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<SEC-DOCUMENT>0000930413-01-501588.txt : 20020412
<SEC-HEADER>0000930413-01-501588.hdr.sgml : 20020412
ACCESSION NUMBER:		0000930413-01-501588
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		7
FILED AS OF DATE:		20011127

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BLACKROCK CORE BOND TRUST
		CENTRAL INDEX KEY:			0001160864
		STANDARD INDUSTRIAL CLASSIFICATION:	 []

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-71836
		FILM NUMBER:		1799910

	BUSINESS ADDRESS:	
		STREET 1:		345 PARK AVE
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10154
		BUSINESS PHONE:		2127545300

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BLACKROCK CORE BOND TRUST
		CENTRAL INDEX KEY:			0001160864
		STANDARD INDUSTRIAL CLASSIFICATION:	 []

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-10543
		FILM NUMBER:		1799911

	BUSINESS ADDRESS:	
		STREET 1:		345 PARK AVE
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10154
		BUSINESS PHONE:		2127545300
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>c22094_n2-a.txt
<TEXT>
================================================================================
- --------------------------------------------------------------------------------


    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 27, 2001

                                       SECURITIES ACT REGISTRATION NO. 333-71836
                                   INVESTMENT COMPANY REGISTRATION NO. 811-10543


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM N-2

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933  [X]

                          PRE-EFFECTIVE AMENDMENT NO. 2               [X]

                          POST-EFFECTIVE AMENDMENT NO.                [ ]

                                     AND/OR

                          REGISTRATION STATEMENT UNDER

                       THE INVESTMENT COMPANY ACT OF 1940             [X]


                                 AMENDMENT NO. 2                      [X]

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

                           BLACKROCK CORE BOND TRUST
         (EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)

                              100 BELLEVUE PARKWAY
                           WILMINGTON, DELAWARE 19809
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (888) 825-2257
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                         RALPH L. SCHLOSSTEIN, PRESIDENT
                            BLACKROCK CORE BOND TRUST
                                 345 PARK AVENUE
                            NEW YORK, NEW YORK 10154
                     (NAME AND ADDRESS OF AGENT FOR SERVICE)

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

                                   COPIES TO:

        MICHAEL K. HOFFMAN, ESQ.                LEONARD B. MACKEY, JR. ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP    CLIFFORD CHANCE ROGERS & WELLS LLP
            FOUR TIMES SQUARE                         200 PARK AVENUE
        NEW YORK, NEW YORK 10036                 NEW YORK, NEW YORK 10166

     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


<TABLE>
<CAPTION>
===================================================================================================================================
                                                                      PROPOSED           PROPOSED
                                                AMOUNT BEING       MAXIMUM OFFERING   MAXIMUM AGGREGATE      AMOUNT OF
    TITLE OF SECURITIES BEING REGISTERED         REGISTERED         PRICE PER UNIT     OFFERING PRICE      REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                <C>               <C>                  <C>
Common Shares, $.001 par value................ 30,000,000 shares       $15.00           $450,000,000         $112,500(1)
====================================================================================================================================
</TABLE>

(1)  $15,000 previously paid.

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 THE 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 DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

- -------------------------------------------------------------------------------
===============================================================================
<PAGE>

                            BLACKROCK CORE BOND TRUST
                              CROSS REFERENCE SHEET

                              PART A -- PROSPECTUS

<TABLE>
<CAPTION>

             ITEMS IN PART A OF FORM N-2                            LOCATION IN PROSPECTUS
             -------------------------------------       -------------------------------------------
<S>        <C>                                               <C>
Item 1.    Outside Front Cover ...........................   Cover page

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

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

Item 4.    Financial Highlights .........................    Not Applicable

Item 5.    Plan of Distribution .........................    Cover Page; Prospectus Summary; Underwriting

Item 6.    Selling Shareholders .........................    Not Applicable

Item 7.    Use of Proceeds ..............................    Use of Proceeds; The Trust's Investments

Item 8.    General Description of the Registrant .........   The Trust; The Trust's Investments; Risks; Description of Shares;
                                                             Certain Provisions in the Agreement and Declaration of Trust;
                                                             Closed-End Trust Structure; Borrowings and Preferred Shares

Item 9.    Management ....................................   Management of the Trust; Custodian and Transfer Agent; Trust Expenses

Item 10.   Capital Stock, Long-Term Debt, and
           Other Securities ..............................   Description of Shares; Dividend Reinvestment Plan; Certain Provisions
                                                             in the Agreement and Declaration of Trust; Tax Matters

Item 11.   Defaults and Arrears on Senior Securities .....   Not Applicable

Item 12.   Legal Proceedings ............................    Legal Opinions

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

                  PART B -- STATEMENT OF ADDITIONAL INFORMATION

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

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

Item 16.   General Information and History ..............    Not Applicable

Item 17.   Investment Objective and Policies .............   Investment Objective and Policies; Investment Policies and Techniques;
                                                             Other Investment Policies and Techniques; Portfolio Transactions

Item 18.   Management ...................................    Management of the Trust; Portfolio Transactions and Brokerage

Item 19.   Control Persons and Principal Holders of
           Securities ...................................    Not Applicable

Item 20.   Investment Advisory and Other Services .......    Management of the Trust; Experts

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

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

Item 23.   Financial Statements ..........................   Financial Statements; Report of Independent Auditors

                           PART C -- OTHER INFORMATION

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

</TABLE>

<PAGE>


     PROSPECTUS                                              NOVEMBER 27, 2001
- -------------------------------------------------------------------------------
                SHARES


[LOGO] BLACKROCK

BLACKROCK CORE BOND TRUST

     COMMON SHARES OF BENEFICIAL INTEREST
- -------------------------------------------------------------------------------


INVESTMENT   OBJECTIVE.   BlackRock   Core  Bond  Trust  (the   "Trust")   is  a
newly-organized,  diversified,  closed-end  management  investment company.  The
Trust's   investment   objective  is  to  provide  current  income  and  capital
appreciation.

PORTFOLIO  CONTENTS.  The Trust seeks to achieve  its  investment  objective  by
investing  primarily in a diversified  portfolio of investment  grade bonds. The
Trust's fixed income investments will include a broad range of bonds,  including
corporate  bonds,  U.S.  government and agency  securities and  mortgage-related
securities.  The Trust will invest in bonds that,  in the opinion of the Trust's
investment  advisor and  sub-advisor,  can provide  current  income and have the
potential for above average total return.  Under normal market  conditions,  the
Trust expects to be fully invested in bonds.  The Trust will invest at least 75%
of its  total  managed  assets  in  bonds  that at the  time of  investment  are
investment grade quality.  Investment grade quality bonds are bonds rated within
the four highest grades (Baa or BBB or better by Moody's Investors Service, Inc.
("Moody's"), Standard & Poors Ratings Group ("S&P"), Fitch IBCA, Inc. ("Fitch"))
or another  nationally  recognized  rating agency, or bonds that are unrated but
judged to be of  comparable  quality by the Trust's  investment  advisor  and/or
sub-advisor.  The Trust may invest its remaining assets in high yield bonds that
at the time of investment  are rated Ba/BB or below by Moody's,  S&P or Fitch or
bonds that are  unrated  but judged to be of  comparable  quality by the Trust's
investment advisor and sub-advisor.  Bonds of below investment grade quality are
regarded as having predominately speculative characteristics with respect to the
issuer's capacity to pay interest and repay principal, and are commonly referred
to as "junk bonds." The Trust may invest up to 10% of its total  managed  assets
in bonds  issued in foreign  currencies.  The Trust  cannot  ensure that it will
achieve its investment objective.

NO PRIOR  HISTORY.  Because  the Trust is newly  organized,  its shares  have no
history of public trading.  Shares of closed-end investment companies frequently
trade at a discount  from their net asset  value.  This risk may be greater  for
investors  expecting  to sell their  shares in a  relatively  short period after
completion of the public offering.  The Trust's common shares have been approved
for listing, subject to notice of issuance, on the New York Stock Exchange under
the symbol "BHK".

BORROWING.  The Trust  currently  anticipates  borrowing  funds  and/or  issuing
preferred  shares in an aggregate  amount of  approximately 33 1/3% of its total
managed  assets  to  buy  additional  securities.  This  practice  is  known  as
"leverage." The Trust may borrow from banks or other financial institutions. The
Trust may also borrow through reverse  repurchase  agreements,  dollar rolls and
through the issuance of preferred shares.  The use of preferred shares and other
borrowing techniques to leverage the common shares can create risks.

This prospectus contains information you should know before investing, including
information about risks. Please read it before you invest and keep it for future
reference.

INVESTING IN THE COMMON SHARES INVOLVES CERTAIN RISKS. SEE "RISKS" ON PAGE 18 OF
THIS PROSPECTUS.

NEITHER  THE  SECURITIES  AND  EXCHANGE  COMMISSION  NOR  ANY  STATE  SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS  IS TRUTHFUL OR  COMPLETE.  ANY  REPRESENTATION  TO THE CONTRARY IS A
CRIMINAL OFFENSE.

PLEASE SEE PAGE 39 OF THIS PROSPECTUS FOR IMPORTANT PRIVACY POLICY INFORMATION.


                                   PRICE TO           SALES          PROCEEDS
                                    PUBLIC            LOAD           TO TRUST
- -------------------------------------------------------------------------------
     Per Share                     $15.000           $0.675           $14.325
- -------------------------------------------------------------------------------
     Total                         $                 $                $
- -------------------------------------------------------------------------------

                                   UBS WARBURG

DEUTSCHE BANC ALEX. BROWN                                 PRUDENTIAL SECURITIES

GRUNTAL & CO., L.L.C.                          J.J.B. HILLIARD, W.L. LYONS, INC.
                                                        A PNC COMPANY


WACHOVIA SECURITIES                                 WELLS FARGO VAN KASPER, LLC




<PAGE>

(CONTINUED FROM PREVIOUS PAGE)


The underwriters  named  in  this prospectus  may  purchase up to     additional
common shares at the public offering price within 45 days from the  date of this
prospectus to cover over-allotments.

The  underwriters  expect to deliver the common shares to purchasers on or about
November, 2001.

You should read the prospectus,  which contains important  information about the
Trust,  before deciding whether to invest in the common shares and retain it for
future reference. A Statement of Additional Information,  dated November,  2001,
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 may request a free copy of the Statement of
Additional  Information,  the table of  contents  of which is on page 39 of this
prospectus,  by calling (888)  825-2257 or by writing to the Trust,  or obtain a
copy (and  other  information  regarding  the  Trust)  from the  Securities  and
Exchange Commission's web site (http://www.sec.gov).

The Trust's  common shares do not represent a deposit or obligation  of, and are
not guaranteed or endorsed by, any bank or other insured depository institution,
and 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 or incorporated by reference
in this prospectus.  We have not, and the underwriters have not,  authorized any
other person to provide you with different  information.  If anyone provides you
with different or  inconsistent  information,  you should not rely on it. We are
not, and the  underwriters  are not, making an offer to sell these securities in
any  jurisdiction  where the offer or sale is not  permitted.  You should assume
that the  information in this prospectus is accurate only as of the date of this
prospectus.  Our business,  financial condition,  and prospects may have changed
since that date.

Until December,  2001 (25 days after the date of this  prospectus),  all dealers
that buy, sell or trade the common shares,  whether or not participating in this
offering,  may be required to deliver a  prospectus.  This is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.

TABLE OF CONTENTS
- -------------------------------------------------------------------------------
  Prospectus summary ......................................................    1
  Summary of Trust expenses ...............................................    7
  The Trust ...............................................................    8
  Use of proceeds .........................................................    8
  The Trust's investments .................................................    8
  Borrowings and preferred shares .........................................   15
  Risks ...................................................................   18
  How the Trust manages risk ..............................................   22
  Management of the Trust .................................................   23
  Net asset value .........................................................   27
  Distributions ...........................................................   27
  Dividend reinvestment plan ..............................................   28
  Description of shares ...................................................   29
  Certain provisions in the Agreement and
    Declaration of Trust ..................................................   32
  Closed-end trust structure ..............................................   33
  Repurchase of shares ....................................................   34
  Tax matters .............................................................   34
  Underwriting ............................................................   37
  Custodian and transfer agent ............................................   38
  Legal opinions ..........................................................   38
  Table of contents for the Statement of
    Additional Information ................................................   39

<PAGE>

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

PROSPECTUS SUMMARY

THIS IS ONLY A SUMMARY. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT
YOU SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON SHARES. YOU SHOULD REVIEW THE
MORE DETAILED  INFORMATION  CONTAINED IN THIS PROSPECTUS AND IN THE STATEMENT OF
ADDITIONAL INFORMATION.

THE TRUST

BlackRock  Core  Bond  Trust  is  a  newly  organized,  diversified,  closed-end
management investment company.  Throughout the prospectus, we refer to BlackRock
Core  Bond  Trust  simply as the  "Trust"  or as "we,"  "us" or "our."  See "The
Trust."

THE OFFERING
The Trust is offering     common  shares  of  beneficial  interest at $15.00 per
share through a group of underwriters (the "Underwriters")  led  by UBS  Warburg
LLC. The common shares of beneficial interest are  called "common shares" in the
rest of this prospectus. You must purchase at least  100  common shares ($1,500)
in order to participate in this offering. The  Trust  has given the Underwriters
an option to purchase up to         additional common  shares to cover orders in
excess of        common shares. BlackRock  Advisors,  Inc.  has  agreed  to  pay
organizational expenses and offering costs (other  than  sales load) that exceed
$0.03 per share. See "Underwriting."

INVESTMENT OBJECTIVE
The  Trust's  investment  objective  is to provide  current  income and  capital
appreciation.  No  assurance  can be  given  that the  Trust  will  achieve  its
investment objective.

INVESTMENT POLICIES
The Trust seeks to achieve its investment  objective by investing primarily in a
diversified  portfolio  of  investment  grade  bonds.  The Trust's  fixed income
investments will include a broad range of bonds, including corporate bonds, U.S.
government and agency securities and mortgage-related securities. The Trust will
invest  primarily  in bonds that,  in the opinion of  BlackRock  Advisors,  Inc.
("BlackRock Advisors" or the "Advisor") and BlackRock Financial Management, Inc.
("BlackRock  Financial  Management" or the  "Sub-Advisor")  may provide  current
income and have the  potential  for  above-average  total  return.  Under normal
market  conditions,  the Trust expects to be fully invested in bonds.  The Trust
will invest at least 75% of its total  managed  assets in bonds that at the time
of investment are investment  grade quality.  Investment grade quality bonds are
bonds  rated  within the four  highest  grades (Baa or BBB or better by Moody's,
S&P,  Fitch or another  nationally  recognized  rating agency) or bonds that are
unrated  but  judged  to be  of  comparable  quality  by  the  Advisor  and  the
Sub-Advisor. The Trust may invest up to 25% of its total managed assets in bonds
that at the time of investment  are rated Ba/BB or below by Moody's,  S&P, Fitch
or another  nationally  recognized  rating  agency or bonds that are unrated but
judged to be of comparable quality by the Advisor and the Sub-Advisor.  Bonds of
below investment grade quality are regarded as having predominately  speculative
characteristics  with respect to the issuer's capacity to pay interest and repay
principal, and are commonly referred to as "junk bonds." The Trust may invest up
to 10% of its total managed  assets in bonds issued in foreign  currencies.  See
"The Trust's investments."

BORROWINGS AND PREFERRED SHARES
The Trust currently  anticipates borrowing funds and/or issuing preferred shares
in an  aggregate  amount  of up to 33 1/3% of its  total  managed  assets to buy
additional securities. This practice is known as

- -------------------------------------------------------------------------------
                                                                               1

<PAGE>

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

"leverage."  The Trust may borrow from banks and other  financial  institutions.
The Trust may also borrow additional funds through reverse repurchase agreements
and dollar  rolls and through the  issuance of  preferred  shares of  beneficial
interest ("Preferred  Shares").  The Trust is authorized to incur leverage up to
38% of its total managed assets.  Leverage  involves  greater risks. The Trust's
leveraging strategy may not be successful. See "Risks--Leverage Risk."

The money the Trust  obtains  through  leverage  is  expected  to be invested in
intermediate and long-term bonds that will generally pay fixed rates of interest
over the life of the bonds.

Money borrowed for investment  purposes generally will pay interest or dividends
based on shorter-term  interest rates. If the rate of return,  after the payment
of applicable  expenses of the Trust,  on the  intermediate  and long-term bonds
purchased by the Trust is greater  than the  interest or  dividends  paid by the
Trust on  borrowed  money,  the  Trust  will  generate  more  income  from  such
investments  than it will need to pay  interest  or  dividends  on the  borrowed
money.  If so, the excess income may be used to pay higher  dividends to holders
of common shares.  However, the Trust cannot assure you that the use of leverage
will result in a higher yield on the common  shares.  When leverage is employed,
the net asset  value and  market  price of the  common  shares  and the yield to
holders of common shares will be more volatile.  See  "Borrowings  and preferred
shares" and "Description of shares--Preferred Shares."

INVESTMENT ADVISOR

BlackRock  Advisors  will  be  the  Trust's  investment  advisor  and  BlackRock
Advisors'  affiliate,  BlackRock  Financial  Management,  as  sub-advisor,  will
provide  certain  day-to-day   investment  management  services  to  the  Trust.
BlackRock  Advisors and  BlackRock  Financial  Management  both are wholly owned
subsidiaries  of BlackRock,  Inc.,  which is one of the largest  publicly traded
investment  management  firms in the United  States with $225  billion of assets
under  management as of September 30, 2001.  BlackRock,  Inc. and its affiliates
manage assets on behalf of more than 3,300 institutions and 200,000  individuals
worldwide,  including nine of the 10 largest companies in the U.S. as determined
by FORTUNE MAGAZINE,  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  BlackRock  Provident
Institutional  Funds.  BlackRock,  Inc.  is  the  nation's  26th  largest  asset
management  firm according to PENSIONS & INVESTMENTS,  May 14, 2001.  Throughout
the prospectus, we sometimes refer to BlackRock Advisors and BlackRock Financial
Management  collectively  as  "BlackRock."  BlackRock  Advisors  will receive an
annual fee, payable  monthly,  in a maximum amount equal to 0.55% of the average
weekly value of the Trust's  managed  assets.  "Managed  assets" means the total
assets of the Trust  (including any assets  attributable  to leverage) minus the
sum of accrued  liabilities (other than debt representing  financial  leverage).
The liquidation  preference of any Preferred Shares issued by the Trust is not a
liability.  UBS  Warburg  LLC has been  retained  by the  Advisor  to act as the
shareholder servicing agent. See "Management of the Trust."

INVESTMENT PHILOSOPHY

BlackRock applies the same controlled-duration, active relative value sector
rotation style to the management of all its fixed income mandates. Active
relative value sector rotation is a process by which BlackRock manages
fixed-income portfolios by using a strategy that invests in sectors of the fixed
income market that BlackRock believes are undervalued by moving out of sectors
that BlackRock believes are fairly or overvalued. BlackRock researches and is
active in analyzing the sectors which it believes are under, fairly and over
valued in order to achieve a portfolio's investment objective. BlackRock has
in-depth expertise in all sectors of the fixed income market. BlackRock
specializes in managing fixed income portfolios against both published and
customized benchmarks and has been doing this since the inception of its fixed
income products in 1988.

BlackRock's  style is designed with the objective of generating  excess  returns
with  lower  risk  than its  benchmarks  and  competitors.  The use of  advanced
analytics  provides real-time analysis of a vast array of risk measures designed
to measure the  potential  impact of various  sector and security  strategies on
total return. As a result,  consistent value is added and performance volatility
is controlled.

- -------------------------------------------------------------------------------
2

<PAGE>

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

BlackRock's  disciplined  investment  process  seeks to add value  through:  (i)
controlling  portfolio  duration  within a narrow  band  relative to a benchmark
index, (ii) relative value  sector/sub-sector  rotation and security  selection,
(iii)  rigorous  quantitative  analysis of the valuation of each security and of
the portfolio as a whole,  (iv) intense credit analysis and review,  and (v) the
judgment of experienced portfolio managers.

The technology that enables BlackRock to implement its investment  strategies is
constantly improving. BlackRock's commitment to maintaining its state-of-the-art
analytics in the most cost  efficient way is manifest in (i) the  development of
proprietary tools, (ii) the purchase of tools such as RiskMetrics(TM), and (iii)
the  integration  of all of these  tools  into a  unique  portfolio  level  risk
management system. By continually  updating analytics and systems,  BlackRock is
able to better quantify and evaluate the risk of each investment decision.

BlackRock's  approach to credit risk incorporates a combination of sector-based,
top-down  macro-analysis  of industry sectors to determine  relative  weightings
with a name-specific  (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 name-specific  approach focuses on identifying special
opportunities  where the market undervalues a credit, and devoting  concentrated
resources  to  research  the  credit  and  monitor  the  position.   BlackRock's
analytical process focuses on anticipating change in credit trends before market
recognition.  Credit research is a critical,  independent element of BlackRock's
process.

DISTRIBUTIONS

The Trust intends to distribute  monthly all or a portion of its net  investment
income to holders of common  shares.  We expect to declare the  initial  monthly
dividend  on the  Trust's  common  shares  within  approximately  45 days  after
completion  of  this  offering  and  to  pay  that  initial   monthly   dividend
approximately  60 to 90 days  after  completion  of  this  offering.  Unless  an
election is made to receive dividends in cash,  shareholders will  automatically
have all dividends  and  distributions  reinvested in common shares  through the
Trust's Dividend Reinvestment Plan. See "Dividend reinvestment plan."

The Trust will  distribute to holders of its common shares monthly  dividends of
all or a portion of its net income after the payment of interest  and  dividends
in connection with leverage.  If the Trust realizes a long-term capital gain, it
will be  required  to  allocate  such gain  between  the  common  shares and any
Preferred  Shares issued by the Trust in proportion to the total  dividends paid
to each class for the year in which the income is realized.  See "Distributions"
and "Borrowings and preferred shares."

LISTING

The common shares have been approved for listing on the New York Stock Exchange,
subject to notice of issuance, under the trading or "ticker" symbol "BHK". See
"Description of shares--Common Shares."


CUSTODIAN AND TRANSFER AGENT

State  Street Bank and Trust  Company  will serve as the Trust's  Custodian  and
EquiServe  Trust Company,  N.A. will serve as the Trust's  Transfer  Agent.  See
"Custodian and transfer agent."



MARKET PRICE OF SHARES

Common  shares of closed-end  investment  companies  frequently  trade at prices
lower  than  their net asset  value.  Common  shares  of  closed-end  investment
companies  like the Trust that invest  predominately  in investment  grade bonds
have during some periods  traded at prices higher than their net asset value and
during other  periods  traded at prices  lower than their net asset  value.  The
Trust cannot assure you that its common shares will trade at a price higher than
or equal to net asset value. The Trust's net asset value

- --------------------------------------------------------------------------------
                                                                               3

<PAGE>

will be reduced  immediately  following  this offering by the sales load and the
amount of the organization and offering  expenses paid by the Trust. See "Use of
proceeds."  In  addition  to net asset  value,  the market  price of the Trust's
common  shares may be affected by such  factors as the Trust's use of  leverage,
dividend  stability,  portfolio  credit  quality,  liquidity,  market supply and
demand and the Trust's dividend level,  which is, in turn,  affected by expenses
and call  protection for portfolio  securities.  See  "Borrowings  and preferred
shares,"  "Risks,"  "Description  of shares" and the section of the Statement of
Additional  Information  with the heading  "Repurchase  of Common  Shares."  The
common shares are designed primarily for long-term  investors and you should not
purchase  common  shares of the Trust if you intend to sell them  shortly  after
purchase.

SPECIAL RISK CONSIDERATIONS


NO OPERATING HISTORY

The Trust is a newly organized closed-end  management investment company with no
operating history.

MARKET DISCOUNT RISK

Shares of  closed-end  management  investment  companies  frequently  trade at a
discount from their net asset value.

INTEREST RATE RISK

Generally,  when market interest rates fall, debt security prices rise, and vice
versa.  Interest  rate risk is the risk that the bonds in the Trust's  portfolio
will decline in value because of increases in market interest rates.  The prices
of  longer-term  bonds  fluctuate  more  than  prices of  shorter-term  bonds as
interest   rates   change.   Because   the  Trust  will  invest   primarily   in
intermediate-term  and  intermediate  and long-term  bonds,  net asset value and
market price per share of the common shares will  fluctuate  more in response to
changes  in market  interest  rates  than if the  Trust  invested  primarily  in
shorter-term  bonds. The Trust's use of leverage,  as described below, will tend
to increase common share interest rate risk.

CREDIT RISK

Credit  risk is the risk that one or more bonds in the  Trust's  portfolio  will
decline in price,  or fail to pay  interest or principal  when due,  because the
issuer of the bond experiences a decline in its financial  status.  Under normal
market  conditions,  the Trust  will  invest  at least 75% of its total  managed
assets in bonds rated Baa/BBB or higher at the time of the investment. The Trust
may invest up to 25% (measured at the time of  investment)  of its total managed
assets in bonds that are rated  Ba/BB or below or that are unrated but judged to
be of comparable quality by BlackRock.

Lower grade bonds are commonly  referred to as Ojunk  bonds.O The value of lower
grade bonds is affected by the creditworthiness of the issuers of the securities
and by general economic and specific industry conditions.  Issuers of high-yield
bonds are not perceived to be as strong  financially as those with higher credit
ratings,  so the bonds are usually  considered  speculative  investments.  These
issuers are generally more  vulnerable to financial  setbacks and recession than
more  creditworthy  issuers  which may impair their ability to make interest and
principal  payments.  Lower grade  bonds tend to be less liquid than  investment
grade bonds.  Investments  in lower grade bonds will expose the Trust to greater
risks  than  if the  Trust  owned  only  higher  grade  securities.  Some of the
additional  risks you should consider in relation to lower grade  securities are
market risk and interest rate risk.

LEVERAGE RISK

The  use  of  leverage  through  reverse  repurchase  agreements,   dollar  roll
transactions,  borrowing  of money  and the  issuance  of  Preferred  Shares  to
purchase additional securities creates an opportunity for increased common share
net  investment  income  dividends,  but also  creates  risks for the holders of
common shares.

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4

<PAGE>

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Leverage is a  speculative  technique  that may expose the Trust to greater risk
and  increased  costs.  Increases  and  decreases  in the  value of the  Trust's
portfolio will be magnified when the Trust uses leverage. As a result,  leverage
may cause  greater  changes in the Trust's net asset value.  The Trust will also
have to pay  interest  and  dividends  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.   The  Trust's  leveraging  strategy  may  not  be
successful.

Reverse repurchase  agreements involve the risks that the interest income earned
on the  investment  of the proceeds  will be less than the interest  expense and
fund  expenses,  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.  There is no assurance
that reverse repurchase agreements can be successfully employed.

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.  If the  broker/dealer to whom the Trust
sells securities becomes insolvent,  the Trust's right to purchase or repurchase
securities  may be  restricted.  Successful  use of dollar rolls may depend upon
BlackRock's  ability to correctly predict interest rates and prepayments.  There
is no assurance that dollar rolls can be successfully employed.

We anticipate that the money borrowed for investment  purposes will pay interest
or dividends  based on  shorter-term  interest rates that would be  periodically
reset.  The Trust  intends  to invest the  proceeds  of the money  borrowed  for
investment purposes in intermediate and long-term,  typically fixed rate, bonds.
So long as the Trust's bond portfolio  provides a higher rate of return,  net of
Trust  expenses,  than interest and dividend rates on borrowed  money,  as reset
periodically,  the leverage may cause the holders of common  shares to receive a
higher current rate of return than if the Trust were not leveraged. If, however,
long- and/or  short-term rates rise, the interest and dividend rates on borrowed
money could exceed the rate of return on  intermediate  and long-term bonds held
by the Trust that were  acquired  during  periods of  generally  lower  interest
rates,  reducing  return to the holders of common shares.  Leverage  creates two
major types of risks for the holders of common shares:

o     the  likelihood of greater  volatility of net asset value and market price
      of the common  shares  because  changes in the value of the  Trust's  bond
      portfolio,  including  bonds  bought with the proceeds  from  leverage are
      borne entirely by the holders of common shares; and

o     the possibility  either that common share net investment  income will fall
      if the interest and dividend  rates on leverage rises or that common share
      net  investment  income will  fluctuate  because the interest and dividend
      rates on leverage varies.

PREPAYMENT RISK

If interest rates fall, the principal on debt  securities  held by the Trust may
be paid earlier than  expected.  If this  happens,  the proceeds  from a prepaid
security  would likely be reinvested  by the Trust in  securities  bearing lower
interest  rates,  resulting  in a  possible  decline in the  Trust's  income and
distributions to shareholders. The Trust may invest in pools of mortgages issued
or  guaranteed  by  private   issuers  or  U.S.   government   agencies.   These
mortgage-related  securities are especially sensitive to prepayment risk because
borrowers often refinance their mortgages when interest rates drop.

MORTGAGE-RELATED SECURITIES RISK

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

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                                                                               5

<PAGE>
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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  non-mortgage  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, mortgage-related and
asset-backed  security's  total  return and maturity may be difficult to predict
precisely.  To  the  extent  that  the  Trust  purchases  mortgage  related  and
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.

The  Trust  may from  time to time  purchase  in the  secondary  market  certain
mortgage  pass-through  securities  packaged and master serviced by PNC Mortgage
Securities Corp. ("PNC Mortgage") or Midland Loan Services, Inc. ("Midland") (or
Sears Mortgage if PNC Mortgage succeeded to rights and duties of Sears Mortgage)
or mortgage-related  securities  containing loans or mortgages originated by PNC
Bank or its  affiliates.  It is  possible  that  under some  circumstances,  PNC
Mortgage,  Midland or their affiliates could have interests that are in conflict
with the holders of these  mortgage-backed  securities,  and such holders  could
have rights against PNC Mortgage, Midland or their affiliates.

FOREIGN RISKS

Because the Trust may own  securities of foreign  issuers,  it may be subject to
risks not usually associated with owning securities of U.S. issuers. These risks
can  include  fluctuations  in foreign  currencies,  foreign  currency  exchange
controls,   political  and  economic   instability,   differences  in  financial
reporting,  differences  in  securities  regulation  and  trading,  and  foreign
taxation  issues.  Investing in securities of issuers based in emerging  markets
entails all of the risks of  investing  in  securities  of foreign  issuers to a
heightened degree.

ANTI-TAKEOVER PROVISIONS

The Trust's  Agreement and  Declaration of Trust includes  provisions that could
limit the ability of other  entities or persons to acquire  control of the Trust
or convert the Trust to open-end  status.  These  provisions  could  deprive the
holders  of common  shares of  opportunities  to sell their  common  shares at a
premium over the then current  market price of the common shares or at net asset
value.





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6

<PAGE>


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Summary of Trust expenses

The  following  tables  show  Trust  expenses  as a  percentage  of  net  assets
attributable to common shares.

 Shareholder Transaction Expenses

Sales Load Paid by You (as a percentage of offering price) ..........     4.50%
Dividend Reinvestment Plan Fees .....................................     None*

                                                             PERCENTAGE OF NET
                                                            ASSETS ATTRIBUTABLE
                                                             TO COMMON SHARES**
- -------------------------------------------------------------------------------
Annual Expenses
      Management Fees ........................................... 0.83%
      Interest Expense .......................................... 1.50%
      Other Expenses ............................................ 0.18%
                                                                  ----
        Total Net Annual Expenses ............................... 2.51%***
                                                                  =====

*     YOU WILL BE CHARGED A $2.50 SERVICE  CHARGE AND PAY  BROKERAGE  CHARGES IF
      YOU DIRECT THE PLAN AGENT (AS DEFINED  BELOW) TO SELL YOUR  COMMON  SHARES
      HELD IN A DIVIDEND REINVESTMENT ACCOUNT.

**   STATED AS A PERCENTAGE  OF THE TRUST'S TOTAL  MANAGED  ASSETS  ASSUMING THE
     LEVERAGE IN AN AMOUNT EQUAL TO 33 1/3% OF THE TRUST'S TOTAL MANAGED  ASSETS
     (AFTER INCURRING LEVERAGE),  THE TRUST'S EXPENSES WOULD BE ESTIMATED AS SET
     OUT IN THE TABLE  BELOW.  "MANAGED  ASSETS"  MEANS THE TOTAL  ASSETS OF THE
     TRUST  (INCLUDING  ANY  ASSETS  ATTRIBUTABLE  TO ANY  LEVERAGE  THAT MAY BE
     OUTSTANDING)  MINUS  THE  SUM  OF  ACCRUED  LIABILITIES  (OTHER  THAN  DEBT
     REPRESENTING  FINANCIAL  LEVERAGE).   THE  LIQUIDATION  PREFERENCE  OF  THE
     PREFERRED SHARES IS NOT A LIABILITY.


                                                          PERCENTAGE OF TOTAL
                                                             MANAGED ASSETS
- -------------------------------------------------------------------------------
Annual Expenses

      Management Fees .........................................  0.55%
      Interest Expense ........................................  1.00%
      Other Expenses ..........................................  0.12%
                                                                ----------
        Total Net Annual Expenses .............................  1.67%***
                                                                ==========

***   TOTAL  ANNUAL  EXPENSES  (BEFORE  INTEREST  PAYMENTS  ON  BORROWINGS)  ARE
      ESTIMATED TO BE 1.01% AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO COMMON
      SHARES AND 0.67% AS A PERCENTAGE OF TOTAL MANAGED ASSETS.

