BLACKROCK 2012 TERM TRUST, N-2, 2000-10-24

BLACKROCK 2012 TERM TRUST
N-2, 2000-10-24

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As filed with the Securities and Exchange Commission on October 24, 2000

Securities Act Registration No. 333-_____
Investment Company Registration No. 811-_____
-----------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------

FORM N-2

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

The BlackRock 2012 Term Trust
(Exact Name of Registrant as Specified In Charter)

400 Bellevue Parkway
Wilmington, Delaware 19809
(Address of Principal Executive Offices)

(888) 8BLACKROCK
(Registrant's Telephone Number, including Area Code)

Ralph L. Schlosstein, President
The BlackRock 2012 Term Trust
345 Park Avenue
New York, New York 10154
(Name and Address of Agent for Service)

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

Copies to:

Richard T. Prins, Esq.
Michael K. Hoffman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036

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

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

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Shares (par value $.01 per share)..... 10,000 shares $10 $100,000 $27
---------------------------------------------------------------------------------- --------------------------------------
</TABLE>

The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

THE BLACKROCK 2012 TERM TRUST
CROSS REFERENCE SHEET

Part A-Prospectus

ITEMS IN PART A OF FORM N-2
SPECIFIED IN PROSPECTUS LOCATION IN PROSPECTUS

<S> <C> <C>
Item 1. Outside Front Cover...................................................Cover page

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

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

Item 4. Financial Highlights..................................................Inapplicable

Item 5. Plan of Distribution..................................................Cover Page; Prospectus Summary; How to Purchase
Shares

Item 6. Selling Shareholders..................................................Inapplicable

Item 7. Use of Proceeds.......................................................Use of Proceeds; Investment Objective and Policies

Item 8. General Description of the Registrant.................................Cover Page; Prospectus Summary; The Trust;
Investment Objective and Policies

Item 9. Management............................................................Prospectus Summary; Management

Item 10. Capital Stock, Long-Term Debt, and Other Securities...................Capitalization; Investment Objective and
Policies; Tax Matters

Item 11. Defaults and Arrears on Senior Securities............................ Inapplicable

Item 12. Legal Proceedings.....................................................Inapplicable

Item 13. Table of Contents of the Statement of Additional Table of Contents of the Statement of Additional
Information...........................................................Information

Part B-Statement of Additional Information

ITEMS IN PART B OF FORM N-2 LOCATION IN STATEMENT OF
ADDITIONAL INFORMATION

Item 14. Cover Page...........................................................Cover Page

Item 15. Table of Contents....................................................Back Cover Page

Item 16. General Information and History......................................Inapplicable

Item 17. Investment Objective and Policies....................................Investment Objective and Policies; Investment
Policies and Techniques

Item 18. Management...........................................................Management

Item 19. Control Persons and Principal Holders of Securities..................Management

Item 20. Investment Advisory and Other Services...............................Management

Item 21. Brokerage Allocation and Other Practices.............................Portfolio Transactions

Item 22. Tax Status...........................................................Tax Matters

Item 23. Financial Statements.................................................Financial Statements

</TABLE>

Part C-Other Information

Items 24-33 have been answered in Part C of this Registration Statement

SUBJECT TO COMPLETION, DATED , 2000
PROSPECTUS
THE BLACKROCK 2012 TERM TRUST

[FLAG]

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

The BlackRock 2012 Strategic Term Trust (the "Trust") is a
diversified, closed-end, management investment company. The Trust's
investment objective is:

o to provide current income and to return $10 per share
(the initial public offering price per share) to holders
of shares on or about December 31, 2012; and

o to provide capital appreciation.

The Trust seeks to achieve its investment objective by investing in a
diversified portfolio of investment grade fixed income securities of
varying maturities to provide current income. The Trust's fixed income
investments will include a broad range of U.S. dollar-denominated bonds,
including corporate debt securities, U.S. government bonds and asset-and
mortgage-backed securities. Under normal circumstances, the Trust will
invest at least 75% of its total assets in fixed income securities. The
Trust will also attempt to achieve capital appreciation by purchasing
forward contracts based on the Standard & Poor's 500 Index with an initial
notional value equivalent to 25% of the Trust's total assets; provided that
no more than 5% of the Trust's total assets may be invested in initial
margin for forward contracts on the Standard & Poor's 500 Index. The Trust
will use leverage which is a speculative technique that may expose the
Trust to greater risk and increased costs. See "Risk Factors."

The Trust seeks to return $10 per common share to shareholders on or
about December 31, 2012 when the Trust will terminate. The Trust will
actively manage its portfolio of fixed income securities to seek to achieve
this objective. The Trust will also retain each year a small percentage of
its net investment income not to exceed 10% for any year, as required by
federal income tax rules. No assurance can be given that the Trust will
achieve its investment objective. See "Risk Factors."

The Trust's shares will not be listed on any securities exchange, and
the Trust anticipates that no secondary market will develop for its shares.
As a closed-end fund, the Trust is prohibited from redeeming its shares on
a daily basis. You may not be able to sell your shares when you want to and
accordingly the shares are appropriate only as a long-term investment.

The Trust intends to raise approximately $ million of net proceeds in
its initial offering. The Trust anticipates that the initial offering will
end on or about December 31, 2000. The minimum investment in this offering
is $1,000. The Trust's shares are being offered initially by brokers and
dealers selected by BlackRock Distributors, Inc. at a price of $ per share,
plus a sales charge of up to $ per share, for a maximum offering price of
$10.00 per share. The sales charge is payable to the selected broker or
dealer who arranges for a sale. The Trust will pay each broker-dealer a
shareholder servicing fee at an annual rate of % of the net asset value of
the outstanding shares owned by customers of such broker or dealer. See
"How to Purchase Shares." The Trust will also pay organizational and offering
expenses estimated at $ .

The Trust intends to offer additional shares at net asset value on a
continuous basis. Orders for additional shares will be accepted in
connection with each quarterly tender offer. The number of shares available
to fill orders in connection with each tender offer will not exceed the
number of shares repurchased by the Trust in the respective quarterly
tender offer. See "Additional Sale of Shares."

This prospectus contains important information about the Trust. You
should read the prospectus before deciding whether to invest and retain it
for future reference. A statement of additional information, dated , 2000,
containing additional information about the Trust, has been filed with the
Securities and Exchange Commission and is incorporated by reference in its
entirety into this prospectus. You can review the table of contents of the
statement of additional information on page 24 of this prospectus. You may
request a free copy of the statement of additional information by calling
1-888-825-2257. You may also obtain the statement of additional information
and other information regarding the Trust on the SEC's web site
(http://www.sec.gov).

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

The Trust's shares are expected to be available for delivery to
purchasers, in book-entry form, through the facilities of the National
Securities Clearing Corporation on or about December , 2000.

December , 2000

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
THE TRUST HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. THE TRUST IS NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.

TABLE OF CONTENTS

Page

PROSPECTUS SUMMARY.......................................................4
INVESTMENT OBJECTIVE AND POLICIES........................................9
INVESTMENT STRATEGIES...................................................10
MANAGEMENT..............................................................11
OFFERS.................................................................14
CALCULATION OF NET ASSET VALUE..........................................17
CAPITAL STOCK...........................................................17
DISTRIBUTION POLICY.....................................................18
TAXES...................................................................19
GENERAL INFORMATION.....................................................21
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION...................................23

PROSPECTUS SUMMARY

The following information is a summary of, and is qualified in its
entirety by reference to, more detailed information included in this
prospectus and the Trust's statement of additional information.

THE TRUST.......................................... The BlackRock 2012
Term Trust is a
diversified,
closed-end management
investment company.
The Trust will
distribute
substantially all of
its assets on or about
December 31, 2012 when
the Trust will
terminate.

INVESTMENT OBJECTIVE AND POLICIES.................. The Trust's investment
objective is (1) to
provide current income
and to return $10 per
share (the initial
public offering price
per share) to holders
of shares on or about
December 31, 2012 and
(2) to provide capital
appreciation. No
assurance can be given
that the Trust will
achieve its investment
objective.

The Trust seeks to
achieve its investment
objective by investing
its assets in a
diversified portfolio
of fixed income
securities of varying
maturities to provide
current income. The
Trust's fixed income
investments will
include a broad range
of U.S. investment
grade bonds, including
corporate debt
securities, U.S.
government bonds and
asset-and
mortgage-backed
securities. Under
normal circumstances,
the Trust will invest
at least 75% of its
total assets in fixed
income securities. The
Trust will also
attempt to achieve
capital appreciation
by purchasing forward
contracts based on the
Standard & Poor's 500
Index with an initial
notional value
equivalent to 25% of
the Trust's total
assets; provided that
no more than 5% of the
Trust's total assets
may be invested in
initial margin for
forward contracts on
the Index.

The Trust seeks to
return $10 per common
share to shareholders
on or about December
31, 2012 when the
Trust will terminate.
The Trust will
actively manage its
portfolio of fixed
income securities. The
Trust will also retain
each year a small
percentage of its net
investment income not
to exceed 10% for any
year, as required by
federal income tax
rules.

INVESTMENT MANAGER................................. BlackRock Advisors,
Inc. acts as the
Trust's investment
manager. The
investment manager is
responsible for the
investment strategy of
the Trust. The
investment manager and
its affiliates
comprise a global
asset management firm
with assets of
approximately $190
billion under
management as of
September 30, 2000.

INVESTMENT MANAGER FEES............................ The Trust will pay a
fee to the investment
manager for its
management services at
an annual rate of % of
the average weekly
value of the Trust's
managed assets. See
"Management - The
Investment Advisory
Agreement."

RISK FACTORS....................................... Investment in the
Trust involves risk.
Before investing, you
should consider
carefully the
following principal
risks:

o The Trust is
newly organized
and has no
operating
history.

o You may not be
able to sell your
shares when you
want to.

o If interest rates
rise, the value
of the Trust's
fixed income
portfolio will
decline.

o If an issuer of a
fixed income
security
experiences
financial
difficulty or
defaults, there
may be a negative
impact on income
and the value of
the Trust's fixed
income portfolio.

o The Trust will
use leverage in
managing its
fixed income
portfolio which
may expose the
Trust to greater
risk and increase
its costs.

o The value of the
Trust's equity
component will go
up or down
depending upon
the value of the
stocks in the
Standard & Poor's
500 Index.

o The Trust will be
subject to credit
risk with respect
to the
counterparties to
the Standard &
Poor's 500 Index
forward contracts
purchased by the
Trust.

o The stocks
represented in
the Standard &
Poor's 500 Index
may underperform
other types of
equity
investments
(e.g., small
capitalization
securities).

TENDER OFFERS...................................... The Trust's shares
will not be listed on
any securities
exchange, and the
Trust anticipates that
no secondary market
will develop for its
shares. As a
closed-end fund, the
Trust is prohibited
from redeeming its
shares on a daily
basis. You may not be
able to sell your
shares when you want
to and accordingly the
shares are appropriate
only as a long-term
investment.

In order to provide
liquidity to
shareholders,
commencing on
September 30, 2001 the
Trust will make
quarterly tender
offers to repurchase
at least 5% of its
outstanding shares at
net asset value. A
withdrawal charge of
1% designed to recover
offering expenses will
be charged in
connection with shares
which are accepted by
the Trust for tender
pursuant to quarterly
tender offers. See
"Tender Offers."

THE OFFERING....................................... The Trust is initially
offering its shares
through brokers and
dealers selected by
BlackRock
Distributors, Inc.,
through whom the Trust
intends to raise
approximately $
million. The Trust
anticipates that the
initial offering will
end on or about
December 31, 2000. The
minimum investment is
$1,000. The maximum
purchase price per
share of $10.00
includes a sales
charge of up to $ per
share. The sales
charge is payable to
the selected broker or
dealer who arranges
for a sale. The Trust
will pay each selected
broker or dealer a
shareholder servicing
fee at an annual rate
of [ %] of the net
asset value of the
outstanding shares
owned by customers of
such broker or dealer.
See "How to Purchase
Shares."

ADDITIONAL SALES OF SHARES ........................ The Trust intends to
offer additional
shares at their net
asset value on a
continuous basis.
Orders for additional
shares will be
accepted in connection
with each quarterly
tender offer. The
number of shares
available to fill
orders in connection
with each tender offer
will not exceed the
number of shares
repurchased by the
Trust in the
respective quarterly
tender offer. Orders
for additional shares
will not be accepted
until the closing of
the Trust's initial
tender offer. See
"Additional Sales of
Shares."

DISTRIBUTION POLICY AND REINVESTMENT
PLAN.......................................... The Trust will pay monthly
dividends on the
shares in amounts
representing all or a
portion of the net
investment income, if
any, earned each year.
The Trust will pay to
shareholders monthly
all or a portion of
any taxable net
capital gain realized
on its investments.
The Trust will retain
each year a small
percentage of its net
investment income not
to exceed 10% for any
year, as required by
federal income tax
rules. In certain
circumstances, the
Trust may be subject
to federal excise tax
on the retained
amounts. Such retained
income is expected to
constitute a portion
of the liquidating
distribution returned
to investors on or
about December 31,
2012.

An automatic
reinvestment plan is
available for any
holder of the Trust's
common stock who
wishes to purchase
additional shares
using dividends and/or
capital gain
distributions paid by
the Trust. Shares will
be issued under the
plan at their net
asset value on the
ex-dividend date.
There is no sales
charge or other charge
for reinvestment.

RISK FACTORS

Apart from the specific risks identified below, the Trust's
investments may be adversely affected by the broad investment environment,
which is influenced by many factors, including interest rates, inflation,
politics, fiscal policy and current events. As with any fund, the Trust's
net asset value will fluctuate. You may experience a decline in the value
of your investment and you could lose money.

NEWLY ORGANIZED

The trust is a newly organized, diversified, closed-end management
investment company and has no operating history.

LIQUIDITY RISK

The Trust is a closed-end investment company designed primarily
for long-term investors and is not intended to be a trading vehicle. There
is no secondary trading market for the Trust's shares, and the Trust
expects that no secondary market will develop. The Trust's shares are
therefore not readily marketable. Although the Trust, as a fundamental
policy, will make quarterly tender offers for at least 5% of its
outstanding shares at net asset value you may not be able to sell all of
the shares you desire to sell. The Trust's Board of Trustees may set a
maximum number of shares the Trust will repurchase for any tender offer.
Moreover, the Trust's repurchase policy may have the effect of decreasing
the size of the Trust. This may force the Trust to sell assets it would not
otherwise sell. It may also reduce the investment opportunities available
to the Trust and cause its expense ratio to increase.

FIXED INCOME RISK

Two of the main risks of investing in fixed income securities are
interest rate risk and credit risk. Typically, when interest rates rise,
there is a corresponding decline in the market value of bonds, such as
those held by the Trust. Credit risk refers to the possibility that the
issuer of a bond will experience financial difficulty or default and not be
able to make interest and principal payments. This would result in a
negative impact on income and the value of the Trust's fixed income
portfolio.

REINVESTMENT RISK

Reinvestment risk is the risk that income from the Trust's fixed
income portfolio will decline if and when the Trust invests the proceeds
from matured, traded, prepaid or called bonds at lower interest rates. This
risk will increase as the Trust approaches its termination date, because
the Trust will reinvest such proceeds in bonds with maturities on or about
its termination date, and shorter bonds generally pay lower rates of
interest than longer term bonds.

LEVERAGE RISK

The Trust will use leverage in managing its portfolio of fixed
income securities. Leverage is a speculative technique that may expose the
Trust to greater risk and increased costs. Increases and decreases in the
Trust's portfolio will be magnified when the Trust uses leverage. For
example, leverage may cause greater changes in the Trust's net asset value.
The Trust will also have to pay interest on its borrowings, which may
reduce the Trust's return. This interest expense may be greater than the
Trust's return on the underlying investment.

