- --------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- --------------------------------------------------------------------------------
November 30, 1999
Dear Shareholder:
After easing monetary policy three times during the fourth quarter of 1998,
the Federal Reserve reversed its trend by raising the Fed funds target rate 75
basis points (to 5.50%) over the course of 1999 in response to robust GDP, low
unemployment and rising equity prices. U.S. Treasury yields rose significantly
during the past twelve months, with the yield of the 30-year Treasury rising
above 6.00% for the first time since May 1998.
Despite the rise in Treasury yields, continued strong economic growth may
spur the Federal Reserve to proactively fight perceived inflation through
continued monetary policy tightening in 2000. Until the inflation picture
becomes clearer, we expect interest rates to remain largely range-bound.
Accordingly, we will continue to seek the most attractive relative value
opportunities and utilize our proprietary risk management systems to help the
Trust to achieve its investment objectives.
This report contains a summary of market conditions during the annual
period and a review of portfolio strategy by your Trust's managers in addition
to the Trust's audited financial statements and a detailed portfolio list of the
portfolio's holdings. Continued thanks for your confidence in BlackRock. We
appreciate the opportunity to help you achieve your long-term investment goals.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
- -------------------- ------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
November 30, 1999
Dear Shareholder:
We are pleased to present the first annual report for The BlackRock High
Yield Trust ("the Trust") for the period between the Trust's commencement of
investment operations on December 23, 1998 and the fiscal year-end on October
31, 1999. We would like to take this opportunity to review the Trust's stock
price and net asset value (NAV) performance, summarize market developments and
discuss the Trust's portfolio management activity since inception.
The Trust is a diversified, actively managed closed-end bond fund whose
shares are traded on the New York Stock Exchange under the symbol "BHY". The
Trust's primary investment objective is to provide high current income, and its
secondary objective is capital appreciation. The Trust seeks to achieve this
objective by investing at least 80% of the portfolio in high yield or "junk
bonds" (rated "BB" or below by a major rating agency or of equivalent quality).
The table below summarizes the changes in the Trust's stock price and NAV
since commencement of investment operations:
<TABLE>
<CAPTION>
-------------------------------------------------------------
10/31/99 12/23/98 CHANGE HIGH LOW
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
STOCK PRICE $ 12.50 $ 15.06 (17.00%) $ 15.125 $ 12.0625
- -------------------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $ 13.58 $ 14.91 (8.92%) $ 15.39 $ 13.57
- -------------------------------------------------------------------------------------------
10-YEAR U.S. TREASURY NOTE 6.02% 4.80% 25.42% 6.24 % 4.61%
- -------------------------------------------------------------------------------------------
</TABLE>
THE FIXED INCOME MARKETS
The US economy sustained its growth during the past twelve months, as U.S.
exports and manufacturing continued to rebound. Additionally, consumer strength
remains an important contributor to economic growth as low unemployment and
rising incomes fuel domestic demand. After lowering interest rates three times
in the second half of 1998, and despite inflation concerns as measured by CPI
and PPI remaining relatively benign, the Federal Reserve adopted a tightening
bias and raised its target for the Federal funds rate from 4.75% to 5.50%
between June and November 1999. In a statement accompanying the latest
tightening on November 16, it was indicated that the Fed believes that growth
"continues in excess of the economy's growth potential"; nevertheless, the Fed
reversed their tightening stance by adopting a neutral bias.
After a brief rally in late 1998, Treasury yields rose dramatically during
1999. Over the period, the yield of the 30-year Treasury increased by 100 basis
points, closing at 6.16% on October 31. Bond prices, which move inversely to
their yields, were punished by the constant threat of inflation in response to
the strong economic data and the market's uncertainty over the Fed's policy
throughout the year. Recently, a weaker dollar, higher commodity prices and
strong gains in the U.S. and European equity markets have depressed overall
demand for fixed income securities.
For the period, high yield bonds as measured by the LEHMAN BROTHERS HIGH
YIELD INDEX returned 0.63%, outperforming both Treasuries (-0.82% as measured by
the MERRILL U.S. TREASURY MASTER INDEX) and the -0.35% return for the broader
investment grade bond market as measured by the LEHMAN BROTHERS AGGREGATE INDEX.
However, much of this outperformance occurred during the first half of the
period, as investors began to shun credit risk and embrace liquidity as year-end
approached and Y2K related concerns increased. During the past few months,
overall high yield bond demand has weakened, leading to significant outflows
from mutual funds. Within the high yield sector, investors emphasized higher
rated non-investment grade credits (BB- and B-rated), as lower rated issuers
scrambled to find financing sources.
THE TRUST'S PORTFOLIO AND INVESTMENT STRATEGY
The Trust's portfolio is actively managed to diversify exposure to various
sectors, issuers and security types. BlackRock's investment strategy emphasizes
a relative value approach, which allows the Trust to capitalize upon changing
market conditions by rotating industry sectors, credits and coupons.
2
<PAGE>
Since our last report, the Trust has continued to focus on companies with
consistent revenue streams that we believe will offer the Trust stable cash
flows. Accordingly, the Trust's largest sector weighting has been in the
telecommunications sector, which has benefited from improving fundamentals and
the potential for consolidation. The Portfolio has been underweight in the
healthcare and textile sectors, which have been weak performers. With respect to
credit allocation, the Trust's strategy to emphasize upper and middle tier
credit sectors while underweighting CCC-rated securities enhanced returns during
the period.
The following charts show the Trust's current asset composition and credit
quality allocations:
- ----------------------------------------------
STANDARD & POOR'S/MOODY'S
CREDIT RATING OCTOBER 31, 1999
- ----------------------------------------------
BB/Ba 11%
- ----------------------------------------------
B/B 64%
- ----------------------------------------------
CCC/Caa 7%
- ----------------------------------------------
Not Rated 18%
- ----------------------------------------------
We look forward to continuing to manage the Trust to benefit from the
opportunities available to investors in the investment grade municipal market.
We thank you for your investment and continued interest in The BlackRock High
Yield Trust. Please feel free to call our marketing center at (800) 227-7BFM
(7236) if you have any specific questions which were not addressed in this
report.
Sincerely yours,
/s/ Robert S. Kapito /s/ Dennis Schaney
- -------------------- ------------------
Robert S. Kapito Dennis Schaney
Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager
BlackRock Financial Management, Inc. BlackRock Financial Management, Inc.
