BLACKROCK HIGH YIELD TRUST, 497, 1998-12-18

BLACKROCK HIGH YIELD TRUST
497, 1998-12-18

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PROSPECTUS
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5,800,000 Shares
THE BLACKROCK HIGH YIELD TRUST
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The BlackRock High Yield Trust (the "Trust") is a newly-organized closed-end
fund. Our objective is to generate high current income and, to a lesser
extent, to seek capital appreciation. We will invest our assets primarily in a
diversified portfolio of "high-risk, high yield" securities. These are
securities, mostly bonds but also preferred stocks, rated lower than "Baa" by
Moody's or lower than "BBB" by Standard & Poor's or not rated by any rating
agency but which our investment adviser believes are comparable to securities
rated in these categories. The Trust's strategies may result in an above
average amount of risk and volatility or loss of principal, and therefore, may
increase the risk of loss of your investment in the Trust in comparison to the
risk of loss of your investment in The BlackRock 1998 Term Trust or other
BlackRock closed-end funds. For example, we may borrow money to purchase
additional securities to try to achieve our objective of high current income.
There is, of course, no guarantee that we will achieve our investment
objectives.

BlackRock Advisors, Inc. will act as our investment adviser. BlackRock
Advisors, Inc. is a global asset management company that manages a broad range
of investment products, including a family of open-end funds (i.e., mutual
funds) and closed-end funds, for clients worldwide. BlackRock Advisors, Inc.
manages client assets totaling approximately $120 billion. One of BlackRock
Advisors, Inc.'s affiliates, BlackRock Financial Management, Inc. (or
"BlackRock") will handle the day-to-day investment management of the Trust.

By this Prospectus, we are offering Shares of the Trust at a subscription
price of $15.00 per Share. BlackRock Advisors, Inc. or one of its affiliates
(not the Trust or its investors) will pay the sales load or underwriting
commission on the Shares you buy to the Underwriters or other institutions
participating in this offering equal to 4.5% of the Subscription Price per
Share. The right to request to subscribe for Shares is being offered to a
limited number of potential investors. It is being offered to investors who
hold shares of The BlackRock 1998 Term Trust as of the close of business on
November 12, 1998. The BlackRock 1998 Term Trust is scheduled to liquidate
around December 31, 1998 and, in connection with this offering, holders of
shares of The BlackRock 1998 Term Trust may use all or a portion of their
distribution from the liquidation of The BlackRock 1998 Term Trust to purchase
Shares of the Trust. Because it is possible that this liquidating distribution
may not be made prior to the payment date for the Shares of the Trust, you
should consult with your broker or financial adviser to make sure that you
have available sufficient other funds for the purchase of the Shares. We are
also offering the right to request to subscribe for Shares to shareholders, as
of November 12, 1998, of all other closed-end funds managed by BlackRock and
certain other persons. A description of how to purchase and pay for Shares of
the Trust in the offering can be found under the heading "Terms of the
Offering" on page 55 of this Prospectus. You should know that an investment in
the Trust is not comparable or similar to your current investment in The
BlackRock 1998 Term Trust or any of the other closed-end funds managed by
BlackRock.

Because of the high risk nature of the securities that will be purchased for
the Trust's portfolio, an investment in the Shares may not be suitable for the
risk tolerance of all investors who own shares of The BlackRock 1998 Term
Trust or other BlackRock closed-end funds. Please consult with your broker or
financial adviser prior to making your investment decision. The minimum number
of Shares you can buy in this offering is 100 Shares (or $1,500). Currently,
there is no public market for Shares of the Trust. The Shares are approved for
listing on the New York Stock Exchange under the symbol "BHY." You should be
aware that shares of closed-end funds often have traded at a discount to their
net asset values and the Shares of the Trust may likewise trade at such a
discount. This public offering is a firm commitment underwriting.

THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS AND SPECIAL
CONSIDERATIONS" BEGINNING ON PAGE 45 OF THIS PROSPECTUS FOR FACTORS THAT YOU
SHOULD CONSIDER IN CONNECTION WITH AN INVESTMENT IN THE SHARES OF THE TRUST.
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Subscription Price.................................... $15.00 $87,000,000
Sales Load............................................ None None
Proceeds, before expenses, to the Trust............... $15.00 $87,000,000
</TABLE>

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

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Delivery and payment for the Shares will be on or about December 23, 1998.

PRUDENTIAL SECURITIES INCORPORATED
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY

December 17, 1998
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(Continued from cover page)

We have granted the Underwriters a 45-day option to purchase up to 870,000
additional Shares, solely to cover over-allotments, which they may exercise up
to three times during the 45-day period at the public offering price on the
same terms and conditions described herein. Assuming all those additional
Shares are purchased by the Underwriters, the total proceeds to the Trust from
the offering would be $100,050,000. The Trust will pay offering expenses of
$116,000 ($133,400 if the over-allotment option is exercised in full), which
will be deducted from the total proceeds of the offering. BlackRock Advisors,
Inc. or an affiliate will pay all of the organizational expenses of the Trust.
BlackRock Advisors, Inc. or an affiliate will also pay all offering expenses
that exceed $0.02 per Share.

This Prospectus provides information about the Trust that you should know
before investing in the Trust. You should read this Prospectus carefully and
retain it for future reference. The Securities and Exchange Commission
maintains an Internet World Wide Web site (http://www.sec.gov) that contains
this Prospectus. You may call or write the Trust at 345 Park Avenue, New York,
New York 10154, telephone number 800-227-7236.

An investment in the Trust is not a deposit of any bank or other insured
depository institution. Your investment is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

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TABLE OF CONTENTS

<TABLE>
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PAGE
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<S> <C>
Prospectus Summary........................................................ 1
Trust Expenses............................................................ 21
The Trust................................................................. 23
Use of Proceeds........................................................... 23
Investment Objectives and Policies........................................ 24
Other Investment Practices................................................ 36
Risk Factors and Special Considerations................................... 45
Investment Restrictions................................................... 54
Terms of the Offering..................................................... 55
Management of the Trust................................................... 58
Trustees and Officers of the Trust........................................ 64
Portfolio Transactions.................................................... 67
Determination of Net Asset Value.......................................... 68
Dividends and Distributions............................................... 70
Taxes..................................................................... 71
Automatic Dividend Reinvestment Plan...................................... 76
Custodian and Transfer and Dividend Disbursing Agent...................... 77
Description of Shares..................................................... 78
Underwriting.............................................................. 82
Legal Proceedings......................................................... 85
Additional Information.................................................... 85
Legal Opinions............................................................ 85
Experts................................................................... 85
Report of Independent Accountants......................................... 86
Statement of Assets and Liabilities....................................... 87
Appendix A: Ratings of Corporate Bonds.................................... A-1
Appendix B: Certain Characteristics and Risks of Futures and Options...... B-1
Appendix C: Description of Mortgage-Related Securities.................... C-1
</TABLE>
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PROSPECTUS SUMMARY

This summary highlights some information from this Prospectus. It may not
contain all the information that is important to you. To understand this
offering fully, you should read the entire Prospectus carefully. In particular,
you should read carefully and consider the information provided under the
heading "Risk Factors and Special Considerations" beginning on page 45. You
should also know that an investment in the Trust is not comparable or similar
to your current investment in The BlackRock 1998 Term Trust or any other
closed-end fund managed by BlackRock.

THE TRUST The formal name of this trust is The BlackRock High
Yield Trust. Throughout this Prospectus, we will refer
to The BlackRock High Yield Trust simply as the "Trust"
or as "we," "us" or "our." Our primary investment
objective is to generate high current income. To a
lesser extent, and if it is consistent with the primary
objective, we will also seek capital appreciation. To
this end, our assets will be invested primarily in a
diversified portfolio of high-risk, high yield bonds
and other high-risk, high yield income securities, such
as preferred stocks. The Trust is a closed-end fund.
BlackRock Advisors, Inc., a global asset management
company with approximately $120 billion of assets under
management, will act as our investment adviser and its
affiliate, BlackRock Financial Management, Inc. (or
"BlackRock") will handle the day-to-day investment
management of the Trust.

THE OFFERING By this Prospectus, we are offering Shares of the Trust
at a subscription price of $15.00 per Share. BlackRock
Advisors, Inc. or one of its affiliates (not the Trust
or its investors) will pay the sales load or
underwriting commission on the Shares you buy to the
Underwriters or institutions participating in this
offering equal to 4.5% of the Subscription Price per
Share. See "Underwriting." The minimum number of Shares
you can buy in this offering is 100 Shares (or $1,500).
The right to request to subscribe for Shares is being
offered to investors who hold shares of The BlackRock
1998 Term Trust Inc. as of the close of business on
November 12, 1998. The BlackRock 1998 Term Trust is
scheduled to liquidate around December 31, 1998 and, in
connection with this offering, holders of shares of The
BlackRock 1998 Term Trust may use all or a portion of
their distribution from the liquidation of The
BlackRock 1998 Term Trust to purchase Shares of the
Trust. We are also offering the right to request to
subscribe for Shares to those investors who were
shareholders, as of November 12, 1998, of the other
closed-end funds managed by BlackRock and certain other
persons. A description of how to purchase and pay for
Shares of the Trust in this offering can be found under
the heading "Terms of the Offering" on page 55 of this
Prospectus.

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SALES CHARGE PAYABLE
BY BLACKROCK
ADVISORS, INC. BlackRock Advisors, Inc. or one of its affiliates (not
the Trust or its investors) will pay out of its own
assets the sales load or underwriting commission for
sales of Shares in this offering.

INVESTMENT OBJECTIVES
AND POLICIES INVESTMENT OBJECTIVES. Our primary objective is to
generate high current income. To a lesser extent, and
if it is consistent with our primary objective, we will
also seek capital appreciation. The Trust is designed
for investors willing to assume additional risk in
return for the potential for high current income and
for capital appreciation. The Trust is not intended to
be a complete investment program. There is no guarantee
or assurance that the Trust will achieve either of its
objectives. The Trust's strategies may result in an
above average amount of risk and volatility or loss of
principal, and therefore may increase the risk of loss
of your investment in the Trust in comparison to the
risk of loss of your investment in The BlackRock 1998
Term Trust or other BlackRock closed-end funds.
Therefore, this type of investment may be inappropriate
for your risk profile. Please consult your broker or
financial adviser prior to making your investment
decision.

INVESTMENT POLICIES. In line with our investment
objectives, we will invest our assets primarily in a
diversified portfolio of high-risk, high yield bonds
and other high-risk, high yield income securities, such
as preferred stocks. Under normal market conditions, we
expect to have at least 80% of our total assets
invested in such high-risk, high yield securities.
High-risk, high yield securities are generally income
securities which, if rated at the time of purchase, are
rated lower than Baa by Moody's Investors Service, Inc.
(or "Moody's"), lower than BBB by Standard & Poor's
Ratings Group (or "S&P") or similarly rated by other
rating agencies. Bond ratings are assigned by a rating
agency based on the agency's determination of the
ability of the issuer to pay interest and repay
principal when due. Bonds rated Baa/BBB and higher are
described as "investment grade," while lower grade
securities (those with ratings lower than Baa/BBB or
unrated bonds of similar quality) are classified as
"non-investment grade" or "junk bonds." We will invest
primarily in lower grade securities, which may include
securities that are not rated by any rating agency but
which BlackRock believes to be comparable to securities
rated lower grade.

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The securities in which we may invest include the
following:

--STRAIGHT INCOME SECURITIES. These include bonds and
other debt obligations, which generally have fixed or
variable interest rates with payments due at regular
intervals. These also include preferred stocks, which
generally have a fixed or variable dividend rate
(unlike interest payable on debt securities, dividends
payable on preferred stocks must be declared by the
issuer's board of directors). Income securities may be
convertible into equity securities and the terms of the
income securities may include features such as call
provisions and sinking funds.

--ZERO-COUPON, PAY-IN-KIND AND DEFERRED PAYMENT
SECURITIES. Zero-Coupon Securities have no current
interest payment obligation; they are issued at a
discount to their stated value at maturity. When held
to scheduled maturity, the increase in price from the
purchase price to the maturity price compensates the
investor for receiving no current interest on the
security. Pay-In-Kind Securities pay interest in
additional securities rather than cash. Deferred
Payment Securities have no current interest payment
obligation and convert on a specified date to interest-
bearing income securities. The Trust will not invest
more than 30% of its total assets in these three types
of income securities.

--BANK LOANS. Bank Loans are loans extended to
corporate and other borrowers by commercial banks or
other financial institutions. They may have fixed
interest rates, but often pay interest at rates that
are reset periodically on the basis of a market
reference rate plus a premium. Bank Loans may be
secured by collateral or they may be unsecured. The
Trust will not invest more than 25% of its total assets
in Bank Loans.

--MEZZANINE INVESTMENTS. Mezzanine Investments are debt
securities that generally are privately issued,
unsecured and subordinated to other obligations of the
issuer. Mezzanine Investments often are convertible
into equity securities of the issuer or are issued with
related warrants, options or other equity securities
attached. The Trust will not invest more than 15% of
its total assets in Mezzanine Investments.

--COLLATERALIZED BOND OBLIGATIONS. Collateralized Bond
Obligations (or "CBOs") are structured securities
backed by a pool of income securities. CBOs are
typically separated into tranches representing
differing degrees of credit quality. The top tranche
represents the highest credit quality, has the greatest
collateralization from the underlying pool of income
securities and has the lowest

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interest rate. Lower CBO tranches have lower credit
quality and have higher interest rates intended to
compensate for the increased risks. The Trust will not
invest more than 15% of its total assets in CBOs.

--DISTRESSED SECURITIES. Distressed Securities are
securities where the issuer is in a bankruptcy
reorganization proceeding, is subject to some other
form of public or private debt restructuring, is
otherwise in default or in significant risk of being in
default as to the payment of interest or repayment of
principal or are securities trading at prices
substantially below other lower grade securities of
companies in similar industries. Under normal market
conditions, the Trust will invest in Distressed
Securities that are producing current income. At times,
Distressed Securities may not produce current income.
Although Distressed Securities are particularly
speculative investments, BlackRock believes they
provide the opportunity for enhanced income and capital
appreciation. The Trust will not invest more than 10%
of its total assets in Distressed Securities.

--MORTGAGE-RELATED AND ASSET-BACKED SECURITIES.
Mortgage-Related Securities are structured securities of
mortgage loans on residential and commercial properties.
Commercial Mortgage-Backed Securities (or "CMBS") are
secured by commercial property, such as industrial and
warehouse properties, office buildings, retail space and
shopping malls, multi-family properties and cooperative
apartments, hotels and motels, nursing homes, hospitals,
senior living centers and agricultural property. Assets
underlying CMBS may relate to only a few properties or
to a single property. Asset-Backed Securities are
similar in structure to Mortgage-Related Securities, but
the underlying collateral is generally consumer debt,
including home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane
leases, mobile home loans, recreational vehicle loans
and hospital account receivables. Interest payments on
these securities may be fixed or variable and may be
structured to vary inversely with movements in market
rates of interest. The Trust will not invest more than
15% of its total assets in CMBS and, under current
market conditions, the Trust does not expect to invest
in other types of Mortgage-Related Securities or Asset-
Backed Securities.

--FOREIGN SECURITIES. Although it does not currently
expect to do so, the Trust may invest up to 35% of its
total assets in Foreign Securities, which are income
securities issued by non-U.S. issuers or that are
denominated in foreign currencies or multicurrency
units. Foreign Securities include income securities
issued by foreign governments and other sovereign
entities and debt securities issued by

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foreign corporations. Typically, the Trust will not
hold any Foreign Securities of issuers in so-called
"emerging markets" (or lesser developed countries), and
in any case the Trust will not invest more than 10% of
its total assets in such securities.

--OTHER SECURITIES. For a description of other
securities in which the Trust may invest, see
"Investment Objectives and Policies."

INVESTMENT STRATEGY. In selecting income securities for
the Trust's portfolio, BlackRock will seek to identify
issuers and industries that BlackRock believes are
likely to experience stable or improving financial
conditions. BlackRock believes this strategy should
enhance the Trust's ability to earn high current income
and achieve capital appreciation. BlackRock's analysis
may include:

. credit research on the issuers' financial
strength;

. assessment of the issuers' ability to meet
principal and interest payments;

. general industry trends;

. the issuers' managerial strength;

. changing financial conditions;

. borrowing requirements or debt maturity
schedules; and

. the issuers' responsiveness to changes in
business conditions and interest rates.

BlackRock may also consider relative values among
issuers based on anticipated cash flow, interest or
dividend coverage, asset coverage and earnings
prospects.

In certain market conditions, the Trust may implement
various temporary "defensive" strategies at times when
BlackRock determines that conditions in the markets
make pursuing the Trust's basic investment strategy
inconsistent with the best interests of its
shareholders. These strategies may include investing
all or a portion of the Trust's assets in higher-
quality, short-term income securities. In addition,
BlackRock may determine that investment grade quality
securities offer attractive opportunities for high
current income and capital appreciation. In such
conditions, the Trust may decide to invest less than
80% of its total assets in lower grade income
securities.

RISK MANAGEMENT. BlackRock's approach to managing high
yield investments is to apply its risk management
framework by using proprietary technology and value-
oriented security selection to

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identify the securities that are expected to deliver
the highest yield for the amount of risk assumed. The
Trust's investment strategy emphasizes risk management
through the following process:

. creating a diversified portfolio of securities
within various sectors of the high yield market;

. performing individual, company-by-company credit
research to seek to select securities which
BlackRock believes will be able to meet its debt
obligations;

. performing sector analysis to determine the
sectors which BlackRock expects to have stable or
improving credit quality in the future; and

. utilizing the expertise and experience of the
management team to make investment decisions.

INVESTMENT PRACTICES. In seeking to achieve our
investment objectives, we may also use a number of
other investment practices and techniques, including:

--LEVERAGE. We expect to use financial leverage through
borrowing money to purchase additional securities or
through other transactions such as reverse repurchase
agreements, which have the effect of financial
leverage. We expect that as the Trust becomes fully
invested we will use financial leverage in an amount up
to 33 1/3% of our total assets (including the amount
obtained through leverage). Use of financial leverage
creates the opportunity for higher income and capital
appreciation for the Shareholders but, at the same
time, magnifies the effect of any losses and involves
other risks described below.

--OTHER INVESTMENT MANAGEMENT TECHNIQUES. Although not
intended to be a significant element in the Trust's
investment strategy, from time to time the Trust may
use various other investment management techniques that
also involve certain risks and special considerations,
including:

. engaging in interest rate and credit derivatives
transactions;

. engaging in foreign currency transactions in
connection with the Trust's investment in foreign
securities;

. using options and financial futures;

. making forward commitments; and

. lending the Trust's portfolio securities.

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MANAGEMENT OF THE
TRUST BlackRock Advisors, Inc. will act as our investment
adviser. BlackRock Advisors, Inc. is a global asset
management company that manages a broad range of
investment products, including a family of 35 open-end
funds (i.e., mutual funds) and 21 closed-end funds, for
clients worldwide. BlackRock Advisors, Inc. manages
client assets totaling over $120 billion. BlackRock
Advisors, Inc. has appointed BlackRock Financial
Management, Inc. (or "BlackRock"), one of its
affiliates, to handle the day-to-day investment
management of the Trust. BlackRock was founded in 1988
and manages stocks, bonds and money market instruments
on a global basis. BlackRock has expertise in the
government, mortgage, corporate, asset-backed, non-
dollar, high yield and municipal sectors of the fixed-
income securities market. BlackRock currently manages
approximately $61.1 billion in fixed income assets
invested across the credit quality spectrum and yield
curve. BlackRock also manages approximately $46.7
billion in cash or other short term, highly liquid
investments, $11.1 billion of equity securities and
$1.2 billion in various alternative investments.

MANAGEMENT FEE The Trust will pay BlackRock Advisors, Inc. a monthly
fee at the annual rate of 1.05% of the "Managed
Assets." Managed Assets equals the average weekly value
of the total assets of the Trust (including those
assets purchased with leverage) minus the sum of
accrued liabilities (other than the aggregate
indebtedness constituting financial leverage). The
advisory fee that we will pay to BlackRock Advisors,
Inc. will be higher if the Trust uses financial
leverage than if the Trust does not use such leverage.

ADMINISTRATORS BlackRock and Prudential Investments Fund Management
LLC, an affiliate of Prudential Securities
Incorporated, will act as the Trust's Administrators.
The Trust will pay each Administrator a monthly fee
based on the Trust's average weekly Managed Assets (as
defined above) at the annual rate of 0.05%.

LISTING Prior to this Offering, there has been no public market
for the Shares. The Shares have been approved for
listing on the New York Stock Exchange under the symbol
"BHY."

DIVIDENDS AND OTHER We intend to pay monthly distributions to Shareholders
DISTRIBUTIONS from our net investment income. The initial
distribution is expected to be paid approximately 60
days after the date of this Prospectus.

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AUTOMATIC DIVIDEND
REINVESMENT PLAN We have established an Automatic Dividend Reinvestment
Plan (the "Plan"). Under the Plan, all distributions
from the Trust will automatically be reinvested in
additional Shares of the Trust. These additional Shares
will either be purchased in the open market, or newly
issued by the Trust, depending on whether the Shares
are trading at or above their net asset value.
Shareholders who want distributions to be paid in cash
must elect to do so. Shareholders who intend to hold
their Shares through a broker should contact their
broker to determine whether or how they may participate
in the Plan. See "Automatic Dividend Reinvestment
Plan."

CLOSED-END FUND
STRUCTURE The Trust is a newly-organized closed-end fund. Closed-
end funds differ from open-end funds (which are
commonly referred to as mutual funds) in that closed-
end funds, unlike mutual funds, generally list their
shares for trading on a stock exchange and do not
redeem their shares at the request of a shareholder.
This means that if you wish to sell your shares of a
closed-end fund you must trade them on the market like
any other stock at the price prevailing in the market
for the shares at that time. With a mutual fund, shares
may be redeemed or bought back by the mutual fund at
"net asset value" if a shareholder wishes to sell the
shares of the fund. Also, mutual funds generally offer
new shares of the fund on a continuous basis to new
investors, whereas closed-end funds do not. The
continuous in-flows and out-flows of assets in a mutual
fund can make it more difficult to manage the
investments of a mutual fund. By comparison, closed-end
funds are generally able to stay more fully invested in
securities that are consistent with their investment
objectives, and also have greater flexibility to make
certain types of investments and to use certain
investment strategies, such as financial leverage.

However, shares of closed-end funds frequently trade at
a discount to their net asset value. Because of this
possibility, which may not be in the interest of
Shareholders, the Trust's Board of Trustees might
consider engaging in open market repurchases, tender
offers for Shares at net asset value or other programs
intended to reduce the discount. There is, of course,
no guarantee or assurance that the Board of Trustees
will decide to engage in any of these actions. Nor is
there any guarantee or assurance that such actions, if
undertaken, would result in the Shares trading at a
price equal or close to net asset value per Share. The
Board of Trustees might also consider converting the
Trust to an open-end mutual fund, which would also
require a vote of the Shareholders of the Trust. The
Board of Trustees believes,

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however, that the closed-end structure is desirable, in
light of the Trust's investment objectives and
policies. Therefore, you should assume that it is not
likely that the Board of Trustees would vote to convert
the Trust to an open-end fund.

RISK FACTORS AND
SPECIAL
CONSIDERATIONS You should carefully consider your ability to assume
the following risks before investing in the Shares of
the Trust. An investment in the Shares is different
than an investment in The BlackRock 1998 Term Trust or
in the other BlackRock closed-end funds, and may not be
suitable for all investors. This type of investment may
be inappropriate for your risk tolerance. Therefore,
please consult your broker or financial adviser prior
to making your investment decision. You should not
consider an investment in the Shares as a complete
investment program. You should also read carefully the
section of this Prospectus titled "Risk Factors and
Special Considerations" which begins on page 45.

GENERAL. As a newly-organized fund, the Trust has no
operating history. The Shares are designed primarily
for investors who plan to invest and hold their
investment for the long term. Therefore, you should not
consider the Shares as a vehicle for trading purposes.
The net asset value of the Shares will fluctuate with
changes in interest rates, as well as with changes in
the prices of the securities owned by the Trust. These
fluctuations are likely to be greater when the Trust is
using financial leverage.

LOWER-GRADE SECURITIES. As a "high yield fund," the
majority of the Trust's assets will be invested in
high-risk, high yield securities of lower grade
quality, which are commonly referred to as "junk
bonds." With its portfolio consisting predominantly of
lower grade securities, the Trust is exposed to greater
risks than a fund that owns higher grade securities.
Because of the substantial risks associated with lower
grade securities, you could lose money on your
investment in Shares of the Trust, both in the short-
term and the long-term. Here are some risks you should
consider.

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developments, such as a decline in profits, or adverse
economic conditions, such as a recession, than are the
prices of higher grade securities. Securities that
have longer maturities or that do not make regular
interest payments also fluctuate more in price in
response to negative corporate or economic news.
Therefore, lower grade securities may experience high
default rates, which would mean that the Trust may
lose some of its investment in such securities, which
would adversely affect the Trust's net asset value and
ability to make distributions. The effects of this
default risk are significantly greater for the holders
of lower grade securities because these securities
often are unsecured and subordinated to the payment
rights of other creditors of the issuer.

. MARKET RISK. The prices of income securities tend to
fall as interest rates rise. Securities that have
longer maturities tend to fluctuate more in price in
response to changes in market interest rates. A
decline in the prices of the income securities owned
by the Trust would cause a decline in the net asset
value of the Trust, which could adversely affect the
trading price of the Trust's Shares. This "market
risk" is usually greater among income securities with
longer maturities or durations. Although the Trust
has no policy governing the maturities of its
investments, the Trust expects that it will invest in
a portfolio of income securities with an average
maturity of approximately ten years. This means that
the Trust will be subject to greater market risk
(other things being equal) than a fund investing
solely in shorter-term securities. Market risk is
often greater among certain types of income
securities, such as zero-coupon bonds, which do not
make regular interest payments. As interest rates
change, these bonds often fluctuate in price more
than higher quality bonds that make regular interest
payments. Because the Trust may invest in these types
of income securities, it may be subject to greater
market risk than a fund that invests only in current
interest paying securities.

. INCOME RISK. The income investors receive from the
Trust is based primarily on the interest it earns
from its investments, which can vary widely over the
short and long-term. If interest rates drop,
investors' income from the Trust over time could drop
as well if the Trust purchases securities with lower
interest coupons.

10
<PAGE>

likely to have to replace such called security with a
lower yielding security. If that were to happen, it
would decrease the Trust's net investment income.

. LIQUIDITY RISK. The Trust may invest in securities
for which there is no readily available trading
market or which are otherwise illiquid. The Trust may
not be able to readily dispose of such securities at
prices that approximate those at which the Trust
could sell such securities if they were more widely-
traded and, as a result of such illiquidity, the
Trust may have to sell other investments or engage in
borrowing transactions if necessary to raise cash to
meet its obligations. In addition, the limited
liquidity could affect the market price of the
securities, thereby adversely affecting the Trust's
net asset value and ability to make dividend
distributions.

BANK LOANS. The Trust may invest up to 25% of its total
assets in Bank Loans. As in the case of junk bonds,
Bank Loans may be rated in lower grade rating
categories, or may be unrated but of lower grade
quality. As in the case of junk bonds, Bank Loans can
provide higher yields than higher grade income
securities, but are subject to greater credit and other
risks. Although Bank Loan obligations often are secured
by pledges of assets by the borrower and have other
structural aspects intended to provide greater
protection to the holders of Bank Loans than the
holders of unsecured and subordinated securities, there
are also additional risks in holding Bank Loans. In
particular, the secondary trading market for Bank Loans
is not well developed, and therefore, Bank Loans
present increased market risk relating to liquidity and
pricing concerns. In addition, there is no assurance
that the liquidation of the collateral would satisfy
the claims of the borrower's obligations in the event
of the nonpayment of scheduled interest or principal,
or that the collateral could be readily liquidated. As
a result, the Trust might not receive payments to which
it is entitled and thereby may experience a decline in
the value of its investment and its net asset value.