COUNTERPARTY RISK

The Trust will be subject to credit risk with respect to the
counterparties to the Standard & Poor's 500 Index forward contracts
purchased by the Trust. If a counterparty becomes bankrupt or otherwise
fails to perform its obligations under a forward contract due to financial
difficulties, the Trust may experience significant delays in obtaining any
recovery under the forward contract in bankruptcy or other reorganization
proceeding. The Trust may obtain only a limited recovery or may obtain no
recovery in such circumstances.

STOCK RISK

Because the Trust seeks exposure to the returns of the stocks
contained in the Standard & Poor's 500 Index, it is subject to the general
risks of stocks. The main risk of an investment in stocks is that stock
values fluctuate in price. The value of the Trust's investment may go up or
down depending on the performance of the stocks contained in the Standard &
Poor's 500 Index, which means the Trust could lose money. Because different
kinds of stocks go in and out of favor depending on market conditions, the
stocks contained in the Standard & Poor's 500 Index may perform better or
worse than other types of equity investments (e.g., small capitalization
equity securities).

SUMMARY OF TRUST EXPENSES

The following table illustrates the expenses and fees that the
Trust expects to incur and that shareholders can expect to bear.

SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Sales load (as a percentage of offering price)................................ %
Automatic reinvestment plan fees.............................................. none
Maximum redemption fee ....................................................... %
ANNUAL EXPENSES (as a percentage of net assets)
Management fees............................................................... %
Shareholder Servicing Fee..................................................... %
Other expenses................................................................ %
---------
Total annual expenses (before Interest Payments on Borrowed Funds)............ %
---------
Interest Payments on Borrowed Funds .......................................... %
---------
Total annual expenses (after Interest Payments on Borrowed Funds) ............ %
=========

</TABLE>

The purpose of the table above is to assist you in understanding
the various costs and expenses you would bear directly or indirectly as a
shareholder of the Trust. The annual "Other expenses" shown above are
estimated, based on net assets of the Trust of $ million at the closing
of the initial offering, organizational and offering expenses payable by the
Trust estimated to be $ . For a more complete description of the various
costs and expenses of the Trust, see "Management."

Example 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

<S> <C> <C> <C> <C>
You would pay the following expenses on a $ $ $ $
$1,000 investment, assuming a 5% annual
return:

</TABLE>

THE EXAMPLE DOES NOT PRESENT ACTUAL EXPENSES AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. Moreover, the Trust's actual rate of
return may be greater or less than the hypothetical 5% return shown in the
example.

THE TRUST

The BlackRock 2012 Strategic Term Trust is a diversified,
closed-end management investment company. The Trust will distribute
substantially all of its assets on or about December 31, 2012 when the
Trust will terminate. The Trust was organized as a business trust under the
laws of the State of Delaware on October 20, 2000 and has registered under
the Investment Company Act of 1940 (the "1940 Act"). The Trust's principal
office is located at 400 Bellevue Parkway, Wilmington, Delaware 19807 and
its telephone number (888) 825-2257.

USE OF PROCEEDS

The net proceeds of the offering will be invested in accordance
with the Trust's investment objective and policies as stated below. It is
presently anticipated that the Trust will be able to invest substantially
all of the net proceeds in accordance with its objective and policies
within six to eight months after the completion of the offering. To the
extent that all of the proceeds cannot be so invested, pending such
investment, they will be invested in short-term, high quality fixed income
securities or securities that seek to emulate the returns of the Standard &
Poor's 500 Index.

The Trust will pay out of the proceeds of the initial offering its
organizational and offering expenses, estimated to be $ , and the
distribution costs of the initial offering, estimated at $ . Such expenses
will therefore be borne by investors in the initial offering. Investors in
any subsequent offering may not bear any organizational expenses or any
offering or distribution expense from the initial offering.

INVESTMENT OBJECTIVE AND POLICIES

The Trust's investment objective is to (1) provide current income
and to return $10 per share (the initial public offering price per share)
to holders of shares on or about December 31, 2012 and (2) provide capital
appreciation.

The Trust seeks to achieve current income by investing its assets
in a diversified portfolio of investment grade fixed income securities of
varying maturities. The Trust seeks to achieve capital appreciation by
investing in forward contracts on the Standard & Poor's 500 Index. The
Trust will attempt to return $10 to shareholders on December 31, 2012 by
actively managing the maturity of its portfolio of fixed income securities.

INVESTMENT STRATEGIES

The Trust's fixed income securities will include a broad range of
U.S. dollar-denominated investment grade bonds including corporate debt
securities, U.S. Government bonds, and mortgage-and asset-backed
securities. The Trust will buy only securities that are rated investment
grade at time of purchase by at least one major rating agency or determined
by the investment manager to be of similar quality. The investment manager
uses a relative value style that seeks bonds that will add value while
controlling risk. Relative value is assessed in sector, sub-sector, and
individual security selection. If a security falls below investment grade,
the investment manager will decide whether to continue to hold the
security. A security will be sold if, in the opinion of the investment
manager, the risk of continuing to hold the security in unacceptable when
compared to the total return potential. The investment manager will use
leverage in managing the Trust's fixed income portfolio by borrowing for
investment purposes up to 33% of the Trust's value. Leverage will be
primarily in the form of reverse repurchase agreements and dollar roll
transactions.

The Trust seeks to return $10 per share to shareholders on or
about December 31, 2012 by actively managing its portfolio of fixed income
securities. The Trust will also retain each year a small percentage of its
net investment income not to exceed 10% for any year, as required by
applicable federal income tax rules.

The Trust's equity component will consist of forward contracts on
the Standard & Poor's 500 Index that replicate the return of the Index. In
a forward contract, the Trust will post initial margin for the contract and
pay a predetermined rate of interest on the notional value of the contract
during its term. At the end of the contract, the Trust will receive a cash
payment equivalent to the return of the Standard & Poor's 500 Index on the
notional value of the contract. Using these forward contracts, the
investment manager seeks to obtain exposure to the returns of the Standard
& Poor's 500 Index with respect to 25% of the value of the Trust's
portfolio.

Under normal circumstances, the Trust will invest at least 75% of
its total assets in investment grade fixed income securities. The Trust
will not invest more than 5% of its total assets in initial margin for
forward contracts and will not purchase forward contracts having a notional
value in excess of 25% of the Trust's total assets. The Trust may also
invest in other fixed income investments (including below investment grade
or "high yield" fixed income securities), equity securities or short term
temporary investments.

FIXED INCOME PHILOSOPHY

The investment manager's investment decision-making process for
the Trust's fixed income securities is subject to the same discipline,
oversight and investment philosophy that the firm applies to other sectors
of the fixed income market.

The investment manager uses a relative value strategy that
evaluates the trade-off between risk and return in selecting the Trust's
fixed income securities. This strategy is combined with disciplined risk
control techniques and applied in sector, sub-sector and individual
security selection decisions. The investment manager's extensive personnel
and technology resources are the key drivers of the investment philosophy.

The investment manager has in-depth expertise in the fixed income
market. The investment manager applies the same risk-controlled, active
sector rotation style (discussed below) to the management process for all
of its fixed income portfolios.

The investment manager's portfolio management process emphasizes
research and analysis of specific sectors and securities, not interest rate
speculation. The investment manager believes that market-timing strategies
can be highly volatile and potentially produce inconsistent results.
Instead, the investment manager thinks that value over the long term is
best achieved through a risk-controlled approach, focusing on sector
allocation, security selection and yield curve management (discussed
below).

The investment manager also believes that over the long term,
intense credit analysis will add value and avoid significant relative
performance impairments.

The investment manager's approach to credit risk incorporates a
combination of sector-based top-down macro-analysis of industry sectors to
determine relative weightings with an issuer-specific, bottom-up detailed
credit analysis of issuers and structures. The sector-based approach
focuses on rotating into sectors that are undervalued and exiting sectors
when fundamentals or technicals become unattractive. The issuer-specific
approach focuses on identifying special opportunities where the market
undervalues a credit, and devoting concentrated resources to research the
credit and monitor the position. The investment manager's yield curve
management process involves, among other things, an evaluation of the
risk/return trade off for bonds having different durations, and selecting
bonds believed to present an attractive yield relative to the degree of
interest rate risk involved.

REVERSE REPURCHASE AGREEMENTS

Borrowings may be made by the Trust through reverse repurchase
agreements under which the Trust sells portfolio securities to financial
institutions such as banks and broker-dealers and agrees to repurchase them
at a particular date and price. Such agreements are considered to be
borrowings under the 1940 Act. The Trust may utilize reverse repurchase
agreements when it is anticipated that the interest income to be earned
from the investment of the proceeds of the transaction is greater than the
interest expense of the transaction. This use of reverse repurchase
agreements may be regarded as leveraging and, therefore, speculative.

DOLLAR ROLL TRANSACTIONS

To take advantage of attractive opportunities in the mortgage
market and to enhance current income, the Trust may enter into dollar roll
transactions. A dollar roll transaction involves a sale by the Trust of a
mortgage-backed or other security concurrently with an agreement by the
Trust to repurchase a similar security at a later date at an agreed-upon
price. The securities that are repurchased will bear the same interest rate
and stated maturity as those sold, but pools of mortgages collateralizing
those securities may have different prepayment histories than those sold.
During the period between the sale and repurchase, the Trust will not be
entitled to receive interest and principal payments on the securities sold.
Proceeds of the sale will be invested in additional instruments for the
Trust, and the income from these investments will generate income for the
Trust. If such income does not exceed the income, capital appreciation and
gain or loss that would have been realized on the securities sold as part
of the dollar roll, the use of this technique will diminish the investment
performance of the Trust compared with what the performance would have been
without the use of dollar rolls.

MANAGEMENT

TRUSTEES AND OFFICERS

The Board of Trustees is responsible for the overall management of
the Trust, including supervision of the duties performed by the investment
manager. There are Trustees. Two of the Trustees are "interested persons"
(as defined in the 1940 Act). The names and business addresses of the
Trustees and officers of the Trust and their principal occupations and
other affiliations during the past five years are set forth under
"Management" in the statement of additional information.

INVESTMENT MANAGER

BlackRock Advisors, Inc. acts as the Trust's investment manager.
BlackRock Advisors, Inc. is one of the largest publicly traded investment
management firms in the United States with $191 billion of assets under
management as of September 30, 2000. BlackRock Advisors, Inc. manages
assets on behalf of more than 3,000 institutions and 160,000 individuals
worldwide, including nine of the ten largest companies in the U.S. as
determined by Fortune Magazine(1), through a variety of equity, fixed
income, liquidity and alternative investment separate accounts and mutual
funds, including the company's flagship fund families, BlackRock Funds and

--------
1 Issue of April 17, 2000

Provident Institutional Funds. In addition, the company provides risk
management and technology services to a growing number of institutional
investors under the BlackRock Solutions name. Clients are served from the
company's headquarters in New York City, as well as offices in Philadelphia
PA, Wilmington, DE, Edinburgh, Scotland and Tokyo, Japan. BlackRock
Advisors, Inc. is a member of the PNC Financial Services Group, Inc. , one
of the largest diversified financial services organizations in the United
States, and is majority-owned by PNC and by BlackRock employees.

BlackRock Advisors, Inc. manages [ ] other investment companies
with investment objectives similar to the Trust. To date, [ ] of these
investment companies have reached their respective maturity dates. Of these
[ ] investment companies, [ ] have met their investment objective as of
their respective maturity date. However, past performance is no guarantee
of future performance.

PORTFOLIO MANAGEMENT TEAM

The investment manager uses a team approach to managing its
portfolios. The investment manager believes that this approach offers
substantial benefits over one that is dependent on the market wisdom or
investment expertise of only a few individuals. The investment manager's
portfolio management team includes:

MICHAEL P. LUSTIG, Managing Director and portfolio manager, is a
member of the Investment Strategy Group. Mr. Lustig is primarily
responsible for managing the firm's table closed-end funds and derivative
products effort. Previously, Mr. Lustig developed analytical models for
security and portfolio analysis, assisted in the structuring of BlackRock's
mutual funds and analyzed the asset/liability structure of client
portfolios. Prior to joining BlackRock in 1989, Mr. Lustig was an associate
in the Financial Strategies and Investment Analysis Division of Security
Pacific Merchant Bank. Mr. Lustig joined Security Pacific in 1987 and was
responsible for developing models to trade derivative products including
caps, floors, swaps, callable/putable bonds, futures and options. Mr.
Lustig earned a BA degree in Computer Science and Art History from Columbia
University in 1986.

SCOTT AMERO, Managing Director and portfolio manager, is a member
of the Investment Strategy Group. Mr. Amero has primary responsibility for
managing client portfolios, specializing in the mortgage, and short and
intermediate duration sectors including asset-backed securities (ABS),
adjustable rate mortgage securities (ARMs) and other short duration
mortgage products. Mr. Amero also serves as a Vice President for
BlackRock's family of closed-end mutual funds and for the Smith Barney
Adjustable Rate Government Income Fund.

Prior to joining BlackRock in 1990, Mr. Amero was a Vice President
in Fixed Income Research at The First Boston Corporation. Mr. Amero joined
First Boston in 1985 and became the firm's primary strategist for short
duration securities.

Mr. Amero has authored numerous publications on topics including
mortgage securities, short duration securities and derivative products. He
recently authored "The Challenges of CMO Portfolio Management" which was
published in CMO Portfolio Management. Mr. Amero earned a BA degree in
applied math and economics from Harvard University in 1985 and an MBA in
finance from New York University in 1991.

ROBERT S. KAPITO, Vice Chairman of BlackRock, Inc., is co-head of
the Equity Operating Committee, Head of the Portfolio Management Group, a
member of the Management Committee, the Investment Strategy Group, and
BlackRock International's Management Committee. Mr. Kapito is responsible
for the portfolio management of the Fixed Income, Domestic Equity and
International Equity, Liquidity, and Alternative Investment Groups of
BlackRock.

In addition, Mr. Kapito plays a key role in coordinating the
efforts of the analytical and administrative groups with the portfolio
management group. He is also involved in marketing and managing several of
BlackRock's funds. Mr. Kapito serves as a Vice President for BlackRock's
family of closed-end mutual funds and for the Smith Barney Adjustable Rate
Government Income Fund.

Prior to founding BlackRock in 1988, Mr. Kapito was a Vice
President in the Mortgage Products Group at The First Boston Corporation.
Mr. Kapito joined First Boston in 1979 in the Public Finance Department.
Mr. Kapito left First Boston to complete his MBA degree and returned to the
firm in 1983 in the Mortgage Products Group. While with this Group, Mr.
Kapito initially traded mortgage securities and then became the head trader
of collateralized mortgage obligations (CMOs). Ultimately, Mr. Kapito
became head of Mortgage Capital Markets with responsibility for marketing
and pricing all of the mortgage-backed and asset-backed securities
underwritten by First Boston. In 1982, Mr. Kapito worked as a strategic
consultant with Bain & Co. and with two other private companies in Europe.

Mr. Kapito earned a BS degree in economics from the Wharton School
of the University of Pennsylvania in 1979 and an MBA degree from Harvard
Business School in 1983.