- --------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
- --------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BHY
- --------------------------------------------------------------------------------
Initial Offering Date: December 12, 1998
- --------------------------------------------------------------------------------
Closing Stock Price as of 10/31/99: $ 12.50
- --------------------------------------------------------------------------------
Net Asset Value as of 10/31/99: $ 13.58
- --------------------------------------------------------------------------------
Yield on Closing Stock Price as of 10/31/99 ($12.50)1: 12.90%
- --------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $ 0.134375
- --------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $ 1.6125
- --------------------------------------------------------------------------------
1 Yield on closing stock price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2 The distribution is not constant and is subject to change.
3
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- ---------------- --------------- ------------------------------------------- -------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS-144.5%
CORPORATE BONDS-139.6%
AERO & DEFENSE-2.2%
B- $ 1,000 Condor Systems, Inc.**,
Sr. Sub. Note,
11.88%, 5/1/09 .......................... $ 880,000
B 1,000 Worldwide Flight Services Inc.**,
Sr. Note,
12.25%, 8/15/07 ......................... 975,000
----------
1,855,000
----------
AIR TRANSPORT-2.2%
B+ 2,000 Amtran, Inc., Sr. Note,
9.63%, 12/15/05 ......................... 1,890,000
----------
AUTOMOTIVE-6.7%
B 2,000 Group 1 Automotive, Inc.,
Sr. Sub. Note,
10.88%, 3/1/09 .......................... 1,910,000
B2 4,000 Sonic Automotive, Inc., Sr. Sub. Note,
11.00%, 8/1/08 .......................... 3,850,000
----------
5,760,000
----------
BUILDING & DEVELOPMENT-8.3%
Ba1 3,000 D. R. Horton, Inc., Sr. Note,
8.00%, 2/1/09 ........................... 2,655,000
B- 2,000 Formica Corp., Sr. Note,
10.875%, 3/1/09 ......................... 1,800,000
BB- 3,000 United States Home Corp., Sr. Sub.
Note, 8.88%, 2/15/09 ..................... 2,632,500
----------
7,087,500
----------
CABLE TV-10.6%
B 4,000 Echostar DBS Corp., Sr. Note,
9.38%, 2/1/09 ........................... 3,940,000
B+ 2,000 James Cable Partners LP,
Sr. Note, Ser. B,
10.75%, 8/15/04 ........................ 1,995,000
NR 2,000 Knology Holdings, Inc., Sr. Note,
(11.875% commencing 10/15/02),
Zero Coupon, 10/15/07 .................. 1,160,000
United Pan-Europe**, Sr. Notes, ...........
B2 1,500 10.88%, 8/1/09 .......................... 1,462,500
B2 1,000 (12.50% commencing 8/1/04),
Zero Coupon, 8/1/09 ..................... 525,000
----------
9,082,500
----------
CHEMICAL-3.2%
B+ 6,440 Huntsman ICI Chemicals LLC**,
Sr. Note, Zero Coupon, 12/31/09 ........ 1,746,850
BB 1,000 Lyondell Chemical Co., Sr. Sec. Note,
Ser. A, 9.63%, 5/1/07 ................... 1,002,500
----------
2,749,350
----------
CLOTHING & TEXTILES-11.6%
NR 3,500 Kasper ASL Ltd., Sr. Note,
12.75%, 3/31/04 ......................... 3,377,500
B- 1,000 St. John Knits International Inc.**,
Sr. Sub. Note,
12.50%, 7/1/09 .......................... 870,000
B- 2,000 Supreme International Corp.,
Sr. Sub. Note,
12.25%, 4/1/06 .......................... 1,930,000
B- 4,000 Triarc Consumer Products Group,
LLC**, Sr. Sub. Note,
10.25%, 2/15/09 ......................... 3,780,000
----------
9,957,500
----------
COSMETICS & TOILETRIES-2.0%
B- 3,250 Revlon Consumer Products Corp.,
Sr. Sub. Note,
8.63%, 2/1/08 ........................... 1,722,500
----------
ELECTRONICS-4.2%
BB- 2,000 Knowles Electronics Inc**,
Sr. Sub. Note,
13.13%, 10/15/09 ........................ 1,960,000
BB+ 1,800 Toll Corp., Sr. Sub. Note,
8.00%, 5/1/09 ........................... 1,611,000
----------
3,571,000
----------
FARMING & AGRICULTURE-3.8%
B 3,000 Ainsworth Lumber Co. Ltd.,
Sr. Sec. Note,
12.50%, 7/15/07 ......................... 3,240,000
----------
FINANCIAL INTERMEDIARIES-13.2%
Ba3 2,500 First Dominion Funding II**,
Ser. 1-A, Class D-1,
11.61%, 4/25/14 ......................... 2,250,000
B- 2,000 Penhall International Corp., Sr. Note,
12.00%, 8/1/06 .......................... 1,990,000
Ba3 2,500 Stanfield Co. Ltd.**,
Note, Class D-1,
11.62%, 7/15/14 ......................... 2,475,000
B+ 3,000 Willis Corroon Group, Sr.
