be prorated to each Trust ratably and booked prior to the merger date.
/3/ Represents the estimated gross proceeds from the issuance of new preferred
shares.
/4/ Represents the estimated cost of the issuance of the new preferred.
- ----
/5/ Represents a reclass of cash to due to custodian.
/6/ Represents a reclass based on $0.01 par value of new BKN shares
outstanding.

F-18
<PAGE>

STATEMENT OF OPERATIONS

The following table sets forth for the six months ended April 30, 1999 and for
the year ended October 31, 1998, the statement of operations for each of the
Trusts and the pro forma statement of operations as adjusted to give effect to
all of the Mergers.

<TABLE>
<CAPTION>
Pro Forma
Statement of Operations
For the Six months ended Pro Forma Pro Forma
April 30, 1999 (Unaudited) BKN BMN BMT BRM Adjustments* Combined
- -------------------------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income
Income
Interest and discount
earned.................. $10,493,252 $21,402,752 $12,295,158 $18,248,804 $ 0 $ 62,439,966
----------- ----------- ----------- ----------- --------- ------------
Expenses
Investment advisory..... 680,772 1,284,467 736,189 1,159,706 0 3,861,133
Administration.......... 291,759 256,894 210,509 321,345 564,266 1,654,771
Auction agent........... 171,000 278,500 166,500 277,500 893,500
Custodian............... 41,500 80,000 55,000 70,000 (56,500) 190,000
Reports to
shareholders............ 36,500 45,000 30,250 38,500 (35,000) 115,250
Directors............... 29,000 42,000 31,304 42,000 (102,304) 42,000
Audit................... 19,000 27,000 21,250 29,730 (63,500) 33,500
Transfer agent.......... 12,500 16,250 17,000 14,500 0 60,250
Legal................... 4,000 10,000 10,000 10,000 (24,000) 10,000
Miscellaneous........... 19,083 95,434 65,416 88,648 (23,000) 245,581
----------- ----------- ----------- ----------- --------- ------------
Total expenses.......... 1,305,114 2,135,544 1,343,417 2,061,949 259,962 7,105,985
----------- ----------- ----------- ----------- --------- ------------
Net investment income..... 9,188,138 19,267,208 10,951,741 16,186,856 259,962 55,333,981
----------- ----------- ----------- ----------- --------- ------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss)
on investments............ 1,719 2,678 2,656 (190,174) 0 (183,121)
Net change in unrealized
appreciation on
investments............... (2,878,921) (9,477,326) (4,185,206) (6,952,798) 0 (23,494,251)
----------- ----------- ----------- ----------- --------- ------------
Net loss on investments... (2,977,202) (9,474,648) (4,182,550) (7,142,972) 0 (23,677,372)
----------- ----------- ----------- ----------- --------- ------------
Net Increase in Net
Investment Assets
Resulting
from Operations........... $ 6,310,936 $ 9,972,560 $ 6,679,191 $ 9,043,884 $ 259,962 $ 31,656,608
=========== =========== =========== =========== ========= ============
</TABLE>
- ----
* Adjustments to reflect anticipated expenses based on historical information
and Pro Forma Combined Net Assets.

F-19
<PAGE>

<TABLE>
<CAPTION>
Pro Forma
Statement of Operations
For the Year ended Pro Forma Pro Forma
October 31, 1998 (Unaudited) BKN BMN BMT BRM Adjustments* Combined
- ---------------------------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income
Income
Interest and discount
earned................. $20,724,998 $42,805,504 $24,590,316 $36,497,608 $ 0 $124,618,426
----------- ----------- ----------- ----------- ---------- ------------
Expenses
Investment advisory..... 1,361,169 2,568,933 1,472,377 2,319,412 0 7,721,891
Administration.......... 583,358 513,787 421,017 662,689 1,128,530 3,309,381
Auction agent........... 345,000 557,000 333,000 555,000 0 1,790,000
Custodian............... 107,500 160,000 110,000 140,000 (137,500) 380,000
Reports to
shareholders........... 69,000 90,000 60,500 77,000 (70,000) 226,500
Directors............... 64,000 84,000 62,608 84,000 (210,608) 84,000
Audit................... 41,000 54,000 42,500 59,500 (130,000) 67,000
Transfer agent.......... 23,000 32,500 34,000 29,000 0 118,500
Legal................... 6,000 20,000 20,000 20,000 (46,000) 20,000
Miscellaneous........... 92,838 190,867 130,831 176,696 (70,894) 520,338
----------- ----------- ----------- ----------- ---------- ------------
Total expenses.......... 2,692,865 4,271,087 2,686,833 4,123,297 463,258 14,237,610
----------- ----------- ----------- ----------- ---------- ------------
Net investment income..... 18,032,133 38,534,417 21,903,483 32,374,311 463,258 110,380,816
----------- ----------- ----------- ----------- ---------- ------------
Realized and Unrealized
Gain (Loss) on
Investments
Net realized gain (loss)
on investments........... 3,208,243 (163,828) 16,839 57,572 0 3,118,826
Net change in unrealized
appreciation on
investments.............. 8,422,329 3,358,947 3,514,040 11,392,691 0 26,688,007
----------- ----------- ----------- ----------- ---------- ------------
Net gain on investments... 11,630,572 3,195,119 3,530,879 11,450,263 0 29,806,833
----------- ----------- ----------- ----------- ---------- ------------
Net Increase in Net
Investment Assets
Resulting
from Operations.......... $29,662,705 $41,729,536 $25,434,362 $43,824,574 $ 463,528 $140,187,649
=========== =========== =========== =========== ========== ============
</TABLE>
- -----
* Adjustments to reflect anticipated expenses based on historical information
and Pro Forma Combined Net Assets.

F-20
<PAGE>

CERTAIN PRO FORMA FINANCIAL INFORMATION

The following tables present certain pro-forma financial information for the
periods indicated as adjusted to give effect to each of the potential Mergers
separately and all of the potential Mergers together.

<TABLE>
<CAPTION>
Pro-forma Total Returns
-------------------------------------------------------------------------------
BKN, BKN, BKN, BKN, BMN,
Period BKN & BMN BMN & BMT BMN & BRM BKN & BMT BKN & BRM BMT & BRM BMT & BRM
- ------ --------- ---------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Six months ended April
30, 1999................ 1.53% 2.52% 2.43% 2.36% 2.25% 2.35% 2.48%
Year ended October 31,
1998.................... 23.70% 23.79% 23.56% 23.37% 23.09% 23.35% 23.69%
Year ended October 31,
1997.................... 17.75% 17.85% 17.61% 17.41% 17.11% 17.39% 17.75%
Year ended October 31,
1996.................... 12.16% 12.25% 12.01% 11.82% 11.51% 11.80% 12.15%

<CAPTION>
Pro-forma Average Net Assets
-------------------------------------------------------------------------------
BKN, BKN, BKN, BKN, BMN,
Period BKN & BMN BMN & BMT BMN & BRM BKN & BMT BKN & BRM BMT & BRM BMT & BRM
- ------ --------- ---------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Six months ended April
30, 1999................ $768,493 $1,058,914 $1,232,338 $550,391 $723,815 $1,014,236 $1,522,759
Year ended October 31,
1998.................... 766,661 1,056,122 1,228,793 548,741 721,412 1,010,873 1,518,254
Year ended October 31,
1997.................... 742,789 1,025,280 1,179,690 526,438 680,848 963,339 1,462,181
Year ended October 31,
1996.................... 734,148 1,012,835 1,160,715 517,227 665,107 943,794 1,439,402

<CAPTION>
Pro-forma Operating Expense Ratios
-------------------------------------------------------------------------------
BKN, BKN, BKN, BKN, BMN,
Period BKN & BMN BMN & BMT BMN & BRM BKN & BMT BKN & BRM BMT & BRM BMT & BRM
- ------ --------- ---------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Six months ended April
30, 1999*............... 0.96% 0.95% 0.94% 0.98% 0.96% 0.95% 0.94%*
Year ended October 31,
1998.................... 0.96% 0.95% 0.94% 0.98% 0.96% 0.95% 0.94%
Year ended October 31,
1997.................... 0.96% 0.96% 0.95% 0.99% 0.97% 0.97% 0.95%
Year ended October 31,
1996.................... 0.97% 0.96% 0.95% 1.00% 0.98% 0.97% 0.95%
</TABLE>
- ----
* annualized

F-21
<PAGE>

COMPARATIVE PERFORMANCE INFORMATION

Comparative investment performance for BKN and the Trusts for certain periods
ended April 30, 1999 are shown below.

<TABLE>
<CAPTION>
Average Annual Total
Average Annual Total Investment Return
Return on Market Value On Net Asset Value
---------------------------------------- -------------------------
1 Year 3 Yrs. 5 Yrs. Life 1 Year 3 Yrs. 5 Yrs. Life
-------- -------- -------- ------- ------ ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BKN...... % % % % 8.03% 9.54% 9.72% 7.70%
BMN...... % % % % 6.32% 6.74% 7.32% 8.19%
BMT...... % % % % 6.59% 7.53% 7.96% 8.52%
BRM...... % % % % 7.43% 8.45% 8.60% 8.41%
</TABLE>

Total Investment Return on Market Value is the average annual combination of
reinvested dividend income, reinvested capital gains distributions, if any,
and changes in price per share. Total Return on Net Asset Value is the average
annual combination of reinvested dividend income, reinvested capital gains
distributions, if any, and changes in net asset value per common share. The
life of BKN and each Trust is calculated from April 30, 1999 to February 28,
1993 for BKN, September 27, 1991 for BMN, February 28, 1992 for BMT and
September 25, 1992 for BRM. Past performance information is not necessarily
indicative of future results.

F-22
<PAGE>

CAPITALIZATION

The following table sets forth, as of April 30, 1999, (i) the capitalization of
each of the Trusts; (ii) the capitalization of BKN; and (iii) the pro forma
capitalization of BKN as adjusted to give effect to each of the Mergers
separately and all of the Mergers together. The capitalization of each Trust
and BKN is likely to be different at the Closing as a result of the effects of
the Trusts' and BKN's ongoing operations.

CAPITALIZATION AS OF APRIL 30, 1999

<TABLE>
<CAPTION>
BKN BMN BMT BRM
(Actual) (Actual) (Actual) (Actual)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shareholders' Equity:
Common shares, $.01
par value per share,
200,000,000 shares
authorized for each
Trust and BKN:........ $ 167,071 $ 454,106 $ 258,856 $ 272,071
[16,707,093] shares
outstanding for BKN
[45,410,639] shares
outstanding for BMN
[25,885,639] shares
outstanding for BMT
[27,207,093] shares
outstanding for BRM
Preferred shares,
$25,000 liquidation
value per share:........ 130,000,000 225,000,000 130,000,000 206,000,000
[5,200] shares
outstanding for BKN
[9,000] shares
outstanding for BMN
[5,200] shares
outstanding for BMT
[8,240] shares
outstanding for BRM
Paid-in surplus......... 232,077,765 421,119,385 239,833,688 378,448,780
Undistributed net
investment income....... 1,635,168 25,429,910 10,095,794 19,588,085
Accumulated Net realized
loss.................... (79,399) (16,471) (349,238) (307,403)
Net unrealized
appreciation of
investments............. 23,889,864 57,576,789 38,829,810 62,973,290
------------ ------------ ------------ ------------
Net assets.............. $387,690,469 $729,563,719 $418,668,910 $666,974,829
------------ ------------ ------------ ------------
Net assets attributable
to common shares........ $257,690,469 $504,563,719 $288,668,910 $460,974,829
============ ============ ============ ============
</TABLE>

F-23
<PAGE>

PRO FORMA CAPITALIZATION
AS OF APRIL 30, 1999

<TABLE>
<CAPTION>
BKN and BKN, BMN BKN, BMN BKN, BKN, BMN,
BMN and BMT and BRM BKN and BMT BKN and BRM BMT & BRM BMT & BRM
Pro forma Pro forma Pro forma Pro forma Pro Forma Pro Forma Pro Forma
-------------- -------------- -------------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shareholders'
Equity:
Common shares of
BKN, $.01 par
value per share,
200,000,000
shares authorized
for each Trust
and BKN:......... $ 48,536 $ 665,876 $ 772,781 $ 350,411 $ 457,316 $ 640,656 $ 956,721
Preferred shares,
$25,000
liquidation value
per share,
shares
authorized:....... 651,306,929 890,446,907 1,028,512,850 470,526,173 608,592,115 847,732,093 1,267,652,828
Paid-in surplus.... 454,573,655 622,282,622 720,791,033 331,371,205 429,879,616 597,588,583 888,500,000
Undistributed net
investment
income............ 9,075,078 13,285,872 15,363,163 5,845,962 7,923,253 12,134,047 19,573,957
Accumulated net
loss.............. (95,870) (445,108) (403,273) (428,637) (386,802) (736,040) (752,511)
Net unrealized
appreciation of
investments....... 81,466,653 120,296,463 144,439,943 62,719,674 86,863,154 125,692,964 183,269,751
-------------- -------------- -------------- ------------ -------------- -------------- --------------
Net assets......... $1,196,808,980 $1,646,378,455 $1,909,630,673 $870,230,611 $1,133,482,829 $1,583,052,304 $2,359,200,148
============== ============== ============== ============ ============== ============== ==============
Net assets
attributable to
common shares..... $ 742,235,326 $1,024,095,833 $1,188,839,641 $538,859,405 $ 703,603,213 $ 985,463,721 $1,470,700,148
============== ============== ============== ============ ============== ============== ==============
Common shares
outstanding....... 48,253,593 66,577,586 77,288,129 35,031,087 45,741,629 64,065,623 95,612,121
============== ============== ============== ============ ============== ============== ==============
</TABLE>

F-24
<PAGE>

APPENDIX I

FORM OF AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of the day
of , 1999, by and among The BlackRock Municipal Target Term Trust Inc.
("BMN"), The BlackRock Insured Municipal Term Trust Inc. ("BMT") and The
BlackRock Insured Municipal 2008 Term Trust Inc. ("BRM" and, together with BMN
and BMT, the "Trusts"and each a "Trust") and The BlackRock Investment Quality
Municipal Trust Inc. ("BKN" and, together with the Trusts, the "Funds"), each
a Maryland corporation.

PLAN OF MERGER

The merger of each of BMN, BMT and BRM with and into BKN will comprise the
following: (i) the relevant Trust will be merged with and into BKN in
accordance with the Maryland General Corporation Law ("Maryland Law"); (ii)
the separate existence of such Trust will cease; (iii) BKN will be the
surviving corporation; (iv) each share of common stock ("Common Stock") of
such Trust will be converted into and exchangeable for an equivalent dollar
amount (to the nearest one ten-thousandth of one cent) of full shares of
Common Stock of BKN, with a par value of $.01 per share ("BKN Common Stock"),
and the right to receive cash in lieu of any fractional shares of BKN,
computed based on the relative net asset value per share of such Trust and BKN
on the last business day prior to the Effective Date (as defined in Section
7(a)) of such merger and (v) each share of preferred stock (the "Preferred
Stock") of such Trust will be converted into and exchangeable for one newly
issued share of Preferred Stock of BKN (the "BKN Preferred Stock") as set
forth in Section 4(b) of this Agreement, all upon and subject to the terms
hereinafter set forth (each a "Merger" and collectively the "Mergers").

As soon as practicable after satisfaction of all conditions to a Merger, BKN
and the Trust that is a party to such Merger will jointly file executed
articles of merger (the "Articles of Merger") with the Department of
Assessments and Taxation of the State of Maryland and make all other filings
or recordings required by Maryland Law in connection with such Merger. A
Merger shall become effective at such time as the Articles of Merger are filed
with and accepted for recording by the Department of Assessments and Taxation
of the State of Maryland or at such later time as is specified in the Articles
of Merger (the "Effective Date").

From and after the Effective Date of any Merger, BKN will possess all of the
rights, privileges, purposes, powers and franchises and be subject to all of
the restrictions, liabilities, obligations, disabilities and duties of BKN and
the Trust party to such Merger, all as provided under Maryland Law.

The parties intend that each Merger shall qualify as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended ("Code").

As promptly as practicable after a Merger, the registration of the Trust that
is a party to such Merger under the Investment Company Act of 1940, as amended
(the "1940 Act") shall be terminated.

I-1
<PAGE>

AGREEMENT

In consideration of the covenants and agreements hereinafter set forth, and
intending to be legally bound, BKN and each Trust hereby agree as follows:

1 Representations and Warranties of BKN.

BKN represents and warrants to, and agrees with each Trust that:

a. BKN is a corporation duly organized, validly existing and in good
standing in conformity with Maryland Law, and has the power to own all of
its assets and to carry out this Agreement. BKN has all necessary federal,
state and local authorizations to carry on its business as it is now being
conducted and to carry out this Agreement.

b. BKN is duly registered under the 1940 Act as a diversified, closed-end
management investment company and such registration has not been revoked or
rescinded and is in full force and effect. BKN has elected and qualified
for the special tax treatment afforded regulated investment companies
("RICs") under Sections 851-855 of the Code at all times since its
inception, and intends to continue to so qualify until consummation of the
Mergers and thereafter.

c. BKN has full power and authority to enter into and perform its
obligations under this Agreement. The execution, delivery and performance
of this Agreement has been duly authorized by all necessary action of its
Board of Directors, and this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects
of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar
laws relating to or affecting creditors' rights generally and court
decisions with respect thereto.

d. There are no material legal, administrative or other proceedings pending
or, to the knowledge of BKN, threatened against BKN which assert liability
on the part of BKN or which materially affect its financial condition or
its ability to consummate any or all of the Mergers. BKN is not charged
with or, to the best of its knowledge, threatened with any violation or
investigation of any possible violation of any provisions of any Federal,
state or local law or regulation or administrative ruling relating to any
aspect of its business.

e. BKN is not a party to or obligated under any provision of its Articles
of Incorporation, as amended, its Articles Supplementary, as amended, or
its by-laws, as amended, or any contract or other commitment or obligation,
and is not subject to any order or decree which would be violated by its
execution of or performance under this Agreement, except for those that
will be complied with, satisfied, amended or waived to cure any potential
violation as a condition precedent to any Merger.

f. Each Trust has been furnished with a statement of assets, liabilities
and capital and a schedule of investments of BKN, each as of the end of
BKN's most recently completed fiscal year, said financial statements having
been audited by Deloitte & Touche LLP, independent public accountants.

g. Each Trust has been furnished with BKN's Annual Report to Stockholders
for its most recently completed fiscal year, and the audited financial
statements appearing therein fairly present the

I-2
<PAGE>

financial position of BKN as of the dates indicated therein, in conformity
with generally accepted accounting principles applied on a consistent
basis.

h. There are no material contracts outstanding to which BKN is a party that
have not been disclosed in the N-14 Registration Statement (as defined in
Section l(1) below) or will not otherwise be disclosed to each Trust prior
to the Effective Date of the Merger to which each Trust is a party.

i. BKN has no known liabilities of a material amount, contingent or
otherwise, other than those shown on BKN's statements of assets,
liabilities and capital referred to above, those incurred in the ordinary
course of its business as an investment company since the end of BKN's most
recently completed fiscal year and those incurred in connection with the
Mergers. Prior to the Effective Date of a Merger, BKN will advise the Trust
that is a party to such Merger in writing of all known liabilities,
contingent or otherwise, whether or not incurred in the ordinary course of
business, existing or accrued.

j. BKN has filed, or has obtained extensions to file, all Federal, state
and local tax returns which are required to be filed by it, and has paid
all Federal, state and local taxes shown on said returns to be due and
owing and all assessments received by it, up to and including the taxable
year in which the Effective Date of a Merger occurs. All tax liabilities of
BKN have been adequately provided for on its books, and no tax deficiency
or liability of BKN has been asserted and no question with respect thereto
has been raised by the Internal Revenue Service or by any state or local
tax authority for taxes in excess of those already paid, up to and
including the taxable year in which the Effective Date of a Merger occurs.

k. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by BKN of any
Merger, except such as may be required under the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934, as amended
(the "1934 Act"), the 1940 Act, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and the laws of the State of
Maryland.

l. The registration statement filed by BKN on Form N-14 relating to the BKN
Common Stock and BKN Preferred Stock to be issued pursuant to this
Agreement, and any supplement or amendment thereto or to the documents
therein (as amended, the "N-14 Registration Statement"), on the effective
date of the N-14 Registration Statement, at the time of the stockholders'
meetings referred to in Section 6(a) of this Agreement and at the Effective
Date, insofar as it relates to BKN (i) will comply in all material respects
with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the
rules and regulations thereunder and (ii) will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading; and the prospectus included therein will not contain any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection only shall apply to
statements in or omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by BKN for use
in the N-14 Registration Statement as provided in Section 6 of this
Agreement.

