--------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISOR
--------------------------------------------------------------------------------
November 30, 2000
Dear Shareholder:
The continued trend of economic growth boosted by strong consumer
confidence, a tight labor market and inflation concerns caused the Federal
Reserve to aggressively tighten during the first part of the year. As a result,
the Fed raised the discount rate to 6.50% during the period in an attempt to
achieve its objective of engineering a "soft landing" for the explosive U.S.
economy. The third quarter of 2000 saw a sharp decline in market expectations
for further Fed tightenings amidst evidence of significant deceleration in
growth, peaking inflation pressures and a sharp reversal in the stock market
wealth effect globally.
The reduction in Fed tightening fears and the potential for a slower pace
of Treasury buybacks due to a more expansionary fiscal policy enabled high
quality spread product to outperform Treasuries in the third quarter of 2000.
Looking forward we believe that both consumers and corporations face
significant headwinds that suggest a likely GDP growth rate close to the Fed
target of 3.5%-4.0%. The risk, however, is even slower growth. While consumer
confidence is still high, a sharp reversal of the wealth effect year-to-date,
higher oil prices that have acted as a tax on the consumer and muted employment
growth should lead personal consumption growth to decline to 3.0%. We believe
that the Fed may eventually be required to ease interest rates to ensure a soft
landing. Monetary conditions are restrictive globally; in the absence of a
fiscal stimulus the Fed may have to ease policy moderately. The end scenario is
likely to be favorable to financial assets and the performance of spread assets
versus Treasuries.
This annual 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 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.
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
---------------------- ---------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
November 30, 2000
Dear Shareholder:
We are pleased to present the audited annual report for The BlackRock High
Yield Trust ("the Trust") for the fiscal year ended October 31, 2000. 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 during the year.
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
over the year:
<TABLE>
<CAPTION>
---------------------------------------------------------------
10/31/00 10/31/99 CHANGE HIGH LOW
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK PRICE $11.875 $12.50 (5.00%) $13.5625 $11.25
----------------------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $10.60 $13.58 (21.94%) $13.81 $10.60
----------------------------------------------------------------------------------------------
10-YEAR U.S. TREASURY NOTE % 5.75% 6.02% (4.49%) 6.79% 5.58%
----------------------------------------------------------------------------------------------
</TABLE>
THE FIXED INCOME MARKETS
The rapid expansion of U.S. GDP witnessed throughout much of the period
finally slowed dramatically in the third quarter. After expanding at nearly a
6.0% annualized rate in the first half of the year, growth in the third quarter
slowed to 3.0%. Higher oil prices and declines in global equity markets led to
declines in consumer spending, residential investment and manufacturing
activity. According to the minutes of the October 3, 2000 FOMC meeting, "Recent
data have indicated that the expansion of aggregate demand has moderated to a
pace closer to the enhanced rate of growth of the economy's potential to
produce. The more rapid advances in productivity also continue to help contain
costs and hold down underlying price pressures." The Federal Reserve raised the
discount rate by 0.25% at their meetings in November 1999, February, and March
2000 and raised the discount rate by 0.50% in May 2000 to bring the current
discount rate to 6.50%.
Treasury yields were inverted for much of the period as yields rose on the
short-end of the yield curve in response to the Fed's increases in the discount
rate, and yields on the long-end of the curve fell below the short-end in
reaction to the announcement that the Treasury would buy back $30 billion of
Treasuries with maturities ranging from 10 to 30 years. In the second half of
the period, concerns over rising inflation from a surge in oil prices, weaker
stock markets and signs of slower growth all caused the bond market to price in
a neutral Federal Reserve. This shift in market sentiment caused significant
yield curve disinversion during the third quarter of 2000. As the slower growth
scenario plays out, the curve is likely to steepen further. For the annual
period, the 10-year Treasury fell from 6.02% on October 31, 1999 to 5.75% on
October 31, 2000.
At the beginning of the period, high yield spreads widened compared to
Treasuries. The combination of cash exiting high yield mutual funds, interest
rate concerns, and the volatility in the U.S. equity markets caused high yield
performance to suffer. In mid-June high yield bond volume picked up as spreads
tightened and prices increased. Strength continued through early September, but
towards the end of the month high yield bonds gave back some of their gains.