The purpose of the table above and the example  below is to help you  understand
all fees and  expenses  that  you,  as a holder  of common  shares,  would  bear
directly or indirectly.  The expenses shown in the table under "Other  Expenses"
and "Total Net Annual  Expenses" are based on estimated  amounts for the Trust's
first year of  operations  and assume that the Trust  issues  13,333,333  common
shares.  If the Trust issues fewer common shares,  all other things being equal,
these  expenses  would  increase.  See  "Management  of the Trust" and "Dividend
reinvestment plan."

The following example illustrates the expenses (including the sales load of $45)
that you would pay on a $1,000  investment in common shares,  assuming (1) total
net annual expenses of 2.51% of net assets attributable to common shares and (2)
a 5% annual return:(1)

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                                                                               7
<PAGE>

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SUMMARY OF TRUST EXPENSES

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

Total Expenses Incurred....... $69          $120         $173         $317

(1)   THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION  OF FUTURE EXPENSES.
      THE EXAMPLE ASSUMES THAT THE ESTIMATED  "OTHER  EXPENSES" SET FORTH IN THE
      ANNUAL   EXPENSES   TABLE  ARE  ACCURATE  AND  THAT  ALL   DIVIDENDS   AND
      DISTRIBUTIONS  ARE REINVESTED AT NET ASSET VALUE.  ACTUAL  EXPENSES MAY BE
      GREATER OR LESS THAN THOSE ASSUMED.  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 Trust is a newly organized,  diversified,  closed-end  management investment
company  registered  under the  Investment  Company Act of 1940, as amended (the
"Investment  Company Act"). The Trust was organized as a Delaware business trust
on October 12, 2001,  pursuant to an Agreement and Declaration of Trust governed
by the laws of the State of Delaware. As a newly organized entity, the Trust has
no operating  history.  The Trust's  principal office is located at 100 Bellevue
Parkway, Wilmington, Delaware 19809, and its telephone number is (888) 825-2257.

USE OF PROCEEDS

The net proceeds of the offering of common shares will be  approximately $
($        if the Underwriters exercise the over-allotment option in full) after
payment of the estimated  organization and offering costs. The Trust will invest
the net  proceeds of the  offering  in  accordance  with the Trust's  investment
objective and policies as stated below.  We currently  anticipate that the Trust
will be able to invest  substantially all of the net proceeds in bonds that meet
the Trust's investment  objective and policies within approximately three months
after the completion of the offering. Pending such investment, it is anticipated
that the proceeds will be invested in short-term investment grade securities.

THE TRUST'S INVESTMENTS

INVESTMENT OBJECTIVE AND POLICIES

The  Trust's  investment  objective  is to provide  current  income and  capital
appreciation.  No  assurance  can be  given  that the  Trust  will  achieve  its
investment objective.

The Trust will invest  primarily in  investment  grade bonds.  Bonds held by the
Trust  may  take  the  form of  bonds,  notes,  bills,  debentures,  convertible
securities,  warrants attached to debt securities,  bank debt obligations,  loan
participations and assignments, trust preferred securities and securities issued
by  entities  organized  and  operated  for the  purpose  of  restructuring  the
investment  characteristics of securities.  Under current market conditions, the
Trust  intends  to  invest  primarily  in  corporate   bonds,   mortgage-related
securities and U.S. government and agency debt securities.

Under normal market conditions,  the Trust will invest at least 75% of its total
managed assets in investment grade quality bonds. Investment grade quality means
that such bonds are rated,  at the time of  investment,  within the four highest
grades  (Baa or BBB or better  by  Moody's,  S&P,  Fitch or  another  nationally
recognized  rating  agency) by one  nationally  recognized  rating agency or are
unrated  but judged to be of  comparable  quality by  BlackRock.  Bonds that are
rated by two or more nationally recognized rating agencies will be considered to
have  the  higher  credit  rating.  Changes  in  economic  conditions  or  other
circumstances  are more likely to lead to a weakened capacity for bonds that are
rated  BBB or Baa (or  that  have  equivalent  ratings)  to make  principal  and
interest payments than is the case for higher rated

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8

<PAGE>


THE TRUST'S INVESTMENTS

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bonds.  The Trust may invest up to 25% of its total managed assets in bonds that
are rated, at the time of investment,  Ba/BB or below by Moody's,  S&P, Fitch or
another nationally recognized rating agency or that are unrated but judged to be
of comparable quality by BlackRock.  Bonds of below investment grade quality are
commonly  referred to as Ojunk bonds.O Bonds of below  investment  grade quality
are regarded as having predominantly speculative characteristics with respect to
the  issuer's  capacity to pay interest  and repay  principal.  The lowest rated
bonds in which the Trust may invest are securities  rated in the category "C" or
determined by BlackRock 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.  These credit quality  policies apply only at the time a security is
purchased,  and the Trust is not  required  to dispose of a security if a rating
agency downgrades its assessment of the credit  characteristics  of a particular
issue. In determining  whether to retain or sell a security that a rating agency
has downgraded, BlackRock may consider such factors as BlackRock's assessment of
the  credit  quality  of the  issuer  of the  security,  the  price at which the
security could be sold and the rating, if any, assigned to the security by other
rating agencies.  Appendix A to the Statement of Additional Information contains
a general description of Moody's, S&P's and Fitch's ratings of debt securities.

The Trust may invest up to 10% of its total managed assets in bonds  denominated
in  currencies  other  than the U.S.  dollar.  The  Trust  may  also  invest  in
securities  of other  open-  or  closed-end  investment  companies  that  invest
primarily in bonds of the types in which the Trust may invest directly.

The Trust will also invest in bonds that, in BlackRock's opinion, are underrated
or  undervalued  or have the  potential  for  above-average  current  income and
capital  appreciation.  Underrated  bonds are those  whose  ratings  do not,  in
BlackRock's opinion, reflect their true creditworthiness.  Undervalued bonds are
bonds that, in the opinion of BlackRock,  are worth more than the value assigned
to them in the marketplace. BlackRock may at times believe that bonds associated
with a particular market sector (for example,  mortgage-related  securities), or
issued by a particular  issuer,  are  undervalued.  BlackRock may purchase those
bonds for the Trust's portfolio because they represent a market sector or issuer
that  BlackRock  considers  undervalued,  even if the value of those  particular
bonds  appears  to be  consistent  with the  value of  similar  bonds.  Bonds of
particular issuers (for example, the Federal Home Loan Mortgage Association) may
be  undervalued  because  there is a  temporary  excess of supply in that market
sector,  or  because of a general  decline  in the market  price of bonds of the
market  sector for reasons  that do not apply to the  particular  bonds that are
considered  undervalued.  The Trust's  investment in  underrated or  undervalued
bonds will be based on  BlackRock's  belief that their yield is higher than that
available on bonds bearing  equivalent levels of interest rate risk, credit risk
and other forms of risk, and that their prices will ultimately rise, relative to
the  market,  to reflect  their true  value.  Initially,  the Trust  expects its
portfolio  to have an average  credit  quality  of "A".  The Trust may engage in
active and frequent  trading of portfolio  securities  to achieve its  principal
investment strategies.

As part of the management of the Trust, BlackRock manages the effective duration
of the Trust's portfolio.  Under current market conditions,  the duration of the
portfolio  is  expected  to be within  +/- 20% of the  duration  of the ten year
Treasury note.  Effective  duration measures the expected  sensitivity of market
price to  changes  in  interest  rates,  taking  into  account  the  effects  of
structural complexities.  Each year of duration represents an expected 1% change
in the price of a bond for every 1% change in interest rates. For example,  if a
bond has an average  duration of four  years,  its price will fall about 4% when
interest rates rise by 1%. Conversely,  the bond's price will rise about 4% when
interest  rates fall by 1%. The target  duration  of the Trust's  portfolio  may
change from time to time.  For further  information  on duration,  See "Duration
Management  and Other  Management  Techniques"  in the  Statement of  Additional
Information.

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                                                                               9


<PAGE>



THE TRUST'S INVESTMENTS

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The Trust can borrow money to buy additional securities.  This practice is known
as "leverage." The Trust may borrow from banks or other  financial  institutions
or through  reverse  repurchase  agreements,  dollar rolls and other  investment
techniques.  The Trust  currently  anticipates  borrowing  funds and/or  issuing
preferred  shares in an aggregate amount of  approximately  33 1/3% of its total
managed assets.

The Trust may lend some of its  securities  in order to earn  income.  The Trust
will receive  collateral in cash or high quality securities equal to the current
value of the loaned  securities.  The Trust earns  interest on the securities it
lends and income when it invests the collateral for the loaned securities. These
loans  will be  limited  to 33 1/3% of the value of the  Trust's  total  managed
assets.

BlackRock  may,  but is not  required  to,  when  consistent  with  the  Trust's
investment objective,  use various strategic investment  transactions  described
below to earn  income,  facilitate  portfolio  management  and  mitigate  risks,
including currency risk. See "--Strategic Transactions."

During temporary  defensive  periods,  including the period during which the net
proceeds of this  offering  are being  invested,  and in order to keep the Trust
fully  invested,  the Trust may invest up to 100% of its total managed assets in
short-term investments. The Trust may not achieve its investment objective under
these circumstances.

The Trust cannot  change its  investment  objective  without the approval of the
holders of a majority of the  outstanding  common  shares and, if any  Preferred
Shares are issued,  the Preferred  Shares voting together as a single class, and
of the holders of a majority of the  outstanding  Preferred  Shares  voting as a
separate  class.   Under  the  Investment   Company  Act,  a  "majority  of  the
outstanding"  means  (1) 67% or  more of the  outstanding  shares  present  at a
meeting,  if the  holders  of  more  than  50%  of the  shares  are  present  or
represented by proxy, or (2) more than 50% of the outstanding shares,  whichever
is less. See "Description of  shares--Preferred  Shares--Voting  Rights" and the
Statement of Additional  Information  under  "Description  of  Shares--Preferred
Shares" for additional  information with respect to the voting rights of holders
of Preferred Shares.

CORPORATE BONDS

The Trust will invest in corporate  bonds.  The  investment  return of corporate
bonds  reflects  interest on the security and changes in the market value of the
security. The market value of a corporate bond generally may be expected to rise
and fall  inversely  with interest  rates.  The market value of a corporate bond
also may be affected by the credit rating of the corporation,  the corporation's
performance and  perceptions of the corporation in the market place.  There is a
risk  that  the  issuers  of the  securities  may  not be  able  to  meet  their
obligations  on  interest  or  principal  payments  at the time called for by an
instrument.

U.S. GOVERNMENT SECURITIES

The  Trust may  invest  in debt  securities  issued  or  guaranteed  by the U.S.
government,  its  agencies or  instrumentalities  including:  (1) U.S.  Treasury
obligations,  which  differ in their  interest  rates,  maturities  and times of
issuance,  such as U.S.  Treasury  bills  (maturity  of one year or less),  U.S.
Treasury  notes  (maturity  of  one to  ten  years),  and  U.S.  Treasury  bonds
(generally  maturities  of greater  than ten  years),  including  the  principal
components or the interest  components  issued by the U.S.  government under the
Separate Trading of Registered Interest and Principal  Securities program (i.e.,
"STRIPS"),  all of which are  backed by the full  faith and credit of the United
States; and (2) obligations issued or guaranteed by U.S.  government agencies or
instrumentalities,  including government guaranteed mortgage-related securities,
some of which are backed by the full faith and credit of the U.S. Treasury, some
of which  are  supported  by the right of the  issuer  to  borrow  from the U.S.
government and some of which are backed only by the credit of the issuer itself.

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10


<PAGE>


THE TRUST'S INVESTMENTS

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

MORTGAGE-RELATED SECURITIES

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

Interests  in pools of  mortgage-related  securities  differ from other forms of
bonds,  which normally provide for periodic payment of interest in fixed amounts
with  principal  payments at maturity or specified  call dates.  Instead,  these
securities  provide  a monthly  payment  which  consists  of both  interest  and
principal  payments.  In effect,  these  payments  are a  "pass-through"  of the
monthly  payments  made by the  individual  borrowers  on their  residential  or
commercial  mortgage  loans,  net of any fees paid to the issuer or guarantor of
such  securities.  Additional  payments  are caused by  repayments  of principal
resulting from the sale of the underlying property,  refinancing or foreclosure,
net of fees or costs which may be  incurred.  Some  mortgage-related  securities
(such as securities issued by the "Government National Mortgage Association," or
"GNMA") are described as "modified  pass-through."  These securities entitle the
holder to receive all interest and principal payments owed on the mortgage pool,
net of certain fees, at the scheduled payment dates regardless of whether or not
the mortgagor actually makes the payment.

The rate of  prepayments  on  underlying  mortgages  will  affect  the price and
volatility of a mortgage-related security, and may have the effect of shortening
or extending the effective  maturity of the security beyond what was anticipated
at the time of purchase. To the extent that unanticipated rates of prepayment on
underlying  mortgages  increase in the effective  maturity of a mortgage-related
security, the volatility of such security can be expected to increase.

The yield and maturity  characteristics  of  mortgage-related  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.  The
relationship   between   prepayments   and   interest   rates   may  give   some
mortgage-related securities less potential for growth in value than conventional
fixed-income  securities 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, a mortgage-related  security's
total return and maturity may be difficult to predict  precisely.  To the extent
that the Trust purchases mortgage-related  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.

Mortgage-related securities come in different classes that have different risks.
The Trust may invest in lower, or junior, classes of mortgage-related securities
which  may have a rating  below  investment  grade  and  therefore  are  riskier
investments  than higher rated  securities.  Junior classes of  mortgage-related
securities  protect the senior class investors  against losses on the underlying
mortgage  loans by taking  the first  loss if there are  liquidations  among the
underlying  loans.  Junior  classes  generally  receive  principal  and interest
payments only after all required payments have been made to more senior classes.
Because the Trust may invest in junior classes of  mortgage-related  securities,
it may not be able to recover all of

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its  investment in the securities it purchases.  In addition,  if the underlying
mortgage  portfolio  has been  overvalued,  or if mortgage  values  subsequently
decline, the Trust may suffer significant losses.

Investments in mortgage-related  securities,  especially lower rated securities,
involve the risks of  interruptions  in the payment of  interest  and  principal
(delinquency) and the potential for loss of principal if the property underlying
the security is sold as a result of foreclosure on the mortgage (default). These
risks include the risks associated with direct ownership of real estate, such as
the effects of general and local economic  conditions on real estate values, the
conditions of specific industry  segments,  the ability of tenants to make lease
payments and the ability of a property to attract and retain  tenants,  which in
turn may be affected by local market conditions such as oversupply of space or a
reduction  of  available  space,  the  ability of the owner to provide  adequate
maintenance and insurance,  energy costs, government regulations with respect to
environmental, zoning, rent control and other matters, and real estate and other
taxes.  The  risks  associated  with  the  real  estate  industry  will  be more
significant  for the Trust to the extent  that it  invests  in  mortgage-related
securities.   These  risks  are  heightened  in  the  case  of  mortgage-related
securities  related  to a  relatively  small  pool  of  mortgage  loans.  If the
underlying  borrowers cannot pay their mortgage loans,  they may default and the
lenders may  foreclose  on the  property.  Finally,  the ability of borrowers to
repay  mortgage  loans  underlying  mortgage-related  securities  will typically
depend upon the future  availability  of  financing  and the  stability  of real
estate values.

For mortgage  loans not  guaranteed by a government  agency or other party,  the
only  remedy of the  lender in the event of a default is to  foreclose  upon the
property.  If borrowers are not able or willing to pay the principal  balance on
the loans, there is a good chance that payments on the related  mortgage-related
securities  will not be made.  Certain  borrowers on  underlying  mortgages  may
become  subject  to  bankruptcy  proceedings,  in which  case  the  value of the
mortgage-related securities may be hurt.

LOWER GRADE SECURITIES

The Trust may invest up to 25% of its total managed  assets in bonds rated below
investment  grade such as those  rated Ba or lower by Moody's and BB or lower by
S&P or  securities  comparably  rated by other  rating  agencies  or in  unrated
securities  determined  by BlackRock to be of  comparable  quality.  These lower
grade  securities  are commonly  known as "junk bonds."  Securities  rated below
investment grade are judged to have speculative  characteristics with respect to
the interest and principal payments.

The  values  of  lower  grade  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 lower grade 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
lower  grade  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 lower grade securities have a lower degree of protection with
respect to  principal  and interest  payments  than do investors in higher rated
securities.

During an economic downturn,  a substantial period of rising interest rates or a
recession,  issuers of lower grade 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 ability of the issuers to repay  principal
and interest.  If the issuer of a security held generally by the Trust defaults,
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.

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The  secondary  markets  for  lower  grade  securities  are not as liquid as the
secondary markets for higher rated  securities.  The secondary markets for lower
grade   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 lower grade 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 change
in the condition of a particular  issuer.  Under certain  economic and/or market
conditions,  the Trust may have  difficulty  disposing  of certain  lower  grade
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 lower
grade  securities,   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 lower grade  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  lower  grade
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 lower  grade  securities,  the  financial
condition  of  issuers  of these  securities  and the  value  and  liquidity  of
outstanding  lower grade 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 lower grade securities and
limiting the  deductibility  of interest by certain  corporate  issuers of lower
grade securities  adversely  affected the lower grade  securities  market in the
past.

When the secondary market for lower grade 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 lower grade 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.

FOREIGN SECURITIES

The Trust may invest up to 10% of its total  managed  assets in bonds  issued in
foreign currencies. Although the Trust intends to invest primarily in securities
of governments or established companies based in developed countries,  the value
of the Trust's  investments may be adversely affected by changes in political or
social conditions,  diplomatic relations,  confiscatory taxation, expropriation,
nationalization,  limitation on the removal of funds or assets, or imposition of
(or change in) exchange  control or tax regulations in those foreign  countries.
In  addition,  changes in  government  administrations  or  economic or monetary
policies  in the  United  States  or abroad  could  result  in  appreciation  or
depreciation of Trust  securities and could favorably or unfavorably  affect the
Trust's operations. Furthermore, the economies of individual foreign nations may
differ from the U.S. economy, whether favorably or unfavorably, in areas such as
growth of gross  national  product,  rate of  inflation,  capital  reinvestment,
resource  self-sufficiency and balance of payments position. It may also be more
difficult to obtain and enforce a judgment against a foreign issuer. In general,
less  information is publicly  available with respect to foreign issuers than is
available with respect to U.S.  companies.  Most foreign  companies are also not
subject  to  the  uniform  accounting  and  financial   reporting   requirements
applicable to issuers in the United States. Any foreign  investments made by the
Trust must be made in compliance with U.S. and foreign currency restrictions and
tax laws restricting the amounts and types of foreign investments.

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Because  foreign  securities  generally  are  denominated  and pay  dividends or
interest  in  foreign  currencies,  and  the  Trust  may  hold  various  foreign
currencies  from  time to time,  the  value of the net  assets  of the  Trust as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates.  Generally,  the Trust's currency exchange  transactions will be
conducted  on a spot  (i.e.,  cash)  basis at the spot  rate  prevailing  in the
currency exchange market. The cost of the Trust's currency exchange transactions
will  generally  be the  difference  between  the bid and offer spot rate of the
currency being purchased or sold. In order to protect against uncertainty in the
level of future foreign currency exchange, the Trust is authorized to enter into
certain foreign currency exchange transactions.

The Trust may also  invest in issuers  located  in  emerging  market  countries.
Investment in securities of issuers  based in  underdeveloped  emerging  markets
entails all of the risks of investing in securities of foreign issuers  outlined
in  the  above  section  to  a  heightened  degree.  In  addition  to  brokerage
commissions,  custodial  services  and other  costs  relating to  investment  in
emerging  markets are generally more  expensive than in the United States.  Such
markets   have  been  unable  to  keep  pace  with  the  volume  of   securities
transactions, making it difficult to conduct such transactions. The inability of
the Trust to make intended securities purchases due to settlement problems could
cause the Trust to miss  attractive  investment  opportunities.  An inability to
dispose of a security due to settlement  problems  could result in losses to the
Trust due to subsequent declines in the value of the security.

STRATEGIC TRANSACTIONS

The Trust may,  but is not  required  to,  use  various  strategic  transactions
described  below to earn income,  facilitate  portfolio  management and mitigate
risks. Such strategic transactions are generally accepted under modern portfolio
management and are regularly  used by many mutual funds and other  institutional
investors.  Although BlackRock seeks to use the practices to further the Trust's
investment  objective,  no  assurance  can be given  that these  practices  will
achieve this result.

The Trust may purchase and sell derivative  instruments such as  exchange-listed
and  over-the-counter  put and call options on  securities,  financial  futures,
equity, fixed-income and interest rate indices, and other financial instruments,
purchase and sell financial  futures  contracts and options thereon,  enter into
various interest rate  transactions  such as swaps,  caps, floors or collars and
enter into various currency  transactions  such as currency  forward  contracts,
currency  futures  contracts,  currency swaps or options on currency or currency
futures or credit  transactions  and credit  default  swaps.  The Trust also may
purchase  derivative  instruments  that combine  features of these  instruments.
Collectively,  all of the above are referred to as "Strategic Transactions." The
Trust generally seeks to use Strategic Transactions as a portfolio management or
hedging  technique to seek to protect  against  possible  adverse changes in the
market value of securities held in or to be purchased for the Trust's portfolio,
protect  the value of the  Trust's  portfolio,  facilitate  the sale of  certain
securities for investment purposes,  manage the effective interest rate exposure
of the Trust,  protect  against changes in currency  exchange rates,  manage the
effective maturity or duration of the Trust's portfolio,  or establish positions
in the derivatives  markets as a temporary  substitute for purchasing or selling
particular  securities.  The Trust may use  Strategic  Transactions  to  enhance
potential  gain,  although no more than 5% of the Trust's total  managed  assets
will be committed to variation margin for Strategic Transactions for non-hedging
purposes.

Strategic  Transactions have risks,  including the imperfect correlation between
the value of such instruments and the underlying assets, the possible default of
the other party to the transaction or illiquidity of the derivative instruments.
Furthermore,  the ability to successfully use Strategic  Transactions depends on
BlackRock's  ability to predict  pertinent  market  movements,  which  cannot be
assured.  Thus, the use of Strategic  Transactions  may result in losses greater
than if they  had not been  used,  may  require  the  Trust to sell or  purchase
portfolio  securities  at  inopportune  times or for prices  other than  current
market values,  may limit the amount of appreciation the Trust can realize on an
investment, or may cause

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the Trust to hold a security that it might  otherwise  sell. The use of currency
transactions  can  result  in the  Trust  incurring  losses  as a result  of the
imposition of exchange  controls,  suspension of settlements or the inability of
the Trust to deliver or receive a specified currency. Additionally, amounts paid
by the Trust as premiums and cash or other assets held in margin  accounts  with
respect to Strategic  Transactions are not otherwise  available to the Trust for
investment purposes.

A more  complete  discussion  of  Strategic  Transactions  and  their  risks  is
contained in the Trust's Statement of Additional Information.

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES

The Trust may buy and sell bonds on a when-issued basis and may purchase or sell
bonds on a "forward  commitment"  basis.  When such transactions are negotiated,
the price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but delivery and payment for the securities takes place at a
later date.  This type of transaction  may involve an element of risk because no
interest accrues on the bonds prior to settlement and, because bonds are subject
to market  fluctuations,  the value of the bonds at the time of delivery  may be
less or more than cost. Cash and liquid securities, having a market value at all
times at least equal to the amount of the commitment,  will be segregated by the
Trust's custodian.

OTHER INVESTMENT COMPANIES

The Trust may  invest up to 10% of its total  managed  assets in  securities  of
other open- or closed-end investment companies that invest primarily in bonds of
the types in which the Trust may invest directly. The Trust generally expects to
invest in other  investment  companies  either during  periods when it has large
amounts of uninvested  cash, such as the period shortly after the Trust receives
the proceeds of the offering of its common shares,  or during periods when there
is a shortage of  attractive  opportunities  in the  fixed-income  market.  As a
shareholder in an investment company,  the Trust would bear its ratable share of
that investment  company's expenses,  and would remain subject to payment of the
Trust's advisory and other fees and 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.  BlackRock will take
expenses into account when evaluating the investment  merits of an investment in
an investment company relative to available bond investments.  The securities of
other  investment  companies may also be leveraged and will therefore be subject
to the same leverage  risks to which the Trust is subject.  As described in this
prospectus  in the  sections  entitled  "Risks" and  "Borrowings  and  preferred
shares," the net asset value and market  value of leveraged  shares will be more
volatile  and the yield to  shareholders  will tend to  fluctuate  more than the
yield generated by unleveraged shares.  Investment companies may have investment
policies  that differ from those of the Trust.  In  addition,  to the extent the
Trust invests in other  investment  companies,  the Trust will be dependent upon
the investment and research abilities of persons other than BlackRock. The Trust
treats its  investments  in such open- or  closed-end  investment  companies  as
investments in bonds.

BORROWINGS AND PREFERRED SHARES

The Trust currently  anticipates borrowing funds and/or issuing Preferred Shares
in an aggregate  amount of  approximately 33 1/3% of its total managed assets to
purchase additional securities.  This practice is known as "leverage." The Trust
may  borrow  from banks and other  financial  institutions  and may also  borrow
additional  funds  using  such  investment  techniques  and in such  amounts  as
BlackRock may from time to time determine.  Of these investment techniques,  the
Trust expects  primarily to use reverse  repurchase  agreements  and dollar roll
transactions.  Changes in the value of the  Trust's  bond  portfolio,  including
bonds bought with the proceeds of the  leverage,  will be borne  entirely by the
holders of common shares. If there is a net decrease,  or increase, in the value
of the Trust's investment portfolio, the leverage

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BORROWINGS AND PREFERRED SHARES
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will decrease,  or increase (as the case may be), the net asset value per common
share to a greater extent than if the Trust were not  leveraged.  During periods
in which the Trust is using  leverage,  the fees paid to BlackRock  for advisory
and sub-advisory  services will be higher than if the Trust did not use leverage
because  the fees paid will be  calculated  on the  basis of the  Trust's  total
managed assets, including the proceeds from the issuance of Preferred Shares and
other leverage. The Trust is authorized to incur leverage up to 38% of its total
managed assets. Leverage involves greater risks. The Trust's leveraging strategy
may not be successful.

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 Investment
Company  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.

DOLLAR ROLL TRANSACTIONS

Borrowings may be made by the Trust through 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.

PREFERRED SHARES

Although the Trust is  authorized,  under the  Investment  Company Act, to issue
Preferred Shares in an amount up to 50% of its total assets less its liabilities
and indebtedness,  the Trust anticipates that under current market conditions it
will offer Preferred  Shares  representing no more than 10% of the Trust's total
managed assets  immediately  after the issuance of the Preferred Shares. If as a
result  of market  conditions,  or any other  reason,  the Trust  does not issue
Preferred  Shares, the Trust will limit its  borrowing to 33 1/3% of the Trust's
total managed  assets.  The Preferred  Shares would have complete  priority upon
distribution of assets over the common shares.  The issuance of Preferred Shares
will  leverage  the common  shares.  Although  the timing and other terms of the
offering of  Preferred  Shares and the terms of the  Preferred  Shares  would be
determined  by the Trust's  board of trustees,  the Trust  expects to invest the
proceeds of any Preferred  Shares offering in intermediate  and long-term bonds.
The Preferred  Shares will pay adjustable  rate dividends  based on shorter-term
interest rates, which would be redetermined  periodically by an auction process.
The adjustment period for Preferred Share dividends could be as short as one day
or as long as a year or more.  So long as the Trust's  portfolio  is invested in
securities  that provide a higher rate of return than the  dividend  rate of the
Preferred Shares,  after taking expenses into  consideration,  the leverage will
cause  you to  receive  a  higher  rate of  income  than if the  Trust  were not
leveraged.

Under the Investment  Company Act, the Trust is not permitted to issue Preferred
Shares  unless  immediately  after such  issuance the value of the Trust's total
assets,  less all liabilities and indebtedness of the Trust, is at least 200% of
the liquidation value of the outstanding Preferred Shares (i.e., the liquidation
value may not exceed 50% of the Trust's  total assets less all  liabilities  and
indebtedness of the Trust). In



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addition,  the Trust is not  permitted  to declare  any cash  dividend  or other
distribution on its common shares unless, at the time of such  declaration,  the
value of the Trust's total assets is at least 200% of the  liquidation  value of
its  outstanding   Preferred   Shares  plus  its  outstanding   liabilities  and
indebtedness.  If Preferred Shares are issued, the Trust intends,  to the extent
possible, to purchase or redeem Preferred Shares from time to time to the extent
necessary  in order to  maintain  coverage of any  Preferred  Shares of at least
200%. In addition,  as a condition to obtaining ratings on the Preferred Shares,
the terms of any Preferred  Shares issued are expected to include asset coverage
maintenance  provisions  which will require a reduction of  indebtedness  or the
redemption of the Preferred Shares in the event of  non-compliance  by the Trust
and may also prohibit dividends and other  distributions on the common shares in
such circumstances. In order to meet redemption requirements, the Trust may have
to  liquidate  portfolio  securities.  Such  liquidations  and  redemptions,  or
reductions in indebtedness,  would cause the Trust to incur related  transaction
costs and could result in capital losses to the Trust. Prohibitions on dividends
and other distributions on the common shares could impair the Trust's ability to
qualify as a regulated  investment  company  under the Internal  Revenue Code of
1986, as amended (the "Code").  If the Trust has Preferred  Shares  outstanding,
two of the Trust's  trustees will be elected by the holders of Preferred  Shares
voting  separately  as a class.  The  remaining  trustees  of the Trust  will be
elected by holders of common  shares and Preferred  Shares voting  together as a
single class. In the event the Trust failed to pay dividends on Preferred Shares
for two years, holders of Preferred Shares would be entitled to elect a majority
of the trustees of the Trust.

The Trust will be subject to certain  restrictions  imposed by guidelines of one
or more rating  agencies that may issue  ratings for Preferred  Shares issued by
the Trust.  These  guidelines are expected to impose asset coverage or portfolio
composition requirements that are more stringent than those imposed on the Trust
by the  Investment  Company Act and may limit the ability of the Trust to borrow
money through the use of reverse repurchase  agreements and dollar rolls and may
limit the ability of the Trust to engage in  Strategic  Transactions.  It is not
anticipated  that these  covenants  or  guidelines  will impede  BlackRock  from
managing  the  Trust's  portfolio  in  accordance  with the  Trust's  investment
objective and policies.

The Trust may also borrow  money in an amount equal to 5% of its total assets as
a temporary  measure for  extraordinary  or emergency  purposes,  including  the
payment  of  dividends  and the  settlement  of  securities  transactions  which
otherwise might require untimely dispositions of Trust securities.

Assuming that the leverage will represent  approximately  33 1/3% of the Trust's
total managed assets and that the Trust does not issue any Preferred Shares, the
interest  paid on the leverage is a blended  annual  average rate of 3.00%,  the
income  generated  by the Trust's  portfolio  (net of estimated  expenses)  must
exceed 1.14% in order to cover the interest payments related to the leverage. Of
course,  these  numbers  are  merely  estimates  used for  illustration.  Actual
interest rates on leverage will vary frequently and may be significantly  higher
or lower than the rate estimated above.

The following  table is furnished in response to  requirements of the Securities
and Exchange Commission.  It is designed to illustrate the effect of leverage on
common  share  total  return,   assuming  investment   portfolio  total  returns
(comprised  of income  and  changes  in the value of bonds  held in the  Trust's
portfolio)  of -10%,  -5%, 0%, 5% and 10%.  These assumed  investment  portfolio
returns are  hypothetical  figures  and are not  necessarily  indicative  of the
investment  portfolio  returns  experienced or expected to be experienced by the
Trust. See "Risks." The table further reflects leverage  representing 33 1/3% of
the Trust's  total  managed  assets,  a 5.15%  yield on the  Trust's  investment
portfolio,  net of expenses, and the Trust's currently projected blended average
annual leverage interest rate of 3.00%.



<TABLE>

<S>                                               <C>           <C>           <C>            <C>         <C>

Assumed Portfolio Total Return
   (Net of Expenses) ............................    (10)%         (5)%            0%           5%          10%
Common Share Total Return ....................... (16.50)%      (9.00)%       (1.50)%        6.00%       13.50%
</TABLE>


- -------------------------------------------------------------------------------
                                                                              17

<PAGE>



BORROWINGS AND PREFERRED SHARES
- -------------------------------------------------------------------------------



Assuming that the leverage will represent approximately 38% of the Trust's total
managed assets and that the Trust issues Preferred Shares equal to approximately
10% of the Trust's total managed assets,  the interest and dividends paid on the
leverage is a blended annual average rate of 3.07%,  the income generated by the
Trust's  portfolio  (net of  estimated  expenses)  must exceed 1.17% in order to
cover the interest and dividend  payments  related to the  leverage.  Of course,
these numbers are merely estimates used for illustration.  Actual interest rates
on leverage will vary frequently and may be  significantly  higher or lower than
the rate estimated above.

The following  table is furnished in response to  requirements of the Securities
and Exchange Commission.  It is designed to illustrate the effect of leverage on
common  share  total  return,   assuming  investment   portfolio  total  returns
(comprised  of income  and  changes  in the value of bonds  held in the  Trust's
portfolio)  of -10%,  -5%, 0%, 5% and 10%.  These assumed  investment  portfolio
returns are  hypothetical  figures  and are not  necessarily  indicative  of the
investment  portfolio  returns  experienced or expected to be experienced by the
Trust. See "Risks." The table further reflects leverage using debt and Preferred
Shares representing,  in the aggregate, 38% of the Trust's total managed assets,
a 5.25% yield on the Trust's  investment  portfolio,  net of  expenses,  and the
Trust's  currently  projected  blended  average  annual  leverage  dividend  and
interest rate of 3.07%.