MEZZANINE INVESTMENTS. The Trust may invest up to 15%
of its total assets in Mezzanine Investments. Mezzanine
Investments are typically subordinated debt securities,
are often unsecured by any collateral and are often
accompanied by warrants, options and other rights to
purchase equity of the issuer. The issuer's ability to
repay a Mezzanine Investment often depends on the
issuer's ability to "refinance" or replace the
Mezzanine Investment with another income security.
Issuers of Mezzanine Investments often are highly
leveraged and may have difficulty in refinancing.
Therefore,

11
<PAGE>

Mezzanine Investments may experience high default
rates, which would mean that the Trust may lose money
on its Mezzanine Investments which would adversely
affect the Trust's net asset value and level of
distributions. The rights to purchase equity involve
additional risks. The purchase of rights or warrants
involves the risk that the Trust could lose the
purchase value of a right or warrant if the right to
subscribe to additional shares is not exercised prior
to the rights' and warrants' expiration and the
effective price paid for the right or warrant added to
the subscription price of the related security may
exceed the value of the underlying security.

COLLATERALIZED BOND OBLIGATIONS. The Trust may invest
up to 15% of its total assets in collateralized bond
obligations (or "CBOs"). Income from the pool of lower
grade securities collateralizing the obligations is
typically separated into tranches representing
different degrees of credit quality. The top tranche of
CBOs, which represents the highest credit quality in
the pool, has the greatest collateralization and pays
the lowest interest rate. Lower CBO tranches represent
lower degrees of credit quality and pay higher interest
rates to compensate for the attendant risks. The bottom
tranche specifically receives the residual interest
payments (i.e. money that is left over after the higher
tiers have been paid) rather than a fixed interest
rate. The return on the lower tranches of CBOs are
especially sensitive to the rate of defaults in the
collateral pool, which increases the risk of the Trust
losing its investment in lower CBO tranches.

DISTRESSED SECURITIES. The Trust may invest up to 10%
of its total assets in Distressed Securities.
Investment in Distressed Securities is speculative and
involves significant risk, including possible loss of
the principal invested. Although in current market
conditions the Trust expects that it will invest in
Distressed Securities that are producing current
income, at times, Distressed Securities may not produce
current income and may require the Trust to bear
certain extraordinary expenses in order to protect and
recover its investment. To the extent the Trust pursues
its secondary objective of capital appreciation through
investment in Distressed Securities that do not produce
current income, the Trust will generally be less able
to achieve current income for its Shareholders.

MORTGAGE-RELATED AND ASSET-BACKED SECURITIES. Although
the Trust may invest in residential and commercial
Mortgage-Related and other Asset-Backed Securities, the
Trust expects that most of such investments will be
limited to CMBS, in which the Trust will not

12
<PAGE>

invest more than 15% of its total assets. These
securities entail considerable risk, i.e., credit risk,
market risk, prepayment risk and interest rate risk.

Risks Associated with Mortgage-Related Securities. The
risks associated with Mortgage-Related Securities
include:

. credit risks associated with the performance of
the underlying mortgage properties and of the
borrowers owning these properties;

. adverse changes in economic conditions and
circumstances are more likely to have an adverse
impact on Mortgage-Related Securities secured by
loans on certain types of commercial properties
than on those secured by loans on residential
properties;

. prepayment risk can lead to significant
fluctuations in value of the Mortgage-Related
Security; and

. loss of all or part of the premium, if any, paid
if there is a decline in the market value of the
security, whether resulting from changes in
interest rates or prepayments on the underlying
mortgage collateral.

Risks Associated with CMBS. The Trust's investments in
CMBS will typically consist of CMBS that are
subordinated to more senior classes of such securities
("Subordinated CMBS"). Assets underlying CMBS may
relate to only a few properties or to a single
property. Because the commercial mortgage loans that
back a CMBS are generally not amortizing or not fully
amortizing, at their maturity date repayment of the
remaining principal balance or "balloon" is due and
usually must be repaid through the attainment of an
additional loan or sale of the property. If the
commercial borrower is unable to refinance or attain an
additional loan or the property is sold at or below the
remaining principal amount of the mortgage, the result
could be a decline in the value, and thus the price, of
the related CMBS (which decline could be greater in the
case of a Subordinated CMBS).

13
<PAGE>

substantially greater risk of nonpayment than are
senior classes of CMBS. Even within a class of
subordinated securities, most CMBS are structured with
a hierarchy of levels (or "loss positions"). Loss
positions are the order in which non-recoverable losses
of principal are applied to the securities within a
given structure.

FOREIGN SECURITIES. The Trust may invest up to 35% of
its total assets in Foreign Securities. Such
investments involve certain risks not involved in
domestic investments. Securities markets in foreign
countries are not as developed, efficient or liquid as
the United States markets. Therefore, the prices of
Foreign Securities often are volatile. Although the
Trust will report its net asset value and pay dividends
in U.S. dollars, Foreign Securities often are purchased
with and make interest payments in foreign currencies.
Therefore, when the Trust invests in Foreign
Securities, it will be subject to foreign currency
risk, which means that the Trust's net asset value
could decline as a result of changes in the exchange
rates between foreign currencies and the U.S. dollar.
Certain foreign countries may impose restrictions on
the ability of issuers of Foreign Securities to make
payments of principal and interest to investors located
outside the country, due to blockage of foreign
currency exchanges or otherwise. In addition, the Trust
will be subject to risks associated with adverse
political and economic developments in foreign
countries, which could cause the Trust to lose money on
its investments in Foreign Securities. Typically, the
Trust will not hold any Foreign Securities of issuers
in so-called "emerging markets" (or lesser developed
countries), and in any case the Trust will not invest
more than 10% of its total assets in such securities.
Investments in such securities are particularly
speculative.

LEVERAGE. Although the use of leverage by the Trust may
create an opportunity for increased net income and
capital appreciation for the Shares, it also results in
additional risks and can magnify the effect of any
losses. If the income and gains earned on securities
purchased with leverage proceeds are greater than the
cost of leverage, the Trust's return will be greater
than if leverage had not been used. Conversely, if the
income or gains from the securities purchased with such
proceeds does not cover the cost of leverage, the
return to the Trust will be less than if leverage had
not been used. There is no assurance that a leveraging
strategy will be successful. Leverage involves risks
and special considerations for Shareholders including:

. the likelihood of greater volatility of net asset
value and market price of the Shares than a
comparable portfolio without leverage;

14
<PAGE>

. the risk that fluctuations in interest rates on
borrowings and short term debt or in the dividend
rates on any preferred stock that the Trust must
pay will reduce the return to the Shareholders;

. the effect of leverage in a declining market,
which is likely to cause a greater decline in the
net asset value of the Shares than if the Trust
were not leveraged, which may result in a greater
decline in the market price of the Shares; and

. when the Trust uses financial leverage, the
investment advisory fees payable to BlackRock
Advisors, Inc. will be higher than if the Trust
did not use leverage.

Any requirement that the Trust sell assets at a loss in
order to redeem or pay any leverage or for other
reasons would reduce the Trust's net asset value and
also make it difficult for the net asset value to
recover. BlackRock in its best judgment nevertheless
may determine to continue to use leverage if it expects
that the benefits to the Trust's Shareholders of
maintaining the leveraged position will outweigh the
current reduced return.

Certain types of borrowings by the Trust may result in
the Trust being subject to covenants in credit
agreements relating to asset coverage and Trust
composition requirements. The Trust may be subject to
certain restrictions on investments imposed by
guidelines of one or more Rating Agencies, which may
issue ratings for the short-term corporate debt
securities or preferred stock issued by the Trust.
These guidelines may impose asset coverage or Trust
composition requirements that are more stringent than
those imposed by the Investment Company Act of 1940, as
amended (the "Investment Company Act"). BlackRock does
not believe that these covenants or guidelines will
impede BlackRock from managing the Trust's portfolio in
accordance with the Trust's investment objectives and
policies.

15
<PAGE>

Strategic Transactions involve risks, including (i)
that the loss on the Strategic Transaction position may
be larger than the gain in the portfolio position being
hedged and (ii) that the derivative instruments used in
Strategic Transactions may not be liquid and may
require the Trust to pay additional amounts of money.
Successful use of Strategic Transactions depends on
BlackRock's ability to correctly predict market
movements which, of course, cannot be assured. Losses
on Strategic Transactions may reduce the Trust's net
asset value and its ability to pay dividends if they
are not offset by gains on the portfolio positions
being hedged. The Trust may also lend the securities it
owns to others, which allows the Trust the opportunity
to earn additional income. Although the Trust will
require the borrower of the securities to post
collateral for the loan and the terms of the loan will
require that the Trust be able to reacquire the loaned
securities if certain events occur, the Trust is still
subject to the risk that the borrower of the securities
may default, which could result in the Trust losing
money, which would result in a decline in the Trust's
net asset value. The Trust may also purchase securities
for delayed settlement. This means that the Trust is
generally obligated to purchase the securities at a
future date for a set purchase price, regardless of
whether the value of the securities is more or less
than the purchase price at the time of settlement.

MARKET PRICE, DISCOUNT AND NET ASSET VALUE OF
SHARES. Whether investors will realize gains or losses
upon the sale of Shares will not depend directly upon
the Trust's net asset value, but will depend upon the
market price of the Shares at the time of sale. Since
the market price of the Shares will be affected by such
factors as the relative demand for and supply of the
Shares in the market, general market and economic
conditions and other factors beyond the control of the
Trust, the Trust cannot predict whether the Shares will
trade at, below or above net asset value or at, below
or above the public offering price. Shares of closed-
end funds often trade at a discount to their net asset
values and the Trust's Shares may trade at such a
discount. This risk may be greater for investors
expecting to sell their Shares of the Trust soon after
completion of the public offering. The Shares are
designed primarily for long-term investors, and
investors in the Shares should not view the Trust as a
vehicle for trading purposes. See "Risk Factors and
Special Considerations" and "Description of Shares."

16
<PAGE>

ability of the Trust's Board of Trustees or
Shareholders to amend the Trust Agreement. These
provisions of the Trust Agreement may be regarded as
"anti-takeover" provisions. These provisions could have
the effect of depriving the Shareholders of
opportunities to sell their shares at a premium over
prevailing market prices by discouraging a third party
from seeking to obtain control of the Trust in a tender
offer or similar transaction. See "Investment
Objectives and Policies," "Risk Factors and Special
Considerations" and "Description of Shares."

YEAR 2000 RISKS. Like other investment companies,
financial and business organizations and individuals
around the world, the Trust could be adversely affected
if the computer systems used by BlackRock and the
Trust's other service providers do not properly process
and calculate date-related information and data from
and after January 1, 2000. This is commonly known as
the "Year 2000 Issue." BlackRock is taking steps to
address the Year 2000 Issue with respect to the
computer systems that it uses and to obtain assurances
that comparable steps are being taken by the Trust's
other major service providers. At this time, however,
we cannot give any assurance that these steps will be
sufficient to avoid any adverse impact on the Trust.

TERMS OF THE OFFERING GENERAL. In connection with the scheduled liquidation
of The BlackRock 1998 Term Trust ("BBT") around
December 31, 1998, the Trust is offering to the holders
of record of common shares of BBT (the "BBT Shares") as
of the close of business on November 12, 1998 (the
"Record Date") the right to request to subscribe for
Shares of the Trust. BBT has announced that it will
liquidate its portfolio of securities and will
distribute substantially all of the proceeds from this
liquidation (the "Liquidating Distribution") to the
holders of BBT Shares. Record Date holders of BBT
Shares who exercise their right to request to subscribe
for Shares may direct that all or a portion of their
Liquidating Distribution be credited to the account
through which they will purchase the Shares. If you do
not subscribe for Shares of the Trust, you will still
receive your full Liquidating Distribution. See
"Payment for Shares."

The Trust is also offering the right to request to
subscribe for Shares to Record Date holders of common
shares of other closed-end investment companies for
which BlackRock acts as investment adviser. These
BlackRock closed-end funds and BBT are collectively
referred to as "BlackRock Trusts." Record Date holders
of common shares (the "BlackRock Trust Shares") of the
BlackRock

17
<PAGE>

Trusts are referred to as the "Eligible Shareholders."
The Trust is also offering the opportunity to request
to subscribe for Shares of the Trust at the
Subscription Price to employees of BlackRock and its
affiliates and existing customers of PNC Brokerage as
of the Record Date.

SUBSCRIPTION PRIVILEGE OF ELIGIBLE SHAREHOLDERS.
Eligible Shareholders may request to subscribe for
Shares at a rate of one Share for each BlackRock Trust
Share held on the Record Date (the "Subscription
Privilege") and may also request to subscribe for any
amount of additional Shares. These procedures through
which Eligible Shareholders may request to subscribe for
Shares are described below under "--Method of
Subscription." Eligible Shareholders should carefully
read this Prospectus, including the section titled "Risk
Factors and Special Considerations," and should consult
with their broker to determine whether the Shares are a
suitable investment for your risk tolerance.

SUBSCRIPTION PRICE; MINIMUM PURCHASE. The Subscription
Price for the Shares is $15.00 per Share. BlackRock
Advisors, Inc. or an affiliate (not the Trust or its
investors) will pay the sales load or underwriting
commission from its own assets to the Underwriters and
other broker-dealers and financial institutions
participating ("Participating Institutions") in the
initial public offering of the Trust's Shares (the
"Offering") in connection with sales of Shares. See
"Underwriting." The minimum purchase is 100 shares (or
$1,500). Eligible Shareholders who hold any number of
any BlackRock Trust Shares may request to purchase 100
Shares pursuant to the Subscription Privilege and may
request to subscribe for additional Shares, regardless
of the number of BlackRock Trust Shares held by such
Eligible Shareholder.

MINIMUM OFFERING AMOUNT. The Board of Trustees of the
Trust has determined not to consummate the Offering
unless a sufficient number of orders to purchase Shares
in the Offering (the "Minimum Offering Amount") are
received such that the Board of Trustees determines, in
its sole discretion, that the Trust could commence
operations with an approximate expense ratio as
estimated in this Prospectus.

EXPIRATION DATE AND PRICING DATE. Any Record Date
Eligible Shareholder that wishes to request to
subscribe for Shares pursuant to the Subscription
Privilege must do so by 5:00 p.m., New York City time,
on December 16, 1998 (the "Subscription Privilege
Expiration Date"). Exercises of Subscription Privileges
will be processed December 17, 1998 (the "Pricing
Date").

18
<PAGE>

NON-TRANSFERABILITY. The rights to participate in the
Subscription Privilege have no economic or other value
and are non-transferable and, therefore, may not be
purchased or sold.

METHODS OF SUBSCRIPTION. Shares may be purchased in the
Offering, only through the Underwriters or other
Participating Institutions. See "Underwriting."
. If you hold BlackRock Trust Shares with or through
one of the Underwriters or other Participating
Institutions, you may contact your broker or
financial adviser, through which you can request to
subscribe for Shares.
. If you do not hold BlackRock Trust Shares with or
through a broker-dealer or financial institution that
is one of the Underwriters or other Participating
Institutions (see "Underwriting"), you should contact
BlackRock at the address and telephone number listed
below to arrange for an account to be established
through which you can request to subscribe for
Shares.

BlackRock Financial Management, Inc.
345 Park Avenue
New York, New York 10154
800-227-7BFM (7236)

The Trust's strategies may result in an above average
amount of risk and volatility or loss of principal, and
therefore, may increase the risk of loss of your
investment in the Trust in comparison to the risk of
loss of your investment in The BlackRock 1998 Term
Trust or other BlackRock closed-end funds. Please
consult your broker or financial adviser to determine
whether an investment in the Trust is appropriate for
you.

PAYMENT FOR SHARES. Payment for Shares requested to be
subscribed for must be made by December 23, 1998 (the
"Settlement Date") to the Underwriters or other
Participating Institutions through which you subscribe
for Shares. Record Date holders of BBT Shares who
exercise their right to request to subscribe for Shares
may direct that all or a portion of their Liquidating
Distribution be credited to the account through which
they will purchase the Shares. Because the price per
share of BBT upon liquidation is different from the
Subscription Price per Share of the Trust, you will
need to supplement your Liquidating Distribution to
satisfy your purchase of the number of Shares of the
Trust equal to the number of BBT shares you now hold.
Although the Liquidating Distribution is expected to be
made before the Settlement Date, each Shareholder is
responsible for

19
<PAGE>

payment of the Subscription Price for the Shares to
which they subscribe in the Offering. In the event the
Offering is not consummated for any reason, BBT
Shareholders who request to subscribe for Shares will
be paid their Liquidating Distribution in accordance
with the terms of the plan of liquidation of BBT.

- -------------------------------------------------------------------------------
IMPORTANT DATES TO REMEMBER

<TABLE>
<S> <C>
Record Date............................................ November 12, 1998
Subscription Period.................. November 23, 1998 to December 16, 1998
Final BBT Trading Date................................. December 10, 1998
Subscription Privilege Expiration Date................. December 16, 1998
Pricing Date........................................... December 17, 1998
First Trading Date..................................... December 18, 1998
Settlement/Payment Date/1/............................. December 23, 1998
</TABLE>

--------
/1/ Some Participating Institutions may require payment by
investors at a date prior to the Settlement/Payment Date.
-------------------------------------------------------------------------------

20
<PAGE>

TRUST EXPENSES

The following tables are intended to assist investors in understanding the
various costs and expenses that an investor in the Trust will bear, directly
or indirectly.

<TABLE>
<CAPTION>
ASSUMING
33 1/3 %
LEVERAGE(1)
-----------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load and Underwriting Commissions (as a Percentage of
Offering Price).................................................. None
Dividend Reinvestment Plan Fees................................... None
ANNUAL TRUST OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS
ATTRIBUTABLE TO SHARES)
Management Fee.................................................... 1.58%
Administration Fees............................................... 0.15%
Interest Payments on Borrowed Funds............................... 2.80%
Other Expenses(2)................................................. 0.23%
-----
Total Annual Trust Expenses................................... 4.76%
=====
</TABLE>
- --------
(1) The Trust intends to use leverage only if BlackRock believes that it would
result in higher income to Shareholders over time. See "Other Investment
Practices--Leverage" and "Risk Factors and Special Considerations--
Leverage." The table above assumes borrowings of 33 1/3% of total assets
(including the amount borrowed) at an annualized interest rate of 5.60%,
which is based upon the Trust's estimation of current market conditions.
The actual rate could be higher or lower. At times when the Trust does not
use leverage, the estimated annual operating expenses would be:

<TABLE>
<CAPTION>
ASSUMING
NO
LEVERAGE
--------
<S> <C>
Management Fee.................................................... 1.05%
Administration Fees............................................... 0.10%
Interest Payments on Borrowed Funds............................... None
Other Expenses(2)................................................. 0.15%
-----
Total Annual Trust Expenses................................... 1.30%
=====
</TABLE>
(2) Reflects estimated amounts for the Trust's first year of operations.

EXAMPLE

The following Example demonstrates the projected dollar amount of total
cumulative expense that would be incurred over various periods with respect to
a hypothetical investment in the Trust. These amounts are based upon payment
by the Trust of operating expenses at the levels set forth in the
aforementioned table. An investor would directly or indirectly pay the
following expenses on a $1,000 investment in the Trust, assuming (i) total
annual expenses of 1.30% (assuming no leverage) and 4.76% (assuming leverage
of 33 1/3% of the Trust's total assets) and (ii) a 5% annual return throughout
the periods and reinvestment of all dividends and other distributions at net
asset value:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Assuming No Leverage....................... $13 $ 41 $ 71 $157
Assuming 33 1/3% Leverage.................. $48 $143 $239 $482
</TABLE>

This Example assumes that the percentage amounts listed under Total Annual
Expenses remain the same in the years shown. The above tables and the
assumption in the Example of a 5% annual return and reinvestment at net asset
value are required by regulation of the Securities and Exchange

21
<PAGE>

Commission ("SEC") applicable to all investment companies; the assumed 5%
annual return is not a prediction of, and does not represent, the projected or
actual performance of the Shares. Actual expenses and annual rates of return
may be more or less than those assumed for purposes of the Example. In
addition, although the Example assumes reinvestment of all dividends and other
distributions at net asset value, participants in the Trust's Automatic
Dividend Reinvestment Plan may receive Shares obtained by the Plan Agent at or
based on the market price in effect at that time, which may be at, above or
below net asset value.

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES, AND
THE TRUST'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.

22
<PAGE>

THE TRUST

The BlackRock High Yield Trust (the "Trust") is registered under the
Investment Company Act as a diversified, closed-end management investment
company. The Trust was organized as a business trust under the laws of
Delaware on August 10, 1998 and has no operating history. The Trust's
principal office is located at 345 Park Avenue, New York, New York 10154, and
its telephone number is 1-800-227-7236. BlackRock Advisors, Inc. is the
Trust's investment adviser. BlackRock Advisors, Inc. has entered into a sub-
advisory agreement with its wholly-owned subsidiary, BlackRock Financial
Management, Inc. (or "BlackRock"), pursuant to which the responsibilities of
managing the Trust's portfolio on a daily basis have been delegated to
BlackRock. See "Management of the Trust." As an investment in the Trust has
certain above average risk and volatility features, you should consult your
broker-dealer or other financial advisor prior to making an investment
decision. This type of investment may be inappropriate for your risk
tolerance.

The Trust is offering its shares of beneficial interest, par value $.001 per
share (the "Shares") in its initial public offering (the "Offering") as
described in this Prospectus. By this Prospectus, we are offering Shares of
the Trust at a subscription price of $15.00 per Share. BlackRock Advisors,
Inc. or one of its affiliates (not the Trust or its investors) will pay the
sales load or underwriting commission on the Shares you buy from its own
assets to the Underwriters or Participating Institutions in this offering
equal to 4.5% of the Subscription Price per Share. The right to request to
subscribe for Shares is being offered to investors who hold shares of The
BlackRock 1998 Term Trust as of the close of business on November 12, 1998.
The BlackRock 1998 Term Trust is scheduled to liquidate around December 31,
1998 and, in connection with this Offering, holders of shares of The BlackRock
1998 Term Trust may use all or a portion of their distribution from the
liquidation of The BlackRock 1998 Term Trust to purchase Shares of the Trust.
We are also offering the right to request to subscribe for Shares to those
investors who are shareholders, as of November 12, 1998, of other closed-end
funds managed by BlackRock. The Trust is also offering the opportunity to
request to subscribe for Shares to employees of BlackRock and its affiliates
and existing customers of PNC Brokerage as of the Record Date. A description
of how to purchase and pay for Shares of the Trust in this Offering can be
found under the heading "Terms of the Offering" on page 55 of this Prospectus.
The minimum number of Shares you can buy in the Offering is 100 Shares (or
$1,500).

USE OF PROCEEDS

The net proceeds of the Trust from this Offering, before deducting offering
expenses, are approximately $87,000,000 ($100,050,000 if the Underwriters'
over-allotment option is exercised in full). The net proceeds will be invested
in accordance with the Trust's investment objectives and policies during a
period not to exceed six months from the closing of this Offering. Pending
such investment, the net proceeds may be invested in high quality, short-term
debt securities. BlackRock Advisors, Inc. or one of its affiliates will pay
all of the organizational expenses of the Trust. BlackRock Advisors, Inc. or
one of its affiliates will also pay all offering expenses of the Trust that
exceed $0.02 per Share.

23
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

INVESTMENT OBJECTIVES

The Trust's primary investment objective is to seek high current income. The
Trust will also seek capital appreciation as a secondary objective, to the
extent consistent with its primary objective of seeking high current income.
The Trust is designed for investors willing to assume additional risk in
return for the potential for high current income and for capital appreciation.
The Trust is not intended to be a complete investment program and there is no
assurance that the Trust will achieve either of its objectives. The Trust's
strategies may result in an above average amount of risk and volatility or
loss of principal, and therefore, may increase the risk of loss of your
investment in the Trust in comparison to the risk of loss of your investment
in The BlackRock 1998 Term Trust or other BlackRock closed-end funds.
Therefore, this type of investment may be inappropriate for your risk
tolerance. Please consult your broker or financial adviser to determine
whether an investment in the Trust is appropriate for you. The Trust's
investment objectives cannot be changed without approval by the holders of a
majority (as defined in the Investment Company Act) of the Trust's outstanding
voting shares.

INVESTMENT POLICIES

In line with our investment objectives, we will invest our assets primarily in
a diversified portfolio of high-risk, high yield bonds and other high-risk,
high yield income securities, such as preferred stocks. Under normal market
conditions, we expect to have at least 80% of our total assets invested in
such high-risk, high yield securities. High-risk, high yield securities are
generally income securities which, if rated at the time of purchase, are rated
lower than Baa by Moody's Investors Service, Inc. (or "Moody's"), lower than
BBB by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. (or
"S&P") or similarly rated by other nationally recognized securities rating
organization (each, a "Rating Agency"). Securities rated Baa/BBB and higher
are described as "investment grade," while lower grade securities (those with
ratings lower than Baa/BBB or unrated securities of similar quality) are
classified as "non-investment grade" or "junk bonds." We will invest primarily
in lower grade securities, which may include securities that are not rated by
any rating agency but which BlackRock believes to be comparable to securities
rated lower grade. The Trust may invest up to 25% of its total assets in loans
extended to corporate borrowers by commercial banks or other financial
institutions ("Bank Loans"). The Trust may invest up to 15% of its total
assets in securities known as "Mezzanine Investments," which are generally
subordinated, privately placed debt securities issued with attached equity
securities. The Trust may invest up to 15% of its total assets in
collateralized bond obligations ("CBOs") which are structured securities
backed by a pool of income securities. The Trust may also invest up to 10% of
its total assets in securities that are the subject of bankruptcy proceedings
or otherwise in default or in significant risk of being in default
("Distressed Securities"). Lower grade securities in which the Trust may
invest include Mortgage-Related Securities, which are structured securities of
mortgage loans on residential and commercial properties. The Trust will not
invest more than 15% of its total assets in CMBS. Additionally, the Trust may
invest up to 30% of its total assets in stripped and Zero-Coupon Securities,
Pay-In-Kind Securities and Deferred Payment Securities. The Trust may invest
up to 35% of its total assets in debt securities of issuers domiciled outside
of the United States or that are denominated in various foreign currencies and
multinational currency units ("Foreign Securities"). Typically, the Trust will
not hold any Foreign Securities of

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<PAGE>

emerging market issuers, and in any case such securities will not comprise
more than 10% of the Trust's net assets. Up to 20% of the Trust's total assets
may be invested in equity securities other than preferred stocks. The
foregoing percentages are as of the time of investment by the Trust and could
thereafter be exceeded as a result of market value fluctuations of the Trust's
portfolio.

In selecting income securities for the Trust's portfolio, BlackRock will seek
to identify issuers and industries that BlackRock believes are likely to
experience stable or improving financial conditions. BlackRock believes that
this strategy should enhance the Trust's ability to earn high current income
and provide opportunities for capital appreciation. BlackRock's analysis may
include consideration of general industry trends, the issuer's managerial
strength, changing financial condition, borrowing requirements or debt
maturity schedules, and its responsiveness to changes in business conditions
and interest rates. BlackRock may also consider relative values based on
anticipated cash flow, interest or dividend coverage, asset coverage, capital
structures and earnings prospects. In managing the assets of the Trust,
BlackRock will utilize an active management approach that stresses the
flexibility to reallocate investments as appropriate. BlackRock will diversify
the Trust's portfolio of assets in an effort to minimize exposure to
individual securities, issuers and industries. Although it does not intend to
do so to any significant degree, BlackRock may also use advanced and
proprietary hedging and risk management techniques for the Trust. See "Other
Investment Practices--Strategic Transactions" and "Risk Factors and Special
Considerations--Other Investment Management Techniques."

The Trust expects to utilize financial leverage through borrowings, including
the issuance of debt securities, or the issuance of preferred shares or
through other transactions, such as reverse repurchase agreements, which have
the effect of financial leverage. The Trust intends to utilize financial
leverage in an initial amount equal to approximately 33 1/3% of its total
assets (including the amount obtained through leverage). The Trust generally
will not utilize leverage if it anticipates that the Trust's leveraged capital
structure would result in a lower return to Shareholders than that obtainable
over time with an unleveraged capital structure. Use of financial leverage
creates an opportunity for increased income and capital appreciation for the
Shareholders, but at the same time, creates special risks and there can be no
assurance that a leveraging strategy will be successful during any period in
which it is employed. See "Other Investment Practices--Leverage" and "Risk
Factors and Special Considerations--Leverage."