Underperformance continued through October with spreads widening, illiquid
market conditions and continued outflows from mutual funds. Default fears
increased during the period and a high concentration of telecommunication debt
in the market was a significant contributor to the distress in the sector. The
market continues to be a two-tier market with investors showing aversion to
risk, and favoring quality issues. The BBB and BB segments have outperformed B
and CCC and defaulted tiers. For the year ended October 31, 2000, high yield
bonds measured by the LEHMAN BROTHERS HIGH YIELD INDEX, returned -1.61%, versus
a return of 7.30% for the LEHMAN BROTHERS AGGREGATE INDEX.
2
<PAGE>
THE TRUST'S PORTFOLIO AND INVESTMENT STRATEGY
The Trust's portfolio is actively managed to diversify exposure to various
sectors, issuers, credit ratings 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.
The trust continued to focus on strong credits, remaining overweight B
rated securities and underweight BBB's versus its benchmark. During the year the
portfolio increased positions in BB's, while reducing positions in securities
that were not rated. Although new issue supply of high yield bonds remained
light, demand for BB's remained strong with BB's outperforming B's and CCC's as
the credit curve continued to steepen throughout the year. In response to the
market's narrowed focus, performance was best in the information technology,
energy and utility sectors.
The following chart shows the Trust's current and October 31, 1999 credit
quality allocation:
--------------------------------------------------------------------------------
CREDIT RATING* OCTOBER 31, 2000 OCTOBER 31, 1999
--------------------------------------------------------------------------------
BBB/Baa 4% -
--------------------------------------------------------------------------------
BB/Ba 24% 11%
--------------------------------------------------------------------------------
B/B 60% 64%
--------------------------------------------------------------------------------
CCC/Caa 6% 7%
--------------------------------------------------------------------------------
Not Rated 6% 18%
--------------------------------------------------------------------------------
----------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
We look forward to continuing to manage the Trust to benefit from the
opportunities available to investors in the high yield fixed income market as
well as maintain the trust's ability to meet its investment objectives. 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,
/s/ Robert S. Kapito /s/ Dennis Schaney
----------------------------------- ---------------------------------------
Robert S. Kapito Dennis Schaney
Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager
BlackRock Advisors, Inc. BlackRock Advisors, Inc.
3
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BHY
--------------------------------------------------------------------------------
Initial Offering Date: December 23, 1998
--------------------------------------------------------------------------------
Closing Stock Price as of 10/31/00: $11.875
--------------------------------------------------------------------------------
Net Asset Value as of 10/31/00: $10.60
--------------------------------------------------------------------------------
Yield on Closing Stock Price as of 10/31/00 ($11.875)(1): 14.53%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share(2): $ 0.14375
--------------------------------------------------------------------------------
Current Annualized Distribution per Share(2): $ 1.72500
--------------------------------------------------------------------------------