Note, 9.00%, 2/1/09 ..................... 2,655,000
Baa3 2,000 Zais Investment Grade Ltd.**,
Note, Class C,
9.95%, 9/23/14 .......................... 1,964,375
----------
11,334,375
----------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- ------------ ------------ ------------------------------------------------ ------------
<S> <C> <C> <C>
FOOD SERVICE-2.6%
B- $1,250 Ameriserve Food Distribution Inc.,
Sr. Sub. Note,
8.88%, 10/15/06 .............................. $ 906,250
CCC+ 1,200 Nebco Evans Holding Co., Sr. Sub. Note,
(12.375% commencing 7/15/02),
Zero Coupon, 7/15/07 ......................... 360,000
BB- 1,000 Sbarro Inc.**, Sr. Note,
11.00%, 9/15/09 .............................. 982,500
-----------
2,248,750
-----------
FOREST PRODUCTS-2.6%
CCC+ 2,500 Repap New Brunswick, Inc., 2nd
Priority Sr. Sec. Note,
10.63%, 4/15/05 .............................. 2,218,750
-----------
HEALTH CARE-6.6%
B- 2,000 Concentra Operating Corp.**,
Sr. Sub. Note, Ser. A,
13.00%, 8/15/09 .............................. 1,800,000
CCC+ 2,635 Fountain View, Inc., Sr. Sub. Note,
11.25%, 4/15/08 .............................. 1,884,025
BB- 2,000 Polaroid Corp., Note, 11.50%, 2/15/06 .......... 1,980,000
-----------
5,664,025
-----------
HOME FURNISHING- 1.1%
B 1,000 Mattress Discounters Corp.**, Note,
12.63%, 7/15/07 .............................. 940,000
-----------
HOTELS & CASINO-2.0%
Ba3 2,000 Meristar Hospitality Corp.,
Sr. Sub. Note,
8.75%, 8/15/07 ............................... 1,750,000
-----------
INDUSTRIAL EQUIPMENT-8.4%
B- 1,500 Muzak LP, Sr. Sub. Note,
9.88%, 3/15/09 ............................... 1,440,000
B 3,000 National Equipment Services, Inc.,
Sr. Sub. Note,
Ser. C, 10.00%, 11/30/04 ..................... 2,940,000
B- 1,000 Precision Partners, Inc.**,
Sr. Sub. Note,
12.00%, 3/15/09 .............................. 880,000
BB+ 1,000 Veritas DGC Inc.,
Sr. Note, Ser. C, 9.75%, 10/15/03 ............ 1,010,000
B 1,000 WEC Co. Inc.**, Sr. Note,
12.00%, 7/15/09 .............................. 920,000
-----------
7,190,000
-----------
LEISURE-4.2%
B- 3,000 AMC Entertainment Inc., Sr. Sub. Note,
9.50%, 3/15/09 ............................... 2,655,000
B- 1,000 Phoenix Color Corp.,
Sr. Sub. Note,
10.38%, 2/1/09 ............................... 927,500
-----------
3,582,500
-----------
NONFERROUS METALS & MINERALS-2.4%
B+ 2,250 Wheeling Pittsburgh Corp., Sr. Note,
9.25%, 11/15/07 .............................. 2,092,500
-----------
OIL & GAS-6.1%
B+ 2,000 Pogo Producing Co., Sr. Sub. Note,
10.38%, 2/15/09 .............................. 2,070,000
Ba3 3,000 R&B Falcon Corp., Sr. Note,
12.25%, 3/15/06 .............................. 3,180,000
-----------
5,250,000
-----------
RETAILERS-4.0%
B- 4,000 Hollywood Entertainment Corp.,
Sr. Sub. Note, Ser. B,
10.63%, 8/15/04 .............................. 3,400,000
-----------
STEEL-4.6%
BB- 2,000 Golden Northwest Aluminum Inc.,
1st Mortgage Note, 12.00%,
12/15/06 ..................................... 2,050,000
B 2,000 Republic Technologies International,
Sr. Sec. Note, 13.75%, 7/15/09 ............... 1,850,000
-----------
3,900,000
-----------
TELECOMMUNICATION-27.0%
B 1,540 Allegiance Telecom Inc., Sr. Note,
Ser. B, (11.75% commencing
2/15/03), Zero Coupon, 2/15/08 ............... 1,039,500
B 3,500 Globenet Comm. Group Ltd.**,
Sr. Note, 13.00%, 7/15/07 .................... 3,465,000
B- 1,000 Hyperion Telecommunications,
Sr. Note, (13.00% commencing
4/15/01), Zero Coupon, 4/15/03 ............... 862,500
B3 2,000 Intermedia Communications Inc.,
Sr. Sub. Note, (12.25%
commencing 3/01/04),
Zero Coupon, 3/1/09 .......................... 1,080,000
B 3,500 IPC Information Systems Inc., Sr. Note
(10,875% commencing 11/1/03),
Zero Coupon, 5/1/08 .......................... 2,607,500
B3 5,000 Nextel Partners Inc., Sr. Note,
(14.80% commencing 2/1/04),
Zero Coupon, 2/1/09 .......................... 3,137,500
B 2,000 Nextlink Communications, Sr. Note,
12.50%, 4/15/06 .............................. 2,125,000
NR 3,000 Northeast Optic, Sr. Note,
12.75%, 8/15/08 .............................. 3,090,000
B 5,000 Pinnacle Holdings, Inc., Sr. Note,
(10.00% commencing 3/15/03),
Zero Coupon, 3/15/08 ......................... 2,950,000
CCC 3,000 Teligent, Inc., Sr. Note,
11.50%, 12/1/07 .............................. 2,752,500
-----------
23,109,500
-----------
TOTAL CORPORATE BONDS-139.6%
(cost $125,568,452) .......................... 119,595,750
-----------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
RATING* VALUE
(UNAUDITED) SHARES DESCRIPTION (NOTE 1)
- ------------- --------------- --------------------------------------- ----------------
<S> <C> <C> <C>
PREFERRED STOCK-2.5%
TELECOMMUNICATION
B1 1,032 Adelphia Business Solutions,**
Ser. B, 12.87%, 10/15/07 PIK ........ $ 939,290
CCC 1,201 Nextel Communications, Inc.,**
Ser. E, 11.13%, 2/15/10 PIK ......... 1,225,020
-----------
TOTAL PREFERRED STOCK-2.5%
(cost $2,082,804).................... 2,164,310
-----------
PRINCIPAL
AMOUNT
(000)
--------
SENIOR BANK LOANS-2.4%
HEALTH CARE
B $2,000 Oxford Health Plans, Inc.,
9.34%, 5/13/03
(cost $2,008,532) ..................... 2,010,000
-----------
TOTAL LONG-TERM INVESTMENTS-144.5%
(cost $129,659,788) ................... 123,770,060
-----------
SHORT-TERM INVESTMENTS-0.4%
DISCOUNT NOTES
374 Federal Home Loan Bank,
5.16%, 11/1/99
(cost $374,000) ....................... 374,000
-----------
TOTAL INVESTMENTS-144.9%
(cost $130,033,788) ................... 124,144,060
-----------
Liabilities in excess of other assets-
(44.9)% ............................... (38,491,894)
NET ASSETS-100% ......................... $85,652,166
===========
</TABLE>
- ---------------------
*Using the higher of Standard & Poor's, Moody's or Fitch's rating.
**Private placements restricted as to resale.
- ------------------------------------------------------
KEY TO ABBREVIATIONS:
PIK- Payment in Kind.