<TABLE>

<S>                                                  <C>           <C>           <C>            <C>         <C>
Assumed Portfolio Total Return
   (Net of Expenses) ............................    (10)%         (5)%            0%           5%          10%
Common Share Total Return ....................... (18.01)%      (9.95)%       (1.88)%        6.18%       14.25%
</TABLE>


Common  share  total  return  is  composed  of two  elements--the  common  share
dividends  paid by the Trust (the amount of which is largely  determined  by the
net  investment  income of the Trust after paying  dividends and interest on its
leverage) and gains or losses on the value of the  securities the Trust owns. As
required by Securities and Exchange  Commission  rules,  the tables above assume
that the Trust is more likely to suffer  capital  losses  than to enjoy  capital
appreciation.  For example, to assume a total return of 0% the Trust must assume
that the  interest  it  receives on its debt  security  investments  is entirely
offset by losses in the value of those bonds.

RISKS

The net asset value of the common shares will fluctuate with and be affected by,
among other things,  interest rate risk, credit risk, prepayment risk, extension
risk,  leverage risk, currency risk, high yield risk and an investment in common
shares will be subject to market discount risk,  inflation risk and market risk,
each of which is more fully described below.

NEWLY ORGANIZED

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

MARKET DISCOUNT RISK

As with any stock,  the price of the Trust's  shares will  fluctuate with market
conditions and other factors. If shares are sold, the price received may be more
or  less  than  the  original  investment.  Net  asset  value  will  be  reduced
immediately  following  the  initial  offering  by a 4.5% sales load  charge and
organizational  and  selling  expenses  paid by the  Trust.  Common  shares  are
designed for long-term  investors and should not be treated as trading vehicles.
Shares of  closed-end  management  investment  companies  frequently  trade at a
discount  from their net asset  value.  The Trust's  shares may trade at a price
that is less than the  initial  offering  price.  This risk may be  greater  for
investors  who sell  their  shares in a  relatively  short  period of time after
completion of the initial offering.

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18

<PAGE>


RISKS
- -------------------------------------------------------------------------------

INTEREST RATE RISK

Interest rate risk is the risk that debt securities, and the Trust's net assets,
will  decline in value  because of changes in interest  rates.  Generally,  debt
securities will decrease in value when interest rates rise and increase in value
when interest rates  decline.  This means that the net asset value of the common
shares will fluctuate with interest rate changes and the  corresponding  changes
in the value of the Trust's debt  security  holdings.  The value of  longer-term
debt  securities  fluctuates  more in response to changes in interest rates than
does the value of shorter-term debt securities. Because the Trust will initially
invest primarily in intermediate  and long-term debt  securities,  the net asset
value and market  price per share of the common  shares will  fluctuate  more in
response  to  changes  in  market  interest  rates  than if the  Trust  invested
primarily in  shorter-term  debt  securities.  The Trust's use of  leverage,  as
described below, will tend to increase common share interest rate risk.

CREDIT RISK

Credit risk is the risk that an issuer of a bond will become  unable to meet its
obligation  to make  interest and principal  payments.  In general,  lower rated
bonds  carry a greater  degree of risk that the issuer  will lose its ability to
make interest and principal payments,  which could have a negative impact on the
Trust's  net asset  value or  dividends.  The Trust may  invest up to 25% of its
total  managed  assets in bonds that are rated Ba/BB or below by  Moody's,  S&P,
Fitch or another  nationally  recognized  rating  agency or that are unrated but
judged to be of comparable quality by BlackRock.  Bonds rated Ba/BB or below are
regarded as having predominately speculative characteristics with respect to the
issuer's  capacity  to pay  interest  and repay  principal,  and these bonds are
commonly  referred to as "junk bonds".  These lower grade securities are subject
to a greater risk of default.  The value of lower grade bonds is affected by the
creditworthiness  of the issuers of the securities  and by general  economic and
specific  industry  conditions.  Issuers of  high-yield  bonds are not as strong
financially  as those  with  higher  credit  ratings,  so the bonds are  usually
considered  speculative  investments.  These  issuers  are  more  vulnerable  to
financial setbacks and recession than more creditworthy issuers which may impair
their ability to make interest and principal  payments.  Lower grade  securities
tend to be less liquid than investment  grade  securities.  Investments in lower
grade  securities will expose the Trust to greater risks than if the Trust owned
only higher grade  securities.  Some of the additional risks you should consider
in relation to lower grade  securities are market  discount risk,  interest rate
risk and pre-payment risk.

PREPAYMENT RISK

If interest  rates fall,  the  principal  on bonds held by the Trust may be paid
earlier than expected. If this happens, the proceeds from a prepaid security may
be reinvested by the Trust in securities bearing lower interest rates, resulting
in a possible  decline in the Trust's income and  distributions to shareholders.
The Trust may  invest in pools of  mortgages  issued or  guaranteed  by  private
issuers   or   U.S.   government   agencies   and    instrumentalities.    These
mortgage-related  securities are especially sensitive to prepayment risk because
borrowers often refinance their mortgages when interest rates drop.

EXTENSION RISK

The prices of bonds tend to fall as interest  rates rise.  For  mortgage-related
securities,  if interest rates rise,  borrowers may prepay mortgages more slowly
than  originally  expected.  This may  further  reduce the  market  value of the
securities and lengthen their durations.

LEVERAGE RISK

Leverage  risk is the risk  associated  with the  borrowing  of funds  and other
investment  techniques,  including the issuance of the  Preferred  Shares by the
Trust, to leverage the common shares.

- -------------------------------------------------------------------------------
                                                                              19

<PAGE>


RISKS
- -------------------------------------------------------------------------------


Leverage is a speculative  technique  which may expose the Trust to greater risk
and  increase  its costs.  Increases  and  decreases in the value of the Trust's
portfolio will be magnified when the Trust uses leverage. For example,  leverage
may cause  greater  swings in the  Trust's net asset value or cause the Trust to
lose more than it  invested.  The Trust  will also have to pay  interest  on its
borrowings,  reducing the Trust's return.  This interest  expense may be greater
than the Trust's return on the underlying investment. There is no assurance that
the Trust's leveraging strategy will be successful.

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.

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.  If the  broker/dealer to whom the Trust
sells securities becomes insolvent,  the Trust's right to purchase or repurchase
securities  may be  restricted.  Successful  use of dollar rolls may depend upon
BlackRock's  ability to correctly predict interest rates and prepayments.  There
is no assurance that dollar rolls can be successfully employed.

If leverage  is  employed,  the net asset  value and market  value of the common
shares will be more volatile, and the yield to the holders of common shares will
tend to  fluctuate  with  changes  in the  shorter-term  interest  rates  on the
leverage. If the interest rate on the leverage approaches the net rate of return
on the Trust's investment  portfolio,  the benefit of leverage to the holders of
the common shares would be reduced. If the interest rate on the leverage exceeds
the net rate of return on the Trust's  portfolio,  the leverage will result in a
lower rate of return to the holders of common  shares than if the Trust were not
leveraged.  Because the intermediate and long-term bonds included in the Trust's
portfolio will typically pay fixed rates of interest while the interest rates on
the leverage vary from time to time,  this could occur even when both  long-term
and short-term  rates rise. In addition,  the Trust will pay (and the holders of
common  shares  will  bear) any costs and  expenses  relating  to any  leverage.
Accordingly,  the Trust cannot assure you that the use of leverage  would result
in a higher yield or return to the holders of the common shares.

Any  decline in the net asset  value of the  Trust's  investments  will be borne
entirely by the holders of common shares.  Therefore, if the market value of the
Trust's  portfolio  declines,  the leverage will result in a greater decrease in
net asset  value to the  holders  of common  shares  than if the Trust  were not
leveraged.  This  greater  net asset  value  decrease  will also tend to cause a
greater decline in the market price for the common shares. In extreme cases, the
Trust  might be in danger  of  failing  to  maintain  the  required  200%  asset
coverage,  of losing its ratings on any  Preferred  Shares issued or the Trust's
current  investment income might not be sufficient to meet the interest payments
on indebtedness or the dividend  requirements on any Preferred  Shares. In order
to counteract such an event, the Trust might need to reduce its indebtedness and
to liquidate  investments  in order to fund a  redemption  of some or all of the
Preferred Shares.  Liquidation at times of low bond prices may result in capital
losses and may reduce returns to the holders of common shares.

While the Trust may from time to time consider  reducing leverage in response to
actual or  anticipated  changes in interest  rates in an effort to mitigate  the
increased  volatility  of current  income and net asset  value  associated  with
leverage, there can be no assurance that the Trust will actually reduce leverage
in the future or that any reduction, if undertaken,  will benefit the holders of
common  shares.  Changes  in the future  direction  of  interest  rates are very
difficult to predict accurately. If the Trust were to reduce leverage based on a
prediction  about future changes to interest rates,  and that prediction  turned
out to be incorrect,  the  reduction in leverage  would likely reduce the income
and/or total returns to holders of

- -------------------------------------------------------------------------------
20

<PAGE>

RISKS

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

common  shares  relative  to the  circumstance  where the Trust had not  reduced
leverage.  The Trust may  decide  that this risk  outweighs  the  likelihood  of
achieving  the desired  reduction to volatility in income and share price if the
prediction were to turn out to be correct,  and determine not to reduce leverage
as described above.

The Trust may  invest in the  securities  of other  investment  companies.  Such
securities  may also be leveraged and will  therefore be subject to the leverage
risks  described  above.  This  additional   leverage  may,  in  certain  market
conditions,  reduce the net asset  value of the  Trust's  common  shares and the
returns to the holders of common shares.

CURRENCY RISK

Since the Trust may invest in securities  denominated  in currencies  other than
the U.S.  dollar,  the Trust will be  affected  by  changes in foreign  currency
exchange  rates (and  exchange  control  regulations)  which affect the value of
investments in the Trust and the accrued income and unrealized  appreciation  or
depreciation of the  investments.  Changes in foreign  currency  exchange ratios
relative to the U.S.  dollar will  affect the U.S.  dollar  value of the Trust's
assets  denominated  in that currency and the Trust's  yield on such assets.  In
addition,  the Trust will incur costs in  connection  with  conversions  between
various currencies.

COUNTERPARTY RISK

The Trust will be subject to credit risk with respect to the  counterparties  to
the  derivative  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.

INFLATION RISK

Inflation  risk is the risk that the value of assets or income  from  investment
will be worth less in the future as inflation  decreases the value of money.  As
inflation  increases,  the real value of the common shares and  distributions on
those shares may decline.  In addition,  during any periods of rising inflation,
leverage costs would likely increase, which would tend to further reduce returns
to the holders of common shares.

FOREIGN RISKS

Because the Trust may own  securities of foreign  issuers,  it may be subject to
risks not usually associated with owning securities of U.S. issuers. These risks
can  include  fluctuations  in foreign  currencies,  foreign  currency  exchange
controls,   political  and  economic   instability,   differences  in  financial
reporting,  differences  in  securities  regulation  and  trading,  and  foreign
taxation issues.

EMERGING MARKETS RISK

Investing in  securities  of issuers based in  underdeveloped  emerging  markets
entails all of the risks of  investing  in  securities  of foreign  issuers to a
heightened  degree.  These  heightened  risks  include:  (i)  greater  risks  of
expropriation,   confiscatory  taxation,   nationalization,   and  less  social,
political and economic  stability;  (ii) the smaller size of the market for such
securities and a lower volume of trading,  resulting in lack of liquidity and in
price  volatility;  and (iii) certain  national  policies which may restrict the
Trust's investment  opportunities including restrictions on investing in issuers
or industries deemed sensitive to relevant national interests.

RISKS OF USING DERIVATIVE INSTRUMENTS

In general terms,  a derivative  instrument is one whose value depends on (or is
derived from) the value of an underlying asset, interest rate or index. Options,
futures, options on futures, credit default swaps,


- -------------------------------------------------------------------------------
                                                                              21


<PAGE>

RISKS
- -------------------------------------------------------------------------------

interest rate swaps or other interest rate-related  transactions are examples of
derivative  instruments.  Derivative  instruments  involve risks  different from
direct  investments  in underlying  securities.  These risks  include  imperfect
correlation  between the value of the  instruments  and the  underlying  assets;
risks of default  by the other  party to  certain  transactions;  risks that the
transactions  may result in losses that partially or completely  offset gains in
portfolio positions; and risks that the instruments may not be liquid.

RECENT DEVELOPMENTS

As a result of the terrorist  attacks on the World Trade Center and the Pentagon
on September 11, 2001, many of the U.S.  securities  markets were closed for all
or a portion of a four-day  period.  These terrorist  attacks and related events
have led to  increased  short-term  market  volatility  and may  have  long-term
effects on U.S. and world  economies  and markets.  A similar  disruption of the
financial  markets could impact interest  rates,  auctions,  secondary  trading,
ratings, credit risk, inflation and other factors relating to the securities.

HOW THE TRUST MANAGES RISK

INVESTMENT LIMITATIONS

The  Trust  has  adopted  certain  investment   limitations  designed  to  limit
investment  risk.  These  limitations  are  fundamental  and may not be  changed
without the  approval of the  holders of a majority  of the  outstanding  common
shares and, if issued,  Preferred  Shares voting together as a single class, and
the approval of the holders of a majority of the  Preferred  Shares  voting as a
separate class. Among other restrictions, the Trust may not invest more than 25%
of its total managed  assets in  securities  of issuers in any one industry.  In
addition,  with respect to 75% of its total  managed  assets,  the Trust may not
invest more than 5% of the value of its total managed  assets in the  securities
of any  single  issuer  or  purchase  more  than 10% of the  outstanding  voting
securities of any one issuer  (excluding  the U.S.  government,  its agencies or
instrumentalities).

The Trust may become  subject to  guidelines  which are more  limiting  than its
investment  restrictions in order to obtain and maintain ratings from Moody's or
S&P on the Preferred  Shares that it may issue,  including  restrictions  on its
ability to incur leverage  through the use of reverse  repurchase  agreements or
dollar rolls and the Trust's  ability to use Strategic  Transactions.  The Trust
does not anticipate that such guidelines would have a material adverse effect on
the Trust's common shareholders or the Trust's ability to achieve its investment
objective.   See  "Investment  Objective  and  Policies"  in  the  Statement  of
Additional   Information   for  a   complete   list  of  the   fundamental   and
non-fundamental investment policies of the Trust.

QUALITY OF INVESTMENTS

The Trust  will  invest at least  75% of its  total  managed  assets in bonds of
investment  grade quality at the time of  investment.  Investment  grade quality
means  that such bonds are rated by  national  rating  agencies  within the four
highest  grades (Baa or BBB or better by  Moody's,  S&P or Fitch) or are unrated
but judged to be of comparable quality by BlackRock.

MANAGEMENT OF INVESTMENT PORTFOLIO AND CAPITAL STRUCTURE TO LIMIT LEVERAGE RISK

The Trust may take certain  actions if  short-term  interest  rates  increase or
market conditions otherwise change (or the Trust anticipates such an increase or
change) and the Trust's  leverage  begins (or is expected)  to adversely  affect
common  shareholders.  In order to attempt to offset  such a negative  impact of
leverage on common  shareholders,  the Trust may shorten the average maturity of
its investment  portfolio (by investing in short-term  securities) or may reduce
its indebtedness or extend the maturity of outstanding

- -------------------------------------------------------------------------------
22

<PAGE>


HOW THE TRUST MANAGES RISK
- -------------------------------------------------------------------------------


Preferred Shares. The Trust may also attempt to reduce the leverage by redeeming
or  otherwise   purchasing   Preferred   Shares.   As   explained   above  under
"Risks--Leverage  Risk," the success of any such attempt to limit  leverage risk
depends on  BlackRock's  ability to  accurately  predict  interest rate or other
market changes. Because of the difficulty of making such predictions,  the Trust
may never  attempt to manage its capital  structure  in the manner  described in
this paragraph.

If market conditions suggest that additional  leverage would be beneficial,  the
Trust may sell previously unissued Preferred Shares or Preferred Shares that the
Trust previously issued but later repurchased.

HEDGING STRATEGIES

The Trust may use various  investment  strategies  designed to limit the risk of
bond price  fluctuations  and to  preserve  capital.  These  hedging  strategies
include using swaps,  financial futures contracts,  options on financial futures
or options  based on either an index of long-term  securities or on taxable debt
securities whose prices, in the opinion of BlackRock,  correlate with the prices
of the Trust's investments.

MANAGEMENT OF THE TRUST

TRUSTEES AND OFFICERS

The board of trustees is  responsible  for the overall  management of the Trust,
including  supervision  of the duties  performed by  BlackRock.  There are eight
trustees of the Trust. Two of the trustees are "interested  persons" (as defined
in the Investment  Company Act).  The name and business  address 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 of the Trust" in the
Statement of Additional Information.

INVESTMENT ADVISOR AND SUB-ADVISOR

BlackRock  Advisors,  Inc.  acts as the Trust's  investment  advisor.  BlackRock
Financial Management,  Inc. acts as the Trust's sub-advisor.  BlackRock Advisors
and  BlackRock  Financial  Management  both are  wholly  owned  subsidiaries  of
BlackRock,  Inc.,  which  is one  of  the  largest  publicly  traded  investment
management  firms in the  United  States  with  $225  billion  of  assets  under
management as of September 30, 2001.  BlackRock,  Inc. and its affiliates manage
assets on  behalf  of more  than  3,300  institutions  and  200,000  individuals
worldwide,  including nine of the 10 largest companies in the U.S. as determined
by FORTUNE MAGAZINE,  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  BlackRock  Provident
Institutional  Funds.  BlackRock,  Inc.  is  the  nation's  26th  largest  asset
management firm according to PENSIONS & INVESTMENTS, May 14, 2001.

     The  BlackRock  organization  has  over 13  years  of  experience  managing
closed-end  products and currently  advises a closed-end family of 25 funds with
approximately  $6.7 billion in assets as of September  30, 2001. As of September
30, 2001,  BlackRock manages more than $132 billion in fixed-income assets alone
and employs more than 180 global professionals solely dedicated to fixed-income.
Clients are served from the company's  headquarters in New York City, as well as
offices  in  Wilmington,   Delaware,  San  Francisco,   California,  Hong  Kong,
Edinburgh,  Scotland and Tokyo,  Japan.  BlackRock,  Inc. is a member of The PNC
Financial Services Group, Inc. ("PNC"), one of the largest diversified financial
services organizations in the United States, and is majority-owned by PNC and by
BlackRock employees.

INVESTMENT PHILOSOPHY

BlackRock  applies the same  controlled-duration,  active  relative value sector
rotation  style to the  management  of all its  fixed  income  mandates.  Active
relative value sector rotation is a process by which

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                                                                              23


<PAGE>


MANAGEMENT OF THE TRUST

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


BlackRock manages fixed-income portfolios by using a strategy that invests in
sectors of the fixed income market that BlackRock believes are undervalued by
moving out of sectors that BlackRock believes are fairly or overvalued.
BlackRock researches and is active in analyzing the sectors which it believes
are under, fairly and over valued in order to achieve a portfolio's investment
objective. BlackRock has in-depth expertise in all sectors of the fixed income
market. BlackRock specializes in managing fixed income portfolios against both
published and customized benchmarks and has been doing this since the inception
of its fixed income products in 1988.

BlackRock's  style is designed with the objective of generating  excess  returns
with  lower  risk  than its  benchmarks  and  competitors.  The use of  advanced
analytics  provides real-time analysis of a vast array of risk measures designed
to measure the  potential  impact of various  sector and security  strategies on
total return. As a result,  consistent value is added and performance volatility
is controlled.

BlackRock's  disciplined  investment  process  seeks to add value  through:  (i)
controlling  portfolio  duration  within a narrow  band  relative to a benchmark
index, (ii) relative value  sector/sub-sector  rotation and security  selection,
(iii)  rigorous  quantitative  analysis of the valuation of each security and of
the portfolio as a whole,  (iv) intense credit analysis and review,  and (v) the
judgment of experienced portfolio managers.

The technology that enables BlackRock to implement its investment  strategies is
constantly improving. BlackRock's commitment to maintaining its state-of-the-art
analytics in the most cost  efficient way is manifest in (i) the  development of
proprietary tools, (ii) the purchase of tools such as RiskMetrics(TM), and (iii)
the  integration  of all of these  tools  into a  unique  portfolio  level  risk
management system. By continually  updating analytics and systems,  BlackRock is
able to better quantify and evaluate the risk of each investment decision.

BlackRock's  approach to credit risk incorporates a combination of sector-based,
top-down  macro-analysis  of industry sectors to determine  relative  weightings
with a name-specific  (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 name-specific  approach focuses on identifying special
opportunities  where the market undervalues a credit, and devoting  concentrated
resources  to  research  the  credit  and  monitor  the  position.   BlackRock's
analytical process focuses on anticipating change in credit trends before market
recognition.  Credit research is a critical,  independent element of BlackRock's
process.

BLACKROCK'S PORTFOLIO MANAGEMENT TEAM

BlackRock uses a team approach to managing its  portfolios.  BlackRock  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 the following  individuals who have
an average of 17 years of experience:

KEITH ANDERSON,  Managing Director and Chief Investment Officer, Fixed Income of
BlackRock,  Inc. and its  predecessor  entities,  is co-head of the Fixed Income
Operating Committee, and Chairman of the Investment Strategy Group since 1988.

Mr. Anderson is responsible for global fixed income  strategy,  asset allocation
and the overall management of client portfolios. In this capacity he coordinates
a team of thirty-one  portfolio  managers and more than  twenty-five  credit and
quantitative  analysts who specialize in the government,  agency,  corporate and
mortgage sectors and sub-sectors, worldwide.

Mr. Anderson is a member of the Treasury  Borrowing  Advisory  Committee,  which
meets  quarterly in  Washington,  D.C.  with the Secretary and Staff of the U.S.
Treasury to advise them on the financing and management of the Federal debt.

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24


<PAGE>



MANAGEMENT OF THE TRUST
- -------------------------------------------------------------------------------


Prior to founding  BlackRock in 1988, Mr. Anderson was a Vice President in Fixed
Income  Research at The First  Boston  Corporation.  Mr.  Anderson  joined First
Boston in 1987 as a  mortgage  securities  and  derivative  products  strategist
working with institutional money managers. From 1983 to 1987, Mr. Anderson was a
Vice President and portfolio manager at Criterion Investment  Management Company
where he had primary responsibility for a $2.8 billion fixed income portfolio.

Mr.  Anderson  has  authored  numerous  articles  on  fixed  income  strategies,
including  two  articles  in THE  HANDBOOK  OF FIXED  INCOME  OPTIONS:  Scenario
Analysis  and the Use of  Options  in  Total  Return  Portfolio  Management  and
Measuring, Interpreting, and Applying Volatility within the Fixed Income Market.

ROBERT S. KAPITO, Vice Chairman of BlackRock, Inc., and its predecessor entities
since 1988, Mr. Kapito is also Head of the Portfolio  Management Group, and is a
member of the  Investment  Strategy  Group.  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. 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.


MICHAEL P. LUSTIG,  Managing Director and portfolio manager,  is a member of the
Investment  Strategy  Group.  Mr. Lustig is responsible  for managing the firm's
taxable closed-end funds and structured products effort. In this role Mr. Lustig
has held various  titles at BlackRock  from  1994-1996 he was a Vice  President,
1997-1999  Director  and become a Managing  Director  in 2000.  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.  In this role Mr. Lustig held various titles in
1989 he joined BlackRock as an associate and become a vice president in 1993.

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 1986 and was  responsible for developing
models  to  trade   derivative   products   including   caps,   floors,   swaps,
callable/putable bonds, futures and options.

DENNIS  M.  SCHANEY,  Managing  Director,  has been a member  of the  Investment
Strategy  Group  since  joining  BlackRock  in 1998.  Mr.  Schaney  has  primary
responsibility  for  BlackRock's  high yield  business and is co-head of taxable
credit research.

Prior to joining  BlackRock in 1998,  Mr.  Schaney spent nine years with Merrill
Lynch. From 1989 to 1992 he was Head of Corporate Research and beginning in 1992
Mr.  Schaney was made a Managing  Director  in the firm's  Global  Fixed  Income
Research and  Economics  Department.  During the time that Mr.  Schaney  managed
Merrill's  Corporate and Municipal Bond Research  Departments,  the group became
the top-ranked Fixed Income Research Department according to industry polls. Mr.
Schaney's specific sector

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                                                                              25

<PAGE>



MANAGEMENT OF THE TRUST
- -------------------------------------------------------------------------------


specialties  included the media,  entertainment,  and cable sectors for both the
high yield and investment  grade markets for which he was named to Institutional
Investor's  All American  Fixed  Income Team for five of the last six years.  In
addition,   throughout   his   career,   Mr.   Schaney  has  covered  the  auto,
transportation,  technology  and  aerospace  industries.  Mr.  Schaney began his
investment career with Standard and Poor's  (1982-1985),  followed by four years
(1985-1989)  with The First Boston  Corporation;  two years as an analyst in the
firm's Fixed Income and Research Department and two years as a Vice President in
the firm's Investment Banking Department.

BRUCE W. REPASY,  Director since 2001, and has been a portfolio  manager,  and a
member of BlackRock's  Investment Strategy Group since joining in 1999 as a vice
president.   Mr.  Repasy  is  primarily   responsible  for  managing   BlackRock
Specialized Asset Management portfolios.

Before  joining  BlackRock in 1999, Mr. Repasy spent seven years as an Assistant
Vice President and portfolio manager for institutional assets at PNC. He assumed
his  role at PNC in 1994  and was  involved  in the  management  of  fixed  rate
securities including corporate bond, government bond, asset backed, and mortgage
backed  securities.  Previously,  he was a  compliance  Examiner  for the United
States  Securities  and  Exchange  Commission  specializing  in mutual  fund and
investment advisor oversight.  Mr. Repasy began his investment career in 1985 as
an operations assistant at Prudential Insurance Company.

INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an investment  management  agreement between BlackRock  Advisors and
the Trust, the Trust has agreed to pay for the investment  advisory services and
facilities provided by BlackRock Advisors a fee payable monthly in arrears at an
annual rate equal to 0.55% of the average  weekly  value of the Trust's  managed
assets (the "management fee"). The Trust will also reimburse  BlackRock Advisors
for certain  expenses  BlackRock  Advisors  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 BlackRock Advisors
who devote  substantial  time to Trust operations may be reimbursed to BlackRock
Advisors.  Managed assets are the total assets of the Trust,  which includes any
proceeds from the Preferred Shares,  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 BlackRock  Advisors 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,  which include those assets  purchased
with leverage.

Pursuant  to a  Shareholder  Servicing  Agreement  between  UBS Warburg LLC (the
"Shareholder  Servicing Agent") and BlackRock,  the Shareholder  Servicing Agent
will undertake to make public information  pertaining to the Trust on an ongoing
basis and to  communicate  to investors  and  prospective  investors the Trust's
features  and  benefits   (including  periodic  seminars  or  conference  calls,
responses to questions  from current or  prospective  shareholders  and specific
shareholder  contact where  appropriate).  The Shareholder  Servicing Agent also
will make available to investors and  prospective  investors  market price,  net
asset value,  yield and other  information  regarding  the Trust,  if reasonably
obtainable,  for the purpose of  maintaining  the visibility of the Trust in the
investor community. At the request of BlackRock, the Shareholder Servicing Agent
will provide certain economic research and statistical  information and reports,
if   reasonably   obtainable,   on  behalf  of  the  Trust,   and  consult  with
representatives  and  Trustees  of the  Trust  in  connection  therewith,  which
information  and reports shall include:  (a)  statistical  and financial  market
information  with respect to the Trust's market  performance and (b) comparative
information  regarding  the  Trust and other  closed-end  management  investment
companies  with respect to (1) the net asset value of their  respective  shares,
(2) the respective market  performance of the Trust and such other companies and
(3) other  relevant  performance  indicators.  At the request of BlackRock,  the
Shareholder  Servicing  Agent also will provide  information to and consult with
the Board of Trustees with respect to applicable

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26

<PAGE>

MANAGEMENT OF THE TRUST
- -------------------------------------------------------------------------------



modifications  to  dividend  policies  or capital  structure,  repositioning  or
restructuring  of the Trust,  conversion of the Trust to an open-end  investment
company,  liquidation or merger; provided,  however, that under the terms of the
Shareholder  Servicing  Agreement,   the  Shareholder  Servicing  Agent  is  not
obligated to render any opinions,  valuations or  recommendations of any kind or
to perform any such similar services.

For these  services,  BlackRock will pay the  Shareholder  Servicing Agent a fee
equal on an annual  basis to 0.10% of the  average  weekly  value of the Trust's
total managed assets, payable in arrears at the end of each calendar month.

Under  the  terms  of  the  Shareholder  Servicing  Agreement,  the  Shareholder
Servicing  Agent is relieved from liability to BlackRock for any act or omission
in the course of its performances under the Shareholder  Servicing  Agreement in
the  absence  of gross  negligence  or  willful  misconduct  by the  Shareholder
Servicing Agent.

The  Shareholder  Servicing  Agreement  will continue for an initial term of two
years and thereafter for successive one-year periods unless terminated by either
party upon 60 days written notice.

In addition to the  management  fee of  BlackRock  Advisors,  the Trust pays all
other  costs and  expenses  of its  operations,  including  compensation  of its
trustees  (other than those  affiliated  with  BlackRock  Advisors),  custodian,
transfer and dividend disbursing agent expenses,  legal fees, leverage expenses,
rating agency fees listing fees and expenses,  expenses of independent auditors,
expenses  of   repurchasing   shares,   expenses  of  preparing,   printing  and
distributing  shareholder  reports,  notices,  proxy  statements  and reports to
governmental agencies, and taxes, if any.

NET ASSET VALUE

The net asset  value of the common  shares of the Trust will be  computed  based
upon the value of the Trust's portfolio  securities and other assets.  Net asset
value per common share will be determined as of the close of the regular trading
session on the New York Stock Exchange no less  frequently  than on the Thursday
of each week and on the last  business day of each month.  In the event that any
Thursday is not a business day or it is not practicable to calculate the Trust's
net asset value on any business day for which a calculation is required, the net
asset value will be calculated on a date determined by BlackRock  Advisors.  The
Trust  calculates  net asset value per common share by  subtracting  the Trust's
liabilities (including accrued expenses, dividends payable and any borrowings of
the Trust),  the liquidation  value of any outstanding  Preferred Shares and the
amount of  outstanding  debt of the Trust from the Trust's total managed  assets
(the  value of the  securities  the  Trust  holds  plus  cash or  other  assets,
including  interest accrued but not yet received) and dividing the result by the
total number of common shares of the Trust outstanding.

The Trust values its fixed income securities by using market quotations,  prices
provided by market makers or estimates of market values obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures  established by the board of trustees of the Trust. A portion of
the  Trust's  fixed  income  investments  will be valued  utilizing  one or more
pricing  services  approved by the Trust's  board of  trustees.  Bonds  having a
remaining  maturity  of 60 days or less  when  purchased  and  bonds  originally
purchased  with  maturities  in  excess  of 60 days  but  which  currently  have
maturities of 60 days or less may be valued at amortized cost. Any securities or
other assets for which current market  quotations are not readily  available are
valued  at their  fair  value  as  determined  in good  faith  under  procedures
established  by and under the  general  supervision  and  responsibility  of the
Trust's board of trustees.

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                                                                              27

<PAGE>

DISTRIBUTIONS

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

DISTRIBUTIONS

The Trust  intends  to  distribute  to  holders  of its  common  shares  monthly
dividends of all or a portion of its net income after  payment of dividends  and
interest in connection  with leverage used by the Trust. It is expected that the
initial monthly dividend on shares of the Trust's common shares will be declared
within  approximately  45  days  and  paid  approximately  60 to 90  days  after
completion  of this  offering.  The Trust  expects  that all or a portion of any
capital gain will be distributed at least annually.

Various factors will affect the level of the Trust's income, including the asset
mix,  the  average  maturity of the  Trust's  portfolio,  the amount of leverage
utilized by the Trust and the  Trust's  use of  hedging.  To permit the Trust to
maintain a more  stable  monthly  distribution,  the Trust may from time to time
distribute less than the entire amount of income earned in a particular  period.
The undistributed income would be available to supplement future  distributions.
As a result,  the  distributions  paid by the Trust for any  particular  monthly
period  may be more or less than the  amount of  income  actually  earned by the
Trust during that period. Undistributed income will add to the Trust's net asset
value and, correspondingly,  distributions from undistributed income will deduct
from the Trust's  net asset  value.  Shareholders  will  automatically  have all
dividends and  distributions  reinvested in common shares of the Trust issued by
the  Trust or  purchased  in the open  market  in  accordance  with the  Trust's
Dividend  Reinvestment  Plan  unless an election  is made to receive  cash.  See
"Dividend reinvestment plan."