(1) Yield on closing stock price is calculated by dividing the current
annualized distribution per share by the closing stock price per share.
(2) Distribution is not constant and is subject to change.
4
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2000
--------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
LONG-TERM INVESTMENTS-140.0%
CORPORATE BONDS-137.1%
AERO & DEFENSE-1.5%
B- $1,500 Condor Systems, Inc.**,
Sr. Sub. Note,
11.88%, 5/1/09 ....................... $ 990,000
-----------
AIR TRANSPORT-4.0%
Amtran, Inc., Sr. Notes,
B+ 2,000 9.63%, 12/15/05 ..................... 1,740,000
B+ 1,000 10.50%, 8/1/04 ...................... 930,000
-----------
2,670,000
-----------
AUTOMOTIVE-7.8%
B 2,000 Group 1 Automotive, Inc.,
Sr. Sub. Note,
10.88%, 3/1/09 ....................... 1,760,000
B 4,000 Sonic Automotive, Inc.,
Sr. Sub. Note,
11.00%, 8/1/08 ....................... 3,440,000
-----------
5,200,000
-----------
BUILDING & DEVELOPMENT-5.7%
D.R. Horton, Inc., Sr. Notes,
Ba1 1,500 8.38%, 6/15/04 ...................... 1,425,000
Ba1 1,450 10.50%, 4/1/05 ...................... 1,450,000
BB- 1,000 K. Hovnanian Enterprises, Inc.,
Sr. Note,
10.50%, 10/1/07 ...................... 940,000
-----------
3,815,000
-----------
CABLE TV-9.8%
BB+ 1,000 British Sky Broadcasting Group,
Sr. Sec. Note,
8.20%, 7/15/09 ....................... 927,590
B2 2,000 James Cable Partners LP,
Sr. Note, Ser. B,
10.75%, 8/15/04 ...................... 1,600,000
NR 3,000 Knology Holdings, Inc., Sr. Note,
(11.875% commencing 10/15/02),
Zero Coupon, 10/15/07 ................ 1,350,000
B 3,000 United Pan-Europe, Sr. Note,
11.25%, 2/1/10 ....................... 2,250,000
B3 500 Worldwide Fiber, Inc., Sr. Note,
12.50%, 12/15/05 ..................... 430,000
-----------
6,557,590
-----------
CHEMICAL-2.9%
B+ 2,000 Lyondell Chemical Co., Sr. Sec. Note,
10.88%, 5/1/09 ....................... 1,920,000
-----------
CLOTHING & TEXTILES-3.2%
NR 3,500+ Kasper ASL Ltd., Sr. Note,
12.75%, 3/31/04 ...................... 1,225,000
B- 1,000 St. John Knits International, Inc.,
Sr. Sub. Note,
12.50%, 7/1/09 ....................... 915,000
-----------
2,140,000
-----------
CONGLOMERATES-0.5%
B- 1,000 Px Escrow Corp.,
Sr. Sub. Note,
(9.625% commencing 2/1/02),
Zero Coupon, 2/1/06 .................. 340,000
-----------
COSMETICS & TOILETRIES-2.8%
CCC 3,250 Revlon Consumer Products Corp.,
Sr. Sub Note,
8.63%, 2/1/08 ........................ 1,852,500
-----------
ELECTRONICS-3.2%
B- 2,000 Knowles Electronics, Inc.**,
Sr. Sub Note,
13.13%, 10/15/09 ..................... 1,865,000
B- 500 PSI Net, Inc., Sr. Note,
11.00%, 8/1/09 ....................... 250,000
-----------
2,115,000
-----------
FARMING & AGRICULTURE-1.9%
B 1,500 Ainsworth Lumber Co. Ltd.,
Sr. Sec. Note,
12.50%, 7/15/07 ...................... 1,275,000
-----------
FINANCIAL INTERMEDIARIES-18.4%
BB 1,000 Felcor Lodging L.P.**,
Sr. Note, 9.50%, 9/15/08 ............. 990,000
Ba3 2,500 First Dominion Funding II**,
Ser. 1-A, Class D-1,
11.61%, 4/25/14 ...................... 2,250,000
CCC+ 2,000 Madison River Capital Corp.,
Sr. Note,
13.25%, 3/1/10 ....................... 1,440,000
Ba3 1,500 Orion Power Holdings, Inc.**,
Sr. Note,
12.00%, 5/1/10 ....................... 1,575,000
B2 2,000 Oxford Health Plans, Inc.**, Sr. Note,
11.00%, 5/15/05 ...................... 2,180,000
B- 1,000 Penhall International Corp., Sr. Note,
12.00%, 8/1/06 ....................... 900,000
Ba3 1,000 Willis Corroon Group, Sr. Note,
9.00%, 2/1/09 ........................ 905,000
Baa3 2,000 Zais Investment Grade Ltd.**,
Note, Class C,
9.95%, 9/23/14 ....................... 2,036,200
-----------
12,276,200
-----------
See Notes to Financial Statements.