THE INVESTMENT ADVISORY AGREEMENT

Pursuant to an investment management agreement between the
investment manager and the Trust, the Trust has agreed to pay for the
services and facilities provided by the investment manager a fee, payable
monthly in arrears, at an annual rate equal to ____% of the average weekly
value of the Trust's managed assets (the "management fee"). The investment
management agreement covers both investment advisory and administration
services. The Trust will reimburse the investment manager for all
out-of-pocket expenses the investment manager incurs in connection with
performing administrative services for the Trust. In addition, with the
approval of the Board of Trustees, a pro rata portion of the salaries,
bonuses, health insurance, retirement benefits and similar employment costs
for the time spent on Trust operations (other than the provision of
services required under the investment management agreement) of all
personnel employed by the investment manager or its affiliates who devote
substantial time to Trust operations or the operations of other investment
companies advised by the Trust may be reimbursed to the investment manager
or its affiliates.

Managed assets are the total assets of the Trust minus the sum of
accrued liabilities (other than indebtedness attributable to leverage).
This means that during periods in which the Trust is using leverage, the
fee paid to the investment manager will be higher than if the Trust did not
use leverage because the fee is calculated as a percentage of the Trust's
managed assets, including those purchased with leverage.

Except as indicated above, the Trust will pay all of its expenses,
including fees of the Trustees not affiliated with the investment manager
and board meeting expenses; fees of the investment manager and the
Administrator; interest charges; taxes; organization expenses; charges and
expenses of the Trust's legal counsel and independent accountants, and of
the transfer agent, registrar and dividend disbursing agent of the Trust;
expenses of repurchasing shares; expenses of issuing any preferred shares
or indebtedness; expenses of printing and mailing share certificates (if
any), stockholder reports, notices, proxy statements and reports to
governmental offices; brokerage and other expenses connected with the
execution, recording and settlement of portfolio security transactions;
expenses connected with negotiating, effecting the purchase or sale of, or
registering privately issued portfolio securities; custodial fees and
expenses for all services to the Trust, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of
calculating and publishing the net asset value of the Trust's shares;
expenses of membership in investment company associations; expenses of
fidelity bonding and other insurance expenses including insurance premiums;
expenses of stockholders meetings; and SEC and state registration fees.

TERM OF THE TRUST

The Trust's Agreement and Declaration of Trust provides that the
Trust will terminate on December 31, 2012, without shareholder approval. In
connection with such termination, the Trust will liquidate all of its
assets and distribute to stockholders the net proceeds therefrom after
making appropriate provision for any liabilities of the Trust. Prior to
such termination, however, the Board of Trustees of the Trust will consider
whether it is in the best interests of shareholders to terminate and
liquidate the Trust without shareholder approval notwithstanding the
Agreement and Declaration of Trust. In considering the matter, the Board of
Trustees will take into account, among other factors, the adverse effect
which capital losses realized upon disposition of securities in connection
with liquidation (if any such losses are anticipated) would have on the
Trust and it shareholders. In the event that the Board of Trustees
determines that under the circumstances, termination and liquidation of the
Trust on December 31, 2012 without a shareholder vote would not be in the
best interest of shareholders, the Board of Trustees will call a special
meeting of shareholders to consider appropriate amendment. The Trust's
Agreement and Declaration of Trust would require the affirmative vote of
the holders of at least 75% of outstanding shares to approve such an
amendment.

TENDER OFFERS

The Trust is structured as a closed-end fund, which means that you
will not have the right to redeem your shares on a daily basis. In
addition, the Trust will not list its shares on any stock exchange and does
not expect any trading market to develop for its shares. As a result, if
you invest in the Trust you may not be able to sell your shares when you
want to and the shares accordingly are appropriate only as a long term
investment.

To provide you with a degree of liquidity, and the ability to
receive net asset value on a disposition of your shares, the Trust will
make quarterly tender offers to repurchase its shares. The tender offers
will be limited to a specified percentage of the Trust's outstanding
shares. Shares will be repurchased at their net asset value. The Trust
intends to commence the first quarterly tender offer in September 30, 2001.

THE TRUST WILL OFFER TO REPURCHASE AT LEAST 5% OF ITS OUTSTANDING SHARES
EACH QUARTER

Each quarter, the Trust will offer to repurchase at least 5% of
the number of shares outstanding on the date repurchase requests are due.
The Trust's Board of Trustees may establish a larger percentage for any
quarterly tender offer. However, the percentage will not be less than 5% or
more than 25% of the shares outstanding on the date repurchase requests are
due.

The Trust intends to commence the first quarterly tender offer in
September 30, 2001. Thereafter, quarterly tender offers will commence on or
about each March 31, June 30, September 30 and December 31 and will be
completed in the following month.

When a tender offer commences, the Trust will publish a
notification of the offer in accordance with applicable securities laws.
The notification will specify, among other things:

o the percentage of shares that the Trust is offering to
repurchase. This will be at least 5%.
o the date on which a shareholder's repurchase request is due.
o the date that will be used to determine the Trust's net
asset value applicable to the tender offer. This is
generally expected to be the day on which requests are due.
o the date by which shareholders will receive the proceeds
from their share sales.
o the net asset value of the shares of the Trust as of a date
no more than seven days prior to the date of the
notification.

The Trust intends to publish this notification approximately 30
days before the due date for the tender request. In no event will the
notice be published less than 21 or more than 42 days in advance. Your
shares of the Trust must be held through a selected broker or dealer.
Certificated shares will not be available, and you will not be able to
receive tender offers directly from the Trust. Your selected broker or
dealer may require additional time to mail the tender offer to you, to
process your request, and to credit your account with the proceeds of any
tender shares.

THE DUE DATE FOR TENDER REQUESTS IS A DEADLINE THAT WILL BE STRICTLY OBSERVED

If your intermediary fails to submit your tender request in good
order by the due date, you will be unable to liquidate your shares until a
subsequent quarter, and you will have to resubmit your request in that
quarter. You should be sure to advise your intermediary of your intentions
in a timely manner. You may withdraw or change your tender request at any
point before the due date.

THE TRUST'S FUNDAMENTAL POLICIES WITH RESPECT TO TENDER OFFERS

The Trust has adopted the following fundamental policies in
relation to its tender offers which may only be changed by a majority vote
of the outstanding voting securities of the Trust:

o as stated above, the Trust intends to make tender offers
every three months, pursuant to Rule 13e-4 under the
Securities Exchange Act of 1934, as it may be amended from
time to time, commencing September 30, 2001;
o 5% of the Trust's outstanding stock will be subject to the
tender offer, unless the Board of Trustees establishes a
different percentage, which must be between 5% and 25%;
o the repurchase request due dates will be , , and
(or the preceding business day if that day is a New York Stock
Exchange holiday); and
o there will be a maximum 14 day period between the due date
for each tender request and the date on which the Trust's
net asset value for that tender is determined.

OVERSUBSCRIBED TENDER OFFERS

There is no minimum number of shares that must be tendered before
the Trust will honor tender requests. However, the percentage determined by
the Board of Trustees for each tender offer will set a maximum number of
shares that may be purchased by the Trust. In the event a tender offer by
the Trust is oversubscribed, the Trust may, but is not required to,
repurchase additional shares up to a maximum amount of 2% of the
outstanding shares of the Trust. If the Trust determines not to repurchase
additional shares beyond the tender offer amount, or if shareholders tender
an amount of shares greater than that which the Trust is entitled to
purchase, the Trust will repurchase the shares tendered on a pro rata
basis.

If proration is necessary, the Trust will send a notice of
proration to selected brokers and dealers on the business day following the
due date. The number of shares each investor asked to have repurchased will
be reduced by the same percentage. If any shares that you wish to tender to
the Trust are not repurchased because of proration, you will have to wait
until the next tender offer, and your tender request will not be given any
priority over other investors' requests. Thus, there is a risk that the
Trust may not purchase all of the shares you wish to tender in a given
quarter or in any subsequent quarter. In anticipation of the possibility of
proration, some shareholders may tender more shares than they wish to have
repurchased in a particular quarter, thereby increasing the likelihood of
proration. THERE IS NO ASSURANCE THAT YOU WILL BE ABLE TO TENDER AS MANY OF
YOUR SHARES AS YOU DESIRE TO SELL.

The Trust may suspend or postpone a tender offer in limited
circumstances, but only with the approval of a majority of the Board of
Trustees, including a majority of independent Trustees.

DETERMINATION OF TENDER PRICE

The tender price payable in respect of a tendered share will be
equal to the share's net asset value on the date specified in the notice.
The Trust's net asset value per share may change materially between the
date a tender offer is mailed and the due date, and it may also change
materially shortly after a tender is completed. The method by which the
Trust calculates net asset value is discussed under the caption
"Calculation of Net Asset Value."

WITHDRAWAL CHARGE

A withdrawal charge of 1% designed to recover offering expenses
will be charged in connection with shares which are accepted by the Trust
for tender pursuant to quarterly tender offers. Proceeds from the
withdrawal charge will be paid to the Trust.

PAYMENT

The Trust expects to repurchase shares on the next business day
after the net asset value determination date selected to determine the
tender price. Proceeds will be distributed to intermediaries as specified
in the tender offer notification, usually on the third business day after
repurchase. In any event, the Trust will pay tender proceeds no later than
seven days after such net asset value determination date.

IMPACT OF REPURCHASE POLICIES ON THE LIQUIDITY OF THE TRUST

From the time the Trust distributes or publishes each tender offer
notification until the net asset value determination date, the Trust must
maintain liquid assets at least equal to the percentage of its shares
subject to the tender offer. For this purpose, liquid assets means assets
that may be disposed of in the ordinary course of business at approximately
the price at which they are valued or which mature by the tender payment
date. The Trust is also permitted to borrow up to 5% of its assets to meet
tender requests.

IN-KIND REPURCHASES

Under normal conditions, the Trust intends to repurchase its
shares for cash. However, the Trust reserves the right to pay for all or a
portion of tendered shares with an in-kind distribution of a portion of its
portfolio securities.

CONSEQUENCES OF TENDER OFFERS

The Trust believes that tender offers will generally be beneficial
to the Trust's shareholders, and will generally be funded from available
cash or sales of portfolio securities. However, if the Trust borrows to
finance repurchases, interest on that borrowing will increase the Trust's
expenses and will reduce any net investment income. To the extent the Trust
finances tender proceeds by selling Trust investments, the Trust will hold
a larger proportion of its total assets in fixed income securities.
Subsequent to each quarterly tender, the Trust may offer additional shares
which may alleviate these potential consequences, but there is no assurance
that the Trust will be able to raise new cash.

Tender offers provide shareholders with the opportunity to dispose
of shares at net asset value. The Trust does not anticipate that a
secondary market will develop, but in the event that a secondary market
were to develop, it is possible that shares would trade in that market at a
discount to net asset value. The existence of periodic tender offers at net
asset value may not alleviate such discount.

Repurchase of the Trust's shares will tend to reduce the number of
outstanding shares and, depending upon the Trust's investment performance
and its ability to sell additional shares, its net assets. A reduction in
the Trust's net assets will tend to increase the Trust's expense ratio.

In addition, the repurchase of shares by the Trust will be a
taxable event to shareholders. For a discussion of these tax consequences,
see "Taxes."

CALCULATION OF NET ASSET VALUE

The Trust will compute its net asset value on Thursday of each
week as of the close of regular trading of the New York Stock Exchange,
which is generally 4:00 p.m. New York time. Securities owned by the Trust
will be valued at current market prices. If reliable market prices are
unavailable, securities will be valued at fair value as determined in good
faith in accordance with procedures approved by the Trust's Board of
Trustees. Fair value represents a good faith approximation of the value of
an asset and will be used where there is no public market or possibly no
market at all for a company's securities. The fair values of one or more
assets may not, in retrospect, be the prices at which those assets could
have been sold during the period in which the particular fair values were
used in determining the Trust's net asset value. As a result, the Trust's
issuance or repurchase of its shares at net asset value at a time when it
owns securities that are valued at fair value may turn out to have had the
effect of diluting or increasing the economic interest of remaining
shareholders. All fair value determinations by the investment manager are
subject to ratification by the Board of Trustees.

Expenses of the Trust, including the investment manager's
investment management fee and the costs of any borrowings, are accrued
daily and taken into account for the purpose of determining net asset
value.

The net asset value per share is computed by dividing the net
asset value of the Trust by the number of shares then outstanding. The net
asset value per share will be rounded up or down to the nearest cent. You
may obtain the Trust's weekly net asset value per share by calling
1-888-825-2257 or by visiting the investment manager's internet website
(www.br.com). The Trust also intends to publish its net asset value once
weekly in various financial periodicals.

CAPITAL STOCK

The Trust is an unincorporated business trust organized under the
laws of the state of Delaware pursuant to an Agreement and Declaration of
Trust dated October 20, 2000. The Trust is authorized to issue 100 million
shares of capital stock, all of one class called common shares, $0.01 par
value. The Board of Trustees is authorized to classify and reclassify any
unissued capital shares from time to time by setting or changing the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemptions of such shares. The Board of Trustees is also authorized to
increase or decrease the number of shares the Trust is authorized to issue.

Shares are entitled to one vote per share at all meetings of
shareholders. The Trust does not intend to hold annual meetings of
shareholders. Shareholders do not have preemptive, subscription or
conversion rights, and are not liable for further calls or assessments.
Shareholders are entitled to receive dividends only if and to the extent
declared by the Board of Trustees.

Shares are not available in certificated form, and shares must be
held through a selected broker or dealer.

CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST

The Trust's Agreement and Declaration of Trust includes provisions
that could have the effect of limiting the ability of other entities or
persons to acquire control of the Trust or to change the composition of its
board of trustees. This could have the effect of depriving shareholders of
an opportunity to sell their shares at a premium over prevailing market
prices by discouraging a third party from seeking to obtain control over
the Trust, which attempts could have the effect of increasing the expenses
of the Trust and disrupting the normal operation of the Trust. The Board of
Trustees is divided into three classes, with the terms of one class
expiring at each annual meeting of shareholders. At each annual meeting,
one class of Trustees is elected to a three-year term. This provision could
delay for up to two years the replacement of a majority of the Board of
Trustees. A Trustee may be removed from office by the action of two-thirds
of the remaining trustees or by a vote of the holders of at least two-
thirds of the shares.

In addition, the Trust's Agreement and Declaration of Trust
requires the favorable vote of the holders of at least 75% of the
outstanding shares of each class of the Trust, voting as a class, then
entitled to vote to approve, adopt or authorize certain transactions with
five percent-or-greater holders of a class of shares and their associates,
unless two-thirds of the Board of Trustees by resolution has approved a
memorandum of understanding with such holders, in which case normal voting
requirements would be in effect. For proposes of these provisions, a five
percent-or-greater holder of a class of shares (a "Principal Shareholder")
refers to any person who, whether directly or indirectly and whether alone
or together with its affiliates and associates, beneficially owns 5% or
more of the outstanding shares of any class of shares of beneficial
interest of the Trust. The transactions subject to these special approval
requirements are:

o the merger or consolidation of the Trust or any subsidiary
of the Trust with or into any Principal Shareholder;

o the issuance of any securities of the Trust to any Principal
Shareholder for cash, except pursuant to the Dividend
Reinvestment Plan;

o the sale, lease or exchange of all or any substantial part
of the assets of the Trust to any Principal Shareholder,
except assets having an aggregate fair market value of less
that $1 million, aggregating for the purpose of such
computation all assets sold, leased or exchanged in any
series of similar transactions within a twelve-month period.

The Board of Trustees has determined that provisions with respect
to the Board of Trustees and the 75% voting requirements described above,
and the requirements relating to conversions to an open-end trust described
below, which voting requirements are greater than the minimum requirements
under Delaware law or the 1940 Act, are in the best interest of
shareholders generally. Reference should be made to the Agreement and
Declaration of Trust on file with the SEC for the full text of these
provisions.