DIVIDEND REINVESTMENT PLAN

Unless  the  registered  owner  of  common  shares  elects  to  receive  cash by
contacting the Plan Agent, all dividends  declared for your common shares of the
Trust will be  automatically  reinvested by EquiServe  Trust Company,  N.A. (the
"Plan Agent"),  agent for  shareholders in  administering  the Trust's  Dividend
Reinvestment  Plan (the "Plan"),  in additional common shares of the Trust. If a
registered  owner of common shares elects not to  participate  in the Plan,  you
will receive all dividends in cash paid by check mailed  directly to you (or, if
the shares are held in street or other  nominee  name,  then to such nominee) by
EquiServe Trust Company,  N.A., as dividend  disbursing agent. You may elect not
to  participate  in the Plan and to  receive  all  dividends  in cash by sending
written instructions or by contacting EquiServe Trust Company, N.A., as dividend
disbursing  agent, at the address set forth below.  Participation in the Plan is
completely  voluntary  and may be  terminated  or  resumed  at any time  without
penalty by contacting the Plan Agent before the dividend record date;  otherwise
such   termination  or  resumption   will  be  effective  with  respect  to  any
subsequently   declared  dividend  or  other  distribution.   Some  brokers  may
automatically  elect to receive cash on your behalf and may re-invest  that cash
in additional  common shares of the Trust for you. If you wish for all dividends
declared  on your  common  shares  of the Trust to be  automatically  reinvested
pursuant to the Plan, please contact your broker.

The Plan Agent will open an account for each common  shareholder  under the Plan
in  the  same  name  in  which  such  common  shareholder's  common  shares  are
registered.  Whenever  the  Trust  declares  a  dividend  or other  distribution
(together,  a  "dividend")  payable in cash,  non-participants  in the Plan will
receive cash and  participants in the Plan will receive the equivalent in common
shares.  The  common  shares  will  be  acquired  by  the  Plan  Agent  for  the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized common shares from the
Trust ("newly issued common  shares") or (ii) by purchase of outstanding  common
shares  on the open  market  ("open-market  purchases")  on the New  York  Stock
Exchange or elsewhere.  If, on the payment date for any dividend,  the net asset
value per  common  share is equal to or less than the  market  price per  common
share,  the Plan Agent will invest the dividend  amount in newly  issued  common
shares on behalf of the  participants.  The number of newly issued common shares
to be credited to each participant's account will

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28

<PAGE>


DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------

be  determined  by dividing  the dollar  amount of the dividend by the net asset
value per common  share on the date the common  shares  are  issued.  If, on the
payment date for any  dividend,  the net asset value per common share is greater
than the market value,  the Plan Agent will invest the dividend amount in common
shares acquired on behalf of the participants in open-market  purchases.  In the
event of a market discount on the payment date for any dividend,  the Plan Agent
will have until the last  business  day before the next date on which the common
shares  trade on an  "ex-dividend"  basis or 30 days after the payment  date for
such  dividend,  whichever is sooner (the "last purchase  date"),  to invest the
dividend  amount in common  shares  acquired  in  open-market  purchases.  It is
contemplated  that the Trust will pay monthly income dividends.  Therefore,  the
period during which  open-market  purchases can be made will exist only from the
payment  date of each  dividend  through the date before the next  "ex-dividend"
date which typically will be  approximately  ten days. If, before the Plan Agent
has  completed  its  open-market  purchases,  the market  price per common share
exceeds the net asset  value per common  share,  the  average  per common  share
purchase  price paid by the Plan  Agent may  exceed  the net asset  value of the
common shares,  resulting in the  acquisition of fewer common shares than if the
dividend had been paid in newly  issued  common  shares on the dividend  payment
date. Because of the foregoing difficulty with respect to open-market purchases,
the Plan  provides  that if the Plan Agent is unable to invest the full dividend
amount in  open-market  purchases  during the  purchase  period or if the market
discount shifts to a market premium during the purchase  period,  the Plan Agent
may cease making open-market  purchases and may invest the uninvested portion of
the  dividend  amount in newly issued  common  shares at the net asset value per
common share at the close of business on the last purchase date.

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

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

There will be no brokerage charges with respect to common shares issued directly
by the Trust.  However,  each participant will pay a pro rata share of brokerage
commissions  incurred in connection with  open-market  purchases.  The automatic
reinvestment of dividends will not relieve participants of any Federal, state or
local  income tax that may be  payable  (or  required  to be  withheld)  on such
dividends. See "Tax matters."

The Trust reserves the right to amend or terminate the Plan.  There is no direct
service  charge to  participants  in the Plan;  however,  the Trust reserves the
right to amend the Plan to include a service charge payable by the participants.

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


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                                                                              29

<PAGE>


DESCRIPTION OF SHARES

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DESCRIPTION OF SHARES

COMMON SHARES

The  Trust is an  unincorporated  business  trust  organized  under  the laws of
Delaware  pursuant to an Agreement and  Declaration of Trust dated as of October
12, 2001. The Trust is authorized to issue an unlimited  number of common shares
of  beneficial  interest,  par value $.001 per share.  Each common share has one
vote  and,  when  issued  and paid  for in  accordance  with  the  terms of this
offering, will be fully paid and non-assessable,  except that the trustees shall
have the power to cause shareholders to pay expenses of the Trust by setting off
charges  due  from   shareholders   from   declared  but  unpaid   dividends  or
distributions  owed the  shareholders  and/or by  reducing  the number of common
shares owned by each respective  shareholder.  The holders of common shares will
not be entitled to receive any  distributions  from the Trust unless all accrued
dividends  and  interest  and  dividend  payments  with  respect to the  Trust's
leverage  have been paid,  unless  certain  asset  coverage  (as  defined in the
Investment Company Act) tests with respect to the leverage employed by the Trust
are satisfied after giving effect to the  distributions and unless certain other
requirements  imposed by any rating agencies rating any Preferred  Shares issued
by the Trust have been met. See  "--Preferred  Shares" below.  All common shares
are equal as to dividends,  assets and voting privileges and have no conversion,
preemptive  or other  subscription  rights.  The  Trust  will  send  annual  and
semi-annual  reports,  including  financial  statements,  to all  holders of its
shares.

The Trust has no present  intention of offering any additional shares other than
possible issuance of Preferred Shares.  Any additional  offerings of shares will
require  approval by the Trust's board of trustees.  Any additional  offering of
common shares will be subject to the requirements of the Investment Company Act,
which  provides  that shares may not be issued at a price below the then current
net asset value,  exclusive of sales load, except in connection with an offering
to  existing  holders of common  shares or with the consent of a majority of the
Trust's outstanding voting securities.

The Trust's  common shares have been approved for listing,  subject to notice of
issuance, on the New York Stock Exchange under the symbol "BHK".

The Trust's net asset value per share  generally  increases  when interest rates
decline, and decreases when interest rates rise, and these changes are likely to
be greater because the Trust intends to have a leveraged capital structure.  Net
asset value will be reduced immediately  following the offering of common shares
by the amount of the sales load and organization  and offering  expenses paid by
the Trust. See "Use of proceeds."

Unlike open-end funds, closed-end funds like the Trust do not continuously offer
shares and do not provide daily redemptions. Rather, if a shareholder determines
to buy additional common shares or sell shares already held, the shareholder may
do so by trading  through a broker on the New York Stock  Exchange or otherwise.
Shares of closed-end  investment  companies  frequently  trade on an exchange at
prices lower than net asset value.  Shares of  closed-end  investment  companies
like the Trust that invest  predominantly in investment grade bonds have, during
some  periods,  traded at prices  higher than net asset value and,  during other
periods,  have traded at prices lower than net asset  value.  Because the market
value of the common shares may be influenced by such factors as dividend  levels
(which are in turn  affected  by  expenses)  call  protection  on its  portfolio
securities,  dividend  stability,  portfolio  credit  quality,  net asset value,
relative demand for and supply of such shares in the market,  general market and
economic conditions and other factors beyond the control of the Trust, the Trust
cannot  assure you that  common  shares will trade at a price equal to or higher
than net asset value in the future. The common shares are designed primarily for
long-term  investors and you should not purchase the common shares if you intend
to sell them soon after purchase.  See "Borrowings and preferred shares" and the
Statement of Additional Information under "Repurchase of Common Shares."


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30


<PAGE>


DESCRIPTION OF SHARES

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PREFERRED SHARES

The  Agreement  and  Declaration  of Trust  provides  that the Trust's  board of
trustees may authorize and issue  Preferred  Shares with rights as determined by
the board of trustees,  by action of the board of trustees  without the approval
of the holders of the common shares. Holders of common shares have no preemptive
right to purchase any Preferred Shares that might be issued.

The Trust may elect to issue Preferred Shares as part of its leverage  strategy.
If Preferred Shares are issued,  the Trust currently  intends to issue Preferred
Shares  representing  approximately  10% of the  Trust's  total  managed  assets
immediately  after the Preferred  Shares are issued.  The board of trustees also
reserves the right to change the foregoing  percentage  limitation and may issue
Preferred  Shares to the extent  permitted by the Investment  Company Act, which
currently  limits  the  aggregate  liquidation  preference  of  all  outstanding
Preferred  Shares  to  50%  of  the  value  of the  Trust's  total  assets  less
liabilities and indebtedness of the Trust. We cannot assure you,  however,  that
any Preferred Shares will be issued. Although the terms of any Preferred Shares,
including dividend rate, liquidation preference and redemption provisions,  will
be  determined  by the board of  trustees,  subject  to  applicable  law and the
Agreement and Declaration of Trust, it is likely that the Preferred  Shares will
be structured to carry a relatively short-term dividend rate reflecting interest
rates on short-term bonds, by providing for the periodic  redetermination of the
dividend rate at relatively short intervals  through an auction,  remarketing or
other procedure.  The Trust also believes that it is likely that the liquidation
preference, voting rights and redemption provisions of the Preferred Shares will
be similar to those stated below.

LIQUIDATION PREFERENCE

In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Trust,  the holders of Preferred  Shares will be entitled to receive a
preferential liquidating  distribution,  which is expected to equal the original
purchase price per Preferred Share plus accrued and unpaid dividends, whether or
not  declared,  before any  distribution  of assets is made to holders of common
shares.  After  payment of the full amount of the  liquidating  distribution  to
which they are entitled, the holders of Preferred Shares will not be entitled to
any further participation in any distribution of assets by the Trust.

VOTING RIGHTS

The  Investment  Company Act requires that the holders of any Preferred  Shares,
voting  separately  as a  single  class,  have the  right to elect at least  two
trustees  at all times.  The  remaining  trustees  will be elected by holders of
common  shares and  Preferred  Shares,  voting  together as a single  class.  In
addition, subject to the prior rights, if any, of the holders of any other class
of senior securities  outstanding,  the holders of any Preferred Shares have the
right to elect a majority  of the  trustees  of the Trust at any time two years'
dividends on any Preferred  Shares are unpaid.  The Investment  Company Act also
requires that, in addition to any approval by shareholders  that might otherwise
be  required,  the  approval  of the  holders of a majority  of any  outstanding
Preferred Shares,  voting separately as a class,  would be required to (1) adopt
any plan of reorganization that would adversely affect the Preferred Shares, and
(2) take any action  requiring a vote of security holders under Section 13(a) of
the  Investment  Company  Act,  including,  among other  things,  changes in the
Trust's  subclassification as a closed-end  investment company or changes in its
fundamental  investment  restrictions.  See "Certain provisions in the Agreement
and  Declaration  of Trust." As a result of these  voting  rights,  the  Trust's
ability to take any such actions may be impeded to the extent that there are any
Preferred  Shares  outstanding.  The board of trustees  presently  intends that,
except as  otherwise  indicated  in this  prospectus  and  except  as  otherwise
required by applicable law,  holders of Preferred  Shares will have equal voting
rights  with  holders of common  shares  (one vote per share,  unless  otherwise
required by the  Investment  Company Act) and will vote together with holders of
common shares as a single class.

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                                                                              31


<PAGE>


DESCRIPTION OF SHARES

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



The affirmative  vote of the holders of a majority of the outstanding  Preferred
Shares,  voting as a separate class, will be required to amend,  alter or repeal
any of the preferences, rights or powers of holders of Preferred Shares so as to
affect  materially  and  adversely  such  preferences,  rights or powers,  or to
increase or decrease the authorized number of Preferred  Shares.  The class vote
of holders of Preferred  Shares described above will in each case be in addition
to any other vote required to authorize the action in question.

REDEMPTION,  PURCHASE AND SALE OF PREFERRED SHARES BY THE TRUST

The terms of the  Preferred  Shares are  expected  to provide  that (1) they are
redeemable by the Trust in whole or in part at the original  purchase  price per
share plus accrued dividends per share, (2) the Trust may tender for or purchase
Preferred  Shares  and (3) the  Trust  may  subsequently  resell  any  shares so
tendered for or purchased. Any redemption or purchase of Preferred Shares by the
Trust will reduce the leverage applicable to the common shares, while any resale
of shares by the Trust will increase that leverage.

The discussion above describes the possible  offering of Preferred Shares by the
Trust. If the board of trustees determines to proceed with such an offering, the
terms of the Preferred  Shares may be the same as, or different  from, the terms
described  above,  subject  to  applicable  law and the  Trust's  Agreement  and
Declaration of Trust. The board of trustees, without the approval of the holders
of common shares, may authorize an offering of Preferred Shares or may determine
not to authorize such an offering, and may fix the terms of the Preferred Shares
to be offered.

CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST

The 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. Such 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 a majority of
the remaining  trustees followed by a vote of the holders of at least 75% of the
shares then entitled to vote for the election of the respective trustee.

In  addition,  the Trust's  Agreement  and  Declaration  of Trust  requires  the
favorable  vote of a majority of the Trust's  board of trustees  followed by the
favorable vote of the holders of at least 75% of the outstanding  shares of each
affected class or series of the Trust,  voting  separately as a class or series,
to approve,  adopt or authorize certain  transactions with 5% or greater holders
of a class or series of shares and their associates,  unless the transaction has
been approved by at least 80% of the trustees,  in which case "a majority of the
outstanding voting securities" (as defined in the Investment Company Act) of the
Trust  shall be  required.  For  purposes of these  provisions,  a 5% or greater
holder of a class or series 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 or series of shares of beneficial interest of the Trust.

The 5% holder 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;

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32


<PAGE>



CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST
- -------------------------------------------------------------------------------


o     the issuance of any  securities of the Trust to any Principal  Shareholder
      for cash;


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 than  $1,000,000,  aggregating for the
      purpose of such  computation  all assets sold,  leased or exchanged in any
      series of similar transactions within a twelve-month period; or

o     the sale,  lease or exchange to the Trust or any  subsidiary of the Trust,
      in exchange for  securities  of the Trust,  of any assets of any Principal
      Shareholder,  except assets having an aggregate  fair market value of less
      than  $1,000,000,  aggregating for purposes of such computation all assets
      sold, leased or exchanged in any series of similar  transactions  within a
      twelve-month period.

To convert the Trust to an open-end  investment  company,  the Trust's Agreement
and  Declaration of Trust requires the favorable vote of a majority of the board
of the trustees followed by the favorable vote of the holders of at least 75% of
the outstanding  shares of each affected class or series of shares of the Trust,
voting separately as a class or series,  unless such amendment has been approved
by at least 80% of the  trustees,  in which case "a majority of the  outstanding
voting securities" (as defined in the Investment Company Act) of the Trust shall
be required.  The  foregoing  vote would satisfy a separate  requirement  in the
Investment  Company  Act  that  any  conversion  of  the  Trust  to an  open-end
investment company be approved by the shareholders. If approved in the foregoing
manner,  conversion  of the Trust to an open-end  investment  company  could not
occur until 90 days after the shareholders' meeting at which such conversion was
approved  and  would  also  require  at  least  30  days'  prior  notice  to all
shareholders.  Conversion of the Trust to an open-end  investment  company would
require  the  redemption  of  any  outstanding  Preferred  Shares,  which  could
eliminate or alter the leveraged  capital structure of the Trust with respect to
the common  shares.  Following  any such  conversion,  it is also  possible that
certain of the  Trust's  investment  policies  and  strategies  would have to be
modified to assure sufficient portfolio  liquidity.  In the event of conversion,
the common  shares  would  cease to be listed on the New York Stock  Exchange or
other  national  securities  exchanges  or market  systems.  Shareholders  of an
open-end  investment  company may require the company to redeem  their shares at
any  time,  except  in  certain  circumstances  as  authorized  by or under  the
Investment  Company Act, at their net asset value, less such redemption  charge,
if any, as might be in effect at the time of a redemption.  The Trust expects to
pay all  such  redemption  requests  in  cash,  but  reserves  the  right to pay
redemption  requests in a  combination  of cash or  securities.  If such partial
payment  in  securities  were  made,  investors  may  incur  brokerage  costs in
converting  such  securities to cash. If the Trust were converted to an open-end
fund, it is likely that new shares would be sold at net asset value plus a sales
load. The board of trustees believes,  however, that the closed-end structure is
desirable in light of the Trust's investment objective and policies.  Therefore,
you should assume that it is not likely that the board of trustees would vote to
convert the Trust to an open-end fund.

To liquidate the Trust, the Trust's Agreement and Declaration of Trust, requires
the  favorable  vote of a  majority  of the board of  trustees  followed  by the
favorable vote of the holders of at least 75% of the outstanding  shares of each
affected class or series of the Trust,  voting  separately as a class or series,
unless such  amendment has been  approved by at least 80% of trustees,  in which
case "a  majority  of the  outstanding  voting  securities"  (as  defined in the
Investment Company Act) of the Trust shall be required.

For  the  purposes  of  calculating  "a  majority  of  the  outstanding   voting
securities" under the Trust's Agreement and Declaration of Trust, each class and
series of the Trust shall vote together as a single class,  except to the extent
required by the Investment  Company Act or the Trust's Agreement and Declaration
of Trust with  respect to any class or series of shares.  If a separate  vote is
required,  the applicable proportion of shares of the class or series, voting as
a separate class or series, also will be required.

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                                                                              33

<PAGE>



CLOSED-END TRUST STRUCTURE
- -------------------------------------------------------------------------------


The board of trustees has determined  that  provisions with respect to the board
of trustees and the  shareholder  voting  requirements  described  above,  which
voting requirements are greater than the minimum requirements under Delaware law
or the  Investment  Company  Act,  are  in the  best  interest  of  shareholders
generally. Reference should be made to the Agreement and Declaration of Trust on
file with the  Securities  and  Exchange  Commission  for the full text of these
provisions.

CLOSED-END TRUST STRUCTURE

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

Shares of  closed-end  funds  frequently  trade at a discount to their net asset
value.  Because of this  possibility and the recognition  that any such discount
may not be in the interest of shareholders,  the Trust's board of trustees might
consider from time to time engaging in  open-market  repurchases,  tender offers
for  shares  or other  programs  intended  to  reduce  the  discount.  We cannot
guarantee or assure,  however, that the Trust's board of trustees will decide to
engage in any of these  actions.  Nor is there any  guarantee or assurance  that
such actions, if undertaken, would result in the shares trading at a price equal
or close to net asset value per share. The board of trustees might also consider
converting the Trust to an open-end mutual fund, which would also require a vote
of the shareholders of the Trust.

REPURCHASE OF SHARES

Shares of closed-end investment companies often trade at a discount to their net
asset  values,  and the  Trust's  common  shares may also trade at a discount to
their net asset value,  although it is possible that they may trade at a premium
above net asset  value.  The market price of the Trust's  common  shares will be
determined  by such  factors as  relative  demand for and supply of such  common
shares in the market,  the Trust's net asset value,  general market and economic
conditions  and other  factors  beyond the control of the Trust.  See "Net asset
value."  Although  the Trust's  common  shareholders  will not have the right to
redeem  their  common  shares,  the Trust may take action to  repurchase  common
shares in the open market or make tender offers for its common shares.  This may
have the effect of reducing any market discount from net asset value.

There is no assurance  that, if action is undertaken to repurchase or tender for
common shares,  such action will result in the common shares' trading at a price
which approximates their net asset value. Although share repurchases and tenders
could have a favorable  effect on the market price of the Trust's common shares,
you  should be aware  that the  acquisition  of common  shares by the Trust will
decrease the total net assets of the Trust and,  therefore,  may have the effect
of increasing the Trust's expense ratio and


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34

<PAGE>


TAX MATTERS

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


decreasing the asset coverage with respect to any Preferred Shares  outstanding.
Any  share  repurchases  or  tender  offers  will  be made  in  accordance  with
requirements of the Securities  Exchange Act of 1934, the Investment Company Act
and the principal stock exchange on which the common shares are traded.

TAX MATTERS

FEDERAL INCOME TAX MATTERS

The following is a description of certain U.S.  federal income tax  consequences
to a  shareholder  of  acquiring,  holding and disposing of common shares of the
Trust.  The discussion  reflects  applicable tax laws of the United States as of
the date of this  prospectus,  which tax laws may be  changed  or subject to new
interpretations  by the  courts or the  Internal  Revenue  Service  (the  "IRS")
retroactively  or  prospectively.  No  attempt  is made to  present  a  detailed
explanation of all U.S. federal, state, local and foreign tax concerns affecting
the Trust and its  shareholders,  and the  discussion  set forth herein does not
constitute tax advice.  Investors are urged to consult their own tax advisers to
determine the tax consequences to them of investing in the Trust.

The Trust intends to elect and to qualify for special tax treatment  afforded to
a regulated  investment company under subchapter M of the Code. As long as it so
qualifies,  in any taxable year in which it  distributes at least 90% of its net
investment income (which includes,  among other items, dividends,  interest, the
excess of any net short-term capital gains over net long-term capital losses and
other taxable  income other than net capital gain (which  consists of the excess
of its net long-term capital gain over its net short-term  capital loss) reduced
by deductible expenses) determined without regard to the deduction for dividends
paid  and its net  tax-exempt  interest  (the  excess  of its  gross  tax-exempt
interest   over  certain   disallowed   deductions)   the  Trust  (but  not  its
shareholders)  will not be subject to U.S. federal income tax to the extent that
it distributes  its net investment  income and net realized  capital gains.  The
Trust intends to distribute substantially all of such income.

Dividends  paid by the Trust from its  ordinary  income or from an excess of net
short-term capital gains over net long-term capital losses (together referred to
hereafter  as  "ordinary  income  dividends")  are  taxable to  shareholders  as
ordinary income to the extent of the Trust's earning and profits.  Distributions
made from an excess of net long-term  capital gains over net short-term  capital
losses ("capital gain dividends"),  including capital gain dividends credited to
a  shareholder  but  retained  by the  Trust,  are  taxable to  shareholders  as
long-term  capital gains,  regardless of the length of time the  shareholder has
owned Trust shares.  Distributions in excess of the Trust's earnings and profits
will first reduce the adjusted  tax basis of a holder's  shares and,  after such
adjusted tax basis is reduced to zero,  will  constitute  capital  gains to such
holder (assuming the shares are held as a capital asset).  Generally,  not later
than 60 days after the close of its  taxable  year,  the Trust will  provide its
shareholders with a written notice designating the amount of any ordinary income
dividends or capital gain dividends and other distributions.

The sale or other disposition of common shares of the Trust will normally result
in capital gain or loss to  shareholders.  Any loss upon the sale or exchange of
Trust  shares held for six months or less will be treated as  long-term  capital
loss to the extent of any capital gain  dividends  received  (including  amounts
credited as an undistributed  capital gain dividend) by the shareholder.  A loss
realized  on a sale or  exchange  of shares of the Trust will be  disallowed  if
other Trust shares are acquired  (whether through the automatic  reinvestment of
dividends  or  otherwise)  within a 61-day  period  beginning 30 days before and
ending 30

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

(1)   THE ECONOMIC GROWTH AND TAX RELIEF  RECONCILIATION ACT OF 2001,  EFFECTIVE
      FOR TAXABLE  YEARS  BEGINNING  AFTER  DECEMBER 31, 2000,  CREATES A NEW 10
      PERCENT  INCOME  TAX  BRACKET  AND  REDUCES  THE TAX RATES  APPLICABLE  TO
      ORDINARY INCOME OVER A SIX YEAR PHASE-IN PERIOD.  BEGINNING IN THE TAXABLE
      YEAR 2006,  ORDINARY  INCOME WILL BE SUBJECT TO A 35% MAXIMUM  RATE,  WITH
      APPROXIMATELY PROPORTIONATE REDUCTIONS IN THE OTHER ORDINARY RATES.

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                                                                              35

<PAGE>


TAX MATTERS

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

days after the date that the shares are disposed of. In such case,  the basis of
the shares acquired will be adjusted to reflect the disallowed loss. Present law
taxes both long-term and short-term  capital gains of  corporations at the rates
applicable to ordinary income. For non-corporate taxpayers,  however, short-term
capital gains and ordinary  income will  currently be taxed at a maximum rate of
38.6% while long-term capital gains generally will be taxed at a maximum rate of
20%.(1)

Dividends  and other  taxable  distributions  are taxable to  shareholders  even
though they are reinvested in additional shares of the Trust. Due to the Trust's
expected  investments,  in general,  distributions  will not be  eligible  for a
dividends  received  deduction  allowed to  corporations  under the Code. If the
Trust pays a dividend in January  which was  declared in the  previous  October,
November  or December to  shareholders  of record on a specified  date in one of
such months,  then such  dividend will be treated for tax purposes as being paid
by the Trust and  received  by its  shareholders  on  December 31 of the year in
which the dividend was declared.

The Trust is required  in certain  circumstances  to backup  withhold on taxable
dividends  and  certain  other  payments  paid to  non-corporate  holders of the
Trust's  shares  who do not  furnish  the  Trust  with  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
U.S.  federal  income  tax  liability,   if  any,  provided  that  the  required
information is furnished to the IRS.

THE FOREGOING IS A GENERAL AND ABBREVIATED SUMMARY OF THE PROVISIONS OF THE CODE
AND THE TREASURY  REGULATIONS 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.  A
MORE COMPLETE  DISCUSSION OF THE TAX RULES  APPLICABLE TO THE TRUST CAN BE FOUND
IN THE STATEMENT OF ADDITIONAL  INFORMATION  WHICH IS  INCORPORATED BY REFERENCE
INTO THIS  PROSPECTUS.  SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS
REGARDING  SPECIFIC  QUESTIONS AS TO FEDERAL,  FOREIGN,  STATE,  LOCAL INCOME OR
OTHER TAXES.


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36

<PAGE>




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

UNDERWRITING

THE UNDERWRITERS  NAMED BELOW (THE  "UNDERWRITERS"),  ACTING THROUGH UBS WARBURG
LLC, 299 PARK AVENUE,  NEW YORK,  NEW YORK, AS LEAD  MANAGER,  AND DEUTSCHE BANC
ALEX. BROWN INC.,  PRUDENTIAL SECURITIES  INCORPORATED,  FIRST UNION SECURITIES,
INC., GRUNTAL & CO., L.L.C., J.J.B. HILLIARD,  W.L. LYONS, INC., AND WELLS FARGO
VAN KASPER, LLC AS THEIR REPRESENTATIVES (THE "REPRESENTATIVES"), HAVE SEVERALLY
AGREED,  SUBJECT TO THE TERMS AND CONDITIONS OF THE UNDERWRITING  AGREEMENT WITH
THE TRUST AND BLACKROCK,  TO PURCHASE FROM THE TRUST THE NUMBER OF COMMON SHARES
SET FORTH OPPOSITE THEIR  RESPECTIVE  NAMES.  THE  UNDERWRITERS ARE COMMITTED TO
PURCHASE AND PAY FOR ALL OF SUCH COMMON  SHARES (OTHER THAN THOSE COVERED BY THE
OVER-ALLOTMENT OPTION DESCRIBED BELOW) IF ANY ARE PURCHASED.


                                                              NUMBER OF
NAME                                                       COMMON SHARES
- -------------------------------------------------------------------------------

UBS Warburg LLC................................................
Deutsche Banc Alex. Brown Inc..................................
Prudential Securities Incorporated.............................
First Union Securities, Inc....................................
Gruntal &Co., L.L.C............................................
J.J.B. Hilliard, W.L. Lyons, Inc...............................
Wells Fargo Van Kasper, LLC....................................
  Total........................................................

The Trust has granted to the  Underwriters  an option,  exercisable  for 45 days
from the date of this Prospectus,  to purchase up to an additional
common shares to cover  over-allotments,  if any, at the initial offering price.
The  Underwriters  may exercise  such option  solely for the purpose of covering
over-allotments incurred in the sale of the common shares offered hereby. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment, subject to certain conditions, to purchase an additional
number of common shares proportionate to such Underwriter's  initial commitment.
The Trust has agreed to pay a commission to the Underwriters in the amount of up
to $     per common share (4.5% of the public offering  price per common share).
The Representatives have advised the Trust  that  the Underwriters may pay up to
$       per common share from such commission  to selected dealers who  sell the
common   shares and  that  such  dealers  may  reallow a  concession   of up  to
$       per common  share to  certain  other dealers who  sell  shares.Investors
must pay for any common shares purchased on or before November, 2001.

Prior to this  offering,  there  has been no public or  private  market  for the
common shares or any other securities of the Trust.  Consequently,  the offering
price for the  common  shares was  determined  by  negotiation  among the Trust,
BlackRock and the Representatives.  There can be no assurance, however, that the
price at which common shares sell after this offering will not be lower than the
price at  which  they are sold by the  Underwriters  or that an  active  trading
market in the common shares will develop and continue after this  offering.  The
minimum investment requirement is 100 common shares.

The Trust and BlackRock have agreed to indemnify the several  Underwriters,  for
or to contribute to the losses  arising out of, certain  liabilities,  including
liabilities under the Securities Act of 1933, as amended.

The  expenses of the  offering  are  estimated at         and are payable by the
Trust. BlackRock Advisors has agreed to pay organizational expenses and offering
costs (other than sales load) that exceed $0.03 per share.

The Trust has agreed not to offer,  sell or  register  with the  Securities  and
Exchange  Commission any equity securities of the Trust, other than issuances of
common shares, including pursuant to the Trust's Dividend Reinvestment Plan, and
issuances in connection with any offering of Preferred Shares, each as

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                                                                              37

<PAGE>


UNDERWRITING

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

contemplated in this Prospectus,  for a period of 180 days after the date of the
Underwriting Agreement without the prior written consent of the Representatives.

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

In connection with this offering,  the Underwriters may purchase and sell common
shares in the open market.  These  transactions may include  over-allotment  and
stabilizing  transactions  and  purchases  to cover  syndicate  short  positions
created in connection with this offering.  Stabilizing  transactions  consist of
certain bids or purchases  for the purpose of  preventing or retarding a decline
in the market price of the common shares and syndicate short  positions  involve
the sale by the  Underwriters of a greater number of common shares than they are
required to purchase from the Trust in this offering.  The Underwriters also may
impose a penalty bid, whereby selling  concessions  allowed to syndicate members
or other  broker-dealers  in respect of the common  shares sold in this offering
for their  account,  may be reclaimed by the syndicate if such common shares are
repurchased  by the syndicate in  stabilizing  or covering  transactions.  These
activities may stabilize,  maintain or otherwise  affect the market price of the
common shares,  which may be higher than the price that might otherwise  prevail
in the open market; and these activities,  if commenced,  may be discontinued at
any time  without  notice.  These  transactions  may be effected on the New York
Stock Exchange or otherwise.

First Union Securities, Inc., a subsidiary of Wachovia Corporation, conducts its
investment  banking,  institutional,  and capital markets  businesses  under the
trade name of Wachovia  Securities.  Any references to "Wachovia  Securities" in
this prospectus,  however, do not include Wachovia Securities,  Inc., a separate
broker-dealer  subsidiary of Wachovia  Corporation and sister affiliate of First
Union  Securities,  Inc.,  which may or may not be  participating  as a separate
selling dealer in the distribution of the common shares.

The Trust anticipates that the  Representatives  and certain other  Underwriters
may  from  time to time  act as  brokers  and  dealers  in  connection  with the
execution  of  its  portfolio   transactions   after  they  have  ceased  to  be
Underwriters and, subject to certain restrictions, may act as such brokers while
they are Underwriters.

J.J.B.  Hilliard,  W.L. Lyons, Inc. one of the Underwriters,  is an affiliate of
BlackRock Advisors and BlackRock Financial Management.




CUSTODIAN AND TRANSFER AGENT

The Custodian of the assets of the Trust is State Street Bank and Trust Company,
225  Franklin  Street,  Boston,  Massachusetts  02110.  The  Custodian  performs
custodial,  fund accounting and portfolio accounting  services.  EquiServe Trust
Company, N.A., 150 Royall Street, Canton, Massachusetts 02021, will serve as the
Trust's Transfer Agent with respect to the common shares.

LEGAL OPINIONS

Certain legal  matters in connection  with the common shares will be passed upon
for the Trust by Skadden,  Arps,  Slate,  Meagher & Flom LLP, New York, New York
and for the  Underwriters by Clifford Chance Rogers & Wells,  LLP, New York, New
York.  Clifford  Chance  Rogers & Wells,  LLP may rely as to certain  matters of
Delaware law on the opinion of Skadden, Arps, Slate, Meagher & Flom LLP.

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38

<PAGE>



- --------------------------------------------------------------------------------
TABLE OF CONTENTS FOR THE

STATEMENT OF ADDITIONAL INFORMATION

Use of Proceeds ...................................................   B-2

Investment Objectives and Policies ................................   B-2

Investment Policies and Techniques ................................   B-4

Other Investment Policies and Techniques ..........................   B-16

Management of the Trust ...........................................   B-21

Portfolio Transactions and Brokerage ..............................   B-27

Description of Shares .............................................   B-28

Repurchase of Common Shares .......................................   B-29

Tax Matters .......................................................   B-30

Performance Related and Comparative Information ...................   B-34

Experts ...........................................................   B-36

Additional Information ............................................   B-36

Report of Independent Auditors ....................................   F-1

Financial Statements ..............................................   F-2

APPENDIX A  Ratings of Investments ................................   A-1

APPENDIX B  General Characteristics and Risks of Hedging Strategies   B-1




PRIVACY PRINCIPLES OF THE TRUST

The Trust is committed to  maintaining  the privacy of its  shareholders  and to
safeguarding their non-public personal information. The following information is
provided to help you understand  what personal  information  the Trust collects,
how the Trust protects that information and why, in certain cases, the Trust may
share information with select other parties.