I-3
<PAGE>

m. BKN is authorized to issue 200,000,000 shares of capital stock, par
value $.01 per share, of which shares are designated BKN Common Stock,
of which are designated Auction Rate Municipal Preferred Stock, Series
T7 and of which are designated Auction Rate Municipal Preferred Stock
Series T28. Each outstanding share of capital stock is fully paid,
nonassessable and has full voting rights.

n. All of the issued and outstanding shares of BKN Common Stock and BKN
Preferred Stock have been offered for sale and sold in conformity with all
applicable Federal and state securities laws.

o. The BKN Common Stock and BKN Preferred Stock to be issued pursuant to
this Agreement will have been duly authorized and, when issued and
delivered pursuant to this Agreement, will be legally and validly issued
and will be fully paid and nonassessable and will have full voting rights,
and no stockholder of BKN will have any preemptive right of subscription or
purchase in respect thereof.

p. At or prior to the Effective Date, the BKN Common Stock and BKN
Preferred Stock to be issued pursuant to this Agreement will be duly
qualified for offering to the public in conformity with all applicable
federal and sate securities laws, and there are a sufficient number of such
shares registered under the 1933 Act to permit the issuance contemplated by
this Agreement.

q. At or prior to the Effective Date of a Merger, BKN will have obtained
any and all regulatory, rating agency, director and stockholder approvals
necessary to issue the BKN Common Stock and the BKN Preferred Stock in
connection with such Merger.

r. The books and records of BKN made available to each Trust and/or its
counsel are substantially true and correct and contain no material
misstatements or omissions with respect to the operations of BKN.

2.Representations and Warranties of each Trust.

Each Trust severally and not jointly represents and warrants to, and agrees
with, each other party to this Agreement that:

a. The Trust is a corporation duly organized, validly existing and in good
standing in conformity with Maryland Law, and has the power to own all of
its assets and to carry out this Agreement. The Trust has all necessary
Federal, state and local authorizations to carry on its business as it is
now being conducted and to carry out this Agreement.

b. The Trust is duly registered under the 1940 Act as a diversified,
closed-end management investment company, and such registration has not
been revoked or rescinded and is in full force and effect. The Trust has
elected and qualified for the special tax treatment afforded RICs under
Sections 851-855 of the Code at all times since its inception and intends
to continue to so qualify for its taxable year ending upon the termination
of the Trust.

c. The Trust has full power and authority to enter into and perform its
obligations under this Agreement. The execution, delivery and performance
of this Agreement has been duly authorized by all necessary action of the
Trust's Board of Directors, and this Agreement constitutes a valid and
binding contract enforceable in accordance with its terms, subject to the
effects of bankruptcy,

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<PAGE>

insolvency, moratorium, fraudulent conveyance and similar laws relating to
or affecting creditors' rights generally and court decisions with respect
thereto.

d. There are no material legal, administrative or other proceedings pending
or, to the knowledge of the Trust, threatened against the Trust which
assert liability on the part of the Trust or which materially affect its
financial condition or its ability to consummate the Merger to which it is
a party. The Trust is not charged with or, to the best of its knowledge,
threatened with any violation or investigation of any possible violation of
any provisions of any Federal, state or local law or regulation or
administrative ruling relating to any aspect of its business.

e. The Trust is not a party to or obligated under any provision of its
Articles of Incorporation, as amended, Articles Supplementary, as amended,
or its by-laws, as amended, or any contract or other commitment or
obligation, and is not subject to any order or decree which would be
violated by its execution of or performance under this Agreement, except
for those that will be complied with, satisfied, amended or waived to cure
any potential violation as a condition precedent to the Merger to which it
is a party.

f. Each other party to this Agreement has been furnished with a statement
of assets, liabilities and capital and a schedule of investments of the
Trust, each as of the end of the Trust's most recently completed fiscal
year, said financial statements having been audited by Deloitte & Touche
LLP, independent public accountants.

g. Each other party to this Agreement has been furnished with the Trust's
Annual Report to Stockholders for the Trust's most recently completed
fiscal year, and the audited financial statements appearing therein fairly
present the financial position of the Trust as of the date thereof, in
conformity with generally accepted accounting principles applied on a
consistent basis.

h. There are no material contracts outstanding to which the Trust is a
party that have not been disclosed in the N-14 Registration Statement or
will not otherwise be disclosed to each other party to this Agreement prior
to the Effective Date of the Merger to which the Trust is a party.

i. The Trust has no known liabilities of a material amount, contingent or
otherwise, other than those shown on its statements of assets, liabilities
and capital referred to above, those incurred in the ordinary course of its
business as an investment company since the date of such statements, and
those incurred in connection with the Merger to which it is a party. Prior
to the Effective Date of the Merger to which the Trust is a party, the
Trust will advise each other party to this Agreement in writing of all
known liabilities, contingent or otherwise, whether or not incurred in the
ordinary course of business, existing or accrued.

j. The Trust has filed, or has obtained extensions to file, all Federal,
state and local tax returns which are required to be filed by it, and has
paid all Federal, state and local taxes shown on said returns to be due and
owing and all assessments received by it, up to and including the taxable
year in which the Effective Date of the Merger to which the Trust is a
party occurs. All tax liabilities of the Trust have adequately been
provided for on its books, and no tax deficiency or liability of the Trust
has been asserted and no question with respect thereto has been raised by
the Internal Revenue Service or by any state or local tax authority for
taxes in excess of those already paid, up to and including the taxable year
in which the Effective Date of the Merger to which the Trust is a party
occurs.

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<PAGE>

k. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Trust of the
Merger to which it is a party, except such as may be required under the
1933 Act, the 1934 Act, the 1940 Act, the HSR Act and the laws of the State
of Maryland.

l. The N-14 Registration Statement, on its effective date, at the time of
the stockholders' meetings referred to in Section 6(a) of this Agreement
and on the Effective Date of the Merger to which the Trust is a party,
insofar as it relates to the Trust (i) will comply in all material respects
with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the
rules and regulations thereunder, and (ii) will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading; and the prospectus included therein will not contain any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to
statements in or omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by the Trust for
use in the N-14 Registration Statement as provided in Section 6 of this
Agreement.

m. The Trust is authorized to issue 200,000,000 shares of capital stock,
par value $.01 per share. The number of shares of the Trust's capital stock
designated Common Stock and the number of shares classified as Preferred
Stock and their designations are set forth on Schedule 2(m) to this
Agreement. Each share of the Trust's outstanding Common Stock and Preferred
Stock is fully paid, nonassessable and has full voting rights.

n. All of the issued and outstanding shares of Common Stock and Preferred
Stock of the Trust have been offered for sale and sold in conformity with
all applicable Federal and state securities laws.

o. The books and records of the Trust made available to each other party to
this Agreement and/or its counsel are substantially true and correct and
contain no material misstatements or omissions with respect to the
operations of the Trust.

3.The Mergers.

a. Subject to the requisite approvals of the stockholders of BKN and the
applicable Trust being given, and to the other terms and conditions
contained herein, BKN and each Trust agree that (i) such Trust will be
merged with and into BKN in accordance with Maryland law, (ii) the separate
existence of such Trust will cease, (iii) BKN will be the surviving
corporation, (iv) each share of Common Stock of such Trust outstanding at
the Effective Date will be converted into and exchangeable for an
equivalent dollar amount (to the nearest one ten-thousandth of one cent) of
full shares of BKN Common Stock and cash in lieu of any fractional shares
of BKN, computed based on the net asset value per share of such Trust and
BKN on the last business day prior to the Effective Date of such Merger,
and (v) each share of Preferred Stock of such Trust will be converted into
and exchangeable for one newly issued share of BKN Preferred Stock as set
forth in Section 4(b) of the Agreement.

I-6
<PAGE>

b. Prior to the Effective Date for a Merger, the Trust involved in such
Merger shall declare a dividend or dividends which, together with all
previous dividends, shall have the effect of distributing to its
stockholders all of its net investment company taxable income for the
period from the beginning of its current fiscal year to and including the
Closing Date for such Merger, if any, and all of its net capital gain, if
any, realized for such period. In this regard, the last dividend period for
each series of Preferred Stock of each Trust prior to the Closing Date of
the Merger to which such Trust is a party may be shorter than the dividend
period for each such series determined as set forth in the applicable
Articles Supplementary.

c. The Merger of any Trust into BKN pursuant to this Agreement is not
contingent upon the Merger of any other Trust into BKN pursuant to this
Agreement. If the Merger of any Trust is rejected by the stockholders of
such Trust or of BKN or is not consummated for any other reason, the Merger
of any other Trust with and into BKN shall nonetheless be completed in
accordance and subject to the terms and conditions set forth herein.

d. As soon as practicable after satisfaction of all conditions to a Merger,
BKN and the respective Trust will jointly file the Articles of Merger with
the Department of Assessments and Taxation of the State of Maryland and
make all other filings or recordings required by Maryland Law in connection
with such Merger.

e. From and after the Effective Date for any Merger, BKN will possess all
of the rights, privileges, purposes, powers and franchises and be subject
to all of the restrictions, liabilities, obligations, disabilities and
duties of BKN and such merged Trust, all as provided under Maryland Law.

4.Conversion to BKN Stock.

a. At the Effective Date of a Merger, each share of Common Stock of the
Trust involved in such Merger will be converted into and exchangeable for
an equivalent dollar amount (to the nearest one ten-thousandth of one cent)
of full shares of BKN Common Stock and the right to receive cash in lieu of
any fractional shares of BKN, computed based on the net asset value per
share of BKN and the respective Trust on the last business day prior to the
Effective Date of such Merger. The net asset value per share of BKN and the
Trust involved in such Merger shall be determined as of the last business
day prior to the Effective Date, and no formula will be used to adjust the
net asset value so determined of BKN or such Trust to take into account
differences in realized and unrealized gains and losses. The value of the
assets of BKN and of the Trust involved in such Merger shall be determined
by BKN for purposes of the Merger pursuant to the procedures utilized by
BKN in valuing its own assets and determining its own liabilities. Such
valuation and determination shall be made by BKN in cooperation with the
Trusts and shall be confirmed in writing by BKN to the Trusts. BKN shall
issue to the stockholders of the Trust involved in such Merger separate
certificates or share deposit receipts for the BKN Common Stock by
delivering the certificates or share deposit receipts evidencing ownership
of the BKN Common Stock to State Street Bank & Trust Company, as the
transfer agent and registrar for BKN Common Stock. With respect to any
stockholder of a Trust holding certificates evidencing ownership of the
Common Stock of any Trust as of the Effective Date for the Merger of such
Trust, and subject to BKN being informed thereof in writing by the
respective Trust, BKN will not permit such

I-7
<PAGE>

stockholder to receive new certificates evidencing ownership of the BKN
Common Stock or pledge or redeem such BKN Common Stock, in any case, until
such stockholder has surrendered his or her outstanding certificates
evidencing ownership of the Common Stock of such Trust or, in the event of
lost certificates, posted adequate bond. Each such Trust, at its own
expense, will request its stockholders to surrender their outstanding
certificates evidencing ownership of the Common Stock of such Trust or post
adequate bond therefor. Dividends payable to holders of record of shares of
BKN Common Stock as of any date after the Effective Date of a Merger and
prior to the exchange of certificates by any stockholder of the Trust party
to such Merger shall be paid to such stockholder, without interest;
however, such dividends shall not be paid unless and until such stockholder
surrenders his or her stock certificates for exchange. No fractional shares
of BKN Common Stock will be issued to a Trust's stockholders. In lieu
thereof, BKN's transfer agent, State Street Bank & Trust Company, will
aggregate all fractional shares of BKN and sell the resulting full shares
on the New York Stock Exchange at the current market price for shares of
BKN for the account of all holders of fractional interests, and each such
holder will receive such holder's pro rata share of the proceeds of such
sale, without interest, upon surrender of such holder's BKN Common Stock
certificates.

b. At the Effective Date of a Merger, each outstanding share of Preferred
Stock of the Trust involved in such Merger will be converted into and
exchangeable for one share of BKN Preferred Stock having the same terms,
except as set forth herein. The initial dividend rate of each new share of
BKN Preferred Stock will be the same as that established in the most recent
auction of the corresponding share of Preferred Stock of the respective
Trust. Dividends will accumulate on Preferred Shares of each of the
participating Trusts up to and including the Closing Date and will be paid,
together with the dividends then payable in respect of the newly issued
corresponding shares of BKN Preferred, to the holders thereof on the
dividend payment date in respect of the Initial Dividend Period of such
newly issued shares. The "Initial Dividend Period" of the shares of BKN
Preferred will be a period consisting of the number of days following the
day on which the relevant Merger is completed that would have remained in
the dividend period for the corresponding series of Preferred Shares of the
respective Trust in effect immediately prior to the Closing Date for such
Merger. The dividend rate for the shares of each new share of BKN Preferred
for such Initial Dividend Period thereof will be the dividend rate in
effect immediately prior to the Closing Date for such Merger for the
corresponding share of Preferred Stock of the respective Trust. The initial
auction for each share of BKN Preferred Stock issued pursuant to a Merger
will be held on the day on which the auction next succeeding the Closing
Date for such Merger would have been held for the corresponding share of
Preferred Stock of the respective Trust but for the Merger.

5.Payment of Expenses.

a. BKN shall pay, subsequent to the Effective Date of a Merger, all
expenses incurred in connection with the Merger, including, but not limited
to, all costs related to the preparation and distribution of the N-14
Registration Statement and the fees of counsel to the Funds party to such
Merger. Such fees and expenses shall include legal, accounting and state
securities or blue sky fees (if any), printing costs, filing fees, stock
exchange fees, rating agency fees, portfolio transfer taxes (if any), and
any similar expenses incurred in connection with the respective Merger.
None

I-8
<PAGE>

of BKN or any Trust shall pay any expenses of its respective stockholders
arising out of or in connection with any Merger.

b. If for any reason any or all of the Mergers are not consummated, no
party shall be liable to any other party for any damages resulting
therefrom, including, without limitation, consequential damages.

6.Covenants of BKN and each Trust.

a. BKN and each Trust agree to call a special meeting of its respective
stockholders to be held as soon as is practicable after the effective date
of the N-14 Registration Statement for the purpose of considering the
Merger to which such Trust is a party as described in this Agreement.

b. BKN and each Trust covenants to operate its respective business as
presently conducted between the date hereof and the Effective Date of the
Merger with such Trust.

c. BKN and each Trust agree that, as soon as practicable after satisfaction
of all conditions to the Merger to which such Trust is a party, they will
jointly file executed Articles of Merger with the Department of Assessments
and Taxation of the State of Maryland and make all other filings or
recordings required by Maryland Law in connection with such Merger.

d. BKN undertakes that it will file, or cause its agents to file, an
application pursuant to Section 8(f) of the 1940 Act for an order declaring
that each Trust which consummates a Merger with BKN has ceased to be a
registered investment company.

e. BKN will file the N-14 Registration Statement with the Securities and
Exchange Commission (the "Commission") and will use its best efforts to
provide that the N-14 Registration Statement becomes effective as promptly
as practicable. Each Trust agrees to cooperate fully with BKN and will
furnish to BKN the information relating to itself to be set forth in the N-
14 Registration Statement as required by the 1933 Act, the 1934 Act, the
1940 Act, and the rules and regulations thereunder.

f. BKN and each Trust agree to proceed as promptly as possible to cause to
be made all necessary filings under the HSR Act with respect to the
transactions contemplated by this Agreement and to ensure that the related
waiting period expires or is otherwise terminated at the earliest possible
time.

g. BKN agrees that it has no plan or intention to sell or otherwise dispose
of the assets of any Trust to be acquired in the Merger, except for
dispositions made in the ordinary course of business.

h. BKN and each Trust agree that, on or before the Effective Date of a
Trust's Merger with BKN, all of such Trust's Federal and other tax returns
and reports required to be filed on or before such date shall have been
filed and all taxes shown as due on said returns either shall have been
paid or adequate liability reserves shall have been provided for the
payment of such taxes. In connection with this covenant, BKN and each Trust
agree to cooperate with each other in filing any tax return, amended return
or claim for refund, determining a liability for taxes or a right to a

I-9
<PAGE>

refund of taxes or participating in or conducting any audit or other
proceeding in respect of taxes. BKN agrees to retain for a period of ten
(10) years following the Effective Date of a Merger all returns, schedules
and work papers and all material records or other documents relating to tax
matters of the Trust party to such Merger for its taxable periods first
ending after such Effective Date and for all prior taxable periods. Any
information obtained under this subsection shall be kept confidential
except as otherwise may be necessary in connection with the filing of
returns or claims for refund or in conducting an audit or other proceeding.
After the Effective Date of a Merger, BKN shall prepare, or cause its
agents to prepare, any Federal, state or local tax returns, including any
Forms 1099, required to be filed by the Trust party to such Merger with
respect to its final taxable years ending with The Effective Date of its
Merger into BKN and for any prior periods or taxable years and further
shall cause such tax returns and Forms 1099 to be duly filed with the
appropriate taxing authorities. Notwithstanding the aforementioned
provisions of this subsection, any expenses incurred by BKN or any Trust
(other than for payment of taxes) in connection with the preparation and
filing of said tax returns and Forms 1099 after the Effective Date shall be
borne by BKN.

i. BKN and each Trust agree to mail to each of its respective stockholders
of record entitled to vote at the special meeting of stockholders at which
action is to be considered regarding this Agreement, in sufficient time to
comply with requirements as to notice thereof, a combined Proxy Statement
and Prospectus which complies in all material respects with the applicable
provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940
Act, and the rules and regulations, respectively, thereunder.

j. Following the consummation of any and all of the Mergers, BKN expects to
stay in existence and continue its business as a closed-end management
investment company registered under the 1940 Act.

k. Except as contemplated herein, BKN and each Trust agree that, during the
period from the date hereof to and including the Effective Date for each
Merger, BKN and each Trust will declare and pay dividends consistent with
past practices and the terms of the Common Stock and Preferred Stock issued
by each such Fund.

7.Effective Date.

a. The Merger of BKN and any Trust shall become effective at such time as
the Articles of Merger for such Merger are accepted for filing by the
Department of Assessments and Taxation of the State of Maryland or at such
later time as is specified in the Articles of Merger (the "Effective
Date").

b. Prior to the Effective Date of its Merger, each Trust shall have made
arrangements with its transfer agent to deliver to BKN, as soon as
practicable after the Effective Date, a list of the names and addresses of
all of the stockholders of record of Trust on the Effective Date and the
number of shares of Common Stock and Preferred Stock of the Trust owned by
each such stockholder, certified by its transfer agent or by its President
to the best of their knowledge and belief.

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<PAGE>

8.BKN Conditions.