- ------------------------------------------------------
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $130,033,788) (Note 1) $124,144,060
Interest receivable .............................. 2,719,779
Other assets ..................................... 387,190
------------
127,251,029
------------
LIABILITIES
Loan payable (Note 4) ............................ 41,000,000
Interest payable ................................. 215,946
Investment advisory fee payable (Note 2) ......... 114,443
Due to custodian ................................. 48,332
Administration fee payable (Note 2) .............. 10,899
Other accrued expenses ........................... 209,243
------------
41,598,863
------------
NET ASSETS ....................................... $85,652,166
===========
Net assets were comprised of:
Common stock, at par (Note 5) ................... $ 6,307
Paid-in capital in excess of par ................ 94,467,559
------------
94,473,866
Undistributed net investment income ............. 759,704
Accumulated net realized losses ................. (3,691,676)
Net unrealized depreciation ..................... (5,889,728)
------------
Net assets, October 31, 1999 ..................... $85,652,166
===========
NET ASSET VALUE PER SHARE:
($85,652,166 \d 6,306,667 shares of
common stock issued and outstanding) ........... $ 13.58
============
- --------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 23, 1998*
THROUGH OCTOBER 31, 1999
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest (net of premium amortization of $66,872
and interest expense of $1,650,851) .............. $ 9,460,817
Dividends ......................................... 239,725
-----------
9,700,542
-----------
Expenses
Investment advisory ............................... 1,138,034
Administration .................................... 108,384
Legal ............................................. 140,000
Organization expense (Note 1) ..................... 63,500
Directors ......................................... 35,000
Custodian ......................................... 30,000
Reports to shareholders ........................... 30,000
Transfer agent .................................... 20,000
Audit ............................................. 18,000
Miscellaneous ..................................... 40,649
-----------
Total operating expenses ........................... 1,623,567
-----------
Reimbursement from BlackRock Advisers, Inc.
(Note 1) .......................................... (63,500)
-----------
Total operating expenses after reimbursement ...... 1,560,067
-----------
Net investment income ............................... 8,140,475
-----------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (NOTE 3)
Net realized loss on investments .................... (3,691,676)
Net change in unrealized depreciation on
investments ....................................... (5,889,728)
-----------
Net loss on investments ............................. (9,581,404)
-----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ......................... $(1,440,929)
===========
- ----------------
* Commencement of investment operations (Note 1).
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
STATEMENT OF CASH FLOWS
FOR THE PERIOD DECEMBER 23, 1998*
THROUGH OCTOBER 31, 1999
- --------------------------------------------------------------------------------
RECONCILIATION OF NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS TO NET CASH FLOWS
USED FOR OPERATING ACTIVITIES
Net decrease in net assets resulting from operations ......... $ (1,440,929)
--------------
Increase in investments ...................................... (133,725,464)
Net realized loss ............................................ 3,691,676
Increase in unrealized depreciation .......................... 5,889,728
Increase in interest receivable .............................. (2,719,779)
Increase in interest payable ................................. 215,946
Increase in other assets ..................................... (213,690)
Increase in accrued expenses and other liabilities ........... 209,417
--------------
Total adjustments ........................................... (126,652,166)
--------------
Net cash flows used for operating activities ................. $ (128,093,095)
==============
INCREASE (DECREASE) IN CASH
Net cash flows used for operating activities ................. $ (128,093,095)
--------------
Cash flows provided by financing activities:
Net proceeds from public offering of Trust shares 94,373,866
Increase in loans ........................................... 41,000,000
Cash dividends paid ......................................... (7,380,771)
--------------
Net cash flows provided by financing activities .............. 127,993,095
--------------
Net decrease in cash ........................................ (100,000)
Cash at beginning of period ................................. 100,000
--------------
Cash at end of period ....................................... $ -
==============
- ----------------
* Commencement of investment operations (Note 1).
- --------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
STATEMENTS OF CHANGES
IN NET ASSETS
FOR THE PERIOD DECEMBER 23, 1998*
THROUGH OCTOBER 31, 1999
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income ......... $ 8,140,475
Net realized loss ............. (3,691,676)
Net change in unrealized
depreciation ................. (5,889,728)
-----------
Net decrease in
net assets resulting from
operations ................... (1,440,929)
Dividends from
net investment income ......... (7,380,771)
Net proceeds from public offering
of Trust shares ............... 94,373,866
-----------
Total increase .................. 85,552,166
-----------
NET ASSETS
Beginning of period ............. 100,000
-----------
End of period ................... $85,652,166
===========
- ----------------
* Commencement of investment operations (Note 1).
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
DECEMBER 23, 1998**
THROUGH
OCTOBER 31, 1999
---------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ........................ $ 15.00
----------
Net investment income (net of $0.26 interest expense) ....... 1.29
Net realized and unrealized loss on investments ............. (1.52)
----------
Net decrease from investment operations ..................... (0.23)
----------
Dividends from net investment income ........................ (1.17)
----------
Capital charge with respect to issuance of shares ........... (.02)
----------
Net asset value, end of period* ............................. $ 13.58
==========
Per share market value, end of period* ...................... $ 12.50
==========
TOTAL INVESTMENT RETURN+ ................................... (9.68)%
==========
RATIOS TO AVERAGE NET ASSETS:
Operating expenses (net of reimbursement)@ .................. 1.98%+++
Net investment income ....................................... 10.34%+++
SUPPLEMENTAL DATA:
Average net assets (in thousands) ........................... $ 92,116
Portfolio turnover .......................................... 121%
Net assets, end of period (in thousands) .................... $ 85,652
Loans outstanding, end of period (in thousands) ............. $ 41,000
Asset coverage++ ............................................ $ 3,094
- ----------
* Net asset value and market value are published in BARRON'S on Saturday and
THE WALL STREET JOURNAL each Monday.
** Commencement of investment operations (Note 1).
@ The ratio of operating expenses, including interest expense to average net
assets was 4.08% +++. The ratio of operating expenses including interest
expense prior to reimbursement of expenses was 4.16%+++.
+ Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day and a sale at the current market
price on the last day of the period reported. Dividends and distributions,
if any, are assumed for purposes of this calculation, to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment return does not reflect brokerage commissions. Total investment
return for periods less than one full year are not annualized.
++ Per $1,000 of loans outstanding.
+++ Annualized.
The information above represents the audited operating performance for a share
of common stock outstanding, total investment return, ratios to average net
assets and other supplemental data for the period indicated. This information
has been determined based upon financial information provided in the financial
statements and market value data for the Trust's shares.