Generally,  the Trust  does not  receive  any  non-public  personal  information
relating to its shareholders,  although certain non-public personal  information
of its  shareholders  may  become  available  to the  Trust.  The Trust does not
disclose any non-public  personal  information  about its shareholders or former
shareholders  to anyone,  except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).

The  Trust  restricts  access  to  non-public  personal  information  about  its
shareholders to employees of the Trust's  investment  advisor and its affiliates
with a  legitimate  business  need  for the  information.  The  Trust  maintains
physical,   electronic  and  procedural   safeguards  designed  to  protect  the
non-public personal information of its shareholders.

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                                                                              39

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                       [LOGO OF BLACKROCK](SM) BLACKROCK

<PAGE>


                 SUBJECT TO COMPLETION, DATED NOVEMBER 27, 2001



                            BLACKROCK CORE BOND TRUST

                       STATEMENT OF ADDITIONAL INFORMATION

     BlackRock Core Bond Trust (the "Trust") is a newly organized, diversified,
closed-end management investment company. This Statement of Additional
Information relating to common shares does not constitute a prospectus, but
should be read in conjunction with the prospectus relating thereto dated
November , 2001. 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
(888) 825-2257. You may also obtain a copy of the prospectus on the Securities
and Exchange Commission's web site (http://www.sec.gov). Capitalized terms used
but not defined in this Statement of Additional Information have the meanings
ascribed to them in the prospectus.

                                TABLE OF CONTENTS

                                                                           PAGE
                                                                           ----
Use of Proceeds ........................................................    B-2
Investment Objectives and Policies .....................................    B-2
Investment Policies and Techniques .....................................    B-4
Other Investment Policies and Techniques ...............................    B-16
Management of the Trust ................................................    B-21
Portfolio Transactions and Brokerage ...................................    B-27
Description of Shares ..................................................    B-28
Repurchase of Common Shares ............................................    B-29
Tax Matters ............................................................    B-30
Performance Related and Comparative Information ........................    B-34
Experts ................................................................    B-36
Additional Information .................................................    B-36
Report of Independent Auditors .........................................    F-1
Financial Statements ...................................................    F-2
APPENDIX A  Ratings of Investments .....................................    A-1
APPENDIX B  General Characteristics and Risks of Hedging Strategies ....    B-1




       This Statement of Additional Information is dated November , 2001.


<PAGE>



                                 USE OF PROCEEDS

     Pending investment in bonds that meet the Trust's investment  objective and
policies, the net proceeds of the offering will be invested in, short-term money
market  securities  with  relatively  low  volatility  (such as U.S.  government
securities  and  intermediate-term  bonds),  to the extent such  securities  are
available. If necessary,  the Trust may also purchase, as temporary investments,
securities  of other  open-  or  closed-end  investment  companies  that  invest
primarily in bonds of the type in which the Trust may invest directly.

                       INVESTMENT OBJECTIVES AND POLICIES

INVESTMENT RESTRICTIONS

     Except as described  below,  the Trust, as a fundamental  policy,  may not,
without the  approval of the  holders of a majority  of the  outstanding  common
shares and any Preferred  Shares voting  together as a single class,  and of the
holders of a majority of any outstanding  Preferred  Shares voting as a separate
class:

          (1) invest 25% or more of the value of its total managed assets in
any one industry.


          (2) With respect to 75% of its total managed assets,  invest more than
5% of the value of its total  managed  assets in the  securities  of any  single
issuer or purchase more than 10% of the outstanding voting securities of any one
issuer.

          (3) issue senior securities or borrow money other than as permitted by
the  Investment  Company  Act or pledge  its assets  other  than to secure  such
issuances or in connection with hedging transactions,  short sales,  when-issued
and forward commitment transactions and similar investment strategies;

          (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  objective 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 other than bonds
secured by 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 (the "CFTC") as a commodity pool.

         When used with respect to particular shares of the Trust,  "majority of
the  outstanding"  means (i) 67% or more of the shares present at a meeting,  if
the holders of more than 50% of the shares are present or  represented by proxy,
or (ii) more than 50% of the shares, whichever is less.

     For purposes of applying the limitation set forth in  subparagraph  (1) and
(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.  However, obligations backed only by
the assets and  revenues of  non-governmental  issuers  may for this  purpose be
deemed to be issued by such non-governmental issuers.

     Under the  Investment  Company  Act,  the Trust may invest up to 10% of its
total managed  assets in the aggregate in shares of other  investment  companies
and up to 5% of its total managed 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

                                       B-2

<PAGE>


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 herein and in the prospectus. As described
in the prospectus in the section entitled "Risks," the net asset value and
market value of leveraged shares will be more volatile and the yield to
shareholders will tend to fluctuate more than the yield generated by unleveraged
shares.

     In addition to the foregoing fundamental  investment policies, the Trust is
also subject to the following  non-fundamental  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 after giving effect to
     such sale,  the market value of all  securities  sold short does not exceed
     25% of the  value of the  Trust's  total  managed  assets  and the  Trust's
     aggregate  short sales of a particular  class of securities 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; or

         (3) purchase securities of companies for the purpose of exercising
     control.

     As a non-fundamental policy, under normal market conditions, the Trust will
invest at least 80% of its assets in bonds. Bonds held by the Trust may take the
form of bonds, notes, bills, debentures, convertible securities, warrants
attached to bonds, bank debt obligations, loan participations and assignments,
trust preferred securities and securities issued by entities organized and
operated for the purpose of restructuring the investment characteristics of
securities. The Trust has adopted a policy to provide shareholders of the Trust
at least 60 days prior notice of any change in this investment policy.

     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 the
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 tax year, (a) no more than
25% of the value of the Trust's total managed assets are invested in the
securities (other than United States government securities or securities of
other regulated investment companies) of a single issuer or two or more issuers
controlled by the Trust and engaged in the same, similar or related trades or
businesses and (b) with regard to at least 50% of the Trust's total managed
assets, no more than 5% of its total managed assets are invested in the
securities (other than United States government securities or securities of
other regulated investment companies) 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.

     The Trust intends to apply for ratings for any Preferred Shares issued by
the Trust from Moody's and/or S&P. In order to obtain and maintain the required
ratings, the Trust will be required to comply with investment quality,
diversification and other guidelines established by Moody's or S&P. Such
guidelines will likely be more restrictive than the restrictions set forth
above. The Trust does not anticipate that such guidelines would have a material
adverse effect on the Trust's holders of common shares or its ability to achieve
its investment objective. The Trust presently anticipates that any Preferred
Shares that it issues would be initially given the highest ratings by Moody's
(Aaa) or by S&P (AAA), but no assurance can be given that such ratings will be
obtained. No minimum rating is required for the issuance of Preferred Shares by
the Trust. Moody's and S&P receive fees in connection with their ratings
issuances.

                                       B-3

<PAGE>




                       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.

PORTFOLIO INVESTMENTS

     The Trust will invest  primarily in a portfolio of investment  grade dollar
denominated bonds.

     Bonds rated Baa or BBB or above are considered "investment grade"
securities; bonds rated Baa are considered medium grade obligations which lack
outstanding investment characteristics and have speculative characteristics,
while bonds rated BBB are regarded as having adequate capacity to pay principal
and interest. Bonds rated below investment grade quality are obligations of
issuers that are considered predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal according to the terms of
the obligation and, therefore, carry greater investment risk, including the
possibility of issuer default and bankruptcy and increased market price
volatility. Bonds rated below investment grade tend to be less marketable than
higher-quality bonds because the market for them is less broad. The market for
unrated bonds is even narrower. During periods of thin trading in these markets,
the spread between bid and asked prices is likely to increase significantly and
the Trust may have greater difficulty selling its portfolio securities. The
Trust will be more dependent on BlackRock's research and analysis when investing
in these securities.

     The Trust may invest in high yield securities rated, at the time of
investment, Ba/BB or below by Moody's, S&P, Fitch or another nationally
recognized rating agency, or that are unrated but judged to be of comparable
quality. The lowest rated bonds in which the Trust may invest are securities
rated in the category "C" or determined by BlackRock 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.

     A general description of Moody's, S&P's and Fitch's ratings of bonds is set
forth in Appendix A hereto. The ratings of Moody's, S&P and Fitch represent
their opinions as to the quality of the bonds they rate. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality. Consequently, bonds with the same maturity, coupon and rating may have
different yields while obligations of the same maturity and coupon with
different ratings may have the same yield.

MORTGAGE RELATED AND ASSET-BACKED SECURITIES

     The Trust may make significant investments in residential and commercial
mortgage-related securities issued by governmental entities and private issuers.
The Trust currently intends to invest a smaller portion of its assets in
asset-backed 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 non-mortgage
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.

                                       B-4


<PAGE>


     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, mortgage-related and
asset-backed security's total return and maturity may be difficult to predict
precisely. To the extent that the Trust purchases mortgage-related and
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.

     The Trust may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged and master serviced by PNC Mortgage
Securities Corp. ("PNC Mortgage") or Midland Loan Services, Inc. ("Midland") (or
Sears Mortgage if PNC Mortgage succeeded to rights and duties of Sears Mortgage)
or mortgage-related securities containing loans or mortgages originated by PNC
Bank or its affiliates. It is possible that under some circumstances, PNC
Mortgage, Midland or their affiliates could have interests that are in conflict
with the holders of these mortgage-backed securities, and such holders could
have rights against PNC Mortgage, Midland or their affiliates.

     MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of mortgage-related
securities differ from other forms of bonds, which normally provide for periodic
payment of interest in fixed amounts with principal payments at maturity or
specified call dates. Instead, these securities provide a monthly payment which
consists of both interest and principal payments. In effect, these payments are
a "pass-through" of the monthly payments made by the individual borrowers on
their residential or commercial mortgage loans, net of any fees paid to the
issuer or guarantor of such securities. Additional payments are caused by
repayments of principal resulting from the sale of the underlying property,
refinancing or foreclosure, net of fees or costs which may be incurred. Some
mortgage-related securities (such as securities issued by the "Government
National Mortgage Association," or "GNMA") are described as "modified
pass-through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.

     The rate of prepayments on underlying mortgages will affect the price and
volatility of a mortgage-related security, and may have the effect of shortening
or extending the effective maturity of the security beyond what was anticipated
at the time of purchase. To the extent that unanticipated rates of prepayment on
underlying mortgages increase the effective maturity of a mortgage-related
security, the volatility of such security can be expected to increase.

     The  principal  governmental  guarantor of  mortgage-related  securities is
GNMA.  GNMA is a wholly owned United States  Government  corporation  within the
Department  of Housing and Urban  Development.  GNMA is authorized to guarantee,
with the full  faith and  credit of the  United  States  Government,  the timely
payment of principal and interest on securities issued by institutions  approved
by GNMA (such as savings and loan  institutions,  commercial  banks and mortgage
bankers)  and  backed  by pools of  mortgages  insured  by the  Federal  Housing
Administration  (the "FHA"), or guaranteed by the Department of Veterans Affairs
(the "VA").

     Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA but are not backed by the
full faith and credit of the United States Government. FHLMC was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. It is a government-sponsored corporation
formerly owned by the twelve Federal Home Loan Banks and now owned entirely by
private stockholders. FHLMC issues Participation Certificates ("PCs") which
represent interests in conventional

                                       B-5

<PAGE>


mortgages from FHLMC's national portfolio. FHLMC guarantees the timely payment
of interest and ultimate collection of principal, but PCs are not backed by the
full faith and credit of the United States Government.

     Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may,
in addition, be the originators and/or servicers of the underlying mortgage
loans as well as the guarantors of the mortgage-related securities. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments in the former
pools. However, timely payment of interest and principal of these pools may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit, which may be
issued by governmental entities, private insurers or the mortgage poolers. The
insurance and guarantees are issued by governmental entities, private insurers
and the mortgage poolers. Such insurance and guarantees and the creditworthiness
of the issuers thereof will be considered in determining whether a
mortgage-related security meets the Trust's investment quality standards. There
can be no assurance that the private insurers or guarantors can meet their
obligations under the insurance policies or guarantee arrangements. The Trust
may buy mortgage-related securities without insurance or guarantees if, through
an examination of the loan experience and practices of the originator/servicers
and poolers, the Advisor determines that the securities meet the Trust's quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable.

     Mortgage-backed securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the Trust's
industry concentration restrictions, set forth above under "Investment
Objectives and Policies," by virtue of the exclusion from that test available to
all U.S. Government securities. In the case of privately issued mortgage-related
securities, the Trust takes the position that mortgage-related securities do not
represent interests in any particular "industry" or group of industries. The
assets underlying such securities may be represented by a portfolio of first
lien residential mortgages (including both whole mortgage loans and mortgage
participation interests) or portfolios of mortgage pass-through securities
issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a
mortgage-related security may in turn be insured or guaranteed by the FHA or the
VA. In the case of privately issued mortgage-related securities whose underlying
assets are neither U.S. Government securities nor U.S. Government-insured
mortgages, to the extent that real properties securing such assets may be
located in the same geographical region, the security may be subject to a
greater risk of default than other comparable securities in the event of adverse
economic, political or business developments that may affect such region and,
ultimately, the ability of residential homeowners to make payments of principal
and interest on the underlying mortgages.

     CMOs and  REMICs.  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  REMICs,  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

                                      B-6

<PAGE>



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 prices 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 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."

     COMMERCIAL MORTGAGE-BACKED SECURITIES. Commercial mortgage-backed
securities include securities that reflect an interest in, and are secured by,
mortgage loans on commercial real property. The market for commercial
mortgage-backed securities developed more recently and in terms of total
outstanding principal amount of issues is relatively small compared to the
market for residential single-family mortgage-backed securities. Many of the
risks of investing in commercial mortgage-backed securities reflect the risks of
investing in the real estate securing the underlying mortgage loans. These risks
reflect the effects of local and other economic conditions on real estate
markets, the ability of tenants to make loan payments, and the ability of a
property to attract and retain tenants. Commercial mortgage-backed securities
may be less liquid and exhibit greater price volatility than other types of
mortgage- or asset-backed securities.

                                       B-7

<PAGE>


     OTHER  MORTGAGE-RELATED   SECURITIES.   Other  mortgage-related  securities
include  securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property,  including  mortgage  dollar rolls,  CMO residuals or stripped
mortgage-backed  securities ("SMBS").  Other mortgage-related  securities may be
equity or bonds issued by agencies or  instrumentalities  of the U.S. Government
or by private originators of, or investors in, mortgage loans, including savings
and  loan  associations,   homebuilders,   mortgage  banks,   commercial  banks,
investment  banks,  partnerships,  trusts and  special  purpose  entities of the
foregoing.

     CMO RESIDUALS. CMO residuals are mortgage securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.

     The cash flow generated by the mortgage assets underlying a series of CMOs
is applied first to make required payments of principal and interest on the CMOs
and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO residual represents income and/or a
return of capital. The amount of residual cash flow resulting from a CMO will
depend on, among other things, the characteristics of the mortgage assets, the
coupon rate of each class of CMO, prevailing interest rates, the amount of
administrative expenses and the prepayment experience on the mortgage assets. In
particular, the yield to maturity on CMO residuals is extremely sensitive to
prepayments on the related underlying mortgage assets, in the same manner as an
interest-only ("IO") class of stripped mortgage-backed securities. See
"Mortgage-Related Securities--Stripped Mortgage-Backed Securities." In addition,
if a series of a CMO includes a class that bears interest at an adjustable rate,
the yield to maturity on the related CMO residual will also be extremely
sensitive to changes in the level of the index upon which interest rate
adjustments are based. As described below with respect to stripped
mortgage-backed securities, in certain circumstances the Trust may fail to
recoup fully its initial investment in a CMO residual.

     CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has only very recently developed and CMO residuals currently may
not have the liquidity of other more established securities trading in other
markets.

     STRIPPED MORTGAGE-BACKED SECURITIES. SMBS are derivative multi-class
mortgage securities. SMBS may be issued by agencies or instrumentalities of the
U.S. Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose entities of the foregoing.

     SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the interest
and most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the "IO" class), while
the other class will receive all of the principal (the principal- only or "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on the Trust's yield to maturity from these securities. If the underlying
mortgage assets experience greater than anticipated prepayments of principal,
the Trust may fail to recoup some or all of its initial investment in these
securities even if the security has received the highest rating from one or more
nationally recognized statistical ratings organizations.

     ASSET-BACKED SECURITIES. 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


                                      B-8

<PAGE>


backed by a pool of assets representing the obligations of a number of different
parties.


     Non-mortgage 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.

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 notes 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.

     The Trust may  purchase  (i) debt  securities  issued by the U.S.  Treasury
which are direct obligations of the U.S. Government,  including bills, notes and
bonds,  and (ii) obligations  issued or guaranteed by U.S.  Government-sponsored
instrumentalities  and federal agencies,  including FNMA, Federal Home Loan Bank
and the Federal Housing Administration.

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

                                       B-9

<PAGE>


subject to greater risks than securities which have higher credit ratings,
including a higher 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.

     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, BlackRock 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 BlackRock's own credit analysis than
in the case of mutual funds investing in higher-rated securities. For a
description of these ratings, see Appendix A.

     In selecting non-investment grade securities, BlackRock 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. BlackRock 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 make distributions. If a security's rating
is reduced below the minimum credit rating that is permitted for the Trust,
BlackRock will consider whether the Trust should continue to hold the security.

     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 and transaction costs.

     The lowest rated bonds in which the Trust may invest are  securities  rated
in the category "C" or  determined  by  BlackRock 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.

SHORT-TERM FIXED-INCOME SECURITIES

     For temporary  defensive  purposes or to keep cash on hand fully  invested,
the Trust may invest up to 100% of its total managed assets in cash  equivalents
and short-term fixed-income securities.  Short-term fixed income investments are
defined to include, without limitation, the following:

          (1) U.S. government securities, including bills, notes and bonds
     differing as to maturity and rates of interest that are either issued or
     guaranteed by the U.S. Treasury or by U.S. government agencies or
     instrumentalities. U.S. government securities include securities issued by
     (a) the Federal Housing Administration, Farmers Home Administration,
     Export-Import Bank of the United States, Small Business Administration, and
     the Government National Mortgage Association, whose securities are
     supported by the full faith and credit of the United States; (b) the
     Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
     Tennessee Valley Authority, whose securities are supported by the right of
     the agency to borrow from the U.S. Treasury; (c) the Federal National
     Mortgage Association, whose securities are supported by the discretionary
     authority of the U.S. government to purchase certain obligations of the
     agency or instrumentality; and (d) the Student Loan Marketing Association,
     whose securities are supported only by its credit. While the U.S.
     government provides financial support to such U.S. government-sponsored
     agencies or instrumentalities, no assurance can be given that it always
     will do so since it is not so obligated by law. The U.S. government, its
     agencies and instrumentalities do not guarantee the market value of their
     securities. Consequently, the value of such securities may fluctuate.

                                      B-10

<PAGE>


          (2) Certificates of deposit issued against funds deposited in a bank
     or a savings and loan association. Such certificates are for a definite
     period of time, earn a specified rate of return, and are normally
     negotiable. The issuer of a certificate of deposit agrees to pay the amount
     deposited plus interest to the bearer of the certificate on the date
     specified thereon. Certificates of deposit purchased by the Trust may not
     be fully insured by the Federal Deposit Insurance Corporation.

          (3) Repurchase agreements, which involve purchases of debt securities.
     At the time the Trust purchases securities pursuant to a repurchase
     agreement, it simultaneously agrees to resell and redeliver such securities
     to the seller, who also simultaneously agrees to buy back the securities at
     a fixed price and time. This assures a predetermined yield for the Trust
     during its holding period, since the resale price is always greater than
     the purchase price and reflects an agreed-upon market rate. Such actions
     afford an opportunity for the Trust to invest temporarily available cash.
     The Trust may enter into repurchase agreements only with respect to
     obligations of the U.S. government, its agencies or instrumentalities;
     certificates of deposit; or bankers' acceptances in which the Trust may
     invest or other securities. Repurchase agreements may be considered loans
     to the seller, collateralized by the underlying securities. The risk to the
     Trust is limited to the ability of the seller to pay the agreed-upon sum on
     the repurchase date; in the event of default, the repurchase agreement
     provides that the Trust is entitled to sell or take possession of the
     underlying collateral. If the value of the collateral declines after the
     agreement is entered into, and if the seller defaults under a repurchase
     agreement when the value of the underlying collateral is less than the
     repurchase price, the Trust could incur a loss of both principal and
     interest. BlackRock monitors the value of the collateral at the time the
     action is entered into and at all times during the term of the repurchase
     agreement. BlackRock does so in an effort to determine that the value of
     the collateral always equals or exceeds the agreed-upon repurchase price to
     be paid to the Trust. If the seller were to be subject to a Federal
     bankruptcy proceeding, the ability of the Trust to liquidate the collateral
     could be delayed or impaired because of certain provisions of the
     bankruptcy laws.

          (4) Commercial paper, which consists of short-term unsecured
     promissory notes, including variable rate master demand notes issued by
     corporations to finance their current operations. Master demand notes are
     direct lending arrangements between the Trust and a corporation. There is
     no secondary market for such notes. However, they are redeemable by the
     Trust at any time. BlackRock will consider the financial condition of the
     corporation (e.g., earning power, cash flow and other liquidity ratios) and
     will continuously monitor the corporation's ability to meet all of its
     financial obligations, because the Trust's liquidity might be impaired if
     the corporation were unable to pay principal and interest on demand.
     Investments in commercial paper will be limited to commercial paper rated
     in the highest categories by a major rating agency and which mature within
     one year of the date of purchase or carry a variable or floating rate of
     interest.

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 addition to providing for
periodic adjustments in the interest rate. The Trust may invest up to 5% of
their total managed assets in leveraged inverse floating rate debt instruments
("inverse floaters"). 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. Issuers
of unrated variable and floating rate instruments must satisfy the same criteria
as set forth above for the Trust. The absence of an active secondary market with
respect to particular variable and 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,
BlackRock will consider the earning power, cash flows and liquidity ratios of
the issuers and guarantors of such instruments and, if the instruments

                                      B-11

<PAGE>


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 portfolio 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 involved can recover payment
of principal as specified in the instrument, depending on the type of instrument
involved.

DURATION MANAGEMENT AND OTHER MANAGEMENT TECHNIQUES

     The Trust may use a variety of other investment management techniques and
instruments. The Trust may purchase and sell futures contracts, enter into
various interest rate transactions and may purchase and sell exchange-listed and
over-the-counter put and call options on securities, financial indices and
futures contracts (collectively, "Additional Investment Management Techniques").
These Additional Investment Management Techniques may be used for duration
management and other risk management techniques in an attempt to protect against
possible changes in the market value of the Trust's portfolio resulting from
trends in the bonds markets and changes in interest rates, to protect the
Trust's unrealized gains in the value of its portfolio securities, to facilitate
the sale of such securities for investment purposes, to establish a position in
the securities markets as a temporary substitute for purchasing particular
securities and to enhance income or gain. There is no particular strategy that
requires use of one technique rather than another as the decision to use any
particular strategy or instrument is a function of market conditions and the
composition of the portfolio. The Additional Investment Management Techniques
are described below. The ability of the Trust to use them successfully will
depend on BlackRock's ability to predict pertinent market movements as well as
sufficient correlation among the instruments, which cannot be assured. Inasmuch
as any obligations of the Trust that arise from the use of Additional Investment
Management Techniques will be covered by segregated liquid assets or offsetting
transactions, the Trust and BlackRock believe such obligations do not constitute
senior securities and, accordingly, will not treat them as being subject to its
borrowing restrictions. Commodity options and futures contracts regulated by the
CFTC have specific margin requirements described below and are not treated as
senior securities. The use of certain Additional Investment Management
Techniques may give rise to taxable income and have certain other tax
consequences. See "Tax matters."

     INTEREST RATE TRANSACTIONS. The Trust may enter into interest rate swaps
and the purchase or sale of interest rate caps and floors. The Trust expects to
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio as a duration management
technique or to protect against any increase in the price of securities the
Trust anticipates purchasing at a later date. The Trust will ordinarily use
these transactions as a hedge or for duration or risk management although it is
permitted to enter into them to enhance income or gain. Interest rate swaps
involve the exchange by the Trust with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of principal.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor.

     The Trust may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, and into interest rate swaps on a net
basis, i.e., the two payment streams are netted out, with the Trust receiving or
paying, as the case may be, only the net amount of the two payments on the
payment dates. The Trust will accrue the net amount of the excess, if any, of
the Trust's obligations over its entitlements with respect to each interest rate
swap on a daily basis and will segregate with a custodian an amount of cash or
liquid securities having an aggregate net asset value at all times at least
equal to the accrued excess. If there is a

                                      B-12

<PAGE>


default by the other party to such a transaction, the Trust will have
contractual remedies pursuant to the agreements related to the transaction.

     The Trust will not enter into any interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying ability of the
other party thereto is rated in the highest rating category of at least one
nationally recognized statistical rating organization at the time of entering
into such transaction or the parties have entered into a collateral arrangement
that in the opinion of BlackRock adequately limits the Trust's potential credit
exposure on interest rate swap, cap or floor transactions to the other party.

     FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Trust may also
enter into contracts for the purchase or sale for future delivery ("futures
contracts") of debt securities, aggregates of debt securities or indices or
prices thereof, other financial indices and U.S. government debt securities or
options on the above. The Trust will ordinarily engage in such transactions only
for BONA FIDE hedging, risk management (including duration management) and other
portfolio management purposes. However, the Trust is also permitted to enter
into such transactions for non-hedging purposes to enhance income or gain, in
accordance with the rules and regulations of the CFTC, which currently provide
that no such transaction may be entered into if at such time more than 5% of the
Trust's net assets would be posted as initial margin and premiums with respect
to such non-hedging transactions.

     CALLS ON SECURITIES, INDICES AND FUTURES CONTRACTS. The Trust may sell or
purchase call options ("calls") on bonds and indices based upon the prices of
futures contracts and debt securities that are traded on U.S. and foreign
securities exchanges and in the over-the-counter markets. A call gives the
purchaser of the option the right to buy, and simultaneously obligates the
seller to sell, the underlying security, futures contract or index at the
exercise price at any time or at a specified time during the option period. All
such calls sold by the Trust must be "covered" as long as the call is
outstanding (i.e., the Trust must own the securities or futures contract subject
to the call or other securities acceptable for applicable escrow requirements).
A call sold by the Trust exposes the Trust during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security, index or futures contract and may require the Trust to hold
a security, or futures contract, which it might otherwise have sold. The
purchase of a call gives the Trust the right to buy a security, futures contract
or index at a fixed price. Calls on futures on bonds must also be covered by
deliverable securities or the futures contract or by liquid high grade debt
securities segregated to satisfy the Trust's obligations pursuant to such
instruments.

     PUTS ON SECURITIES, INDICES AND FUTURES CONTRACTS. The Trust may purchase
put options ("puts") that relate to bonds (whether or not it holds such
securities in its portfolio), indices or futures contracts. The Trust may also
sell puts on bonds, indices or futures contracts on such securities if the
Trust's contingent obligations on such puts are secured by segregated assets
consisting of cash or liquid high grade debt securities having a value not less
than the exercise price. The Trust will not sell puts if, as a result, more than
50% of the Trust's assets would be required to cover its potential obligations
under its hedging and other investment transactions. In selling puts, there is a
risk that the Trust may be required to buy the underlying security at a price
higher than the current market price.

     Appendix B contains further information about the characteristics, risks
and possible benefits of Additional Investment Management Techniques and the
Trust's other policies and limitations (which are not fundamental policies)
relating to investment in futures contracts and options. The principal risks
relating to the use of futures contracts and other Additional Investment
Management Techniques are: (a) less than perfect correlation between the prices
of the instrument and the market value of the securities in the Trust's
portfolio; (b) possible lack of a liquid secondary market for closing out a
position in such instruments; (c) losses resulting from interest rate or other
market movements not anticipated by BlackRock; and (d) the obligation to meet
additional variation margin or other payment requirements, all of which could
result in the Trust being in a worse position than if such techniques had not
been used.

     To maintain greater flexibility, the Trust may invest in instruments which
have the characteristics of futures

                                      B-13

<PAGE>



contracts. These instruments may take a variety of forms, such as bonds with
interest or principal payments determined by reference to the value of a
commodity at a future point in time. The risks of such investments could reflect
the risks of investing in futures and securities, including volatility and
illiquidity.

Certain provisions of the Code may restrict or affect the ability of the Trust
to engage in Additional Investment Management Techniques. See "Tax matters."


FORWARD CURRENCY CONTRACTS

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

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

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

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

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

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

                                      B-14

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

SHORT SALES

     The Trust may make short sales of bonds. 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 to hedge
positions, for duration and risk management, in order to maintain portfolio
flexibility or to enhance income or gain.

     When the Trust makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. The Trust may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.

     The Trust's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other liquid securities. The Trust will also be required to
segregate similar collateral with its custodian to the extent, if any, necessary
so that the aggregate collateral value is at all times at least equal to the
current market value of the security sold short. Depending on arrangements made
with the broker-dealer from which it borrowed the security regarding payment
over of any payments received by the Trust on such security, the Trust may not
receive any payments (including interest) on its collateral deposited with such
broker-dealer.

     If the price of the security sold short increases between the time of the
short sale and the time the Trust replaces the borrowed security, the Trust will
incur a loss; conversely, if the price declines, the Trust will realize a gain.
Any gain will be decreased, and any loss increased, by the transaction costs
described above. Although the Trust's gain is limited to the price at which it
sold the security short, its potential loss is theoretically unlimited.

     The Trust will not make a short sale if, after giving effect to such sale,
the market value of all securities sold short exceeds 25% of the value of its
total managed assets or the Trust's aggregate short sales of a particular class
of securities exceeds 25% of the outstanding securities of that class. The Trust
may also make short sales Oagainst the boxO 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.

BORROWING

     The Trust reserves the right to borrow funds to the extent permitted as
described under the caption "Investment Objective and Policies--Investment
Restrictions." The proceeds of borrowings may be used for any valid purpose
including, without limitation, liquidity, investments and repurchases of shares
of the Trust. Borrowing is a form of leverage and, in that respect, entails
risks comparable to those associated with the issuance of Preferred Shares.

REVERSE REPURCHASE AGREEMENTS

     The Trust may enter into reverse repurchase agreements with respect to its
portfolio investments subject to the investment restrictions set forth herein.
Reverse repurchase agreements involve the sale of securities held by the Trust
with an agreement by the Trust to repurchase the securities at an agreed upon
price, date and interest payment. At the time the Trust enters into a reverse
repurchase agreement, it may segregate liquid instruments having a value not
less than the repurchase price (including accrued interest). The use by the
Trust of reverse repurchase agreements involves many of the same risks of
leverage since the proceeds derived from such reverse

                                      B-15

<PAGE>


repurchase agreements may be invested in additional securities. Reverse
repurchase agreements involve the risk that the market value of the securities
acquired in connection with the reverse repurchase agreement may decline below
the price of the securities the Trust has sold but is obligated to repurchase.
Also, reverse repurchase agreements involve the risk that the market value of
the securities retained in lieu of sale by the Trust in connection with the
reverse repurchase agreement may decline in price.

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

DOLLAR ROLL TRANSACTIONS

     To take advantage of attractive opportunities in the bond 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, the issuance of Preferred Shares and other borrowings,
will not exceed, in the aggregate, 38% of the value of its total managed 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 investment manager's ability to correctly predict interest
rates and prepayments. There is no assurance that dollar rolls can be
successfully employed.

                    OTHER INVESTMENT POLICIES AND TECHNIQUES


RESTRICTED AND ILLIQUID SECURITIES

     Certain of the Trust's investments may be illiquid. Illiquid securities may
be 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.

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES

     The Trust may purchase bonds on a "when-issued" basis and may purchase or
sell bonds on a "forward commitment" basis. When such transactions are
negotiated, the price, which is generally expressed in yield


                                      B-16

<PAGE>




terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. When-issued and forward commitment
securities may be sold prior to the settlement date, but the Trust will enter
into when-issued and forward commitment securities only with the intention of
actually receiving or delivering the securities, as the case may be. If the
Trust disposes of the right to acquire a when-issued security prior to its
acquisition or disposes of its right to deliver or receive against a forward
commitment, it can incur a gain or loss. At the time the Trust entered into a
transaction on a when-issued or forward commitment basis, it may segregate with
its custodian cash or other liquid securities with a value not less than the
value of the when-issued or forward commitment securities. The value of these
assets will be monitored daily to ensure that their marked to market value will
at all times equal or exceed the corresponding obligations of the Trust. There
is always a risk that the securities may not be delivered and that the Trust may
incur a loss. Settlements in the ordinary course are not treated by the Trust as
when-issued or forward commitment transactions and accordingly are not subject
to the foregoing restrictions.