5
<PAGE>
--------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
FOOD PRODUCTS-0.0%
C $ 1,200+ Nebco Evans Holding Co.,
Sr. Sub. Note,
(12.375% commencing 7/15/02),
Zero Coupon, 7/15/07 .................. $ 1,500
----------
FOOD SERVICE-3.0%
Caa1 500+ Ameriserve Food Distribution, Inc.**,
Sr. Sub. Note,
12.00%, 9/15/06 ....................... 110,000
B 1,000 Pantry, Inc., Sr. Sub. Note,
10.25%, 10/15/07 ...................... 920,000
BB- 1,000 Sbarro, Inc., Sr. Note,
11.00%, 9/15/09 ....................... 1,010,000
----------
2,040,000
----------
FOREST PRODUCTS-3.1%
B 1,140 Doman Industries Ltd.,
Sr. Note, 8.75%, 3/15/04 .............. 684,000
BBB 1,360 Repap New Brunswick, Inc.,
2nd Priority Sr. Sec. Note,
10.63%, 4/15/05 ....................... 1,397,400
----------
2,081,400
----------
HEALTH CARE-2.6%
B- 2,000 Concentra Operating Corp.,
Sr. Sub. Note, Ser. A,
13.00%, 8/15/09 ....................... 1,760,000
----------
HOME FURNISHING-1.4%
B+ 1,000 Mattress Discounters Corp., Note,
12.63%, 7/15/07 ....................... 920,000
----------
INDUSTRIAL EQUIPMENT-12.8%
B+ 2,000 Asia Global Crossing**, Sr. Note,
13.38%, 10/15/10 ...................... 1,870,000
B- 1,500 Muzak LP, Sr. Sub. Note,
9.88%, 3/15/09 ........................ 1,320,000
B 3,000 National Equipment Services, Inc.,
Sr. Sub. Note, Ser. C,
10.00%, 11/30/04 ...................... 2,055,000
CCC 250 Oakwood Homes Corp.,
Sr. Note,
8.13%, 3/1/09 ......................... 77,500
B- 1,000 Precision Partners, Inc.,
Sr. Sub. Note,
12.00%, 3/15/09 ....................... 550,000
B 1,000 United States Can Co.**,
Sr. Sub. Note,
12.38%, 10/1/10 ....................... 980,000
BB+ 1,000 Veritas DGC, Inc., Sr. Note, Ser. C,
9.75%, 10/15/03 ....................... 1,015,000
B 1,000 Woods Equipment Co., Inc., Sr. Note,
12.00%, 7/15/09 ....................... 730,000
----------
8,597,500
----------
LEISURE-5.2%
B 3,000 Alliance Atlantis Commerce, Inc.,
Sr. Sub. Note,
13.00%, 12/15/09 ...................... 3,090,000
B- 500 Phoenix Color Corp.,
Sr. Sub. Note,
10.38%, 2/1/09 ........................ 410,000
----------
3,500,000
----------
NONFERROUS METALS & MINERALS-3.5%
BB- 2,000 Golden Northwest Aluminum, Inc.,
1st Mtg. Note,
12.00%, 12/15/06 ...................... 1,900,000
B 2,000 Republic Technologies International,
Sr. Sec. Note,
13.75%, 7/15/09 ....................... 300,000
B+ 2,250 Wheeling Pittsburgh Corp., Sr. Note,
9.25%, 11/15/07 ....................... 180,000
----------
2,380,000
----------
OIL & GAS-6.3%
B 700 Chesapeake Energy Corp., Sr. Note,
9.13%, 4/15/06 ........................ 675,500
Ba3 3,000 R&B Falcon Corp., Sr. Note,
12.25%, 3/15/06 ....................... 3,510,000
----------
4,185,500
----------
PHOTO EQUIPMENT & SUPPLIES-2.4%
BB- 2,000 Polaroid Corp., Sr. Note,
11.50%, 2/15/06 ....................... 1,580,000
----------
RAIL INDUSTRIES-1.4%
B- 1,000 Railamerica Transportation Corp.**,
Sr. Sub. Note,
12.88%, 8/15/10 ....................... 930,000
----------
RETAILERS-3.3%
B- 4,000 Hollywood Entertainment Corp.,
Sr. Sub. Note, Ser. B,
10.63%, 8/15/04 ....................... 2,200,000
----------
TELECOMMUNICATIONS-25.9%
B- 2,000 Fairpoint Communications, Inc.,
Sr. Sub. Note,
12.50%, 5/1/10 ........................ 1,740,000
B 1,000 Flag Telecom Holdings Ltd., Sr. Note,
11.63%, 3/30/10 ....................... 820,000
B- 3,000 MGC Communications, Inc., Sr. Note,
13.00%, 4/1/10 ........................ 1,830,000
B1 1,500 Nextel Communications, Inc., Sr. Note,
12.00%, 11/1/08 ....................... 1,605,000
B- 1,000 Nextel International, Inc.**, Sr. Note,
12.75%, 8/1/10 ........................ 910,000
Nextel Partners, Inc., Sr. Notes,
B3 3,000 11.00%, 3/15/10 ....................... 3,015,000
B3 1,250 (14.80% commencing 2/1/04),
Zero Coupon, 2/1/09 ................... 878,125
B 2,000 Nextlink Communications, Sr. Note,
12.50%, 4/15/06 ....................... 1,920,000
NR 3,000 Northeast Optic, Sr. Note,
12.75%, 8/15/08 ....................... 2,400,000
B- 1,000 Partner Communications,
Sr. Sub. Note,
13.00%, 8/15/10 ....................... 800,000
NR 600 PF Net Communications, Inc.,
Sr. Note,
13.75%, 5/15/10 ....................... 408,000
CCC 2,500 Teligent, Inc., Sr. Note,
11.50%, 12/1/07 ....................... 1,000,000
----------
17,326,125
----------
See Notes to Financial Statements.