The obligation of BKN to consummate a Merger with a Trust shall be subject to
the satisfaction or waiver of the following conditions, provided that the
failure of any Trust to satisfy any of these conditions shall not affect the
obligation of BKN to consummate its Merger with any other Trust:

a. This Agreement shall have been adopted, and the Merger shall have been
approved, by the affirmative vote of a majority of the shares of the BKN
Common Stock and BKN Preferred Stock outstanding on the record date for the
Special Meeting of BKN stockholders voting together as a single class; and
the Trust shall have delivered to BKN a copy of the resolutions approving
this Agreement and the Merger to which such Trust is a party adopted by its
Board of Directors and stockholders and certified by its respective
Secretary.

b. The Trust shall have furnished to BKN a statement of assets, liabilities
and capital, together with a schedule of investments with their respective
dates of acquisition and tax costs, certified on its behalf by its
President (or any Vice President) and its Treasurer, and a certificate of
both such officers, dated the Effective Date of the Merger to which such
Trust is a party, certifying that there has been no material adverse change
in its respective financial position since the date of such Trust's most
recent financial statements provided to BKN, other than changes in its
portfolio securities since that date or changes in the market value of its
portfolio securities.

c. The Trust shall have furnished to BKN a certificate signed by its
President (or any Vice President) and its Treasurer, dated the Effective
Date of the Merger to which such Trust is a party, certifying that as of
such Effective Date all representations and warranties made in this
Agreement are true and correct in all material respects as if made at and
as of such date and it has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied at
or prior to such date.

d. The Trust shall have delivered to BKN a letter from Deloitte & Touche
LLP, dated the Effective Date of the Merger to which such Trust is a party,
stating that such firm has performed a limited review of the Federal, state
and local income tax returns for the Trust's most recently completed fiscal
year, and that based on such limited review, nothing came to their
attention which caused them to believe that such returns did not properly
reflect, in all material respects, the Federal, state and local income
taxes of the Trust for the period covered thereby; and that for the period
from such date, to and including such Effective Date and for any taxable
year ending upon its dissolution, such firm has performed a limited review
to ascertain the amount of applicable Federal, state and local taxes, and
has determined that either such amount has been paid or reserves have been
established for payment of such taxes, this review to be based on unaudited
financial data; and that based on such limited review, nothing has come to
their attention which caused them to believe that the taxes paid or
reserves set aside for payment of such taxes were not adequate in all
material respects for the satisfaction of Federal, state and local taxes
for the period from such date, to and including such Effective Date and for
any taxable year ending upon its dissolution or that the Trust would not
continue to qualify as a regulated investment company for Federal income
tax purposes.

e. BKN shall have received an opinion of Miles & Stockbridge P.C., as
special counsel to BKN and the Trust, in form and substance satisfactory to
BKN and dated the Effective Date of the

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<PAGE>

Merger to which such Trust is a party, to the effect that (i) BKN and the
Trust each is a corporation duly organized, validly existing and in good
standing in conformity with Maryland Law; (ii) all corporate actions
required to be taken by BKN and each respective Trust to authorize this
Agreement and to effect the Merger have been duly authorized by all
necessary corporate actions on the part of BKN and the Trust; (iii) the
execution and delivery of this Agreement does not, and the consummation of
the Merger will not, violate any material provision of the Articles of
Incorporation, as amended, the Articles Supplementary, as amended, or the
by-laws, as amended, or any agreement (known to such counsel) to which BKN
or the respective Trust is a party or by which BKN or the respective Trust
is bound, except insofar as the parties have agreed to amend such provision
as a condition precedent to the Merger; (iv) to the best of such counsel's
knowledge, no consent, approval, authorization or order of any Maryland
state court or governmental authority is required for the consummation by
BKN or the Trust of the Merger to which they are parties, except such as
have been obtained under Maryland Law and under state securities or blue
sky laws; (v) this Agreement has been duly authorized, executed and
delivered by BKN and the Trust and represents a valid and binding contract,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
pertaining to the enforcement of creditors' rights generally and by
equitable principles; and (vi) the BKN Common Stock and BKN Preferred Stock
to be issued pursuant to the Merger are duly authorized and, upon delivery
and the consummation of the Merger, will be validly issued and outstanding
and fully paid and nonassessable, and no stockholder of BKN has any
preemptive right to subscription or purchase in respect thereof (pursuant
to the Articles of Incorporation, as amended, Articles Supplementary, as
amended, or the by-laws of BKN or as a matter of Maryland Law). In giving
the opinion set forth above, Miles & Stockbridge P.C. may state that it is
relying on certificates of officers of BKN and the Trust with regard to
matters of fact and certificates and written statements of governmental
officials with respect to factual matters.

f. BKN shall have received an opinion from Skadden, Arps, Slate, Meagher &
Flom LLP (together with its affiliates, "Skadden"), as special counsel to
BKN, in form and substance satisfactory to BKN and dated the Effective
Date, to the effect that (i) BKN and the Trust each is registered as a
diversified, closed-end management investment company under the 1940 Act,
(ii) to the best of such counsel's knowledge, no consent, approval,
authorization or order of any United States federal governmental authority
is required for the consummation by BKN or the Trust that is a party to the
Merger, except such as have been obtained under the 1933 Act, the 1934 Act
and the 1940 Act and the published rules and regulations of the Commission
thereunder and such as may be required under state securities or blue sky
laws; (iii) the N-14 Registration Statement has become effective under the
1933 Act, no stop order suspending the effectiveness of the N-14
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the 1933 Act, and
the N-14 Registration Statement, and each amendment or supplement thereto,
as of their respective effective dates, appear on their face to be
appropriately responsive in all material respects to the requirements of
the 1933 Act, the 1934 Act and the 1940 Act and the published rules and
regulations of the Commission thereunder, except that such counsel need not
opine with respect to financial statements and schedules and other
financial and statistical data included or incorporated by reference in the
N-14 Registration Statement or to schedules, exhibits or appendices
included or

I-12
<PAGE>

incorporated by reference in the N-14 Registration Statement; and (iv) to
the best of such counsel's knowledge, no material suit, action or legal or
administrative proceeding is pending or threatened against BKN or the
Trust, the unfavorable outcome of which would materially adversely affect
BKN or the Trust, as the case may be. Such opinion also shall state that
(A) while such counsel cannot make any representation as to the accuracy or
completeness of statements of fact in the N-14 Registration Statement or
any amendment or supplement thereto, nothing has come to their attention
that would lead them to believe that, on the respective effective dates of
the N-14 Registration Statement and any amendment or supplement thereto,
(1) the N-14 Registration Statement or any amendment or supplement thereto
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; and (2) the prospectus included in the
N-14 Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (B) such counsel does not express any opinion or belief as
to financial statements and schedules and other financial and statistical
data included or incorporated by reference in the N-14 Registration
Statement or to schedules, exhibits or appendices included or incorporated
by reference in the N-14 Registration Statement. In giving the opinion set
forth above, Skadden may state that it is relying on certificates of
officers of BKN and the Trust with regard to matters of fact and
certificates and written statements of government officials with respect to
factual matters.

g. BKN shall have received an opinion from Skadden, as counsel to BKN, in
form and substance satisfactory to BKN and dated the Effective Date of a
Merger, to the effect that for Federal income tax purposes such Merger will
constitute a "reorganization" within the meaning of Section 368(a) of the
Code and BKN and the respective Trust will each be deemed a "party" to such
reorganization within the meaning of Section 368(b) of the Code. In giving
the opinion set forth above, Skadden may state that it is relying on
certificates of officers of BKN and the respective Trust with regard to
factual and other matters.

h. The assets or liabilities of the Trust, respectively, to be transferred
to BKN shall not include any assets or liabilities which BKN, by reason of
charter limitations or otherwise, may not properly acquire or assume.

i. The N-14 Registration Statement shall have become effective under the
1933 Act and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of the Trust, shall be contemplated by the
Commission.

j. The Commission shall not have issued an unfavorable advisory report
under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Merger to
which the Trust is a party under Section 25(c) of the 1940 Act and no other
legal, administrative or other proceeding shall be instituted or threatened
which would materially affect the financial condition of the Trust or would
prohibit the Merger to which the Trust is a party.

k. All proceedings taken by the Trust and its counsel in connection with
the Merger and all documents incidental thereto shall be satisfactory in
form and substance to BKN.

l. Prior to the Effective Date, the Trust shall have declared a dividend or
dividends which, together with all such previous dividends, shall have the
effect of distributing to its stockholders

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<PAGE>

all of its net investment company taxable income, if any, for the tax year
of such Trust ending on the Effective Date of the Merger to which such
Trust is a party, and all of its net capital gain, if any, realized for the
tax year of such Trust ending on the Effective Date of the Merger to which
such Trust is a party.

m. On or before the Effective Date of a Merger, BKN shall have received
from Standard & Poor's Ratings Group and Moody's Investors Service written
evidence confirming that consummation of such Merger will not impair the
Aaa and AAA ratings assigned to the outstanding shares of BKN Preferred
Stock and assigning Aaa or AAA ratings to the shares of BKN Preferred Stock
issued in connection with such Merger.

9.The Trust's Conditions.

The obligations of each Trust hereunder shall be subject to the following
conditions:

a. This Agreement shall have been adopted, and the Merger to which the
Trust is a party shall have been approved, by the affirmative vote of a
majority of the shares of Common Stock and of a majority of the shares of
Preferred Stock of the Trust outstanding on the record date for the special
meeting of such Trust's stockholders, each voting as a separate class; and
BKN shall have delivered to the Trust a copy of the resolutions approving
this Agreement and the Merger to which such Trust is a party adopted by its
Board of Directors and stockholders and certified by its Secretary.

b. BKN shall have furnished to the Trust, a statement of assets,
liabilities and capital, together with a schedule of its investments,
certified on its behalf by its President (or any Vice President) and its
Treasurer, and a certificate of both such officers, dated as of the
Effective Date of the Merger to which the Trust is a party, certifying that
as of such Effective Date there has been no material adverse change in its
financial position since the date of BKN's most recent financial statements
provided to the Trust, other than changes in its portfolio securities since
that date or changes in the market value of its portfolio securities.

c. BKN shall have furnished to the Trust a certificate signed by its
President (or any Vice President) and its Treasurer, dated as of the
Effective Date of the Merger to which the Trust is a party, certifying that
(i) all representations and warranties of BKN made in this Agreement are
true and correct in all material respects with the same effect as if made
at and as of such Effective Date, and that BKN has complied with all of the
agreements and satisfied all of the conditions on its part to be performed
or satisfied at or prior to such date and (ii) immediately after the
Effective Date, BKN will be in compliance with all asset coverage tests
applicable to the BKN Preferred Stock.

d. The Trust shall have received the opinion or opinions of Miles &
Stockbridge P.C. and Skadden, as counsel to the Trust, in form and
substance satisfactory to the Trust and dated the Effective Date of the
Merger to which the Trust is a party, with respect to the matters specified
in Sections 9(e), (f) and (g) of this Agreement and such other matters as
the Trust reasonably may deem necessary or desirable.

e. All proceedings taken by BKN and its counsel in connection with the
Merger to which the Trust is a party and all documents incidental thereto
shall be satisfactory in form and substance to the Trust.

I-14
<PAGE>

f. The N-14 Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of BKN, shall be contemplated by the
Commission.

g. The Commission shall not have issued an unfavorable advisory report
under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Merger to
which the Trust is a party under Section 25(c) of the 1940 Act, no other
legal, administrative or other proceeding shall be instituted or threatened
which would materially affect the financial condition of BKN or would
prohibit the Merger to which the Trust is a party.

h. On or before the Closing Date of a Merger, the Board of Directors of BKN
shall have classified, authorized and unissued shares of BKN Common Stock
as a series of BKN Preferred Stock with, and shall have filed Articles
Supplementary to its Articles of Incorporation describing, the powers,
rights and preferences of series of BKN Preferred Stock which are the same
as the powers, rights and preferences of the series of Preferred Stock of
the Trust party to such Merger listed on Schedule 2(m) to this Agreement,
except as set forth in Section 4(b) of this Agreement.

i. On or before the Effective Date of a Merger, BKN shall have received
from Standard & Poor's Ratings Group and Moody's Investors Service written
evidence confirming that consummation of the Merger will not impair the Aaa
and AAA ratings assigned to the outstanding shares of BKN Preferred Stock
and assigning Aaa or AAA ratings to shares of BKN Preferred Stock to be
issued in connection with such Merger.

10.Termination, Postponement and Waivers.

a. Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated with respect to a Merger and any of the
Mergers abandoned at any time (whether before or after adoption thereof by
the stockholders of BKN and any Trust) prior to the respective Effective
Date of a Merger, or such Effective Date may be postponed, (i) by mutual
consent of the Boards of Directors of BKN or the Trust that is party to
such Merger; (ii) by the Board of Directors of a Trust if any condition of
such Trust's obligations set forth in Section 9 of this Agreement has not
been fulfilled or waived and (iii) by the Board of Directors of BKN in its
sole discretion.

b. If the transactions contemplated by this Agreement with respect to a
Merger have not been consummated by December 31, 1999, any Fund may
terminate this Agreement with respect to its Merger by action of its Board
of Directors.

c. In the event of termination of this Agreement pursuant to the provisions
hereof, the same shall become void and have no further effect, and there
shall not be any liability on the part of BKN or the respective Trust or
persons who are their directors, trustees, officers, agents or stockholders
in respect of this Agreement.

d. At any time prior to the Effective Date of a Merger, the Board of
Directors of BKN or the respective Trust may, by written instrument signed
by it (i) extend the time for the performance of any of the obligations or
other acts of the other, (ii) waive any inaccuracies in the representations
and warranties of the other contained herein, (iii) waive compliance with
any of

I-15
<PAGE>

the agreements of the other or conditions to its obligations contained
herein and (iv) amend this Agreement; provided in each case that, in the
judgment of the Board of Directors of BKN and/or the respective Trust,
after consultation with its counsel, such action or waiver will not have a
material adverse effect on the benefits intended under this Agreement to
the stockholders of BKN and/or the respective Trust, on behalf of which
such action is taken. This Agreement may not be amended except by an
instrument in writing executed by the parties affected by any such
amendment.

e. The respective representations and warranties contained in Sections 1
and 2 of this Agreement shall expire with, and be terminated by, the
consummation of the respective Merger, and none of BKN, any Trust or any of
their officers, directors or trustees, agents or stockholders shall have
any liability with respect to such representations or warranties after the
Effective Date. This provision shall not protect any officer, director or
trustee, agent or stockholder of BKN, any Trust against any liability to
the entity for which that officer, director or trustee, agent or
stockholder so acts or to its stockholders to which that officer, director
or trustee, agent or stockholder otherwise would be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties in the conduct of such office.

f. If any order or orders of the Commission with respect to this Agreement
shall be issued prior to the Effective Date and shall impose any terms or
conditions which are determined by action of the Boards of Directors of BKN
or a Trust to be acceptable, such terms and conditions shall be binding as
if a part of this Agreement without further vote or approval of the
stockholders of BKN or the respective Trust, unless such terms and
conditions shall result in a change in the method of computing the number
of shares of BKN Common Stock or BKN Preferred Stock to be issued pursuant
to this Agreement in which event, unless such terms and conditions shall
have been included in the proxy solicitation materials furnished to the
stockholders of BKN and the respective Trust prior to the meetings at which
the Merger shall have been approved, this Agreement shall not be
consummated and shall terminate unless BKN and the respective Trust
promptly shall call special meetings of stockholders at which such
conditions so imposed shall be submitted for approval.

11.Other Matters.

a. Pursuant to Rule 145 under the 1933 Act, and in connection with the
issuance of any shares to any person who at the time of a Merger is, to its
knowledge, an affiliate of a party to such Merger pursuant to Rule 145(c),
BKN will cause to be affixed upon the certificate(s) issued to such person
(if any) a legend as follows:

THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO THE
RESPECTIVE TRUST (OR ITS STATUTORY SUCCESSOR) OR ITS PRINCIPAL UNDERWRITER
UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER
THE SECURITIES ACT OF 1933 OR (II) IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE FUND, SUCH REGISTRATION IS NOT REQUIRED

I-16
<PAGE>

and, further, that stop transfer instructions will be issued to BKN's
transfer agent with respect to such shares. Each Trust, respectively, will
provide BKN on the Effective Date of its Merger with the name of any Trust
stockholder who is to the knowledge of such Trust an affiliate of it on
such date.

b. Any notice, report or demand required or permitted by any provision of
this Agreement shall be in writing and shall be deemed to have been given
if delivered or mailed, first class postage prepaid, addressed to BKN or
any Trust in any case at 345 Park Avenue, New York, New York, 10154, Attn:
Ralph L. Schlosstein, President.

c. This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the Mergers, constitutes the
only understanding with respect to the Mergers, may not be changed except
by a letter of agreement signed by each party and shall be governed by and
construed in accordance with the laws of the State of Maryland applicable
to agreements made and to be performed in said state.

d. Copies of the Articles of Incorporation and Articles Supplementary, and
all amendments, if any, of BKN and each Trust are on file with the State
Department of Assessments and Taxation of Maryland, and notice is hereby
given that this instrument is executed on behalf of the Directors of BKN
and each Trust. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be deemed
to be an original but all such counterparts together shall constitute but
one instrument.

I-17
<PAGE>

IN WITNESS WHEREOF, each of the undersigned has executed and delivered this
Agreement and Plan of Merger as of the date first written above.

The BlackRock Investment
Quality Municipal Trust Inc.

By: _________________________________
Name: Ralph L. Schlosstein
Title: President

The BlackRock Municipal
Target Term Trust Inc.

By: _________________________________
Name: Ralph L. Schlosstein
Title: President

The BlackRock Insured Municipal
Term Trust Inc.

By: _________________________________
Name: Ralph L. Schlosstein
Title: President

The BlackRock Insured Municipal
2008 Term Trust Inc.

By: _________________________________
Name: Ralph L. Schlosstein
Title: President

I-18
<PAGE>

Schedule 2(m)

<TABLE>
<CAPTION>
Authorized
Trust Designation Amount
- ----- -------------------------------------------------- ----------
<S> <C> <C>
BMN Auction Rate Municipal Preferred Stock, Series W7
Auction Rate Municipal Preferred Stock, Series W28
Auction Rate Municipal Preferred Stock, Series F7

BRM Auction Rate Municipal Preferred Stock, Series T7
Auction Rate Municipal Preferred Stock, Series T28
Auction Rate Municipal Preferred Stock, Series R7
Auction Rate Municipal Preferred Stock, Series R28

BMT Auction Rate Municipal Preferred Stock, Series M7
Auction Rate Municipal Preferred Stock, Series M28
</TABLE>

I-19

SUBJECT TO COMPLETION--DATED July 23, 1999

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST, INC.
345 Park Avenue
New York, New York 10154
(212) 754-5560

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

STATEMENT OF ADDITIONAL INFORMATION

Relating to the Merger of each of:

THE BLACKROCK MUNICIPAL TARGET TERM TRUST INC. ("BMN")

THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC. ("BMT")

THE BLACKROCK INSURED MUNICIPAL 2008 TERM TRUST INC. ("BRM")

with and into:

THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC. ("BKN")

Dated __________, 1999
-----------------

This Statement of Additional Information provides information about BKN, a
closed-end management investment company organized as a Maryland
corporation, in addition to information contained in the Combined Proxy
Statement/Prospectus of BKN, dated ________, 1999, which also serves as the
proxy statement of BMN, BMT and BRM, each a closed-end management investment
company organized as a Maryland corporation (collectively,
the "Trusts"), in connection with the issuance of common shares and preferred
shares of BKN to shareholders of the Trusts. This Statement of Additional
Information is not a prospectus. It should be read in conjunction with the
Combined Proxy Statement/Prospectus, into which it has been incorporated by
reference and which may be obtained by contacting BKN or the Trusts at the
address and telephone number set forth above.
<PAGE>

TABLE OF CONTENTS
Page
----
<TABLE>
<S> <C>
Audited Financial Statements for BKN for the annual period ended October 31, 1998 ......... 6

Unaudited Financial Statements for BKN for the six-month period ended April 30, 1999 ..... 15

Audited Financial Statements for BMN for the annual period ended December 31, 1998 ....... 25

Audited Financial Statements for BMT for the annual period ended December 31, 1998 ....... 35

Audited Financial Statements for BRM for the annual period ended December 31, 1998 ....... 45

Annex A: Description of Credit Ratings for Municipal Obligations ........................ A-1