PAY-IN-KIND BONDS

     The Trust may invest in Pay-in-kind, or "PIK," bonds. PIK bonds are bonds
which pay interest through the issuance of additional debt or equity securities.
Similar to zero coupon obligations, PIK bonds also carry additional risk as
holders of these types of securities realize no cash until the cash payment date
unless a portion of such securities is sold and, if the issuer defaults, the
Trust may obtain no return at all on its investment. The market price of PIK
bonds is affected by interest rate changes to a greater extent, and therefore
tends to be more volatile, than that of securities which pay interest in cash.
Additionally, current federal tax law requires the holder of certain PIK 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 portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.

BRADY BONDS

     The Trust's emerging market debt securities may include emerging market
governmental debt obligations commonly referred to as Brady Bonds. Brady Bonds
are debt securities, generally denominated in U.S. dollars, issued under the
framework of the Brady Plan, an initiative announced by U.S. Treasury Secretary
Nicholas F. Brady in 1989 as a mechanism for debtor nations (primarily emerging
market countries) to restructure their outstanding external indebtedness
(generally, commercial bank debt). Brady Bonds are created through the exchange
of existing commercial bank loans to foreign entities for new obligations in
connection with debt restructuring. A significant amount of the Brady Bonds that
the Trust may purchase have no or limited collateralization, and the Trust will
be relying for payment of interest and (except in the case of principal
collateralized Brady Bonds) principal primarily on the willingness and ability
of the foreign government to make payment in accordance with the terms of the
Brady Bonds. A substantial portion of the Brady Bonds and other sovereign debt
securities in which the Trust may invest are likely to be acquired at a
discount.

THE EURO

     On January 1, 1999, 11 European countries implemented a new currency unit,
the Euro, which is expected to replace the existing national currencies of these
countries by December 31, 2001, and to reshape financial markets, banking
systems and monetary policies in Europe and other parts of the world. The
countries that initially converted or tied their currencies to the Euro are
Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Ireland,
Finland, Italy, Portugal and Spain. Implementation of this plan means that
financial transactions and market information, including share quotations and
company accounts, in participating countries will be denominated in Euros.
Participating governments will issue their bonds in Euros, and monetary policy
for participating countries will be uniformly managed by a new central bank, the
European Central Bank.

     Although it is not possible to predict the impact of the Euro
implementation plan on the Trust, the


                                      B-17

<PAGE>


transition to the Euro may change the economic environments and behavior of
investors, particularly in European markets. For example, investors may begin to
view those countries using the Euro as a single entity, and BlackRock may need
to adapt its investment strategy accordingly. The process of implementing the
Euro also may adversely affect financial markets world-wide and may result in
changes in the relative strength and value of the U.S. dollar or other major
currencies, as well as possible adverse tax consequences. The transition to the
Euro is likely to have a significant impact on fiscal and monetary policy in the
participating countries and may produce unpredictable effects on trade and
commerce generally. These resulting uncertainties could create increased
volatility in financial markets world-wide.

COLLATERALIZED BOND OBLIGATIONS

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

MEZZANINE INVESTMENTS

     The Trust may invest in certain high yield securities known as mezzanine
investments, which are subordinated debt securities which are generally issued
in private placements in connection with an equity security (e.g., with attached
warrants). Such mezzanine investments may be issued with or without registration
rights. Similar to other high yield securities, maturities of mezzanine
investments are typically seven to ten years, but the expected average life is
significantly shorter at three to five years. Mezzanine investments are usually
unsecured and subordinate to other obligations of the issuer.

LOAN PARTICIPATIONS AND ASSIGNMENTS

     The Trust may invest in fixed and floating rate loans ("Loans") arranged
through private negotiations between a corporation or foreign government and one
or more financial institutions ("Lenders"). The Trust's investments in Loans are
expected in most instances to be in the form of participations in Loans
("Participations") and assignments of all or a portion of Loans ("Assignments")
from third parties. Participations typically will result in the Trust having a
contractual relationship only with the Lender not the borrower. The Trust will
have the right to receive payments of principal, interest and any fees to which
it is entitled only from the Lender selling the Participation and the Trust and
only upon receipt by the Lender of the payments by the borrower. In connection
with purchasing Participations, the Trust generally has no direct right to
enforce compliance by the borrower with the terms of the loan agreement relating
to the Loan ("Loan Agreement"), nor any rights of set-off against the borrower,
and the Trust may not directly benefit from any collateral supporting the Loan
in which is has purchased the Participation. As a result the Trust will assume
the credit risk of both the borrower and the Lender that is selling the
Participation. In the event of the insolvency of the Lender selling a
Participation, the Trust may be treated as a general creditor of the Lender and
may not benefit from any set-off between the Lender and the borrower. The Trust
will acquire Participations only if the Lender interpositioned between the Trust
and the borrower is determined by BlackRock to be creditworthy. When the Trust
purchases Assignments from Lenders, the Trust will acquire direct rights against
the borrower on the Loan. However, since Assignments are arranged through
private negotiations between potential assignees and assignors, the rights and
obligations acquired by the Trust as the purchaser of an Assignment may differ
from, and be more limited than, those held by the assigning Lender.

     The Trust may have difficulty disposing of Assignments and Participations.
Because there is no liquid market for such securities, the Trust anticipates
that such securities could be sold only to a limited number of institutional
investors. The lack of a liquid secondary market will have an adverse impact on
the value of such

                                      B-18

<PAGE>


securities and on the Trust's ability to dispose of particular Assignments or
Participations when necessary to meet the Trust's liquidity needs or in response
to a specific economic event, such as a deterioration in the creditworthiness of
the borrower. The lack of a liquid secondary market for Assignments and
Participations also may make it more difficult for the Trust to assign a value
to those securities for purposes of valuing the Trust's portfolio and
calculating its net asset value.

STRUCTURED INVESTMENTS

     The Trust may invest a portion of its assets in interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of securities. This type of restructuring involves the deposit
with or purchase by an entity, such as a corporation or a trust, of specified
instruments and the issuance by that entity of one or more classes of securities
("Structures Investments") backed by, or representing interests in the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Investments to create securities
with different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Investments is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Investments of the type
in which the Trust anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments,

     The Trust is permitted to invest in a class of Structured Investments that
is either subordinated or not subordinated to the right of payment of another
class. Subordinated Structured Investments typically have higher yields and
present greater risks than unsubordinated Structured Investments,

     Certain issuers of Structured Investments may be deemed to be "investment
companies" as defined in the Investment Company Act. As a result, the Trust's
investment in these Structured Investments may be limited by the restrictions
contained in the Investment Company Act. Structured Investments are typically
sold in private placement transaction, and there currently is no active trading
market for Structured Investments.

CONVERTIBLE SECURITIES

     The Trust may invest in convertible securities. A convertible security is a
bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock or other equity
security of the same or a different issuer within a particular period of time at
a specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Before conversion, convertible securities have characteristics similar to
nonconvertible fixed-income securities in that they ordinarily provide a stable
stream of income with generally higher yields than those of common stocks of the
same or similar issuers, but lower yields than comparable nonconvertible
securities. The value of a convertible security is influenced by changes in
interest rates, with investment value declining as interest rates increase and
increasing as interest rates decline. The credit standing of the issuer and
other factors also may have an effect on the convertible security's investment
value. Convertible securities rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities may be subject to redemption at the option of
the issuer at a price established in the convertible security's governing
instrument. The Trust will treat investments in convertible debt securities as
debt securities for purposes of its investment policies.

WARRANTS

     The Trust may acquire warrants for equity securities and debt securities
that are acquired as units with debt securities. Warrants are securities
permitting, but not obligating, their holder to subscribe fo other securities.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, warrants
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities and a warrant ceases to have

                                      B-19

<PAGE>


value if it is not exercised prior to its expiration date. The Trust does not
intend to retain in it portfolio any common stock received upon the exercise of
a warrant and will sell the common stock as promptly as practicable and in the
manner that it believes will reduce its risk of a loss in connection with the
sale.

PROJECT LOANS

The Trust may invest in project loans, which are fixed income securities of
issuers whose revenues are primarily derived from mortgage loans to
multi-family, nursing home and other real estate development projects. The
principal payments on these mortgage loans will be insured by agencies and
authorities of the U.S. Government.

REPURCHASE AGREEMENTS

      As temporary investments, the Trust may invest in repurchase agreements. A
repurchase agreement is a contractual agreement whereby the seller of securities
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed-upon repurchase price determines the
yield during the Trust's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Trust will only enter into repurchase agreements with
registered securities dealers or domestic banks that, in the opinion of
BlackRock, present minimal credit risk. The risk to the Trust is limited to the
ability of the issuer to pay the agreed-upon repurchase price on the delivery
date; however, although the value of the underlying collateral at the time the
transaction is entered into always equals or exceeds the agreed-upon repurchase
price, if the value of the collateral declines there is a risk of loss of both
principal and interest. In the event of default, the collateral may be sold but
the Trust might incur a loss if the value of the collateral declines, and might
incur disposition costs or experience delays in connection with liquidating the
collateral. In addition, if bankruptcy proceedings are commenced with respect to
the seller of the security, realization upon the collateral by the Trust may be
delayed or limited. BlackRock will monitor the value of the collateral at the
time the transaction is entered into and at all times subsequent during the term
of the repurchase agreement in an effort to determine that such value always
equals or exceeds the agreed-upon repurchase price. In the event the value of
the collateral declines below the repurchase price, BlackRock will demand
additional collateral from the issuer to increase the value of the collateral to
at least that of the repurchase price, including interest.

STRIPPED, ZERO COUPONS AND DEFERRED PAYMENT 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 (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 the 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 changes 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 more volatile and there is
a greater risk that the initial investment will not be fully recouped.

                                      B-20

<PAGE>



     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 to potentially 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 "Tax matters."

     The Trust may invest in Deferred Payment Securities. Deferred Payment
Securities are securities that remain Zero-Coupon Securities until a
predetermined date, at which time the stated coupon rate becomes effective and
interest becomes payable at regular intervals. Deferred Payment Securities are
subject to greater fluctuations in value and may have lesser liquidity in the
event of adverse market conditions than comparably rated securities paying cash
interest at regular interest payment periods.

LENDING OF SECURITIES

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

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

                             MANAGEMENT OF THE TRUST

INVESTMENT MANAGEMENT AGREEMENT

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

     The investment management agreement also provides that in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, BlackRock Advisors is not liable to the

                                      B-21

<PAGE>


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

     The investment management agreement was approved by the Trust's board of
trustees on October 15, 2001, including a majority of the trustees who are not
parties to the agreement or interested persons of any such party (as such term
is defined in the Investment Company Act). This agreement provides for the Trust
to pay a management fee at an annual rate equal to 0.55% of the average weekly
value of the Trust's Managed Assets.

     The investment management agreement was approved by the sole common
shareholder of the Trust as of November 19, 2001. The investment management
agreement will continue in effect for a period of two years from its effective
date, and if not sooner terminated, will continue in effect for successive
periods of 12 months thereafter, provided that each continuance is specifically
approved at least annually by both (1) the vote of a majority of the Trust's
board of trustees or the vote of a majority of the outstanding voting securities
of the Trust (as such term is defined in the Investment Company Act) and (2) by
the vote of a majority of the trustees who are not parties to the investment
management agreement or interested persons (as such term is defined in the
Investment Company Act) of any such party, cast in person at a meeting called
for the purpose of voting on such approval. The investment management agreement
may be terminated as a whole at any time by the Trust, without the payment of
any penalty, upon the vote of a majority of the Trust's board of trustees or a
majority of the outstanding voting securities of the Trust or by BlackRock
Advisors, on 60 days' written notice by either party to the other. The
investment management agreement will terminate automatically in the event of its
assignment (as such term is defined in the Investment Company Act and the rules
thereunder).

SUB-INVESTMENT ADVISORY AGREEMENT

     BlackRock Financial Management, the Sub-Advisor, is a wholly owned
subsidiary of BlackRock, Inc. Pursuant to the sub-investment advisory agreement,
BlackRock Advisors has appointed BlackRock Financial Management, one of its
affiliates, to perform certain of the day-to-day investment management of the
Trust. BlackRock Financial Management will receive a portion of the management
fee paid by the Trust to BlackRock Advisors. From the management fees, BlackRock
Advisors will pay BlackRock Financial Management, for serving as Sub-Advisor, a
fee equal to 38% of the monthly management fees received by BlackRock Advisors.

     The sub-investment advisory agreement also provides that, in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Trust will indemnify BlackRock Financial Management,
its directors, officers, employees, agents, associates and control persons for
liabilities incurred by them in connection with their services to the Trust,
subject to certain limitations.

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

     The sub-investment advisory agreement was approved by the Trust's board of
trustees on October 15, 2001, including a majority of the trustees who are not
parties to the agreement or interested persons of any such party (as such term
is defined in the Investment Company Act). The sub-investment advisory agreement
was approved by the sole common shareholder of the Trust as of November 19,
2001. The sub-investment advisory agreement will continue in effect for a period
of two years from its effective date, and if not sooner terminated, will
continue in effect for successive periods of 12 months thereafter, provided that
each continuance is specifically approved at least annually by both (1) the vote
of a majority of the Trust's board of trustees or the vote of a majority of the
outstanding voting securities of the Trust (as defined in the Investment Company
Act) and (2) by the vote of a majority of the trustees who are not parties to
such agreement or interested persons (as such term is defined in the Investment
Company Act) of any such party, cast in person at a meeting called for


                                      B-22

<PAGE>


the purpose of voting on such approval. The sub-investment advisory agreement
may be terminated as a whole at any time by the Trust, without the payment of
any penalty, upon the vote of a majority of the Trust's board of trustees or a
majority of the outstanding voting securities of the Trust, or by BlackRock
Advisors or BlackRock Financial Management, on 60 days' written notice by either
party to the other. The sub-investment advisory agreement will also terminate
automatically in the event of its assignment (as such term is defined in the
Investment Company Act and the rules thereunder).

TRUSTEES AND OFFICERS

      The officers of the Trust manage its day-to-day operations. The officers
are directly responsible to the Trust's board of trustees which sets broad
policies for the Trust and chooses its officers. The following is a list of the
trustees and officers of the Trust and a brief statement of their present
positions and principal occupations during the past five years. Trustees who are
interested persons of the Trust (as defined in the Investment Company Act) are
denoted by an asterisk (*). Trustees who are independent trustees (as defined in
the Investment Company Act) (the "Independent Trustees") are denoted without an
asterisk. The business address of the Trust, BlackRock Advisors and their board
members and officers is 100 Bellevue Parkway, Wilmington, Delaware 19809, unless
specified otherwise below. The trustees listed below are either trustees or
directors of other closed-end funds in which BlackRock Advisors acts as
investment advisor.


<TABLE>
<CAPTION>

                                               PRINCIPAL OCCUPATION DURING THE
NAME AND ADDRESS                    TITLE      PAST FIVE YEARS AND OTHER AFFILIATIONS
- -------------                       ----       ---------------------------
<S>                             <C>            <C>

Andrew F. Brimmer                 Trustee      President of Brimmer & Company, Inc., a Washington, D.C.-
4400 MacArthur Blvd., N.W.                     based economic and financial consulting firm. Director of
Suite 302                                      CarrAmerica Realty Corporation and Borg-Warner Automotive.
Washington, DC 20007                           Formerly member of the Board of Governors of the Federal
Age: 75                                        Reserve System. Formerly Director of AirBorne Express, BankAmerica
                                               Corporation (Bank of America), Bell South Corporation,
                                               College Retirement Equities Fund (Trustee), Commodity
                                               Exchange, Inc. (Public Governor), Connecticut Mutual Life
                                               Insurance Company, E.I. Dupont de Nemours & Company,
                                               Equitable Life Assurance Society of the United States,
                                               Gannett Company, Mercedes-Benz of North America, MNC
                                               Financial Corporation (American Security Bank), NMC Capital
                                               Management, Navistar International Corporation, PHH Corp.
                                               and UAL Corporation (United Airlines).


Richard E. Cavanagh               Trustee      President and Chief Executive Officer of The Conference Board,
845 Third Avenue                               Inc., a leading global business membership organization, from
New York, NY 10022                             1995-present. Former Executive Dean of the John F. Kennedy
Age: 55                                        School of Government at Harvard University from 1988-1995.
                                               Acting Director, Harvard Center for Business and Government (1991-1993).
                                               Formerly Partner (principal) of McKinsey & Company, Inc. (1980-1988). Former
                                               Executive Director of Federal Cash Management, White House Office of Management
                                               and Budget (1977-1979). Co-author, THE WINNING PERFORMANCE (best selling
                                               management book published in 13 national editions). Trustee Emeritus, Wesleyan
                                               University. Trustee, Drucker Foundation, Airplanes Group, Aircraft Finance Trust
                                               (AFT) and Educational Testing Service (ETS). Director, Arch Chemicals, Fremont
                                               Group and The Guardian Life Insurance Company of America.

</TABLE>

                                      B-23

<PAGE>

<TABLE>
<S>                               <C>          <C>
Kent Dixon                        Trustee      Consultant/Investor. Former President and Chief Executive
430 Sandy Hook Road                            Officer of Empire Federal Savings Bank of America and Banc
St. Petersburg, FL 33706                       PLUS Savings Association, former Chairman of the Board,
Age: 64                                        President and Chief Executive Officer of Northeast Savings. Former
                                               Director of ISFA  (the owner of INVEST, a national securities brokerage
                                               service designed for banks and thrift institutions).

</TABLE>


<TABLE>
<CAPTION>

                                               PRINCIPAL OCCUPATION DURING THE
NAME AND ADDRESS                    TITLE      PAST FIVE YEARS AND OTHER AFFILIATIONS
- -------------                       ----       --------------------------------------
<S>                               <C>          <C>
Frank J. Fabozzi                  Trustee      Consultant. Editor of THE JOURNAL OF PORTFOLIO MANAGEMENT and
858 Tower View Circle                          Adjunct Professor of Finance at the School of Management at
New Hope, PA 18938                             Yale University. Director, Guardian Mutual Funds Group.
Age: 53                                        Author and editor of several books on fixed income portfolio
                                               management. Visiting Professor of Finance and Accounting at the
                                               Sloan School of Management, Massachusetts Institute of Technology from
                                               1986 to August 1992.

Laurence D. Fink*                 Trustee      Director, Chairman and Chief Executive Officer of BlackRock,
Age: 48                                        Inc. since its formation in 1998 and of BlackRock, Inc.'s predecessor entities
                                               since 1988. Chairman of the Management Committee of BlackRock,
                                               Inc. Formerly, Managing Director of the First Boston Corporation,
                                               Member of its Management Committee, Co-head of its Taxable Fixed
                                               Income Division and Head of its Mortgage and Real Estate Products
                                               Group. Currently, Chairman of the Board of each of the closed-end
                                               Trusts in which BlackRock Advisors, Inc. acts as investment
                                               advisor, President, Treasurer and a Trustee of the BlackRock
                                               Funds, Chairman of the Board and Director of Anthracite Capital,
                                               Inc., a Director of BlackRock's offshore funds and alternative
                                               products and Chairman of the Board of Nomura BlackRock Asset
                                               Management Co., Ltd. Currently, Vice Chairman of the Board of
                                               Trustees of Mount Sinai-New York University Medical Center and
                                               Health System and a Member of the Board of Phoenix House.

James Clayburn LaForce, Jr.       Trustee      Dean Emeritus of The John E. Anderson Graduate School of
P.O. Box 1595                                  Management, University of California since July 1, 1993.
Pauma Valley, CA 92061                         Director, Jacobs Engineering Group, Inc., Payden & Rygel
Age: 72                                        Investment Trust, Provident Investment Counsel Funds, Timken Company,
                                               Motor Cargo Industries and Trust for Investment Managers.
                                               Acting Dean of The School of Business, Hong Kong University
                                               of Science and Technology 1990-1993. From 1978 to September
                                               1993, Dean of The John E. Anderson Graduate School of
                                               Management, University of California.

Walter F. Mondale                 Trustee      Partner, Dorsey & Whitney, a law firm (December 1996-present,
220 South Sixth Street                         September 1987-August 1993). Formerly, U.S. Ambassador to
Minneapolis, MN 55402                          Japan (1993-1996). Formerly Vice President of the United
Age: 73                                        States, U.S. Senator and Attorney General of the State of Minnesota.
                                               1984 Democratic Nominee for President of the United States. Director,
                                               Northwest Airlines Corporation, NWA Inc., Northwest Airlines, Inc. and
                                               UnitedHealth Group Corporation.

</TABLE>

                                      B-24
<PAGE>

<TABLE>
<CAPTION>

                                               Principal Occupation During The
Name and Address                    Title      Past Five Years and Other Affiliations
- -------------------------------     ----       --------------------------------------
<S>                               <C>          <C>

Ralph L. Schlosstein*             Trustee and  Director since 1999 and President of BlackRock, Inc. since its
Age: 50                           President    formation in 1998 and of BlackRock, Inc.'s predecessor entities since 1988.
                                               Member of the Management Committee and Investment Strategy Group of
                                               BlackRock, Inc. Formerly, Managing Director of Lehman Brothers, Inc.
                                               and Co-head of its Mortgage and Savings Institutions Group. Currently,
                                               President of each of the closed-end Trusts in which BlackRock
                                               Advisors, Inc. acts as investment advisor and a Director and Officer
                                               of BlackRock's alternative products. Currently, a Member of the
                                               Visiting Board of Overseers of the John F. Kennedy School of
                                               Government at Harvard University, the Financial Institutions Center
                                               Board of the Wharton School of the University of Pennsylvania, and a
                                               Trustee of New Visions for Public Education in New York City.
                                               Formerly, a Director of Pulte Corporation and a Member of Fannie Mae's
                                               Advisory Council.


Anne F. Ackerley                  Secretary    Managing Director of BlackRock, Inc. since 2000. Formerly
Age: 39                                        First Vice President and Chief Operating Officer, Mergers
                                               and Acquisitions Group at Merrill Lynch & Co. from 1997 to 2000; First
                                               Vice President and Chief Operating Officer, Public Finance Group at
                                               Merrill Lynch & Co. from 1995 to 1997; First Vice President, Emerging
                                               Markets Fixed Income Research at Merrill Lynch & Co. prior thereto.


Henry Gabbay                      Treasurer    Managing Director of BlackRock, Inc. and its predecessor
Age: 54                                        entities.


Robert S. Kapito                  Vice         Vice Chairman of BlackRock, Inc. and its predecessor entities.
Age: 44                           President

James Kong                        Assistant    Managing Director of BlackRock, Inc. and its predecessor
Age: 41                           Treasurer    entities.


Richard Shea, Esq.                Vice         Managing Director of BlackRock, Inc. since 2000; Chief
Age: 41                           President/   Operating Officer and Chief Financial Officer of Anthracite
                                  Tax          Capital, Inc. since 1998. Formerly, Director of BlackRock, Inc.
                                               and its predecessor entities.
</TABLE>


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

     The fees and expenses of the Independent Trustees of the Trust are paid by
the Trust. The trustees who are members of the BlackRock organization receive no
compensation from the Trust. During the year ended December 31, 2000, the
Independent Trustees/Directors earned the compensation set forth below in their
capacities as trustees/directors of the funds in the BlackRock Family of Funds.
It is estimated that the Independent Trustees will receive from the Trust the
amounts set forth below for the Trust's calendar year ending December 31, 2001,
assuming the Trust had been in existence for the full calendar year.

                                      B-25


<PAGE>

                                                      TOTAL COMPENSATION FROM
                                        ESTIMATED       THE TRUST AND FUND
                                       COMPENSATION        COMPLEX PAID TO
        NAME OF BOARD MEMBER            FROM TRUST         BOARD MEMBER(1)
        ---------------------           ------------    ----------------------
Andrew F. Brimmer ..................   $  6,000(2)(3)       $160,000(4)
Richard E. Cavanagh ................   $  6,000(2)          $160,000(4)
Kent Dixon .........................   $  6,000             $160,000
Frank J. Fabozzi ...................   $  6,000             $160,000
James Clayburn La Force, Jr ........   $  6,000(2)          $160,000(4)
Walter F. Mondale ..................   $  6,000(2)          $160,000(4)


- ----------

(1)  Represents the total compensation earned by such persons during the
     calendar year ended December 31, 2000 from the twenty-two closed-end funds
     advised by the Advisor (the "Fund Complex"). Two of these funds, BlackRock
     Target Term Trust and the BlackRock 2001 Term Trust, were terminated on
     December 29, 2000 and June 30, 2001, respectively. On July 31, 2001, five
     additional closed-end funds advised by the Advisor were added to the Fund
     Complex.

(2)  Of these amounts it is anticipated that Messrs. Brimmer, Cavanagh, La Force
     and Mondale may defer $1,500, $1,500, $3,750 and $1,500, respectively,
     pursuant to the Fund Complex's deferred compensation plan.

(3)  At a meeting of the boards of directors/trustees of the Fund Complex held
     on August 24, 2000, Andrew F. Brimmer was appointed Olead directorO for
     each board of trustees/directors in the Fund Complex. For his services as
     lead trustee/director, Andrew F. Brimmer will be compensated in the amount
     of $40,000 per annum by the Fund Complex to be allocated among the funds in
     the Fund Complex based on each fund's relative net assets.

(4)  Of this amount, Messrs. Brimmer, Cavanagh, La Force and Mondale deferred
     $12,000, $12,000, $77,500 and $31,000, respectively, pursuant to the Fund
     Complex's deferred compensation plan .


     Each Independent Trustee/Director receives an annual fee calculated as
follows: (i) $6,000 from each fund/trust in the Fund Complex and (ii) $1,500 for
each meeting of each board in the Fund Complex attended by such Independent
Trustee/Director. The total annual aggregate compensation for each Independent
Trustee/Director is capped at $160,000 per annum, except that Dr. Brimmer
receives an additional $40,000 from the Fund Complex for acting as the lead
trustee/director for each board of trustees/directors in the Fund Complex. In
the event that the $160,000 cap is met with respect to an Independent
Trustee/Director, the amount of the Independent Trustee/Director's fee borne by
each fund in the Fund Complex is reduced by reference to the net assets of the
Trust relative to the other funds in the Fund Complex. In addition, the
attendance fees of each Independent Trustee/Director of the funds/trusts are
reduced proportionately, based on each respective fund's/trust's net assets, so
that the aggregate per meeting fee for all meetings of the boards of
trustees/directors of the funds/trusts held on a single day does not exceed
$20,000 for any Independent Trustee/Director.

CODES OF ETHICS

     The Trust, the Advisor, the Sub-Advisor and the Trust's principal
underwriters have adopted codes of ethics under Rule 17j-1 of the Investment
Company Act. These codes permit personnel subject to the codes to invest in
securities, including securities that may be purchased or held by the Trust.

INVESTMENT ADVISOR AND SUB-ADVISOR

     BlackRock Advisors, Inc. acts as the Trust's investment advisor. BlackRock
Financial Management acts as the Trust's sub-advisor. BlackRock Advisors and
BlackRock Financial Management are both wholly owned subsidiaries of BlackRock,
Inc., which is one of the largest publicly traded investment management firms in
the United States with $225 billion of assets under management as of September
30, 2001. BlackRock Advisors is one of the nation's leading fixed income
managers with over $203 billion of fixed income and liquidity assets under
management with over 180 professionals dedicated solely to fixed income.
BlackRock, Inc. and its affiliates manage assets on behalf of more than 3,300
institutions and 200,000 individuals worldwide, including


                                      B-26

<PAGE>

nine of the ten largest companies in the U.S. as determined by FORTUNE MAGAZINE,
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 BlackRock Provident Institutional Funds.
BlackRock, Inc. is the nation's 26th largest asset management firm according to
PENSIONS & INVESTMENTS, May 14, 2001.

     The BlackRock organization has over 13 years of experience managing
closed-end products and currently advises a closed-end family of 25 funds. As of
September 30, 2001, BlackRock managed over $6.7 billion in closed-end products.
In addition, BlackRock provides risk management and investment system services
to a growing number of institutional investors under the BlackRock Solutions
name advising over $1.3 trillion in outside assets. Clients are served from the
company's headquarters in New York City, as well as offices in Wilmington,
Delaware, San Francisco, California, Hong Kong, Edinburgh, Scotland and Tokyo,
Japan. BlackRock, Inc. is a member of The PNC Financial Services Group, Inc.
("PNC"), one of the largest diversified financial services organizations in the
United States, and is majority-owned by PNC and by BlackRock employees.

                      PORTFOLIO TRANSACTIONS AND BROKERAGE

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

     The Advisor and the Sub-Advisor are 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 Advisor's and
the Sub-Advisor'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 difficulty in
executing the order, and the best net price. There are many instances when, in
the judgment of the Advisor or the Sub-Advisor, 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. However, it is not the policy of BlackRock, absent special circumstances,
to pay higher commissions to a firm because it has supplied such research or
other services.

     The Advisor and the Sub-Advisor are able to fulfill their obligation to
furnish a continuous investment program to the Trust without receiving research
or other information from brokers; however, each 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 Advisor and/or the Sub-Advisor, and does not
reduce the Advisor's and/or the Sub-Advisor's normal research activities in
rendering investment advice under the investment management agreement or the
sub-investment advisory agreement. It is possible that the Advisor's and/or the
Sub-Advisor'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 Advisor
and/or the Sub-Advisor 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

                                      B-27

<PAGE>


be allocated among the companies and accounts on a good faith equitable basis by
the Advisor and/or the Sub-Advisor in their 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 Advisor's or the Sub-Advisor's organization,
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.

     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 costs, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of securities and on the reinvestment in other securities.

                              DESCRIPTION OF SHARES

COMMON SHARES

     The Trust intends to hold annual meetings of shareholders so long as the
common shares are listed on a national securities exchange and such meetings are
required as a condition to such listing.

PREFERRED SHARES

     Although the terms of any Preferred Share issued by the Trust, including
their dividend rate, voting rights, liquidation preference and redemption
provisions, will be determined by the board of trustees (subject to applicable
law and the Trust's Agreement and Declaration of Trust) when it authorizes a
Preferred Shares offering, the Trust currently expects that the preference on
distributions, liquidation preference, voting rights and redemption provisions
of any such Preferred Shares will likely be as stated in the prospectus.

     If the board of trustees determines to proceed with an offering of
Preferred Shares, the terms of the Preferred Shares may be the same as, or
different from, the terms described in the prospectus, subject to applicable law
and the Trust's Agreement and Declaration of Trust. The board of trustees,
without the approval of the holders of common shares, may authorize an offering
of Preferred Shares or may determine not to authorize such an offering, and may
fix the terms of the Preferred Shares to be offered.

     The board of trustees (subject to applicable law and the Trust's Agreement
and Declaration of Trust) may authorize an offering, without the approval of the
holders of either common shares or Preferred Shares, of other classes of shares,
or other classes or series of shares, as they determine to be necessary,
desirable or appropriate, having such terms, rights, preferences, privileges,
limitations and restrictions as the board of trustees see fit. The Trust
currently does not expect to issue any other classes of shares, or series of
shares, except for the common shares and the Preferred Shares.

OTHER SHARES

     The board of trustees (subject to applicable law and the Trust's Agreement
and Declaration of Trust) may authorize an offering, without the approval of the
holders of either common shares or Preferred Shares, of other classes of shares,
or other classes or series of shares, as they determine to be necessary,
desirable or appropriate, having such terms, rights, preferences, privileges,
limitations and restrictions as the board of trustees see fit. The Trust
currently does not expect to issue any other classes of shares, or series of
shares, except for the common shares and the Preferred Shares.


                                      B-28

<PAGE>




                           REPURCHASE OF COMMON SHARES

     The Trust is a closed-end investment company and as such its shareholders
will not have the right to cause the Trust to redeem their shares. Instead, the
Trust's common shares will trade in the open market at a price that will be a
function of several factors, including dividend levels (which are in turn
affected by expenses), net asset value, call protection, dividend stability,
relative demand for and supply of such shares in the market, general market and
economic conditions and other factors. Because shares of a closed-end investment
company may frequently trade at prices lower than net asset value, the Trust's
board of trustees may consider action that might be taken to reduce or eliminate
any material discount from net asset value in respect of common shares, which
may include the repurchase of such shares in the open market or in private
transactions, the making of a tender offer for such shares, or the conversion of
the Trust to an open-end investment company. The board of trustees may decide
not to take any of these actions. In addition, there can be no assurance that
share repurchases or tender offers, if undertaken, will reduce market discount.

     Notwithstanding the foregoing, at any time when the Trust's Preferred
Shares are outstanding, the Trust may not purchase, redeem or otherwise acquire
any of its common shares unless (1) all accrued Preferred Shares dividends have
been paid and (2) at the time of such purchase, redemption or acquisition, the
net asset value of the Trust's portfolio (determined after deducting the
acquisition price of the common shares) is at least 200% of the liquidation
value of the outstanding Preferred Shares (expected to equal the original
purchase price per share plus any accrued and unpaid dividends thereon). Any
service fees incurred in connection with any tender offer made by the Trust will
be borne by the Trust and will not reduce the stated consideration to be paid to
tendering shareholders.

     Subject to its investment restrictions, the Trust may borrow to finance the
repurchase of shares or to make a tender offer. Interest on any borrowings to
finance share repurchase transactions or the accumulation of cash by the Trust
in anticipation of share repurchases or tenders will reduce the Trust's net
income. Any share repurchase, tender offer or borrowing that might be approved
by the Trust's board of trustees would have to comply with the Securities
Exchange Act of 1934, as amended, the Investment Company Act and the rules and
regulations thereunder.