6
<PAGE>
--------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
UTILITIES-4.5%
BB- $2,000 Atlantic Methanol Capital Co.**,
Sr. Sec. Note,
10.88%, 12/15/04 .................... $ 1,990,000
BB 1,000 CMS Energy Corp., Sr. Note,
9.88%, 10/15/07 ..................... 1,010,000
-----------
3,000,000
-----------
Total Corporate Bonds
(cost $112,736,411).................. 91,653,315
-----------
PREFERRED STOCK-2.7%
SHARES TELECOMMUNICATIONS
----------
B- 1,170 Adelphia Business Solutions,
Ser. B, 12.88%, 10/15/07, PIK ....... 585,000
CCC+ 1,340 Nextel Communications, Inc.,
Ser. E, 11.13%, 2/15/10, PIK ........ 1,232,800
-----------
1,817,800
-----------
Total Preferred Stock-2.7%
(cost $2,340,465)...................... 1,817,800
-----------
[email protected]%
2 Republic Technologies International,
Expires 7/15/09 ..................... 20
1 Mattress Discounters Corp.,
Expires 7/15/07 ..................... 10,000
1 Railamerica Transportation Corp.,
Expires 8/15/10 ..................... 10,000
1 PF Net Communications, Inc.,
Expires 5/15/10 ..................... 132,000
-----------
Total Warrants
(cost $415,361)...................... 152,020
-----------
Total Long-Term Investments-140.0%
(cost $115,492,237)................... 93,623,135
-----------
SHORT-TERM INVESTMENTS-1.5%
DISCOUNT NOTES
$1,000 Federal Home Loan Bank,
6.40%, 11/1/00 (cost $1,000,000) .... $ 1,000,000
-----------
TOTAL INVESTMENTS-141.5%
(cost $116,492,237)................... 94,623,135
Liabilities in excess of other
assets-(41.5)% ...................... (27,755,801)
-----------
NET ASSETS-100% ....................... $66,867,334
===========
---------------------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
** Security is exempt from registration under rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers.
+ Issuer is technically in default; non-income producing security.
@ Non-income producing securities.
--------------------------------------------------------------------------------
KEY TO ABBREVIATION:
PIK - Payment in Kind. See glossary for definition.
--------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2000
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $116,492,237)
(Note 1) ............................................... $ 94,623,135
Cash ..................................................... 95,751
Interest receivable ...................................... 3,119,416
Receivable for investments sold .......................... 2,348,537
Other assets ............................................. 65,044
------------
100,251,883
------------
LIABILITIES
Loan payable (Note 4) .................................... 33,000,000
Interest payable ......................................... 189,966
Investment advisory fee payable (Note 2) ................. 99,989
Administration fee payable (Note 2) ...................... 9,523
Deferred trustees fees (Note 1) .......................... 3,150
Other accrued expenses ................................... 81,921
------------
33,384,549
------------
NET ASSETS .................................................. $ 66,867,334
============
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 ........................ 977,511
Accumulated net realized losses ............................ (6,714,941)
Net unrealized depreciation ................................ (21,869,102)
------------
Net assets, October 31, 2000 ................................ $ 66,867,334
============
NET ASSET VALUE PER SHARE:
($66,867,334 \d 6,306,667 shares of
common stock issued and outstanding) ...................... $10.60
======
--------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2000
--------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest (net of premium amortization of $95,894
and interest expense of $2,623,102) ....................... $ 11,772,256
Dividends ................................................. 260,265
------------
12,032,521
------------
Expenses
Investment advisory ....................................... 1,245,466
Administration ............................................ 118,616
Reports to shareholders ................................... 50,000
Custodian ................................................. 44,000
Independent accountants ................................... 22,000
Legal ..................................................... 20,000
Registration .............................................. 16,000
Trustees .................................................. 16,000
Transfer agent ............................................ 14,000
Miscellaneous ............................................. 40,006
------------
Total operating expenses ................................... 1,586,088
------------
Net investment income ....................................... 10,446,433
------------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS
Net realized loss on investments ............................ (3,023,265)
Net change in unrealized depreciation on
investments ............................................... (15,979,374)
------------
Net loss on investments ..................................... (19,002,639)
------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................... $ (8,556,206)
============
See Notes to Financial Statements.