</TABLE>

BKN and the Trusts will provide, without charge, upon the written or oral
request of any person to whom the Combined Proxy Statement/Prospectus is
delivered, a copy of this Statement of Additional Information.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
====================================================================================================================================
PRINCIPAL OPTION CALL
RATING* AMOUNT PROVISIONS+ VALUE
(UNAUDITED) (OO0) DESCRIPTION (UNAUDITED) (NOTE 1)
====================================================================================================================================
<S> <C> <C> <C> <C>
LONG-TERM INVESTMENTS-146.8%
CALIFORNIA -13.8%
Aa2 $ 1,220 California Hsg. Fin. Agcy. Rev., Home Mtg.,
Ser. C, 5.65%, 8/01/14 ....................................... 2/04 at 102 $ 1,260,785
California St. G.O.,
A1 5,770 5.00%, 10/01/14 .............................................. 10/07 at 101 5,893,824
Aa3 2,955 5.25%, 10/01/10 .............................................. No Opt. Call 3,225,087
AAA 15,460 Los Angeles Cnty. Asset Leasing Corp. Rev.,
5.95%, 12/01/07, AMBAC ....................................... No Opt. Call 17,753,646
University of California Rev., Research Fac., Ser. B,
A+ 2,000 6.10%, 9/01/03++ ............................................. N/A 2,239,000
A+ 3,305 6.20%, 9/01/03++ ............................................. N/A 3,714,390
A+ 2,000 6.25%, 9/01/03++ ............................................. N/A 2,252,121
-------------
36,338,853
-------------
COLORADO - 12.9%
Arapahoe Cnty. Cap. Impvt. Hwy. Rev., Trust Fund, Ser. E,
AAA 3,100 Zero Coupon, 8/31/04 ......................................... No Opt. Call 2,454,301
Denver City & Cnty. Arpt. Rev.,
Baa1 1,120 Ser. C, 6.65%, 11/15/05 ...................................... 11/02 at 102 1,222,558
Baa1 3,000 Ser. C, 6.50%, 11/15/06 ...................................... 11/02 at 102 3,253,680
Aaa 3,705 Ser. D, 7.00%, 11/15/01++ ................................... N/A 4,041,303
Baa1 14,085 Ser. D, 7.00%, 11/15/25 ...................................... 11/01 at 100 14,993,905
E-470 Pub. Hwy. Auth. Rev., Ser. B,
AAA 3,000 Zero Coupon, 9/01/11, MBIA ................................... No Opt. Call 1,685,220
AAA 10,000 Zero Coupon, 9/01/18, MBIA ................................... No Opt. Call 3,686,500
AAA 2,250 6.90%, 8/31/05 ++ ............................................ N/A 2,695,230
-------------
34,032,697
-------------
CONNECTICUT - 3.6%
Aa3 8,750 Connecticut St. G.O., Ser. A, 5.50%, 11/15/08 ................. 11/03 at 102 9,491,825
-------------
DISTRICT OF COLUMBIA - 1.9%
District of Columbia G.O., Ser. E, CAPMAC,
AAA 1,830 6.00%, 6/01/09 ............................................... 6/03 at 102 1,981,744
AAA 70 6.00%, 6/01/03++ ............................................. N/A 77,120
AAA 3,000 Washington D.C. Convention Ctr. Auth. Ded. Tax Rev.,
5.25%, 10/01/17, AMBAC ....................................... 10/08 at 101 3,054,690
-------------
5,113,554
-------------

FLORIDA - 2.4%
AAA 1,745 Florida Hsg. Fin. Agcy. Rev., Sngl. Fam. Mtg.,
Ser. 1994-A, 6.55%, 7/01/14 .................................. 1/05 at 102 1,876,241
BBB- 4,000 Santa Rosa Bay Bridge Auth. Rev., 6.25%, 7/01/28. ............. 7/06 at 102 4,448,400
-------------
6,324,641
-------------

GEORGIA - 0.9%
AAA 2,250 Georgia St. Hsg. & Fin. Auth. Rev., Sngl.
Fam. Mtg., Ser. C, 7.00%, 12/01/15, FHA ...................... 12/04 at 102 2,436,750
-------------
ILLINOIS - 8.6%
AAA 5,050 Chicago Wtr. Rev., 5.25%, 11/01/23, FGIC ...................... 11/07 at 102 5,140,849
AAA 3,000 Cook Cnty. Cap. Impt., 5.875%, 11/15/06, FGIC++.. ............. N/A 3,393,840
AAA 4,165 Cook Cnty. G.O., Ser. A, 5.20%, 11/15/08, MBIA ................ 11/07 at 101 4,438,057
Illinois Edl. Fac. Auth. Rev., Loyola Univ., FGIC,
AAA 5,000 5.70%, 7/01/03++ ............................................. N/A 5,353,050
AAA 4,000 5.45%, 7/01/14 ............................................... 7/03 at 102 4,240,680
-------------
22,566,476
-------------

INDIANA - 3.2%
Baa2 7,595 Indianapolis Arpt. Auth. Rev., Spl. Fac. Fed.
Express Corp. Proj., 7.10%, 1/15/17 .......................... 7/04 at 102 8,473,590
-------------
KENTUCKY - 7.2%
AAA 2,850 Boone Cnty. P.C.R., 5.50%, 1/01/24, MBIA ...................... 1/04 at 102 2,960,637
AAA 15,000 Kentucky St. Tpke. Auth., Econ. Dev. Road Rev.,
5.75%, 7/01/13, AMBAC ........................................ 7/03 at 102 16,110,300
-------------
19,070,937
-------------

LOUISIANA - 7.3%
AAA 14,400 Louisiana Pub. Fac. Auth. Hosp. Rev.,
Our Lady of the Lake Regl. Med. Ctr.,
5.90%, 12/01/03, FSA++ ........................................ N/A 15,950,736
AAA 2,860 Louisiana Stadium & Expo Dist., Htl. Ocpcy. Tax,
6.00%, 7/01/16, FGIC ......................................... 7/06 at 102 3,319,931
-------------
19,170,667
-------------
</TABLE>

See Notes to Financial Statements.

<PAGE>

MASSACHUSETTS - 2.4%
AAA 6,500 Massachusetts St. Hlth.& Edl. Fac. Auth. Rev.,
Hallmark Hlth. Sys., Ser. A., 5.00% 7/01/21, FSA ............. 7/08 at 101 6,370,455
-------------
MICHIGAN - 3.7%
AAA 4,000 Greater Detroit Res. Rec. Auth. Rev., Ser. A,
6.25%, 12/13/08, AMBAC ....................................... No Opt. Call 4,628,800
AAA 5,000 River Rouge Sch. Dist., 5.625%, 5/01/22, FSA .................. 5/03 at 101.50 5,246,150
-------------
9,874,950
-------------

MONTANA - 1.7%
Lake of the Ozarks Cmnty. Brdg. Corp. Brdg. Sys. Rev.,
NR 2,000 5.25%, 12/01/14 .............................................. 12/08 at 102 1,973,520
NR 2,500 5.25%, 12/01/26 .............................................. 12/08 at 102 2,387,550
-------------
4,361,070
-------------

NEVADA - 1.5%
AAA 3,750 Washoe Cnty. Arpt. Auth., Arpt. Sys. Impvt. Rev.,
Ser. B, 5.80%, 7/01/09, MBIA ................................. 7/03 at 102 4,060,012
-------------
NEW YORK - 23.6%
AAA 5,400 Metropolitan Trans. Auth. Commuter Fac. Rev., Ser. A,
5.75%, 7/01/21, MBIA ......................................... 7/07 at 101.5 5,874,768
New York City G.O.,
A3 4,140 Ser. A, 6.00%, 8/01/05 ....................................... No Opt. Call 4,565,550
AAA 3,000 Ser. D, 5.60%, 11/01/05, AMBAC ............................... No Opt. Call 3,276,930
A3 7,000 Ser. E, 6.50%, 2/15/06 ....................................... No Opt. Call 7,958,650
A- 6,160 Ser. H, 7.20%, 2/01/02++, .................................... N/A 6,894,457
A3 840 Ser. H, 7.20%, 2/01/13 ....................................... 2/02 at 101.50 926,033
New York City Ind. Dev. Agcy. Spec. Fac. Rev., Term.
One Group Assoc. Proj.,
A 4,000 6.00%, 1/01/08 ............................................... 1/04 at 102 4,295,320
A 1,000 6.00%, 1/01/15 ............................................... 1/04 at 102 1,060,080
AAA 9,375 New York City Mun. Wtr. Fin. Auth., Wtr. & Swr.
Rev., Ser. A, 5.125%, 6/15/22, AMBAC ......................... 6/07 at 101 9,444,188
AA 4,000 New York City Transitional Fin. Auth. Rev.,
Ser. C, 4.75%, 5/01/23 ....................................... 5/08 at 102 3,843,720
A3 3,000 New York St. Dorm. Auth. Rev., St. Univ. Edl. Fac.,
Ser. B, 6.10%, 5/15/04++ ..................................... N/A 3,373,920
A- 1,955 New York St. Hsg. Fin. Agcy., Hlth. Fac. of
New York City, Ser. A, 6.375%, 11/04/04 ...................... No Opt. Call 2,167,000
AAA 5,000 New York St. Med. Care Fac. Rev., New York Hosp.,
Ser. A, 6.60%, 2/15/05++, AMBAC .............................. N/A 5,808,450
AAA 2,620 New York St. Urban Dev. Corp. Rev., Correctional Fac.,
5.625%, 1/01/07, AMBAC ....................................... 1/03 at 102 2,823,679
-------------
62,312,745
-------------

NORTH CAROLINA - 2.3%
AAA 5,000 North Carolina Eastn. Mun. Pwr. Agcy. Rev.,
Ser. B, 7.00%, 1/01/08, CAPMAC ............................... No Opt. Call 5,985,500
-------------
OHIO - 0.7%
NR 500 Cleveland Cuyahoga Cnty. Port Auth. Rev.,
Port Dev. Proj., 6.00%, 3/01/07 .............................. No Opt. Call 511,200
AAA 1,220 Ohio St. Higher Edl. Fac. Com., Univ. Dayton Proj.,
5.35%, 12/01/17, AMBAC ....................................... 12/07 at 101 1,283,489
-------------
1,794,689
-------------

PENNSYLVANIA - 12.2%
AAA 8,000 Delaware Valley Regl. Fin. Auth. Ser. A,
5.50%, 8/01/28, AMBAC ........................................ No Opt. Call 8,631,280
AAA 10,100 Lehigh Cnty. Gen. Purpose Auth. Rev., St. Lukes Hosp.
Bethlehem Proj., 5.50%, 11/15/13, AMBAC ...................... 11/03 at 102 10,609,444
AAA 7,000 Montgomery Cnty. Ed. & Hlth. Care Auth., Holy Redeemer,
5.25%, 10/01/23, AMBAC ....................................... 10/07 at 101 7,119,000
AAA 4,000 Pennsylvania Intergovernmental Coop. Auth., Spl.
Tax Rev., Philadelphia Fdg. Prog., 5.50%, 6/15/20, FGIC ...... 6/06 at 100 4,161,240
AAA 1,500 Pennsylvania St. G.O., First Ser., 5.375%, 5/15/09, FGIC ...... 5/06 at 101.50 1,616,220
-------------
32,137,184
-------------

RHODE ISLAND - 2.3%
AA+ 3,640 Rhode Island Hsg. & Mtg. Fin., Homeownership Oppty., Ser. 15-B,
6.75%, 10/01/17 .............................................. 4/04 at 102 3,913,072
AAA 2,000 Rhode Island St. Hlth. & Edu. Bldg. Corp. Rev.,
Hosp. Fin., 5.50%, 5/15/16, MBIA ............................. 5/07 at 102 2,110,440
-------------
6,023,512
-------------

TENNESSEE - 3.3%
A2 7,800 Maury Cnty. Ind. Dev. Brd., P.C.R.,
Saturn Corp. Proj., 6.50%, 9/01/24 ........................... 9/04 at 102 8,654,880
-------------

</TABLE>

See Notes to Financial Statements.
6

<PAGE>

UTAH - 6.6%
AAA 4,450 Intermountain Pwr. Agcy. Rev., Pwr. Supply,
Ser. F, 5.00%, 7/01/13, AMBAC ................................ No Opt. Call 4,450,267
A1 1,800 Intermountain Pwr. Agcy. Rev., Fst. Crossover,
Ser. 86 B, 5.00%, 7/01/16 .................................... No Opt. Call 1,770,660
BBB 11,250 Tooele Cnty. Hazardous Wst. Trmt. Rev.,
Union Pacific Proj., 5.70%, 11/01/26 ......................... 4/08 at 102 11,142,563
-------------
17,363,490
-------------

WASHINGTON - 11.7%
Aa 6,900 Seattle G.O., 5.40%, 1/01/08 .................................. 1/03 at 102 7,306,341
AA 2,650 Seattle Wtr. Sys. Rev., 5.50%, 6/01/18 ........................ 6/03 at 102 2,727,539
AA+ 4,000 Washington St. G.O., Ser. A, 5.375%, 7/01/21 .................. 7/06 at 100 4,104,560
Washington St. Pub. Pwr. Supply Sys. Rev.,
AAA 13,395 Nuclear Proj. No. 1, 5.75%, 7/01/11, MBIA .................... 7/06 at 102 14,633,234
AAA 2,000 Nuclear Proj. No. 2, 5.55%, 7/01/10, FGIC .................... 7/03 at 102 2,114,540
-------------
30,886,214
-------------

WISCONSIN - 1.6%
AAA 4,000 Wisconsin St. Hlth. & Edl. Fac. Auth. Rev., Marquette Univ.,
5.50%, 6/01/18, MBIA ......................................... 6/08 at 102 4,161,840
-------------
Total Long-Term Investments (cost $360,077,039)................ 386,845,824
-------------
TOTAL INVESTMENTS - 146.8% (cost $360,077,039)................. 386,845,824
Other assets in excess of liabilities - 2.5% .................. 6,744,128
Liquidation value of preferred stock - (49.3)% ................ (130,000,000)
-------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS - 100% ........... $ 263,589,952
=============
</TABLE>

- ----------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
+ Option call provisions: date (month/year) and price of the earliest call or
redemption. There may be other call provisions at varying prices at later
dates.
++ This bond is prerefunded. See glossary for definition.

<TABLE>
<CAPTION>
===============================================================================================================
THE FOLLOWING ABBREVIATIONS ARE USED IN PORTFOLIO DESCRIPTIONS:
<S> <C> <C> <C>
AMBAC - American Municipal Bond Assurance Corporation FSA - Financial Security Assurance
CAPMAC - Capital Markets Assurance Corporation G.O. - General Obligation Bond
FGIC - Financial Guaranty Insurance Company MBIA - Municipal Bond Insurance Association
FHA - Federal Housing Administration P.C.R. - Pollution Control Revenue
</TABLE>

See Notes to Financial Statements.
7

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT
QUALITY MUNICIPAL TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $360,077,039) (Note 1) . $ 386,845,824
Cash ................................................. 4,631,467
Interest receivable .................................. 6,817,001
Other assets ......................................... 9,515
-------------
398,303,807
-------------
LIABILITIES
Payable for investments purchased .................... 4,190,060
Dividends payable-preferred stock .................... 138,906
Investment advisory fee payable (Note 2) ............. 115,987
Administration fee payable (Note 2) .................. 49,709
Other accrued expenses ............................... 219,193
-------------
4,713,855
-------------
NET INVESTMENT ASSETS ................................ $393,589,952
=============
Net investment assets were comprised of:
Common stock:
Par value (Note 4) ................................. $ 167,071
Paid-in capital in excess of par ................... 232,077,765
Preferred stock (Note 4) ............................ 130,000,000
-------------
362,244,836
Undistributed net investment income ................. 1,449,281
Accumulated net realized gain ....................... 3,127,050
Net unrealized appreciation ......................... 26,768,785
-------------
Net investment assets, October 31, 1998 .............. $ 393,589,952
=============
Net assets applicable to common shareholders ......... $ 263,589,952
=============
Net asset value per common share:
($263,589,952 [div] 16,707,093 shares of
common stock issued and outstanding) ............... $ 15.78
=============
</TABLE>

- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT
QUALITY MUNICIPAL TRUST INC.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Interest and discount earned ........... $20,724,998
-----------
Expenses
Investment advisory .................... 1,361,169
Administration ......................... 583,358
Auction agent .......................... 345,000
Custodian .............................. 107,500
Reports to shareholders ................ 69,000
Directors .............................. 64,000
Audit .................................. 41,000
Transfer agent ......................... 23,000
Legal .................................. 6,000
Miscellaneous .......................... 92,838
-----------
Total expenses ......................... 2,692,865
-----------
Net investment income .................... 18,032,133
-----------

REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 3)
Net realized gain on investments ......... 3,208,243
Net change in unrealized appreciation
on investments ......................... 8,422,329
-----------
Net gain on investments .................. 11,630,572
-----------

NET INCREASE IN NET INVESTMENT ASSETS
RESULTING FROM OPERATIONS ............... $29,662,705
===========
</TABLE>

See Notes to Financial Statements.
8

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET INVESTMENT ASSETS
Operations:
Net investment income ................................................... $ 18,032,133 $ 18,096,994
Net realized gain on investments ........................................ 3,208,243 4,449,946
Net change in unrealized appreciation on investments .................... 8,422,329 8,949,932
------------- -------------
Net increase in net investment assets resulting from operations ......... 29,662,705 31,496,872
Dividends and distributions:
To common shareholders from net investment income ....................... (13,554,216) (13,100,478)
To common shareholders from net realized gain on investments ............ (3,343,299) (322,193)
To preferred shareholders from net investment income .................... (3,967,577) (4,591,740)
To preferred shareholders from net realized gain on investments ......... (1,133,378) (104,104)
------------- -------------
Total dividends and distributions ....................................... (21,998,470) (18,118,515)
------------- -------------
Total increase ......................................................... 7,664,235 13,378,357
NET INVESTMENT ASSETS
Beginning of year ........................................................ 385,925,717 372,547,360
------------- -------------
End of year .............................................................. $ 393,589,952 $ 385,925,717
============= =============
</TABLE>

See Notes to Financial Statements.
9

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------
1998 1997
PER SHARE OPERATING PERFORMANCE: ------------ ------------
<S> <C> <C>
Net asset value, beginning of year ................................ $ 15.32 $ 14.52
-------- -------
Net investment income ............................................. 1.08 1.08
Net realized and unrealized gain (loss)
on investments ................................................... 0.70 0.80
-------- -------
Net increase (decrease) from investment operations ................ 1.78 1.88
-------- -------
Dividends and Distributions:
Dividends from net investment income to:
Common shareholders .............................................. ( 0.81) ( 0.78)
Preferred shareholders ........................................... ( 0.24) ( 0.27)
Distributions from net realized gain on
investments to:
Common shareholders .............................................. ( 0.20) ( 0.02)
Preferred shareholders ........................................... ( 0.07) ( 0.01)
-------- --------
Total dividends and distributions ............................... ( 1.32) ( 1.08)
-------- --------
Capital charge with respect to issuance
of shares ........................................................ - -
-------- --------
Net asset value, end of year* ..................................... $ 15.78 $ 15.32
======== ========
Per share market value, end of year* .............................. $ 15.44 $ 13.38
======== ========
TOTAL INVESTMENT RETURN+ .......................................... 22.07% 14.20%
======== ========
RATIOS TO AVERAGE NET ASSETS
OF COMMON SHAREHOLDERS:++
Expenses .......................................................... 1.04% 1.07%
Net investment income before preferred stock dividends ............ 6.95% 7.42%
Preferred stock dividends ......................................... 1.53% 1.88%
Net investment income available to common
shareholders ..................................................... 5.42% 5.54%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (in thousands) .......... $259,280 $243,947
Portfolio turnover ................................................ 46% 160%
Net assets of common shareholders, end of year (in thousands) ..... $263,590 $255,926
Preferred stock outstanding (in thousands) ........................ $130,000 $130,000
Asset coverage per share of preferred stock,
end of year# ..................................................... $ 75,690 $ 74,241
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------
1996 1995 1994
PER SHARE OPERATING PERFORMANCE: ------------ ------------ -------------
<S> <C> <C> <C>
Net asset value, beginning of year ................................ $ 14.18 $ 12.05 $ 14.76
------- ------- --------
Net investment income ............................................. 1.09 1.10 1.06
Net realized and unrealized gain (loss)
on investments ................................................... 0.34 2.16 (2,64)
------- ------- --------
Net increase (decrease) from investment operations ................ 1.43 3.26 (1.58)
------- ------- --------
Dividends and Distributions:
Dividends from net investment income to:
Common shareholders .............................................. (0.79) (0.82) (0.90)
Preferred shareholders ........................................... (0.28) (0.31) (0.21)
Distributions from net realized gain on
investments to:
Common shareholders .............................................. (0.01) -- --
Preferred shareholders ........................................... (0.01) -- --
-------- -------- --------
Total dividends and distributions ............................... (1.09) (1.13) (1.11)
-------- -------- --------
Capital charge with respect to issuance
of shares ........................................................ -- -- (0.02)
-------- -------- --------
Net asset value, end of year* ..................................... $ 14.52 $ 14.18 $ 12.05
======== ======== ========
Per share market value, end of year* .............................. $ 12.44 $ 12.00 $ 10.38
======== ======== ========
TOTAL INVESTMENT RETURN+ .......................................... 10.41% 24.01% (20.98%)
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
OF COMMON SHAREHOLDERS:++
Expenses .......................................................... 1.12% 1.16% 1.14%
Net investment income before preferred stock dividends ............ 7.57% 8.36% 7.80%
Preferred stock dividends ......................................... 1.97% 2.34% 1.55%
Net investment income available to common
shareholders ..................................................... 5.60% 6.02% 6.25%
SUPPLEMENTAL DATA:
Average net assets of common shareholders (in thousands) .......... $238,540 $219,740 $226,935
Portfolio turnover ................................................ 164% 182% 210%
Net assets of common shareholders, end of year (in thousands) ..... $242,547 $236,990 $201,343
Preferred stock outstanding (in thousands) ........................ $130,000 $130,000 $130,000
Asset coverage per share of preferred stock,
end of year# ..................................................... $ 71,644 $ 70,575 $127,440
</TABLE>

- ----------
* Net asset value and market value are published in THE WALL STREET JOURNAL
each Monday.
# A stock split occurred on July 24, 1995 (Note 4).
+ Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day and a sale at the current market
price on the last day of the year reported. Dividends and distributions, if
any, are assumed for purposes of this calculation, to be reinvested at prices
obtained under the Trust's dividend reinvestment plan. Total investment
return does not reflect brokerage commissions.
++ Ratios are calculated on the basis of income and expenses applicable to both
the common and preferred stock relative to the average net assets of common
shareholders. Ratios do not reflect the effect of dividend payments to
preferred shareholders.