     Although the decision to take action in response to a discount from net
asset value will be made by the board of trustees at the time it considers such
issue, it is the board's present policy, which may be changed by the board of
trustees, not to authorize repurchases of common shares or a tender offer for
such shares if: (1) such transactions, if consummated, would (a) result in the
delisting of the common shares from the New York Stock Exchange, or (b) impair
the Trust's status as a regulated investment company under the Code, (which
would make the Trust a taxable entity, causing the Trust's income to be taxed at
the corporate level in addition to the taxation of shareholders who receive
dividends from the Trust) or as a registered closed-end investment company under
the Investment Company Act; (2) the Trust would not be able to liquidate
portfolio securities in an orderly manner and consistent with the Trust's
investment objective and policies in order to repurchase shares; or (3) there
is, in the board's judgment, any (a) material legal action or proceeding
instituted or threatened challenging such transactions or otherwise materially
adversely affecting the Trust, (b) general suspension of or limitation on prices
for trading securities on the New York Stock Exchange, (c) declaration of a
banking moratorium by Federal or state authorities or any suspension of payment
by United States or New York banks, (d) material limitation affecting the Trust
or the issuers of its portfolio securities by Federal or state authorities on
the extension of credit by lending institutions or on the exchange of foreign
currency, (e) commencement of war, armed hostilities or other international or
national calamity directly or indirectly involving the United States, or (f)
other event or condition which would have a material adverse effect (including
any adverse tax effect) on the Trust or its shareholders if shares were
repurchased. The board of trustees may in the future modify these conditions in
light of experience.

     The repurchase by the Trust of its shares at prices below net asset value
will result in an increase in the net asset value of those shares that remain
outstanding. However, there can be no assurance that share repurchases or tender
offers at or below net asset value will result in the Trust's shares trading at
a price equal to their net asset value. Nevertheless, the fact that the Trust's
shares may be the subject of repurchase or tender offers from

                                      B-29

<PAGE>


time to time, or that the Trust may be converted to an open-end investment
company, may reduce any spread between market price and net asset value that
might otherwise exist.

     In addition, a purchase by the Trust of its common shares will decrease the
Trust's total managed assets which would likely have the effect of increasing
the Trust's expense ratio. Any purchase by the Trust of its common shares at a
time when Preferred Shares are outstanding will increase the leverage applicable
to the outstanding common shares then remaining.

     Before deciding whether to take any action if the common shares trade below
net asset value, the Trust's board of trustees would likely consider all
relevant factors, including the extent and duration of the discount, the
liquidity of the Trust's portfolio, the impact of any action that might be taken
on the Trust or its shareholders and market considerations. Based on these
considerations, even if the Trust's shares should trade at a discount, the board
of trustees may determine that, in the interest of the Trust and its
shareholders, no action should be taken.

                                   TAX MATTERS

U.S. FEDERAL INCOME TAX MATTERS

     The following is a description of certain U.S. federal income tax
consequences to a shareholder of acquiring, holding and disposing of common
shares of the Trust. The discussion reflects applicable tax laws of the United
States as of the date of this prospectus, which tax laws may be changed or
subject to new interpretations by the courts or the Internal Revenue Service
(the "IRS") retroactively or prospectively. No attempt is made to present a
detailed explanation of all U.S. federal, state, local and foreign tax concerns
affecting the Trust and its shareholders, and the discussion set forth herein
does not constitute tax advice. Investors are urged to consult their own tax
advisers to determine the tax consequences to them of investing in the Trust.

     The Trust intends to elect and to qualify for special tax treatment
afforded to a regulated investment company under subchapter M of the Code. As
long as it so qualifies, in any taxable year in which it distributes at least
90% of its net investment income (as defined below), the Trust (but not its
shareholders) will not be subject to U.S. federal income tax to the extent that
it distributes its net investment income and net realized capital gains. The
Trust intends to distribute substantially all of such income.

     In order to qualify to be taxed as a regulated investment company, the
Trust must, among other things: (a) derive at least 90% of its net investment
income which is its annual gross income (including tax-exempt interest) from
dividends, interest, payments with respect to certain securities loans, gains
from the sale or other disposition of stock or securities, or foreign
currencies, or other income (including but not limited to gain from options,
futures and forward contracts) derived with respect to its business of investing
in such stock, securities or currencies, 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 managed 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) or two or more issuers
controlled by the Trust and engaged in the same, similar or related trades or
businesses.

     As mentioned above, as a regulated investment company, the Trust generally
is not subject to U.S. federal income tax on income and gains that it
distributes each taxable year to its shareholders, provided that in such taxable
year it distributes at least 90% of the sum of its (i) investment company
taxable income (which includes, among other items, dividends, interest, the
excess of any net short-term capital gains over net long-term capital losses and
other taxable income other than net capital gain (as defined below) reduced by
deductible expenses) determined without regard to the deduction for dividends
paid and (ii) its net tax-exempt interest (the excess of its gross tax-exempt
interest over certain disallowed deductions). For purposes of satisfying the 90%
distribution

                                      B-30

<PAGE>


requirement, a distribution will not qualify if it is a "preferential" dividend
(i.e., a distribution which is not fully pro rata among shares of the same class
or where there is preference to one class of stock as compared with another
class except to the extent that such preference exists by reason of the issuance
of such shares.). The Trust may retain for investment its net capital gain
(which consists of the excess of its net long-term capital gain over its net
short-term capital loss). However, if the Trust retains any net capital gain or
any investment company taxable income, it will be subject to tax at regular
corporate rates on the amount retained. If the Trust retains any net capital
gain, it may designate the retained amount as undistributed capital gains in a
notice to its shareholders who, if subject to U.S. federal income tax on
long-term capital gains (i) will be required to include in income their share of
such undistributed long-term capital gain and (ii) will be entitled to credit
their proportionate share of the tax paid by the Trust against their U.S.
federal tax liability, if any, and to claim refunds to the extent the credit
exceeds such liability. For U.S. federal income tax purposes, the tax basis of
shares owned by a shareholder of the Trust will be increased by the amount of
undistributed capital gain included in the gross income of such shareholder less
the tax deemed paid by such shareholder under clause (ii) of the preceding
sentence.

     Dividends  paid by the Trust from its ordinary  income or from an excess of
net  short-term  capital  gains  over net  long-term  capital  losses  (together
referred  to  hereafter  as  "ordinary   income   dividends")   are  taxable  to
shareholders  as  ordinary  income to the  extent  of the  Trust's  earning  and
profits.  Distributions  made from an excess of net long-term capital gains over
net short-term capital losses ("capital gain dividends")  including capital gain
dividends  credited to  shareholders  but  retained  by the Trust (as  described
above) are taxable to shareholders as long-term capital gains, regardless of the
length of time the shareholder has owned Trust shares.  Distributions  in excess
of the Trust's  earnings and profits will first reduce the adjusted tax basis of
a holder's  shares and,  after such adjusted tax basis is reduced to zero,  will
constitute  capital  gains to such  holder  (assuming  the  shares are held as a
capital asset). Generally, not later than 60 days after the close of its taxable
ear, the Trust will provide its shareholders  with a written notice  designating
the amount of any ordinary income dividends or capital gain dividends.

     The sale or other disposition of common shares of the Trust (except in the
case of a redemption where a shareholder's percentage stock interest is not
meaningfully reduced) will normally result in capital gain or loss to
shareholders. Any loss upon the sale or exchange of Trust shares held for six
months or less will be treated as long-term capital loss to the extent of any
capital gain dividends received (including amounts credited as an undistributed
capital gain) by the shareholder. A loss realized on a sale or exchange of
shares of the Trust will be disallowed if other Trust shares are acquired
(whether through the automatic reinvestment of dividends or otherwise) within a
61-day period beginning 30 days before and ending 30 days after the date that
the shares are disposed of. In such case, the basis of the shares acquired will
be adjusted to reflect the disallowed loss.

     Present law taxes both long-term and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, short-term capital gains and ordinary income will currently
be taxed at a maximum rate of 38.6% while long-term capital gains generally will
be taxed at a maximum rate of 20%.(1)

     Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Trust. Due to the Trust's expected investments, in
general, distributions will not be eligible for a dividends received deduction
allowed to corporations under the Code. If the Trust pays a dividend in January
which was declared in the previous October, November or December to shareholders
of record on a specified date in one of such months, then such dividend will be
treated for tax purposes as being paid by the Trust and received by its
shareholders on December 31 of the year in which the dividend was declared.


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


(1)  The Economic Growth and Tax Relief Reconciliation Act of 2001, effective
     for taxable years beginning after December 31, 2000, creates a new 10
     percent income tax bracket and reduces the tax rate applicable to ordinary
     income over a six year phase-in period. Beginning in the taxable year 2006,
     ordinary income will be subject to a 35% maximum rate, with approximately
     proportionate reductions in the other ordinary rates.

                                      B-31

<PAGE>



     The IRS has taken the position in a revenue ruling that if a regulated
investment company has two classes of shares, it may designate distributions
made to each class in any year as consisting of no more than such class's
proportionate share of particular types of income, including net long-term
capital gains. A class's proportionate share of a particular type of income is
determined according to the percentage of total dividends paid by the regulated
investment company during such year that was paid to such class. Consequently,
if both common shares and Preferred Shares are outstanding, the Trust intends to
designate distributions made to the classes as consisting of particular types of
income in accordance with the classes' proportionate shares of such income.
Thus, capital gain dividends will be allocated between the holders of common
shares and Preferred Shares in proportion to the total dividends paid to each
class during the taxable year.

     If the Trust utilizes leverage through borrowings, it may be restricted by
loan covenants with respect to the declaration and payment of dividends in
certain circumstances. Additionally, if at any time when shares of Preferred
Shares are outstanding, the Trust does not meet the asset coverage requirements
of the Investment Company Act, the Trust will be required to suspend
distributions to holders of common shares until the asset coverage is restored.
Limits on the Trust's payment of dividends may prevent the Trust from
distributing at least 90% of its net income and may therefore jeopardize the
Trust's qualification for taxation as a regulated investment company and/or may
subject the Trust to the 4% excise tax described below. Upon any failure to meet
the asset coverage requirements of the Investment Company Act, the Trust may, in
its sole discretion, redeem shares of Preferred Shares in order to maintain or
restore the requisite asset coverage and avoid the adverse consequences to the
Trust and its shareholders of failing to qualify as a regulated investment
company. There can be no assurance, however, that any such action would achieve
these objectives. The Trust will endeavor to avoid restrictions on its ability
to make dividend payments.

     A shareholder that is a nonresident alien individual or a foreign
corporation (a "foreign investor") generally may be subject to U.S. withholding
tax at the rate of 30% (or possibly a lower rate provided by an applicable tax
treaty) on ordinary income dividends. Different tax consequences may result if
the foreign investor 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 and certain other conditions are met.

     The Trust is required in certain circumstances to backup withhold on
taxable dividends and certain other payments paid to non-corporate holders of
the Trust's shares who do not furnish the Trust with 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
U.S. federal income tax liability, if any, provided that the required
information is furnished to the IRS.

     If in any year the Trust should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Trust would incur a regular
corporate federal income tax upon its income for the year and all distributions
to its shareholders would be taxable to shareholders as ordinary dividend income
to the extent of the Trust's earning as and profits. The Code requires a
regulated investment company to pay a nondeductible 4% excise tax to the extent
the regulated investment company does not distribute, during each calendar year,
98% of its taxable income, determined on a calendar year basis, and 98% of its
capital gains, determined, in general, on an October 31 year end, plus certain
undistributed amount from previous years, on which the Trust paid no U.S.
federal income tax. While the Trust intends to distribute its income and capital
gains in the manner necessary to minimize imposition of the 4% excise tax, there
can be no assurance that sufficient amounts of the Trust's taxable income and
capital gains will be distributed to avoid entirely the imposition of the tax.
In such event, the Trust will be liable for the tax only on the amount by which
it does not meet the foregoing distribution requirements.

     The Trust will invest in securities rated in the lower rating categories of
nationally recognized rating organizations ("junk bonds" or "high yield bonds").
Some of these junk bonds or high-yield bonds may be purchased at a discount and
may therefore cause the Trust to accrue and distribute income before amounts due
under the obligations are paid. In addition, a portion of the interest payments
on such junk bonds and high-yield bonds may be treated as dividends for U.S.
federal income tax purposes. In such cases, if the issuer of the junk

                                      B-32

<PAGE>


bonds or high-yield bonds is a domestic corporation, dividend payments by the
Trust will be eligible for the dividends received deduction to the extent of the
deemed dividend portion of such interest payments.

     The Trust may write (i.e., sell) covered call and covered put options on
its portfolio securities, purchase call and put options on securities and engage
in transactions in financial futures and related options on such futures. Such
options and futures contracts that are "Section 1256 contracts" will be "marked
to market" for U.S. federal income tax purposes at the end of each taxable year,
i.e., each such option or futures contract will be treated as sold for its fair
market value on the last day of the taxable year. Unless such contact is a
forward foreign exchange contract, or is a non-equity option or a regulated
futures contract for a non-U.S. currency for which the Trust elects to have gain
or loss treated as ordinary gain or loss under Code section 988 (as described
below), gain or loss from Section 1256 contracts will be 60% long-term and 40%
short-term capital gain or loss. Application of these rules to Section 1256
contracts held by the Trust may alter the timing and character of distributions
to shareholders. The mark-to-market rules outlined above, however, will not
apply to certain transactions entered into by the Trust solely to reduce the
risk of changes in price or interest or currency exchange rate with respect to
its investments.

     The federal income tax rules governing the taxation of interest rate swaps
are not entirely clear and may require the Trust to treat payment received under
such arrangements as ordinary income and to amortize such payment under certain
circumstances. The Trust does not anticipate that its activity in this regard
will affect its qualification as a regulated investment company.

     Code Section 1092, which applies to certain "straddles," may affect the
taxation of the Trust's sales of securities and transactions in options and
futures. Under Section 1092, the Trust may, for U.S. federal income tax
purposes, be required to postpone recognition of losses incurred in certain
sales of securities and certain closing transactions in options and futures.

      Under Code Section 988, special rules are provided for certain
transactions in a currency other than the taxpayer's functional currency
(generally currencies other than the U.S. dollar). In general, foreign currency
gains and losses in connection with certain debt instruments, from certain
forward contracts, from futures contracts that are not "regulated futures
contracts" and from unlisted options will be treated as ordinary income or loss
under Code Section 988. In certain circumstances, the Trust may elect capital
gain or loss treatment for such transactions. In general, however Code Section
988 gains or losses will increase or decrease the amount of the Trust's
investment company taxable income available to be distributed to shareholders as
ordinary income. If section 988 losses exceed other investment company taxable
income during a taxable year, the Trust would not be able to make any ordinary
dividend distributions, or distributions made before the losses were realized
would be recharacterized as a return of capital to shareholders, rather than as
an ordinary dividend, reducing each shareholder's basis in his Trust shares.
These rules, however, will not apply to certain transactions entered into by the
Trust solely to reduce the risk of currency fluctuations with respect to its
investments.

     The foregoing is a general, summary of the provisions of the Code and the
Treasury Regulations 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.

     Ordinary income and capital gain dividends may also be subject to state and
local taxes. Certain states exempt from state income taxation dividends paid by
regulated investment companies which are derived from interest on United States
Government obligations. State law varies as to whether dividend income
attributable to United States obligations is exempt from state income tax.

     Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, foreign, state, local income or other taxes.

                                      B-33
<PAGE>


                 PERFORMANCE RELATED AND COMPARATIVE INFORMATION


                                   10/93-9/94               10/98-12/99
                                    ---------               ----------
Mortgages(1)                         -1.14%                    2.67%
Asset Backed Securities(2)            0.81%                    2.22%
U.S. Corporates(3)                   -4.49%                   -1.35%
U.S. Agencies(4)                     -3.97%                   -0.77%
U.S. Governments(5)                  -4.04%                   -2.33%
High Yield(6)                         3.03%                    4.57%

     Certain Fixed Income Sectors Have Performed Positively in Rising Interest
Rate Environments


     The graph above displays the performance of different fixed income sectors
during the two most recent rising interest rate periods, as measured by the
10-year Treasury Note. (The Trust will aim to maintain interest rate exposure
within a narrow band around that of the 10-year Treasury Note.) This shows that
during rising rate environments, some sectors have historically had positive
returns. A portfolio that rotates among various fixed income sectors may have
the ability to offset some interest rate risk.

Source: Lehman Brothers / BlackRock Advisors, Inc.

(1) LEHMAN FIXED RATE MBS INDEX

     The MBS Index covers the mortgage-backed pass-through securities of Ginnie
Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The MBS Index is formed
by grouping the universe of over 600,000 individual fixed rate MBS pools into
approximately 3,500 generic aggregates. These aggregates are defined according
to the following parameters:

         Agency (GNMA,  FNMA, FHLMC)
         Program (30-year,  15-year,  balloon,  GPM)
         Pass-through  coupon (6.0%,  6.5%, . . ., etc.)
         Origination year (1987, 1988, . . ., etc.)

     In other words, each aggregate is a proxy for the outstanding pools for a
given agency, program, issue year, and coupon. The index maturity and liquidity
criteria are then applied to these aggregates to determine which qualify for
inclusion in the index. About 600 of these generic aggregates meet the criteria.

     The aggregates included in the index are priced daily using a matrix
pricing routine based on trader price quotations by agency, program, coupon, and
degree of seasoning.

(2) LEHMAN ASSET-BACKED SECURITIES INDEX

     The Asset-Backed Securities (ABS) Index has five subsectors:
         Credit and charge cards
         Autos
         Home equity loans
         Utility
         Manufactured Housing

     The index includes pass-through, bullet, and controlled amortization
structures. The ABS Index includes only the senior class of each ABS issue;
subordinated tranches are not included.

(3) LEHMAN U.S. CREDIT INDEX


     Publicly issued U.S. corporate and specified foreign debentures and secured
notes that meet the specified maturity, liquidity, and quality requirements. To
qualify, bonds must be SEC-registered.

     Sectors

     The index includes both corporate and non-corporate sectors. The corporate
sectors are Industrial, Utility, and Finance, which include both U.S. and
non-U.S. corporations. The non-corporate sectors are Sovereign, Supranational,
Foreign Agency, and Foreign Local Government.

                                      B-34

<PAGE>




(4) LEHMAN U.S. AGENCY INDEX


     Publicly issued debt of U.S. Government agencies, quasi-federal
corporations, and corporate or foreign debt guaranteed by the U.S. Government
(such as USAID securities). The largest issues are Fannie Mae, the Resolution
Trust Funding Corporation (REFCORP), and the Federal Home Loan Bank System
(FHLB). The index includes both callable and noncallable agency securities.

(5) Lehman U.S. Government Index


     Securities issued by the U.S. Government (i.e., securities in the Treasury
     and Agency Indices).
     Inclusions
         Public  obligations of the U.S.  Treasury with a remaining  maturity of
         one year or more.
         Publicly  issued debt of U.S.  Government  agencies,
         quasi-federal corporations, and corporate or foreign debt.

(6) Lehman High Yield Index

     The Lehman Brothers High Yield Index covers the universe of fixed rate,
non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues
from countries designated as emerging markets (e.g., Argentina, Brazil,
Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of
issuers in non-EMG countries are included. Original issue zeroes, step-up coupon
structures, and 144-As are also included.

     Sectors
     The index includes both corporate and non-corporate sectors. The corporate
sectors are Industrial, Utility, and Finance, which include both U.S. and
non-U.S. corporations. The Yankee sector has been discontinued as of 7/1/00. The
bonds in the former Yankee sector have not been removed from the index, but have
been reclassified into other sectors.

POTENTIAL TO REDUCE OVERALL INVESTMENT PORTFOLIO RISK

     Historically,  diversification  between  stocks and bonds has  protected  a
portfolio from some of the more significant declines that an all-stock portfolio
may have experienced. Consider the following illustration showing the benefit of
a  diversified  investor's  portfolio  (65% stock / 35% bonds) over a 100% stock
portfolio during four memorable declines over the last 20 years.*


<TABLE>
<CAPTION>
                                             100% EQUITY PORTFOLIO   DIVERSIFIED PORTFOLIO      100% BOND PORTFOLIO
                                          ------------------------   ---------------------      --------------------
<S>                                               <C>                  <C>                        <C>
Technology Decline (2/29/00 - 9/30/01) .........     -22.3%                  -9.8%                        13.4%
Russian Crisis (6/30/98 - 8/31/98) .............     -15.3%                  -9.9%                         0.1%
Gulf War (12/31/89 - 10/31/90) .................     -11.4%                  -7.2%                         0.6%
October 1987 Crash (8/31/87 - 11/30/87) ........     -29.5%                 -18.9%                         0.7%
</TABLE>



     Source: CDA Wiesenberger/BlackRock Advisors, Inc.

- --------------
*    Past performance is no guarantee of future results. The 100% equity returns
     reflect a full investment in the S&P 500 Composite Total Return Index. The
     S&P 500 Composite Total Return Index is an unmanaged index consisting of
     most of the largest stocks in the U.S., includes the reinvestment of
     dividends and is considered to be a common measure of the U.S. stock
     market. The diversified portfolio returns reflect a 65% investment in the
     S&P 500, a 26% investment in the Lehman Aggregate Bond Index, and a 9%
     investment in the Lehman High Yield Composite Bond Index. The Lehman
     Aggregate Bond Index is representative of intermediate-term government
     bonds, investment-grade corporate securities and mortgage-backed
     securities. The Lehman High Yield Composite Bond Index covers the universe
     of fixed-rate, non-investment grade debt. The 100% bond portfolio returns
     reflect a 75% investment in the Lehman Aggregate Bond Index and a 25%
     investment in the Lehman High Yield Composite Bond Index. A 100% equity
     portfolio may outperform a diversified portfolio and a bond portfolio
     during a period of strong price performance in the equity markets. Indexes
     are unmanaged and cannot be purchased directly. The portfolios above do not
     reflect a leveraged portfolio. The BlackRock Core Bond Trust expects to
     employ leverage. A leveraged portfolio may perform differently.

                                      B-35

<PAGE>



INTERMEDIATE-TERM BONDS REMAIN ATTRACTIVE

                           SHORT-TERM-INTEREST YIELDS

- -------------------------------------------------------------------------------
        January 31, 2001        September 28, 2001          DIFFERENCE
- -------------------------------------------------------------------------------
              4.99%                    2.37%                  - 2.62%
- -------------------------------------------------------------------------------

                            INTERMEDIATE-TERM YIELDS

- -------------------------------------------------------------------------------
        January 31, 2001        September 28, 2001          DIFFERENCE
- -------------------------------------------------------------------------------
              5.11%                    4.59%                  - 0.52%
- -------------------------------------------------------------------------------


     The BlackRock Core Bond Trust is designed to invest in the
intermediate-term part of the yield curve. While recent interest rate reductions
by the Federal Reserve have affected short-term yields, the intermediate-term
remain attractive.

     Source: Bloomberg / BlackRock Advisors, Inc.


     Yields of three-month and ten year Treasury bonds represent short-term and
intermediate-term yields, respectively. Past performance is no guarantee of
future results.

                                     EXPERTS

     The Statement of Net Assets of the Trust as of November 19, 2001 appearing
in this Statement of Additional Information has been audited by Deloitte &
Touche LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and is included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing. Deloitte & Touche
LLP, located at 200 Berkeley Street, Boston, Massachussets, 02116, provides
accounting and auditing services to the Trust.

                             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 (the "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. A copy of the Registration Statement may be inspected without charge
at the Commission's principal office in Washington, D.C., and copies of all or
any part thereof may be obtained from the Commission upon the payment of certain
fees prescribed by the Commission.



                                      B-36

<PAGE>




                         REPORT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholder of
BlackRock Core Bond Trust

     We have audited the accompanying statement of assets and liabilities of
BlackRock Core Bond Trust (the "Trust") as of November 19, 2001 and the related
statement of operations and changes in net assets for the period October 15,
2001 (date of inception) to November 19, 2001. These financial statements are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

     In our opinion, such financial statements presents fairly, in all material
respects, the financial position of the Trust at November 19, 2001 and the
results of its operations and changes in its net assets for the period then
ended, in conformity with accounting principles generally accepted in the United
States of America.


/s/ Deloitte & Touche LLP
Boston, Massachusetts
November 20, 2001




                                      F-1


<PAGE>

                            BLACKROCK CORE BOND TRUST

                       STATEMENT OF ASSETS AND LIABILITIES


<TABLE>
<S>                                                                      <C>
ASSETS:

Cash ...................................................................  $135,014

LIABILITIES:
Payable for organization costs .........................................    35,000
                                                                          --------
Net Assets .............................................................  $100,014
                                                                          ========

Net assets were comprised of:

     Common stock at par (Note 1) ......................................        $9
     Paid-in capital in excess of par ..................................   135,005
                                                                          --------
                                                                           135,014

     Undistributed net investment loss .................................   (35,000)
                                                                          --------
Net assets, November 19, 2001 ..........................................  $100,014
                                                                          ========
Net asset value per share:

Equivalent to 9,425 shares of common stock issued
and outstanding, par value $0.001, unlimited shares authorized .........    $10.61
                                                                          ========

                            BLACKROCK CORE BOND TRUST
                             STATEMENT OF OPERATIONS
               FOR THE PERIOD OCTOBER 15, 2001 (DATE OF INCEPTION)
                              TO NOVEMBER 19, 2001

Investment Income ......................................................       $--
Expenses
     Organization expenses .............................................    35,000
                                                                          --------
Net investment loss ....................................................  $(35,000)
                                                                          ========

                            BLACKROCK CORE BOND TRUST
                       STATEMENT OF CHANGES IN NET ASSETS
               FOR THE PERIOD OCTOBER 15, 2001 (DATE OF INCEPTION)
                              TO NOVEMBER 19, 2001

INCREASE (DECREASE) IN NET ASSETS
Operations:
   Net Investment loss .................................................  $(35,000)
                                                                          --------
   Net decrease in net assets resulting from operations ................   (35,000)
                                                                          --------
Capital Stock Transactions

   Net proceeds from the issuance of common shares .....................   135,014
                                                                          --------
     Total increase ....................................................   100,014
                                                                          ========

NET ASSETS
Beginning of Period ....................................................         0
                                                                          --------
End of Period ..........................................................  $100,014
                                                                          ========
</TABLE>


                                      F-2

<PAGE>


NOTES TO FINANCIAL STATEMENTS

Note 1. Organization

The Blackrock Core Bond Trust (the "Trust") was organized as a Delaware business
trust on October 15, 2001 and is registered as a non-diversified, closed-end
management investment company under the Investment Company Act of 1940. The
Trust had no operations other than a sale to Blackrock Advisors, Inc. of 9,425
shares of common stock for $135,014 ($14.325 per share).

Note 2. Agreements

The Trust has entered into an Investment Advisory Agreement with BlackRock
Advisors, Inc. The Trust will pay BlackRock Advisors, Inc. a monthly fee (the
"Investment Management Fee") at an annual rate of 0.40% of the average weekly
value of the Trust's Managed Assets.

Note 3. Organization Expenses and Offering Costs

Organization expenses of $35,000 have been expensed. Offering costs, estimated
to be approximately $815,000 will be charged to paid-in capital at the time
shares of beneficial interest are sold. BlackRock Advisors, Inc. has agreed to
pay organization expenses and offering costs that exceed $0.03 per common share.

Note 4. Cash & Cash Equivalents

The Trust considers all highly liquid debt instruments with a maturity of three
months or less at time of purchase to be cash equivalents.


                                      F-3

<PAGE>



                                   APPENDIX A

RATINGS OF INVESTMENTS

COMMERCIAL PAPER RATINGS

     A Standard & Poor's commercial paper rating is a current  assessment of the
likelihood  of timely  payment of debt  considered  short-term  in the  relevant
market.  The following  summarizes  the rating  categories  used by Standard and
Poor's for commercial paper:

     "A-1"         Issue's degree of safety regarding timely payment is strong.
                   Those issues determined to possess extremely
                   strong safety characteristics are denoted "A-1+."

     "A-2"         Issue's capacity for timely payment is satisfactory.
                   However, the relative degree of safety is not as high as
                   for issues designated "A-1."

     "A-3"         Issue has an adequate  capacity for timely payment.  It
                   is,  however,  somewhat more  vulnerable to the adverse
                   effects of changes in circumstances  than an obligation
                   carrying a higher designation.

     "B"           Issue has only a speculative capacity for timely payment.

     "C"           Issue has a doubtful capacity for payment.

     "D"           Issue is in payment default.

     Moody's  commercial paper ratings are opinions of the ability of issuers to
repay  punctually  promissory  obligations  not having an  original  maturity in
excess of 9 months.  The  following  summarizes  the rating  categories  used by
Moody's for commercial paper:

     "Prime-1"           Issuer or related supporting institutions are
                         considered to have a superior capacity for repayment of
                         short-term promissory obligations. Prime-1 repayment
                         capacity will normally be evidenced by the following
                         characteristics: leading market positions in well
                         established industries; high rates of return on funds
                         employed; conservative capitalization structures with
                         moderate reliance on debt and ample asset protection;
                         broad margins in earning coverage of fixed financial
                         charges and high internal cash generation; and well
                         established access to a range of financial markets and
                         assured sources of alternate liquidity.

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

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

     "Not Prime"         Issuer does not fall within any of the Prime rating
                         categories.

     Fitch  short-term  ratings  apply to debt  obligations  that are payable on
demand or have original maturities of generally up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:

     "F-1+"        Securities possess exceptionally strong credit quality.
                   Issues assigned this rating are


                                      A-1

<PAGE>


                   regarded as having the strongest degree of assurance for
                   timely payment.

     "F-1"         Securities  possess very strong credit quality.  Issues
                   assigned  this rating  reflect an  assurance  of timely
                   payment only  slightly less in degree than issues rated
                   "F-1+."

     "F-2"         Securities possess good credit quality. Issues assigned
                   this rating have a satisfactory degree of assurance for
                   timely  payment,  but the  margin  of  safety is not as
                   great as the "F-1+" and "F-1" categories.

     "F-3"         Securities possess fair credit quality. Issues assigned
                   this rating have  characteristics  suggesting  that the
                   degree of  assurance  for timely  payment is  adequate;
                   however,  near-term  adverse  changes could cause these
                   securities to be rated below investment grade.

     "F-S"         Securities possess weak credit quality. Issues assigned
                   this rating have  characteristics  suggesting a minimal
                   degree  of  assurance   for  timely   payment  and  are
                   vulnerable  to near-term  adverse  changes in financial
                   and economic conditions.

     "D"           Securities are in actual or imminent payment default.


     Fitch may also use the symbol "LOC" with its short-term ratings to indicate
that the rating is based upon a letter of credit issued by a commercial bank.

     Thomson BankWatch  short-term  ratings assess the likelihood of an untimely
or  incomplete  payment of principal or interest of  unsubordinated  instruments
having  a  maturity  of one year or less  which  are  issued  by  United  States
commercial  banks,  thrifts and non-bank  banks;  non-United  States banks;  and
broker-dealers. The following summarizes the ratings used by Thomson BankWatch:

     "TBW-1"        This designation represents Thomson BankWatch's highest
                    rating  category  and  indicates  a very high degree of
                    likelihood  that principal and interest will be paid on
                    a timely basis.

     "TBW-2"        This  designation  indicates  that  while the degree of
                    safety   regarding  timely  payment  of  principal  and
                    interest is strong,  the  relative  degree of safety is
                    not as high as for issues rated "TBW-1."

     "TBW-3"        This designation represents the lowest investment grade
                    category  and  indicates  that  while  the debt is more
                    susceptible to adverse  developments (both internal and
                    external)  than   obligations   with  higher   ratings,
                    capacity to service  principal and interest in a timely
                    fashion is considered adequate.

     "TBW-4"        This designation indicates that the debt is regarded as
                    non-investment grade and therefore speculative.


     IBCA  assesses the  investment  quality of unsecured  debt with an original
maturity  of less than one year which is issued by bank  holding  companies  and
their  principal  bank  subsidiaries.   The  following   summarizes  the  rating
categories used by IBCA for short-term debt ratings:

     "A1+"               Obligations which posses a particularly strong credit
                         feature are supported by the highest capacity for
                         timely repayment.

     "A1"                Obligations  are  supported  by  the  highest capacity
                         for  timely repayment.

     "A2"                Obligations are supported  by a satisfactory  capacity
                         for timely repayment.

     "A3"                Obligations are supported  by a satisfactory capacity
                         for timely repayment.

     "B"                 Obligations for which there is an uncertainty as to
                         the capacity to ensure timely repayment.

     "C"                 Obligations for which there is a high risk of default
                         or which are currently in default.


                                      A-2

<PAGE>

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

     The  following  summarizes  the  ratings  used by  Standard  &  Poor's  for
corporate and municipal debt:

     "AAA"               This designation represents the highest rating assigned
                         by Standard & Poor's to a debt obligation and indicates
                         an extremely  strong capacity to pay interest and repay
                         principal.

     "AA"                Debt is considered to have a very strong capacity to
                         pay interest and repay principal and differs from AAA
                         issues only in small degree.

     "A"                 Debt is  considered  to have a strong  capacity  to pay
                         interest and repay  principal  although such issues are
                         somewhat  more  susceptible  to the adverse  effects of
                         changes in circumstances  and economic  conditions than
                         debt in higher-rated categories.

     "BBB"               Debt is regarded as having an adequate capacity to pay
                         interest and repay principal. Whereas such issues
                         normally exhibit adequate protection parameters,
                         adverse economic conditions or changing circumstances
                         are more likely to lead to a weakened capacity to pay
                         interest and repay principal for debt in this category
                         than in higher-rated categories.