In certain market conditions, BlackRock may determine that income securities
rated investment grade (i.e., at least Baa by Moody's or BBB by S&P or
comparably rated by another Rating Agency) or U.S. Government Obligations
offer significant opportunities for high income and capital appreciation. In
such conditions, the Trust may invest less than 80% of its total assets in
lower grade income securities of U.S. issuers. In addition, the Trust may
implement various temporary "defensive" strategies at times when BlackRock
determines that conditions in the markets make pursuing the Trust's basic
investment strategy inconsistent with the best interests of its Shareholders.
These strategies may include investing all or a portion of the Trust's assets
in higher-quality debt securities.

The Trust will invest primarily in bonds, debentures, notes and other debt or
income instruments, including preferred stocks. The Trust's portfolio
securities may have fixed or variable rates of interest, and may include
convertible debt obligations and convertible preferred stock, warrant and
equity shares, Mortgage-Related Securities (including CMBS), Asset-Backed
Securities, Bank Loans, Mezzanine Investments, Government Securities, CBOs,
Distressed Securities, Zero-Coupon Securities, Pay-In-Kind Securities and
Deferred Payment Securities. The issuers of the Trust's portfolio securities

25
<PAGE>

may include domestic and foreign corporations, partnerships, trusts or similar
entities, and governmental entities or their political subdivisions, agencies
or instrumentalities. The Trust may invest in securities of any maturity. In
connection with its investments in corporate debt securities, or restructuring
of investments owned by the Trust, the Trust may receive warrants or other
non-income producing equity securities. The Trust may retain such securities,
including equity shares received upon conversion of convertible securities,
until BlackRock determines it is appropriate in light of current market
conditions to effect a disposition of such securities.

STATISTICAL INFORMATION REGARDING LOWER GRADE SECURITIES

The following table presents annualized compound total return for various
fixed income benchmarks for the period from January 1, 1991 through November
3, 1998. Over this period, the high yield market as measured by the Merrill
Lynch High Yield Master II Index has provided a higher total compounded return
than comparable maturity Treasuries and investment grade debt securities.

ANNUALIZED TOTAL COMPOUNDED RETURN
JANUARY 1, 1991 THROUGH NOVEMBER 3, 1998

<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Merrill Lynch High Yield Master II Index (1)........................... 14.14%
Merrill Lynch U.S. Treasuries/Agencies Index, 10+ Years (2)............ 11.26%
Merrill Lynch U.S. Corporate Master Index (3).......................... 9.63%
Merrill Lynch U.S. Treasuries/Agencies Index, 1-10 Years (4)........... 7.78%
Merrill Lynch U.S. 3-Month Treasury Bill Index (5)..................... 4.95%
- --------------------------------------------------------------------------------
</TABLE>
- --------
(1) The Merrill Lynch High Yield Master II Index is an unmanaged index of U.S.
bonds and U.S. dollar-denominated bonds of non-U.S. issuers, in each case
with at least $100 million face value outstanding, with a maturity equal
to or greater than one year and rated by S&P in the categories below
"BBB-" and rated by Moody's in the categories generally below "Baa3" but
not in default.
(2) The Merrill Lynch U.S. Treasuries/Agencies Index, 10+ Years is an
unmanaged index of all U.S. treasury notes and bonds with at least $1
billion face value outstanding and with a maturity greater than or equal
to ten years.
(3) The Merrill Lynch U.S. Corporate Master Index (All Maturities) is an
unmanaged index of fixed-coupon U.S. investment grade bonds with at least
$100 million face value outstanding generally with ratings of at least
"Baa3" and "BBB-" based on Moody's and S&P ratings, respectively.
(4) The Merrill Lynch U.S. Treasuries/Agencies Index, 1-10 Years is an
unmanaged index of all U.S. treasury notes and bonds with at least $1
billion face value outstanding and with a maturity greater than or equal
to one year and less than ten years.
(5) The Merrill Lynch U.S. 3-Month Treasury Bill Index is an unmanaged index
which, at the beginning of every month, is comprised of the U.S. Treasury
Bill with a maturity closest to, but not longer than, 3 months from that
date. It is assumed that this issue is held for one month, then sold with
the net proceeds reinvested in the bill selected at the beginning of the
next month.

There are differences between the securities that comprise the indices shown
above, particularly the Merrill Lynch High Yield Master II Index, and the
securities in which the Trust will invest. The indices are unmanaged indices
and no account charges, management fees or other expenses are reflected in the
indices. The Trust will not seek to match the composition or performance of
any such indices. The performance of the various indices should not be viewed
as indicative of the performance of the Trust.

In addition, past performance is no guarantee of future performance. The
statistical information described above reflects a comparison of the
annualized compound total return percentages of various

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<PAGE>

asset classes as represented by their respective indices for the period from
January 1, 1991 through November 3, 1998. The statistical information
described above does not reflect the past or future performance of the Trust.
An investor cannot invest directly in an index. Lower grade income securities
are subject to greater risks and uncertainties than other securities set forth
in the statistical information described above, including U.S. Treasury
securities which are guaranteed as to the payment of principal and interest by
the U.S. Government.

BlackRock believes that historical yields of lower grade securities have
exceeded those of higher grade securities of similar maturities, in light of
the higher degree of risk associated with investing in lower grade securities.
This difference in yields attributable to differing credit quality is commonly
referred to as a "credit spread." Such spreads are influenced by the general
credit quality of the lower grade securities outstanding at any time, economic
conditions, default rates and other factors influencing the secondary market
for lower grade securities, such as the number of issues outstanding and the
level of participation of investment banks and other financial institutions in
the issuance and trading of lower grade securities. The following table
presents the historical credit spreads on lower grade securities, measured by
the weighted average yield to maturity (assuming exercise of issuers' market
call options) of the lower grade securities included in the DLJ High Yield
Index, relative to the yield on the U.S. Treasury securities of a comparable
maturity at that time to the DLJ High Yield Index, as determined by Donaldson,
Lufkin & Jenrette Securities Corporation. Although BlackRock believes that the
spreads over U.S. Treasuries are representative of the historical average
spreads in the overall lower grade securities market, the Trust will have no
direct investment in, nor will its performance be indicative of, the DLJ High
Yield Index. The following comparison should not be considered a
representation of future market rates, spreads of lower grade securities over
U.S. Treasury securities nor what an investment the Trust may earn or what an
investor's yield or total return may be in the future.

COMPARISON OF SPREADS OF YIELD TO MATURITY (ASSUMING EXERCISE OF ISSUERS'
MARKET CALL OPTIONS) OF THE LOWER GRADE SECURITIES INCLUDED IN THE DLJ HIGH
YIELD INDEX RELATIVE TO
YIELDS OF COMPARABLE MATURITY U.S. TREASURIES

<TABLE>
<CAPTION>
SEPT. MAR. SEPT. MAR. SEPT. MAR. SEPT. MAR. SEPT.
1990 1991 1991 1992 1992 1993 1993 1994 1994
----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Spread of Yield of DLJ
High Yield Index
Relative to Yields of
Comparable Maturity
U.S. Treasuries....... 9.70% 8.02% 7.54% 4.90% 5.63% 4.33% 4.52% 3.90% 4.06%
<CAPTION>
MAR. SEPT. MAR. SEPT. MAR. SEPT. MAR. SEPT. OCT.
1995 1995 1996 1996 1997 1997 1998 1998 1998
----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Spread of Yield of DLJ
High Yield Index
Relative to Yields of
Comparable Maturity
U.S. Treasuries....... 4.41% 4.51% 4.13% 3.53% 3.29% 3.13% 3.45% 6.87% 7.35%
</TABLE>
Source: Donaldson, Lufkin & Jenrette Securities Corporation.

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<PAGE>

Default loss rates, for U.S. lower grade bonds by year for the years 1990
through 1997 were as follows:

DEFAULT LOSS RATES(1)

(1) Defined as the number of issuers of lower grade bonds that defaulted in a
given year as a percentage of the number of issuers that could have
defaulted on such securities in that time period. Source: Moody's
Investors Service.

The statistical information with respect to historical default loss rates is
based on information contained in Moody's Default Rates on Lower Grade Income
Securities, and is intended to demonstrate default loss rate trends over the
period indicated. It should not be viewed as a definitive indication of the
relative magnitude of changes in credit quality from year to year and is not a
prediction of future rates of default. Although other methods of analyzing
default experience, such as comparing default experience of seasoned issues,
would produce different relative figures, BlackRock believes that the
foregoing default loss-rate data evidence a general trend of declining default
rates.

For the period January 1, 1989 through December 31, 1997, the cumulative gross
default rate for lower grade bonds was 38.34%. This figure represents the
probability that a high yield bond outstanding on January 1, 1989 would
default by December 31, 1997 and does not take into account any recovery of
lost principal or interest. The rate is based on the ratio of the number of
issuers that defaulted on high yield bonds outstanding on January 1, 1989 to
the number of issuers at risk of defaulting on such bonds as of such date and
is based only on bonds that have been rated by Moody's. The foregoing is
derived from information obtained by the Trust from the February 1998 issue of
a Moody's publication entitled "Historical Default Rates of Corporate Bond
Issuers, 1920-1997."

The market of outstanding high yield securities has generally increased since
1988. The aggregate outstanding principal amount of high yield securities was
as follows:

PRINCIPAL AMOUNT OF LOWER GRADE SECURITIES
($ IN BILLIONS)

Source: Donaldson, Lufkin & Jenrette Securities Corporation.

Because of the combined historical data relating to the performance of lower
grade securities relative to other asset classes, the increase in the size and
diversification of the market for lower grade securities, the historical
default rates and the current spreads of the yields available on lower grade
securities relative to higher quality securities, BlackRock believes that the
relative risks and returns available in the current high yield market have
improved significantly from prior market conditions. See "Risk Factors and
Special Considerations" for factors you should consider in connection with an
investment in the Shares of the Trust.

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<PAGE>

PORTFOLIO SECURITIES

LOWER GRADE SECURITIES. The Trust generally will invest in securities rated
below investment grade such as those rated Ba or lower by Moody's and BB or
lower by S&P or securities comparably rated by other Rating Agencies or in
unrated securities determined by BlackRock to be of comparable quality.
Securities rated Ba by Moody's are judged to have speculative elements; their
future cannot be considered as well assured and often the protection of
interest and principal payments may be very moderate. Securities rated BB by
S&P are regarded as having predominantly speculative characteristics and,
while such obligations have less near-term vulnerability to default than other
speculative grade debt, they face 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. Securities
rated C by Moody's are regarded as having extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P are in
default and the payment of interest and/or repayment of principal is in
arrears. See "Appendix A--Description of Corporate Bond Ratings" for
additional information concerning rating categories.

Lower grade securities, though high yielding, are characterized by high risk.
They may be subject to certain risks with respect to the issuing entity and to
greater market fluctuations than certain lower yielding, higher rated
securities. The retail secondary market for lower grade securities may be less
liquid than that of higher rated securities; adverse conditions could make it
difficult at times for the Trust to sell certain securities or could result in
lower prices than those used in calculating the Trust's net asset value.

The prices of debt securities generally are inversely related to interest rate
changes; however, the price volatility caused by fluctuating interest rates of
securities also is inversely related to the coupon of such securities.
Accordingly, below investment grade securities may be relatively less
sensitive to interest rate changes than higher quality securities of
comparable maturity, because of their higher coupon. This higher coupon is
what the investor receives in return for bearing greater credit risk. The
higher credit risk associated with below investment grade securities
potentially can have a greater effect on the value of such securities than may
be the case with higher quality issues of comparable maturity, and will be a
substantial factor in the Trust's relative Share price volatility.

Lower grade securities may be particularly susceptible to economic downturns.
It is likely that an economic recession could disrupt severely the market for
such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.

The ratings of Moody's, S&P and the other Rating Agencies represent their
opinions as to the quality of the obligations which they undertake to rate.
Ratings are relative and subjective and, although ratings may be useful in
evaluating the safety of interest and principal payments, they do not evaluate
the market value risk of such obligations. Although these ratings may be an
initial criterion for selection of portfolio investments, BlackRock also will
independently evaluate these securities and the ability of the issuers of such
securities to pay interest and principal. To the extent that the Trust invests
in lower grade securities that have not been rated by a Rating Agency, the
Trust's ability to achieve its investment objective will be more dependent on
BlackRock's credit analysis than would be the case when the Trust invests in
rated securities.

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<PAGE>

ZERO-COUPON, PAY-IN-KIND AND DEFERRED PAYMENT SECURITIES. The Trust may invest
up to 30% of its total assets in Zero-Coupon, Pay-In-Kind or Deferred Payment
Securities. Zero-Coupon Securities are securities that are sold at a discount
to par value and on which interest payments are not made during the life of
the security. Upon maturity, the holder is entitled to receive the par value
of the security. While interest payments are not made on such securities,
holders of such securities are required each year, for federal income tax
purposes, to accrue income with respect to these securities as if it were
actually received. Because the Trust must distribute this non-cash income to
Shareholders, to the extent that Shareholders elect to receive dividends in
cash rather than reinvesting such dividends in additional shares, the Trust
may have to sell portfolio securities to generate cash for distribution and,
in such event, the Trust would have fewer assets with which to purchase income
producing securities. The Trust accrues income with respect to these
securities prior to the receipt of cash payments. Pay-In-Kind Securities are
securities that have interest payable by delivery of additional securities.
Upon maturity, the holder is entitled to receive the aggregate par value of
the securities. Deferred Payment Securities are securities that remain Zero-
Coupon Securities until a predetermined date, at which time the stated coupon
rate becomes effective and interest becomes payable at regular intervals.
Zero-Coupon, Pay-In-Kind and Deferred Payment Securities are subject to
greater fluctuation in value and may have lesser liquidity in the event of
adverse market conditions than comparably rated securities paying cash
interest at regular interest payment periods.

BANK LOANS. The Trust may invest up to 25% of its total assets in Bank Loans
denominated in U.S. and foreign currencies that are originated, negotiated and
structured by a syndicate of lenders ("Co-Lenders") consisting of commercial
banks, thrift institutions, insurance companies, financial companies or other
financial institutions one or more of which administers the security on behalf
of the syndicate (the "Agent Bank"). Co-Lenders may sell such securities to
third parties called "Participants." The Trust may invest in such securities
either by participating as a Co-Lender at origination or by acquiring an
interest in the security from a Co-Lender or a Participant (collectively,
"Participation Interests"). Co-Lenders and Participants interposed between the
Trust and the corporate borrower (the "Borrower"), together with Agent Banks,
are referred herein as "Intermediate Participants." The Trust also may
purchase a participation interest in a portion of the rights of an
Intermediate Participant, which would not establish any direct relationship
between the Trust and the Borrower. In such cases, the Trust would be required
to rely on the Intermediate Participant that sold the participation interest
not only for the enforcement of the Trust's rights against the Borrower but
also for the receipt and processing of payments due to the Trust under the
security. Because it may be necessary to assert through an Intermediate
Participant such rights as may exist against the Borrower, in the event the
Borrower fails to pay principal and interest when due, the Trust may be
subject to delays, expenses and risks that are greater than those that would
be involved if the Trust would enforce its rights directly against the
Borrower. Moreover, under the terms of a Participation Interest, the Trust may
be regarded as a creditor of the Intermediate Participant (rather than of the
Borrower), so that the Trust may also be subject to the risk that the
Intermediate Participant may become insolvent. Similar risks may arise with
respect to the Agent Bank if, for example, assets held by the Agent Bank for
the benefit of the Trust were determined by the appropriate regulatory
authority or court to be subject to the claims of the Agent Bank's creditors.
In such case, the Trust might incur certain costs and delays in realizing
payment in connection with the Participation Interest or suffer a loss of
principal and/or interest. Further, in the event of the bankruptcy or
insolvency of the Borrower, the obligation of the

30
<PAGE>

Borrower to repay the loan may be subject to certain defenses that can be
asserted by such Borrower as a result of improper conduct by the Agent Bank or
Intermediate Participant.

MEZZANINE INVESTMENTS. The Trust may invest up to 15% of its total assets in
certain lower grade securities known as "Mezzanine Investments," which are
subordinated debt securities that are generally issued in private placements
in connection with an equity security (e.g., with attached warrants) or may be
convertible into equity securities. Mezzanine Investments may be issued with
or without registration rights. Similar to other lower grade securities,
maturities of Mezzanine Investments are typically seven to ten years, but the
expected average life is significantly shorter at three to five years.
Mezzanine Investments are usually unsecured and subordinated to other
obligations of the issuer.

In connection with its purchase of Mezzanine Investments, the Trust may
participate in rights offerings and may purchase warrants, which are
privileges issued by corporations enabling the owners to subscribe and
purchase a specified number of shares of the corporation at a specified price
during a specified period of time. Subscription rights normally have a short
life span to expiration. The purchase of rights or warrants involves the risk
that the Trust could lose the purchase value of a right or warrant if the
right to subscribe to additional shares is not exercised prior to the rights'
and warrants' expiration. Also, the purchase of rights and/or warrants
involves the risk that the effective price paid for the right and/or warrant
added to the subscription price of the related security may exceed the value
of the subscribed security's market price such as when there is no movement in
the level of the underlying security.

COLLATERALIZED BOND OBLIGATIONS. The Trust may invest up to 15% of its total
assets in collateralized bond obligations ("CBOs"), which are structured
securities backed by a diversified pool of high yield, public or private fixed
income securities. These may be fixed pools or may be "market value" (or
managed) pools of collateral. The pool of high yield securities is typically
separated into tranches representing different degrees of credit quality. The
top tranche of CBOs, which represents the highest credit quality in the pool,
has the greatest collateralization and pays the lowest interest rate. Lower
CBO tranches represent lower degrees of credit quality and pay higher interest
rates intended to compensate for the attendant risks. The bottom tranche
specifically receives the residual interest payments (i.e. money that is left
over after the higher tranches have been paid) rather than a fixed interest
rate. The return on the lower tranches of CBOs is especially sensitive to the
rate of defaults in the collateral pool. Under normal market conditions, the
Trust expects to invest in the lower tranches of CBOs.

DISTRESSED SECURITIES. The Trust may invest up to 10% of its total assets in
Distressed Securities. Investment in Distressed Securities is speculative and
involves significant risk, including possible loss of the principal invested.
Distressed Securities may be performing or non-performing and generally trade
at prices substantially lower than lower grade securities of companies in
similar industries. Under normal market conditions, the Trust intends to
invest in Distressed Securities that are producing current income. At times,
Distressed Securities may not produce income and may require the Trust to bear
certain extraordinary expenses (including legal, accounting, valuation and
transaction expenses) in order to protect and recover its investment.
Therefore, to the extent the Trust invests in Distressed Securities, the
Trust's ability to achieve current income for its Shareholders may be
diminished. The

31
<PAGE>

Trust also will be subject to significant uncertainty as to when and in what
manner and for what value the obligations evidenced by the Distressed
Securities will eventually be satisfied (e.g., through a liquidation of the
obligor's assets, an exchange offer or plan of reorganization involving the
Distressed Securities or a payment of some amount in satisfaction of the
obligation). In addition, even if an exchange offer is made or plan of
reorganization is adopted with respect to Distressed Securities held by the
Trust, there can be no assurance that the securities or other assets received
by the Trust in connection with such exchange offer or plan of reorganization
will not have a lower value or income potential than may have been anticipated
when the investment was made. Moreover, any securities received by the Trust
upon completion of an exchange offer or plan of reorganization may be
restricted as to resale. As a result of the Trust's participation in
negotiations with respect to any exchange offer or plan of reorganization with
respect to an issuer of Distressed Securities, the Trust may be restricted
from disposing of such securities.

MORTGAGE-RELATED SECURITIES. Mortgage-Related Securities are a form of
derivative collateralized by pools of commercial or residential mortgages.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations. These
securities may include complex instruments such as collateralized mortgage
obligations, stripped mortgage-backed securities, mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs"),
adjustable rate mortgages, real estate investment trusts ("REITs"), including
debt and preferred stock issued by REITs, as well as other real estate-related
securities. The Mortgage-Related Securities in which the Trust may invest
include those with fixed, floating or variable interest rates, those with
interest rates that change based on multiples of changes in a specified index
of interest rates and those with interest rates that change inversely to
changes in interest rates, as well as those that do not bear interest.
Although the Trust may invest in residential and commercial Mortgage-Related
Securities issued by governmental entities and private issuers, the Trust
expects that most of such investments will be limited to CMBS, in which the
Trust will not invest more than 15% of its total assets. See "Appendix C--
Description of Mortgage-Related Securities" for additional information
concerning mortgage-related securities.

Commercial Mortgage-Related Securities. CMBS generally are multi-class debt or
pass-through certificates secured or backed by mortgage loans on commercial
properties. The Trust may invest up to 15% of its total assets in CMBS. CMBS
generally are structured to provide protection to the senior class investors
against potential losses on the underlying mortgage loans. This protection
generally is provided by having the holders of subordinated classes of
securities ("Subordinated CMBS") take the first loss if there are defaults on
the underlying commercial mortgage loans. Other protection, which may benefit
all of the classes or particular classes, may include issuer guarantees,
reserve funds, additional Subordinated CMBS, cross-collateralization and over-
collateralization.

The Trust may invest in Subordinated CMBS issued or sponsored by commercial
banks, savings and loan institutions, mortgage bankers, private mortgage
insurance companies and other non-governmental issuers. Subordinated CMBS have
no governmental guarantee, and are subordinated in some manner as to the
payment of principal and/or interest to the holders of more senior mortgage-
related securities arising out of the same pool of mortgages. The holders of
Subordinated CMBS typically are compensated with a higher stated yield than
are the holders of more senior mortgage-related securities. On the other hand,
Subordinated CMBS typically subject the holder to greater risk

32
<PAGE>

than senior CMBS and tend to be rated in a lower rating category, and
frequently a substantially lower rating category, than the senior CMBS issued
in respect of the same mortgage pool. Subordinated CMBS generally are likely
to be more sensitive to changes in prepayment and interest rates and the
market for such securities may be less liquid than is the case for traditional
fixed-income securities and senior mortgage-related securities.

The market for CMBS developed more recently and in terms of total outstanding
principal amount of issues is relatively small compared to the market for
residential single-family mortgage-related securities. In addition, commercial
lending generally is viewed as exposing the lender to a greater risk of loss
than one-to-four family residential lending. Commercial lending, for example,
typically involves larger loans to single borrowers or groups of related
borrowers than residential one-to-four family mortgage loans. In addition, the
repayment of loans secured by income producing properties typically is
dependent upon the successful operation of the related real estate project and
the cash flow generated therefrom. Consequently, adverse changes in economic
conditions and circumstances are more likely to have an adverse impact on
mortgage-related securities secured by loans on commercial properties than on
those secured by loans on residential properties.

ASSET-BACKED SECURITIES. Asset-Backed Securities are a form of derivative
securities. The securitization techniques used for asset-backed securities are
similar to those used for Mortgage-Related Securities. The collateral for
these securities may include home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. The Trust may
invest in these and other types of asset-backed securities that may be
developed in the future. Asset-Backed Securities present certain risks that
are not presented by Mortgage-Related Securities. Primarily, these securities
may provide the Trust with a less effective security interest in the related
collateral than do Mortgage-Related Securities. Therefore, there is the
possibility that recoveries on the underlying collateral may not, in some
cases, be available to support payments on these securities.

FOREIGN SECURITIES. The Trust may invest up to 35% of its total assets in
Foreign Securities, which may include debt securities issued by foreign
governments and other sovereign entities and debt securities issued by foreign
corporations and securities denominated in foreign currencies or multinational
currency units. Under normal market conditions, the Trust will not hold any
Foreign Securities of emerging market issuers, and, in the event the Trust
decides to hold any such Foreign Securities of emerging market issuers, such
securities will not comprise more than 10% of the Trust's total assets.
Foreign securities markets generally are not as developed or efficient as
those in the United States. Securities of some foreign issuers are less liquid
and more volatile than securities of comparable U.S. issuers. Similarly,
volume and liquidity in most foreign securities markets are less than in the
United States and, at times, volatility of price can be greater than in the
United States.

Because evidences of ownership of such securities usually are held outside the
United States, the Trust will be subject to additional risks which include
possible adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect or restrict the payment of principal and interest
on the Foreign Securities to investors located outside the country of the
issuer, whether from currency blockage or otherwise.

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<PAGE>

Since Foreign Securities often are purchased with and payable in currencies of
foreign countries, the value of these assets as measured in U.S. dollars may
be affected favorably or unfavorably by changes in currency rates and exchange
control regulations.

CONVERTIBLE SECURITIES. The Trust may invest in convertible securities, which
are income securities that may, at the holder's option, be converted into or
exchanged for a prescribed amount of equity securities of the same or a
different issuer within a particular period of time. Convertible securities
may be converted at either a stated price or stated rate into underlying
shares of common stock. Convertible securities have characteristics similar to
both fixed-income and equity securities. Convertible securities generally are
subordinated to other similar but non-convertible securities of the same
issuer, although convertible bonds, as corporate debt obligations, enjoy
seniority in right of payment to all equity securities, and convertible
preferred stock is senior to shares of common stock, of the same issuer.
Because of the subordination feature, however, convertible securities
typically have lower ratings than similar non-convertible securities.

Although to a lesser extent than with fixed-income securities, the market
value of convertible securities tends to decline as interest rates increase
and, conversely, tends to increase as interest rates decline. In addition,
because of the conversion feature, the market value of convertible securities
tends to vary with fluctuations in the market value of the underlying common
stock. A unique feature of convertible securities is that as the market price
of the underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience market value declines
to the same extent as the underlying common stock. When the market price of
the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.

Convertible securities are investments that provide for a stable stream of
income with generally higher yields than common stock. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate.
Convertible securities, however, generally offer lower interest or dividend
yields than non-convertible securities of similar quality because of the
potential for capital appreciation.

VARIABLE AND FLOATING RATE SECURITIES. Variable and floating rate securities
provide for a periodic adjustment in the interest rate paid on the
obligations. The terms of such obligations provide that interest rates are
adjusted periodically based upon an interest rate adjustment index as provided
in the respective obligations. The adjustment intervals may be regular, and
range from daily up to annually, or may be event-based, such as based on a
change in the prime rate.

The Trust may invest in floating rate debt instruments ("floaters"). The
interest rate on a floater is a variable rate which is tied to another
interest rate, such as a money-market index or Treasury bill rate. The
interest rate on a floater resets periodically, typically every six months.
Because of the interest rate reset feature, floaters provide the Trust with a
certain degree of protection against rises in interest rates, although the
Trust will participate in any declines in interest rates as well. The Trust
also may

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<PAGE>

invest in inverse floating rate debt instruments ("inverse floaters"). The
interest rate on an inverse floater resets in the opposite direction from the
market rate of interest to which the inverse floater is indexed or inversely
to a multiple of the applicable index. An inverse floating rate security may
exhibit greater price volatility than a fixed rate obligation of similar
credit quality.

STRIPPED SECURITIES. The Trust may invest in zero-coupon U.S. Treasury
securities, which are Treasury Notes and Bonds that have been stripped of
their unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Such stripped securities also are issued by corporations and
financial institutions which constitute a proportionate ownership of the
issuer's pool of underlying U.S. Treasury securities. A stripped security pays
no interest to its holder during its life and is sold at a discount to its
face value at maturity. The market prices of such securities generally are
more volatile than the market prices of securities that pay interest
periodically and are likely to respond to a greater degree to changes in
interest rates than coupon securities having similar maturities and credit
qualities.

U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not so obligated
by law.

EQUITY SECURITIES. The Trust may invest up to 20% of its total assets in
common stock, warrants or other equity securities (other than preferred
stocks) of U.S. and foreign issuers when consistent with the Trust's
objectives. The Trust will generally, but not exclusively, hold such
investments as a result of purchases of unit offerings of debt securities
which include such securities or in connection with an actual or proposed
conversion or exchange of debt securities. The Trust may also purchase equity
securities not associated with debt securities when, in the opinion of
BlackRock, such purchase is appropriate.

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<PAGE>

OTHER INVESTMENT PRACTICES

The Trust may utilize other investment practices and portfolio management
techniques as set forth below.