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION & ACCOUNTING POLICIES
The BlackRock High Yield Trust (the "Trust"), was orga& nized on August 10, 1998
as a Delaware business trust, and is registered as a diversified, closed-end
management investment company under the Investment Company Act of 1940. The
Trust had no transactions until December 15, 1998 when it sold 6,667 shares of
common stock for $100,000 to BlackRock Financial Management, Inc. Investment
operations commenced on December 23, 1998. The investment objective of the Trust
is to generate high current income with a secondary objective of capital
appreciation. The ability of issuers of debt securities held by the Trust to
meet their obligations may be affected by economic developments in a specific
industry or region. No assurance can be given that the Trust's investment
objective will be achieved.
The following is a summary of significant accounting policies followed by
the Trust.
SECURITIES VALUATION: The Trust values debt securities, preferred stock and
service bank loans on the basis of current market quotations provided by dealers
or pricing services approved by the Trust's Board of Directors. In determining
the value of a particular security, pricing services may use certain information
with respect to transactions in such securities, quotations from dealers, market
transactions in comparable securities, various relationships observed in the
market between securities, and calculated yield measures based on valuation
technology commonly employed in the market for such securities. Any securities
or other assets for which such current market quotations are not readily
available are valued at fair value as determined in good faith under procedures
established by and under the general supervision and responsibility of the
Trust's Board of Directors.
Short-term securities which mature in 60 days or less are valued at
amortized cost, if their term to maturity from date of purchase is 60 days or
less. Short-term securities with a term to maturity greater than 60 days from
the date of purchase are valued at current market quotations until maturity or
disposition.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Trust accretes discount or amortizes premium on securities
purchased using the interest method. Dividend income is recorded on the
ex-dividend date. Expenses are recorded on the accrual basis which may require
the use of certain estimates by management.
TAXES: It is the Trust's intention to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute sufficient amounts of its taxable income to shareholders. Therefore,
no Federal income tax provision is required.
DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and
distributions monthly, first from net investment income then from realized
short-term capital gains and other sources, if necessary. Net long-term capital
gains, if any, in excess of loss carryforwards are distributed at least
annually. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
DEFERRED ORGANIZATION EXPENSES: A total of $63,500 was incurred in connection
with the organization of the Trust. All such costs were reimbursed by the
Adviser.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2. AGREEMENTS
The Trust has an Investment Advisory Agreement and an Administration Agreement
with BlackRock Financial Management, Inc. (the "Adviser"), a wholly-owned
subsidiary of BlackRock Advisors, Inc., which is a wholly-owned subsidiary of
BlackRock, Inc., which in turn is an indirect majority-owned subsidiary of PNC
Bank Corp. The Trust has an Administration Agreement with Prudential Investments
Fund Management LLC ("PIFM") (collectively with the Advisor, the
"Administrators"), a wholly-owned subsidiary of The Prudential Insurance Co. of
America.
The investment fee paid to the Adviser is computed weekly and payable
monthly at an annual rate of 1.05% of the Trust's managed assets. The
administration fee paid to each of the Administrators is also computed weekly
and payable monthly at an annual rate of 0.05% of the Trust's managed assets, or
net assets plus leverage.
10
<PAGE>
Pursuant to the agreements, the Adviser provides continuous supervision of
the investment portfolio and pays the compensation of officers of the Trust. The
Administrators pay occupancy and certain clerical and accounting costs of the
Trust. The Trust bears all other costs and expenses.
NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments
for the period ended October 31, 1999 aggregated $284,005,333 and $152,062,853,
respectively.
The Trust may invest in securities which are not readily marketable,
including those which are restricted as to disposition under securities law
("restricted securities"). At October 31, 1999, the Trust held 24% of its
portfolio assets in securities restricted as to resale.
The federal income tax basis of the Trust's investments at October 31,1999
was $130,281,861 and, accordingly, net unrealized depreciation for federal
income tax purposes was $6,137,801 (gross unrealized appreciation-$1,479,294,
gross unrealized depreciation-$7,617,095).
NOTE 4. BORROWINGS
LOAN PAYABLE: The Trust has a $47 million dollar committed credit facility (the
"facility"). Under the terms of the facility, the fund borrows at the London
Interbank Overnight Rate ("LIBOR") plus facility and administrative fees. In
addition, the fund pays a liquidity fee on the unused portion of the facility.
The fund may borrow up to 331|M/3% of its total assets up to the committed
amount. In accordance with the terms of the debt agreement, the fund has pledged
its portfolio assets as collateral for the borrowing.
For the period ended October 31, 1999, the Fund borrowed a daily weighted
average balance of $33,802,884 at a weighted average interest rate at 5.70%.
REVERSE REPURCHASE AGREEMENTS: The Trust may enter into reverse repurchase
agreements with qualified, third party broker-dealers as determined by and under
the direction of the Trust's Board of Directors. Interest on the value of
reverse repurchase agreements issued and outstanding is based upon competitive
market rates at the time of issuance. At the time the Trust enters into a
reverse repurchase agreement, it will establish and maintain a segregated
account with the lender, the value of which at least equals the principal amount
of the reverse repurchase transaction, including accrued interest. The Trust did
not enter into any reverse repurchase agreements during the period.
NOTE 5. CAPITAL
There are an unlimited amount of $.01 par value common stock authorized. Of the
6,306,667 shares outstanding at October 31 , 1999, the Adviser owned 6,952
shares. During the period ended October 31, 1999 the Trust issued 5,800,000
shares in connection with it's initial public offering and 500,000 shares in
connection with the exercise of the underwriters over allotment option. Offering
costs of $126,133 incurred in connection with the public offering of common
stock have been charged to paid-in capital in excess of par. Prudential
Securities Inc., an affiliate of PIFM, advised the Trust that it received
approximately $621,000 in underwriting fees.
NOTE 6. DIVIDENDS
Subsequent to October 31, 1999, the Board of Directors of the Trust declared a
dividend from undistributed earnings of $0.134375 per share payable November 30,
1999 to shareholders of record on November 15, 1999.