8
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
STATEMENT OF CASH FLOWS
YEAR ENDED OCTOBER 31, 2000
--------------------------------------------------------------------------------
RECONCILIATION OF NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS TO NET CASH FLOWS
PROVIDED BY OPERATING ACTIVITIES
Net decrease in net assets resulting from operations ........ $ (8,556,206)
------------
Decrease in investments ..................................... 10,518,286
Net realized loss ........................................... 3,023,265
Increase in unrealized depreciation ......................... 15,979,374
Increase in interest receivable ............................. (399,637)
Increase in receivable for investments sold ................. (2,348,537)
Decrease in interest payable ................................ (25,980)
Decrease in other assets .................................... 322,146
Decrease in accrued expenses and other liabilities .......... (188,334)
------------
Total adjustments .......................................... 26,880,583
------------
Net cash flows provided by operating activities ............. $ 18,324,377
============
INCREASE (DECREASE) IN CASH
Net cash flows provided by operating activities ............. $ 18,324,377
------------
Cash flows used for financing activities:
Decrease in loans .......................................... (8,000,000)
Cash dividends paid ........................................ (10,228,626)
------------
Net cash flows used for financing activities ................ (18,228,626)
------------
Net increase in cash ....................................... 95,751
Cash at beginning of year .................................. --
------------
Cash at end of year ........................................ $ 95,751
============
--------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 2000
--------------------------------------------------------------------------------
FOR THE PERIOD
DECEMBER 23,
1998*
YEAR ENDED THROUGH
OCTOBER 31, OCTOBER 31,
2000 1999
--------------- ---------------
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income .................... $ 10,446,433 $ 8,140,475
Net realized loss ........................ (3,023,265) (3,691,676)
Net change in unrealized
depreciation ............................ (15,979,374) (5,889,728)
------------ ------------
Net decrease in
net assets resulting from
operations .............................. (8,556,206) (1,440,929)
Dividends from
net investment income .................... (10,228,626) (7,380,771)
Net proceeds from public offering
of Trust shares .......................... -- 94,373,866
------------ ------------
Total increase (decrease) .................. (18,784,832) 85,552,166
------------ ------------
NET ASSETS
Beginning of year .......................... 85,652,166 100,000
------------ ------------
End of year (including undistributed
net investment income of
$977,511 and $759,704,
respectively) ............................ $ 66,867,334 $ 85,652,166
============ ============
--------------------
*Commencement of investment operations (Note 1).
See Notes to Financial Statements.
9
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 23, 1998**
YEAR ENDED THROUGH
OCTOBER 31, OCTOBER 31,
2000 1999
------------- --------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................................. $ 13.58 $ 15.00
------- -------
Net investment income (net of interest expense of $0.42 and $0.26, respectively) 1.66 1.29
Net realized and unrealized loss on investments ................................. ( 3.02) ( 1.52)
------- -------
Net decrease from investment operations .......................................... ( 1.36) ( 0.23)
------- -------
Dividends from net investment income ............................................. ( 1.62) ( 1.17)
------- -------
Capital charge with respect to issuance of shares ................................ - ( .02)
------- -------
Net asset value, end of period* .................................................. $ 10.60 $ 13.58
======= =======
Per share market value, end of period* ........................................... $ 11.88 $ 12.50
======= =======
TOTAL INVESTMENT RETURN+ ........................................................ 8.23% ( 9.68)%
======= =======
RATIOS TO AVERAGE NET ASSETS:
Operating expenses ............................................................... 1.99% 1.98%+++/a
Operating expenses and interest expense .......................................... 5.29% 4.08%+++/a
Net investment income ............................................................ 13.12% 10.34%+++
SUPPLEMENTAL DATA:
Average net assets (in thousands) ................................................ $79,602 $92,116
Portfolio turnover ............................................................... 92% 121%
Net assets, end of period (in thousands) ......................................... $66,867 $85,652
Borrowings outstanding, end of period (in thousands) ............................. $33,000 $41,000
Asset coverage\^\^ ............................................................... $ 3,032 $ 3,094
</TABLE>
----------
* Net asset value and market value are published in BARRON'S on Saturday and
THE WALL STREET JOURNAL on Monday.