LEVERAGE

The Trust expects to utilize leverage through borrowings or issuance of debt
securities or preferred shares. The Trust intends to utilize leverage in an
initial amount equal to approximately 33 1/3% of its total assets (including
the amount obtained from leverage). The Trust generally will not utilize
leverage if it anticipates that the Trust's leveraged capital structure would
result in a lower return to Shareholders than that obtainable if the Shares
were unleveraged for any significant amount of time. The use of leverage by
the Trust creates an opportunity for increased net income and capital
appreciation for the Shares, but, at the same time, creates special risks. The
Trust also may borrow money as a temporary measure for extraordinary or
emergency purposes, including the payment of dividends and the settlement of
securities transactions which otherwise may require untimely dispositions of
portfolio securities. Subject to applicable regulatory requirements, the Trust
at times may borrow from affiliates of BlackRock, provided that the terms of
such borrowings are no less favorable than those available from comparable
sources of funds in the marketplace.

The concept of leveraging is based on the premise that the cost of the assets
to be obtained from leverage will be based on short term rates which normally
will be lower than the return earned by the Trust on its longer term portfolio
investments. Since the total assets of the Trust (including the assets
obtained from leverage) will be invested in the higher yielding portfolio
investments or portfolio investments with the potential for capital
appreciation, the holders of Shares will be the beneficiaries of the
incremental return. Should the differential between the underlying assets and
cost of leverage narrow, the incremental return "pick up" will be reduced.
Furthermore, if long term rates rise, the net asset value of the Shares will
reflect the decline in the value of portfolio holdings resulting therefrom.

Leverage creates risks for holders of the Shares, including the likelihood of
greater volatility of net asset value and market price of the Shares, and the
risk that fluctuations in interest rates on borrowings and debt or in the
dividend rates on any preferred stock may affect the return to the holders of
the Shares. To the extent the income or capital appreciation derived from
securities purchased with funds received from leverage exceeds the cost of
leverage, the Trust's return will be greater than if leverage had not been
used. Conversely, if the income or capital appreciation from the securities
purchased with such funds is not sufficient to cover the cost of leverage, the
return on the Trust will be less than if leverage had not been used, and
therefore the amount available for distribution to Shareholders as dividends
and other distributions will be reduced. In the latter case, BlackRock in its
best judgment nevertheless may determine to maintain the Trust's leveraged
position if it expects that the benefits to the Trust's Shareholders of
maintaining the leveraged position will outweigh the current reduced return.
As discussed under "Management of the Trust," the fee paid to BlackRock will
be calculated on the basis of the Trust's assets including proceeds from
borrowings for leverage and the issuance of preferred stock. During periods in
which the Trust is utilizing financial leverage, the investment advisory fees
payable to BlackRock will be higher than if the Trust did not utilize a
leveraged capital structure. The use of leverage creates risks and involves
special considerations. See "Risk Factors and Special Considerations--
Leverage."

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<PAGE>

Capital raised through leverage will be subject to interest costs or dividend
payments which may not exceed the income and capital appreciation on the
assets purchased. The Trust also may be required to maintain minimum average
balances in connection with borrowings or to pay a commitment or other fee to
maintain a line of credit; either of these requirements will increase the cost
of borrowing over the stated interest rate. The issuance of additional classes
of preferred stock involves offering expenses and other costs and may limit
the Trust's freedom to pay dividends on Shares or to engage in other
activities. Borrowings and the issuance of a class of preferred stock having
priority over the Trust's Shares create an opportunity for greater return per
Share, but at the same time such borrowing is a speculative technique in that
it will increase the Trust's exposure to capital risk. Unless the income and
capital appreciation, if any, on assets acquired with borrowed funds or
offering proceeds exceed the cost of borrowing or issuing additional classes
of securities, the use of leverage will diminish the investment performance of
the Trust compared with what it would have been without leverage.

Certain types of borrowings may result in the Trust being subject to covenants
in credit agreements relating to asset coverage and portfolio composition
requirements. The Trust may be subject to certain restrictions on investments
imposed by guidelines of one or more Rating Agencies, which may issue ratings
for the short term corporate debt securities or preferred stock issued by the
Trust. These guidelines may impose asset coverage or portfolio composition
requirements that are more stringent than those imposed by the Investment
Company Act. It is not anticipated that these covenants or guidelines will
impede BlackRock from managing the Trust's portfolio in accordance with the
Trust's investment objectives and policies.

Under the Investment Company Act, the Trust is not permitted to incur
indebtedness unless immediately after such incurrence the Trust has an asset
coverage of at least 300% of the aggregate outstanding principal balance of
indebtedness (i.e., such indebtedness may not exceed 33 1/3% of the Trust's
total assets). Additionally, under the Investment Company Act, the Trust may
not declare any dividend or other distribution upon any class of its capital
shares, or purchase any such capital shares, unless the aggregate indebtedness
of the Trust has, at the time of the declaration of any such dividend or
distribution or at the time of any such purchase, an asset coverage of at
least 300% after deducting the amount of such dividend, distribution, or
purchase price, as the case may be. Under the Investment Company Act, the
Trust is not permitted to issue preferred shares unless immediately after such
issuance the net asset value of the Trust's portfolio is at least 200% of the
liquidation value of the outstanding preferred shares (i.e., such liquidation
value may not exceed 50% of the Trust's total assets). In addition, the Trust
is not permitted to declare any cash dividend or other distribution on its
Shares unless, at the time of such declaration, the net asset value of the
Trust's portfolio (determined after deducting the amount of such dividend or
distribution) is at least 200% of such liquidation value. In the event
preferred shares are issued, the Trust intends, to the extent possible, to
purchase or redeem preferred shares from time to time to maintain coverage of
any preferred shares of at least 200%. In addition, during any period when
preferred shares are outstanding, the Investment Company Act would require
that two of the Trust's Trustees be elected by holders of the preferred
shares, voting separately as a class, and that during any period in which the
Trust were in arrears in an amount equal to two full years' dividends on such
preferred shares, a majority of the Trust's Trustees be so elected.

The Trust's willingness to borrow money and issue new securities for
investment purposes, and the amount the Trust will borrow or issue, will
depend on many factors, the most important of which are

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<PAGE>

investment outlook, market conditions and interest rates. Successful use of a
leveraging strategy depends on BlackRock's ability to predict correctly
interest rates and market movements, and there is no assurance that a
leveraging strategy will be successful during any period in which it is
employed.

Assuming the utilization of leverage by borrowings in the amount of
approximately 33 1/3% of the Trust's total assets, and an annual interest rate
of 5.60% payable on such leverage based on market rates as of the date of this
Prospectus, the annual return on the assets attributable to the Shares that
the Trust's portfolio must experience (net of expenses) in order to cover such
interest payments would be 1.87%. The Trust's actual cost of leverage will be
based on market rates at the time the Trust undertakes a leveraging strategy,
and such actual cost of leverage may be higher or lower than that assumed.

The following table is designed to illustrate the effect on the return to a
holder of the Trust's Shares of the leverage obtained by borrowings in the
amount of approximately 33 1/3% of the Trust's total assets, assuming
hypothetical annual returns of the Trust's portfolio of minus 10% to plus 10%.
As the table shows, the leverage generally increases the return to
Shareholders when portfolio return is positive and greater than the cost of
leverage and decreases the return when the portfolio return is negative or
less than the cost of leverage. The figures appearing in the table are
hypothetical and actual returns may be greater or less than those appearing in
the table.

<TABLE>
<S> <C> <C> <C> <C> <C>
Assumed Portfolio Return (net of expenses)... (10)% (5)% 0% 5% 10%
Corresponding Share Return................... (17.8)% (10.3)% (2.8)% 4.7% 12.2%
</TABLE>

The Trust currently expects that it may enter into definitive agreements with
respect to a credit facility shortly after the closing of the Offering of the
Shares made by this Prospectus. The Trust is currently in negotiations with a
limited number of large commercial banks to arrange a credit facility pursuant
to which the Trust expects to be entitled to borrow an amount equal to
approximately 33 1/3% of the Trust's total assets (inclusive of the amount
borrowed) as of the closing of the offer and sale of the Shares. Any such
borrowings would constitute financial leverage. The terms of any agreements
relating to such a credit facility have not been determined and are subject to
definitive agreement and other conditions, but the Trust anticipates that such
a credit facility would have terms substantially similar to the following: (i)
a final maturity not expected to exceed three years, subject to possible
extension by the Trust; (ii) with respect to each draw under the facility, an
interest rate equal to the lesser of LIBOR plus a stated premium or an
alternate rate on the outstanding amount of each such draw, reset over periods
ranging from one to six months; (iii) payment by the Trust of certain fees and
expenses including an underwriting fee, a commitment fee on the average
undrawn amount of the facility, an ongoing administration fee and the expenses
of the lenders under the facility incurred in connection therewith. The
facility is not expected to be convertible into any other securities of the
Trust, outstanding amounts are expected to be prepayable by the Trust prior to
final maturity without significant penalty and there are not expected to be
any sinking fund or mandatory retirement provisions. Outstanding amounts would
be payable at maturity or such earlier times as required by the agreement. The
Trust may be required to prepay outstanding amounts under the facility or
incur a penalty rate of interest in the event of the occurrence of certain
events of default. The Trust expects to indemnify the lenders under the
facility against liabilities they may incur in connection with the facility.
In addition the Trust expects that such a credit facility would contain
certain covenants which,

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<PAGE>

among other things, likely will limit the Trust's ability to pay dividends in
certain circumstances, incur additional debt, change its fundamental
investment policies and engage in certain transactions including mergers and
consolidations, and may require asset coverage ratios in addition to those
required by the Investment Company Act. The Trust may be required to pledge
its assets and to maintain a portion of its assets in cash or high grade
securities as a reserve against interest or principal payments and expenses.
The Trust expects that any credit facility would have customary covenant,
negative covenant and default provisions. There can be no assurance that the
Trust will enter into an agreement for a credit facility on terms and
conditions representative of the foregoing, or that additional material terms
will not apply. In addition, if entered into, any credit facility may in the
future be replaced or refinanced by one or more credit facilities having
substantially different terms or by the issuance of preferred shares or debt
securities.

Until the Trust borrows or issues preferred shares, the Trust's Shares will
not be leveraged, and the risks and special considerations related to leverage
described in this Prospectus will not apply. Such leveraging of the Shares
cannot be fully achieved until the proceeds resulting from the use of leverage
have been invested in longer-term debt instruments in accordance with the
Trust's investment objectives and policies.

STRATEGIC TRANSACTIONS

Consistent with its investment objectives and policies as set forth herein,
the Trust may also enter into certain hedging and risk management
transactions. In particular, the Trust may purchase and sell futures
contracts, exchange-listed and over-the-counter put and call options on
securities, financial indices and futures contracts, forward foreign currency
contracts and may enter into various interest rate transactions (collectively,
"Strategic Transactions"). Strategic Transactions may be used to attempt to
protect against possible changes in the market value of the Trust's portfolio
resulting from fluctuations in the debt securities markets and changes in
interest rates, to protect the Trust's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes or to establish a position in the securities markets as a temporary
substitute for purchasing particular securities. Any or all of these
techniques may be used at any time. There is no particular strategy that
requires use of one technique rather than another. Use of any Strategic
Transaction is a function of market conditions. The Strategic Transactions
that the Trust may use are described below. The ability of the Trust to hedge
successfully will depend on BlackRock's ability to predict pertinent market
movements, which cannot be assured.

Interest Rate Transactions. Among the Strategic Transactions into which the
Trust may enter are interest rate swaps and the purchase or sale of interest
rate caps and floors. The Trust expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio as a duration management technique or to protect against any
increase in the price of securities the Trust anticipates purchasing at a
later date. The Trust intends to use these transactions for hedging and risk
management purposes and not as a speculative investment. The Trust will not
sell interest rate caps or floors that it does not own. Interest rate swaps
involve the exchange by the Trust with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of
principal. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a

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<PAGE>

predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate cap. The purchase
of an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to receive payments
of interest on a notional principal amount from the party selling such
interest rate floor.

The Trust may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending on whether it is hedging its
assets or liabilities, and will usually enter into interest rate swaps on a
net basis, i.e., the two payment streams are netted out, with the Trust
receiving or paying, as the case may be, only the net amount of the two
payments on the payment dates. In as much as these hedging transactions are
entered into for good faith hedging purposes, BlackRock and the Trust believe
such obligations do not constitute senior securities and, accordingly, will
not treat them as being subject to its borrowing restrictions. The Trust will
accrue the net amount of the excess, if any, of the Trust's obligations over
its entitlements with respect to each interest rate swap on a daily basis and
will segregate with a custodian an amount of cash or liquid securities having
an aggregate net asset value at least equal to the accrued excess. The Trust
will not enter into any interest rate swap, cap or floor transaction unless
the unsecured senior debt or the claims-paying ability of the other party
thereto is rated in the highest rating category of at least one nationally
recognized rating organization at the time of entering into such transaction.
If there is a default by the other party to such a transaction, the Trust will
have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals
and as agents utilizing standardized swap documentation. Caps and floors are
more recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps.

Futures Contracts and Options on Futures Contracts. In connection with its
hedging and other risk management strategies, the Trust may also enter into
contracts for the purchase or sale for future delivery ("future contracts") of
debt securities, aggregates of debt securities, financial indices, and U.S.
Government debt securities or options on the foregoing to hedge the value of
its portfolio securities that might result from a change in interest rates or
market movements. The Trust will engage in such transactions only for bona
fide hedging, risk management and other appropriate portfolio management
purposes. In each case the Trust will engage in such transactions, in
accordance with the rules and regulations of the Commodity Futures Trading
Commission.

Credit Derivatives. The Trust may engage in credit derivative transactions.
There are two broad categories of credit derivatives: default price risk
derivatives and market spread derivatives. Default price risk derivatives are
linked to the price of reference securities or loans after a default by the
issuer or borrower, respectively. Market spread derivatives are based on the
risk that changes in market factors, such as credit spreads, can cause a
decline in the value of a security, loan or index. There are three basic
transactional forms for credit derivatives: swaps, options and structured
instruments. The use of credit derivatives is a highly specialized activity
which involves strategies and risks different from those associated with
ordinary portfolio security transactions. If BlackRock is incorrect in its
forecasts of default risks, market spreads or other applicable factors, the
investment performance of the Trust would diminish compared with what it would
have been if these techniques were not used. Moreover, even if BlackRock is
correct in its forecasts, there is a risk that a credit derivative position
may correlate imperfectly with the price of the asset or liability being
hedged. There is no limit on the

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<PAGE>

amount of credit derivative transactions that may be entered into by the
Trust. The Trust's risk of loss in a credit derivative transaction varies with
the form of the transaction. For example, if the Trust purchases a default
option on a security, and if no default occurs with respect to the security,
the Trust's loss is limited to the premium it paid for the default option. In
contrast, if there is a default by the grantor of a default option, the
Trust's loss will include both the premium that it paid for the option and the
decline in value of the underlying security that the default option hedged.

Calls on Securities, Indices and Futures Contracts. In order to enhance income
or reduce fluctuations in net asset value, the Trust may sell or purchase call
options ("calls") on securities and indices based upon the prices of debt
securities that are traded on U.S. securities exchanges and on the over-the-
counter markets. A call option gives the purchaser of the option the right to
buy, and obligates the seller to sell, the underlying security, futures
contract or index at the exercise price at any time or at a specified time
during the option period. All such calls sold by the Trust must be "covered"
as long as the call is outstanding (i.e., the Trust must own the instrument
subject to the call or other securities or assets acceptable for applicable
segregation and coverage requirements). A call sold by the Trust exposes the
Trust during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security, index or futures
contract and may require the Trust to hold an instrument which it might
otherwise have sold. The purchase of a call gives the Trust the right to buy
the underlying instrument or index at a fixed price. Calls on futures
contracts on securities written by the Trust must also be covered by assets or
instruments acceptable under applicable segregation and coverage requirements.

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

Appendix B contains further information about the characteristics, risk and
possible benefits of Strategic Transactions and the Trust's other policies and
limitations (which are not fundamental policies) relating to investment by the
Trust in futures contracts and options. The principal risks relating to the
use of futures and other Strategic Transactions are: (i) less than perfect
correlation between the prices of the hedging instrument and the market value
of the securities in the Trust's portfolio; (ii) possible lack of a liquid
secondary market for closing out a position in such instruments; (iii) losses
resulting from interest rate or other market movements not anticipated by
BlackRock; and (iv) the obligation to meet additional variation margin or
other payment requirements.

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

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<PAGE>

REVERSE REPURCHASE AGREEMENTS

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

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

LENDING OF SECURITIES

The Trust may lend its portfolio securities to banks or dealers which meet the
creditworthiness standards established by the Board of Trustees of the Trust
("Qualified Institutions"). By lending its portfolio securities, the Trust
attempts to increase its income through the receipt of interest on the loan.
Any gain or loss in the market price of the securities loaned that may occur
during the term of the loan will be for the account of the Trust. The Trust
may lend its portfolio securities so long as the terms and the structure of
such loans are not inconsistent with requirements of the Investment Company
Act, which currently require that (i) the borrower pledge and maintain with
the Trust collateral consisting of cash, a letter of credit issued by a
domestic U.S. bank, or securities issued or guaranteed by the U.S. government
having a value at all times not less than 100% of the value of the securities
loaned, (ii) the borrower add to such collateral whenever the price of the
securities loaned rises (i.e., the value of the loan is "marked to the market"
on a daily basis), (iii) the loan be made subject to termination by the Trust
at any time and (iv) the Trust receive reasonable interest on the loan (which
may include the Trust's investing any cash collateral in interest bearing
short term investments), any distributions on the loaned securities and any
increase in their market value. The Trust will not lend portfolio securities
if, as a result, the aggregate of such loans exceeds 33 1/3% of the value of
the Trust's total assets (including such loans). Loan arrangements made by the
Trust will comply with all other applicable regulatory requirements, including
the rules of the New York Stock

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<PAGE>

Exchange, which rules presently require the borrower, after notice, to
redeliver the securities within the normal settlement time of five business
days. All relevant facts and circumstances, including the creditworthiness of
the Qualified Institution, will be monitored by BlackRock, and will be
considered in making decisions with respect to lending securities, subject to
review by the Trust's Board of Trustees.

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

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES

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

Securities purchased on a forward commitment or when-issued basis are subject
to changes in value (generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and
changes, actual or anticipated, in the level of interest rates. Securities
purchased with a forward commitment or when-issued basis may expose the Trust
to risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risks that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction
itself. Purchasing securities on a forward commitment or when-issued basis
when the Trust is fully invested may result in greater potential fluctuation
in the value of the Trust's net assets and its net asset value per share.

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ILLIQUID SECURITIES

When purchasing securities that have not been registered under the Securities
Act, and are not readily marketable, the Trust will endeavor, to the extent
practicable, to obtain the right to registration at the expense of the issuer.
Generally, there will be a lapse of time between the Trust's decision to sell
any such security and the registration of the security permitting sale. During
any such period, the price of the securities will be subject to market
fluctuations. In addition, the Trust may not be able to readily dispose of
such securities at prices that approximate those at which the Trust could sell
such securities if they were more widely traded and, as a result of such
illiquidity, the Trust may have to sell other investments or engage in
borrowing transactions if necessary to raise cash to meet its obligations.

The Trust may purchase certain securities eligible for resale to qualified
institutional buyers as contemplated by Rule 144A under the Securities Act
("Rule 144A Securities"). Rule 144A provides an exemption from the
registration requirements of the Securities Act for the resale of certain
restricted securities to certain qualified institutional buyers. One effect of
Rule 144A is that certain restricted securities may be considered liquid,
though no assurance can be given that a liquid market for Rule 144A Securities
will develop or be maintained. However, where a substantial market of
qualified institutional buyers has developed for certain unregistered
securities purchased by the Trust pursuant to Rule 144A under the Securities
Act, the Trust intends to treat such securities as liquid securities in
accordance with procedures approved by the Trust's Board of Trustees. Because
it is not possible to predict with assurance how the market for Rule 144A
Securities will develop, the Trust's Board of Trustees has directed BlackRock
to monitor carefully the Trust's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that, for a period
of time, qualified institutional buyers cease purchasing restricted securities
pursuant to Rule 144A, the Trust's investing in such securities may have the
effect of increasing the level of illiquidity in its investment portfolio
during such period.

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RISK FACTORS AND SPECIAL CONSIDERATIONS

You should carefully consider your ability to assume the following risks
before investing in the Shares of the Trust. An investment in the Shares may
not be suitable for all investors. The Trust's strategies may result in an
above average amount of risk and volatility or loss of principal, and
therefore, may increase the risk of loss of your investment in the Trust in
comparison to the risk of loss of your investment in The BlackRock 1998 Term
Trust or other BlackRock closed-end funds. Therefore, this type of investment
may be inappropriate for your risk tolerance. Please consult your broker or
financial adviser to determine whether an investment in the Trust is
appropriate for you. You should not consider an investment in the Shares as a
complete investment program.

GENERAL. As a newly-organized fund, the Trust has no operating history. The
Shares are designed primarily for investors who plan to invest and hold their
investment for the long term. Therefore, you should not consider the Shares as
a vehicle for trading purposes. The net asset value of the Shares will
fluctuate with changes in interest rates, as well as with changes in the
prices of the securities owned by the Trust. These fluctuations are likely to
be greater when the Trust is using financial leverage.

LOWER-GRADE SECURITIES. As a "high yield fund," the majority of the Trust's
assets will be invested in high-risk, high yield securities of lower grade
quality, which are commonly referred to as "junk bonds." With its portfolio
consisting predominantly of lower grade securities, the Trust is exposed to
greater risks than a fund that owns higher grade securities. Because of the
substantial risks associated with lower grade securities, you could lose money
on your investment in Shares of the Trust, both in the short-term and the
long-term. Here are some risks you should consider.

. CREDIT RISK. Credit risk refers to an issuer's ability to make payments of
principal and interest when they are due. Because the Trust will own
securities with low credit quality, it will be subject to a high level of
credit risk. The credit quality of such securities is considered speculative
by rating agencies with respect to the issuer's ability to pay interest or
principal. The prices of lower grade securities are more sensitive to
negative corporate developments, such as a decline in profits, or adverse
economic conditions, such as a recession, than are the prices of higher
grade securities. Securities that have longer maturities or that do not make
regular interest payments also fluctuate more in price in response to
negative corporate or economic news. Therefore, lower grade securities may
experience high default rates, which would mean that the Trust may lose some
of its investment in such securities, which would adversely affect the
Trust's net asset value and ability to make distributions. The effects of
this default risk are significantly greater for the holders of lower grade
securities because these securities often are unsecured and subordinated to
the payment rights of other creditors of the issuer.

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fund investing solely in shorter-term securities. Market risk is often
greater among certain types of income securities, such as zero-coupon bonds,
which do not make regular interest payments. As interest rates change, these
bonds often fluctuate in price more than higher quality bonds that make
regular interest payments. Because the Trust may invest in these types of
income securities, it may be subject to greater market risk than a fund that
invests only in current interest paying securities.

. INCOME RISK. The income investors receive from the Trust is based primarily
on the interest it earns from its investments, which can vary widely over
the short and long-term. If interest rates drop, investors' income from the
Trust over time could drop as well if the Trust purchases securities with
lower interest coupons.

. CALL RISK. If interest rates fall, it is possible that issuers of callable
bonds with high interest coupons will "call" (or prepay) their bonds before
their maturity date. If a call were exercised by the issuer during a period
of declining interest rates, the Trust is likely to have to replace such
called security with a lower yielding security. If that were to happen, it
would decrease the Trust's net investment income.

. LIQUIDITY RISK. The Trust may invest in securities for which there is no
readily available trading market or which are otherwise illiquid. The Trust
may not be able to readily dispose of such securities at prices that
approximate those at which the Trust could sell such securities if they were
more widely traded and, as a result of such illiquidity, the Trust may have
to sell other investments or engage in borrowing transactions if necessary
to raise cash to meet its obligations. In addition, the limited liquidity
could affect the market price of the securities, thereby adversely affecting
the Trust's net asset value and ability to make dividend distributions.

BANK LOANS. The Trust may invest up to 25% of its total assets in Bank Loans.
As in the case of junk bonds, Bank Loans may be rated in lower grade rating
categories or may be unrated, but of lower grade quality. As in the case of
junk bonds, Bank Loans can provide higher yields than higher grade income
securities, but are subject to greater credit and other risks. Although Bank
Loan obligations often are secured by pledges of assets by the borrower and
have other structural aspects intended to provide greater protection to the
holders of Bank Loans than the holders of unsecured and subordinated
securities, there are also additional risks in holding Bank Loans. In
particular, the secondary trading market for Bank Loans is not well developed,
and therefore, Bank Loans present increased market risk relating to liquidity
and pricing concerns. In addition, there is also no assurance that the
liquidation of the collateral would satisfy the claims of the Borrower's
obligations in the event of the nonpayment of scheduled interest or principal,
or that the collateral could be readily liquidated. As a result, the Trust
might not receive payments to which it is entitled and thereby may experience
a decline in the value of its investment and its net asset value.

MEZZANINE INVESTMENTS. The Trust may invest up to 15% of its total assets in
Mezzanine Investments. Mezzanine Investments are typically subordinated debt
securities, are often unsecured by any collateral and are often accompanied by
warrants, options and other rights to purchase equity of the issuer. The
issuer's ability to repay a Mezzanine Investment often depends on the issuer's
ability to "refinance" or replace the Mezzanine Investment with another income
security. Issuers of Mezzanine Investments often are highly leveraged and may
have difficulty in refinancing. Therefore, Mezzanine Investments may
experience high default rates, which would mean that the Trust may lose

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money on its Mezzanine Investments, which would adversely affect the Trust's
net asset value and level of distributions. The rights to purchase equity
involve additional risks. The purchase of rights or warrants involves the risk
that the Trust could lose the purchase value of a right or warrant if the
right to subscribe to additional shares is not exercised prior to the rights'
and warrants' expiration and the effective price paid for the right or warrant
added to the subscription price of the related security may exceed the value
of the underlying security.

COLLATERALIZED BOND OBLIGATIONS. The Trust may invest up to 15% of its total
assets in collateralized bond obligations (or "CBOs"). Income from the pool of
lower grade securities collateralizing the obligations is typically separated
into tranches representing different degrees of credit quality. The top
tranche of CBOs, which represents the highest credit quality in the pool, has
the greatest collateralization and pays the lowest interest rate. Lower CBO
tranches represent lower degrees of credit quality and pay higher interest
rates to compensate for the attendant risks. The bottom tranche specifically
receives the residual interest payments (i.e., money that is left over after
the higher tiers have been paid) rather than a fixed interest rate. The return
on the lower tranches of CBOs are especially sensitive to the rate of defaults
in the collateral pool, which increases the risk of the Trust losing its
investment placed in lower CBO tranches.

DISTRESSED SECURITIES. The Trust may invest up to 10% of its total assets in
Distressed Securities. Investment in Distressed Securities is speculative and
involves significant risk, including possible loss of the principal invested.
Although in current market conditions the Trust expects that it will invest in
Distressed Securities that are producing current income, at times Distressed
Securities may not produce current income and may require the Trust to bear
certain extraordinary expenses in order to protect and recover its investment.
To the extent the Trust pursues its secondary objective of capital
appreciation through investment in Distressed Securities that do not produce
current income, the Trust will generally be less able to achieve current
income for its Shareholders.

MORTGAGE-RELATED AND ASSET-BACKED SECURITIES. Although the Trust may invest in
residential and commercial Mortgage-Related and other Asset-Backed Securities
issued by governmental entities and private issuers, the Trust expects that
most of such investments will be limited to commercial mortgage-backed
securities (which are referred to as "CMBS"), in which the Trust will not
invest more than 15% of its total assets. These securities entail considerable
risk, i.e., credit risk, market risk, prepayment risk and interest rate risk.

Risks Associated with Mortgage-Related Securities. The risks associated with
Mortgage-Related Securities include:

. credit risks associated with the performance of the underlying mortgage
properties and of the borrowers owning these properties;

. adverse changes in economic conditions and circumstances, which are more
likely to have an adverse impact on Mortgage-Related Securities secured
by loans on certain types of commercial properties than on those secured
by loans on residential properties;

. prepayment risk, which can lead to significant fluctuations in value of
the mortgage-related security; and

. loss of all or part of the premium, if any, paid if there is a decline
in the market value of the security, whether resulting from changes in
interest rates or prepayments on the underlying mortgage collateral.