11
<PAGE>
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THE BLACKROCK HIGH YIELD TRUST
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The BlackRock High Yield Trust:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The BlackRock High Yield Trust (the
"Trust") as of October 31, 1999 and the related statement of operations and of
cash flows, and the statement of changes in net assets and financial highlights
for the period December 23, 1998 (commencement of investment operations) through
October 31, 1999. These financial statements and the financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock High
Yield Trust at October 31, 1999 and the results of its operations, its cash
flows, the changes in its net assets and the financial highlights for the
respective stated period in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
New York, New York
December 13, 1999
12
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
TAX INFORMATION
- --------------------------------------------------------------------------------
We wish to advise you as to the federal tax status of dividends and
distributions paid by the Trust during its fiscal year ended October 31, 1999.
During the fiscal year ended October 31, 1999, the Trust paid dividends of
$1.17 per share from ordinary income. For federal income tax purposes, the
aggregate of any dividends and short-term capital gains distributions you
received are reportable in your 1999 federal income tax return as ordinary
income. Further, we wish to advise you that your income dividends do not qualify
for the dividends received deduction.
For the purpose of preparing your 1999 annual federal income tax return,
however, you should report the amounts as reflected on the appropriate Form 1099
DIV which will be mailed to you in January 2000.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"),
shareholders are automatically enrolled to have all distributions of dividends
and capital gains reinvested by State Street Bank and Trust Company (the "Plan
Agent") in Trust shares pursuant to the Plan. Shareholders who elect not to
participate in the Plan will receive all distributions in cash paid by check in
United States dollars mailed directly to the shareholders of record (or if the
shares are held in street or other nominee name, then to the nominee) by the
transfer agent, as dividend disbursing agent.
The Plan Agent serves as agent for the shareholders in administering the
Plan. After the Trust declares a dividend or determines to make a capital gain
distribution, the transfer agent will acquire shares for the participants'
accounts, depending upon the circumstances described below, either (i) through
receipt of unissued but authorized shares from the Trust ("newly issued shares")
or (ii) by purchase of outstanding shares on the open market, on the New York
Stock Exchange or elsewhere ("open-market purchases"). If, on the dividend
payment date, 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 transfer agent will invest the
dividend amount in newly issued shares on behalf of the participants. The number
of newly issued shares to be credited to each participant's account will be
determined by dividing the dollar amount of the dividend by the net asset value
per share (but in no event less than 95% of the then current market price per
share) on the date the shares are issued. If, on the dividend payment date, the
net asset value per share is greater than the market value per share (such
condition being referred to herein as "market discount"), the transfer agent
will invest the dividend amount in shares acquired on behalf of the participants
in open-market purchases.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Trust shares and a cash
payment will be made for any fraction of a Trust share.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. 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
and distributions. The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income taxes that
may be payable on such dividends or distributions.
The Trust reserves the right to amend or terminate the Plan as applied to
any dividend or distribution paid subsequent to written notice of the change
sent to all shareholders of the Trust at least 90 days before the record date
for the dividend or distribution. The Plan also may be amended or terminated by
the Plan Agent upon at least 90 days' written notice to all shareholders of the
Trust. All correspondence concerning the Plan should be directed to the Plan
Agent at (800) 699-1BFM. The addresses are on the front of this report.
13
<PAGE>
- --------------------------------------------------------------------------------
BLACKROCK HIGH YIELD TRUST
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
There have been no material changes in the Trust's investment objectives or
policies that have not been approved by the shareholders or to its charter or
by-laws or in the principal risk factors associated with investment in the
Trust. There have been no changes in the persons who are primarily responsible
for the day-to-day management of the Trust's portfolio.
YEAR 2000 READINESS DISCLOSURE. The Trust has evaluated its information
technology infrastructure for Year 2000 compliance. Substantially all of the
Trust's information systems are supplied by the Adviser. The Adviser advised the
Trust that it has evaluated whether such systems are year 2000 compliant and
that it expects to incur costs of up to approximately one million dollars to
complete such evaluation and to make any modifications to its systems as may be
necessary to achieve Year 2000 compliance. The Adviser advised the Trust that it
has fully tested its systems for Year 2000 compliance. The Trust may be required
to bear a portion of such cost incurred by the Adviser in this regard. The
Adviser advised the Trust that it does not anticipate any material disruption in
the operations of the Trust as a result of any failure by the Adviser to achieve
Year 2000 compliance. There can be no assurance that the costs will not exceed
the amount referred to above or that the Trust will not experience a disruption
in operations.
The Adviser has advised the Trust that it is continuing to evaluate the
Year 2000 compliance of various suppliers of the Adviser and the Trust. The
Adviser advised the Trust that it has communicated with such suppliers to
determine their Year 2000 compliance status and the extent to which the Adviser
or the Trust could be affected by any supplier's Year 2000 compliance issues. To
date, the Adviser received responses from substantially all such suppliers with
respect to their Year 2000 compliance. However, there can be no assurance that
the systems of such suppliers, who are beyond the Trust's control, will be Year
2000 compliant. In the event that any of the Trust's significant suppliers do
not successfully and timely achieve Year 2000 compliance, the Trust's business
or operations could be adversely affected. The Adviser advised the Trust it has
prepared a contingency plan for Year 2000 compliance by its suppliers. There can
be no assurance that such contingency plan will be successful in preventing a
disruption of the Trust's operations.
The Trust is designating this disclosure as its Year 2000 readiness
disclosure for all purposes under the Year 2000 Information and Readiness
Disclosure Act and the foregoing information shall constitute a Year 2000
Readiness Statement for purposes of that Act.
14
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THE BLACKROCK HIGH YIELD TRUST
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
THE TRUST'S INVESTMENT OBJECTIVE
The BlackRock High Yield Trust's primary investment objective is to provide high
current income with a secondary objective of capital appreciation. To this end,
the Trust will be invested primarily in a diversified portfolio of high yield
bonds and other income securities.
WHO MANAGES THE TRUST?
BlackRock Financial Management, Inc. ("BlackRock") is an SEC-registered
investment adviser. As of September 30, 1999, BlackRock and its affiliates
managed over $148 billion on behalf of taxable and tax-exempt clients worldwide.
Strategies include fixed income, equity and cash and may incorporate both
domestic and international securities. Domestic fixed income strategies utilize
the government, mortgage, corporate and municipal bond sectors. BlackRock
manages twenty-three closed-end funds that are traded on either the New York or
American stock exchanges, and a $24 billion family of open-end equity and bond
funds. BlackRock manages over 487 accounts, domiciled in the United States and
overseas.
WHAT CAN THE TRUST INVEST IN?