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

See Notes to Financial Statements.
10

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT
QUALITY MUNICIPAL TRUST INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. ORGANIZATION & ACCOUNTING POLICIES

The BlackRock Investment Quality Municipal Trust Inc. (the "Trust") was
organized in Maryland on November 19, 1992 as a diversified, closed-end
management investment company. The Trust's investment objective is to manage a
diversified portfolio of high-quality securities while providing high current
income exempt from regular Federal income tax consistent with the preservation
of capital. The ability of issuers of debt securities held by the Trust to meet
their obligations may be affected by economic developments in a specific
industry or region. No assurance can be given that the Trust's investment
objective will be achieved.

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

SECURITIES VALUATION: Municipal securities (including commitments to purchase
such securities on a "when-issued" basis) are valued on the basis of prices
provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. Any securities or other assets for which such current
market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the general
supervision and responsibility of the Trust's Board of Directors.

Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost, if their term to maturity from date of
purchase is 60 days or less, or by amortizing their value on the 61st day prior
to maturity, if their original term to maturity from date of purchase exceeded
60 days.

SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on trade date. Realized and unrealized gains and losses are calculated
on the identified cost basis. Interest income is recorded on the accrual basis
and the Trust accretes original issue discount or amortizes premium on
securities purchased using the interest method.

FEDERAL INCOME TAXES: It is the Trust's intention to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute sufficient net income to shareholders. For this
reason and because substantially all of the Trust's gross income consists of
tax-exempt interest, no Federal income tax provision is required.

DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and
distributions to common shareholders monthly from net investment income, net
realized short-term capital gains and other sources, if necessary. Net
long-term capital gains, if any, in excess of loss carryforwards may be
distributed annually. Dividends and distributions are recorded on the
ex-dividend date. Dividends and distributions to preferred shareholders are
accrued and determined as described in Note 4.

DEFERRED ORGANIZATION EXPENSES: A total of $65,000 was incurred in connection
with the organization of the Trust. These costs were deferred and have been
amortized ratably over a period of sixty months from the date the Trust
commenced investment operations.

RECLASSIFICATION OF CAPITAL ACCOUNTS: Effective January 1, 1994, the Trust
began accounting and reporting for permanent differences between financial and
tax reporting in accordance with the American Institute of Certified Public
Accountants' Statement of Position 93-2: Determination, Disclosure and
Financial Statement of Income, Capital Gain and Return of Capital Distributions
by Investment Companies. The effect of adopting the statement for the year
ended October 31, 1998 was to increase accumulated net realized gain and
decrease undistributed net investment income by $31,244. Net investment income,
net realized gains and net assets were not affected by this change.

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

NOTE 2. AGREEMENTS

The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc., (the "Adviser"), a wholly-owned corporate subsidiary of
BlackRock Advisors, Inc., which is an indirect majority-owned subsidiary of PNC
Bank, N.A., and an Administration Agreement with Princeton Administrators, L.P.
(the "Administrator"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc.

The investment fee paid to the Adviser is computed weekly and payable
monthly at an annual rate of 0.35% of the Trust's average weekly net investment
assets. The administration fee paid to the Administrator is also computed
weekly and payable monthly at an annual rate of 0.15% of the Trust's average
weekly net investment assets.

<PAGE>

Pursuant to the agreements, the Adviser provides continuous supervision
of the investment portfolio and pays the compensation of officers of the Trust
who are affiliated persons of the Adviser. The Administrator pays occupancy and
certain clerical and accounting costs of the Trust. The Trust bears all other
costs and expenses.

NOTE 3. PORTFOLIO SECURITIES

Purchases and sales of invest ment securities, other than short-term
investments, for the year ended October 31, 1998, aggregated $177,852,627 and
$176,510,441, respectively.

The federal income tax basis of the Trust's investments at October 31,
1998 was $360,158,261, and accordingly, net unrealized appreciation was
$26,687,563 (gross unrealized appreciation-$26,828,690, gross unrealized
depreciation-$141,127).

NOTE 4. CAPITAL

There are 200 million shares of $.01 par value common stock authorized. Of
the 16,707,093 common shares outstanding at October 31, 1998, the Adviser owned
7,205 shares. As of October 31, 1998, there were 5,200 shares of Preferred Stock
outstanding as follows: Series T7--2,600 and Series T28--2,600.

The Trust may classify or reclassify any unissued shares of common stock
into one or more series of preferred stock. On April 1, 1993, the Trust
reclassified 2,600 shares of common stock and issued 2 series of Auction Market
Preferred Stock ("Preferred Stock") as follows: Series T7--1,300 shares, Series
T28--1,300 shares. The Preferred Stock had a liquidation value of $50,000 per
share plus any accumulated but unpaid dividends. On May 16, 1995 shareholders
approved a proposal to split each share of the Trust's Auction Market Preferred
Stock into two shares and simultaneously reduce each share's liquidation
preference from $50,000 to $25,000 per share plus any accumulated but unpaid
dividends. The stock split occurred on July 24, 1995.

Dividends on Series T7 are cumulative at a rate which is reset every 7 days
based on the results of an auction. Dividends on Series T28 are also cumulative
at a rate which is reset every 28 days based on the results of an auction.
Dividend rates ranged from 3.30% to 6.01% during the year ended October 31,
1998.

The Trust may not declare dividends or make other distributions on shares
of common stock or purchase any such shares if, at the time of the declaration,
distribution, or purchase, asset coverage with respect to the outstanding
Preferred Stock would be less than 200%.

The Preferred Stock is redeemable at the option of the Trust, in whole or
in part, on any dividend payment date at $25,000 per share plus any accumulated
or unpaid dividends whether or not declared. The Preferred Stock is also
subject to mandatory redemption at $25,000 per share plus any accumulated or
unpaid dividends, whether or not declared, if certain requirements relating to
the composition of the assets and liabilities of the Trust as set forth in the
Articles of Incorporation are not satisfied.

The holders of Preferred Stock have voting rights equal to the holders of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Trust's directors. In addition, the Investment
Company Act of 1940 requires that, along with approval by stockholders 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
(a) adopt any plan of reorganization that would adversely affect the preferred
shares, and (b) take any action requiring a vote of security holders,
including, among other things, changes in the Trust's subclassification as a
closed-end investment company or changes in its fundamental investment
restrictions.

NOTE 5. DIVIDENDS AND DISTRIBUTIONS

Subsequent to October 31, 1998, the Board of Directors of the Trust
declared a dividend from undistributed earnings of $0.0719 per common share
payable November 30, 1998, to shareholders of record on November 16, 1998.

For the period November 1 through November 30, dividends declared on
Preferred Stock totalled $560,312 in aggregate for the two outstanding
Preferred Stock series.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The BlackRock Investment Quality Municipal Trust Inc.:

We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The BlackRock Investment Quality
Municipal Trust Inc. as of October 31, 1998 and the related statements of
operations for the year then ended and of changes in net investment assets for
each of the two years in the period then ended and the financial highlights for
the each of the five years in the period then ended. These financial statements
and the financial highlights are the responsibility of the Trust's management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1998 by correspondence with the custodian and brokers. 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 audits provide a reasonable basis for our
opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock
Investment Quality Municipal Trust Inc. at October 31, 1998, and the results of
its operations, the changes in its net investment assets and its financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP
- -------------------------

DELOITTE & TOUCHE LLP

New York, New York
December 11, 1998

13
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------

(TO COME)

5
<PAGE>

(TO COME)

6
<PAGE>

(TO COME)

7
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT
QUALITY MUNICIPAL TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------

(TO COME)

- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT
QUALITY MUNICIPAL TRUST INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------

(TO COME)

8
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------

(TO COME)

9
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------------------------------------------------------

(TO COME)

10
<PAGE>

(TO COME)

<PAGE>

(TO COME)

<PAGE>

- --------------------------------------------------------------------------------
The BlackRock Municipal Target Term Trust Inc.
Portfolio of Investments December 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Option
Principal Call
Rating* Amount Provisions++ Value
(Unaudited) (000) Description (Unaudited) (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
LONG-TERM INVESTMENTS--141.3%
Alabama--1.0%
Hoover Brd. of Ed. Spl. Tax. Wts., G.O., AMBAC,
AAA $ 1,700 6.50%, 2/01/01+............................................................ N/A $ 1,827,228
AAA 1,815 6.60%, 2/01/01+............................................................ N/A 1,954,410
AAA 1,025 6.625%, 2/01/01+........................................................... N/A 1,104,243
------------
4,885,881
------------
Alaska--2.9%
AAA 7,500 Anchorage Elec. Util. Rev., 7.125%, 6/01/06, MBIA............................... 6/99 at 102 7,745,550
AAA 9,000 No. Slope Boro., Ser. B, Zero Coupon, 6/30/04, FSA.............................. No Opt. Call 7,196,940
------------
14,942,490
------------
Arizona--1.1%
Tucson Bus. Dev. Fin. Corp. Lease Rev., FGIC,
AAA 1,515 6.25%, 7/01/02+............................................................ N/A 1,664,303
AAA 3,495 6.25%, 7/01/06............................................................. 7/02 at 102 3,815,387
------------
5,479,690
------------
California--5.0%
AAA 6,000 California St., G.O., 6.30%, 9/01/06, AMBAC..................................... No Opt. Call 6,885,660
AAA 1,910 California St. Pub. Wrks. Rev., Ser. A, 6.20%, 12/01/02, AMBAC+................. N/A 2,118,763
AAA 4,000 Glendale Hosp. Rev., Adventist Hlth. Ctr., Ser. A, 6.50%, 3/01/07, MBIA......... 3/01 at 102 4,299,080
Los Angeles Wst. Wtr. Sys. Rev., MBIA,
AAA 5,570 5.625%, 6/01/07............................................................ 6/03 at 102 6,042,057
AAA 3,320 Ser. D, 6.60%, 12/01/00+................................................... N/A 3,582,712
AAA 3,500 San Joaquin Hills Tran. Agcy., Toll Rd. Rev., Ser. A, Zero Coupon,
1/15/07, MBIA.............................................................. No Opt. Call 2,506,875
------------
25,435,147
------------
Colorado--1.9%
Denver City & Cnty. Wtr. Brd. Rev., C.O.P., FGIC,
AAA 2,025 6.50%, 11/15/01+........................................................... N/A 2,198,441
AAA 1,385 6.50%, 11/15/05............................................................ 11/01 at 101 1,490,703
AAA 1,110 6.60%, 11/15/01+........................................................... N/A 1,208,058
AAA 765 6.60%, 11/15/06............................................................ 11/01 at 101 824,356
AAA 2,295 6.625%, 11/15/01+.......................................................... N/A 2,499,301
AAA 1,570 6.625%, 11/15/07........................................................... 11/01 at 101 1,690,655
------------
9,911,514
------------
District of Columbia--1.8%
District of Columbia, G.O., Ser B, 5.90%, 6/1/06, MBIA
AAA 1,060 5.90%, 6/1/04+ ............................................................ N/A 1,171,332
AAA 7,190 5.90%, 6/1/06 ............................................................. 6/04 at 102 7,851,624
------------
9,022,956
------------
Florida--12.1%
Florida St. Div. Bd. Fin. Dept. Gen. Svcs. Rev. (Dept. Nat. Res. & Pres.),
AAA 7,000 6.45%, 7/01/01+, MBIA...................................................... N/A 7,534,380
AAA 6,975 6.75%, 7/01/01+, AMBAC..................................................... N/A 7,620,676
AAA 2,190 Florida St. Sunshine Skyway Rev., 6.60%, 7/01/07, MBIA.......................... 7/01 at 101 2,362,222
Greater Orlando Aviation Auth., Arpt. Fac. Rev., Ser. B, FGIC,
AAA 4,760 6.55%, 10/01/06............................................................ 10/02 at 102 5,311,969
AAA 5,070 6.55%, 10/01/07............................................................ 10/02 at 102 5,639,107
AAA 3,155 Gulf Breeze Local Gov't. Ln. Pkg. Rev., 7.70%, 12/01/15, FGIC................... 12/99 at 102 3,277,319
AAA 2,650 Jacksonville Hlth. Fac. Auth. Rev., Mem. Med. Ctr., Ser. A, 6.625%,
5/01/01+, MBIA............................................................. N/A 2,875,462
AAA 7,500 Jacksonville Hosp. Rev., Univ. Med. Ctr. Inc. Proj., 6.50%, 2/01/07, CONNIE LEE. 2/02 at 102 8,169,075
AAA 2,000 No. Broward Hosp. Rev., 6.50%, 1/01/02+, MBIA................................... N/A 2,192,780
</TABLE>

See Notes to Financial Statements.

5
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Option
Principal Call
Rating* Amount Provisions++ Value
(Unaudited) (000) Description (Unaudited) (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
Florida (cont'd)
AAA $10,645 Orange Cnty., Tourist Dev. Tax Rev., Ser. A, 6.375%, 10/01/06, AMBAC............ 10/02 at 102 $11,795,299
AAA 2,570 Tampa Auth. Rev., St. Joseph Hlth. Ctr., 6.70%, 12/01/01+, MBIA................. N/A 2,833,965
AAA 1,600 Tampa Util. Tax & Spec. Rev., 6.80%, 10/01/06, AMBAC............................ 10/01 at 102 1,754,560
------------
61,366,814
------------
Georgia--0.4%
AAA 1,990 Burke Cnty. Dev. Auth. P.C.R., Oglethorpe Pwr. Corp., Ser. B, 6.45%,
1/01/05, MBIA.............................................................. 1/04 at 101 2,204,980
------------
Illinois--14.7%
AAA 4,930 Alton Hlth. Fac. Rev., Christian Hlth. Ctr., 7.00%, 2/15/01+, FGIC.............. N/A 5,350,184
Chicago Cent. Pub. Library, G.O., AMBAC,
AAA 1,800 Ser. A, 6.75%, 4/01/02+......................................................... N/A 1,993,158
AAA 1,600 Ser. C, 6.75%, 4/01/02+......................................................... N/A 1,771,696
AAA 5,555 Cook Cnty., Ser. A, 6.40%, 11/15/02+, MBIA...................................... N/A 6,168,827
AAA 1,775 Cook Cnty. Cmnty. Sch. Dist., G.O., Ser. A, 6.375%, 1/01/02+, FGIC.............. N/A 1,903,901
lllinois Hlth. Fac. Auth. Rev.,
AAA 3,300 Elmhurst Mem. Hosp., 6.60%, 1/01/07, FGIC.................................. 1/02 at 102 3,581,292
AAA 14,585 Sisters Svcs., Inc., Ser. C, 6.625%, 6/01/06, MBIA......................... 6/02 at 102 16,011,559
Illinois Regl. Trans. Auth. Rev., Ser. A, FGIC,
AAA 2,780 6.55%, 11/01/01+........................................................... N/A 3,041,820
AAA 6,125 6.625%, 11/01/01+.......................................................... N/A 6,714,041
AAA 8,725 Illinois St., G.O., 6.40%, 12/15/07, AMBAC...................................... 12/01 at 102 9,537,472
Illinois St. Sales Tax Rev., Ser. O,
AAA 5,900 Zero Coupon, 6/15/07....................................................... No Opt. Call 4,153,482
AAA 5,635 Zero Coupon, 6/15/08....................................................... No Opt. Call 3,739,499
AAA 2,065 6.50%, 6/15/01+............................................................ N/A 2,237,531
AAA 3,935 6.50%, 6/15/06............................................................. 6/02 at 101 4,252,200
AAA 2,000 6.60%, 6/15/01+............................................................ N/A 2,171,720
AAA 2,000 Will Cnty. Cmnty. Sch. Dist. Rev., 7.05%, 12/01/08, AMBAC....................... No Opt. Call 2,426,320
------------
75,054,702
------------
Indiana--2.8%
AAA 9,000 Indiana Univ. Rev., Student Fee, Zero Coupon, 8/01/06, AMBAC.................... No Opt. Call 6,520,500
AAA 2,270 Noblesville West Indpt. Sch. Bldg. Corp., G.O., 7.00%, 7/01/07, MBIA............ 1/01 at 102 2,438,025
AAA 5,000 Warsaw High Sch. Bldg. Corp., G.O., 6.90%, 7/01/05, MBIA........................ 7/00 at 102 5,302,950
------------
14,261,475
------------
Kentucky--3.1%
Danville Multi-City Lease Rev., Swr. & Drain Sys., MBIA,
AAA 2,015 6.60%, 3/01/02+............................................................ N/A 2,219,986
AAA 2,160 6.65%, 3/01/02+............................................................ N/A 2,382,912
AAA 3,750 Kentucky Dev. Fin. Auth. Rev., Sisters of Charity, 6.60%, 11/01/06, MBIA........ 11/01 at 102 4,072,238
AAA 6,410 Kentucky St. Ppty. & Bldgs. Auth. Rev., Proj. 53, 6.625%, 10/01/07, MBIA........ 10/01 at 102 6,970,490
------------
15,645,626
------------
Louisiana--6.9%
Jefferson Sales Tax Dist. Rev., FGIC,
AAA 6,505 Ser. A, 6.75%, 12/01/02+................................................... N/A 7,194,660
AAA 14,495 Ser. A, 6.75%, 12/01/06.................................................... 12/02 at 100 15,883,041
AAA 4,000 Ser. B, 6.75%, 12/01/02+................................................... N/A 4,416,440
AAA 3,500 Louisiana St., G.O., Ser. A, 6.50%, 5/01/07, AMBAC.............................. 5/02 at 102 3,853,640
AAA 5,250 New Orleans, G.O., Zero Coupon, 9/01/06, AMBAC.................................. No Opt. Call 3,784,515
------------
35,132,296
------------
</TABLE>

See Notes to Financial Statements.