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Prepayment Risks. The yield and maturity characteristics of Mortgage-Related
Securities and other Asset-Backed Securities differ from traditional debt
securities. A major difference is that the principal amount of the obligations
may normally be prepaid at any time because the underlying assets (i.e.,
loans) generally may be prepaid at any time, although there may be limitations
on prepayments in CMBS. In calculating the average weighted maturity of the
Trust, the maturity of Mortgage-Related and other Asset-Backed Securities held
by the Trust will be based on estimates of average life which take prepayments
into account. These estimates, however, may not accurately predict actual
prepayment rates. Prepayment risks include the following:

. The relationship between prepayments and interest rates may give some lower
grade Mortgage-Related and Asset-Backed Securities less potential for growth
in value than conventional bonds with comparable maturities;

. In addition, when interest rates fall, the rate of prepayments tends to
increase. During such periods, the reinvestment of prepayment proceeds by
the Trust will generally be at lower rates than the rates that were carried
by the obligations that have been prepaid;

. Because of these and other reasons, a Mortgage-Related or Asset-Backed
Security's total return and maturity may be difficult to predict; and

. To the extent that the Trust purchases Mortgage-Related or Asset-Backed
Securities at a premium, prepayments may result in loss of the Trust's
principal investment to the extent of premium paid.

Risks Associated with CMBS. The Trust's investments in CMBS will typically
consist of CMBS that are subordinated to more senior classes of such
securities ("Subordinated CMBS"). Assets underlying CMBS may relate to only a
few properties or to a single property. Because the commercial mortgage loans
that back a CMBS are generally not amortizing or not fully amortizing, at
their maturity date repayment of the remaining principal balance or "balloon"
is due and usually must be repaid through the attainment of an additional loan
or sale of the property. If the commercial borrower is unable to refinance or
attain an additional loan or the property is sold at below the remaining
principal amount of the mortgage, the result could be a decline in the value,
and thus the price, of the related CMBS (which decline could be greater in the
case of a Subordinated CMBS).

CMBS generally are structured to protect the senior class investors against
potential losses on the underlying mortgage loans. This is generally provided
by having the Subordinated CMBS take the first loss on any defaults on the
underlying commercial mortgage loans. In general, Subordinated CMBS are
entitled to receive repayment of principal only after all required principal
payments have been made to more senior classes and have subordinate rights as
to receipt of interest distributions. Such Subordinated CMBS are subject to a
substantially greater risk of nonpayment than are senior classes of CMBS. Even
within a class of subordinated securities, most CMBS are structured with a
hierarchy of levels (or "loss positions"). Loss positions are the order in
which non-recoverable losses of principal are applied to the securities within
a given structure.

Risks Associated with Non-Mortgage Asset-Backed Securities. Non-mortgage
Asset-Backed Securities involve certain risks in addition to those presented
by Mortgage-Related Securities.

. primarily, these securities do not have the benefit of the same security
interest in the underlying collateral and are more dependent on the
borrower's ability to pay;

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. credit card receivables are generally unsecured, and the debtors are
entitled to the protection of a number of state and Federal consumer
credit laws, many of which give debtors the right to set off certain
amounts owed on the credit cards, thereby reducing the balance due; and

. most issuers of automobile receivables permit the servicers to retain
possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser
would acquire an interest superior to that of the holders of the related
automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under
state laws, the trustee for the holders of the automobile receivables
may not have an effective security interest in all of the obligations
backing such receivables. There is a possibility that recoveries on
repossessed collateral may not, in some cases, be able to support
payments on these securities.

FOREIGN SECURITIES. The Trust may invest up to 35% of its total assets in debt
securities of non-U.S. issuers or that are denominated in various foreign
currencies or multinational currency units ("Foreign Securities"). The Trust's
investment in Foreign Securities may include debt securities issued by foreign
governments and other sovereign entities and debt securities issued by foreign
corporations. Typically, the Trust will not hold any Foreign Securities of
issuers in so-called "emerging markets" (or lesser developed countries), and
in any case the Trust will not invest more than 10% of its total assets in
such securities. Investments in such securities are particularly speculative.

Investing in Foreign Securities involves certain risks not involved in
domestic investments, including, but not limited to:

. fluctuations in foreign exchange rates

. future foreign economic, financial, political and social developments

. different legal systems

. the possible imposition of exchange controls or other foreign
governmental laws or restrictions

. lower trading volume

. much greater price volatility and illiquidity of certain foreign
securities markets

. different trading and settlement practices

. less governmental supervision

. regulation changes in currency exchange rates

. high and volatile rates of inflation

. fluctuating interest rates

. less publicly available information

. different accounting, auditing and financial record-keeping standards
and requirements.

Investments in foreign sovereign debt securities, especially in emerging
market countries, will expose the Trust to the direct or indirect consequences
of political, social or economic changes in the countries that issue the
securities or in which the issuers are located. Certain countries in which the
Trust may invest, especially emerging market countries, have historically
experienced, and may continue to experience, high rates of inflation, high
interest rates, exchange rate fluctuations, large amounts of

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external debt, balance of payments and trade difficulties and extreme poverty
and unemployment. Many of these countries are also characterized by political
uncertainty and instability. The cost of servicing external debt will
generally be adversely affected by rising international interest rates because
many external debt obligations bear interest at rates which are adjusted based
upon international interest rates. In addition, with respect to certain
foreign countries, there is a risk of:

. the possibility of expropriation of assets

. confiscatory taxation

. difficulty in obtaining or enforcing a court judgment

. economic, political or social instability

. diplomatic developments that could affect investments in those
countries.

Because the Trust may invest in securities denominated or quoted in currencies
other than the U.S. dollar, changes in foreign currency exchange rates may
affect the value of securities in the Trust and the unrealized appreciation or
depreciation of investments. Currencies of certain countries may be volatile
and therefore may affect the value of securities denominated in such
currencies, which means that the Trust's net asset value could decline as a
result of changes in the exchange rates between foreign currencies and the
U.S. dollar. These risks often are heightened for investments in smaller,
emerging capital markets. In addition, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as:

. growth of gross domestic product

. rates of inflation

. capital reinvestment

. resources

. self-sufficiency

. balance of payments position

. certain investments in Foreign Securities also may be subject to foreign
withholding taxes.

On January 1, 1999, eleven countries in the European Monetary Union will adopt
the euro as their official currency. However, their current currencies (for
example, the franc, the mark, and the lire) will also continue in use until
January 1, 2002. After that date, it is expected that only the euro will be
used in those eleven countries. A common currency is expected to confer some
benefits in those markets, by consolidating the government debt market for
those countries and reducing some currency risks and costs. But the conversion
to the new currency may affect the Trust operationally and also has potential
risks, some of which are listed below. Among other things, the conversion may
affect:

. issuers in which the Trust invests, because of changes in the
competitive environment from a consolidated currency market and greater
operational costs from converting to the new currency. This may depress
stock values;

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. vendors the Trust depends on to carry out its business, such as its
Custodian (which holds the foreign securities the Trust buys), BlackRock
(which must price the Trust's investments to deal with the conversion to
the euro) and brokers, foreign markets and securities depositories. If
they are not prepared, there could be delays in settlements and
additional costs to the Trust; and

. exchange contracts and derivatives that are outstanding during the
transition to the euro. The lack of currency rate calculations between
the affected currencies and the need to update the Trust's contracts
could pose extra costs to the Trust.

BlackRock will monitor the effects of the conversion on the issuers in which
the Trust invests. The possible effect of these factors on the Trust's
investments cannot be determined with certainty at this time, but they may
reduce or increase the value of some of the Trust's holdings and its
operational costs.

Investing in securities of companies in emerging markets may entail special
risks relating to potential political and economic instability and the risks
of expropriation, nationalization, confiscation or the imposition of
restrictions on foreign investment, convertibility of currencies into U.S.
dollars, the lack of hedging instruments, and on repatriation of capital
invested. Emerging securities markets are substantially smaller, less
developed, less liquid and more volatile than the major securities markets.
The limited size of emerging securities markets and limited trading value
compared to the volume of trading in U.S. securities could cause prices to be
erratic for reasons apart from factors that affect the quality of the
securities. For example, limited market size may cause prices to be unduly
influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of portfolio securities, especially in these
markets. In addition, securities traded in certain emerging markets may be
subject to risks due to the inexperience of financial intermediaries, a lack
of modern technology, the lack of a sufficient capital base to expand business
operations, and the possibility of temporary or permanent termination of
trading. Settlement mechanisms in emerging securities markets may be less
efficient and reliable than in more developed markets. Many emerging market
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates and corresponding currency devaluations have had and may
continue to have negative effects on the economies and securities markets of
certain emerging market countries. Typically, the Trust will not hold any
Foreign Securities of emerging market issuers, and, if it does, such
securities will not comprise more than 10% of the Trust's total assets.

As a result of these potential risks, BlackRock may determine that,
notwithstanding otherwise favorable investment criteria, it may not be
practicable or appropriate to invest in a particular country. The Trust may
invest in countries in which foreign investors, including BlackRock, have had
no or limited prior experience.

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the cost of leverage, the return to the Trust will be less than if leverage
had not been used. There is no assurance that a leveraging strategy will be
successful. Leverage involves risks and special considerations for
Shareholders including:

. the likelihood of greater volatility of net asset value and market price
of the Shares than a comparable portfolio without leverage;

. the risk that fluctuations in interest rates on borrowings and short
term debt or in the dividend rates on any preferred stock that the Trust
must pay will reduce the return to the Shareholders;

. the effect of leverage in a declining market, which is likely to cause
greater decline in the net asset value of the Shares than if the Trust
were not leveraged, which may result in a greater decline in the market
price of the Shares; and

. when the Trust uses financial leverage, the investment advisory fees
payable to BlackRock Advisors, Inc. will be higher than if the Trust did
not use leverage. See "Management of the Trust."

Any requirement that the Trust sell assets at a loss, in order to redeem or
pay any leverage, or for other reasons would reduce the Trust's net asset
value and also make it difficult for the net asset value to recover. BlackRock
in its best judgment nevertheless may determine to continue to use leverage if
it expects that the benefits to the Trust's Shareholders of maintaining the
leveraged position will outweigh the current reduced return.

Certain types of borrowings by the Trust may result in the Trust being subject
to covenants in credit agreements relating to asset coverage and Trust
composition requirements. The Trust may be subject to certain restrictions on
investments imposed by guidelines of one or more Rating Agencies, which may
issue ratings for the short-term corporate debt securities or preferred stock
issued by the Trust. These guidelines may impose asset coverage or Trust
composition requirements that are more stringent than those imposed by the
Investment Company Act. BlackRock does not believe that these covenants or
guidelines will impede BlackRock from managing the Trust's portfolio in
accordance with the Trust's investment objectives and policies. The Trust may
borrow from affiliates of BlackRock, provided that the terms of such
borrowings are no less favorable than those available from comparable sources
of funds in the marketplace.

OTHER INVESTMENT MANAGEMENT TECHNIQUES. The Trust may use various other
investment management techniques that also involve certain risks and special
considerations, including engaging in hedging and risk management transactions
(which we refer to as "Strategic Transactions") including interest rate and
foreign currency transactions, options, futures, swaps and other derivatives
transactions. Strategic Transactions will be entered into to seek to manage
the risks of the Trust's portfolio of securities, but may have the effect of
limiting the gains from favorable market movements. Strategic Transactions
involve risks, including (i) that the loss on the Strategic Transaction
position may be larger than the gain in the portfolio position being hedged
and (ii) that the derivative instruments used in Strategic Transactions may
not be liquid and may require the Trust to pay additional amounts of money.
Successful use of Strategic Transactions depends on BlackRock's ability

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to predict correctly market movements which, of course, cannot be assured.
Losses on Strategic Transactions may reduce the Trust's net asset value and
its ability to pay dividends if they are not offset by gains on the portfolio
positions being hedged. The Trust may also lend the securities it owns to
others, which allows the Trust the opportunity to earn additional income.
Although the Trust will require the borrower of the securities to post
collateral for the loan and the terms of the loan will require that the Trust
be able to reacquire the loaned securities if certain events occur, the Trust
is still subject to the risk that the borrower of the securities may default,
which could result in the Trust losing money, which would result in a decline
in the Trust's net asset value. The Trust may also purchase securities for
delayed settlement. This means that the Trust is generally obligated to
purchase the securities at a future date for a set purchase price, regardless
of whether the value of the securities is more or less than the purchase price
at the time of settlement.

MARKET PRICE, DISCOUNT AND NET ASSET VALUE OF SHARES. Whether investors will
realize gains or losses upon the sale of Shares will not depend directly upon
the Trust's net asset value, but will depend upon the market price of the
Shares at the time of sale. Since the market price of the Shares will be
affected by such factors as the relative demand for and supply of the Shares
in the market, general market and economic conditions and other factors beyond
the control of the Trust, the Trust cannot predict whether the Shares will
trade at, below or above net asset value or at, below or above the public
offering price. Shares of closed-end funds often trade at a discount to their
net asset values and the Trust's Shares may trade at such a discount. This
risk may be greater for investors expecting to sell their Shares of the Trust
soon after completion of the public offering. The Shares are designed
primarily for long-term investors, and investors in the Shares should not view
the Trust as a vehicle for trading purposes. See "Description of Shares."

ANTI-TAKEOVER PROVISIONS. The Trust's Agreement and Declaration of Trust (the
"Trust Agreement") contains provisions limiting (i) the ability of other
entities or persons to acquire control of the Trust, (ii) the Trust's freedom
to engage in certain transactions, and (iii) the ability of the Trust's Board
of Trustees or Shareholders to amend the Trust Agreement. These provisions of
the Trust Agreement may be regarded as "anti-takeover" provisions. These
provisions could have the effect of depriving the Shareholders of
opportunities to sell their shares at a premium over prevailing market prices
by discouraging a third party from seeking to obtain control of the Trust in a
tender offer or similar transaction. See "Investment Objectives and Policies"
and "Description of Shares."

YEAR 2000 RISKS. Like other investment companies, financial and business
organizations and individuals around the world, the Trust could be adversely
affected if the computer systems used by BlackRock and the Trust's other
service providers do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 Issue." BlackRock is taking steps to address the Year 2000
Issue with respect to the computer systems that it uses and to obtain
assurances that comparable steps are being taken by the Trust's other major
service providers. At this time, however, we cannot give any assurance that
these steps will be sufficient to avoid any adverse impact on the Trust.

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INVESTMENT RESTRICTIONS

The Trust has adopted the following investment restrictions as fundamental
policies, which cannot be changed without approval by the holders of a
majority of the Trust's outstanding voting shares (as defined in the
Investment Company Act). All other investment policies of the Trust are
considered non-fundamental and may be changed by the Board of Trustees of the
Trust without prior approval of the Trust's outstanding voting shares. The
Trust may not:

. Purchase any security if as a result 25% or more of the total assets of the
Trust would be invested in the securities of issuers having their principal
business activities in the same industry, provided that there shall be no
such limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities;

. Purchase commodities or commodity contracts, except that the Trust may
purchase and sell options, futures contracts and options thereon and may
engage in interest rate and foreign currency transactions;

. Purchase, hold or deal in real estate, or oil, gas or other mineral leases
or exploration or development programs, except that the Trust may purchase
and sell securities that are secured by, or issued by companies that invest
or deal in, real estate, oil, gas or other minerals, or interests therein;

. Issue senior securities or borrow money, except as permitted by the
Investment Company Act;

. Make loans to others, except through the purchase of debt obligations
(including Bank Loans) and the entry into repurchase agreements. However,
the Trust may lend its portfolio securities in an amount not to exceed 33
1/3% of the value of its total assets. Any loans of portfolio securities
will be made according to guidelines established by the SEC and the Trust's
Board of Trustees;

. Act as an underwriter of securities of other issuers, except to the extent
the Trust may be deemed an underwriter under the Securities Act, by virtue
of its purchase or sale of portfolio securities;

. Invest in the securities of a company for the purpose of exercising
management or control, but the Trust will vote the securities it owns in
its portfolio as a shareholder or otherwise exercise its rights in
accordance with the terms of the securities in accordance with its views;

. Pledge, mortgage or hypothecate its assets, except to the extent necessary
to secure permitted borrowings and to the extent related to the purchase of
securities on a when-issued or forward commitment basis and the deposit of
assets in escrow in connection with writing covered put and call options
and collateral and initial or variation margin arrangements with respect to
options, forward contracts, futures contracts, options on futures
contracts, swaps, caps, collars and floors; and

. Purchase securities of other investment companies, except to the extent
permitted under the Investment Company Act.

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<PAGE>

TERMS OF THE OFFERING

GENERAL. In connection with the scheduled liquidation of The BlackRock 1998
Term Trust Inc. ("BBT") on or about December 31, 1998, the Trust is offering
to the holders of record of common shares of BBT (the "BBT Shares") as of the
close of business on November 12, 1998 (the "Record Date") the right to
request to subscribe for Shares of the Trust. BlackRock Advisors, Inc. or one
of its affiliates (not the Trust or its investors) will pay the sales load or
underwriting commission on the Shares you buy to the Underwriters or other
broker-dealers and financial institutions participating in the Offering
("Participating Institutions") equal to 4.5% of the Subscription Price per
Share. See "Underwriting." As described below under "--Liquidation of BBT,"
Record Date holders of BBT Shares who exercise their right to request to
subscribe for Shares may direct that all or a portion of their Liquidating
Distribution be credited to the account through which they will purchase the
Shares. The Trust is also offering the right to request to subscribe for
Shares to Record Date holders of common shares of the other closed-end funds
for which BlackRock acts as investment adviser. These BlackRock closed-end
funds and BBT are collectively referred to as "BlackRock Trusts." Record Date
holders of common shares (the "BlackRock Trust Shares") of the BlackRock
Trusts are referred to as the "Eligible Shareholders." If you do not subscribe
for Shares of the Trust, you will still receive your Liquidation Distribution.
The Trust is also offering the opportunity to request to subscribe for Shares
of the Trust at the Subscription Price to employees of BlackRock and its
affiliates and existing customers of PNC Brokerage as of the Record Date.

SUBSCRIPTION PRIVILEGE OF ELIGIBLE SHAREHOLDERS. Eligible Shareholders may
request to subscribe for Shares at a rate of one Share for each BlackRock
Trust Share held on the Record Date (the "Subscription Privilege") and may
also request to subscribe for any number of additional Shares. These
procedures through which Eligible Shareholders may request to subscribe for
Shares are described below under "--Methods of Subscription." Eligible
Shareholders should carefully read this Prospectus, including the section
titled "Risk Factors and Special Considerations," and should consult with
their broker to determine whether the Shares are a suitable investment for
your risk tolerance.

SUBSCRIPTION PRICE; MINIMUM PURCHASE. The Subscription Price for the Shares is
$15.00 per Share. BlackRock Advisors, Inc. or an affiliate (not the Trust or
its investors) will pay the sales load or underwriting commission from its own
assets to the Underwriters and Participating Institutions in connection with
sales of Shares. See "Underwriting." The minimum purchase is 100 shares (or
$1,500). Eligible Shareholders who hold any number of any BlackRock Trust
Shares may request to purchase 100 Shares pursuant to the Subscription
Privilege and may request to subscribe for additional Shares, regardless of
the number of BlackRock Trust Shares held by such Eligible Shareholder.

MINIMUM OFFERING AMOUNT. The Board of Trustees of the Trust has determined not
to consummate the Offering unless a sufficient number of orders to purchase
Shares in the Offering (the "Minimum Offering Amount") are received such that
the Board of Trustees determines, in its sole discretion, that the Trust could
commence operations with an approximate expense ratio as estimated in this
Prospectus.

EXPIRATION DATE AND PRICING DATE. Any Record Date Eligible Shareholder that
wishes to request to subscribe for Shares pursuant to the Subscription
Privilege must do so by 5:00 p.m., New York City time, on December 16, 1998
(the "Subscription Privilege Expiration Date"). Exercises of Subscription
Privileges will be processed on December 17, 1998 (the "Pricing Date").

55
<PAGE>

NON-TRANSFERABILITY. The rights to participate in the Subscription Privilege
have no economic or other value and are non-transferable and, therefore, may
not be purchased or sold. The Subscription Privilege is granted to Record Date
Eligible Shareholders, which term, for purposes of the Offering, includes (i)
the person or persons who are the owners, co-owners and beneficiaries of the
account in which the BlackRock Trust Shares are held (collectively, the
"Designated Persons") and (ii) any account (including a trust, Individual
Retirement Account, qualified plan account or other similar arrangement) for
which any Designated Person is directly or indirectly an owner, a co-owner or
a beneficiary.

METHODS OF SUBSCRIPTION. Shares may be purchased in the Offering only through
the Underwriters or other Participating Institutions. See "Underwriting."

. If you hold BlackRock Trust Shares with or through one of the Underwriters
or other Participating Institutions, you may contact your broker or
financial adviser, who may deem this type of investment to be inappropriate
for your risk profile, to request to subscribe for Shares on your behalf.

. If you do not hold BlackRock Trust Shares with or through a broker-dealer
or financial institution that is one of the Underwriters or other
Participating Institutions, you should contact BlackRock at the address and
telephone number listed below to arrange for an account to be established
through which you can purchase the Shares,

BlackRock Financial Management, Inc.
345 Park Avenue
New York, New York 10154
800-227-7BFM (7236)

The Trust's strategies may result in an above average amount of risk and
volatility or loss of principal, and therefore, may increase the risk of loss
of your investment in the Trust in comparison to the risk of loss of your
investment in The BlackRock 1998 Term Trust or other BlackRock closed-end
funds. Please consult your broker or financial adviser to determine whether an
investment in the Trust is appropriate for you.

LIQUIDATION OF BBT. BBT is a diversified, closed-end management investment
company that completed its initial public offering on April 23, 1991 at a
price of $10.00 per share and is listed on the NYSE under the symbol "BBT."
BBT's investment objective is to manage a portfolio of high quality securities
that will return $10.00 per share to investors on or shortly before December
31, 1998, while providing high monthly income. The net asset value per BBT
Share at the close of business on December 17, 1998 was $10.02 and the last
reported sales price of a BBT Share on December 10, 1998 was $10.00. BlackRock
believes that BBT will return $10.00 per share upon liquidation. From its
initial public offering until December 17, 1998, BBT has provided an
annualized total return of 6.48%, assuming all dividends were reinvested in
additional BBT Shares, through the Trust's dividend reinvestment plan.

BBT will liquidate its portfolio of securities and will distribute
substantially all of the cash comprising its net assets (the "Liquidating
Distribution"). If you are a BBT Eligible Shareholder and want to

56
<PAGE>

participate in the Subscription Privilege, you can instruct the State Street
Bank and Trust (the "Subscription Agent") as the agent of BBT in connection
with the Liquidating Distribution, to credit your Liquidating Distribution to
the account of the Underwriter or other Participating Institution through
which you are subscribing for Shares. Although the Liquidating Distribution is
expected to be made before the Settlement Date, each Shareholder is
responsible for payment of the Subscription Price for the Shares to which they
subscribe in the Offering whether or not the Liquidating Distribution is made.
In the event the Offering is not consummated for any reason, BBT Shareholders
who requested to subscribe for Shares will be paid their pro rata portion of
the Liquidating Distribution in accordance with the terms of the plan of
liquidation of BBT. If you do not subscribe for Shares of the Trust, you will
still receive your Liquidation Distribution.

SALE OF SHARES TO THE UNDERWRITERS. On the Expiration Date, the Trust will
sell, and the Underwriters will agree to purchase for distribution, the number
of Shares set forth opposite their names under "Underwriting." The
Underwriters are committed to purchase all of such Shares for distribution if
any such Shares are purchased. The Shares will commence trading on the New
York Stock Exchange under the symbol "BHY" on the business day immediately
following the Pricing Date. It is expected that delivery and payment for the
Shares will take place on the Settlement Date. Confirmations for all Shares
purchased by Eligible Shareholders and clients of the Underwriters and other
Participating Institutions will be sent on or before the Settlement Date.

All questions as to the validity, form, eligibility (including times of
receipt and matters pertaining to beneficial ownership) and other requests to
subscribe for Shares will be determined by the Underwriters which
determinations will be final and binding. The Underwriters reserve the
absolute right to reject any or all requests for subscriptions for Shares not
properly submitted or the acceptance of which would, in the opinion of counsel
for the Underwriters, be unlawful. The Underwriters also reserve the right to
waive any irregularities or conditions, and the interpretations of the
Underwriters of the terms and conditions of the Offering shall be final and
binding. Any irregularities in connection with requests for subscriptions for
Shares must be cured within such time as the Underwriters shall determine
unless waived. None of the Trust, the Underwriters nor the other Participating
Institutions shall be under any duty to give notification of defects in such
requests for subscriptions for Shares or incur any liability for failure to
give such notifications. Requests for subscriptions for Shares will not be
deemed to have been made until such irregularities have been cured or waived.
If you do not subscribe for Shares of the Trust, you will still receive your
Liquidation Distribution.

- -------------------------------------------------------------------------------
IMPORTANT DATES TO REMEMBER

<TABLE>
<S> <C>
Record Date............................................. November 12, 1998
Subscription Period................ November 23, 1998 to December 16, 1998
Final BBT Trading Date.................................. December 10, 1998
Subscription Privilege Expiration Date.................. December 16, 1998
Pricing Date............................................ December 17, 1998
First Trading Date...................................... December 18, 1998
Settlement/Payment Date/1/.............................. December 23, 1998
</TABLE>

/1/ Some Participating Institutions may require payment by investors at a
date prior to the Settlement/Payment Date.
-------------------------------------------------------------------------------

57
<PAGE>

MANAGEMENT OF THE TRUST

BlackRock Advisors, Inc., a global asset management company with approximately
$120 billion of assets under management, will act as the Trust's investment
adviser. BlackRock Advisors, Inc. is a wholly-owned subsidiary of PNC Bank,
N.A. with over 500 employees. BlackRock currently manages the assets of 56
investment companies, including 21 closed-end funds. BlackRock Advisors, Inc.
has entered into a sub-advisory agreement with BlackRock, pursuant to which
the responsibilities of managing the Trust's portfolio on a daily basis have
been delegated to BlackRock. BlackRock was founded in 1988 and has expertise
in the government, mortgage, corporate, asset-backed, municipal, non-dollar
and high yield sectors of the fixed income securities market. BlackRock
currently has approximately $61.1 billion in discretionary fixed income assets
under management invested in a broad array of fixed income products across the
yield curve. BlackRock currently manages approximately $1.2 billion in lower
grade securities, including approximately $735 million in lower grade
corporate securities, including bonds issued by financial, industrial and
utility companies, Yankee bonds, preferred stocks and other income securities.
BlackRock also manages approximately $46.7 billion in cash or other short-
term, highly liquid investments, $11.1 billion of equity securities and $1.2
billion in various alternative investments.

INVESTMENT ADVISORY AGREEMENT

Pursuant to the Investment Advisory Agreement (the "Advisory Agreement"), the
Trust has retained BlackRock Advisors, Inc. to manage the investment of the
Trust's assets and to provide such investment research, advice and
supervision, in conformity with the Trust's investment objective and policies,
as may be necessary for the operations of the Trust.

The Advisory Agreement provides, among other things, that BlackRock Advisors,
Inc. will bear all expenses of its employees and overhead incurred in
connection with its duties under the Advisory Agreement (including the fees
and expenses of BlackRock) and will pay all directors' fees and salaries of
the Trust's trustees and officers who are affiliated persons (as such term is
defined in the Investment Company Act) of BlackRock Advisors, Inc. except that
the Board of Trustees may approve reimbursement for the time spent on Trust
operations of BlackRock Advisors, Inc.'s personnel who spend substantial time
on the operations (other than the provision of investment advice) of the Trust
or other investment companies advised by BlackRock Advisors, Inc. The Advisory
Agreement provides that the Trust shall pay to BlackRock Advisors, Inc. a
monthly fee (the "Investment Advisory Fee") for its services at the annual
rate of 1.05% of the Trust's average weekly value of the total assets of the
Trust minus the sum of accrued liabilities (other than the aggregate
indebtedness constituting financial leverage) (the "Managed Assets"). From
such Investment Advisory Fee, BlackRock Advisors, Inc. will pay BlackRock, for
serving as sub-adviser, a fee equal to an annual rate of 0.35% of the average
weekly value of the Trust's Managed Assets.