DISTRIBUTION POLICY

Dividends will be paid monthly on the shares in amounts
representing all or a portion of the net investment income, if any, earned
each year. Payments on shares will vary in amount, depending on investment
income received and expenses of operation.

All or a portion of any taxable net capital gain realized on
investments will be paid to shareholders at least annually.

The Trust will retain each year a small percentage of its net
investment income not to exceed 10% for any year as required by federal
income tax rules. In certain circumstances, the Trust may be subject to
federal excise tax on the retained amounts.

Such retained income is expected to constitute a portion of the
liquidating distribution returned to investors on or about December 31,
2012.

The net asset value of each share that you own will be reduced by
the amount of the distributions or dividends that you receive with respect
to that share.

AUTOMATIC REINVESTMENT PLAN

The automatic reinvestment plan is available for any holder of the
Trust's common stock who wishes to purchase additional shares using
dividends and/or capital gain distributions paid by the Trust. You may
elect to:

o reinvest both dividends and capital gain distributions;
o receive dividends in cash and reinvest capital gain
distributions; or
o receive both dividends and capital gain distributions in
cash.

Your dividends and capital gain distributions will be reinvested if you do
not instruct your broker or dealer otherwise.

Shares will be issued to you at their net asset value on the
ex-dividend date; there is no sales charge or other charge for
reinvestment. You are free to change your election at any time by
contacting your broker or dealer, who will inform the Trust. Your request
must be received by the Trust before the record date to be effective for
that dividend or capital gain distribution.

TAXES

The Trust intends to qualify and elect to be treated as a
regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). As a regulated investment company,
the Trust will generally be exempt from federal income taxes on net
investment income and capital gains distributed to shareholders, to the
extent and as long as at least 90% of the Trust's investment income and net
short-term capital gains are distributed to shareholders each year.

The Trust will, however, be subject to Federal income tax at
regular corporate income tax rate on any net investment income (other than
net tax-exempt interest income) that it retains.

If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital
gain) will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will be
taxable to the shareholders as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. Such distributions
generally will be eligible for the dividends-received deductions in the
case of corporate shareholders.

If the Trust fails to distribute, by the close of each calendar
year, at least an amount equal to the sum of 98% of its ordinary taxable
income for such year and 98% of its capital gain net income for the one
year period ending October 31 in such year, plus any shortfalls from the
prior year's required distribution, it will be liable for a 4% excise tax
on the portion of the undistributed amount of such income that is less than
the required amount for such distributions.

Dividends from net investment income and distributions from net
short-term capital gain are taxable as ordinary income. Distributions from
net capital gain are taxable as long-term capital gain, regardless of how
long shares in the Trust have been held by the shareholder, and are not
eligible for the dividends-received deduction. The tax treatment of
dividends and capital gain distributions is the same whether you take them
in cash or reinvest them to buy additional Trust shares.

As a regulated investment company the Trust is not allowed to
claim Code Section 243 deduction ("Dividend Received Deduction") in
computing its investment company taxable income. If properly designated by
the Trust, and provided certain holding period requirements are met,
corporate shareholders of the Trust may generally be eligible to treat
dividends received from the Trust as eligible for the dividend received
deduction, but only to the extent the Trust would have been permitted to
take such deduction in the absence of the disallowance stated in the
preceding sentence. The Trust's corporate shareholders shall not be
permitted to take the Dividend Received Deduction with respect to
distributions that are treated as long term capital gain, as described
above.

When you sell Trust shares or have shares repurchased by the
Trust, any gain or loss you realize will generally be treated as a
long-term capital gain or loss if you have held your shares for more than
one year, or as a short-term capital gain or loss if you have held your
shares for one year or less. However, if you sell Trust shares on which a
long-term capital gain distribution has been received and you have held the
shares for six months or less, any loss you realize will be treated as a
long-term capital loss to the extent that it offsets the long-term capital
gain distribution.

The Trust does not intend to operate so as to be permitted to
"pass-through" to its shareholders credit for foreign taxes, if any,
payable by the Trust.

Each January, you will be sent information on the tax status of
any distribution made during the previous calendar year. Because each
shareholder's situation is unique, you should always consult your tax
advisor concerning the effect income taxes may have on your individual
investment.

HOW TO PURCHASE SHARES

INITIAL OFFERING

Shares of the Trust will be offered during the initial offering
through BlackRock Distributors, Inc. as principal underwriter and through
selected brokers and dealers. The Trust anticipates that the initial
offering will end on or about December 31, 2000. Shares of stock are
offered at $ per share plus a sales charge of up to $ per share payable
to the broker or dealer who arranges the sale. The maximum offering price is
$10.00 per share.

The Trust must receive your payment for shares purchased in the
initial offering by , 2000, unless the offering is extended by BlackRock
Distributors, Inc. You should consult with your broker or dealer to ensure
that this deadline is met.

The Trust will have the sole right to accept orders to purchase
shares and reserves the right to reject any order in whole or in part. The
initial offering may be terminated by the Trust or BlackRock Distributors,
Inc. at any time.

In addition, the Trust will pay each selected broker or dealer a
shareholder servicing fee at an annual rate of % of the net asset value
of the outstanding shares owned by customers of such broker or dealer, as
described below.

No market currently exists for the Trust's shares. The Trust's
shares will not be listed on any securities exchange, and the Trust does
not anticipate that a secondary market will develop for its shares. Neither
the investment manager, nor any broker or dealer selected by BlackRock
Distributors, Inc. to participate in the initial offering of the Trust's
shares, intends to make a market in the Trust's shares.

The Trust has agreed to indemnify BlackRock Distributors, Inc.,
and the investment manager has agreed to indemnify each selected broker and
dealer, against certain liabilities, including liabilities under the
Securities Act of 1933.

ADDITIONAL SALES OF SHARES

Shortly after the closing of the initial offering, the Trust
intends to commence a continuous public offering through BlackRock
Distributors, Inc. Orders for additional shares will be accepted in
connection with each quarterly tender offer. The number of shares available
to fill orders in connection with each tender offer will not exceed for
sale will be approximately the same as the number of shares repurchased by
the Trust in the respective quarterly tender offer. If more shares are
subscribed for than are unavailable, the Trust will reduce the amount sold
to each subscriber in proportion to the amount subscribed for. It is
anticipated that sales will be conducted once each quarter. The Board of
Trustees may discontinue the Trust's policy of making additional sales at
any time. In deciding whether to commence sales, the Trust will take into
account all factors it considers relevant, including market conditions, the
cash available to it for investment, the number of shares available for
sale and the Trust's experience with tender offers. Orders for additional
shares will not be accepted until the closing of the Trust's initial tender
offer.

SHAREHOLDER SERVICING FEE

The Trust may pay selected brokers and dealers a shareholder
servicing fee to compensate them for providing shareholder services and the
maintenance of accounts. These services include providing information and
responding to shareholder questions about the structure of the Trust, the
availability of shares in any additional offerings and quarterly tender
offers. The shareholder servicing fee is payable quarterly in arrears at an
annual rate of % of the value of the outstanding shares owned by the
customers of such broker or dealer. This fee is accrued daily as an expense
of the Trust.

GENERAL INFORMATION

The transfer agent, dividend disbursing agent and registrar for
the common shares will be PFPC Inc. The Trust's assets are held under a
Custodial Agreement with State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts.

Certain legal matters in connection with the common shares offered
hereby will be passed upon for the Trust by Skadden, Arps, Slate, Meagher &
Flom LLP, New York, New York and for the selected broker-dealers by
, New York, New York.

, Two World Center, New York, New York, acts as
independent auditors for the Trust.

The Trust sends unaudited semiannual reports and audited annual
reports, including a list of investments held, to stockholders.

The Trust is subject to the informational requirements of the 1940
Act and in accordance therewith is required to file reports, proxy
statements and other information with the SEC. Any such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the SEC, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the SEC's New York Regional Office, Seven World
Trade Center, New York, New York 10048 and its Chicago Regional Office,
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661.

Additional information regarding the Trust and the common shares
is contained in the Registration Statement on Form N-2, including
amendments, exhibits and schedules thereto, relating to such shares filed
by the Trust with the SEC. This prospectus does not contain all of the
information set forth in the Registration Statement, including any
amendments, exhibits and schedules thereto. For further information with
respect to the Trust and the shares offered hereby, reference is made to
the Registration Statement. Statements contained in this prospectus as to
the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.

A copy of the Registration Statement may be inspected without
charge at the SEC's principal office in Washington, D.C., and copies of all
or any part thereof may be obtained from the SEC upon the payment of
certain fees prescribed by the SEC. The SEC maintains a web site
(http://www.sec.gov) that contains the Registration Statement, other
documents incorporated by reference, and other information the Trust has
filed electronically with the SEC, including proxy statements and reports
filed under the 1940 Act.

TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION

Page

INVESTMENT OBJECTIVE AND POLICIES......................... S-2
INVESTMENT POLICIES AND TECHNIQUES........................ S-3
MANAGEMENT............................................... S-15
PORTFOLIO TRANSACTIONS AND BROKERAGE..................... S-18
TAX MATTERS.............................................. S-18
FINANCIAL STATEMENTS..................................... S-21
ADDITIONAL INFORMATION................................... S-21

===============================================================================

THE BLACKROCK
2012 TERM TRUST

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

PROSPECTUS

, 2000
---------------------

===============================================================================

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

SUBJECT TO COMPLETION, DATED ,2000

THE BLACKROCK 2012 TERM TRUST

STATEMENT OF ADDITIONAL INFORMATION

The BlackRock 2012 Term Trust (the "Trust") is a diversified, closed-end
management investment company. This statement of additional information
relating to common shares does not constitute a prospectus, but is
incorporated by reference into and should be read in conjunction with the
prospectus relating hereto dated , 2000. This statement of additional
information does not include all information that a prospective investor
should consider before purchasing common shares, and investors should
obtain and read the prospectus prior to purchasing such shares. A copy of
the prospectus may be obtained without charge by calling (800) 441-7762.
You may also obtain a copy of the prospectus on the Securities and Exchange
Commission's web site (http://www.sec.gov).

TABLE OF CONTENTS

Page

INVESTMENT OBJECTIVE AND POLICIES........................................
INVESTMENT POLICIES AND TECHNIQUES.......................................
MANAGEMENT...............................................................
PORTFOLIO TRANSACTIONS AND BROKERAGE.....................................
STATISTICAL INFORMATION REGARDING
DIFFERENT SECURITIES.....................................................
TAX MATTERS..............................................................
FINANCIAL STATEMENTS.....................................................
ADDITIONAL INFORMATION...................................................

This statement of additional information is dated , 2000.

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT RESTRICTIONS

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

(1) purchase securities of any one issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or certificates of deposit for any such
securities) if more than 5% of the value of the Trust's
total assets would (taken at current value) be invested in
the securities of such issuer, or more than 10% of the
issuer's outstanding voting securities would be owned by the
Trust, except that up to 25% of the value of the Trust's
total assets may (taken at current value) be invested
without regard to these limitations;

(2) invest 25% or more of the value of its total assets in any
one industry;

(3) issue senior securities or borrow money other than as
permitted by the 1940 Act;

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

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

(6) purchase or sell real estate or interests therein; provided
that the Trust may hold and sell any real estate acquired in
connection with its investment in portfolio securities; or

(7) purchase or sell commodities or commodity contracts for any
purposes except as, and to the extent, permitted by
applicable law without the Trust becoming subject to
registration with the Commodity Futures Trading Commission
as a commodity pool.

For purposes of applying the limitation set forth in subparagraph
(2) above, securities of the U.S. Government, its agencies, or
instrumentalities, and securities backed by the credit of a
governmental entity are not considered to represent industries.

For the purpose of applying the limitation set forth in
subparagraph (2) above, an issuer shall be deemed the sole issuer of a
security when its assets and revenues are separate from other governmental
entities and its securities are backed only by its assets and revenues.
Similarly, in the case of a nongovernmental issuer, such as an industrial
corporation or a privately owned or operated hospital, if the security is
backed only by the assets and revenues of the nongovernmental issuer, then
such nongovernmental issuer would be deemed to be the sole issuer. Where a
security is also backed by the enforceable obligation of a superior or
unrelated governmental or other entity (other than a bond insurer), it
shall also be included in the computation of securities owned that are
issued by such governmental or other entity. Where a security is guaranteed
by a governmental entity or some other facility, such as a bank guarantee
or letter of credit, such a guarantee or letter of credit would be
considered a separate security and would be treated as an issue of such
government, other entity or bank.

Under the 1940 Act, the Trust may invest only up to 10% of its
total assets in the aggregate in shares of other investment companies and
only up to 5% of its total assets in any one investment company, provided
the investment does not represent more than 3% of the voting stock of the
acquired investment company at the time such shares are purchased.
As a shareholder in any investment company, the Trust will bear its ratable
share of that investment company's expenses, and would remain subject to
payment of the Trust's advisory fees and other expenses with respect to
assets so invested. Holders of common shares would therefore be subject to
duplicative expenses to the extent the Trust invests in other investment
companies. In addition, the securities of other investment companies may
also be leveraged and will therefore be subject to the same leverage risks
described in the prospectus.

In addition to the foregoing fundamental investment policies, the
Trust is also subject to the following nonfundamental restrictions and
policies, which may be changed by the Board of Trustees. The Trust may not:

(1) Make any short sale of securities except in conformity
with applicable laws, rules and regulations and unless,
giving effect to such sale, the market value of all
securities sold short does not exceed 25% of the then
outstanding securities of that class. The Trust may also
make short sales "against the box" without respect to
such limitations. In this type of short sale, at the time
of the sale, the Trust owns or has the immediate and
unconditional right to acquire at no additional cost the
identical security.

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

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

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

INVESTMENT POLICIES AND TECHNIQUES

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

REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWINGS. The Trust is
authorized to borrow money. If the securities held by the Trust should
decline in value while borrowings are outstanding, the net asset value of
the Trust's outstanding shares will decline in value by proportionately
more than the decline in value suffered by the Trust's securities.
Borrowings may be made by the Trust through reverse repurchase agreements
under which the Trust sells trust securities to financial institutions such
as banks and broker-dealers and agrees to repurchase them at a particular
date and price. Such Agreements are considered to be borrowings under the
1940 Act. The Trust may utilize reverse repurchase agreements when it is
anticipated that the interest income to be earned from the investment of
the proceeds of the transaction is greater than the interest expense of the
transaction. This use of reverse repurchase agreements may be regarded as
leveraging and, therefore, speculative. Reverse repurchase agreements
involve the risks that the interest income earned in the investment of the
proceeds will be less than the interest expense, that the market value of
the securities sold by the Trust may decline below the price of the
securities the Trust is obligated to repurchase and that the securities may
not be returned to the Trust. During the time a reverse repurchase
agreement is outstanding, the Trust will maintain a segregated amount with
the Trust's custodian containing cash, or U.S. Government or other
appropriate liquid securities having a value at least equal to the
repurchase price. The Trust's reverse repurchase agreements, together with
any other borrowings, will not exceed, in the aggregate, 33 1/3% of the
value of its total assets.

VARIABLE AND FLOATING RATE INSTRUMENTS. The Trust may purchase
rated and unrated variable and floating rate instruments. These instruments
may include variable amount master demand notes that permit the
indebtedness thereunder to vary in providing for periodic adjustments in
the interest rate. The interest rate of an inverse floater resets in the
opposite direction from the market rate of interest to which it is indexed.
An inverse floater may be considered to be leveraged to the extent that its
interest rate varies by a magnitude that exceeds the magnitude of the
change in the index rate of interest. The higher degree of leverage
inherent in inverse floaters is associated with greater volatility in their
market values. The absence of an active secondary market with respect to
particular floating rate instruments, however, could make it difficult for
the Trust to dispose of a variable or floating rate instrument if the
issuer defaulted on its payment obligation or during periods when the Trust
is not entitled to exercise its demand rights.