** Commencement of investment operations (Note 1).
a The annualized ratio of operating expenses prior to reimbursement of
expenses was 2.06%. The annualized ratio of operating expenses including
interest expense prior to reimbursement 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 the period less than one full year is not annualized.
++ Per $1,000 of borrowings outstanding.
+++ Annualized.
The information above represents the audited operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data for 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.
10
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1. ORGANIZATION The BlackRock High Yield Trust (the "Trust"), was orga-
ACCOUNTING nized on August 10, 1998 as a Delaware business trust,
POLICIES 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,
warrants and bank loans on the basis of current market quotations provided by
dealers or pricing services approved by the Trust's Board of Trustees. 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.
Exchange traded options are valued at their last sales price as of the close of
options trading on applicable exchanges. In the absence of a last sale options
are valued at the average of the quoted bid and asked prices as of the close of
business. A futures contract is valued at the last sale price as of the close of
the commodities exchange on which it trades. Short-term securities are valued at
amortized cost. Any securities or other assets for which such current market
quotations are not readily available are valued at fair value as determined in
good faith under procedures established by and under the general supervision and
responsibility of the Trust's Board of Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on 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.
FEDERAL INCOME TAXES: It is the Trust's intention to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute sufficient 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 accounting
principles generally accepted in the United States of America.
ESTIMATES: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
DEFERRED COMPENSATION PLAN: Under a deferred compensation plan approved by the
Board of Trustees on February 24, 2000, non-interested Trustees may elect to
defer receipt of all or a portion of their annual compensation.
Deferred amounts earn a return as though equivalent dollar amounts had
been invested in common shares of other BlackRock funds selected by the
Trustees. This has the same economic effect as if the Trustees had invested the
deferred amounts in such other BlackRock funds.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Trust. The
Trust may, however, elect to invest in common shares of those funds selected by
the Trustees in order to match its deferred compensation obligations.
NOTE 2. AGREEMENTS The Trust has an Investment Advisory Agreement and an
Administration Agreement with BlackRock Advisors, Inc.
(the "Advisor"), which is a wholly-owned subsidiary of BlackRock, Inc., which in
turn is an indirect majority-owned subsidiary of PNC Financial Services Group,
Inc. The Trust has an Administration Agreement with Prudential Investments Fund
Management LLC ("PIFM") (collectively with the Advisor, the
11
<PAGE>
"Administrators"), a wholly-owned subsidiary of The Prudential Insurance Co. of
America.
The investment advisory fee paid to the Advisor is computed weekly and
payable monthly at an annual rate of 1.05% of the Trust's managed assets. The
administration fee paid to 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.
Pursuant to the agreements, the Advisor 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 Purchases and sales of investment securities, other than
SECURITIES short-term investments for the year ended October 31,
2000 aggregated $104,351,626 and $116,903,206,
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"). On October 31, 2000, the Trust held 29% of its
portfolio assets in securities restricted as to resale.
The federal income tax basis of the Trust's investments at October 31,
2000 was $116,493,264, and, accordingly, net unrealized depreciation for federal
income tax purposes was $21,870,129, (gross unrealized appreciation-$1,353,115;
gross unrealized depreciation-$23,223,244).
For federal income tax purposes, the Trust had a capital loss carryforward
at October 31, 2000 of approximately $6,714,000 of which $3,444,000 will expire
in 2007 and $3,270,000 will expire in 2008. Accordingly, no capital gains
distribution is expected to be paid to shareholders until net gains have been
realized in excess of such amount.
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 year ended October 31, 2000, the Fund borrowed a daily weighted
average balance of $38,306,011 at a weighted average interest rate at 6.76%. The
maximum amount of borrowing outstanding at any month end during the period was
$41,000,000. This maximum amount existed at month ends: November 30, 1999 (31.9%
of net assets), December 31, 1999 (31.6% of net assets), and January 31, 2000
(31.7% of net assets).
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 establishes and maintains a segregated account
with the lender, containing liquid investment grade securities having a value
not less than the repurchase price, including accrued interest of the reverse
repurchase agreement.
The average daily balance of reverse repurchase agreements outstanding
during the year ended October 31, 2000 was approximately $434,470 at a weighted
average interest rate of 7.38%. The maximum amount of reverse repurchase
agreements outstanding at any month end during the year was $1,786,000 as of
June 30, 2000, which was 1.54% of total assets.