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

The Advisory Agreement also provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, BlackRock Advisors, Inc. is not liable to the Trust or
any of the Trust's Shareholders for any act or omission by BlackRock Advisors,
Inc.

58
<PAGE>

in the supervision or management of its respective investment activities or
for any loss sustained by the Trust or the Trust's Shareholders and provides
for indemnification by the Trust of BlackRock Advisors, Inc., its directors,
officers, employees, agents and control persons for liabilities incurred by
them in connection with their services to the Trust, subject to certain
limitations and conditions.

The Advisory Agreement was approved by the Trust's Board of Trustees, on
November 12, 1998, including a majority of the Trustees who are not parties to
the agreement or interested persons of any such party (as such term is defined
in the Investment Company Act). The Advisory Agreement will be submitted to
Shareholders for their approval at the first meeting of shareholders of the
Trust. The Advisory Agreement will continue in effect for a period of two
years from its effective date, and if not sooner terminated, will continue in
effect for successive periods of 12 months thereafter, provided that each
continuance is specifically approved at least annually by both (1) the vote of
a majority of the Trust's Board of Trustees or the vote of a majority of the
outstanding voting securities of the Trust (as such term is defined in the
Investment Company Act) and (2) by the vote of a majority of the Trustees, who
are not parties to such Agreement or interested persons (as such term is
defined in the Investment Company Act) of any such party, cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement may be terminated as a whole at any time by the Trust, without the
payment of any penalty, upon the vote of a majority of the Trust's Board of
Trustees or a majority of the outstanding voting securities of the Trust or by
BlackRock Advisors, Inc., on 60 days' written notice by either party to the
other. The Advisory Agreement will terminate automatically in the event of its
assignment (as such term is defined in the Investment Company Act and the
rules thereunder).

SUB-INVESTMENT ADVISORY AGREEMENT

Pursuant to the Sub-Investment Advisory Agreement, BlackRock Advisors, Inc.
has appointed BlackRock, one of its affiliates, to handle the day-to-day
investment management of the Trust. BlackRock will receive a portion of the
advisory fee paid by the Trust to BlackRock Advisors, Inc.

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

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

The Sub-Investment Advisory Agreement was approved by the Trust's Board of
Trustees on November 12, 1998, including a majority of the Trustees who are
not parties to the agreement or interested persons of any such party (as such
term is defined in the Investment Company Act). The Sub-Investment Advisory
Agreement will be submitted to Shareholders for their approval at the first
meeting of Shareholders of the Trust. The Sub-Investment Advisory Agreement
will continue in effect

59
<PAGE>

for a period of two years from its effective date, and if not sooner
terminated, will continue in effect for successive periods of 12 months
thereafter, provided that each continuance is specifically approved at least
annually by both (1) the vote of a majority of the Trust's Board of Trustees
or the vote of a majority of the outstanding voting securities of the Trust
(as such term is defined in the Investment Company Act) and (2) by the vote of
a majority of the Trustees, who are not parties to such Agreement for
interested persons (as such term is defined in the Investment Company Act) of
any such party, cast in person at a meeting called for the purpose of voting
on such approval. The Sub-Investment Advisory Agreement may be terminated as a
whole at any time by the Trust, without the payment of any penalty, upon the
vote of a majority of the Trust's Board of Trustees or a majority of the
outstanding voting securities of the Trust or by BlackRock Advisors, Inc. or
by BlackRock, on 60 days' written notice by either party to the other. The
Sub-Investment Advisory Agreement will terminate automatically in the event of
its assignment (as such term is defined in the Investment Company Act and the
rules thereunder).

PORTFOLIO MANAGEMENT TEAM

ROBERT S. KAPITO, Vice Chairman and Head of the Portfolio Management Group,
has been a member of the Management Committee and the Investment Strategy
Group since March 1988. Mr. Kapito has been responsible for the portfolio
management of the Fixed Income, Domestic Equity and International Equity,
Liquidity, and Alternative Investment Groups of BlackRock since March 1988. In
addition, Mr. Kapito has played a key role in coordinating the efforts of the
analytical and administrative groups with the portfolio management group. He
also has been involved in marketing and managing several of BlackRock's funds.
Since March 1988, Mr. Kapito has served as a Vice President for BlackRock's
family of closed-end mutual funds and for the Smith Barney Adjustable Rate
Government Income Fund. Prior to founding BlackRock in 1988, Mr. Kapito was a
Vice President in the Mortgage Products Group at The First Boston Corporation.
Mr. Kapito joined First Boston in 1979 in the Public Finance Department. Mr.
Kapito left First Boston to complete his MBA degree and returned to the firm
in 1983 in the Mortgage Products Group. While with this Group, Mr. Kapito
initially traded mortgage securities and then became the head trader of
collateralized mortgage obligations (CMOs). Ultimately, Mr. Kapito became head
of Mortgage Capital Markets with responsibility for marketing and pricing all
of the mortgage-backed and asset-backed securities underwritten by First
Boston. In 1982, Mr. Kapito worked as a strategic consultant with Bain & Co.
and with two other private companies in Europe. Mr. Kapito currently serves as
President of the Board of Directors of Periwinkle National Theatre, a national
non-profit effort to help disadvantaged youth, and Chairman of the 1998 Hope &
Heroes/Babies & Children's Cancer Fund. Mr. Kapito earned a BS degree in
economics from the Wharton School of the University of Pennsylvania in 1979
and an MBA degree from Harvard Business School in 1983.

DENNIS SCHANEY, Managing Director of BlackRock and Head of the High Yield
Team. Mr. Schaney has primary responsibility for BlackRock's high yield
efforts. Prior to joining BlackRock in 1998, Mr. Schaney spent nine years with
Merrill Lynch, from 1989-1998, where he was a Managing Director in the firm's
Global Fixed Income Research and Economics Department. During the time Mr.
Schaney managed Merrill's Corporate and Municipal Bond Research Departments,
the group became the top-ranked Fixed Income Research Department according to
industry polls. Mr. Schaney's specific sector specialties included the media,
entertainment, and cable sectors for both the high yield and investment grade
markets for which he was named to Institutional Investor's All American Fixed
Income Team

60
<PAGE>

for five of the last six years. In addition, throughout his career,
Mr. Schaney has covered the Auto, Transportation, Technology and Aerospace
industries. Mr. Schaney began his investment career with Standard & Poor's
from 1983-1985, followed by four years with The First Boston Corporation from
1985-1989; two years as an analyst in the firm's Fixed Income and Research
Department and two years as a Vice President in the firm's Investment Banking
Department. Prior to embarking on an investment career, Mr Schaney worked with
United Technologies from 1980-1983. Mr. Schaney earned a BS degree in finance
from the University of Bridgeport in 1980 and an MS degree in financial
management from Fairfield University in 1995. He is a member of the Fixed
Income Analyst Society.

MICHAEL C. BUCHANAN, CFA, Director of BlackRock. Mr. Buchanan has primary
responsibility for trading and overseeing risk management for the High Yield
Team. Prior to joining BlackRock in 1998, Mr. Buchanan was a Vice President at
Conseco Capital Management ("CCM") from 1990-1998 where he was a portfolio
manager responsible for high yield debt, bank loan and emerging markets debt
trading. He also oversaw investment grade corporate bond trading. At CCM,
Mr. Buchanan managed two high yield mutual Trusts and was involved in the
management and oversight of three high yield debt CBOs and a bank loan CLO.
Prior to assuming trading responsibilities in the high yield debt area, Mr.
Buchanan's previous experience at CCM included credit research on the
aerospace, defense and paper/forest products sectors and convertible
securities trading. Mr. Buchanan graduated from Brown University with a BA in
business economics and organizational behavior/management in 1990. He is a
Chartered Financial Analyst and has been on the Indianapolis Society of
Financial Analysts since 1993.

MARK J. WILLIAMS, Director of BlackRock. Mr. Williams has primary
responsibility for originating and evaluating Bank Loan investments for the
High Yield Team. He is also involved in the evaluation and sourcing of
Mezzanine Investments. Prior to joining BlackRock in 1998, Mr. Williams spent
eight years at PNC Bank's New York Office from 1990-1998 and was co-founder of
the bank's leveraged finance group. In that capacity, he was responsible for
originating and structuring proprietary middle market leveraged deals, along
with sourcing and evaluating broadly syndicated leveraged loans in the primary
and secondary markets for PNC Bank's investment portfolio. Mr. Williams has
developed extensive contacts over the years working with private equity
sponsors and major loan syndication groups. Prior to 1990, he worked in PNC's
Philadelphia Office in a variety of marketing and corporate finance roles from
1983-1990. Mr. Williams obtained a BA in Economics from Franklin and Marshall
College in 1983.

PETER SCHWARTZMAN, Vice President of BlackRock. Mr. Schwartzman is a member of
the High Yield Team and an analyst covering the health care, gaming, retail,
textile and lodging industries. Prior to joining BlackRock in 1998 Mr.
Schwartzman spent over four years with Alliance Capital Management as an
analyst from 1994-1998 covering a broad range of high yield and high grade
companies in the health care, gaming, retail, textile and lodging sectors. In
addition, Mr. Schwartzman has done considerable work on a broad array of
distressed situations in the manufacturing, convenience store, and consumer
produce sectors. During his four years at Alliance, his recommendations
contributed to the high yield portfolio's consistently high level of
performance. Prior to Alliance, Mr. Schwartzman spent four years as an analyst
at Moody's Investors Service in the Tax-Exempt Health Care Group from 1989-
1994. At Moody's, Mr. Schwartzman was responsible for the analysis of
hospitals, health systems and long-term care facilities. During his four years
at Moody's he rated over 100 transactions. Mr. Schwartzman received his MBA in
Finance from New York University--Stern School of Business

61
<PAGE>

in 1991 and his BA from Trinity College in 1988. He is a member of the Fixed
Income Analysis Society and also serves on the Finance Committee of the Board
of Directors of the New York Society of the Deaf.

THE ADMINISTRATION AGREEMENTS

BlackRock and Prudential Investments Fund Management LLC (an affiliate of
Prudential Securities Incorporated, one of the Underwriters) will act as the
Trust's administrators (the "Administrators"). Under the Administration
Agreement with the Trust (the "Administration Agreement"), the Administrators
administer the Trust's corporate affairs subject to the supervision of the
Trust's Board of Trustees and in connection therewith furnish the Trust 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 the Trust when BlackRock Advisors, Inc. determines that
leverage may be in the best interests of the Trust's Shareholders. In
connection with its administration of the corporate affairs of the Trust, 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 the Trust in connection
with administering the ordinary course of the Trust's business, other than
those assumed by the Trust, as described below.

The Administration Agreement provides that the Trust shall pay to each
Administrator a monthly fee for its services at an annual rate of 0.05% of the
Trust's average weekly Managed Assets (as described above).

The Administration Agreement was approved by the Trust's Board of Trustees on
November 12, 1998 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.

EXPENSES OF THE TRUST

Except as indicated above, the Trust will pay all of its expenses, including
fees of the trustees not affiliated with BlackRock Advisors, Inc. and board
meeting expenses; fees of BlackRock Advisors, Inc. and the Administrator;
interest charges; taxes; charges and expenses of the Trust's legal counsel and
independent accountants, and of the transfer agent, registrar and dividend
disbursing agent of the Trust; expenses of repurchasing shares; expenses of
printing and mailing share certificates, shareholder reports, notices, proxy
statements and reports to governmental offices; brokerage and other expenses
connected with negotiating, effecting purchase or sale, or registering
privately issued portfolio securities; fees and expenses of the Custodian for
all services to the Trust, including safekeeping Trusts and securities and
maintaining required books and accounts; expenses in calculating and
publishing the net asset value of the Trust's shares; expenses of membership
in investment company associations; expenses of fidelity bonding and other
insurance expenses including insurance premiums; expenses of shareholders
meetings; SEC and state blue sky registration fees; New York Stock Exchange
listing fees; fees payable to the National Association of Securities Dealers,
Inc. in connection with this

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<PAGE>

offering; and its other business and operating expenses. The Trust will pay
offering expenses of $116,000 ($133,400 if the over-allotment option is
exercised in full), which will be deducted from the total proceeds of the
offering. BlackRock Advisors, Inc. has agreed that it or an affiliate will pay
all organizational expenses of the Trust. BlackRock Advisors, Inc. has agreed
that it or an affiliate will also pay all offering expenses of the Trust that
exceed $0.02 per Share.

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<PAGE>

TRUSTEES AND OFFICERS OF THE TRUST

The officers of the Trust manage its day to day operations. The officers are
directly responsible to the Trust's Board of Trustees which sets broad
policies for the Trust and chooses its officers. The following is a list of
the trustees and officers of the Trust and a brief statement of their present
positions and principal occupations during the past five years. Trustees who
are interested persons of the Trust (as defined in the Investment Company) are
denoted by an asterisk (*). The business address of the Trust, BlackRock
Advisors, Inc., and their Board members and officers is 345 Park Avenue, New
York, New York 10154, unless specified otherwise below. The Trustees listed
below are either trustees or directors of other closed-end funds in which
BlackRock acts as investment adviser.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING THE PAST FIVE
NAME AND ADDRESS TITLE YEARS AND OTHER AFFILIATIONS
---------------- ------- ----------------------------
<C> <C> <S>
Andrew F. Brimmer Trustee President of Brimmer & Company, Inc., a
4400 MacArthur Blvd., Washington, D.C.-based economic and financial
N.W. Suite 302 consulting firm. Director of AirBorne
Washington, DC 20007 Express, CarrAmerica Realty Corporation and
Age: 72 Borg-Warner Automotive. Formerly member of
the Board of Governors of the Federal Reserve
System. Formerly Director of BankAmerica
Corporation (Bank of America), BellSouth
Corporation, College Retirement Equities
Trust (Trustee), Commodity Exchange, Inc.
(Public Governor), Connecticut Mutual Life
Insurance Company, E.I. du Pont de Nemours &
Company, Electronic Realty Associates,
Equitable Life Assurance Society of the
United States, Gannett Company (publishing),
MNC Financial Corporation (American Security
Bank), NMC Capital Management, Navistar
International Corporation (truck
manufacturing) and UAL Corporation (United
Airlines).

Richard E. Cavanagh Trustee President and Chief Executive Officer of The
845 Third Avenue Conference Board, Inc., a leading global
New York, NY 10022 business membership organization from
Age: 52 1995-present. Former Executive Dean of the
John F. Kennedy School of Government at
Harvard University from 1988-1995. Acting
Harvard 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
Services (ETS). Director, Olin Corp.
(chemicals and metals), Fremont Group
(investments) and The Guardian Life Insurance
Company of America (insurance).

Kent Dixon Trustee Consultant/Investor. Former President and
9495 Blind Pass Road Chief Executive Officer of Empire Federal
Unit #602 Savings Bank of America and Banc PLUS Savings
St. Petersburg, FL 33706 Association, former Chairman of the Board,
Age: 61 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>

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<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING THE PAST FIVE
NAME AND ADDRESS TITLE YEARS AND OTHER AFFILIATIONS
---------------- ------- ----------------------------
<C> <C> <S>
Frank J. Fabozzi Trustee Consultant. Editor of THE JOURNAL OF
858 Tower View Circle PORTFOLIO MANAGEMENT and Adjunct Professor
New Hope, PA 18938 of Finance at the School of Management at
Age: 50 Yale University. Director, Guardian Mutual
Trusts Group. Author and editor of several
books on fixed income portfolio
management. Visiting Professor of Finance
and Accounting at the Sloan School of
Management, Massachusetts Institute of
Technology from 1986 to August 1992.

Laurence D. Fink* Trustee Chairman and Chief Executive Officer of
Age: 45 BlackRock Financial Management, Inc. since
March 1998. Formerly a Managing Director
of The First Boston Corporation, member of
its Management Committee, co-head of its
Taxable Fixed Income Division and head of
its Mortgage and Real Estate Products
Group (December 1980-March 1988).
Currently, Chairman of the Board and
Director of each of BlackRock's Trusts and
Anthracite Capital, Inc. and as Director
of BlackRock Trust Investors I, BlackRock
Trust Investors II, BlackRock Trust
Investors III, BlackRock Asset Investors
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 Trustee Consultant/Investor. Director of BlackRock
20500 Civic Center Drive Trust Investors I, BlackRock Trust
Suite 3000 Investors II, BlackRock Trust Investors
Southfield, MI 48076 III, BlackRock Asset Investors and Copart,
Age: 61 Inc. (retail-automobile). Formerly
Chairman of the Board and Chief Executive
Officer of Pulte Corporation (homebuilding
and mortgage banking and finance) from May
1974-April 1990.

James Clayburn LaForce, Jr. Trustee Dean Emeritus of The John E. Anderson
P.O. Box 1595 Graduate School of Management, University
Pauma Valley, CA 92061 of California since July 1, 1993.
Age: 69 Director, Eli Lilly and Company
(pharmaceuticals), Imperial Credit
Industries (mortgage banking), Jacobs
Engineering Group, Inc., Rockwell
International Corporation, Payden & Rygel
Investment Trust (mutual trust), Provident
Investment Counsel Trusts (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.

Walter F. Mondale Trustee Partner, Dorsey & Whitney, a law firm
220 South Sixth Street (December 1996-present, September 1987-
Minneapolis, MN 55402 August 1993). Formerly U.S. Ambassador to
Age: 70 Japan (1993-1996). Formerly Vice President
of the United States, U.S. Senator and
Attorney General of the State of
Minnesota. 1984 Democratic Nominee for
President of the United States.
</TABLE>

65
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING THE PAST FIVE
NAME AND ADDRESS TITLE YEARS AND OTHER AFFILIATIONS
---------------- ------------------- ----------------------------
<C> <C> <S>
Ralph L. Schlosstein* Trustee and President of BlackRock since March
Age: 47 President 1988. Formerly a Managing Director
of Lehman Brothers, Inc. and co-head
of its Mortgage and Savings
Institutional Group. Currently
President of each of the closed-end
funds in which BlackRock acts as
investment adviser. 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.

Dennis Schaney Vice President Managing Director of BlackRock and
Age: 41 Head of the High Yield Team since
February 1998. From June 1989 to
February 1998, Managing Director at
Merrill Lynch in the Global Fixed
Income Research and Economics
Department.

Keith T. Anderson Vice President Managing Director of BlackRock since
Age: 39 April 1988. 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 and Chief
Age: 51 Operating Officer of BlackRock since
February 1989. From September 1984
to February 1989, Vice President at
The First Boston Corporation.

Robert S. Kapito Vice President Managing Director and Vice Chairman
Age: 41 of BlackRock since March 1988.
Formerly Vice President at The First
Boston Corporation in the Mortgage
Products Group (from December 1985
to March 1988).

James Kong Assistant Treasurer Managing Director of BlackRock since
Age: 38 January 1991. 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 BlackRock since
Age: 33 August 1988. 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 BlackRock Advisors,
Inc.

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

The address of each officer of the Trust is 345 Park Avenue, New York, New York
10154.

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

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<PAGE>

No officer or employee of the Trust receives any compensation from the Trust
for serving as an officer or Trustee of the Trust. The Trust pays each Trustee
who is not an "interested person" of the Trust (as defined in the Investment
Company Act) $3,800 per annum. In addition, the Trust pays each Trustee who is
not an "interested person" of the Trust (as defined in the Investment Company
Act) $950 per Board meeting attended, and reimburses each Trustee who is not
an "interested person" of the Trust (as defined in the Investment Company Act)
for travel and out-of-pocket expenses.

The aggregate estimated compensation received by each current Trustee of the
Trust for the fiscal year ending October 31, 1999 and the aggregate estimated
compensation received by each current Trustee of the BlackRock Family of Funds
for the fiscal year ending October 31, 1999 as a whole were as follows:

<TABLE>
<CAPTION>
1999 ESTIMATED
AGGREGATE ESTIMATED TOTAL COMPENSATION FROM THE
COMPENSATION TRUST AND FUND COMPLEX
NAME OF BOARD MEMBER FROM TRUST PAID TO BOARD MEMBER*
- -------------------- -------------- -------------------------------------
<S> <C> <C>
Andrew R. Brimmer........ $7,600 $160,000
Richard E. Cavanagh...... $7,600 $160,000
Kent Dixon............... $7,600 $160,000
Frank J. Fabozzi......... $7,600 $160,000
Laurence D. Fink......... $ 0 $ 0
James Grosfeld........... $7,600 $160,000
James Clayborne LaForce,
Jr. .................... $7,600 $160,000
Ralph L. Schlosstein..... $ 0 $ 0
Walter F. Mondale........ $7,600 $140,000
</TABLE>
- --------
* The BlackRock Family of Funds consists of 21 closed-end funds. Total
compensation from Trust and Fund complex paid to each Board member is capped
at $160,000.

PORTFOLIO TRANSACTIONS

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

BlackRock is responsible for effecting securities transactions of the Trust
and will do so in a manner deemed fair and reasonable to Shareholders of the
Trust and not according to any formula. BlackRock's primary considerations in
selecting the manner of executing securities transactions for the Trust will
be prompt execution of orders, the size and breadth of the market for the
security, the reliability, integrity and financial condition and execution
capability of the firm, the size of and difficulty in executing the order, and
the best net price. There may be many instances when, in the judgment of
BlackRock, more than one firm can offer comparable execution services. In
selecting

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<PAGE>

among such firms, consideration will be given to those firms which supply
research and other services in addition to execution services. However, it is
not the policy of BlackRock, absent special circumstances, to pay higher
commissions to a firm because it has supplied such services.

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

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

Although the Advisory Agreement contains no restrictions on portfolio
turnover, under normal market conditions, it is not the Trust's policy to
engage in transactions with the objective of seeking profits from short term
trading. The portfolio turnover rate is expected to vary from year to year.
BlackRock will monitor the Trust's tax status under the Code during periods in
which the Trust's annual turnover rate exceeds 100%. Higher portfolio turnover
(100% or more) results in increased Trust expenses, including brokerage
commissions, dealer mark-ups and other transaction costs on the sale of
securities and on the reinvestment in other securities. To the extent that
increased portfolio turnover results in sales at a profit of securities held
less than three months, the Trust's ability to qualify as a "regulated
investment company" under the Code may be affected.

DETERMINATION OF NET ASSET VALUE

The Trust's investments are valued after the close of business on the New York
Stock Exchange no less frequently than Thursday of each week (except where
such Thursday is not a business day, in which case the first business day
immediately preceding such Thursday) and the last business day of each month,
using available market quotations or at fair value. Substantially all of the
Trust's fixed-income investments (excluding short term investments) are valued
by one or more independent pricing services (the "Service") approved by the
Board of Trustees. Securities valued by the Service for which quoted bid
prices in the judgment of the Service are readily available and are
representative of the bid side of the market are valued at the mean between
the quoted bid prices (as obtained by the

68
<PAGE>

Service from dealers in such securities) and asked prices (as calculated by
the Service based upon its evaluation of the market for such securities).
Other investments valued by the Service are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Short term investments are not valued by the Service and are valued at the
mean price or yield equivalent for such securities or for securities of
comparable maturity, quality and type as obtained from market makers. Other
investments that are not valued by the Service are valued at the last sales
price for securities traded primarily on an exchange or the national
securities market or otherwise at the average of the most recent bid and asked
prices. Bid price is used when no ask price is available. Any assets or
liabilities initially expressed in terms of foreign currency will be
translated into U.S. dollars at the midpoint of the New York interbank market
spot exchange rate as quoted on the day of such translation by the Federal
Reserve Bank of New York or, if no such rate is quoted on such date, at the
exchange rate previously quoted by the Federal Reserve Bank of New York or at
such other quoted market exchange rate as may be determined to be appropriate
by BlackRock. Expenses and fees, including the management fee (reduced by the
expense limitation, if any), are accrued weekly and taken into account for the
purpose of determining the net asset value of the Trust's Shares.

Options, futures contracts and options thereon which are traded on exchanges
are valued at their last sale or settlement price as of the close of the
exchanges or, if no sales are reported, at the average of the quoted bid and
ask prices as of the close of the exchange. Portfolio securities underlying
listed call options will be valued at their market price and reflected in net
assets accordingly. Premiums received on call options written by the Trust
will be included in the liability section of the financial statements as a
deferred credit and subsequently adjusted (marked-to-market) to the current
market value of the option written.

Any assets or liabilities initially expressed in terms of foreign currency
will be translated into U.S. dollars at the prevailing rates of exchange or,
if no such rate is quoted on such date, at the exchange rate utilized on the
previous business day or at such other quoted market exchange rate as may be
determined to be appropriate by BlackRock. Expenses and fees, including the
Management Fee, are accrued weekly and taken into account for the purpose of
determining the net asset value of the Shares.

Illiquid securities, as well as securities or other assets for which recent
market quotations are not readily available, or are not valued by the Service,
are valued at fair value as determined in good faith by the Board of Trustees.
The Board will review the method of valuation on a current basis. In making
their good faith valuation of illiquid securities, the Board members generally
will take the following factors into consideration: illiquid securities which
are, or are convertible into, securities of the same class of securities for
which a public market exists usually will be valued at market value less the
same percentage discount at which purchased. This discount will be revised
periodically by the Board if it believes that the discount no longer reflects
the value of the illiquid securities. Illiquid securities not of the same
class as securities for which a public market exists usually will be valued
initially at cost. Any subsequent adjustment from cost will be based upon
considerations deemed relevant by the Board.

New York Stock Exchange Closings. The holidays (as observed) on which the New
York Stock Exchange is closed currently are: New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas.

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<PAGE>

DIVIDENDS AND DISTRIBUTIONS

It is the Trust's present policy, which may be changed by the Board of
Trustees, to make monthly distributions of its net investment income. All net
realized capital gains, if any, either will be distributed to the Trust's
Shareholders at least annually or will be retained by the Trust, and subject
to Trust-level associated tax liabilities thereon. As a result of the Trust's
ability to invest in Zero-Coupon Securities and Pay-In-Kind Securities, the
Trust expects to make distributions of net investment income in amounts
greater than the total amount to cash actually received in order to satisfy
certain requirements under current federal income tax law. See "Taxes." The
Trust may change the foregoing distribution policy if its experience
indicates, or its Board of Trustees for any reason determines, that changes
are desirable. See "Taxes."

Under the Investment Company Act, the Trust is not permitted to incur
indebtedness unless after such incurrence the Trust has an asset coverage of
at least 300% of the aggregate outstanding principal balance of indebtedness.
Additionally, under the Investment Company Act, the Trust may not declare any
dividend or other distribution upon any class of its capital shares, or
purchase any such capital shares, unless the aggregate indebtedness of the
Trust has, at the time of the declaration of any such dividend or distribution
or at the time of any such purchase, an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be. While any preferred shares are outstanding, the Trust may not
declare any cash dividend or other distribution on its Shares, unless at the
time of such declaration, (1) all accumulated preferred stock dividends have
been paid and (2) the net asset value of the Trust's portfolio (determined
after deducting the amount of such dividend or other distribution) is at least
200% of the liquidation value of the outstanding preferred shares (expected to
be equal to the original purchase price per share plus any accumulated and
unpaid dividends thereon). In addition to the limitations imposed by the
Investment Company Act as described in this paragraph, certain lenders may
impose additional restrictions on the payment of dividends or distributions on
the Trust's Shares in the event of a default on the Trust's borrowings. Any
limitation on the Trust's ability to make distributions on its Shares could in
certain circumstances impair the ability of the Trust to maintain its
qualification for taxation as a regulated investment company. See "Other
Investment Practices--Leverage" and "Taxes."

See "Automatic Dividend Reinvestment Plan" for information concerning the
manner in which dividends and distributions to holders of Shares may be
automatically reinvested in Shares of the Trust. Dividends and distributions
may be taxable to Shareholders whether they are reinvested in Shares of the
Trust or received in cash.

The Trust expects that it will commence paying dividends within 60 days of the
date of this Prospectus.