With respect to purchasable variable and floating rate
instruments, the investment manager will consider the earning power, cash
flows and liquidity ratios of the issuers and guarantors of such
instruments and, if the instruments are subject to a demand feature, will
monitor their financial status to meet payment on demand. Such instruments
may include variable amount master demand notes that permit the
indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate. The absence of an active secondary market
with respect to particular variable and floating rate instruments could
make it difficult for the Trust to dispose of a variable or floating rate
note if the issuer defaulted on its payment obligation or during periods
that the Trust is not entitled to exercise its demand rights, and the Trust
could, for these or other reasons, suffer a loss with respect to such
instruments. In determining average-weighted trust maturity, an instrument
will be deemed to have a maturity equal to either the period remaining
until the next interest rate adjustment or the time the Trust can recover
payment of principal as specified in the instrument, depending on the type
of instrument involved.

INVESTMENT GRADE SECURITIES. Investment grade securities are fixed
income securities rated by one or more of the rating agencies in one of the
four highest rating categories at the time of purchase (e.g., AAA, AA, A or
BBB by S&P or Fitch, or Aaa, Aa, A or Baa by Moody's) or determined to be
of equivalent quality by the Adviser. Securities rated BBB or Baa represent
the lowest of four levels of investment grade securities and are regarded
as borderline between definitely sound obligations and those in which the
speculative element begins to predominate. Ratings assigned to fixed income
securities represent only the opinion of the rating agency assigning the
rating and are not dispositive of the credit risk associated with the
purchase of a particular fixed income security. Moreover, market risk also
will affect the prices of even the highest rated fixed income securities so
that their prices may rise or fall even if the issuer's capacity to repay
its obligations remains unchanged.

MONEY MARKET OBLIGATIONS OF DOMESTIC BANKS, FOREIGN BANKS AND
FOREIGN BRANCHES OF U.S. BANKS. The Trust may purchase bank obligations,
such as certificates of deposit, notes, bankers' acceptances and time
deposits, including instruments issued or supported by the credit of U.S.
or foreign banks or saving institutions having total assets at the time of
purchase in excess of $1 billion. These obligations may be general
obligations of the parent bank or may be limited to the issuing branch or
subsidiary by the terms of a specific obligation or by government
regulation. The assets of a bank or savings institution will be deemed to
include the assets of its domestic and foreign branches for purposes of the
Trust's investment policies. Investments in short-term bank obligations may
include obligations of foreign banks and domestic branches of foreign
banks, and also foreign branches of domestic banks.

MORTGAGE RELATED AND ASSET-BACKED SECURITIES. The Trust may make
significant investments in residential and commercial mortgage-related and
other asset-backed securities (i.e., securities backed by home equity
loans, installment sale contracts, credit card receivables or other assets)
issued by governmental entities and private issuers.

Asset-backed securities are generally issued as pass-through
certificates, which represent undivided fractional ownership interests in
an underlying pool of assets, or as debt instruments, which are also known
as collateralized obligations, and are generally issued as the debt of a
special purpose entity organized solely for the purpose of owning such
assets and issuing such debt. Asset-backed securities are often backed by a
pool of assets representing the obligations of a number of different
parties.

Nonmortgage asset-backed securities involve risks that are not
presented by mortgage-related securities. Primarily, these securities do
not have the benefit of the same security interest in the underlying
collateral. Credit card receivables are generally unsecured, and the
debtors are entitled to the protection of a number of state and Federal
consumer credit laws which give debtors the right to set off certain
amounts owed on the credit cards, thereby reducing the balance due. Most
issuers of automobile receivables permit the servicers to retain possession
of the underlying obligations. If the servicer were to sell these
obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related
automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under
state laws, the trustee for the holders of the automobile receivables may
not have an effective security interest in all of the obligations backing
such receivables. Therefore, there is a possibility that recoveries on
repossessed collateral may not, in some cases, be able to support payments
on these securities.

The yield and maturity characteristics of mortgage-related and
other asset-backed securities differ from traditional debt securities. A
major difference is that the principal amount of the obligations may
normally be prepaid at any time because the underlying assets (i.e., loans)
generally may be prepaid at any time. In calculating the average weighted
maturity of the Trust, the maturity of mortgage-related and other
asset-backed securities held by the Trust will be based on estimates of
average life which take prepayments into account. The average life of a
mortgage-related instrument, in particular, is likely to be substantially
less than the original maturity of the mortgage pools underlying the
securities as the result of scheduled principal payments and mortgage
prepayments. In general, the collateral supporting nonmortgage asset-backed
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments. Like other fixed income securities,
when interest rates rise the value of an asset-backed security generally
will decline; however, when interest rates decline, the value of an
asset-backed security with prepayment features may not increase as much as
that of other fixed income securities.

The relationship between prepayments and interest rates may give
some high-yielding mortgage-related and asset-backed securities less
potential for growth in value than conventional bonds with comparable
maturities. In addition, in periods of falling interest rates, the rate of
prepayments tends to increase. During such periods, the reinvestment of
prepayment proceeds by the Trust will generally be at lower rates than the
rates that were carried by the obligations that have been prepaid. Because
of these and other reasons, an asset-backed security's total return and
maturity may be difficult to predict precisely. To the extent that the
Trust purchases asset-backed securities at a premium, prepayments (which
may be made without penalty) may result in loss of the Trust's principal
investment to the extent of premium paid.

There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related
securities guaranteed by the Government National Mortgage Association
("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as
"Ginnie Maes") which are guaranteed as to the timely payment of principal
and interest by GNMA and such guarantee is backed by the full faith and
credit of the United States. GNMA is a wholly-owned U.S. Government
corporation within the Department of Housing and Urban Development. GNMA
certificates also are supported by the authority of GNMA to borrow funds
from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage
Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely the obligations
of the FNMA, are not backed by or entitled to the full faith and credit of
the United States and are supported by the right of the issuer to borrow
from the Treasury. FNMA is a government-sponsored organization owned
entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of principal and interest by FNMA. Mortgage-related securities
issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include
FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or
"PCs"). FHLMC is a corporate instrumentality of the United States, created
pursuant to an Act of Congress, which is owned entirely by Federal Home
Loan Banks. Freddie Macs are not guaranteed by the United States or by any
Federal Home Loan Banks and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. Freddie Macs entitle the
holder to timely payment of interest, which is guaranteed by the FHLMC.
FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. When FHLMC does not
guarantee timely payment of principal, FHLMC may remit the amount due on
account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year
after it becomes payable.

The Trust may invest in multiple class pass-through securities,
including collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduit ("REMIC") pass-through or participation
certificates ("REMIC Certificates") . These multiple class securities may
be issued by U.S. Government agencies or instrumentalities, including FNMA
and FHLMC, or by trusts formed by private originators of, or investors in,
mortgage loans. In general, CMOs and REMICs are debt obligations of a legal
entity that are collateralized by, and multiple class pass-through
securities represent direct ownership interests in, a pool of residential
or commercial mortgage loans or mortgage pass-through securities (the
"Mortgage Assets"), the payments on which are used to make payments on the
CMOs or multiple pass-through securities. Investors may purchase beneficial
interests in CMOs and REMICs, which are known as "regular" interests or
"residual" interests. The residual in a CMO or REMIC structure generally
represents the interest in any excess cash flow remaining after making
required payments of principal of and interest on the CMOs or RHMICs, as
well as the related administrative expenses of the issuer. Residual
interests generally are junior to, and may be significantly more volatile
than, "regular" CMO and REMIC interests. The Trust does not currently
intend to purchase residual interests. The markets for CMOs and REMICs may
be more illiquid than those of other securities.

Each class of CMOs or REMIC Certificates, often referred to as a
"tranche," is issued at a specific adjustable or fixed interest rate and
must be fully retired no later than its final distribution date. Principal
prepayments on the Mortgage Assets underlying the CMOs or REMIC
Certificates may cause some or all of the classes of CMOs or REMIC
Certificates to be retired substantially earlier than their final
distribution dates. Generally, interest is paid or accrues on all classes
of CMOs or REMIC Certificates on a monthly basis.

The principal of and interest on the Mortgage Assets may be
allocated among the several classes of CMOs or REMIC Certificates in
various ways. In certain structures (known as "sequential pay" CMOs or
REMIC Certificates), payments of principal, including any principal
prepayments, on the Mortgage Assets generally are applied to the classes of
CMOs or REMIC Certificates in the order of their respective final
distribution dates. Thus, no payment of principal will be made on any class
of sequential pay CMOs or REMIC Certificates until all other classes having
an earlier final distribution date have been paid in full.

Additional structures of CMOs or REMIC Certificates include, among
others, "parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or
REMIC Certificates are those which are structured to apply principal
payments and prepayments of the Mortgage Assets to two or more classes
concurrently on a proportionate or disproportionate basis. These
simultaneous payments are taken into account in calculating the final
distribution date of each class.

A wide variety of REMIC Certificates may be issued in the parallel
pay or sequential pay structures. These securities include accrual
certificates (also known as "Z-Bonds"), which only accrue interest at a
specified rate until all other certificates having an earlier final
distribution date have been retired and are converted thereafter to an
interest-paying security, and planned amortization class ("PAC")
certificates, which are parallel pay REMIC Certificates which generally
require that specified amounts of principal be applied on each payment date
to one or more classes of REMIC Certificates (the "PAC Certificates"), even
though all other principal payments and prepayments of the Mortgage Assets
are then required to be applied to one or more other classes of the
Certificates. The scheduled principal payments for the PAC Certificates
generally have the highest priority on each payment date after interest due
has been paid to all classes entitled to receive interest currently.
Shortfalls, if any, are added to the amount payable on the next payment
date. The PAC Certificate payment schedule is taken into account in
calculating the final distribution date of each class of PAC. In order to
create PAC tranches, one or more tranches generally must be created that
absorb most of the volatility in the underlying Mortgage Assets. These
tranches tend to have market price and yields that are much more volatile
than the PAC classes.

FNMA REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA. In addition, FNMA will be
obligated to distribute on a timely basis to holders of FNMA REMIC
Certificates required installments of principal and interest and to
distribute the principal balance of each class of REMIC Certificates in
full, whether or not sufficient funds are otherwise available.

For FHLMC REMIC Certificates, FHLMC guarantees the timely payment
of interest, and also guarantees the ultimate payment of principal as
payments are required to be made on the underlying mortgage participation
certificates ("PCs"). PCs represent undivided interests in specified level
payment, residential mortgages or participations therein purchased by FHLMC
and placed in a PC pool. With respect to principal payments on Pcs, FHLMC
generally guarantees ultimate collection of all principal of the related
mortgage loans without offset or deduction. FHLMC also guarantees timely
payment of principal on certain Pcs, referred to as "Gold PCs."

U.S. GOVERNMENT OBLIGATIONS. The Trust may purchase obligations
issued or guaranteed by the U.S. Government and U.S. Government agencies
and instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government are supported by the full faith
and credit of the U.S. Treasury. Others are supported by the right of the
issuer to borrow from the U.S. Treasury; and still others are supported
only by the credit of the agency or instrumentality issuing the obligation.
No assurance can be given that the U.S. Government will provide financial
support to U.S. Government-sponsored instrumentalities if it is not
obligated to do so by law. Certain U.S. Treasury and agency securities may
be held by trusts that issue participation certificates (such as Treasury
income growth receipts ("TIGRs") and certificates of accrual on Treasury
certificates ("CATs"). The Trust may purchase these certificates, as well
as Treasury receipts and other stripped securities, which represent
beneficial ownership interests in either future interest payments or the
future principal payments on U.S. Government obligations. These instruments
are issued at a discount to their "face value" and may (particularly in the
case of stripped mortgage-backed securities) exhibit greater price
volatility than ordinary debt securities because of the manner in which
their principal and interest are returned to investors.

Examples of the types of U.S. Government obligations which the
Trust may hold include U.S. Treasury bills, Treasury instruments and
Treasury bonds and the obligations of Federal Home Loan Banks, Federal Farm
Credit Banks, Federal Land Banks, the Federal Housing Administration, the
Farmers Home Administration, the Export-Import Bank of the United states,
the Small Business Administration, FNMA, GNMA, the General Services
Administration, the Student Loan Marketing Association, the Central Bank
for Cooperatives, FHLMC, the Federal Intermediate Credit Banks, the
Maritime Administration, the International Bank for Reconstruction and
Development (the "World Bank"), the Asian-American Development Bank and the
Inter-American Development Bank.

NON-INVESTMENT GRADE SECURITIES. The Trust may invest in
non-investment grade or "high yield" fixed income or convertible securities
commonly known to investors as "junk bonds."

High yield securities are bonds that are issued by a company whose
credit rating (based on rating agencies' evaluation of the likelihood of
repayment) necessitates offering a higher coupon and yield on its issues
when selling them to investors who may otherwise be hesitant in purchasing
the debt of such a company. While generally providing greater income and
opportunity for gain, non-investment grade debt securities may be subject
to greater risks than securities which have higher credit ratings,
including a high risk of default, and their yields will fluctuate over
time. High yield securities will generally be in the lower rating
categories of recognized rating agencies (rated "Ba" or lower by Moody's or
"BB" or lower by S&P) or will be non-rated. The credit rating of a high
yield security does not necessarily address its market value risk, and
ratings may from time to time change, positively or negatively, to reflect
developments regarding the issuer's financial condition. High yield
securities are considered to be speculative with respect to the capacity of
the issuer to timely repay principal and pay interest or dividends in
accordance with the terms of the obligation and may have more credit risk
than higher rated securities.

While the market values of high yield securities tend to react
less to fluctuations in interest rates than do those of higher rated
securities, the values of high yield securities often reflect individual
corporate developments and have a high sensitivity to economic changes to a
greater extent than do higher rated securities. Issuers of high yield
securities are often in the growth stage of their development and/or
involved in a reorganization or takeover. The companies are often highly
leveraged (have a significant amount of debt relative to shareholders'
equity) and may not have available to them more traditional financing
methods, thereby increasing the risk associated with acquiring these types
of securities. In some cases, obligations with respect to high yield
securities are subordinated to the prior repayment of senior indebtedness,
which will potentially limit the Trust's ability to fully recover principal
or to receive interest payments when senior securities are in default.
Thus, investors in high yield securities have a lower degree of protection
with respect to principal and interest payments then do investors in higher
rated securities.

During an economic downturn, a substantial period of rising
interest rates or a recession, highly leveraged issuers of high yield
securities may experience financial distress possibly resulting in
insufficient revenues to meet their principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. An economic downturn could also disrupt the market for
lower-rated securities and adversely affect the value of outstanding
securities, the Trust's net asset value and the ability of the issuers to
repay principal and interest. If the issuer of a security held by the Trust
defaulted, the Trust may not receive full interest and principal payments
due to it and could incur additional expenses if it chose to seek recovery
of its investment.

The secondary markets for high yield securities are not as liquid
as the secondary markets for higher rated securities. The secondary markets
for high yield securities are concentrated in relatively few market makers
and participants in the markets are mostly institutional investors,
including insurance companies, banks, other financial institutions and
mutual funds. In addition, the trading volume for high yield securities is
generally lower than that for higher rated securities and the secondary
markets could contract under adverse market or economic conditions
independent of any specific adverse changes in the condition of a
particular issuer. Under certain economic and/or market conditions, the
Trust may have difficulty disposing of certain high yield securities due to
the limited number of investors in that sector of the market. An illiquid
secondary market may adversely affect the market price of the high yield
security, which may result in increased difficulty selling the particular
issue and obtaining accurate market quotations on the issue when valuing
the Trust's assets. Market quotations on high yield securities are
available only from a limited number of dealers, and such quotations may
not be the actual prices available for a purchase or sale.