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, 2000, the advisor owned 6,952 shares.
NOTE 6. DIVIDENDS Subsequent to October 31, 2000, the Board of Trustees of
the Trust declared a dividend from undistributed
earnings of $0.14375 per share payable November 30, 2000
to shareholders of record on November 15, 2000.
12
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK HIGH YIELD TRUST
REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
The Shareholders and Board of Trustees 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, 2000 and the related statement of operations and of
cash flows for the year then ended and the statement of changes in net assets
and financial highlights for the year ended October 31, 2000 and 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
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements 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, 2000 by correspondence with the custodian and
brokers; where replies were not received, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock High
Yield Trust at October 31, 2000 and the results of its operations, its cash
flows, the changes in its net assets and the financial highlights for the
respective stated periods in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
---------------------------
New York, New York
December 8, 2000
13
<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, 2000.
During the fiscal year ended October 31, 2000, the Trust paid dividends of
$1.6219 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 2000 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 2000 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 2001.
--------------------------------------------------------------------------------
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 Plan 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.
--------------------------------------------------------------------------------
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.
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 Advisors, Inc. ("BlackRock") is an SEC-registered investment advisor.
As of September 30, 2000, the Advisor and its affiliates (together, "BlackRock")
managed $191 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-two closed-end funds that are traded on either the New York or
American stock exchanges, and a $28 billion family of open-end funds. BlackRock
managed 670 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, preferred stocks, payment in kind securities, deferred
payment securities, bank loans, mezzanine investments, collateralized bond
obligations, mortgage-related, asset-backed securities and foreign securities.
WHAT IS THE ADVISOR'S INVESTMENT STRATEGY?
In pursuing the Trust's investment objective by investing in high yield
securities, the Advisor will seek to identify issuers and industries that it
believes are likely to experience stable or improving financial conditions. The
Advisor will also consider relative value among issuers based on anticipated
cash flow, interest or dividend coverage, asset coverage and earnings prospects.
The Advisor 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 Advisor 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 advisor. 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 advisor 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 33 1/3% 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 Trust 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 the Advisor 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 primary investment objective of the Trust is
to provide high current income, there can be no assurance that this objective
will be achieved.
DIVIDEND CONSIDERATIONS. The income and dividends paid by the Trust are likely
to vary over time as fixed income market conditions change. Future dividends may
be higher or lower than the dividend the Trust is currently paying.
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 all 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 (NYSE symbol: BHY) 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.
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.
DEFERRED PAYMENT SECURITIES: Deferred payment securities have no current
interest payment obligation and convert on a specified date prior to maturity to
interest bearing securities.
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 up to 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 Trustees 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.
OMMERCIAL MORTGAGE Mortgage-backed securities secured 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.
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.
PAYMENT IN KIND SECURITIES: Payment in kind securities pay interest or
dividends in additional securities rather than
cash.
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
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--------------------------------------------------------------------------------
BLACKROCK ADVISORS, INC.
SUMMARY OF CLOSED-END FUNDS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAXABLE TRUSTS
--------------------------------------------------------------------------------
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 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
</TABLE>
<TABLE>
<CAPTION>
TAX-EXEMPT TRUSTS
--------------------------------------------------------------------------------
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 ADVISORS, INC.
AN OVERVIEW
--------------------------------------------------------------------------------
BlackRock Advisors, Inc. (the "Advisor") is an SEC-registered investment
advisor. As of September 30, 2000, the Advisor and its affiliates (together,
"BlackRock") managed $191 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 managed twenty-two closed-end funds that are traded on either the New
York or American stock exchanges, and a $28 billion family of open-end funds.
BlackRock managed 670 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 are 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
TRUSTEES
Laurence D. Fink, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
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
Anne Ackerley, SECRETARY
INVESTMENT ADVISOR AND ADMINISTRATOR
BlackRock Advisors, Inc.
400 Bellevue Parkway
Wilmington, DE 19809
(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 ACCOUNTANTS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
LEGAL COUNSEL - INDEPENDENT DIRECTORS
Debevoise & Plimpton
875 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
[Logo] Printed on recycled paper 092472-10-6
THE BLACKROCK
HIGH YIELD
TRUST
----------------------
ANNUAL REPORT
OCTOBER 31, 2000
[GRAPHIC OMITTED]