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<PAGE>

TAXES

The following discussion is a general summary of certain U.S. federal income
tax considerations relating to the Trust and to the acquisition, ownership and
disposition of Shares. The discussion is based on the Internal Revenue Code of
1986, as amended (the "Code"), applicable Treasury regulations and rulings now
in effect, all of which are subject to change, possibly retroactively. This
summary does not purport to discuss all of the income tax consequences
applicable to the Trust or to investors that may be subject to special tax
rules, such as foreign investors, banks, tax-exempt organizations, insurance
companies, dealers in securities or currencies, persons that will hold the
Shares as part of an integrated investment (including a "straddle") comprised
of Shares and one or more other positions, or persons having a "functional
currency" other than the U.S. dollar. Investors considering the purchase of
Shares should consult their own tax advisers regarding the application of U.S.
federal income tax laws to their particular situations, as well as any tax
consequences arising under the laws of any state, local, or foreign taxing
jurisdiction.

The Trust intends to qualify and to elect to be treated as a regulated
investment company ("RIC") under the Code. For each taxable year that the
Trust so qualifies, the Trust (but not its Shareholders) will be relieved of
federal income tax on that part of its investment company taxable income
(consisting generally of net investment income, net short term capital gain
and net gains from certain foreign currency transactions) and net capital gain
that is distributed to its Shareholders.

In order to qualify for treatment as a RIC under the Code, the Trust must make
an election to be so treated and must distribute to its Shareholders for each
taxable year at least 90% of its investment company taxable income
("Distribution Requirement") and must meet several additional requirements.
These requirements include the following: (1) the Trust must derive at least
90% of its gross income each taxable year from dividends, interest, payments
with respect to securities loans and gains from the sale or other disposition
of securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); (2) at the
close of each quarter of the Trust's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S.
government securities, securities of other RICs and other securities that are
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Trust's total assets and does not constitute more than 10% of
the voting securities of such issuer; and (3) at the close of each quarter of
the Trust's taxable year, not more than 25% of the value of its total assets
may be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer.

The Trust will be subject to a non-deductible 4% excise tax ("Excise Tax") to
the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31st of that year, plus
certain other amounts. For these purposes, any such income retained by the
Trust, and on which it pays federal income tax, will be treated as having been
distributed.

The Trust may acquire zero-coupon or other securities issued with original
issue discount. As the holder of such securities, the Trust must include in
its gross income the original issue discount that accrues on the securities
during the taxable year, even if it receives no corresponding payment on the
securities during the year. The Trust also must include in its gross income
each year any "interest" distributed in the form of additional securities on
payment-in-kind securities. Because the Trust

71
<PAGE>

annually must distribute substantially all of its investment company taxable
income, including any accrued original issue discount and other non-cash
income, to satisfy the distribution requirement imposed on RICs and to avoid
imposition of the Excise Tax, the Trust may be required in a particular year
to distribute as a dividend an amount that is greater than the total amount of
cash it actually receives. Those distributions will be made from the Trust's
cash assets or from the proceeds of sales of portfolio securities, if
necessary. The Trust may realize capital gains or losses from those sales,
which would increase or decrease its investment company taxable income and/or
net capital gain.

Some of the Trust's investment practices are subject to special provisions of
the Code that may, among other things, defer the use of losses of the Trust
and affect the holding period of the securities held by the Trust and the
nature of the income realized by the Trust. These provisions may also require
the Trust to recognize income or gain without receiving the cash with which to
make distributions in the amounts necessary to satisfy the Distribution
Requirement and the requirements necessary to avoid imposition of the Excise
Tax. The Trust will monitor its transactions and may also make certain tax
elections, in order to mitigate the effect of these rules and prevent
disqualification of the Trust as a RIC.

Income from foreign currencies, and income from transactions in options,
futures and forward currency contracts derived by the Trust with respect to
its business of investing in securities or foreign currencies, will be treated
as qualifying income under the Income Requirement. Under section 988 of the
Code, foreign currency gains or losses from certain forward contracts not
traded in the interbank market as well as certain other gains or losses
attributable to currency exchange rate fluctuations are typically treated as
ordinary income or loss. Such income or loss may increase or decrease (or
possibly eliminate) the Trust's income available for distribution. If, under
the rules governing the tax treatment of foreign currency gain and losses, the
Trust's income available for distribution is decreased or eliminated, all or a
portion of the dividends declared by the Trust may be treated for federal
income tax purposes as a return of capital or, in some circumstances, as
capital gain. Generally, a Shareholder's tax basis in Trust Shares will be
reduced to the extent that an amount distributed to such Shareholder is
treated as a return of capital.

Income received and gains realized by the Trust from investments in foreign
securities may be subject to income, withholding or other taxes imposed by
foreign countries and U.S. possessions that would reduce its yield and/or
total return thereon. Such taxes will not be deductible or creditable by
Shareholders. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.

Dividends from the Trust's investment company taxable income (whether received
in cash or reinvested in additional Shares) generally are taxable to its
Shareholders as ordinary income to the extent of the Trust's earnings and
profits. Distributions of the Trust's net capital gain ("capital gain
dividends"), whether received in cash or reinvested in additional Shares, when
designated as such, are taxable to Shareholders as long term capital gain,
regardless of how long they have held their Trust Shares. See below for a
summary of the tax rates applicable to capital gains dividends. A participant
in the Automatic Dividend Reinvestment Plan will be treated as having received
a distribution in the amount of the cash used to purchase Shares on his or her
behalf, including a pro rata portion of the brokerage fees incurred by the
Transfer Agent. Distributions by the Trust to its Shareholders in any year
that exceed the Trust's earnings and profits generally may be applied by each
Shareholder against his or her basis for the Shares and will be taxable at
capital gains rates (assuming

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<PAGE>

such Shares are held as a capital asset) to any Shareholder only to the extent
the distributions to the Shareholder exceed the Shareholder's basis for his or
her Shares. See below for a discussion of capital gains rates. The Trust will
notify its Shareholders following the end of each calendar year of the amounts
of dividends and capital gain dividends paid (or deemed paid) that year.

The Internal Revenue Service (the "IRS") has taken the position in a revenue
ruling that if a RIC has two classes of shares, it may designate distributions
made to each class in any year as consisting of no more than such class's
proportionate share of particular types of income based on the total
distributions paid to each class for such year, including distributions out of
net capital gain. Consequently, if both common shares and preferred shares are
outstanding, the Trust intends to designate distributions made to the classes
as consisting of particular types of income in accordance with the classes'
proportionate shares of such income. Thus, distributions of net capital gain
will be allocated between holders of common shares and holders of preferred
shares, if any, in proportion to the total distributions made to each class
during the taxable year, or otherwise as required by applicable law.

Dividends and other distributions declared by the Trust in October, November
or December of any year and payable to Shareholders of record on a date in any
of those months will be deemed to have been paid by the Trust and received by
the Shareholders on December 31st of that year if the distributions are paid
by the Trust during the following January. Accordingly, those distributions
will be taxed to Shareholders for the year in which that December 31st falls.

An investor should also be aware that, if Shares are purchased shortly before
the record date for any dividend or other distribution, the investor will pay
full price for the Shares and will receive some portion of the purchase price
back as a taxable distribution.

The Trust may elect in the future to retain net capital gains and pay
corporate income tax thereon. In such event, the Trust would most likely make
an election which would require each Shareholder of record on the last day of
the Trust's taxable year to include in income for tax purposes his
proportionate share of the Trust's undistributed net capital gains. If such an
election is made, each Shareholder would be entitled to credit his
proportionate share of the tax paid by the Trust against his federal income
tax liability and to claim a refund to the extent that the credit exceeds such
liability. In addition, the Shareholder would be entitled to increase the
basis of his Shares for federal income tax purposes by an amount equal to the
difference between (i) the amount included in such Shareholder's income as
long-term capital gains and (ii) such Shareholder's proportionate share of the
tax paid by the Fund.

Upon the sale or exchange of Shares (including a sale pursuant to a Share
repurchase or tender offer by the Trust), a Shareholder generally will
recognize a taxable gain or loss equal to the difference between his or her
adjusted basis in the Shares and the amount received. Any such gain or loss
will be treated as a capital gain or loss if the Shares are capital assets in
the Shareholder's hands and will be long term capital gain or loss if the
Shares have been held for more than one year. See below for a discussion of
the tax rates applicable to capital gains. Any loss recognized on a sale or
exchange of Shares that were held for six months or less will be treated as
long term, rather than short term, capital loss to the extent of any capital
gain dividends previously received thereon. A loss realized on a sale or
exchange of Shares will be disallowed to the extent those Shares are replaced
by other Shares within a period of 61 days beginning 30 days before and ending
30 days after the date of disposition of the

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<PAGE>

Shares (which could occur, for example, as a result of participation in the
Automatic Dividend Reinvestment Plan). In that event, the basis of the
replacement Shares will be adjusted to reflect the disallowed loss.

The maximum federal income tax rate applicable to net capital gains by
individuals and other non-corporate taxpayers is the same as the maximum
ordinary income tax rate for capital assets held for one year or less and 20%
(10% for taxpayers in the 15% marginal tax bracket) for capital assets held
for more than one year. The maximum federal income tax rate for corporations
is 35% for both ordinary income and any capital gain.

The Trust may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends and redemption proceeds paid to non-
corporate Shareholders. This tax may be withheld from dividends if (i) the
Shareholder fails to furnish the Trust with the Shareholder's correct taxpayer
identification number, (ii) the IRS notifies the Trust that the Shareholder
has failed to report properly certain interest and dividend income to the IRS
and to respond to notices to that effect, or (iii) when required to do so, the
Shareholder fails to certify that he or she is not subject to backup
withholding. Redemption proceeds may be subject to withholding under the
circumstances described in (i) above. The Trust must report annually to the
IRS and to each Foreign Shareholder the amount of dividends paid to such
Shareholder and the amount, if any, of tax withheld pursuant to the backup
withholding rules with respect to such dividends. This information may also be
made available to the tax authorities in the Foreign Shareholder's country of
residence. Backup withholding is not an additional tax. Any amounts withheld
under the backup withholding rules from payments made to a Shareholder may be
refunded or credited against such Shareholder's U.S. federal income tax
liability, if any, provided that the required information is furnished to the
IRS.

Taxation of a Shareholder who, as to the United States, is a non-resident
alien individual, foreign trust or estate, foreign corporation or foreign
partnership (a "Foreign Shareholder") depends, in part, on whether the Foreign
Shareholder's income from the Trust is effectively connected with a U.S. trade
or business carried on by such Shareholder. If a Shareholder is a resident
alien or if dividends or distributions from the Trust are effectively
connected with a U.S. trade or business carried on by a Foreign Shareholder,
then dividends of net investment income, distributions of net capital gain and
gain realized upon the sale of shares of the Trust will be subject to U.S.
federal income tax at the rates applicable to U.S. citizens or domestic
corporations. Foreign Shareholders that are corporations may also be subject
to an additional "branch profits tax" with respect to income from the Trust
that is effectively connected with a U.S. trade or business.

If the income from the Trust is not effectively connected with a U.S. trade or
business carried on by the Foreign Shareholder, (i) dividends of net
investment income will be subject to a 30% (or lower applicable treaty rate)
U.S. federal withholding tax, and (ii) distributions of net capital gain and
gains realized upon the sale of Shares will not be subject to U.S. federal
income tax as long as such Foreign Shareholder is not a non-resident alien
individual who was physically present in the United States for more than 182
days during the taxable year and, in the case of gains realized upon the sale
of Shares, certain other conditions are met. However, certain Foreign
Shareholders may nonetheless be subject to 31% backup withholding on
distributions of net capital gain and gross proceeds paid to them upon the
sale of their Shares. See the discussion regarding backup withholding above.

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<PAGE>

United States Treasury Department regulations that are generally effective for
payments made after December 31, 1999 address the withholding of tax and
reporting for certain amounts paid to nonresident aliens and foreign
corporations (the "Withholding Regulations"). Among other things, the
Withholding Regulations may require Shareholders that are not U.S. persons
within the meaning of the Code to furnish new certification of their foreign
status after December 31, 1999. Prospective investors should consult their tax
advisors concerning the applicability and effect of the Withholding
Regulations on an investment in Shares.

Transfer by gift of Shares by a Foreign Shareholder who is a non-resident
alien individual will not be subject to U.S. federal gift tax, but the value
of Shares held by such a shareholder at his death will be includible in such
shareholder's gross estate for U.S. federal estate tax purposes.

The tax consequences to a Foreign Shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described in this
section. Shareholders may be required to provide appropriate documentation to
establish their entitlement to the benefits of such a treaty. Foreign
investors are advised to consult their own tax advisors with respect to (a)
whether their income from the Trust is or is not effectively connected with a
U.S. trade or business carried on by them, (b) whether they may claim the
benefits of an applicable tax treaty and (c) any other tax consequences to
them of an investment in the Trust.

The foregoing is only a brief summary of some of the important federal income
tax considerations generally affecting the Trust and its Shareholders. There
may be other federal, state, local or foreign tax considerations applicable to
a particular investor. Prospective investors are urged to consult their tax
advisers regarding the specific federal income tax consequences of purchasing,
holding and disposing of Shares, as well as the effects of state, local and
foreign tax laws and any proposed tax law changes.

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<PAGE>

AUTOMATIC DIVIDEND REINVESTMENT PLAN

Pursuant to the Trust's Automatic Dividend Reinvestment Plan (the "Plan"),
unless a Shareholder elects to receive cash, all dividend and capital gains
distributions will be automatically reinvested by Boston EquiServe L.P. as
agent for Shareholders in administering the Plan (the "Plan Agent") in
additional Shares of the Trust. Shareholders who elect not to participate in
the Plan will receive all dividends and distributions in cash paid by check
mailed directly to the Shareholder of record (or, if the Shares are held in
street or other nominee name, then to such nominee) by Boston EquiServe L.P.,
as dividend disbursing agent. Plan participants may elect not to participate
in the Plan and to receive all distributions of dividends and capital gains in
cash by sending written instructions to Boston EquiServe L.P., as dividend
disbursing agent, at the address set forth below. Participation in the Plan is
completely voluntary and may be terminated or resumed at any time without
penalty by written notice if received by the Plan Agent not less than ten days
prior to any dividend record date; otherwise such termination will be
effective with respect to any subsequently declared dividend or distribution.

Whenever the Trust declares an ordinary income dividend or a capital gain
dividend (collectively referred to in this section as "dividends") payable
either in shares or in cash, non-participants in the Plan will receive cash,
and participants in the Plan will receive the equivalent in Shares. The Shares
will be acquired by the Plan Agent for the participant's account, depending
upon the circumstances described below, either (i) through receipt of
additional unissued but authorized Shares from the Trust ("newly issued
shares") or (ii) by purchase of outstanding Shares on the open market ("open-
market purchases") on the NYSE or elsewhere. If on the payment date for the
dividend, the net asset value per Share is equal to or less than the market
price per Share plus estimated brokerage commissions (such condition being
referred to herein as "market premium"), the Plan Agent will invest the
dividend amount in newly issued Shares on behalf of the participant. The
number of newly issued Shares to be credited to the participant's account will
be determined by dividing the dollar amount of the dividend by the net asset
value per share on the date the Shares are issued, provided that the maximum
discount from the then current market price per Share on the date of issuance
may not exceed 5%. If on the dividend payment date the net asset value per
Share is greater than the market value (such condition being referred to
herein as "market discount"), the Plan Agent will invest the dividend amount
in Shares acquired on behalf of the participants in open-market purchases.

In the event of a market discount on the dividend payment date, the Plan Agent
will have until the last business day before the next date on which the Shares
trade on an "ex-dividend" basis or in no event more than 30 days after the
dividend payment date (the "last purchase date") to invest the dividend amount
in Shares acquired in open-market purchases. It is contemplated that the Trust
will pay monthly income dividends. Therefore, the period during which open-
market purchases can be made will exist only from the payment date on the
dividend through the date before the next "ex-dividend" date, which typically
will be approximately ten days. If, before the Plan Agent has completed its
open-market purchases, the market price of a Share exceeds the net asset value
per Share, the average per Share purchase price paid by the Plan Agent may
exceed the net asset value of the Trust's Shares, resulting in the acquisition
of fewer Shares than if the dividend had been paid in newly issued Shares on
the dividend payment date. Because of the foregoing difficulty with respect to
open-market purchases, the Plan provides that if the Plan Agent is unable to
invest the full dividend amount in open-market purchases during the purchase
period or if the market discount shifts to a market premium

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<PAGE>

during the purchase period, the Plan Agent will cease making open-market
purchases and will invest the uninvested portion of the dividend amount in
newly issued Shares at the close of business on the last purchase date.

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

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

There will be no brokerage charges with respect to Shares issued directly by
the Trust as a result of dividends or capital gains distributions payable
either in Shares or in cash. However, each participant will pay 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.

The automatic reinvestment of dividends and distributions will not relieve
participants of any Federal, state or local income tax that may be payable (or
required to be withheld) on such dividends. See "Taxes."

Shareholders participating in the Plan may receive benefits not available to
Shareholders not participating in the Plan. If the market price plus
commissions of the Trust's Shares is above the net asset value, participants
in the Plan will receive Shares of the Trust at less than they could otherwise
purchase them and will have Shares with a cash value greater than the value of
any cash distribution they would have received on their Shares. If the market
price plus commissions is below the net asset value, participants will receive
distributions in Shares with a net asset value greater than the value of any
cash distribution they would have received on their Shares. However, there may
be insufficient Shares available in the market to make distributions in Shares
at prices below the net asset value. Also, since the Trust does not redeem its
Shares, the price on resale may be more or less than the net asset value. See
"Taxes" for a discussion of tax consequences of the Plan.

Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan.
There is no direct service charge to participants in the Plan; however, the
Trust reserves the right to amend the Plan to include a service charge payable
by the participants.

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

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company, will act as the Trust's Custodian. The
Custodian may employ sub-custodians outside the U.S. approved by the Board of
Trustees in accordance with regulations under the Investment Company Act.
Boston EquiServe L.P. will act as the Trust's Transfer and Dividend Disbursing
Agent.

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<PAGE>

DESCRIPTION OF SHARES

The Trust is a newly organized unincorporated business trust under the laws of
Delaware pursuant to an Agreement and Trust Agreement (the "Trust Agreement")
dated August 10, 1998. The Trust is authorized to issue an unlimited number of
shares of beneficial interest, par value $.001 per Share. Each share has one
vote and, when issued and paid for in accordance with the terms of the
offering, is fully paid and non-assessable. Trust shares are of one class and
have equal rights as to dividends and liquidation. The Trust may reclassify
Shares as preferred shares, with such rights and designations as the Board of
Trustees shall determine. Shares have no preemptive, subscription or
conversion rights and are freely transferable. The Trust will send annual and
semi-annual financial statements to all its Shareholders.

The Trust Agreement disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The Trust Agreement provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations, a
possibility which management believes is remote. Upon payment of any liability
incurred by the Trust, the shareholder paying such liability will be entitled
to reimbursement from the general assets of the Trust. The Trust intends to
conduct its operations in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Trust.

The Trust has no present intention of offering additional Shares, except as
described herein and under the Automatic Dividend Reinvestment Plan, as it may
be amended from time to time. See "Automatic Dividend Reinvestment Plan."
Other offerings of its Shares, if made, will require approval of the Trust's
Board of Trustees. Any additional offering will not be sold at a price per
Share below the then current net asset value (exclusive of underwriting
discounts and commissions) except in connection with an offering to existing
Shareholders or with the consent of a majority of the Trust's outstanding
Shares.

The Shares have been approved for listing on the New York Stock Exchange under
the symbol "BHY."

ANTI-TAKEOVER PROVISIONS

The Trust's Agreement and Declaration of Trust (the "Trust Agreement")
includes provisions that could have the effect of limiting the ability of
other entities or persons to acquire control of the Trust or to change the
composition of its Board of Trustees, and could have the effect of depriving
Shareholders of an opportunity to sell their Shares at a premium over
prevailing market prices by discouraging a third party from seeking to obtain
control of the Trust. These provisions may have the effect of discouraging
attempts to acquire control of the Trust, which attempts could have the effect
of increasing the expenses of the Trust and interfering with the normal
operation of the Trust. The Board of Trustees is divided into three classes,
with the terms of one class expiring at each annual meeting of Shareholders.
At each annual meeting, one class of Trustees is elected to a three-year term.
This

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<PAGE>

provision could delay for up to two years the replacement of a majority of the
Board of Trustees. A Trustee may be removed from office only for cause by a
written instrument signed by at least two thirds of the remaining Trustees or
by a vote of the holders of at least two-thirds of the Shares.

In addition, the Trust Agreement requires the favorable vote of the holders of
at least 75% of the outstanding Shares of each class of the Trust, voting as a
class, then entitled to vote to approve, adopt or authorize certain
transactions with 5%-or-greater holders of a class of Shares and their
associates, unless the Board of Trustees shall by resolution have approved a
memorandum of understanding with such holders, in which case normal voting
requirements would be in effect. For purposes of these provisions, a 5%-or-
greater holder of a class of Shares (a "Principal Shareholder") refers to any
person who, whether directly or indirectly and whether alone or together with
its affiliates and associates, beneficially owns 5% or more of the outstanding
shares of any class of beneficial interest of the Trust. The transactions
subject to these special approval requirements are: (i) the merger or
consolidation of the Trust or any subsidiary of the Trust with or into any
Principal Shareholder; (ii) the issuance of any securities of the Trust to any
Principal Shareholder for cash (except pursuant to the Automatic Dividend
Reinvestment Plan); (iii) the sale, lease or exchange of all or any
substantial part of the assets of the Trust to any Principal Shareholder
(except assets having an aggregate fair market value of less than $1,000,000,
aggregating for the purpose of such computation all assets sold, leased or
exchanged in any series of similar transactions within twelve-month period);
or (iv) the sale, lease or exchange to the Trust or any subsidiary thereof, in
exchange for securities of the Trust, of any assets of any Principal
Shareholder (except assets having an aggregate fair market value of less than
$1,000,000, aggregating for the purposes of such computation all assets sold,
leased or exchanged in any series of similar transactions within a twelve-
month period).

The Board of Trustees has determined that provisions with respect to the Board
of Trustees and the 75% voting requirements described above (and the
requirements relating to conversion to an open-end Trust described below),
which voting requirements are greater than the minimum requirements under
Delaware law or the Investment Company Act, are in the best interest of
Shareholders generally. Reference should be made to the Trust Agreement on
file with the SEC for the full text of these provisions.

CLOSED-END TRUST STRUCTURE

The Trust has been organized as a closed-end management investment company
(commonly referred to as a closed-end fund). Closed-end funds differ from
open-end management investment companies (commonly referred to as mutual
funds) in that closed-end funds generally list their shares for trading on a
securities exchange and do not redeem their shares at the option of the
shareholder. By comparison, mutual funds issue securities redeemable at net
asset value at the option of the shareholder and typically engage in a
continuous offering of their shares. Mutual funds are subject to continuous
asset in-flows and out-flows that can complicate portfolio management, whereas
closed-end funds generally can stay more fully invested in securities
consistent with the closed-end fund's investment objectives and policies. In
addition, in comparison to open-end funds, closed-end funds have greater
flexibility in the employment of financial leverage and in the ability to make
certain types of investments, such as investments in illiquid securities.
However, shares of closed-end funds frequently trade at a discount to their
net asset value.

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<PAGE>

In recognition of the possibility that the Shares might trade at a discount to
net asset value and that any such discount may not be in the interests of
Shareholders, the Trust's Board of Trustees might consider open market
repurchases or tender offers for Shares at net asset value. There can be no
assurance that the Board of Trustees will decide to undertake any of these
actions or that, if undertaken, such actions would result in the Shares
trading at a price equal or close to net asset value per Share. The Board of
Trustees might also consider the conversion of the Trust to an open-end mutual
fund. The Board of Trustees believes, however, that the closed-end structure
is desirable, given the Trust's investment objective and policies. Investors
should assume, therefore, that it is unlikely that the Board of Trustees would
vote to convert the Trust to an open-end investment company.

CONVERSION TO OPEN-END TRUST

The Trust may be converted to an open-end investment company at any time by an
amendment to the Trust Agreement. The Trust Agreement provides that such an
amendment would require the approval of two-thirds of the Trust's outstanding
shares (including any preferred shares) entitled to vote on the matter, voting
as a single class (or a majority of such shares if the amendment previously
was approved, adopted or authorized by at least two-thirds of the total number
of Trustees) and, assuming the Trust has issued preferred shares, by the
affirmative vote of a majority of outstanding shares, voting as a separate
class. Such a vote also would satisfy a separate requirement in the Investment
Company Act that the change be approved by the shareholders. If approved in
the foregoing manner, conversion of the Trust could not occur until 90 days
after the Shareholders' meeting at which such conversion was approved and
would also require at least 30 days' prior notice to all Shareholders.
Conversion of the Trust to an open-end investment company would require the
redemption of any outstanding preferred shares and any indebtedness not
constituting bank loans, which could eliminate or alter the leveraged capital
structure of the Trust with respect to the Shares. Following any such
conversion, it is also possible that certain of the Trust's investment
policies and strategies would have to be modified to assure sufficient
portfolio liquidity. In particular, the Trust would be required to maintain
its portfolio such that not more than 15% of its net assets would be invested
in illiquid securities, or other illiquid assets, or securities which are
restricted as to resale. Such requirement could cause the Trust to dispose of
portfolio securities or other assets at a time when it is not advantageous to
do so, and could adversely affect the ability of the Trust to meet its
investment objectives. In the event of conversion, the Shares would cease to
be listed on the New York Stock Exchange or other national securities
exchanges or market systems. Shareholders of an open-end investment company
may require the company to redeem their shares at any time (except in certain
circumstances as authorized by or under the Investment Company Act) at their
net asset value, less such redemption charge, if any, as might be in effect at
the time of a redemption. The Trust expects to pay all such redemption
requests in cash, but intends to reserve the right to pay redemption requests
in a combination of cash or securities. If such partial payment in securities
were made, investors may incur brokerage costs in converting such securities
to cash. If the Trust were converted to an open-end fund, it is likely that
new Shares would be sold at net asset value plus a sales load.

REPURCHASE OF SHARES

Shares of closed-end investment companies often trade at a discount to their
net asset values, and the Trust's Shares may likewise trade at a discount to
their net asset value, although it is possible that

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<PAGE>

they may trade at a premium above net asset value. The market price of the
Trust's Shares will be determined by such factors as relative demand for and
supply of such Shares in the market, the Trust's net asset value, general
market and economic conditions and other factors beyond the control of the
Trust. See "Determination of Net Asset Value." Although the Trust's
Shareholders will not have the right to redeem their Shares, the Trust may
take action to repurchase Shares in the open market or make tender offers for
its Shares at their net asset value. This may have the effect of reducing any
market discount from net asset value.