The high yield markets may react strongly to adverse news about an
issuer or the economy, or to the perception or expectation of adverse news,
whether or not it is based on fundamental analysis. Additionally, prices
for high yield securities may be affected by legislative and regulatory
developments. These developments could adversely affect the Trust's net
asset value and investment practices, the secondary market for high yield
securities, the financial condition of issuers of these securities and the
value and liquidity of outstanding high yield securities, especially in a
thinly traded market. For example, federal legislation requiring the
divestiture by federally insured savings and loan associations of their
investments in high yield bonds and limiting the deductibility of interest
by certain corporate issuers of high yield bonds adversely affected the
market in recent years.

When the secondary market for high yield securities becomes more
illiquid, or in the absence of readily available market quotations for such
securities, the relative lack of reliable objective data makes it more
difficult to value the Trust's securities, and judgment plays a more
important role in determining such valuations. Increased illiquidity in the
junk bond market, in combination with the relative youth and growth of the
market for such securities, also may affect the ability of the Trust to
dispose of such securities at a desirable price. Additionally, if the
secondary markets for high yield securities contract due to adverse
economic conditions or for other reasons, certain of the Trust's liquid
securities may become illiquid and the proportion of the Trust's assets
invested in illiquid securities may significantly increase.

The rating assigned by a rating agency evaluates the safety of a
non-investment grade security's principal and interest payments, but does
not address market value risk. Because such ratings of the ratings agencies
may not always reflect current conditions and events, in addition to using
recognized rating agencies and other sources, the investment manager
performs its own analysis of the issuers whose non-investment grade
securities the Trust holds. Because of this, the Trust's performance may
depend more on the investment manager's own credit analysis than in the
case of mutual funds investing in higher-rated securities.

In selecting non-investment grade securities, the investment
manager considers factors such as those relating to the creditworthiness of
issuers, the ratings and performance of the securities, the protections
afforded the securities and the diversity of the Trust. The investment
manager continuously monitors the issuers of non-investment grade
securities held by the Trust for their ability to make required principal
and interest payments, as well as in an effort to control the liquidity of
the Trust so that it can meet redemption requests. If a security's rating
is reduced below the minimum credit rating that is permitted for the Trust,
the investment manager will consider whether the Trust should continue to
hold the security.

In the event that the Trust experiences an unexpected level of net
redemptions, it could be forced to sell its holdings without regard to the
investment merits, thereby decreasing the assets upon which the Trust's
rate of return is based.

The costs attributable to investing in the high yield markets are
usually higher for several reasons, such as higher investment research
costs and higher commission costs.

The Trust may invest in securities ratted in the category "C" and
above or determined by the investment manager to be of comparable quality.
Securities rated "C" are considered highly speculative and may be used to
cover a situation where the issuer has filed a bankruptcy petition but debt
service payments are continued. While such debt will likely have some
quality and protective characteristics, those are outweighed by large
uncertainties or major risk exposure to adverse conditions.

CORPORATE BONDS. Corporate bonds are fixed income securities of
private issuers. Holders of corporate bonds, as creditors, have a prior
legal claim over holders of equity securities of the issuer as to both
income and assets for the principal and interest due to the holder.

COMMERCIAL PAPER. The Trust may purchase commercial paper rated
(at the time of purchase) "A-1" by S&P or "Prime-1" by Moody's or, when
deemed advisable by a Trust's adviser or sub-adviser, "high quality" issues
rated "A-2" or "Prime-2" by S&P or Moody's, respectively. Commercial paper
purchasable by the Trust includes "Section 4(2) paper," a term that
includes debt obligations issued in reliance on the "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933. Section 4(2) paper is restricted as to disposition under the
Federal securities laws, and is frequently sold (and resold) to
institutional investors such as the Fund through or with the assistance of
investment dealers who make a market in the Section 4(2) paper, thereby
providing liquidity. Certain transactions in Section 4(2) paper may qualify
for the registration exemption provided in Rule 144A under the Securities
Act of 1933.

REPURCHASE AGREEMENTS. The Trust may agree to purchase securities
from financial institutions subject to the seller's agreement to repurchase
them at an agreed upon time and price ("repurchase agreements"). Repurchase
agreements are, in substance, loans. Default by or bankruptcy of a seller
would expose the Trust to possible loss because of adverse market action,
expenses and/or delays in connection with the disposition of the underlying
obligations.

The repurchase price under the repurchase agreements generally
equals the price paid by the Trust involved plus interest negotiated on the
basis of current short-term rates (which may be more or less than the rate
of securities underlying the repurchase agreement). The financial
institutions with which a Trust may enter into repurchase agreements will
be banks and nonbank dealers of U.S. Government securities that are listed
on the Federal Reserve Bank of New York's list of reporting dealers, if
such banks and nonbank dealers are deemed creditworthy by the Trust's
investment manager. The Trust's investment manager will continue to monitor
creditworthiness of the Seller under a repurchase agreement, and will
require the seller to maintain during the term of the agreement the value
of the securities subject to the agreement to equal at least the repurchase
price (including accrued interest). In addition, the Trust's investment
manager will require that the value of this collateral, after transaction
costs (including loss of interest) reasonably expected to be incurred on a
default, be equal to or greater than the repurchase price (including
accrued premium) provided in the repurchase agreement. The accrued premium
is the amount specified in the repurchase agreement or the daily
amortization of the difference between the purchase price and the
repurchase price specified in the repurchase agreement. The Trust's
investment manager will mark-to-market daily the value of the securities.
Securities subject to repurchase agreements will be held by the Trust is
custodian (or sub-custodian) in the Federal Reserve/Treasury book-entry
system or by another authorized securities depository. Repurchase
agreements are considered to be loans by the Trust under the 1940 Act.

The use of repurchase agreements involves certain risks. For
example, if the seller of securities under a repurchase agreement defaults
on its obligation to repurchase the underlying securities, as a result of
its bankruptcy or otherwise, the Trust will seek to dispose of such
securities, which action could involve costs or delays. If the seller
becomes insolvent and subject to liquidation or reorganization under
applicable bankruptcy or other laws, a Trust's ability to dispose of the
underlying securities may be restricted. Finally, it is possible that the
Trust may not be able to substantiate its interest in the underlying
securities. To minimize this risk, the securities underlying the repurchase
agreement will be held by the custodian at all times in an amount at least
equal to the repurchase price, including accrued interest. If the seller
fails to repurchase the securities, the Trust may suffer a loss to the
extent proceeds from the sale of the underlying securities are less than
the repurchase price.

WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. The Trust may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "forward commitment," including "TBA" (to be announced)
basis. These transactions involve a commitment by the Trust to purchase or
sell particular securities with payment and delivery taking place at a
future date (perhaps one or two months later), and permit a Trust to lock
in a price or yield on a security it owns or intends to purchase,
regardless of future changes in interest rates or market action.
When-issued and forward commitment transactions involve the risk, however,
that the price or yield obtained in a transaction may be less favorable
than the price or yield available in the market when the securities
delivery takes place.

When the Trust agrees to purchase securities on this basis, the
custodian will set aside liquid assets equal to the amount of the
commitment in a separate account. Normally, the custodian will set aside
Trust securities to satisfy a purchase commitment, and in such a case the
Trust may be required subsequently to place additional assets in the
separate account in order to ensure that the value of the account remains
equal to the amount of the Trust's commitments. It may be expected that the
market value of the Trust's net assets will fluctuate to a greater degree
when it sets aside Trust securities to cover such purchase commitments than
when it sets aside case.

If deemed advisable as a matter of investment strategy, the Trust
may dispose of or renegotiate a commitment after it has been entered into,
and may sell securities it has committed to purchase before those
securities are delivered to the Trust on the settlement date. In these
cases the Trust may realize a taxable capital gain or loss.

When the Trust engages in when-issued, TBA or forward commitment
transactions, it relies on the other party to consummate the trade. Failure
of such party to do so may result in the Trust's incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.

The market value of the securities underlying a commitment to
purchase securities, and any subsequent fluctuations in their market value,
is taken into account when determining the market value of the Trust
starting on the day the Trust agrees to purchase the securities. The Trust
does not earn interest on the securities it has committed to purchase until
they are paid for and delivered on the settlement date.

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

OPTIONS AND FUTURES CONTRACTS. To the extent consistent with its
investment objective, the Trust may write (i.e. sell) covered call options,
buy put options, buy call options and write secured put options for the
purpose of hedging or earning additional income, which may be deemed
speculative. For the payment of a premium, the purchaser of an option
obtains the right to buy (in the case of a call option) or to sell (in the
case of a put option) the item which is the subject of the option at a
stated exercise price for a specified period of time. These options may
relate to particular securities, securities indices, or the yield
differential between two securities, and may or may not be listed on a
securities exchange and may or may not be issued the Options Clearing
Corporation. Options trading is a highly specialized activity that entails
greater than ordinary investment risks. In addition, unlisted options are
not subject to the protections afforded purchasers of listed options issued
by the Options Clearing Corporation, which performs the obligations of its
members if they default.

The Trust may also invest in futures contracts and options on
futures contracts (interest rate futures contracts or index futures
contracts, as applicable). The value of the Trust's contracts may equal or
exceed 100% of its total assets, although the Trust will not purchase or
sell a futures contract unless immediately afterwards the aggregate amount
of margin deposits on its existing futures positions plus the amount of
premiums paid for related futures options entered into for other than bona
fide hedging purposes is 5% or less of its net assets.

Futures contracts obligate the Trust, at maturity, to take or make
delivery of securities, the cash value of a securities index or a stated
quantity of a foreign currency. The Trust may sell a futures contract in
order to offset an expected decrease in the value of its Trust positions
that might otherwise result from a market decline or currency exchange
fluctuation. The Trust may do so either to hedge the value of its
securities Trust as a whole, or to protect against declines occurring prior
to sales of securities in the value of the securities to be sold. In
addition, the Trust may utilize futures contracts in anticipation of
changes in the composition of its holdings or in currency exchange rates.

The Trust may purchase and sell call and put options on futures
contracts traded on an exchange or board of trade. When the Trust purchases
an option on a futures contract, it has the right to assume a position as a
purchaser or a seller of a futures contract at a specified exercise price
during the option period. When the Trust sells an option on a futures
contract, it becomes obligated to sell or buy a futures contract if the
option is exercised. In connection with the Trust's position in a futures
contract or related option, the Trust will create a segregated account of
liquid assets or will otherwise cover its position in accordance with
applicable SEC requirements.

The primary risks associated with the use of futures contracts and
options are (a) the imperfect correlation between the change in market
value of the instruments held by the Trust and the price of the futures
contract or option; (b) possible lack of a liquid secondary market for a
futures contract and the resulting inability to close a futures contract
when desired; (c) losses caused by unanticipated market movements, which
are potentially unlimited; (d) the Trust's inability to predict correctly
the direction of securities prices, interest rates, currency exchange rates
and other economic factors; and (e) the possibility that the counterparty
will default in the performance of its obligations.

The Trust intends to comply with the regulations of the Commodity
Futures Trading Commission exempting the Trust from registration as a
"commodity pool operator."

Options trading is a highly specialized activity which entails
greater than ordinary investment risks. Options on particular securities
may be more volatile than the underlying securities, and therefore, on a
percentage basis, an investment in the underlying securities themselves.
The Trust will write call options only if they are "covered." In the case
of a call option on a security, the option is "covered" if the Trust owns
the security underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or, if
additional cash consideration is required, liquid assets in such amount as
are held in a segregated account by its custodian) upon conversion or
exchange of other securities held by it. For a call option on an index, the
option is covered if the Trust maintains with its custodian liquid assets
equal to the contract value. A call option is also covered if the Trust
holds a call on the same security or index as the call written where the
exercise price of the call held is (i) equal to or less than the exercise
price of the call written, or (ii) greater than the exercise price of the
call written provided the difference is maintained by the Trust in liquid
assets in a segregated account with its custodian.

When the Trust purchases a put option, the premium paid by it is
recorded as an asset of the Trust. When the Trust writes an option, an
amount equal to the net premium (the premium less the commission) received
by the Trust is included in the liability section of the Trust's statement
of assets and liabilities as a deferred credit. The amount of this asset or
deferred credit will be subsequently marked-to-market to reflect the
current value of the option purchased or written. The current value of the
traded option is the last sale price or, in the absence of a sale, the mean
between the last bid and asked prices. If an option purchased by the Trust
expires unexercised the Trust realizes a loss equal to the premium paid. If
the Trust enters into a closing sale transaction on an option purchased by
it, the Trust will realize a gain if the premium received by the Trust on
the closing transaction is more than the premium paid to purchase the
option, or a loss if it is less. If an option written by the Trust expires
on the stipulated expiration date or if the Trust enters into a closing
purchase transaction it will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the net premium received when the
option is sold) and the deferred credit related to such option will be
eliminated. If an option written by the Trust is exercised, the proceeds of
the sale will be increased by the net premium originally received and the
Trust will realize a gain or loss.

There are several risks associated with transactions in options on
securities and indexes. For example, there are significant differences
between the securities and options markets that could result in an
imperfect correlation between these markets, causing a given transaction
not to achieve its objectives. In addition, a liquid secondary market for
particular options, whether traded over-the-counter or on a national
securities exchange ("Exchange") may be absent for reasons which include
the following: there may be insufficient trading interest in certain
options; restrictions may be imposed by an Exchange on opening transactions
or closing transactions or both; trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; unusual or unforeseen circumstances may
interrupt normal operations on an Exchange; the facilities of an Exchange
or the Options Clearing Corporation may not at all times be adequate to
handle current trading volume; or one or more Exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue
the trading of options (or a particular class or series of options), in
which event the secondary market on that Exchange (or in that class or
series of options) would cease to exist, although outstanding options that
had been issued by the Options Clearing Corporation as a result of trades
on that Exchange would continue to be exercisable in accordance with their
terms.

FORWARD CONTRACTS. As discussed in the prospectus, the Trust may
purchase forward contracts on the Standard & Poor's 500 Index. These
forward contracts are privately negotiated and are bought and sold in the
over-the-counter market. The forward contracts will obligate the Trust to
[make an initial margin payment] and pay a predetermined rate of interest
on the contract's notional amount for the term of the contract. At the end
of the contract, the Trust will receive a payment equal to the return of
the Standard & Poor's 500 Index on the notional amount of the contract. The
terms of the forward contract are customized. Forward contracts, like other
over-the-counter contracts that are negotiated directly with an individual
counterparty, subject the Trust to the risk of counterparty default.

INTEREST RATE TRANSACTIONS. The Trust may enter into interest rate
swaps and may purchase or sell interest rate caps and floors. The Trust may
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its holdings, as a duration management
technique or to protect against an increase in the price of securities a
Trust anticipates purchasing at a later date. The Trust intends to use
these transactions as a hedge and not as a speculative investment.

The Trust may enter into interest rate swaps, caps and floors on
either an asset-based or liability-based basis, depending on whether the
Trust is hedging its assets or its liabilities. Interest rate swaps involve
the exchange by the Trust with another party of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments). The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate floor. The
purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive
payments of interest on a notional principal amount from the party selling
such interest rate cap.

The Trust will usually enter into interest rate swaps on a net
basis, i.e., the two payment streams are netted but, with the Trust
receiving or paying, as the case may be, only the net amount of the two
payments.