6
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Option
Principal Call
Rating* Amount Provisions++ Value
(Unaudited) (000) Description (Unaudited) (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
Massachusetts--5.0%
AAA $ 3,670 Mansfield, G.O., 6.65%, 1/15/02+, AMBAC......................................... N/A $ 4,042,798
Massachusetts Bay Trans. Auth. Rev., Gen. Tran. Sys., Ser. A,
AAA 20,015 6.625%, 3/01/01+, MBIA..................................................... N/A 21,627,809
------------
25,670,607
------------
Michigan--8.9%
Detroit Swr. Disp. Rev., FGIC,
AAA 1,655 6.60%, 7/01/01+............................................................ N/A 1,802,345
AAA 1,765 6.65%, 7/01/01+............................................................ N/A 1,924,221
AAA 1,880 6.70%, 7/01/01+............................................................ N/A 2,051,813
AAA 3,750 Grand Rapids Wtr. Sply. Rev., 6.625%, 1/01/08, FGIC............................. 1/01 at 102 3,996,525
Michigan Mun. Bond Auth.,
AAA 5,000 G.O., Ser. D, Zero Coupon, 5/15/06, MBIA................................... No Opt. Call 3,657,700
AAA 1,840 Local Gov't. Loan Prog., 6.35%, 11/01/06, AMBAC............................ 11/04 at 102 2,082,107
Michigan St. Bldg. Auth. Rev.,
AAA 11,590 Ser. I, 6.75%, 10/01/07, MBIA.............................................. 10/01 at 102 12,577,468
AAA 3,850 Ser. II, 6.75%, 10/01/07, AMBAC............................................ 10/01 at 102 4,232,882
AAA 11,940 Michigan St. Hosp. Fin. Auth. Rev., Sparrow Oblig. Grp.,
6.60%, 11/15/07, MBIA...................................................... 11/01 at 102 12,908,812
------------
45,233,873
------------
Nevada--5.2%
AAA 6,210 Clark Cnty. Flood Ctrl., G.O., 6.40%, 11/01/01+, AMBAC.......................... N/A 6,719,282
Clark Cnty. Sch. Dist., G.O., Ser. A, MBIA,
AAA 11,000 6.70%, 3/01/06............................................................. 3/01 at 101 11,693,000
AAA 1,500 6.75%, 3/01/07............................................................. 3/01 at 101 1,596,030
AAA 2,835 Nye Cnty. Sch. Dist., G.O., BIG, 7.25%, 5/01/99+................................ N/A 2,928,470
AAA 3,250 Reno Hosp. Auth. Rev., St. Mary Regl. Med. Ctr., 6.70%, 7/01/01+, MBIA.......... N/A 3,542,955
------------
26,479,737
------------
New Hampshire--0.5%
AAA 2,310 New Hampshire High. Ed. Auth. Rev., Elliot Hosp. of Manchester, 6.70%,
10/01/06, AMBAC............................................................ 10/02 at 102 2,500,714
------------
New Jersey--15.7%
AAA 10,500 Elizabeth, G.O., 6.60%, 8/01/06, MBIA........................................... 8/01 at 102 11,325,510
Howell Twp., G.O., FGIC,
AAA 7,715 6.70%, 1/01/06............................................................. 1/02 at 102 8,423,700
AAA 2,925 6.75%, 1/01/07............................................................. 1/02 at 102 3,206,473
New Jersey St. Hlth. Care Fac. Fin. Auth. Rev., Hackensack Med. Ctr., FGIC,
AAA 12,755 6.65%, 7/01/06............................................................. 7/01 at 102 13,905,628
AAA 3,735 6.70%, 7/01/07............................................................. 7/01 at 102 4,076,342
AAA 1,765 New Jersey St. Hwy. Auth. Rev., Garden St. Pkwy., 6.15%, 1/01/07, AMBAC......... 1/02 at 102 1,896,987
AAA 30,000 New Jersey St. Tpk. Auth. Rev., Ser. C, 6.40%, 1/01/07, AMBAC................... 1/01 at 101.5 31,806,900
No. Jersey Dist. Wtr. Sply. Cmnty. Rev., MBIA,
AAA 2,525 Wanaque No. Proj., Ser. B, 6.50%, 11/15/06................................. 11/01 at 102 2,738,842
AAA 1,065 Wanaque So. Proj., 6.50%, 7/01/06.......................................... No Opt. Call 1,197,774
AAA 1,250 Warren Cnty. Fin. Auth., P.C.R., 6.55%, 12/01/06, MBIA.......................... 12/02 at 102 1,364,087
------------
79,942,243
------------
New Mexico--0.8%
AAA 3,535 Gallup, P.C.R., 6.50%, 8/15/07, MBIA............................................ 8/02 at 102 3,862,765
------------
</TABLE>

See Notes to Financial Statements.

7
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Option
Principal Call
Rating* Amount Provisions++ Value
(Unaudited) (000) Description (Unaudited) (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
New York--14.1%
New York City Mun. Wtr. Fin. Auth., Wtr. & Swr. Sys. Rev., Ser. A, FGIC,
AAA $11,100 6.15%, 6/15/07............................................................. 6/02 at 101.5 $ 12,001,431
AAA 1,090 6.75%, 6/15/01+............................................................ N/A 1,178,203
AAA 1,070 6.75%, 6/15/06............................................................. 6/01 at 101 1,149,811
AAA 1,340 7.00%, 6/15/01+............................................................ N/A 1,456,178
AAA 1,320 7.00%, 6/15/07............................................................. 6/01 at 101 1,424,465
New York City, G.O.,
AAA 13,000 Ser. A, 7.00%, 8/01/07,FSA................................................. 8/06 at 101.5 15,577,640
AAA 10,000 Ser. E, 6.125%, 8/01/06, MBIA.............................................. No Opt. Call 11,251,900
AAA 4,500 New York St. Environ. Fac. Corp., P.C.R., Ser. D, 6.40%, 5/15/06................ 11/04 at 102 5,147,460
AAA 9,830 New York St. Hsg. Fin. Agcy. Rev., Hsg. Proj. Mtge., Ser. A, 5.50%,
11/01/06, FSA................................................................... 5/06 at 102 10,547,295
AAA 5,250 New York St. Urb. Dev. Corp. Rev., 5.625%, 1/01/07, AMBAC....................... 1/03 at 102 5,639,025
AAA 6,000 Triborough Brdg. & Tunl. Auth. Rev., Ser. B, 6.70%, 1/01/08, FGIC............... 1/01 at 102 6,424,380
------------
71,797,788
------------
North Carolina--1.3%
AAA 6,000 North Carolina Eastern Mun. Pwr. Agcy. Sys. Rev., Ser. B, 6.00%, 1/01/06,
CAPMAC..................................................................... No Opt. Call 6,652,020
------------
North Dakota--0.4%
AAA 2,035 Grand Forks Hlth. Care Fac. Rev., United Hosp. Oblig. Grp., 6.50%,
12/01/06, MBIA............................................................. 12/01 at 102 2,193,567
------------
Pennsylvania--10.2%
AAA 6,200 Beaver Cnty. Hosp. Auth., 6.625%, 7/01/06, AMBAC................................ 7/02 at 102 6,886,340
AAA 1,500 Coatesville Sch. Dist., G.O., 6.60%, 3/01/01+, AMBAC............................ N/A 1,592,295
AAA 10,000 Harrisburg Auth. Lease Rev., 6.625%, 6/01/01+, FSA.............................. N/A 10,769,700
AAA 7,450 Pennsylvania St. G.O., Ser. A, 6.50%, 11/01/01+, FGIC........................... N/A 8,114,391
AAA 1,445 Pennsylvania St. Higher Ed. Rev., 6.75%, 7/01/01+, MBIA......................... N/A 1,578,764
AAA 4,500 Pennsylvania St. Tpk. Auth. Rev., Ser. O, 5.80%, 12/01/07, FGIC................. 12/02 at 102 4,838,085
Philadelphia Mun. Auth., Justice Lease Rev.,
AAA 1,550 Ser. A, 7.00%, 11/15/04, MBIA.............................................. 11/01 at 102 1,708,208
AAA 2,370 Ser. B, 7.10%, 11/15/01+, FGIC............................................. N/A 2,632,620
Pittsburgh & Allegheny Cntys. Rev., AMBAC,
AAA 1,015 Ser. A, 6.50%, 7/15/06..................................................... 7/01 at 100 1,076,103
AAA 900 Ser. B, 6.50%, 7/15/06..................................................... 7/01 at 100 954,180
AAA 3,000 Schuylkill Cnty. Redev. Auth., Common Lease Rev., Ser. A, 7.00%, 6/01/07, FGIC.. 6/02 at 101 3,257,190
AAA 7,800 Westmoreland Cnty., G.O., 6.70%, 8/01/01+, AMBAC................................ N/A 8,378,214
------------
51,786,090
------------
Rhode Island--2.4%
AAA 11,220 Conv. Ctr. Auth. Rev., Ser. A, 6.60%, 5/15/01+, MBIA............................ N/A 12,166,856
------------
South Carolina--2.0%
AAA 4,390 Piedmont Mun. Pwr. Agy. Elec. Rev., 6.85%, 1/01/07, FGIC........................ 1/01 at 102 4,703,358
AAA 5,100 Rock Hill Util. Sys. Rev., 6.50%, 1/01/07, FGIC................................. 1/01 at 102 5,430,327
------------
10,133,685
------------
Tennessee--0.5%
AAA 2,350 Met. Nashville, Arpt. Rev., Ser. C, 6.625%, 7/01/07, FGIC....................... 7/01 at 102 2,533,699
------------
Texas--15.3%
AAA 2,000 Austin Util. Sys. Rev., 6.875%, 5/15/01+, AMBAC................................. N/A 2,181,100
AAA 8,500 Cypress-Fairbanks Indpt. Sch. Dist., G.O., Zero Coupon, 8/01/06, AMBAC.......... No Opt. Call 6,190,295
AAA 5,800 El Paso Cnty. Tax Rev., Ser. B, 6.40%, 2/15/07, MBIA............................ 2/02 at 100 6,178,334
Ft. Bend Cnty., Perm. Imprvt., FGIC,
AAA 1,650 G.O., 6.60%, 9/01/02+...................................................... N/A 1,809,027
AAA 1,725 Tax Rev., 6.60%, 9/01/02+.................................................. N/A 1,891,256
</TABLE>

See Notes to Financial Statements.

8
<PAGE>

- ----------
* Rating: Using the higher of Standard & Poor's, Moody's or Fitch's rating.
+ This bond is prerefunded. See glossary for definition.
++ Option call provisions: date (month/year) and prices of the earliest
option call or redemption. There may be other call provisions at varying
prices at later dates.

- --------------------------------------------------------------------------------
THE FOLLOWING ABBREVIATIONS ARE USED IN THE PORTFOLIO DESCRIPTIONS:

AMBAC -- American Municipal Bond Assurance Corporation
BIG -- Bond Investors Guaranty Insurance Company
CAPMAC -- Capital Markets Assurance Company
CONNIE LEE -- College Construction Loan Insurance Association
C.O.P. -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
G.O. -- General Obligation Bond
MBIA -- Municipal Bond Insurance Association
P.C.R. -- Pollution Control Revenue
- --------------------------------------------------------------------------------

See Notes to Financial Statements.

9
<PAGE>

- --------------------------------------------------------------------------------
The BlackRock Municipal Target Term Trust Inc.
Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------

Assets
Investments, at value (cost
$656,068,696) (Note 1) ................................. $ 719,304,965
Interest receivable ...................................... 11,504,776
Receivable for investments sold .......................... 4,941,900
-------------
735,751,641
-------------
Liabilities
Due to custodian ......................................... 1,202,530
Investment advisory fee payable (Note 2) ................. 226,182
Dividends payable--preferred stock ....................... 102,986
Administration fee payable (Note 2) ...................... 45,236
Other accrued expenses ................................... 323,904
-------------
1,900,838
-------------
Net Investment Assets .................................... $ 733,850,803
=============
Net investment assets were comprised of:
Common stock:
Par value (Note 4) ................................... $ 454,106
Paid-in capital in excess of par ..................... 421,119,385
Preferred stock (Note 4) ............................... 225,000,000
-------------
646,573,491

Undistributed net investment income .................... 24,063,235
Accumulated net realized loss .......................... (22,192)
Net unrealized appreciation ............................ 63,236,269
-------------
Net investment assets, December 31, 1998 ............... $ 733,850,803
=============
Net assets applicable to common
shareholders ......................................... $ 508,850,803
=============
Net asset value per common share:
($508,850,803 / 45,410,639 shares of
common stock issued and outstanding) ................... $11.21
======

- --------------------------------------------------------------------------------
The BlackRock Municipal Target Term Trust Inc.
Statement of Operations
Year Ended December 31, 1998
- --------------------------------------------------------------------------------

Net Investment Income

Income
Interest and discount earned ........................... $ 42,823,648
------------

Expenses
Investment advisory .................................... 2,574,318
Auction agent .......................................... 564,500
Administration ......................................... 514,864
Custodian .............................................. 130,000
Directors .............................................. 84,000
Audit .................................................. 60,000
Transfer agent ......................................... 35,000
Reports to shareholders ................................ 25,000
Legal .................................................. 10,000
Miscellaneous .......................................... 70,419
------------
Total expenses ....................................... 4,068,101
------------
Net investment income .................................... 38,755,547
------------

Realized and Unrealized Loss On
Investments (Note 3)
Net realized loss on investments ...................... (22,192)
Net change in unrealized appreciation
on investments ....................................... (3,961,990)
------------
Net loss on investments ............................... (3,984,182)
------------

Net Increase in Net Investment
Assets Resulting from Operations ...................... $ 34,771,365
============

See Notes to Financial Statements.

10
<PAGE>

- --------------------------------------------------------------------------------
The BlackRock Municipal Target Term Trust Inc.
Statements of Changes in Net Investment Assets
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Investment Assets

Operations:
Net investment income .......................................... $ 38,755,547 $ 38,510,968
Net realized gain (loss) on investments ........................... (22,192) 181,766
Net change in unrealized appreciation (depreciation) on investments (3,961,990) 9,243,056
------------- -------------

Net increase in net investment assets resulting from operations .. 34,771,365 47,935,790
------------- -------------
Dividends and distributions:
To preferred shareholders from net investment income .............. (7,606,013) (8,041,758)
To preferred shareholders from capital gains ...................... -- (40,128)
To common shareholders from net investment income ................. (27,927,201) (27,785,620)
To common shareholders from capital gains ......................... -- (141,638)
------------- -------------
Total dividends and distributions ............................. (35,533,214) (36,009,144)
------------- -------------

Total increase (decrease) ................................... (761,849) 11,926,646
------------- -------------

Net Investment Assets

Beginning of year ................................................. 734,612,652 722,686,006
------------- -------------
End of year ....................................................... $ 733,850,803 $ 734,612,652
============= =============
</TABLE>

See Notes to Financial Statements.

11
<PAGE>

- --------------------------------------------------------------------------------
The BlackRock Municipal Target Term Trust Inc.
Financial Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ..................... $ 11.22 $ 10.96 $ 11.14 $ 9.98 $ 11.30
-------- -------- -------- -------- --------
Net investment income ................................ 0.85 0.85 0.84 0.87 0.83
Net realized and unrealized gain (loss) on investments (0.08) 0.20 (0.24) 1.14 (1.39)
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations ..... 0.77 1.05 0.60 2.01 (0.56)
-------- -------- -------- -------- --------
Dividends from net investment income to:
Preferred shareholders ............................... (0.17) (0.18) (0.17) (0.19) (0.14)
Common shareholders .................................. (0.61) (0.61) (0.61) (0.62) (0.62)
Distributions from capital gains to:
Preferred shareholders ............................... -- * * (0.01) --
Common shareholders .................................. -- * * (0.03) --
-------- -------- -------- -------- --------
Total dividends and distributions ...................... (0.78) (0.79) (0.78) (0.85) (0.76)
-------- -------- -------- -------- --------
Net asset value, end of year** ......................... $ 11.21 $ 11.22 $ 10.96 $ 11.14 $ 9.98
======== ======== ======== ======== ========
Market value, end of year** ............................ $ 11.38 $ 11.00 $ 10.25 $ 10.13 $ 8.88
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN+: .............................. 9.35% 13.69% 7.43% 21.67% (8.89%)
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS OF
COMMON SHAREHOLDERS++:
Expenses ............................................... 0.80% 0.88% 0.91% 0.90% 0.94%
Net investment income before preferred stock dividends . 7.63% 7.70% 7.75% 8.06% 7.91%
Preferred stock dividends .............................. 1.50% 1.61% 1.59% 1.83% 1.38%
Net investment income available to common stockholders . 6.13% 6.09% 6.16% 6.23% 6.53%

SUPPLEMENTAL DATA:
Average net assets of common shareholders (in thousands) $508,037 $500,227 $494,667 $487,923 $475,529
Portfolio turnover rate ................................ 0% 8% 5% 9% 21%
Net assets of common shareholders, end of year
(in thousands) ....................................... $508,851 $509,613 $497,686 $506,060 $453,407
Asset coverage per share of preferred stock,
end of year# $ 81,550 $ 81,640 $ 80,298 $ 81,243 $150,783
Preferred stock outstanding (in thousands) ............. $225,000 $225,000 $225,000 $225,000 $225,000
</TABLE>

- ----------
* Actual amount paid for the year ended December 31, 1997 to preferred
shareholders was $0.0008 and to common shareholders was $0.0031 and for
the year ended December 31, 1996 to preferred shareholders was $.0007 and
to common shareholders was $.0024.
** Net asset value and market value are published in The Wall Street Journal
each Monday.
# A stock split occurred on July 24, 1995 (Note 4).
+ Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market price on the last day of each year reported. Dividends are assumed,
for purposes of this calculation to be reinvested at prices obtained under
the Trust's dividend reinvestment plan. This calculation does not reflect
brokerage commissions.
++ Ratios calculated on the basis of income and expenses applicable to both
the common and preferred shares, and preferred stock dividends, relative
to the average net assets of common shareholders.

The information above represents the audited operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data, for each of the years indicated. This
information has been determined based upon financial information provided in the
financial statements and market value data for the Trust's common stock.

12
<PAGE>

- --------------------------------------------------------------------------------
The BlackRock Municipal
Target Term Trust Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------

Note 1. Organization & Accounting Policies

The BlackRock Municipal Target Term Trust Inc. (the "Trust"), was organized in
Maryland on July 16, 1991 as a diversified, closed-end management investment
company. The Trust's investment objective is to manage a diversified portfolio
of high quality securities that will return $10 per share to investors on or
about December 31, 2006 while providing current income exempt from regular
federal income tax. The ability of issuers of debt securities held by the Trust
to meet their obligations may be affected by economic developments in a specific
state, industry or region. No assurance can be given that the Trust's investment
objective will be achieved.

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

Securities Valuation: Municipal securities (including commitments to purchase
such securities on a "when-issued" basis) are valued on the basis of prices
provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. Any securities or other assets for which such current market
quotations are not readily available are valued at fair value as determined in
good faith under procedures established by and under the general supervision and
responsibility of the Trust's Board of Directors.

Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost, if their term to maturity from date of purchase is
60 days or less, or by amortizing their value on the 61st day prior to maturity,
if their original term to maturity from date of purchase exceeded 60 days.

Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Trust amortizes premium and accretes original issue
discount on securities purchased using the interest method.

Federal Income Taxes: It is the Trust's intention to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute sufficient net income to shareholders. For this
reason and because substantially all of the Trust's gross income consists of
tax-exempt interest, no federal income tax provision is required.

Dividends and Distributions: The Trust declares and pays dividends and
distributions to common shareholders monthly from net investment income, net
realized short-term capital gains and other sources, if necessary. Net long-term
capital gains, if any, in excess of loss carryforwards may be distributed
annually. Dividends and distributions are recorded on the ex-dividend date.
Dividends and distributions to preferred shareholders are accrued and determined
as described in Note 4.

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

Reclassification of Capital Accounts: The Trust accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase undistributed net investment income and decrease
accumulated net realized gain by $3,044 compared to amounts previously reported.
Net investment income, net realized gains and net assets were not affected by
this change.

Note 2. Agreements

The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc. (the "Adviser") a wholly-owned corporate subsidiary of
BlackRock Advisors, Inc., which is an indirect majority-owned subsidiary of PNC
Bank, N.A., and an Administration Agreement with Prudential Investments Fund
Management LLC ("PIFM"), an indirect, wholly owned subsidiary of The Prudential
Insurance Company of America. The investment advisory fee paid to the Adviser is
computed weekly and payable monthly at an annual rate of 0.35% of the Trust's
average weekly net investment assets. The administration fee paid to PIFM is
also computed weekly and payable monthly at an annual rate of 0.07% of the
Trust's average weekly net investment assets.

13
<PAGE>

Pursuant to the agreements, the Adviser provides continuous supervision of
the investment portfolio and pays the compensation of officers of the Trust who
are affiliated persons of the Adviser. PIFM pays occupancy and certain clerical
and accounting costs of the Trust. The Trust bears all other costs and expenses.

Note 3. Portfolio Securities

Purchases and sales of investment securities, other than short-term investments
for the year ended December 31, 1998 aggregated $3,868,803 and $1,840,773,
respectively.

The federal income tax basis of the Trust's investments at December 31,
1998 was substantially the same as the basis for financial reporting purposes
and, accordingly, gross and net unrealized appreciation for federal income tax
purposes was $63,236,269.

For federal income tax purposes, the Trust had a capital loss carry
forward at December 31, 1998 of approximately $22,200 which will expire in 2006.
Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amounts.

Note 4. Capital

There are 200 million shares of $.01 par value common stock authorized. Of the
45,410,639 common shares outstanding at December 31, 1998, the Adviser owned
10,639 shares. As of December 31, 1998, there were 9,000 preferred shares
outstanding as follows: Series W7-3,000, Series F7-3,000 and Series W28-3,000.