Under normal market conditions, the Trust will invest at least 80% of its assets
in high yield securities. High yield securities are generally income securities
which, if rated, are rated lower than Baa by Moody's Investors Service (or
"Moody's") , lower than BBB by Standard & Poor's Ratings Group (or "S&P") or
similarly rated by other rating agencies. These securities may include corporate
bonds, zero coupon bonds, bank loans, mezzanine investments, collateralized bond
obligations, mortgage-related, asset-backed securities and foreign securities.
WHAT IS THE ADVISER'S INVESTMENT STRATEGY?
In pursuing the Trust's investment objective by investing in high yield
securities, the Adviser will seek to identify issuers and industries that it
believes are likely to experience stable or improving financial conditions. The
Adviser will also consider relative value among issuers based on anticipated
cash flow, interest or dividend coverage, asset coverage and earnings prospects.
The Adviser will apply its risk management framework by using proprietary
technology and value-oriented security selection to 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:
creating a diversified portfolio of securities within various sectors of the
high yield market; performing individual, company-by-company credit research to
seek the selection of securities which the Adviser believes will be able to meet
its debt obligations; performing sector analysis to determine the sectors which
the Advisor 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.
HOW ARE THE TRUST'S SHARES PURCHASED AND SOLD? DOES THE TRUST PAY DIVIDENDS
REGULARLY?
The Trust's shares are traded on the New York Stock Exchange which provides
investors with liquidity on a daily basis. Orders to buy or sell shares of the
Trust must be placed through a registered broker or financial adviser. The Trust
pays monthly dividends which are typically paid on the last business day of the
month. For shares held in the shareholder's name, dividends may be reinvested in
additional shares of the fund through the Trust's transfer agent, State Street
Bank & Trust Company. Investors who wish to hold shares in a brokerage account
should check with their financial adviser to determine whether their brokerage
firm offers dividend reinvestment services.
LEVERAGE CONSIDERATIONS IN THE TRUST
Under current market conditions, leverage increases the income earned by the
Trust. The Trust employs leverage primarily through the utilization of its
committed credit facility. Leverage permits the Trust to borrow money at
short-term rates and reinvest that money in longer-term assets which typically
offer higher interest rates. The difference between the cost of the borrowed
funds and the income earned on the proceeds that are invested in longer term
assets is the benefit to the Trust from leverage. In general, the portfolio is
typically leveraged at approximately 331|M/3% of total assets.
15
<PAGE>
Leverage also increases the duration (or price volatility of the net assets) of
the Trust, which can improve the performance of the fund in a declining rate
environment, but can cause net assets to decline faster than the market in a
rising environment. BlackRock's portfolio managers continuously monitor and
regularly review the Trust's use of leverage and the Trust may reduce, or
unwind, the amount of leverage employed should BlackRock consider that reduction
to be in the best interests of the shareholders.
SPECIAL CONSIDERATIONS AND RISK FACTORS RELEVANT TO THE TRUST
THE TRUST IS INTENDED TO BE A LONG-TERM INVESTMENT AND IS NOT A SHORT-TERM
TRADING VEHICLE.
INVESTMENT OBJECTIVE. Although the investment objective of the Trust is to
provide high current income, there can be no assurance that this objective will
be achieved.
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, an investor could lose
money on an investment in Shares of the Trust, both in the short-term and the
long-term. An investor should consider some risks including, but not limited to,
credit risk.
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 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 often are unsecured and subordinated to the payment rights of other
creditors of the issuer.
LEVERAGE. The Trust utilizes leverage through its committed credit facility,
which involves special risks. The Trust's net asset value and market value may
be more volatile due to its use of leverage.
MARKET PRICE OF SHARES. The shares of closed-end investment companies such as
the Trust trade on the New York Stock Exchange and as such are subject to supply
and demand influences. As a result, shares may trade at a discount or a premium
to their net asset value.
CORPORATE DEBT SECURITIES. The value of corporate debt securities generally
varies inversely with changes in prevailing market interest rates. The Trust may
be subject to certain reinvestment risks in environments of declining interest
rates.
ZERO COUPON SECURITIES. Such securities receive no cash flows prior to maturity;
therefore, interim price movement on the securities are generally more sensitive
to interest rate movements then securities that make periodic coupon payments.
These securities appreciate in value over time and can play an important role in
helping the Trust achieve its primary objectives.
ILLIQUID SECURITIES. The Trust may invest in securities that are illiquid,
although under current market conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.
NON-U.S. SECURITIES. The Trust may invest less than 35% of its total assets in
non-U.S. dollar-denominated securities which involve special risks such as
currency, political and economic risks.
ANTITAKEOVER PROVISIONS. Certain antitakeover provisions will make a change in
the Trust's business or management more difficult without the approval of the
Trust's Board of Directors and may have the effect of depriving shareholders of
an opportunity to sell their shares at a premium above the prevailing market
price.
16
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THE BLACKROCK HIGH YIELD TRUST
GLOSSARY
- --------------------------------------------------------------------------------
CLOSED-END FUND: Investment vehicle which initially offers a fixed
number of shares and trades on a stock exchange.
The fund invests in a portfolio of securities in
accordance with its stated investment objectives
and policies.
COMMERCIAL MORTGAGE Mortgage-backed securities s ecured or backed by
BACKED SECURITIES (CMBS): mortgage loans on commercial properties.
DISCOUNT: When a fund's net asset value is greater than its
stock price the fund is said to be trading at a
discount.
DIVIDEND: Income generated by securities in a portfolio and
distributed to shareholders after the deduction of
expenses. This Trust declares and pays dividends on
a monthly basis.
DIVIDEND REINVESTMENT: Shareholders may elect to have all distributions of
dividends and capital gains automatically
reinvested into additional shares of the Trust.
GOVERNMENT SECURITIES: Securities issued or guaranteed by the U.S.
government, or one of its agencies or
instrumentalities, such as GNMA, FNMA and FHLMC .
MARKET PRICE: Price per share of a security trading in the
secondary market. For a closed-end fund, this is
the price at which one share of the fund trades on
the stock exchange. If you were to buy or sell
shares, you would pay or receive the market price.
NET ASSET VALUE (NAV): Net asset value is the total market value of all
securities and other assets held by the Trust, plus
income accrued on its investments, minus any
liabilities including accrued expenses, divided by
the total number of outstanding shares. It is the
underlying value of a single share on a given day.