The Trust will accrue the net amount of the excess, if any, of its
obligations over its entitlements with respect to each interest rate swap
on a daily basis and will deliver an amount of liquid assets having an
aggregate net asset value at least equal to the accrued excess to a
custodian that satisfies the requirements of the 1940 Act. If the other
party to an interest rate swap defaults, the Trust's risk of loss consists
of the net amount of interest payments that the Trust is contractually
entitled to receive. The Trust will not enter into any interest rate or
currency swap unless the unsecured commercial paper, senior debt or claims
paying ability of the other party is rated either "A" or "A-1" or better by
S&P, Duff & Phelps or Fitch, or "A" or "P-1" or better by Moody's.

The Trust will enter into interest rate swap, cap and floor
transactions only with institutions deemed the creditworthy by the Trust's
investment manager. If there is a default by the other party to such a
transaction, the Trust will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps and floors are more recent innovations and,
accordingly, they are less liquid than swaps.

SECURITIES LENDING. The Trust may seek additional income by
lending securities on a short-term basis. The securities lending agreements
will require that the loans be secured by collateral in cash, U.S.
Government securities or irrevocable bank letters of credit maintained on a
current basis equal in value to at least the market value of the loaned
securities. The Trust may not make such loans in excess of 331/3% of the
value of its total assets. Securities loans involve risks of delay in
receiving additional collateral or in recovering the loaned securities or
possibly loss of rights in the collateral if the borrower of the securities
becomes insolvent.

The Trust would continue to accrue interest on loaned securities
and would also earn income on investment collateral for such loans. Any
cash collateral received by the Trust in connection with such loans may be
invested in a broad range of high quality, U.S. dollar-denominated money
market instruments that meet Rule 2a-7 restrictions for money market funds.
Specifically, cash collateral may be invested in any of the following
instruments: (a) securities issued or guaranteed as to principal and
interest by the U.S. Government or by its agencies or instrumentalities and
related custodial receipts; (b) "first tier" quality commercial paper and
other obligations issued or guaranteed by U.S. and foreign corporations and
other issuers rated (at the time of purchase) in the highest rating
category by at least two NRSRO's, or one if only rated by one NRSRO; (c)
U.S. dollar-denominated obligations issued or supported by the credit of
U.S. or foreign banks or savings institutions with total assets in excess
of $1 billion (including obligations of foreign branches of such banks)
(i.e. CD's, BA's and time deposits); (d) repurchase agreements relating to
the above instruments, as well as corporate debt; and (e) unaffiliated
money market funds. Any such investments must be rated "first tier" and
must have a maturity of 397 days or less from the date of purchase.

INVESTMENT COMPANIES. In connection with the management of their
daily cash positions, the Trust may invest in securities issued by other
investment companies which invest in short-term debt securities and which
seek to maintain a $1.00 net asset value per share. The Trust may invest in
securities issued by other investment companies within the limits
prescribed by the 1940 Act. As a shareholder of another investment company,
the Trust would bear, along with other shareholders, its pro rata portion
of the other investment company's expenses, including advisory fees. These
expenses would be in addition to the advisory fees and other expenses the
Trust bears directly in connection with its own operations.

STRIPPED AND ZERO COUPONS OBLIGATIONS. To the extent consistent
with its investment objectives, the Trust may purchase Treasury receipts
and other "stripped" securities that evidence ownership in either the
future interest payments or the future principal payments on U.S.
Government and other obligations. These participants, which may be issued
by the U.S. Government and other (or a U.S. Government agency or
instrumentality) or by private issuers such as banks and other
institutions, are issued at a discount to their "face value," and may
include stripped mortgage-backed securities ("SMBS"). Stripped securities,
particularly SMBS, may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors, and they are often illiquid.

SMBS are usually structured with two or more classes that receive
different proportions of the interest and principal distributions from a
pool of mortgage-backed obligations. A common type of SMBS will have one
class receiving all of the interest ("IO or interest only), while the other
class receives all of the principal ("PO" or principal only). However, in
some cases, one class will receive some of the interest and most of the
principal while the other class will receive most of th interest and the
remainder of the principal. If the underlying obligations experience
greater than anticipated prepayments of principal, the Trust may fail to
fully recoup its initial investment. The market value of SMBS can be
extremely volatile in response to change in interest rates. The yields on a
class of SMBS that receives all or most of the interest are generally
higher than prevailing market yields on other mortgage-related obligations
because their cash flow patterns are also volatile and there is a greater
risk that the initial investment will not be fully recouped.

The Trust may invest in zero-coupon bonds, which are normally
issued at a significant discount from face value and do not provide for
periodic interest payments. Zero-coupon bonds may experience greater
volatility in market value than similar maturity debt obligations which
provide for regular interest payments. Additionally, current federal tax
law requires the holder of certain zero-coupon bonds to accrue income with
respect to these securities prior to the receipt of cash payments. To
maintain its qualification as a regulated investment company and avoid
liability for federal income and excise taxes, the Trust may be required to
distribute income accrued with respect to these securities and may have to
dispose of Trust securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements. See "Taxes."

DOLLAR ROLL TRANSACTIONS. To take advantage of attractive
opportunities in the mortgage market and to enhance current income, the
Trust may enter into dollar roll transactions. A dollar roll transaction
involves a sale by the Trust of a mortgage-backed or other security
concurrently with an agreement by the Trust to repurchase a similar
security at a later date at an agreed-upon price. The securities that are
repurchased will bear the same interest rate and stated maturity as those
sold, but pools of mortgages collateralizing those securities may have
different prepayment histories than those sold. During the period between
the sale and repurchase, the Trust will not be entitled to receive interest
and principal payments on the securities sold. Proceeds of the sale will be
invested in additional instruments for the Trust, and the income from these
investments will generate income for the Trust. If such income does not
exceed the income, capital appreciation and gain or loss that would have
been realized on the securities sold as part of the dollar roll, the use of
this technique will diminish the investment performance of the Trust
compared with what the performance would have been without the use of
dollar rolls. At the time the Trust enters into a dollar roll transaction,
it will place in a segregated account maintained with its custodian cash,
U.S. Government securities or other liquid securities having a value equal
to the repurchase price (including accrued interest) and will subsequently
monitor the account to ensure that its value is maintained. The Trust's
dollar rolls, together with its reverse repurchase agreements and other
borrowings, will not exceed, in the aggregate, 33 1/3% of the value of its
total assets.

Dollar roll transactions involve the risk that the market value of
the securities the Trust is required to purchase may decline below the
agreed upon repurchase price of those securities. The Trust's right to
purchase or repurchase securities may be restricted. Successful use of
mortgage dollar rolls may depend upon the sub-adviser's ability to
correctly predict interest rates and prepayments. There is no assurance
that dollar rolls can be successfully employed.

SHORT SALES. The Trust may only make short sales of securities
"against-the-box." A short sale is a transaction in which the Trust sells a
security it does not own in anticipation that the market price of that
security will decline. The Trust may make short sales both as a form of
hedging to offset potential declines in long positions in similar
securities and in order to maintain Trust flexibility. In a short sale
"against-the-box," at the time of sale, the Trust owns or has the immediate
and unconditional right to acquire the identical security at no additional
cost. When selling short "against-the-box," the Trust foregoes an
opportunity for capital appreciation in the security.

SHORT-TERM INVESTMENTS. The Trust may also invest in high quality
money market instruments pending investment or to meet anticipated
redemption requests. The Trust may also invest in these securities in
furtherance of its investment objective. The Trust may invest a portion of
its assets, in certain short-term fixed income obligations in order to
maintain liquidity or to invest temporarily uncommitted cash balances. High
quality money market instruments include U.S. government obligations, U.S.
government agency obligations, dollar denominated obligations of foreign
issuers, bank obligations, including U.S. subsidiaries and branches of
foreign banks, corporate obligations, commercial paper, repurchase
agreements and obligations of supranational organizations. Generally, such
obligations will mature within one year from the date of settlement, but
may mature within two years from the date of settlement.

RESTRICTED AND ILLIQUID SECURITIES. Certain of the Trust's
investments may be illiquid. Illiquid securities are subject to legal or
contractual restrictions on disposition or lack an established secondary
trading market. The sale of restricted and illiquid securities often
requires more time and results in higher brokerage charges or dealer
discounts and other selling expenses than does the sale of securities
eligible for trading on national securities exchanges or in the
over-the-counter markets. Restricted securities may sell at a price lower
than similar securities that are not subject to restrictions on resale.

PORTFOLIO TURNOVER RATE. The Trust's annual portfolio turnover
rate will not be a factor preventing a sale or purchase when the adviser or
sub-adviser believes investment considerations warrant such sale or
purchase. Trust turnover may vary greatly from year to year as well as
within a particular year. High portfolio turnover rates (i.e., 100% or
more) will generally result in higher transaction costs to the Trust and
may result in the realization of short-term capital gains that are taxable
to shareholders as ordinary income.

OPERATING SUBSIDIES. The Trust may create one or more operating
subsidiaries to conduct the Trust's business in accordance with the 1940
Act.

MANAGEMENT

The officers of the Trust manage its day to day operations. The
officers are directly responsible to the Trust's Board of Trustees which
sets broad policies for the Trust and chooses its officers. The following
is a list of the Trustees and officers of the Trust and a brief statement
of their present positions and principal occupations during the past five
years. Trustees who are interested persons of the Trust (as defined in the
1940 Act) are denoted by an asterisk (*). The business address of the Trust
and the investment manager is 400 Bellevue Parkway, Wilmington, Delaware
19809. The business address of the board members and officers is 345 Park
Avenue, New York, New York 10154, unless specified otherwise below. The
Trustees listed below are either Trustees or Directors of other closed-end
funds in which BlackRock Advisors or an affiliate acts as investment
advisor.

<TABLE>
<CAPTION>
Principal Occupation
During the Past Five
Name and Address Title Years and Other Affiliations
---------------- ----- ----------------------------
[Trustees to Come]
<S> <C> <C>
Keith T. Anderson Vice President Managing Director of BlackRock Advisors, Inc.
Age: 40 since January 1991. Managing Director of
BlackRock Financial Management, Inc. since
January 1991. Director of BlackRock Financial
Management, Inc. from April 1988 to January 1991.
From February 1987 to April 1988, Vice President
at The First Boston Corporation in the Fixed Income
Research Department. Previously Vice President
and Senior Portfolio Manager at Criterion
Investment Management Company (now Nicholas-
Applegate).

Henry Gabbay Treasurer Managing Director of BlackRock Advisors, Inc.
Age: 52 since January 1990. Managing Director of
BlackRock Financial Management, Inc. since
January 1990. Director of BlackRock Financial
Management, Inc. from February 1989 to January
1990. From September 1984 to February 1989, Vice
President at The First Boston Corporation.

Robert S. Kapito Vice President Vice Chairman of BlackRock Advisors, Inc. since
Age: 42 March 1988. Vice Chairman of BlackRock
Financial Management, Inc. since March 1988.
Formerly Vice President the First Boston
Corporation in the Mortgage Products Group (from
December 1985 to March 1988).

James Kong Assistant Treasurer Managing Director of BlackRock Financial
Age: 39 Management, Inc. since January 1996. Director of
BlackRock Financial Management, Inc. from
January 1993 to January 1996. Vice President and
Associate of BlackRock Financial Management, Inc.
from January 1991 and April 1989 to January 1993
and January 1991, respectively. From April 1987 to
April 1989, Assistant Vice President at The First
Boston Corporation in the CMO/ABO
Administration Department. Previously affiliated
with Deloitte Haskins & Sells (now Deloitte &
Touche LLP).

Anne Ackerley Secretary Managing Director of [BlackRock Advisors, Inc.]
Age: __ since 2000. From to , at Merrill
Lynch, Pierce, Fenner & Smith Incorporated.

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

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

Richard Shea, Esq. Vice President Effective January 2000 Managing Director of
Age: 40 BlackRock Financial Management, Inc. Director of
BlackRock Financial Management, Inc. from
January 1996 to January 2000. Vice President of
BlackRock Financial Management, Inc. from
February 1993 to January 1996. From December
1988 to February 1993, Associate Vice President
and Tax Counsel at Prudential Securities
Incorporated. From August 1984 to December
1988, Senior Tax Specialist at Laventhol &
Horwath.
</TABLE>

Laurence D. Fink and Ralph L. Schlosstein serve as members of the
executive committee of the Board of Trustees. The executive committee,
which meets between regular meetings of the board of directors, is
authorized to exercise all of the powers of the board of directors except
as otherwise set forth in the charter.

The Board has an Audit Committee consisting of those Trustees who
are not interested persons of the Trust .

No officer or employee of the Trust receives any compensation from
the Trust for serving as an officer or director of the Trust. The Trust
pays each Trustee who is not an "interested person" of the Trust (as
defined in the 1940 Act) $6,000 per year plus $1,500 per board meeting
attended in person or by telephone for travel and out-of-pocket expenses.

The aggregate estimated compensation received by each current
Trustee of the Trust for the fiscal year ending December 31, 2000 and the
aggregate estimated compensation to be received by each such person as a
current director/trustee of the BlackRock family of funds for the fiscal
year ending December 31, 2000 as a whole are estimated as follows:

<TABLE>
<S> <C> <C>
2000 Estimated
Aggregate Estimated Total Compensation from
Compensation From the Trust and Fund
Name of Board Member Trust Complex Paid to Board Member*
-------------------- ---------------------- ------------------------------------

[Trustees to come]
</TABLE>

* As of , 2000 The BlackRock family of funds consists of [22]
closed-end funds. Total compensation from the Trust and the
BlackRock complex paid to each board member is capped at
$160,000; Director fees paid by the Trust may be reduced based
on the Trust's relative net asset value in the event that the
cap is applicable.

STATISTICAL INFORMATION REGARDING DIFFERENT SECURITIES

The following table presents annualized compound total return for
various fixed income benchmarks and the Standard & Poor's 500 Index for the
period from 3/1/88 through 9/30/00.

ANNUALIZED TOTAL COMPOUNDED RETURN
3/1/88 - 9/30/00

------------------------------------------------------------------------------
Merrill Lynch U.S. Corporate Master Index (1)............................8.48%
Merrill Lynch U.S. Treasuries/Agencies Index, 1-10 Years (2).............7.36%
Merrill Lynch U.S. Treasuries/Agencies Index, 10+ Years (3)..............9.39%
Merrill Lynch U.S. 3-Month Treasury Bill Index (4).......................5.72%
Merrill Lynch High Yield Master II Index (5).............................9.57%
Standard & Poor's 500 Index (6).........................................17.24%
------------------------------------------------------------------------------

(1) The Merrill Lynch U.S. Corporate Master Index (All Maturities) is an
unmanaged index of fixed-coupon U.S. investment grade bonds with at
least $100 million face value outstanding generally with ratings of at
least "Baa3" and "BBB-" based on Moody's and S&P ratings,
respectively.
(2) The Merrill Lynch U.S. Treasuries/Agencies Index, 1-10 Years is an
unmanaged index of all U.S. treasury notes and bonds with at least $1
billion face value outstanding and with a maturity greater than or
equal to one year and less than ten years.
(3) The Merrill Lynch U.S. Treasuries/Agencies Index, 10+ Years is an
unmanaged index of all U.S. treasury notes and bonds with at
least $1 billion face value outstanding and with a maturity greater than
or equal to ten years.
(4) The Merrill Lynch U.S. 3-Month Treasury Bill Index is an unmanaged
index which, at the beginning of every month, is comprised of the U.S.
Treasury Bill with a maturity closest to, but not longer than, 3 month
from that date. It is assumed that this issue is held for one month,
then sold with the net proceeds reinvested in the bill selected at the
beginning of the next month.
(5) The Merrill Lynch High Yield Master II Index is an unmanaged index of
U.S. bonds and U.S. dollar-denominated bonds of non-U.S. issuers, in
each case with at least $100 million face value outstanding, with a
maturity equal to or greater than one year and rated by S&P in the
categories below "BBB-" and rated by Moody's in the categories
generally below "Baa3" but not in default.
(6) The Standard and Poor's 500 Index is a stock index comprised of 500
large-cap U.S. companies with a market capitalization of $1 billion or
more. These 500 Companies are a representative sample of some 100
industries chosen mainly for market size, liquidity and industry group
representation.