The Trust may classify or reclassify any unissued shares of common stock
into one or more series of preferred stock. On November 21, 1991 the Trust
reclassified 4,500 shares of common stock and issued 3 series of Auction Market
Preferred Stock ("Preferred Stock") as follows: Series W7--1,500 shares, Series
F7--1,500 shares and Series W28--1,500 shares. The Preferred Stock had a
liquidation value of $50,000 per share plus any accumulated but unpaid
dividends. On May 16, 1995 shareholders approved a proposal to split each share
of preferred stock into two shares and simultaneously reduce each share's
liquidation preference from $50,000 to $25,000 plus any accumulated but unpaid
dividends. The stock split occurred on July 24, 1995.

Dividends on Series W7 and Series F7 are cumulative at a rate which is
reset every 7 days based on the results of an auction. Dividends on Series W28
are also cumulative at a rate which is reset every 28 days based on the results
of an auction. Dividend rates ranged from 2.80% to 4.40% during the year ended
December 31, 1998.

The Preferred Stock is redeemable at the option of the Trust, in whole or
in part, on any dividend payment date at $25,000 per share plus any accumulated
or unpaid dividends whether or not declared. The Preferred Stock is also subject
to mandatory redemption at $25,000 per share plus any accumulated or unpaid
dividends, whether or not declared if certain requirements relating to the
composition of the assets and liabilities of the Trust as set forth in the
Articles of Incorporation are not satisfied.

The holders of Preferred Stock have voting rights equal to the holders of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Trust's directors. In addition, the Investment
Company Act of 1940 requires that along with 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
(a) adopt any plan of reorganization that would adversely affect the Preferred
shares and (b) take any action requiring a vote of security holders, including,
among other things, changes in the Trust's subclassification as a closed-end
investment company or changes in its fundamental investment restrictions.

Note 5. Dividends

Subsequent to December 31, 1998, the Board of Directors of the Trust declared
dividends from undistributed earnings of $0.05125 per common share payable
January 29, 1999 to shareholders of record on January 15, 1999.

For the period January 1, 1999 to January 31, 1999 dividends and
distributions declared on preferred shares totalled $629,515 in aggregate for
the three outstanding preferred share series.

14
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK MUNICIPAL TARGET TERM TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------

The Shareholders and Board of Directors of
The BlackRock Municipal Target Term Trust Inc.:

We have audited the accompanying statement of assets and liabilities including
the portfolio of investments, of The BlackRock Municipal Target Term Trust Inc.,
as of December 31, 1998, and the related statements of operations, and of
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1998 by correspondence with the custodian. 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 audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock
Municipal Target Term Trust Inc. as of December 31, 1998, the results of its
operations, the changes in its net investment assets and the financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP

New York, New York
February 12, 1999

15
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

ARIZONA--1.6%
AAA 4,180 University of Arizona Med. Ctr. Hosp. Rev.,
6.25%, 7/01/10, MBIA ........................................... 7/02 at 102 4,523,220
----------

CALIFORNIA--10.3%
California St., G.0., FGIC,
AAA 4,355 6.80%, 11/01/04+ ............................................... N/A 5,088,556
AAA 145 6.80%, 11/01/10 ................................................ 11/04 at 102 168,416
AAA 3,400 California St. Pub. Wks., 6.60%, 12/01/02+, AMBAC ................. N/A 3,820,682
AAA 6,100 Contra Costa Trans. Auth., 6.50%, 3/01/09, FGIC ................... No Opt. Call 6,543,409
AAA 3,500 Eastern Mun. Wtr. Dist., 6.50%, 7/01/09, FGIC ..................... 7/01 at 101 3,751,440
AAA 3,065 Los Angeles Cnty. Leasing Corp., 6.05%, 12/01/10, AMBAC ........... No Opt. Call 3,562,879
AAA 3,000 San Francisco Bay Area Rapid Trans., 6.75%, 7/01/00+, AMBAC ....... N/A 3,206,040
AAA 3,500 Sonoma Cnty. Correct. Fac., C.O.P., 6.10%, 11/15/12, AMBAC ........ 11/02 at 102 3,836,105
----------
29,977,527
----------

DISTRICT OF COLUMBIA--1.3%
AAA 3,500 District of Columbia, G.O., Ser. A, 6.875%, 6/01/00+, MBIA ........ N/A 3,729,355
----------

FLORIDA--9.1%
AAA 10,750 Broward Cnty. Sch. Bd., 6.50%, 7/01/02+, AMBAC .................... N/A 11,915,192
AAA 12,195 Jacksonville Excise Tax Rev., 6.50%, 10/01/10, AMBAC .............. 10/02 at 102 13,488,646
AAA 1,000 Volusia Cnty. Edl. Fac., 6.50%, 10/15/10, CONNIE LEE .............. 10/02 at 102 1,105,050
----------
26,508,888
----------

GEORGIA--2.6%
AAA 5,000 Henry Cnty. Hosp. Auth. Rev., 6.375%, 7/01/09, FGIC ............... 7/02 at 102 5,440,850
AAA 2,000 Macon-Bibb Cnty. Hosp. Auth. Rev., Georgia Med. Ctr.,
6.75%, 8/01/99+, FGIC .......................................... N/A 2,081,300
----------
7,522,150
----------

ILLINOIS--13.1%
AAA 2,665 Chicago, Res. Mtg. Rev., Zero Coupon, 10/01/09, MBIA .............. No Opt. Call 1,266,621
Cook Cnty., G.O., MBIA,
AAA 7,000 6.50%, 11/15/02+ ............................................... N/A 7,798,350
AAA 4,500 7.00%, 11/01/00+ ............................................... N/A 4,865,310
AAA 5,000 Cook Cnty., Community Schs., 6.50%, 1/01/02+, FGIC ................ N/A 5,380,600
AAA 5,000 ILLINOIS EDL. FAC. AUTH. REV., 5.70%, 7/01/03+, FGIC .............. N/A 5,340,200
Illinois Hlth. Fac. Auth. Rev., FGIC,
AAA 3,000 Ser. A, 6.75%, 1/01/10 ......................................... 1/00 at 102 3,133,680
AAA 1,750 Ser. C, 6.75%, 1/01/00+ ........................................ N/A 1,827,980
AAA 7,980 Kendell Kane & Will Cnty. Sch. Dist., 6.25%, 9/01/11, FGIC ........ 9/01 at 100 8,388,177
----------
38,000,918
----------

INDIANA--3.0%
AAA 1,340 Columbus Sch. Bd., 6.625%, Ser. A, 7/01/11, AMBAC ................. 7/02 at 102 1,467,997
AAA 3,750 Indiana St. Edl. Fac. Auth. Rev., Ser. A, 6.60%, 1/01/11, MBIA .... 1/02 at 102 4,056,412
AAA 3,000 Monroe Cnty. Hosp. Auth. Rev., Bloomington Hosp.,
6.65%, 5/01/02+, MBIA .......................................... N/A 3,295,470
----------
8,819,879
----------
</TABLE>

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

PRINCIPAL OPTION CALL
RATING* AMOUNT PROVISIONS++ VALUE
(UNAUDITED) (000) DESCRIPTION (UNAUDITED) (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------
LOUISIANA--6.6%
<S> <C> <C> <C> <C>
AAA $14,385 Louisiana St., G.O., Ser. A, 6.50%, 5/01/02+, AMBAC ............... N/A $ 15,838,460
AAA 2,905 New Orleans Pub. Impt., G.O., 6.60%, 9/01/02+, FGIC ............... N/A 3,184,984
----------
19,023,444
----------

MASSACHUSETTS--16.1%
AAA 2,100 Boston, G.O., Ser. A, 6.50%, 7/01/12, AMBAC ....................... 7/02 at 102 2,295,741
Massachusetts St. Hlth. &Edl. Fac. Auth. Rev.,
AAA 2,000 Ser. C, 6.50%, 7/01/10, FGIC ................................... 7/02 at 102 2,178,240
AAA 5,000 Ser. D, 6.50%, 7/01/10, MBIA ................................... 7/02 at 102 5,445,600
AAA 3,250 Ser. C, 7.25%, 7/01/00+, MBIA .................................. N/A 3,491,637
Massachusetts St. Hsg. Fin. Agcy., FNMA,
AAA 5,000 Ser. H, 6.75%, 11/15/12 ........................................ 11/03 at 102 5,416,450
AAA 5,500 Residential Dev., Ser. A, 6.875%, 11/15/11 ..................... 5/02 at 102 5,995,440
AAA 600 Residential Dev., Ser. C, 6.875%, 11/15/11 ..................... 5/02 at 102 654,048
Massachusetts St., G.O.,
AAA 2,350 Ser. D, 6.00%, 7/01/01+, MBIA .................................. N/A 2,482,072
AAA 7,865 Ser. C, 6.70%, 11/01/04+, FGIC ................................. N/A 9,063,941
AAA 780 Ser. C, 6.75%, 8/01/01+, AMBAC ................................. N/A 853,991
AAA 440 Ser. C, 6.75%, 8/01/09, AMBAC .................................. 8/01 at 102 475,737
AAA 7,630 Massachusetts St. Wtr. Res., Ser. B, 6.25%, 11/01/10, MBIA ........ 11/02 at 102 8,289,385
----------
46,642,282
----------

MICHIGAN--3.9%
AAA 2,375 Chippewa Valley, Sch. Bldg. & Site Rev., 6.375%, 5/01/01+, FGIC ... N/A 2,550,299
Michigan Mun. Bd. Auth. Rev.,
AAA 900 Ser. A, 6.50%, 11/01/12, MBIA .................................. 11/02 at 102 992,349
AAA 2,040 6.45%, 11/01/07, AMBAC ......................................... 11/04 at 102 2,301,875
AAA 2,050 6.65%, 11/01/09, AMBAC ......................................... 11/04 at 102 2,334,109
AAA 3,000 Western Township Util. Auth. Swr. Dist. Sys. Rev.,
6.50%, 1/01/10, FSA ............................................ 1/02 at 100 3,188,280
----------
11,366,912
----------

MISSISSIPPI--0.7%
AAA 1,800 Harrison Cnty. Waste Wtr. Mgmt., 6.75%, 2/01/11, FGIC ............. 2/01 at 102 1,927,494
----------

NEVADA--7.0%
AAA 4,000 Clark Cnty., G.O., 6.50%, 6/01/02+, AMBAC ......................... N/A 4,425,440
AAA 5,215 Clark Cnty. Arpt., 6.25%, 6/01/01+, FGIC .......................... N/A 5,523,989
Clark Cnty. Sch. Dist.,
AAA 4,185 6.75%, 12/15/04+, FGIC ......................................... N/A 4,845,267
AAA 5,175 7.00%, 6/01/01+, MBIA .......................................... N/A 5,617,566
----------
20,412,262
----------

NEW JERSEY--0.8%
AAA 2,000 Hudson Cnty. Correct. Fac., C.O.P., 6.50%, 12/01/11, MBIA ......... 6/02 at 101.5 2,177,700
----------

NEW YORK--11.1%
AAA 4,500 New York City, G.O., Ser. B, 6.95%, 8/15/04+, MBIA ................ N/A 5,209,065
New York St. Env. Fac. Corp. P.C.R.,
AAA 6,155 6.70%, 5/15/09 ................................................. 11/04 at 102 7,083,851
AAA 4,965 6.80%, 5/15/10 ................................................. 11/04 at 102 5,723,007
New York St. Medicare Fac., AMBAC,
AAA 9,715 6.60%, 2/15/05+ ................................................ N/A 11,195,275
AAA 2,695 6.625%, 2/15/05+ ............................................... N/A 3,109,248
----------
32,320,446
----------
</TABLE>

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

PRINCIPAL OPTION CALL
RATING* AMOUNT PROVISIONS++ VALUE
(UNAUDITED) (000) DESCRIPTION (UNAUDITED) (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------
OHIO--6.0%
Cleveland Wtrwks. Rev., First Mtg., Ser. F, AMBAC,
<S> <C> <C> <C> <C>
AAA $ 6,495 6.50%, 1/01/11 ................................................. 1/02 at 102 $ 7,121,053
AAA 5,505 6.50%, 1/01/02+ ................................................ N/A 6,035,627
AAA 3,900 Lucas Cnty. Hosp. Impt. Rev., St. Vincent Med. Ctr.,
6.50%, 8/15/02+, MBIA .......................................... N/A 4,276,779
----------
17,433,459
----------

OKLAHOMA--2.1%
AAA 5,725 Oklahoma City Wtr. Util. Tr., Wtr. & Sewer Rev., Ser. B,
6.375%, 7/01/12, MBIA .......................................... 7/02 at 100 6,155,577
----------

PENNSYLVANIA--6.1%
AAA 5,000 Dauphin Cnty. Gen. Auth. Rev., 6.25%, 7/01/08, MBIA ............... 7/02 at 102 5,410,550
AAA 2,100 Philadelphia Wtr. &Waste Rev., Ser. A, 5.625%, 6/15/08, AMBAC ..... No Opt. Call 2,323,398
AAA 6,005 Pittsburgh, G.O., Ser. D, 6.00%, 9/01/02+, AMBAC .................. N/A 6,566,768
AAA 3,000 Pittsburgh Wtr. & Swr., 6.75%, 9/01/01+, FGIC ..................... N/A 3,287,430
----------
17,588,146
----------

RHODE ISLAND--4.5%
AAA 2,390 RHODE ISLAND CLEAN WTR. PROTN. FIN. AGCY., P.C.R., REVOLVING FD.
Pooled Ln., Issue A, 6.70%, 10/01/10, MBIA ..................... 10/02 at 102 2,641,476
AAA 10,000 Rhode Island St. Pub. Bldgs. Auth., St. Pub. Proj. Rev., Ser. A,
6.75%, 2/01/00+, AMBAC ......................................... N/A 10,547,000
----------
13,188,476
----------

SOUTH CAROLINA--8.5%
Piedmont Mun. Pwr. Agcy. Elec. Rev.,
AAA 14,925 6.30%, 1/01/11, MBIA ........................................... 1/03 at 102 16,305,712
AAA 7,900 6.50%, 1/01/11, FGIC ........................................... 1/01 at 102 8,400,702
----------
24,706,414
----------

TEXAS--15.7%
Austin Util. Sys. Rev. Comb., Ser A., FGIC,
AAA 7,475 6.00%, 5/15/00+ ................................................ N/A 7,735,504
AAA 1,055 6.00%, 5/15/10 ................................................. 5/00 at 100 1,081,438
AAA 1,580 Dallas Cnty. Road Imp., G.O., 5.625%, 8/15/10 ..................... 8/01 at 100 1,639,756
AAA 2,500 Dallas Ft. Worth Regl. Arpt. Rev., Ser. A, 7.375%, 11/01/10, FGIC . 5/04 at 102 2,914,225
AAA 8,000 El Paso Impt. Auth. Rev., G.O., Ser. A, 6.375%, 8/15/10, FGIC ..... No Opt. Call 8,584,880
Harris Cnty., Toll Road, FGIC,
AAA 2,585 Ser. B, Zero Coupon, 8/15/08 ................................... No Opt. Call 1,712,795
AAA 6,310 Sr. Lien, Ser. A, 6.50%, 8/15/02+ .............................. N/A 7,000,566
AAA 4,775 Sr. Lien, Ser. A, 6.50%, 8/15/11 ............................... 8/02 at 102 5,216,067
AAA 10,440 Houston Wtr. & Swr. Sys., Ser. C, Zero Coupon, 12/01/10, AMBAC .... No Opt. Call 6,112,515
AAA 1,840 North Texas Mun. Wtr. Dist., 6.50%, 6/01/09, MBIA ................. 6/03 at 100 2,011,525
AAA 1,500 Texas Mun. Pwr. Agcy., Ser. A, 6.75%, 9/01/12, AMBAC .............. 9/01 at 102 1,624,200
----------
45,633,471
----------

UTAH--1.2%
AAA 1,450 Salt Lake City Mun. Bldg. Lease, 6.15%, 10/01/10, MBIA ............ 10/04 at 101 1,588,315
AAA 3,175 Salt Lake City Wtr. Conservancy, Zero Coupon, 10/01/10, AMBAC ..... No Opt. Call 1,883,696
----------
3,472,011
----------

VIRGINIA--3.5%
Peninsula Port. Auth., Riverside Hlth. Sys., MBIA,
AAA 6,000 Proj. A, 6.625%, 7/01/10 ....................................... 7/02 at 102 6,573,120
AAA 3,380 Proj. B, 6.625%, 7/01/10 ....................................... 7/02 at 102 3,702,858
----------
10,275,978
----------
</TABLE>

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

PRINCIPAL OPTION CALL
RATING* AMOUNT PROVISIONS++ VALUE
(UNAUDITED) (000) DESCRIPTION (UNAUDITED) (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------
WASHINGTON--5.7%
<S> <C> <C> <C> <C>
AAA $ 4,650 Port of Seattle Rev., 6.60%, 8/01/02+, MBIA ....................... N/A $ 5,170,195
Washington St. Pub. Pwr. Supply Sys. Rev.,
AAA 12,905 Zero Coupon, 7/01/10, MBIA ..................................... No Opt. Call 7,698,349
AAA 3,500 Nuclear Proj. No. 2, Ser. A, 7.00%, 7/01/00+, FGIC ............. N/A 3,747,660
-----------
16,616,204
-----------

WISCONSIN--0.7%
AAA 2,000 Wisconsin St. Hlth. & Edl. Facs. Auth. Rev.,
Wausau Hosp. Inc., Ser. A,
6.625%, 2/15/01+, AMBAC ........................................ N/A 2,156,660
-----------

TOTAL INVESTMENTS--142.3% (cost $372,077,775) ..................... 413,341,383
Other assets in excess of liabilities--2.5% ....................... 7,127,873
Liquidation value of preferred stock--(44.8)% ..................... (130,000,000)
-----------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS--100% ................ $290,469,256
===========
</TABLE>

- ----------
* Rating: Using the higher of Standard & Poor's, Moody's or Fitch's rating.
+ This bond is pre-refunded. See glossary for definition.
++ Option call provisions: date (month/year) and price of the earliest call or
redemption. There may be other call provisions at varying prices at later
dates.