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

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<PAGE>

UNDERWRITING

The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated, One New York Plaza, New York, New York, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, World Financial Center, 250 Vesey
Street, New York, New York, PaineWebber Incorporated, 1285 Avenue of the
Americas, New York, New York and Salomon Smith Barney Inc., 388 Greenwich
Street, New York, New York are acting as representatives (the
"Representatives") have severally agreed, subject to the terms and conditions
contained in the underwriting agreement with the Trust and BlackRock Advisors,
Inc. (the "Underwriting Agreement"), to purchase from the Trust the number of
Shares set forth below opposite their respective names.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Prudential Securities Incorporated................................. 846,439
Merrill Lynch, Pierce, Fenner & Smith Incorporated................. 846,437
PaineWebber Incorporated........................................... 846,437
Salomon Smith Barney Inc. ......................................... 846,437
ABN AMRO Incorporated.............................................. 87,000
Bear, Stearns & Co. Inc. .......................................... 87,000
BT Alex. Brown Incorporated........................................ 87,000
Chase Securities Inc. ............................................. 87,000
CIBC Oppenheimer Corp. ............................................ 87,000
Credit Suisse First Boston Corporation............................. 87,000
Deutsche Bank Securities Inc. ..................................... 87,000
Donaldson, Lufkin & Jenrette Securities Corporation................ 87,000
A.G. Edwards & Sons, Inc. ......................................... 87,000
Lehman Brothers Inc. .............................................. 87,000
SG Cowen Securities Corporation.................................... 87,000
Warburg Dillon Read Inc. .......................................... 87,000
Advest Inc. ....................................................... 43,500
Robert W. Baird & Co. Incorporated................................. 43,500
William Blair & Company, LLC....................................... 43,500
J.C. Bradford & Co. ............................................... 43,500
Crowell, Weedon & Co. ............................................. 43,500
Dain Rauscher Wessels.............................................. 43,500
Everen Securities, Inc. ........................................... 43,500
Fahnestock & Co. Inc. ............................................. 43,500
First Albany Corporation........................................... 43,500
Interstate/Johnson Lane Corporation................................ 43,500
Janney Montgomery Scott Inc. ...................................... 43,500
Jefferies & Company, Inc. ......................................... 43,500
Legg Mason Wood Walker, Incorporated............................... 43,500
McDonald Investments Inc., a Keycorp Company....................... 43,500
Morgan Keegan & Company, Inc. ..................................... 43,500
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Piper Jaffray Inc. ................................................. 43,500
Southwest Securities, Inc. ......................................... 43,500
Sutro & Co. Incorporated............................................ 43,500
Tucker Anthony Incorporated......................................... 43,500
Wedbush Morgan Securities........................................... 43,500
Wheat First Securities, Inc. ....................................... 43,500
George K. Baum & Company............................................ 21,750
BHC Securities, Inc. ............................................... 21,750
D.A. Davidson & Co. ................................................ 21,750
Ferris, Baker Watts, Incorporated................................... 21,750
Fifth Third/The Ohio Company........................................ 21,750
First Southwest Company............................................. 21,750
J.J.B. Hilliard, W.L. Lyons, Inc. .................................. 21,750
Howe Barnes Investments Inc. ....................................... 21,750
JWGenesis Capital Markets LLC....................................... 21,750
Mesirow Financial................................................... 21,750
Neuberger & Berman, LLC............................................. 21,750
Parker/Hunter Incorporated.......................................... 21,750
Ragen Mackenzie Incorporated........................................ 21,750
Roney Capital Markets............................................... 21,750
Scott & Stringfellow, Inc. ......................................... 21,750
Smith, Moore & Co. ................................................. 21,750
Stephens Inc. ...................................................... 21,750
M.L. Stern & Co., Inc. ............................................. 21,750
Sterne Agee & Leach, Inc. .......................................... 21,750
Stifel, Nicolaus & Company, Incorporated............................ 21,750
Suntrust Equitable Securities Corporation........................... 21,750
---------
Total............................................................... 5,800,000
=========
</TABLE>

The Trust is obligated to sell, and the Underwriters are obligated to
purchase, all of the Shares offered hereby, if any are purchased. The
Participating Institutions consist of the Underwriters named above and any
broker-dealer or financial institution that has signed the Soliciting Dealer
Agreement.

BlackRock Advisors, Inc. (or an affiliate) has agreed to pay to the
Underwriters compensation in the gross amount of $0.675 per Share (4.5% of the
Subscription Price per Share) or an aggregate amount of $3,915,000 ($4,502,250
assuming full exercise of the over-allotment option) for all Shares covered by
this Prospectus. Such payment will be the legal obligation of BlackRock (or an
affiliate) and made out of its own assets and will not in any way represent an
obligation of the Trust or its Shareholders. The Trust will pay offering
expenses of $116,000 ($133,400 if the Underwriters' over-allotment option is
exercised in full), which will be deducted from the total proceeds of the
offering. BlackRock Advisors, Inc. has agreed that it or an affiliate will pay
all offering expenses of the Trust that exceed $0.02 per Share. The
Underwriters, through the Representatives, have advised the Trust that the
Underwriters propose to offer the Shares set forth above at the Subscription
Price set forth on the cover page of this

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<PAGE>

Prospectus, that the Underwriters may allow a concession of $0.45 per Share to
certain dealers and that such dealers may reallow a concession of up to $0.10
per Share to certain other dealers. After the initial public offering, the
Subscription Price and the concessions may be changed by the Representatives.

The Trust has granted to the Underwriters an option, exercisable for 45 days
from the date of this Prospectus to purchase up to an additional 870,000
Shares at the Subscription Price set forth on the cover page of this
Prospectus. Such option may be exercised at any time or from time to time
during such 45-day period, but no more than three times. The Underwriters may
exercise such option solely for the purpose of covering over-allotments
incurred in the sale of the Shares offered hereby. To the extent such option
to purchase is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional Shares as the number set forth next to such Underwriter's name in
the preceding table bears to 5,800,000.

The Trust, BlackRock and BlackRock Advisors, Inc. have each agreed to
indemnify the several Underwriters and any other Participating Institutions or
to contribute to the losses arising out of certain liabilities, including
liabilities under the Securities Act.

The Trust, its officers and Trustees (with certain limited exceptions), have
agreed not to, directly or indirectly, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer to sell, contract of sale, pledge, grant of
any option to purchase or other sale or disposition) of any Shares of the
Trust or any securities convertible into, or exchangeable or exercisable for,
Shares of the Trust (other than pursuant to the over-allotment option granted
to the Underwriters, and pursuant to the Automatic Dividend Reinvestment
Plan), for a period of 180 days from the closing of this offering, without the
prior written consent of Prudential Securities Incorporated, on behalf of the
Underwriters. Prudential Securities Incorporated may, in its sole discretion,
at any time and without notice, release all or any portion of the Shares
subject to the foregoing lock-up agreements.

The Representatives have informed the Trust that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

In order to meet the requirements for listing the Shares on the New York Stock
Exchange, the Underwriters have undertaken to sell lots of 100 or more Shares
to a minimum of 2,000 beneficial holders. The minimum investment requirement
is 100 Shares (or $1,500).

Prior to this offering there has been no public market for the Shares or any
other securities of the Trust. Prior to completion of this offering, BlackRock
Advisors, Inc. will control the Trust.

In the ordinary course of their businesses, Prudential Securities
Incorporated, some of the other Underwriters and their respective affiliates
have in the past engaged, and in the future may engage, in investment banking
and financial transactions with the Trust, BlackRock and their affiliates.

In connection with the Offering, certain Underwriters and Participating
Institutions and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Shares. Such
transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Shares for the purpose of stabilizing its market price. The
Underwriters may also create a short position for the account of the

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Underwriters by selling more Shares in connection with the Offering than they
are committed to purchase from the Trust, and in such case may purchase Shares
in the open market following the completion of the Offering to cover all or a
portion of such short position. The Underwriters may also cover all or a
portion of such short position, up to 870,000 Shares, by exercising the
Underwriters' over-allotment option referred to previously. In addition, the
Representatives, on behalf of the Underwriters, may impose "penalty bids"
under contractual arrangement with the Underwriters whereby they may reclaim
from an Underwriter or any other Participating Institution for the account of
the other Underwriters the concession with respect to Shares that are
distributed in the Offering but subsequently purchased by the Representatives
for the account of the Underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the Shares at a level above that which might otherwise prevail in the
open market. None of the transactions described in this paragraph is required
and, if they are undertaken, they may be discontinued at any time.

LEGAL PROCEEDINGS

From time to time BlackRock experiences a number of claims and legal
proceedings incidental to the normal conduct of its businesses. BlackRock does
not believe that liabilities related to such claims and proceedings are likely
to be, individually or in the aggregate, material to the consolidated
financial condition of BlackRock.

ADDITIONAL INFORMATION

Statements contained in this Prospectus as to the content of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Trust's Registration Statement. Each such statement is qualified in all
respects by such reference and the exhibits and schedules thereto. The Trust's
Registration Statement and such exhibits and schedules may be obtained from
the SEC at its principal office at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the fees prescribed by the SEC. The SEC maintains a
website at http://www.sec.gov containing reports, proxy and information
statements and other information regarding registrants, including the Trust,
that file electronically with the SEC. The Trust's Shares have been approved
for listing on the NYSE under the symbol "BHY," subject to official notice of
issuance and, as such, similar information concerning the Trust will be
available for inspection and copy at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.

The Trust intends to furnish its shareholders with annual reports containing
audited financial statements and a report thereon by independent certified
public accountants.

LEGAL OPINIONS

Certain legal matters in connection with the Shares offered hereby will be
passed upon for the Trust and its affiliated entities by Skadden, Arps, Slate,
Meagher & Flom LLP, and for the Underwriters by Cleary, Gottlieb, Steen &
Hamilton.

EXPERTS

The statement of assets and liabilities of the Trust included in this
Prospectus has been so included in reliance upon the report of Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein
and is included in reliance upon the report of such firm given upon their
authority as experts in auditing and accounting.

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REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholder of The BlackRock High Yield Trust:

We have audited the accompanying statement of assets and liabilities of The
BlackRock High Yield Trust (the "Trust") as of December 15, 1998 and the
related statement of operations for the period August 10, 1998 through
December 15, 1998. These financial statements are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Trust as of December 15,
1998 in conformity with generally accepted accounting principles.

New York, New York
December 16, 1998

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STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 15, 1998

<TABLE>
<S> <C>
ASSETS:
Cash.................................................................. $100,000
Offering Costs........................................................ 110,000
Receivable from BlackRock Advisors, Inc. ............................. 63,500
--------
Total Assets........................................................ 273,500
--------
LIABILITIES:
Liabilities and Accrued Expenses...................................... 110,000
Organization Costs.................................................... 63,500
--------
Total Liabilities..................................................... 173,500
--------
Net Assets.......................................................... $100,000
========
Net assets per share, equivalent to 6,667 shares of beneficial
interest issued and outstanding, par value $.001, unlimited
authorized shares.................................................. $ 15.00
========
</TABLE>
STATEMENT OF OPERATIONS
FOR THE PERIOD AUGUST 10, 1998 (INCEPTION) TO DECEMBER 15, 1998
<TABLE>
<S> <C>
Investment Income:
Investment income.................................................... $ --
Expenses:
Organization expenses................................................ 63,500
-------
Total expenses before reimbursement.................................. 63,500
Reimbursement from BlackRock Advisors, Inc. (Note 3)................. (63,500)
-------
Total expenses after reimbursement................................... --
Investment income--net............................................... --
Net Change in Net Assets Resulting from Operations..................... $ --
=======
</TABLE>

NOTE 1. ORGANIZATION

The BlackRock High Yield Trust (the "Trust") was organized as a Delaware
business trust on August 10, 1998 and is registered as a diversified, closed-
end management investment company under the Investment Company Act of 1940.
The Trust has had no operations other than the sale to BlackRock Advisors,
Inc. of 6,667 shares of beneficial interest for $100,000.

NOTE 2. AGREEMENTS

The Trust has entered into an Investment Advisory Agreement with BlackRock
Advisors, Inc. The Trust will pay BlackRock Advisors, Inc. a monthly fee (the
"Investment Advisory Fee") at an annual rate of 1.05% of the average weekly
value of the Trust's Managed Assets. From such Investment Advisory Fee,
BlackRock Advisors, Inc. will pay BlackRock, for serving as sub-adviser, a fee
equal to an annual rate of 0.35% of the average weekly value of the Trust's
Managed Assets. The Trust has also entered into an Administration Agreement
with BlackRock Financial Management, Inc. and Prudential Investments Fund
Management LLC, which provides for payment of a monthly fee to each of the
foregoing at an annual rate of 0.05% of the average weekly value of the
Trust's Managed Assets.

NOTE 3. ORGANIZATION AND OFFERING COSTS

Organization Expenses are reimbursed by BlackRock Advisors, Inc. Offering
Costs will be charged to capital upon the sale of shares of beneficial
interest. All organizational costs will be reimbursed by BlackRock Advisors,
Inc. by December 15, 1999.

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APPENDIX A

RATINGS OF CORPORATE BONDS

DESCRIPTION OF CORPORATE BOND RATINGS OF STANDARD & POOR'S RATINGS SERVICES:

AAA--Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.

A--Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rated
categories.

BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit 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 bonds in this category than for bonds in higher rated
categories.

BB--Bonds rated BB have less near-term vulnerability to default than other
speculative grade debt. However, they face 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.

B--Bonds rated B have a greater vulnerability to default but presently have
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.

CCC--Bonds rated CCC have a current identifiable vulnerability to default and
are dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, they are not likely to
have the capacity to pay interest and repay principal.

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

C--The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating.

D--Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.

S&P's letter ratings may be modified by the addition of a plus (+) or a minus
(-) sign designation, which is used to show relative standing within the major
rating categories, except in the AAA (Prime Grade) category.

A-1
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DESCRIPTION OF BOND RATINGS OF MOODY'S INVESTORS SERVICE, INC.:

Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are 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 generally are known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

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

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

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

Moody's applies the numerical modifiers 1, 2 and 3 to show relative standing
within the major rating categories, except in the Aaa category and in the
categories below B. The modifier 1 indicates a ranking for the security in the
higher end of a rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates a ranking in the lower end of a rating category.

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APPENDIX B

CERTAIN CHARACTERISTICS AND RISKS
OF FUTURES AND OPTIONS

In order to seek to hedge against changes in the value of its portfolio
securities, the Trust may from time to time engage in certain hedging and risk
management strategies. The Trust will engage in such activities from time to
time in BlackRock's discretion, and may not necessarily be engaging in such
activities when movements in interest rates that could affect the value of the
assets of the Trust occur. The Trust's ability to pursue certain of these
strategies may be limited by the Commodity Exchange Act, applicable
regulations of the Commodity Futures Trading Commission ("CFTC") and the
federal income tax requirements applicable to regulated investment companies.

PUT AND CALL OPTIONS ON SECURITIES AND INDICES

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

The Trust's ability to close out its position as a purchaser or seller of an
exchange-listed put or call option is dependent upon the existence of a liquid
secondary market. Among the possible reasons for the absence of a liquid
secondary market on an exchange are: (i) insufficient trading interest in

B-1
<PAGE>

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

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

FORWARD CURRENCY CONTRACTS

The Trust may enter into forward currency contracts to purchase or sell
foreign currencies for a fixed amount of U.S. dollars or another foreign
currency. A forward currency contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of
days (term) from the date of the forward currency contract agreed upon by the
parties, at a price set at the time the forward currency contract is entered
into. Forward currency contracts are traded directly between currency traders
(usually large commercial banks) and their customers.

The Trust may purchase a forward currency contract to lock in the U.S. dollar
price of a security denominated in a foreign currency that the Trust intends
to acquire. The Trust may sell a forward currency contract to lock in the U.S.
dollar equivalent of the proceeds from the anticipated sale of a security or a
dividend or interest payment denominated in a foreign currency. The Trust may
also use forward currency contracts to shift the Trust's exposure to foreign
currency exchange rate changes from one currency to another. For example, if
the Trust owns securities denominated in a foreign currency and BlackRock
believes that currency will decline relative to another currency, it might
enter into a forward currency contract to sell the appropriate amount of the
first foreign currency with payment to be made in the second currency. The
Trust may also purchase forward currency contracts to enhance income when
BlackRock anticipates that the foreign currency will appreciate in value but
securities denominated in that currency do not present attractive investment
opportunities.

B-2
<PAGE>

The Trust may also use forward currency contracts to hedge against a decline
in the value of existing investments denominated in a foreign currency. Such a
hedge would tend to offset both positive and negative currency fluctuations,
but would not offset changes in security values caused by other factors. The
Trust could also hedge the position by entering into a forward currency
contract to sell another currency expected to perform similarly to the
currency in which the Trust's existing investments are denominated. This type
of hedge could offer advantages in terms of cost, yield or efficiency, but may
not hedge currency exposure as effectively as a simple hedge into U.S.
dollars. This type of hedge may result in losses if the currency used to hedge
does not perform similarly to the currency in which the hedged securities are
denominated.

The Trust may also use forward currency contracts in one currency or a basket
of currencies to attempt to hedge against fluctuations in the value of
securities denominated in a different currency if BlackRock anticipates that
there will be a correlation between the two currencies.

The cost to the Trust of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are
involved. When the Trust enters into a forward currency contract, it relies on
the counterparty to make or take delivery of the underlying currency at the
maturity of the contract. Failure by the counterparty to do so would result in
the loss of some or all of any expected benefit of the transaction.

Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward
currency contracts only by negotiating directly with the counterparty. Thus,
there can be no assurance that the Trust will in fact be able to close out a
forward currency contract at a favorable price prior to maturity. In addition,
in the event of insolvency of the counterparty, the Trust might be unable to
close out a forward currency contract. In either event, the Trust would
continue to be subject to market risk with respect to the position, and would
continue to be required to maintain a position in securities denominated in
the foreign currency or to maintain cash or liquid assets in a segregated
account.

The precise matching of forward currency contract amounts and the value of the
securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the forward
currency contract has been established. Thus, the Trust might need to purchase
or sell foreign currencies in the spot (cash) market to the extent such
foreign currencies are not covered by forward currency contracts. The
projection of short term currency market movements is extremely difficult, and
the successful execution of a short term hedging strategy is highly uncertain.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

Characteristics. The Trust may purchase and sell futures contracts and
purchase put and call options on such futures contracts traded on recognized
domestic exchanges as a hedge against anticipated interest rate changes or
other market movements and future risk management. The sale of a futures
contract creates an obligation by the Trust, as seller, to deliver the
specific type of financial instrument called for in the contract at a
specified future time for a specified price. Options on futures

B-3
<PAGE>

contracts are similar to options on securities except that an option on a
futures contract gives the purchaser the right in return for the premium paid
to assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put).

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

Limitations on Use of Futures Contracts and Options on Futures Contracts. The
Trust's use of futures contracts and options on futures contracts will in all
cases be consistent with applicable regulatory requirements and in particular,
the rules and regulations of the CFTC and will be entered into only for bona
fide hedging purposes or other appropriate risk management and duration
management or other appropriate portfolio strategies. In addition, the Trust
may not sell futures contracts if the value of such futures contracts exceeds
the total market value of the Trust's portfolio securities.

The Trust will not engage in transactions in futures contracts or options
thereon for speculative purposes but only for hedging or to manage against
changes resulting from market conditions in the values of securities in its
portfolio. In addition, the Trust will not enter into a futures contract or
option thereon if, immediately thereafter, the sum of the amount of its
initial deposits and premiums on open contracts and options would exceed 5% of
the Trust's total assets (taken at current value); provided, however, that in
the case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. Also,
when required, a segregated account of cash or cash equivalents will be
maintained and marked to market in an amount equal to the market value of the
contract. BlackRock reserves the right to comply with such different standards
as may be established from time to time by CFTC rules and regulations with
respect to the purchase and sale of futures contracts and options thereon.

Segregation and Cover Requirements. Futures contracts, interest rate swaps,
caps, floors and collars, and options on securities, indices and futures
contracts sold by the Trust are generally subject to segregation and coverage
requirements established by either the CFTC or the Commission, with the result
that, if the Trust does not hold the instrument underlying the futures
contract or option, the Trust will be required to segregate on an ongoing
basis with its custodian, cash, U.S. Government securities, or other liquid
high grade debt obligations in an amount at least equal to the Trust's
obligations with respect to such instruments. Such amounts will fluctuate as
the market value of the obligations increases or decreases. The segregation
requirement can result in the Trust maintaining positions it would otherwise
liquidate and consequently segregating assets with respect thereto at a time
when it might be disadvantageous to do so.

B-4
<PAGE>

Strategic Transactions present certain risks. In particular, the variable
degree of correlation between price movements of hedging instruments and price
movements in the position being hedged creates the possibility that losses on
the hedge may be greater than gains in the value of the Trust's positions. In
addition, certain hedging instruments and markets may not be liquid in all
circumstances. As a result, in volatile markets, the Trust may not be able to
close out a transaction in certain of these instruments without incurring
losses substantially greater than the initial deposit. Although the
contemplated use of these instruments should tend to minimize the risk of loss
due to a decline in the value of the hedged position, at the same time they
tend to limit any potential gain which might result from an increase in the
value of such position. The ability of the Trust to hedge successfully will
depend on BlackRock's ability to predict pertinent market movements, which
cannot be assured. Finally, the daily variation margin deposit requirements in
futures contracts that the Trust has sold create an ongoing greater potential
financial risk than do options transactions, where the exposure is limited to
the cost of the initial premium and transaction costs paid by the Trust.
Losses due to Strategic Transactions will reduce net asset value.

The Trust's investments in Strategic Transactions may be limited or affected
by certain provisions of the Code.

B-5
<PAGE>

APPENDIX C

DESCRIPTION OF MORTGAGE-RELATED SECURITIES

Mortgage-Related Securities. Mortgage-related securities are a form of
derivative collateralized by pools of commercial or residential mortgages.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations. These
securities may include complex instruments such as collateralized mortgage
obligations, stripped mortgage-backed securities, mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs"),
adjustable rate mortgages, real estate investment trusts ("REITs"), including
debt and preferred stock issued by REITs, as well as other real estate-related
securities. The mortgage-related securities in which the Trust may invest
include those with fixed, floating or variable interest rates, those with
interest rates that change based on multiples of changes in a specified index
of interest rates and those with interest rates that change inversely to
changes in interest rates, as well as those that do not bear interest.

Government-Agency Securities. Mortgage-related securities issued by the
Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-
Through Certificates (also known as "Ginnie Maes") which are guaranteed as to
the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-
owned U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.

Government-Related Securities. Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA Guaranteed
Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are
solely the obligations of FNMA and are not backed by or entitled to the full
faith and credit of the United States. FNMA is a government-sponsored
organization owned entirely by private shareholders. Fannie Maes are
guaranteed as to timely payment of principal and interest by FNMA. Mortgage-
related securities issued by the Federal Home Loan Mortgage Corporation
("FHLMC") include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the United
States created pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States
or by any Federal Home Loan Bank and do not constitute a debt or obligation of
the United States or of any Federal Home Loan Bank. Freddie Macs entitle the
holder to timely payment of interest, which is guaranteed by FHLMC. FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When FHLMC does not guarantee
timely payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.

Private Entity Securities. These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely
payment of principal and interest on mortgage-related securities backed by
pools created by non-governmental issuers often is supported partially by
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance. The insurance

C-1
<PAGE>

and guarantees are issued by government entities, private insurers and the
mortgage poolers. There can be no assurance that the private insurers or
mortgage poolers can meet their obligations under the policies, so that if the
issuers default on their obligations the holders of the security could sustain
a loss. No insurance or guarantee covers the Trust or the price of the Trust's
shares. Mortgage-related securities issued by non-governmental issuers
generally offer a higher rate of interest than government-agency and
government-related securities because there are no direct or indirect
government guarantees of payment.

Collateralized Mortgage Obligations ("CMOs"). A CMO is a multi-class bond
backed by a pool of mortgage pass-through certificates or mortgage loans. CMOs
may be collateralized by (a) Ginnie Mae, Fannie Mae, or Freddie Mac pass-
through certificates, (b) unsecuritized mortgage loans insured by the Federal
Housing Administration or guaranteed by the Department of Veterans' Affairs,
(c) unsecuritized conventional mortgages, (d) other mortgage-related
securities, or (e) any combination thereof. Each class of CMOs, often referred
to as a "tranche," is issued at a specific coupon rate and has a stated
maturity or final distribution date. Principal prepayments on collateral
underlying a CMO may cause it to be retired substantially earlier than the
stated maturities or final distribution dates. The principal and interest on
the underlying mortgages may be allocated among the several classes of a
series of a CMO in many ways. One or more tranches of a CMO may have coupon
rates which reset periodically at a specified increment over an index, such as
the London Interbank Offered Rate ("LIBOR") (or sometimes more than one
index). These floating rate CMOs typically are issued with lifetime caps on
the coupon rate thereon. The Trust also may invest in inverse floating rate
CMOs. Inverse floating rate CMOs constitute a tranche of a CMO with a coupon
rate that moves in the reverse direction to an applicable index such as LIBOR.
Accordingly, the coupon rate thereon will increase as interest rates decrease.
Inverse floating rate CMOs are typically more volatile than fixed or floating
rate tranches of CMOs. Many inverse floating rate CMOs have coupons that move
inversely to a multiple of the applicable indexes. The effect of the coupon
varying inversely to a multiple of an applicable index creates a leverage
factor. Inverse floaters based on multiples of a stated index are designed to
be highly sensitive to changes in interest rates and can subject the holders
thereof to extreme reductions of yield and loss of principal. The markets for
inverse floating rate CMOs with highly leveraged characteristics at times may
be very thin. The Trust's ability to dispose of its positions in such
securities will depend on the degree of liquidity in the markets for such
securities. It is impossible to predict the amount of trading interest that
may exist in such securities, and therefore the future degree of liquidity.

Stripped Mortgage-Backed Securities. The Trust also may invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are created by
segregating the cash flows from underlying mortgage loans or mortgage
securities to create two or more new securities, each with a specified
percentage of the underlying security's principal or interest payments.
Mortgage securities may be partially stripped so that each investor class
receives some interest and some principal. When securities are completely
stripped, however, all of the interest is distributed to holders of one type
of security, known as an interest-only security, or IO, and all of the
principal is distributed to holders of another type of security known as a
principal-only security, or PO. Strips can be created in a pass-through
structure or as tranches of a CMO. The yields to maturity on IOs and POs are
very sensitive to the rate of principal payments (including prepayments) on
the related underlying mortgage assets. If the underlying mortgage assets
experience greater than anticipated prepayments of principal, the

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Trust may not fully recoup its initial investment in IOs. Conversely, if the
underlying mortgage assets experience less than anticipated prepayments of
principal, the yield on POs could be materially and adversely affected.

Real Estate Investment Trusts. A REIT is a corporation, or a business trust
that would otherwise be taxed as a corporation, which meets the definitional
requirements of the Internal Revenue Code of 1986, as amended (the "Code").
The Code permits a qualifying REIT to deduct dividends paid, thereby
effectively eliminating corporate level federal income tax and making the REIT
a pass-through vehicle for federal income tax purposes. To meet the
definitional requirements of the Code, a REIT must, among other things, invest
substantially all of its assets in interests in real estate (including
mortgages and other REITs) or cash and government securities, derive most of
its income from rents from real property or interest on loans secured by
mortgages on real property, and distribute to shareholders annually a
substantial portion of its otherwise taxable income. REITs are characterized
as equity REITs, mortgage REITs and hybrid REITs. Equity REITs, which may
include operating or finance companies, own real estate directly and the value
of, and income earned by, the REITs depends upon the income of the underlying
properties and the rental income they earn. Equity REITs also can realize
capital gains (or losses) by selling properties that have appreciated (or
depreciated) in value. Mortgage REITs can make construction, development or
long term mortgage loans and are sensitive to the credit quality of the
borrower. Mortgage REITs derive their income from interest payments on such
loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs, generally by holding both ownership interests and mortgage interests in
real estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. They also are
subject to heavy cash flow dependency, defaults by borrowers or tenants, self-
liquidation and the possibility of failing to qualify for tax-free status
under the Code or to maintain exemption from the Investment Company Act.

Adjustable-Rate Mortgage Loans ("ARMs"). ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest
rate for a specified period of time, generally for either the first three,
six, twelve, thirteen, thirty-six, or sixty scheduled monthly payments.
Thereafter, the interest rates are subject to periodic adjustment based on
changes in an index. ARMs typically have minimum and maximum rates beyond
which the mortgage interest rate may not vary over the lifetime of the loans.
Certain ARMs provide for additional limitations on the maximum amount by which
the mortgage interest rate may adjust for any single adjustment period.
Negatively amortizing ARMs may provide limitations on changes in the required
monthly payment. Limitations on monthly payments can result in monthly
payments that are greater or less than the amount necessary to amortize a
negatively amortizing ARM by its maturity at the interest rate in effect
during any particular month.

Other Mortgage-Related Securities. Other mortgage-related securities include
securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage
loans on real property, including CMO residuals. Other mortgage-related
securities may be equity or debt securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.

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INVESTORS SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
NEITHER THE TRUST, BLACKROCK ADVISORS, INC. NOR ANY OF THE UNDERWRITERS HAVE
AUTHORIZED ANYONE TO PROVIDE INVESTORS WITH DIFFERENT INFORMATION. NO OFFER TO
SELL SECURITIES IS BEING MADE IN ANY JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED. INVESTORS SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS ACCURATE AS OF ANY OTHER DATE THAN THE DATE OF THIS
PROSPECTUS.

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PROSPECTUS

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UNTIL JANUARY 11, 1999, ALL DEALERS EFFECTING TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

December 17, 1998

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5,800,000 Shares

THE BLACKROCK
HIGH YIELD TRUST

[LOGO OF BLACKROCK]

PRUDENTIAL SECURITIES INCORPORATED

MERRILL LYNCH & CO.

PAINEWEBBER INCORPORATED

SALOMON SMITH BARNEY

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