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

In addition, past performance is no guarantee of future performance. The
statistical information described above reflects a comparison of the
annualized compound total return percentages of various asset classes as
represented by their respective indices for the period from March 1, 1988
through September 30, 2000. The statistical information described above
does not reflect the past or future performance of the Trust. An investor
cannot invest directly in an index.

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

The investment manager is responsible for effecting securities
transactions of the Trust and will do so in a manner deemed fair and
reasonable to shareholders of the Trust and not according to any formula.
The investment manager's primary considerations in selecting the manner of
executing securities transactions for the Trust will be prompt execution of
orders, the size and breadth of the market for the security, the
reliability, integrity and financial condition and execution capability of
the firm, the amount of difficulty in executing the order, and the best net
price. There are many instances when, in the judgment of the investment
manager, more than one firm can offer comparable execution services. In
selecting among such firms, consideration is given to those firms which
supply research and other services in addition to execution services.
Consideration may also be given to the sale of shares of the Trust to the
extent authorized by the Board of Trustees. However, it is not the policy
of the investment manager, absent special circumstances, to pay higher
commissions to a firm because it has supplied such research or other
services.

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

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

Although the investment management agreement contains no
restrictions on portfolio turnover, it is not the Trust's policy to engage
in transactions with the objective of seeking profits from short-term
trading. It is expected that the annual portfolio turnover rate of the
Trust will be approximately 100% excluding securities having a maturity of
one year or less. Because it is difficult to predict accurately portfolio
turnover rates, actual turnover may be higher or lower. Higher portfolio
turnover results in increased Trust expenses, including brokerage
commissions, dealer mark-ups and other transaction costs on the sale of
securities and on the reinvestment in other securities.

TAX MATTERS

The Trust has qualified and elected, and intends to continue to
qualify under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), as a regulated investment company.

To qualify for tax treatment as a regulated investment company,
the Trust must, among other things: (a) distribute to its shareholders at
least an amount equal to the sum of (i) 90% of its net investment income
(which is its investment company taxable income as that term is defined in
the Code but determined without regard to the deduction for dividends
paid) and (ii) 90% of its net tax-exempt interest income and (b) diversify
its holdings so that, at the end of each fiscal quarter of the Trust (i) at
least 50% of the market value of the Trust's assets is represented by cash,
cash items, U.S. government securities and securities of other regulated
investment companies, and other securities, with these other securities
limited, with respect to any one issuer, to an amount not greater in value
than 5% of the Trust's total assets, and to not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of
the market value of the Trust's assets is invested in the securities of any
one issuer (other than U.S. government securities or securities of other
regulated investment companies). In meeting these requirements, the Trust
may be restricted in the utilization of certain of the investment
techniques described above and in the prospectus. If in any year the Trust
should fail to qualify for tax treatment as a regulated investment company,
the Trust would incur a regular Federal corporate income tax upon its
taxable income for that year, and distributions to its shareholders would
be taxable to such holders as ordinary income to the extent of the Trust's
earnings and profits. A regulated investment company that fails to
distribute, by the close of each calendar year, at least an amount equal to
the sum of 98% of its ordinary taxable income for such year and 98% of its
capital gain net income for the one year period ending October 31 in such
year, plus any shortfalls from the prior year's required distribution, is
liable for a 4% excise tax on the portion of the undistributed amount of
such income that is less than the required amount for such distributions.
To avoid the imposition of this excise tax, the Trust generally makes the
required distributions of its ordinary taxable income, if any, and its
capital gain net income, to the extent possible, by the close of each
calendar year.

Certain of the Trust's investment practices are subject to special
provisions of the Code that, among other things, may defer the use of
certain deductions or losses of the Trust, affect the holding period of
securities held by the Trust and alter the character of the gains or losses
realized by the Trust. These provisions may also require the Trust to
recognize income or gain without receiving cash with which to make
distributions in the amounts necessary to satisfy the requirements for
maintaining regulated investment company status and for avoiding income and
excise taxes. The Trust will monitor its transactions and may make certain
tax elections in order to mitigate the effect of these rules and prevent
disqualification of the Trust as a regulated investment company.

Distributions by the Trust of net investment income received, if
any, from taxable temporary investments and net short-term capital gains,
if any, realized by the Trust will be taxable to its shareholders as
ordinary income. Distributions by the Trust of net capital gain (which is
the excess of net long-term capital gain over net short-term capital loss),
if any, are taxable as long-term capital gain, regardless of the length of
time the shareholder has owned common shares. Distributions, if any, in
excess of the Trust's current and accumulated earnings and profits will
first reduce the adjusted tax basis of a shareholder's shares and, after
that basis has been reduced to zero, will constitute capital gains to the
shareholder (assuming the shares are held as a capital asset). As a
regulated investment company the Trust is not allowed to claim Code Section
243 deduction ("Dividend Received Deduction") in computing its investment
company taxable income. If properly designated by the Trust, and provided
certain holding period requirements are met, corporate shareholders of the
Trust may generally be eligible to treat dividends received from the Trust
as eligible for the Dividend Received Deduction, but only to the extent the
Trust would have been permitted to take such deduction in the absence of
the disallowance stated in the preceding sentence. The Trust's corporate
shareholders shall not be permitted to take the Dividend Received Deduction
with respect to distributions that are treated as long term capital gain,
as described above.

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

The sale or other disposition of common shares will normally
result in capital gain or loss to shareholders. Present law taxes both
long-term and short-term capital gains of corporations at the rates
applicable to ordinary income. For noncorporate taxpayers, however, under
current law short-term capital gains and ordinary income will be taxed at a
maximum rate of 39.6% while long-term capital gains generally will be taxed
at a maximum rate of 20%. However, because of the limitations on itemized
deductions and the deduction for personal exemptions applicable to higher
income taxpayers, the effective rate of tax may be higher in certain
circumstances. Losses realized by a shareholder on the sale or exchange of
shares of the Trust held for six months or less are disallowed to the
extent of any distribution of exempt-interest dividends received with
respect to such shares, and, if not disallowed, such losses are treated as
long-term capital losses to the extent of any capital gain dividend
received or undistributed capital gain deemed received with respect to such
shares. A shareholder's holding period is suspended for any periods during
which the shareholder's risk of loss is diminished as a result of holding
one or more other positions in substantially similar or related property,
or through certain options or short sales. Any loss realized on a sale or
exchange of shares of the Trust will be disallowed to the extent those
shares of the Trust are replaced by other shares within a period of 61 days
beginning 30 days before and ending 30 days after the date of disposition
of the original shares. In that event, the basis of the replacement shares
of the Trust will be adjusted to reflect the disallowed loss, and the
holding period of the shareholder in the replacement shares, will include
the holding period in the original shares.

Nonresident alien individuals and certain foreign corporations and
other entities ("foreign investors") generally are subject to U.S.
withholding tax at the rate of 30% (or possibly a lower rate provided by an
applicable tax treaty) on distributions of net investment income (which
includes net short-term capital gain). To the extent received by foreign
investors, exempt-interest dividends, distributions of net capital gain and
gain from the sale or other disposition of shares generally are exempt from
United States Federal income taxation. Different tax consequences may
result if the owner is engaged in a trade or business in the United States
or, in the case of an individual, is present in the United States for 183
or more days during a taxable year.

The Trust is required in certain circumstances to backup withhold
31% of taxable dividends and certain other payments paid to noncorporate
holders of the Trust's shares who do not furnish to the Trust their correct
taxpayer identification number (in the case of individuals, their social
security number) and certain certifications, or who are otherwise subject
to backup withholding. Backup withholding is not an additional tax. Any
amounts withheld from payments made to a shareholder may be refunded or
credited against such shareholder's United States Federal income tax
liability, if any, provided that the required information is furnished to
the IRS.

The foregoing is a general, summary of the provisions of the Code
and regulations thereunder presently in effect as they directly govern the
taxation of the Trust and its shareholders. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive. Moreover, the foregoing does not address many of the factors
that may be determinative of whether an investor will be liable for the
Federal alternative minimum tax. Shareholders are advised to consult their
own tax advisors for more detailed information concerning the Federal
income tax consequences of purchasing, holding and disposing of Trust
shares.

FINANCIAL STATEMENTS

INDEPENDENT AUDITORS

[ ], located at Two World Financial Center, New York, New York,
provides auditing services to the Trust. The financial statements and
independent auditors report incorporated by reference into this statement
of additional information have been so incorporated and the financial
highlights included in the prospectus have been so included, in reliance
upon the report of [ ] given on their authority as experts in auditing and
accounting.

INCORPORATION BY REFERENCE

The Trust's Statement of Assets and Liabilities, dated , 2000
(audited) and the independent auditors report thereon (the "Report"), which
accompany this statement of additional information, are incorporated herein
by reference.

ADDITIONAL INFORMATION

A Registration Statement on Form N-2, including amendments
thereto, relating to the shares offered hereby, has been filed by the Trust
with the Securities and Exchange Commission, Washington, D.C. The
prospectus and this statement of additional information do not contain all
of the information set forth in the Registration Statement, including any
exhibits and schedules thereto. For further information with respect to the
Trust and the shares offered hereby, reference is made to the Registration
Statement. Statements contained in the prospectus and this statement of
additional information as to the contents of any contract or other document
referred to are not necessarily complete and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all
respects by such reference.

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(1) Financial Statements

Part A - Report of Independent Accountants.*
Statement of Assets and Liabilities.*

Part B - None.

(2) Exhibits:

(a) Agreement and Declaration of Trust.
(b) By-Laws.
(c) Inapplicable.
(d) Form of Specimen Certificate.*
(e) Form of Dividend Reinvestment Plan.*
(f) Inapplicable.
(g) Form of Investment Management and Administration Agreement.*
(h) Form of Underwriting Agreement.*
(i) Inapplicable.
(j) Form of Custodian Agreement.*
(k) Inapplicable.
(l) Opinion and Consent of Counsel to the Trust.*
(m) Inapplicable.
(n) Consent of Independent Public Accountants.*
(o) Inapplicable.
(p) Initial Subscription Agreement.*
(q) Inapplicable.
(r) Code of Ethics
(s) Power of Attorney.*

----------

* To be Filed by Amendment.

Item 25. Marketing Arrangements

Reference is made to the Form of Underwriting Agent Agreement for
the Registrant's shares of beneficial interest to be filed by amendment to
this registration statement.

Item 26. Other Expenses of Issuance and Distribution

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

Registration fees........................................ $ *
Printing (other than certificates)....................... *
Engraving and printing certificates...................... *
Accounting fees and expenses............................. *
Legal fees and expenses.................................. *

Miscellaneous............................................ *

Total............................................. $ *

* To be furnished by amendment.

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

Prior to October 23, 2000 the Registrant had no existence.

Item 28. Number of Holders of Shares

Number of
Title of class Record Holders

Shares of Beneficial Interest 0

Item 29. Indemnification

Article V of the Registrant's Agreement and Declaration of Trust provides
as follows:

Section 5.1. No Shareholder of the Trust shall be subject in such
capacity to any personal liability whatsoever to any Person in connection
with Trust property or the acts, obligations or affairs of the Trust.
Shareholders shall have the same limitation of personal liability as is
extended to stockholders of a private corporation for profit incorporated
under the general corporation law of the State of Delaware. No Trustee or
officer of the Trust shall be subject in such capacity to any personal
liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the
Trust, save only liability to the Trust or its Shareholders arising from
bad faith, willful misfeasance, gross negligence (negligence in the case of
those Trustees or officers who are directors, officers or employees of the
Trust's investment advisor ("Affiliated Indemnities")) or reckless
disregard for his duty to such person; and, subject to the foregoing
exception, all such persons shall look solely to the Trust property for
satisfaction of claims of any nature arising in connection with the affairs
of the Trust. If any shareholder, trustee or officer, as such, of the
Trust, is made a party to any suit or proceeding to enforce any such
liability, subject to the foregoing exception, he shall not, on account
thereof, be held to any personal liability.

Section 5.2. a. The Trust hereby agrees to indemnify the Trustees
and officers of the Trust (each such person being an "indemnitee") against
any liabilities and expenses, including amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and reasonable counsel
fees reasonably incurred by such indemnitee in connection with the defense
or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which
he may be or may have been involved as a party or otherwise or with which
he may be or may have been threatened, while acting in any capacity set
forth above in this Section 5.2 by reason of his having acted in any such
capacity, except with respect to any matter as to which he shall not have
acted in good faith in the reasonable belief that his action was in the
best interest of the Trust or, in the case of any criminal proceeding, as
to which he shall have had reasonable cause to believe that the conduct was
unlawful, provided, however, that no indemnitee shall be indemnified
hereunder against any liability to any person or any expense of such
indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith,
(iii) gross negligence (negligence in the case of Affiliated Indemnities),
or (iv) reckless disregard of the duties involved in the conduct of his
position (the conduct referred to in such clauses (i) through (iv) being
sometimes referred to herein as "disabling conduct"). Notwithstanding the
foregoing, with respect to any action, suit or other proceeding voluntarily
prosecuted by any indemnitee as plaintiff, indemnification shall be
mandatory only if the prosecution of such action, suit or other proceeding
by such indemnitee was authorized by a majority of the Trustees.

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

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

d. The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.

e. Subject to any limitations provided by the Investment Company
Act and this Declaration, the Trust shall have the power and authority to
indemnify other Persons providing services to the Trust to the full extent
provided by law as if the Trust were a corporation organized under the
Delaware General Corporation Law provided that such indemnification has
been approved by a majority of the Trustees.

Insofar as indemnification for liabilities arising under the Act,
may be permitted to Trustees, officers and controlling persons of the
Trust, pursuant to the foregoing provisions or otherwise, the Trust has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

Item 30. Business and Other Connections of Investment Adviser

Not Applicable

Item 31. Location of Accounts and Records

The Registrant's accounts, books and other documents are currently
located at the offices of the Registrant, c/o BlackRock Advisors, Inc., 345
Park Avenue, New York, New York 10154 and at the offices of State Street
Bank and Trust Company, the Registrant's Custodian and, PFPC, Inc. the
Registrant's Transfer Agent and Dividend Disbursing Agent.

Item 32. Management Services

Not Applicable

Item 33. Undertakings

(1) The Registrant hereby undertakes to suspend the offering of its
shares until it amends its prospectus if (a) subsequent to the effective
date of its registration statement, the net asset value declines more than
10 percent from its net asset value as of the effective date of the
Registration Statement or (b) the net asset value increases to an amount
greater than its net proceeds as stated in the prospectus.

(2) No applicable.

(3) Not applicable

(4) Not applicable

(5) The Registrant hereby undertakes that:

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

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

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

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York,
on the 24th day of October 2000.

/s/ Ralph L. Schlosstein
---------------------------------
Ralph L. Schlosstein
President

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities on the 24th day of October 2000.

Name Title

Sole Trustee, President, Chief Executive
/s/ Ralph L. Schlosstein Officer (Principle Executive Officer) and
------------------------------ Chief Financial Officer (Principle Financial
Ralph L. Schlosstein and Accounting Officer)

INDEX TO EXHIBITS

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* To be Filed by Amendment.