Net asset value for the Trust is calculated weekly
and published in BARRON'S on Saturday and THE WALL
STREET JOURNAL on Monday.
PREMIUM: When a fund's stock price is greater than its net
asset value, the fund is said to be trading at a
premium.
17
<PAGE>
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BLACKROCK FINANCIAL MANAGEMENT, INC.
SUMMARY OF CLOSED-END FUNDS
- --------------------------------------------------------------------------------
TAXABLE TRUSTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCK MATURITY
SYMBOL DATE
PERPETUAL TRUSTS --------- ---------
<S> <C> <C>
The BlackRock Income Trust Inc. BKT N/A
The BlackRock North American Government Income Trust Inc. BNA N/A
The BlackRock High Yield Trust BHY N/A
TERM TRUSTS
The BlackRock Target Term Trust Inc. BTT 12/00
The BlackRock 2001 Term Trust Inc. BTM 06/01
The BlackRock Strategic Term Trust Inc. BGT 12/02
The BlackRock Investment Quality Term Trust Inc. BQT 12/04
The BlackRock Advantage Term Trust Inc. BAT 12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc. BCT 12/09
TAX-EXEMPT TRUSTS
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STOCK MATURITY
SYMBOL DATE
PERPETUAL TRUSTS --------- ---------
<S> <C> <C>
The BlackRock Investment Quality Municipal Trust Inc. BKN N/A
The BlackRock California Investment Quality Municipal Trust Inc. RAA N/A
The BlackRock Florida Investment Quality Municipal Trust RFA N/A
The BlackRock New Jersey Investment Quality Municipal Trust Inc. RNJ N/A
The BlackRock New York Investment Quality Municipal Trust Inc. RNY N/A
The BlackRock Pennsylvania Strategic Municipal Trust BPS N/A
The BlackRock Strategic Municipal Trust BSD N/A
TERM TRUSTS
The BlackRock Municipal Target Term Trust Inc. BMN 12/06
The BlackRock Insured Municipal 2008 Term Trust Inc. BRM 12/08
The BlackRock California Insured Municipal 2008 Term Trust Inc. BFC 12/08
The BlackRock Florida Insured Municipal 2008 Term Trust BRF 12/08
The BlackRock New York Insured Municipal 2008 Term Trust Inc. BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. BMT 12/10
</TABLE>
IF YOU WOULD LIKE FURTHER INFORMATION PLEASE DO NOT HESITATE TO CALL BLACKROCK
AT (800) 227-7BFM (7236) OR CONSULT WITH YOUR FINANCIAL ADVISOR.
18
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- --------------------------------------------------------------------------------
BLACKROCK FINANCIAL MANAGEMENT, INC.
AN OVERVIEW
- --------------------------------------------------------------------------------
BlackRock Financial Management, Inc. ("BlackRock") is an SEC-registered
investment adviser. As of September 30, 1999, BlackRock and its affiliates
managed over $148 billion on behalf of taxable and tax-exempt clients worldwide.
Strategies include fixed income, equity and cash and may incorporate both
domestic and international securities. BlackRock manages twenty-three closed-end
funds that are traded on either the New York or American stock exchanges, and a
$24 billion family of open-end equity and bond funds. BlackRock manages over 487
accounts, domiciled in the United States and overseas.
BlackRock's fixed income product was introduced in 1988 by a team of highly
seasoned fixed income professionals. These professionals had extensive
experience creating, analyzing and trading a variety of fixed income
instruments, including the most complex structured securities. In fact, several
individuals at BlackRock were responsible for developing many of the major
innovations in the mortgage-backed and asset-backed securities markets,
including the creation of the first CMO, the floating rate CMO, the
senior/subordinated pass-through and the multi-class asset-backed security.
BlackRock is unique among asset management and advisory firms in the
emphasis it places on the development of proprietary analytical capabilities.
Over one quarter of the firm's professionals is dedicated to the design,
maintenance and use of these systems, which are not otherwise available to
investors. BlackRock's proprietary analytical tools are used for evaluating, and
designing fixed income investment strategies for client portfolios. Securities
purchased include mortgages, corporate bonds, municipal bonds and a variety of
hedging instruments.
BlackRock has developed investment products that respond to investors'
needs and has been responsible for several major innovations in closed-end
funds. In fact, BlackRock introduced the first closed-end mortgage fund, the
first taxable and tax-exempt closed-end funds to offer a finite term, the first
closed-end fund to achieve a AAA rating by Standard & Poor's, and the first
closed-end fund to invest primarily in North American Government securities.
Currently, BlackRock's closed-end funds have dividend reinvestment plans, which
are designed to provide ongoing demand for the stock in the secondary market.
BlackRock manages a wide range of investment vehicles, each having specific
investment objectives and policies.
In view of our continued desire to provide a high level of service to all
our shareholders, BlackRock maintains a toll-free number for your questions. The
number is (800) 227-7BFM (7236). We encourage you to call us with any questions
that you may have about your BlackRock funds and we thank you for the continued
trust that you place in our abilities.
IF YOU WOULD LIKE FURTHER INFORMATION
PLEASE DO NOT HESITATE TO CALL BLACKROCK AT (800) 227-7BFM
19
<PAGE>
BlackRock
DIRECTORS
Laurence D. Fink, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Grosfeld
James Clayburn La Force, Jr.
Walter F. Mondale
Ralph L. Schlosstein
OFFICERS
Ralph L. Schlosstein, PRESIDENT
Scott Amero, VICE PRESIDENT
Keith T. Anderson, VICE PRESIDENT
Michael C. Huebsch, VICE PRESIDENT
Robert S. Kapito, VICE PRESIDENT
Dennis Schaney, VICE PRESIDENT
Richard M. Shea, VICE PRESIDENT/TAX
Henry Gabbay, TREASURER
James Kong, ASSISTANT TREASURER
Karen H. Sabath, SECRETARY
INVESTMENT ADVISER AND ADMINISTRATOR
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
(800) 227-7BFM
ADMINISTRATOR
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
(800) 699-1BFM
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
This report is for shareholder information. This is not a prospectus
intended for use in the purchase or sale of any securities.
THE BLACKROCK HIGH YIELD TRUST
c/o Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry St.
Newark, NJ 07102-4077
(800) 227-7BFM
Printed on recycled paper 092472-10-6
The BlackRock
High Yield
Trust
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Annual Report
October 31, 1999
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