- --------------------------------------------------------------------------------
THE FOLLOWING ABBREVIATIONS ARE USED IN PORTFOLIO DESCRIPTIONS:

AMBAC -- American Municipal Bond Assurance Corporation
CONNIE LEE -- College Construction Loan Insurance Association
C.O.P. -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance, Inc.
G.O. -- General Obligation Bond
MBIA -- Municipal Bond Insurance Association
P.C.R. -- Pollution Control Revenuen
- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INSURED
MUNICIPAL TERM TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
- --------------------------------------------------------------------------------

ASSETS
Investments, at value (cost $372,077,775)
(Note 1) ............................... $413,341,383
Interest receivable ...................... 7,607,712
Prepaid assets ........................... 9,730
------------
420,958,825
------------

LIABILITIES
Due to custodian ......................... 140,318
Investment Advisory fee payable (Note 2) . 125,542
Dividends payable--preferred stock ....... 45,541
Administration fee payable (Note 2) ...... 35,869
Other accrued expenses ................... 142,299
------------
489,569
------------
NET INVESTMENT ASSETS .................... $420,469,256
============
Net investment assets were comprised of:
Common stock:
Par value (Note 4) ................... $ 258,856
Paid-in capital in excess of par ..... 239,833,688
Preferred stock (Note 4) ............... 130,000,000
------------
370,092,544
Undistributed net investment income .... 9,464,998
Accumulated net realized loss .......... (351,894)
Net unrealized appreciation ............ 41,263,608
------------
Net investment assets, December 31, 1998 $420,469,256
============
Net assets applicable to common
shareholders ......................... $290,469,256
============
Net asset value per common share:
($290,469,256 / 25,885,639 shares of
common stock issued and outstanding) ... $11.22
======

- --------------------------------------------------------------------------------
THE BLACKROCK INSURED
MUNICIPAL TERM TRUST INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------

NET INVESTMENT INCOME
Income
Interest and discount earned ........... $24,626,712
-----------
Expenses
Investment advisory .................... 1,474,052
Administration ......................... 421,158
Auction agent .......................... 325,000
Custodian .............................. 114,500
Reports to shareholders ................ 72,000
Directors .............................. 64,500
Audit .................................. 42,000
Transfer agent ......................... 35,000
Legal .................................. 10,000
Miscellaneous .......................... 144,115
-----------
Total expenses ......................... 2,702,325
-----------
Net investment income .................... 21,924,387
-----------

REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3)
Net realized gain on investments ......... 16,839
Net change in unrealized appreciation on
investments ............................ (813,183)
-----------
Net loss on investments .................. (796,344)
-----------

NET INCREASE IN NET INVESTMENT
ASSETS RESULTING FROM OPERATIONS ....... $21,128,043
===========

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,
----------------------------
1998 1997
----------- -----------
INCREASE IN NET INVESTMENT ASSETS
Operations:
<S> <C> <C>
Net investment income .............................................. $ 21,924,387 $ 21,724,960
Net realized gain (loss) on investments ............................ 16,839 (45,924)
Net change in unrealized appreciation on investments ............... (813,183) 7,582,696
----------- -----------
Net increase in net investment assets resulting from operations .... 21,128,043 29,261,732
----------- -----------
Dividends:
To common shareholders from net investment income .................. (16,177,201) (16,177,257)
To preferred shareholders from net investment income ............... (4,443,277) (4,592,916)
----------- -----------
..................................................................... (20,620,478) (20,770,173)
----------- -----------
Total increase ................................................... 507,565 8,491,559
----------- -----------
NET INVESTMENT ASSETS
Beginning of year .................................................... 419,961,691 411,470,132
----------- -----------
End of year .......................................................... $420,469,256 $419,961,691
=========== ===========
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ......... $11.20 $10.87 $11.02 $9.73 $11.18
----------- ----------- ----------- ----------- -----------
Net investment income .................... 0.85 0.84 0.83 0.84 0.82
Net realized and unrealized
gain (loss) on investments ............. (0.03) 0.29 (0.18) 1.27 (1.48)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) from investment
operations ............................... 0.82 1.13 0.65 2.11 (0.66)
----------- ----------- ----------- ----------- -----------
Dividends from net investment income to:
Preferred shareholders ................... (0.18) (0.18) (0.18) (0.20) (0.14)
Common shareholders ...................... (0.62) (0.62) (0.62) (0.62) (0.62)
Distributions from net realized gain
on investments to:
Preferred shareholders ................... -- -- -- -- (0.01)
Common shareholders ...................... -- -- -- -- (0.02)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions .......... (0.80) (0.80) (0.80) (0.82) (0.79)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year* .............. $11.22 $11.20 $10.87 $11.02 $9.73
=========== =========== =========== =========== ===========
Market value, end of year* ................. $11.50 $11.00 $10.13 $10.00 $8.50
=========== =========== =========== =========== ===========
TOTAL INVESTMENT RETURN+ ................... 10.53% 15.22% 7.59% 25.31% (13.38%)
=========== =========== =========== =========== ===========
RATIOSTOAVERAGENETASSETS OF
COMMON SHAREHOLDERS:++
Expenses ................................... 0.93% 0.94% 0.97% 0.96% 1.04%
Net investment income before preferred
stock dividends .......................... 7.56% 7.66% 7.66% 7.97% 7.99%
Preferred stock dividends .................. 1.53% 1.62% 1.61% 1.87% 1.44%
Net investment income available to
common shareholders ...................... 6.03% 6.04% 6.05% 6.10% 6.55%

SUPPLEMENTAL DATA:
Average net assets of common shareholders
(in thousands) ........................... $290,004 $283,531 $281,521 $272,868 $265,851
Portfolio turnover ......................... 0% 1% 1% 1% 31%
Net assets of common shareholders,
end of year (in thousands) ............... $290,469 $289,962 $281,470 $285,226 $251,856
Preferred stock outstanding (in thousands) . $130,000 $130,000 $130,000 $130,000 $130,000
Asset coverage per share of preferred stock,
end of year# ............................. $80,859 $80,762 $79,129 $79,851 $146,868
</TABLE>

- ----------
* Net asset value and market value are published in THE WALL STREET JOURNAL
each Monday. # A stock split occurred on July 24, 1995 (Note 4).
+ Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day and a sale at the current market
price on the last day of each year reported. Dividends and distributions, if
any, are assumed, for purposes of this calculation, to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment returns do not reflect brokerage commissions.
++ Ratios calculated on the basis of income and expenses applicable to both the
common and preferred shares, and preferred stock dividends, relative to the
average net assets of common shareholders.

The information above represents the audited operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data for each of the years indicated. This
information has been determined based upon financial information provided in the
financial statements and market value data for the Trust's common shares.

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INSURED
MUNICIPAL TERM TRUST INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. ORGANIZATION & ACCOUNTING POLICIES

The BlackRock Insured Municipal Term Trust Inc. (the "Trust"), was organized in
Maryland on December 23, 1991 as a diversified, closed-end management investment
company. The Trust's investment objective is to manage a diversified portfolio
of high quality securities that will return $10 per share to investors on or
about December 31, 2010 while providing current income exempt from regular
federal income tax. The ability of issuers of debt securities held by the Trust
to meet their obligations may be affected by economic developments in a specific
state, industry or region. No assurance can be given that the Trust's investment
objective will be achieved. The following is a summary of significant accounting
policies followed by the Trust:

SECURITIES VALUATION: Municipal securities (including commitments to purchase
such securities on a "when-issued" basis) are valued on the basis of prices
provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. Any securities or other assets for which such current market
quotations are not readily available are valued at fair value as determined in
good faith under procedures established by and under the general supervision and
responsibility of the Trust's Board of Directors.

Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost if their term to maturity from date of purchase is 60
days or less, or by amortizing their value on the 61st day prior to maturity, if
their original term to maturity from date of purchase exceeded 60 days.

SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Trust accretes original issue discount or amortizes
premium on securities purchased using the interest method.

FEDERAL INCOME TAXES: For federal income tax purposes, the Trust is treated as a
separate taxpaying entity. It is the intent of the Trust to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its net income to shareholders. For this
reason and because substantially all of the Trust's gross income consists of
tax-exempt interest, no federal income tax provision is required.

DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and
distributions to common shareholders monthly from net investment income, net
realized short-term capital gains and other sources, if necessary. Net long-term
capital gains if any, in excess of loss carryforwards may be distributed
annually. Dividends and distributions are recorded on the ex-dividend date.
Dividends and distributions to preferred shareholders are accrued and determined
as described in Note 4.

NOTE 2. AGREEMENTS

The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc. (the "Adviser"), a wholly-owned corporate subsidiary of
BlackRock Advisors, Inc., which is an indirect majority-owned subsidiary of PNC
Bank, N.A., and an Administration Agreement with Mitchell Hutchins Asset
Management Inc. (the "Administrator"), which is a wholly-owned subsidiary of
PaineWebber Incorporated.

The investment fee paid to the Adviser is computed weekly and payable monthly
at an annual rate of 0.35% of the Trust's average weekly net investment assets.
The administration fee paid to the Administrator is also computed weekly and
payable monthly at an annual rate of 0.10% of the Trust's average weekly net
investment assets.

Pursuant to the agreements, the Adviser provides continuous supervision of
the investment portfolio and pays the compensation of officers of the Trust who
are affiliated persons of the Adviser. The Administrator pays occupancy and
certain clerical and accounting costs of the Trust. The Trust bears all other
costs and expenses.

NOTE 3. PORTFOLIO SECURITIES

Purchases and sales of investment securities, other than short-term investments,
for the year ended December 31, 1998 aggregated $1,611,045 and $1,627,995,
respectively.

<PAGE>

The federal income tax basis of the Trust's investments at December 31, 1998
was substantially the same as the basis for financial reporting, and
accordingly, gross and net unrealized appreciation for federal income tax
purposes was $41,263,608.

For federal income tax purposes, the Trust had a capital loss carryforward at
December 31, 1998 of $351,951 of which $306,027 will expire in 2003 and $45,924
will expire in 2005. Accordingly, no capital gain distribution is expected to be
paid to shareholders until net gains have been realized in excess of such
amount.

NOTE 4. CAPITAL

There are 200 million shares of $.01 par value common stock authorized. Of the
25,885,639 common shares outstanding at December 31, 1998, the Adviser owned
10,583 shares. As of December 31, 1998, there were 5,200 preferred shares
outstanding as follows: 2,600 shares of Series M7 and M28, respectively.

The Trust may classify or reclassify any unissued shares of common stock into
one or more series of preferred stock. On April 27, 1992, the Trust reclassified
2,600 shares of common stock and issued two series of Auction Market Preferred
Stock ("Preferred Stock") as follows: Series M7--1,300 shares and Series
M28--1,300 shares. The Preferred Stock has a liquidation value of $25,000 per
share plus any accumulated but unpaid dividends. On May 16, 1995, shareholders
approved a proposal to split each share of the Trust's Auction Rate Municipal
Preferred Stock into two shares and simultaneously reduce each share's
liquidation preference from $50,000 to $25,000 plus any accumulated but unpaid
dividends. The stock split occurred on July 24, 1995.

Dividends on Series M7 are cumulative at a rate which is reset every 7 days
based on the results of an auction. Dividends on Series M28 are also cumulative
at a rate which is reset every 28 days based on the results of an auction.
Dividend rates ranged from 2.40% to 5.025% for the year ended December 31, 1998.

The Trust may not declare dividends or make other distributions on shares of
common stock or purchase any such shares if, at the time of the declaration,
distribution or purchase, asset coverage with respect to the outstanding
Preferred Stock would be less than 200%.

The Preferred Stock is redeemable at the option of the Trust, in whole or in
part, on any dividend payment date at $25,000 per share plus any accumulated or
unpaid dividends whether or not declared. The Preferred Stock is also subject to
mandatory redemption at $25,000 per share plus any accumulated or unpaid
dividends, whether or not declared, if certain requirements relating to the
composition of the assets and liabilities of the Trust as set forth in the
Articles of Incorporation are not satisfied.

The holders of Preferred Stock have voting rights equal to the holders of
common stock (one vote per share) and will vote together with holders of shares
of common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Trust's directors. In addition, the Investment
Company Act of 1940 requires that along with approval by stockholders 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
(a) adopt any plan of reorganization that would adversely affect the preferred
shares, and (b) take any action requiring a vote of security holders including,
among other things, changes in the Trust's subclassification as a closed-end
investment company or changes in its fundamental investment restrictions.

NOTE 5. DIVIDENDS

Subsequent to December 31, 1998, the Board of Directors of the Trust declared
dividends from undistributed earnings of $0.05208 per common share payable
January 29, 1999 to shareholders of record on January 15, 1999.

For the period January 1, 1999 through January 31, 1999, dividends declared
on preferred shares totalled $300,820 in aggregate for the two outstanding
preferred share series.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------

The Shareholders and Board of Directors of
The BlackRock Insured Municipal Term Trust Inc.:

We have audited the accompanying statement of assets and liabilities including
the portfolio of investments, of The BlackRock Insured Municipal Term Trust
Inc., as of December 31, 1998, and the related statements of operations, and of
changes in net investment assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1998 by correspondence with the custodian. 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 audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock
Insured Municipal Term Trust Inc. as of December 31, 1998, the results of its
operations, the changes in its net investment assets and the financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.

/s/Deloitte & Touche LLP
- ------------------------
Deloitte & Touche LLP

New York, New York
February 12, 1999

<PAGE>

ANNEX A

DESCRIPTION OF CREDIT RATINGS FOR MUNICIPAL OBLIGATIONS

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;

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.

A-1
<PAGE>

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

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

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

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

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

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

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

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

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

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

L The letter "L" indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit
collateral is federally insured by the Federal Savings & Loan
Insurance Corp. or the Federal Deposit Insurance Corp.* 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

A-2
<PAGE>

limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured
institution, upon maturity.

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

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

MUNICIPAL NOTES

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

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

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

Note rating symbols are as follows:

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

SP-2 Satisfactory capacity to pay principal and interest.

SP-3 Speculative capacity to pay principal and interest.

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

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

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

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

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

A-3
<PAGE>

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

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

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

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

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

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

MUNICIPAL BONDS

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

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

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

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

Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may

A-4
<PAGE>

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.

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.

A-5
<PAGE>

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

-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

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

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

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

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

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

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

Fitch IBCA, Inc.--A brief description of the applicable Fitch IBCA, Inc.

("Fitch") ratings symbols and meanings (as published by Fitch) follows:

LONG-TERM CREDIT RATINGS

INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
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,
nev-

A-6
<PAGE>

ertheless, be more vulnerable to changes in circumstances or
in economic conditions than is the case for higher ratings.

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

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

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

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

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

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

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

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

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

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

A-7
<PAGE>

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

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

D Default. Denotes actual or imminent payment default.

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

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

`Withdrawn': A rating is withdrawn when Fitch IBCA 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. RatingAlert is typically resolved over a relatively short
period.

A-8

<PAGE>

PART C

OTHER INFORMATION

Item 15. Indemnification.

Reference is made to Article VI of the Company's By-laws.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions or
otherwise, the Company has been advised that in the opinion of the SEC 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
Company of expense incurred or paid by the director, officer, or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the shares being registered, the Company 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.

Item 16. Exhibits.

<TABLE>
<C> <S>
(1) Articles of Incorporation+
(1)(a) Articles of Amendment+
(2) By-Laws+
(3) INAPPLICABLE
(4) Agreement of Merger**
(5) Articles Supplementary+
(6) Investment Advisory Contract+
(7) INAPPLICABLE
(8) INAPPLICABLE
(9) Custodian Contract+
(10) INAPPLICABLE
(11) Opinion of Counsel+
(12) Consent of Skadden, Arps, Slate, Meagher & Flom LLP+
Transfer Agency Agreement between the Registrant and State Street Bank
(13)(a) & Trust Company+
(b) Form of Auction Agent Agreement+
(c) Form of Broker-Dealer Agreement+
(d) Form of Letter of Representations+
Consent of Deloitte & Touche LLP, independent auditors for the
(14) Registrant*
(15) INAPPLICABLE
(16) Power of Attorney*
(17) INAPPLICABLE
</TABLE>
- --------
* Filed herewith.
** Included as Appendix I to Proxy Statement/Prospectus.
+ To be filed by amendment.

C-1
<PAGE>

Item 17. Undertakings.

(a) The Registrant undertakes to suspend offering of the shares of Common
Stock covered hereby until it amends its Prospectus contained herein if (1)
subsequent to the effective date of this Registration Statement, its net asset
value per share of Common Stock declines more than 10 percent from its net
asset value per share of Common Stock as of the effective date of this
Registration Statement, or (2) its net asset value per share of Common Stock
increases to an amount greater than its net proceeds as stated in the
Prospectus contained herein.

(b) The Registrant undertakes that: (1) For the purpose of determining any
liability under the Securities Act, the information omitted from the form of
prospectus filed as part of a registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant
to Rule 497(h) under the Securities Act shall be deemed to be a part of the
registration statement as of the time it was declared effective. (2) For the
purpose of determining any liability under the Securities Act, 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 such securities at that time shall be deemed to be the initial
bona fide offering thereof.
<PAGE>

SIGNATURE

As required by the Securities Act of 1933, this registration statement has
been signed on behalf by the registrant, in the City of New York, and State of
New York, on the 23rd day of July, 1999.

THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.

/s/ Ralph L. Schlosstein
By___________________________________
Ralph L. Schlosstein President

Each person whose signature appears below hereby authorizes Ralph L.
Schlosstein, Laurence D. Fink and Karen H. Sabath, or any of them, as
attorney-in-fact, to sign on his behalf, individually and in each capacity
stated below, any amendments to this Registration Statement (including post-
effective amendments) and to file the same, with all exhibits thereto, with
the Securities and Exchange Commission.

As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<S> <C> <C>
</TABLE>
Signatures Title Date

* President (Principal July 23, 1999
- ------------------------------------- Executive Officer)
Laurence D. Fink and Director

/s/ Henry Gabbay Treasurer (Principal July 23, 1999
- ------------------------------------- Financial and
Henry Gabbay Accounting Officer)

/s/ Ralph L. Schlosstein
- ------------------------------------- President and July 23, 1999
Ralph L. Schlosstein Director

*
- ------------------------------------- Director July 23, 1999
Andrew F. Brimmer

Director
- -------------------------------------
Richard E. Cavanagh
<TABLE>
<S> <C> <C>
</TABLE>
<PAGE>

<TABLE>
<S> <C> <C>
</TABLE>
Signatures Title Date

* Director July 23, 1999
- -------------------------------------
Kent Dixon

* Director July 23, 1999
- -------------------------------------
Frank J. Fabozzi

Director
- -------------------------------------
James Grosfeld

* Director July 23, 1999
- -------------------------------------
James Clayburn LaForce, Jr.

* Director July 23, 1999
- -------------------------------------
<TABLE>
<S> <C> <C>
</TABLE>
Walter F. Mondale

- --------
* Signed by Ralph L. Schlosstein pursuant to power of attorney, dated July 22,
1999.

/s/ Ralph L. Schlosstein
- -------------------------------------
Ralph L. Schlosstein
<PAGE>

THE BLACKROCK INVESTMENT
QUALITY MUNICIPAL TRUST INC. ("BKN")

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
Consent of Deloitte & Touche LLP, independent auditors for the
(14) Applicant
(16) Power of Attorney
</TABLE>

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Registration Statement on Form
N-14 (the "Registration Statement") of our report dated December 11, 1998
relating to the financial statements and financial highlights appearing in the
October 31, 1998 Annual Report to Shareholders of The Blackrock Investment
Quality Municipal Term Trust Inc. ("BKN") and of our reports dated February 12,
1999 relating to the financial statements and financial highlights appearing in
the December 31, 1998 Annual Reports to Shareholders of The Blackrock Municipal
Target Term Trust Inc. ("BMN"), The Blackrock Insured Municipal Term Trust Inc.
("BMT") and The Blackrock Insured Municipal 2008 Term Trust Inc. ("BRM") which
are also incorporated by reference into the Statement of Additional information.

We also consent to the references to us under the headings "Service Providers
For The Trusts and BKN" and "Financial Highlights for BKN" in the combined Proxy
Statement/Prospectus, constituting part of this Registration Statement.

/s/ DELOITTE & TOUCHE LLP
New York, New York
July 23, 1999

<PAGE>

POWER OF ATTORNEY

That each of the undersigned officers and directors of The BlackRock
Investment Quality Municipal Trust, a corporation formed under the laws of the
State of Maryland (the "Trust"), do constitute and appoint Ralph L. Schlosstein,
Laurance D. Fink and Karen H. Sabath, and each of them, his or her true and
lawful attorneys and agents, each with full power and authority (acting alone
and without the other) to execute in the name and on behalf of each of the
undersigned as such officer or director, a Registration Statement on Form N-14,
including any pre-effective amendments and/or any post-effective amendments
hereto and any subsequent Registration Statement of the Trust pursuant to Rule
462(b) of the Securities Act of 1933, as amended (the "1933 Act") and any other
filings in connection therewith, and to file the same under the 1933 Act or the
Investment Company Act of 1940, as amended, or otherwise, with respect to the
registration and offering by the Trust of its common stock, par value $.01 per
share, and its preferred stock, liquidation preference $25,000 per share,
granting to such attorneys and agents and each of them, full power of
substitution and revocation in the premises; and ratifying and confirming all
that such attorneys and agents or any of them, may do or cause to be done by
virtue of these presents.

This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
instrument.

<PAGE>

IN WITNESS WHEREOF, each of the undersigned has executed this power of
Attorney this 22 day of July, 1999.

/s/ Andrew F. Brimmer
______________________________________________
Dr. Andrew F. Brimmer
Director

______________________________________________
Richard E. Cavanagh
Director

/s/ Kent Dixon
______________________________________________
Kent Dixon
Director

/s/ Frank J. Fabozzi
______________________________________________
Frank J. Fabozzi
Director

______________________________________________
James Grosfeld
Director

/s/ James Clayburn LaForce, Jr.
______________________________________________
James Clayburn LaForce, Jr.
Director

/s/ Walter F. Mondale
______________________________________________
Walter F. Mondale
Director

/s/ Ralph L. Schlosstein
______________________________________________
Ralph L. Schlosstein
Director and President

<PAGE>

/s/ Laurence D. Fink
______________________________________________
Laurence D. Fink
Trustee

/s/ Henry Gabbay
______________________________________________
Henry Gabbay
Treasurer