     "BB," "B,"
     "CCC," "CC"
     and "C"             Debt is regarded, on balance, as predominantly
                         speculative with respect to capacity to pay interest
                         and repay principal in accordance with the terms of the
                         obligation. "BB" indicates the lowest degree of
                         speculation and "C" the highest degree of speculation.
                         While such debt will likely have some quality and
                         protective characteristics, these are outweighed by
                         large uncertainties or major risk exposures to adverse
                         conditions.

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

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

     "CCC"               Debt has a currently identifiable vulnerability to
                         default, and is dependent upon favorable business,
                         financial and economic conditions to meet timely
                         payment of interest and repayment of principal. In the
                         event of adverse business, financial or economic
                         conditions, it is not likely to have the capacity to
                         pay interest and repay principal. The "CCC" rating
                         category is also used for debt subordinated to senior
                         debt that is assigned an actual or implied "B" or "B-"
                         rating.

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

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

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

     "D"                 Debt is in payment default. This rating is used when
                         interest payments or principal

                                      A-3

<PAGE>




                         payments are not made on the date due, even if the
                         applicable grace period has not expired, unless S & P
                         believes that such payments will be made during such
                         grace period. "D" rating is also used upon the filing
                         of a bankruptcy petition if debt service payments are
                         jeopardized.

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

     "r"                 This rating is attached to highlight derivative,
                         hybrid, and certain other obligations that S & P
                         believes may experience high volatility or high
                         variability in expected returns due to non-credit
                         risks. Examples of such obligations are: securities
                         whose principal or interest return is indexed to
                         equities, commodities, or currencies; certain swaps and
                         options; and interest only and principal only mortgage
                         securities. The absence of an "r" symbol should not be
                         taken as an indication that an obligation will exhibit
                         no volatility or variability in total return.


     The  following  summarizes  the ratings used by Moody's for  corporate  and
municipal long-term debt:

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

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

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

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

     "Ba," "B,"
     "Caa," "Ca,"
     and "C"             Bonds that possess one of these ratings provide
                         questionable protection of interest and principal ("Ba"
                         indicates some speculative elements; "B" indicates a
                         general lack of characteristics of desirable
                         investment; "Caa" represents a poor standing; "Ca"
                         represents obligations which are speculative in a high
                         degree; and "C" represents the lowest rated class of
                         bonds). "Caa," "Ca" and "C" bonds may be in default.

      Con.  (---)        Bonds for which the security depends upon the
                         completion of some act or the fulfillment of some
                         condition are rated conditionally. These are bonds
                         secured by (a) earnings of projects under
                         construction, (b) earnings of projects unseasoned in
                         operation experience, (c) rentals which begin when
                         facilities are completed, or (d) payments to which
                         some other limiting condition attaches. Parenthetical
                         rating denotes probable credit stature



                                      A-4


<PAGE>

                         upon completion of construction or elimination of
                         basis of condition.

     (P)                 When applied to forward delivery bonds,  indicates that
                         the  rating  is  provisional  pending  delivery  of the
                         bonds.  The rating may be revised  prior to delivery if
                         changes occur in the legal  documents or the underlying
                         credit quality of the bonds.

     Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment  attributes are designated by the symbols, Aa1,
A1, Ba1 and B1.

     The following  summarizes  the long-term debt ratings used by Duff & Phelps
for corporate and municipal long-term debt:

     "AAA"               Debt is considered to be of the highest credit quality.
                         The risk factors are negligible, being only slightly
                         more than for risk-free U.S. Treasury debt.

     "AA"                Debt is considered of high credit quality. Protection
                         factors are strong. Risk is modest  but  may vary
                         slightly from  time to time because of economic
                         conditions.

     "A"                 Debt possesses protection factors which are average but
                         adequate.  However,  risk factors are more variable and
                         greater in periods of economic stress.

     "BBB"               Debt  possesses  below average  protection  factors but
                         such protection factors are still considered sufficient
                         for prudent  investment.  Considerable  variability  in
                         risk is present during economic cycles.

     "BB," "B,"
     "CCC," "DD,"
     and "DP"            Debt that possesses one of these ratings is considered
                         to  be below investment grade.  Although  below
                         investment grade, debt rated "BB" is deemed likely to
                         meet obligations when due. Debt rated "B" possesses the
                         risk that obligations will not be met when due. Debt
                         rated "CCC" is well below investment grade and has
                         considerable uncertainty as to timely payment of
                         principal, interest or preferred dividends. Debt rated
                         "DD" is a defaulted debt obligation, and the rating
                         "DP" represents preferred stock with dividend
                         arrearages.


     To provide more  detailed  indications  of credit  quality,  the "AA," "A,"
"BBB," "BB" and "B"  ratings  may be  modified by the  addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.

     The  following  summarizes  the  highest  four  ratings  used by Fitch  for
corporate and municipal bonds:

     "AAA"               Bonds considered  to be investment  grade and of the
                         highest credit quality. The  obligor  has  an
                         exceptionally strong ability to pay interest and repay
                         principal, which  is  unlikely  to be affected  by
                         reasonably foreseeable events.

     "AA"                Bonds considered to be investment grade and of very
                         high credit quality. The obligor's ability to pay
                         interest and repay principal is very strong, although
                         not quite as strong as bonds rated "AAA." Because bonds
                         rated in the "AAA" and "AA" categories are not
                         significantly vulnerable to foreseeable future
                         developments, short-term debt of these issuers is
                         generally rated "F-1+."

     "A"                 Bonds  considered to be investment grade and of high
                         credit quality. The obligor's ability to pay interest
                         and repay principal is considered to be strong, but may
                         be more  vulnerable to adverse changes in  economic
                         conditions  and  circumstances than bonds with higher
                         ratings.

     "BBB"               Bonds considered to be investment  grade and  of
                         satisfactory  credit quality. The obligor's ability to
                         pay interest and repay principal is considered to be
                         adequate.


                                      A-5

<PAGE>



                          Adverse changes in economic conditions and
                          circumstances, however, are more likely to have an
                          adverse impact on these bonds, and therefore, impair
                          timely payment. The likelihood that the ratings of
                          these bonds will fall below investment grade is higher
                          than for bonds with higher ratings.

     "BB," "B,"
     "CCC," "CC,"
     "C," "DDD,"
     "DD," and "D"       Bonds that possess one of these ratings are
                         considered by Fitch to be speculative investments. The
                         ratings "BB" to "C" represent Fitch's assessment of the
                         likelihood of timely payment of principal and interest
                         in accordance with the terms of obligation for bond
                         issues not in default. For defaulted bonds, the rating
                         "DDD" to "D" is an assessment of the ultimate recovery
                         value through reorganization or liquidation.


     To provide more detailed indications of credit quality, the Fitch ratings
from and  including "AA" to "BBB" may be modified by the addition of a plus (+)
or  minus (-) sign to show relative standing  within  these  major  rating
categories.

     IBCA  assesses the investment quality of unsecured debt with an  original
maturity  of more than one year which is issued by bank holding companies and
their  principal  bank subsidiaries. The  following  summarizes the rating
categories used by IBCA for long-term debt ratings:

     "AAA"               Obligations for which there is the lowest expectation
                         of investment risk. Capacity for timely repayment of
                         principal and interest is substantial such that adverse
                         changes in business, economic or financial conditions
                         are unlikely to increase investment risk substantially.

     "AA"                Obligations or which there is a very low  expectation
                         of investment risk. Capacity for timely repayment of
                         principal and  interest  is ubstantial, such that
                         adverse changes in business, economic or financial
                         conditions  may increase investment risk, albeit not
                         very significantly.

     "A"                 Obligations for which there is a low  expectation of
                         investment risk. Capacity  for  timely  repayment of
                         principal and interest is strong, although  adverse
                         changes in business, economic or financial conditions
                         may lead to increased investment risk.

     "BBB"               Obligations for which there is currently a low
                         expectation of investment risk. Capacity for timely
                         repayment of principal and interest is adequate,
                         although adverse changes in business, economic or
                         financial conditions are more likely to lead to
                         increased investment risk than for obligations in other
                         categories.

     "BB," "B,"
     "CCC," "CC,"
     and  "C"            Obligations are assigned one of these ratings where
                         it is considered that speculative characteristics are
                         present. "BB" represents the lowest degree of
                         speculation and indicates a possibility of investment
                         risk developing. "C" represents the highest degree of
                         speculation and indicates that the obligations are
                         currently in default.


     IBCA may  append a rating  of plus (+) or minus  (-) to a rating  to denote
relative status within major rating categories.

     Thomson  BankWatch  assesses  the  likelihood  of an untimely  repayment of
principal or interest  over the term to maturity of long term debt and preferred
stock which are issued by United States commercial  banks,  thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings:

     "AAA"               This designation represents the highest category
                         assigned by Thomson BankWatch to

                                      A-6


<PAGE>


                         long-term debt and indicates that the ability to
                         repay principal and interest on a timely basis is
                         extremely high.

     "AA"                This designation indicates a very strong ability to
                         repay principal and interest on a timely basis with
                         limited incremental risk compared to issues rated in
                         the highest category.

     "A"                 This designation indicates that the ability to repay
                         principal and interest is strong. Issues rated "A"
                         could be more vulnerable to adverse developments (both
                         internal and external) than obligations with higher
                         ratings.

     "BBB"               This designation represents Thomson BankWatch's lowest
                         investment grade  category and indicates an acceptable
                         capacity to repay principal and interest. Issues rated
                         "BBB"  are,  however,  more  vulnerable to  adverse
                         developments  (both  internal and external) than
                         obligations with higher ratings.

     "BB," "B,"
     "CCC," and "CC,"    These designations are assigned by Thomson
                         BankWatch to non-investment grade long-term debt. Such
                         issues are regarded as having speculative
                         characteristics regarding the likelihood of timely
                         payment of principal and interest. "BB" indicates the
                         lowest degree of speculation and "CC" the highest
                         degree of speculation.

     "D"                 This designation indicates that the long-term debt
                         is in default.

     PLUS (+) OR
     MINUS (-)           The ratings from "AAA" through "CC" may include a plus
                         or minus sign designation which indicates where
                         within  the respective category the issue is placed.


MUNICIPAL NOTE RATINGS

     A Standard and Poor's rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:

     "SP-1"              The issuers of these municipal notes exhibit very
                         strong or strong capacity to pay principal and
                         interest. Those issues determined to possess
                         overwhelming safety characteristics are given a plus
                         (+) designation.

     "SP-2"              The issuers of these municipal notes exhibit
                         satisfactory capacity to pay principal and interest.

     "SP-3"              The issuers of these municipal notes exhibit
                         speculative capacity to pay principal and interest.


     Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:

     "MIG-1"/
     "VMIG-1"            Loans bearing this designation are of the best quality,
                         enjoying strong protection by established cash flows,
                         superior liquidity support or demonstrated broad-based
                         access to the market for refinancing.

     "MIG-2"/
     "VMIG-2"            Loans bearing this designation are of high quality,
                         with margins of protection ample although not so large
                          As in the preceding group.

     "MIG-3"/
     "VMIG-3"            Loans bearing this designation are of favorable
                         quality, with all security elements

                                      A-7


<PAGE>


                         accounted for but lacking the undeniable strength of
                         the preceding grades. Liquidity and cash flow
                         protection may be narrow and market access for
                         refinancing is likely to be less well established.

     "MIG-4"/
     "VMIG-4"            Loans bearing this designation are of adequate quality,
                         carrying specific risk but having  protection  commonly
                         regarded as required of an investment  security and not
                         distinctly or predominantly speculative.

     "SG"                Loans bearing this designation are of speculative
                         quality and lack margins of protection.

     Fitch  and  Duff &  Phelps  use  the  short-term  ratings  described  under
Commercial Paper Ratings for municipal notes.



                                      A-8

<PAGE>



                                   APPENDIX B

            GENERAL CHARACTERISTICS AND RISKS OF HEDGING TRANSACTIONS


     In order to manage the risk of its securities portfolio, or to enhance
income or gain as described in the prospectus, the Trust will engage in
Additional Investment Management Techniques. The Trust will engage in such
activities in the Advisor's or Sub-Advisor's discretion, and may not necessarily
be engaging in such activities when movements in interest rates that could
affect the value of the assets of the Trust occur. The Trust's ability to pursue
certain of these strategies may be limited by applicable regulations of the
CFTC. Certain Additional Investment Management Techniques may give rise to
taxable income.

PUT AND CALL OPTIONS ON SECURITIES AND INDICES

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

     The Trust's ability to close out its position as a purchaser or seller of
an exchange-listed put or call option is dependent upon the existence of a
liquid secondary market on option exchanges. Among the possible reasons for the
absence of a liquid secondary market on an exchange are: (i) insufficient
trading interest in certain options; (ii) restrictions on transactions imposed
by an exchange; (iii) trading halts, suspensions or other restrictions imposed
with respect to particular classes or series of options or underlying
securities; (iv) interruption of the normal operations on an exchange; (v)
inadequacy of the facilities of an exchange or OCC to handle current trading
volume; or (vi) a decision by one or more exchanges to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options on that exchange that had been
listed by the OCC as a result of trades on that exchange would generally
continue to be exercisable in accordance with their terms. OTC Options are
purchased from or sold to dealers, financial institutions or other
counterparties which have entered into direct agreements with the Trust. With
OTC Options, such variables as expiration date, exercise price and premium will
be agreed upon between the Trust and the counterparty, without the
intermediation of a third party such as the OCC. If the counterparty fails to
make or take delivery of the securities underlying an option it has written, or
otherwise settle the transaction in accordance with the terms of

                                      B-1


<PAGE>

that option as written, the Trust would lose the premium paid for the option as
well as any anticipated benefit of the transaction. As the Trust must rely on
the credit quality of the counterparty rather than the guarantee of the OCC, it
will only enter into OTC Options with counterparties with the highest long-term
credit ratings, and with primary United States government securities dealers
recognized by the Federal Reserve Bank of New York.

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

FUTURES CONTRACTS AND RELATED OPTIONS

     CHARACTERISTICS. The Trust may sell financial futures contracts or purchase
put and call options on such futures as a hedge against anticipated interest
rate changes or other market movements. The sale of a futures contract creates
an obligation by the Trust, as seller, to deliver the specific type of financial
instrument called for in the contract at a specified future time for a specified
price. Options on futures contracts are similar to options on securities except
that an option on a futures contract gives the purchaser the right in return for
the premium paid to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put).

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

     LIMITATIONS ON USE OF FUTURES AND OPTIONS ON FUTURES. The Trust's use of
futures and options on futures will in all cases be consistent with applicable
regulatory requirements and in particular the rules and regulations of the CFTC.
Under such regulations the Trust currently may enter into such transactions
without limit for BONA FIDE hedging purposes, including risk management and
duration management and other portfolio strategies. The Trust may also engage in
transactions in futures contracts or related options for non-hedging purposes to
enhance income or gain provided that the Trust will not enter into a futures
contract or related option (except for closing transactions) for purposes other
than BONA FIDE hedging, or risk management including duration management if,
immediately thereafter, the sum of the amount of its initial deposits and
premiums on open contracts and options would exceed 5% of the Trust's
liquidation value, i.e., net assets (taken at current value); provided, however,
that in the case of an option that is in-the-money at the time of the purchase,
the in-the-money amount may be excluded in calculating the 5% limitation. Also,
when required, a segregated account of cash equivalents will be maintained and
marked to market on a daily basis in an amount equal to the market value of the
contract. The Trust reserves the right to comply with such different standard as
may be established from time to time by CFTC rules and regulations with respect
to the purchase or sale of futures contracts or options thereon.

     SEGREGATION AND COVER REQUIREMENTS. Futures contracts, interest rate swaps,
caps, floors and collars, short sales, reverse repurchase agreements and dollar
rolls, and listed or OTC options on securities, indices and futures contracts
sold by the Trust are generally subject to segregation and coverage requirements
of either the CFTC or the SEC, with the result that, if the Trust does not hold
the security or futures contract underlying the instrument, the T rust will be
required to segregate on an ongoing basis with its custodian, cash, U.S.
government securities, or other liquid high grade debt obligations in an amount
at least equal to the Trust's obligations with respect to

                                       B-2

<PAGE>


such instruments. Such amounts fluctuate as the obligations increase or
decrease. The segregation requirement can result in the Trust maintaining
securities positions it would otherwise liquidate, segregating assets at a time
when it might be disadvantageous to do so or otherwise restrict portfolio
management.

     Additional Investment Management Techniques present certain risks. With
respect to hedging and risk management, the variable degree of correlation
between price movements of hedging instruments and price movements in the
position being hedged create the possibility that losses on the hedge may be
greater than gains in the value of the Trust's position. The same is true for
such instruments entered into for income or gain. In addition, certain
instruments and markets may not be liquid in all circumstances. As a result, in
volatile markets, the Trust may not be able to close out a transaction without
incurring losses substantially greater than the initial deposit. Although the
contemplated use of these instruments predominantly for hedging should tend to
minimize the risk of loss due to a decline in the value of the position, at the
same time they tend to limit any potential gain which might result from an
increase in the value of such position. The ability of the Trust to successfully
utilize Additional Investment Management Techniques will depend on the Advisor's
and the Sub-Advisor's ability to predict pertinent market movements and
sufficient correlations, which cannot be assured. Finally, the daily deposit
requirements in futures contracts that the Trust has sold create an on going
greater potential financial risk than do options transactions, where the
exposure is limited to the cost of the initial premium. Losses due to the use of
Additional Investment Management Techniques will reduce net asset value.



                                      B-3

<PAGE>



                      [This page intentionally left blank.]


<PAGE>





                                     PART C

                                OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

     (1)  FINANCIAL STATEMENTS


          Part A--None
          Part B--Report of Independent Auditors
                  Statement of Assets and Liabilities.

     (2)  EXHIBITS

        (a)     Agreement and Declaration of Trust.(1)

        (b)     By-Laws.(1)

        (c)     Inapplicable.

        (d)     Form of Specimen Certificate.(3)

        (e)     Form of Dividend Reinvestment Plan.(2)

        (f)     Inapplicable.

        (g)(1)  Form of Investment Management Agreement.(2)

        (g)(2)  Form of Sub-Investment Advisory Agreement.(2)

        (h)     Form of Underwriting Agreement.(3)

        (i)     Form of Deferred Compensation Plan for Independent Trustees.(2)

        (j)     Form of Custodian Agreement.(3)

        (k)     Form of Transfer Agency Agreement.(3)

        (l)     Opinion and Consent of Counsel to the Trust.(3)

        (m)     Inapplicable.

        (n)     Consent of Independent Public Accountants.(3)

        (o)     Inapplicable.

        (p)     Form of Initial Subscription Agreement.(2)

        (q)     Inapplicable.

        (r)(1)  Code of Ethics of Trust.(2)

        (r)(2)  Code of Ethics of Advisor and Sub-Advisor.(2)

        (r)(3)  Code of Ethics of J.J.B. Hilliard, W.L. Lyons, Inc.(2)

        (s)     Powers of Attorney(1)


- ------------
(1)  Previously filed with the initial filing on October 18, 2001.

(2)  Previously filed with Pre-effective amendment No. 1 to the Registration
     Statement on October 25, 2001.

(3)  Filed herewith.



ITEM 25. MARKETING ARRANGEMENTS

     Reference  is  made  to  the  Form  of   Underwriting   Agreement  for  the
Registrant's shares of beneficial interest filed herewith.



                                    Part C-1
<PAGE>



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 .........................................           $  112,000

New York Stock Exchange listing fee .......................              115,000
Printing (other than certificates) ........................              351,300
Engraving and printing certificates .......................               22,000
Accounting fees and expenses ..............................                5,000
Legal fees and expenses ...................................              150,000
NASD fee ..................................................               25,000
Miscellaneous .............................................              238,000
  Total ...................................................           $1,018,800



ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT


     None.



ITEM 28. NUMBER OF HOLDERS OF SHARES

                                                       NUMBER OF
                                                        RECORD
  TITLE OF CLASS                                        HOLDERS
     --------                                           -------

Shares of Beneficial Interest......................        1


ITEM 29. INDEMNIFICATION

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

     5.1 NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. 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 Delaware General Corporation Law. No Trustee or officer
of the Trust shall be subject in such capacity to any personal liability
whatsoever to any Person, save only liability to the Trust or its Shareholders
arising from bad faith, willful misfeasance, gross negligence 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.
Any repeal or modification of this Section 5.1 shall not adversely affect any
right or protection of a Trustee or officer of the Trust existing at the time of
such repeal or modification with respect to acts or omissions occurring prior to
such repeal or modification.

     5.2  MANDATORY  INDEMNIFICATION. (a) The Trust hereby  agrees to indemnify
each  person who at any time  serves as a Trustee or officer 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 in this Article V 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,



                                    Part C-2
<PAGE>

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, 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 (1) was
authorized by a majority of the Trustees or (2) was instituted by the indemnitee
to enforce his or her rights to indemnification hereunder in a case in which the
indemnitee is found to be entitled to such indemnification. The rights to
indemnification set forth in this Declaration shall continue as to a person who
has ceased to be a Trustee or officer of the Trust and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives.
No amendment or restatement of this Declaration or repeal of any of its
provisions shall limit or eliminate any of the benefits provided to any person
who at any time is or was a Trustee or officer of the Trust or otherwise
entitled to indemnification hereunder in respect of any act or omission that
occurred prior to such amendment, restatement or repeal.

      (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 Trust (as defined in Section 2(a)(19) of the
Investment Company Act) nor parties to the proceeding ("Disinterested Non-Party
Trustee"), 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 concludes 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 the indemnitee 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 which any person may have or hereafter acquire under
this Declaration, the By-Laws of the Trust, any statute, agreement, vote of
stockholders or Trustees who are "disinterested persons" (as defined in Section
2(a)(19) of the 1940 Act) or any other right to which he or she may be lawfully
entitled.

     (e) Subject to any limitations provided by the 1940 Act and this
Declaration, the Trust shall have the power and authority to indemnify and
provide for the advance payment of expenses to employees, agents and other
Persons providing services to the Trust or serving in any capacity at the
request of the Trust to the full extent corporations organized under the
Delaware General Corporation Law may indemnify or provide for the advance
payment of expenses for such Persons, provided that such indemnification has
been approved by a majority of the Trustees.



                                    Part C-3

<PAGE>


     5.3 NO BOND REQUIRED OF TRUSTEES. No Trustee shall, as such, be obligated
to give any bond or other security for the performance of any of his duties
hereunder.


     5.4 NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No
purchaser, lender, transfer agent or other person dealing with the Trustees or
with any officer, employee or agent of the Trust shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent or be liable for the application
of money or property paid, loaned, or delivered to or on the order of the
Trustees or of said officer, employee or agent. Every obligation, contract,
undertaking, instrument, certificate, Share, other security of the Trust, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. The Trustees may maintain
insurance for the protection of the Trust Property, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable or is required by the 1940
Act.

     5.5 RELIANCE ON EXPERTS, ETC. Each Trustee and officer or employee of the
Trust shall, in the performance of its duties, be fully and completely justified
and protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel, or upon reports made to the Trust by any of the
Trust's officers or employees or by any advisor, administrator, manager,
distributor, selected dealer, accountant, appraiser or other expert or
consultant selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.

     Insofar as indemnification for liabilities arising under the Act, may be
terminated 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. Reference is made to Article 8 of the underwriting
agreement attached as Exhibit (h), which is incorporated herein by reference.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR


     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., 100 Bellevue
Parkway, Wilmington,  Delaware 19809 and at the offices of State Street Bank and
Trust Company, the Registrant's  Custodian,  and EquiServe Trust Company,  N.A.,
the Registrant's Transfer Agent and Dividend Disbursing Agent.

ITEM 32. MANAGEMENT SERVICES

     Not Applicable




                                    Part C-4
<PAGE>


ITEM 33. UNDERTAKINGS

     (1) The Registrant hereby undertakes to suspend the offering of its units
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) Not applicable

     (3) Not applicable

     (4) Not applicable

     (5) (a) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant 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.

                                    Part C-5


<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
the 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 27th day of November, 2001.

                                            /s/ RALPH L. SCHLOSSTEIN
                                          -----------------------------
                                              Ralph L. Schlosstein
                                Trustee, President, Chief Executive Officer and
                                             Chief Financial Officer

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities set forth below on the 27th day of November, 2001.



             NAME                                          TITLE
             ----                                          -----
   /s/ Ralph L. Schlosstein                        Trustee, President,
 ----------------------------                      Chief Executive Officer and
     Ralph L. Schlosstein                          Chief Financial Officer

               *                                   Trustee
 ---------------------------
       Andrew F. Brimmer

               *                                   Trustee
 ----------------------------
      Richard E. Cavanagh

               *                                   Trustee
 ----------------------------
          Kent Dixon

               *                                   Trustee
 ----------------------------
       Frank J. Fabozzi

               *                                   Trustee
 ----------------------------
       Laurence D. Fink

               *                                   Trustee
 ---------------------------
 James Clayburn La Force, Jr.

                                                   Trustee
- ----------------------------
      Walter F. Mondale



*    By:       /s/ Ralph L. Schlosstein
               -------------------------
                 Ralph L. Schlosstein
                   Attorney-in-fact



                                     Part C-6

<PAGE>


INDEX TO EXHIBITS


          (d)     Form of Specimen Certificate

          (h)     Form of Underwriting Agreement

          (j)     Form of Custodian Agreement

          (k)     Form of Transfer Agency Agreement

          (l)     Opinion and Consent of Counsel to the Trust

          (n)     Consent of Independent Public Accountants





                                    Part C-7

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2D
<SEQUENCE>3
<FILENAME>c22094_ex99-2d.txt
<DESCRIPTION>FORM OF SPECIMEN CERTIFICATE
<TEXT>

                                                                     Exhibit (d)

<TABLE>
<S>               <C>                                                                                 <C>
                  COMMON SHARES                                                                        Shares
                  OF BENEFICIAL INTEREST

Number            PAR VALUE $.001
BHK
                  ORGANIZED UNDER THE LAWS
                  OF THE STATE OF DELAWARE


                  The Shares represented by this certificate may not be owned or transferred,           THIS CERTIFICATE
                  directly or indirectly, by or to (I) the United States, or any state or political     IS TRANSFERABLE IN
                  subdivision thereof, any foreign government, any international organization,          BOSTON OR IN NEW YORK CITY
                  or any agency or instrumentality of any of the foregoing, (II) any organization
                 (other than a farmer's cooperative described in ss. 521 of the Internal Revenue        CUSIP 09249E 10 1

                  Code of 1988, as amended (the "Code")) that is exempt from the                        SEE REVERSE
                  tax imposed SEE REVERSE FOR CERTAIN DEFINITIONS by 28 U.S.C.                          FOR CERTAIN
                  ss.ss. 1-1399 and not subject to the tax imposed by 28 U.S.C.                         DEFINITIONS
                  ss. 511; or (III) any rural electric or telephone cooperative
                  described in ss. 1381(A)(2)(C) of the Code.
</TABLE>


                            BlackRock Core Bond Trust


THIS CERTIFIES THAT




IS THE OWNER OF


      FULLY PAID AND NONASSESSABLE COMMON SHARES OF BENEFICIAL INTEREST OF


BlackRock Core Bond Trust, transferable on the books of the Trust by the holder
hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be subject to all of the provisions of the Trust, as
amended from time to time, to all of which the holder by acceptance hereof
assents. This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.

     Witness the facsimile signatures of the duly authorized officers of the
Trust.

     DATED:

     COUNTERSIGNED AND REGISTERED:
       EQUISERVE TRUST COMPANY N.A.
                     (BOSTON)
BY    TRANSFER AGENT AND REGISTRAR

                                 /s/ Anne Ackerley     /s/ Ralph L. Schlosstein

       AUTHORIZED SIGNATURE      SECRETARY             PRESIDENT


<PAGE>

         The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<TABLE>
<S>      <C>      <C>  <C>                                            <C>                        <C>
         TEN COM  -   as tenants in common                            UNIF GIFT MIN ACT-- .......Custodian....................
         TEN ENT  -   as tenants by the entireties                                         (Cust)                (Minor)
         JT TEN   -   as joint tenants with right of survivorship and not as     Act.......................................
                      tenants in common                                                            (State)
</TABLE>


     Additional abbreviations may also be used though not in the above list.



For Value Received _______________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE



<TABLE>


<S>                                 <C>
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
                                  (NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)

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



- ------------------------------------------------------------- Common Shares of Beneficial Interest represented by the within
Certificate and do hereby irrevocably constitute and appoint

- ------------------------------------------------------------- Attorney to transfer the said shares on the books of the within-named
Trust, with full power of substitution in the premises.

Dated
      --------------------


                               X
                                ------------------------------------------------------------------------------------


                               X
                                ------------------------------------------------------------------------------------
                       NOTICE:   THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE
                                 OF THE CERTIFICATE IN EVERY PARTICULAR,  WITHOUT ALTERATION OR ENLARGEMENT OR ANY  CHANGE
                                 WHATEVER.
</TABLE>


Signature(s) Guaranteed



By ----------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO
S.E.C. RULE 17Ad-15.

                                       2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2H
<SEQUENCE>4
<FILENAME>c22094_ex99-2h.txt
<DESCRIPTION>UNDERWRITING AGREEMENT
<TEXT>

                                                                     Exhibit (h)





                            BlackRock Core Bond Trust


                              [            Shares]


                                  Common Shares
                                ($.001 Par Value)


                             UNDERWRITING AGREEMENT


                                November 27, 2001

<PAGE>


                             UNDERWRITING AGREEMENT


                                                               November 27, 2001


UBS Warburg LLC,
as Managing Underwriter
299 Park Avenue
New York, New York  10171-0026

Ladies and Gentlemen:

        BlackRock  Core Bond Trust,  a Delaware  business  trust (the  "Trust"),
proposes  to issue  and sell to the  underwriters  named in  Schedule  A annexed
hereto (the "Underwriters") an aggregate of [ ]common shares (the "Firm Shares")
of beneficial interest $0.001 par value (the "Common Shares"),  of the Trust. In
addition, solely for the purpose of covering over-allotments, the Trust proposes
to grant to the  Underwriters  the  option to  purchase  from the Trust up to an
additional [ ] Common Shares (the "Additional Shares").  The Firm Shares and the
Additional  Shares are  hereinafter  collectively  sometimes  referred to as the
"Shares." The Shares are described in the Prospectus which is referred to below.

        The Trust has filed with the  Securities  and Exchange  Commission  (the
"Commission"),  in accordance with the provisions of the Securities Act of 1933,
as amended,  and the rules and regulations  thereunder  (collectively called the
"Act"),  and with the  provisions  of the  Investment  Company  Act of 1940,  as
amended,  and the rules and  regulations  thereunder  (collectively  called  the
"Investment  Company  Act"),  a  registration  statement  on Form N-2 (File Nos.
333-71836 and  811-10543,  including a prospectus  and a statement of additional
information,  relating to the Shares. The Trust has furnished to you, for use by
the Underwriters and by dealers, copies of one or more preliminary  prospectuses
(including a preliminary  statement of additional  information)  (each  thereof,
including such  preliminary  statement of additional  information,  being herein
called a  "Preliminary  Prospectus")  relating to the Shares.  Except  where the
context  otherwise  requires,  the  registration  statement,  as amended when it
becomes  effective (the  "Effective  Date"),  including all documents filed as a
part  thereof,   and  including  any  information   contained  in  a  prospectus
subsequently  filed with the  Commission  pursuant to Rule 497 under the Act and
deemed to be part of the  registration  statement  at the time of  effectiveness
pursuant  to  Rule  430A  under  the  Act is  herein  called  the  "Registration
Statement,"   and  the   prospectus   (including  the  statement  of  additional
information),  in the form filed by the Trust with the  Commission  pursuant  to
Rule 497  under the Act or, if no such  filing  is  required,  the form of final
prospectus  (including  the form of final  statement of additional  information)
included  in the  Registration  Statement  at the time it became  effective,  is
herein called the  "Prospectus".  Any  registration  statement filed pursuant to
Rule 462(b) of the Act is herein  referred to as the "Rule  462(b)  Registration
Statement,"  and after  such  filing  the term  "Registration  Statement"  shall
include the Rule 462(b) Registration Statement. In addition, the Trust has filed
a Notification  of Registration  on Form N-8A (the  "Notification")  pursuant to
Section 8 of the Investment Company Act.

        BlackRock Advisors,  Inc. ("BAI") acts as the Trust's investment adviser
pursuant to an Investment Management Agreement by and between the Trust and BAI,
dated as of November 19, 2001 (the "Management Agreement").  BlackRock Financial
Management,  Inc. ("BFM") acts as the Trust's investment sub-adviser pursuant to
a Sub-Investment  Advisory Agreement by and between BFM and BAI, as accepted and
agreed  to by the  Trust,  dated as of  November  19,  2001  (the  "Sub-Advisory
Agreement").  BAI and BFM are each an "Adviser",  and together,  the "Advisers".
State Street Bank and Trust Company acts as the custodian (the  "Custodian")  of
the Trust's cash and portfolio assets pursuant to a Custodian  Agreement,  dated
as of November 19, 2001 (the "Custodian Agreement"). EquiServe Trust

<PAGE>


Company acts as the Trust's  transfer agent,  registrar,  shareholder  servicing
agent and dividend  disbursing  agent with  respect to the common  shares of the
Trust (the "Transfer Agent") pursuant to a Transfer Agent and Service Agreement,
dated as of November 26, 2001 (the "Transfer Agency Agreement").

        The Trust, the Advisers and the Underwriters agree as follows:

        1.      SALE  AND  PURCHASE.  Upon  the  basis  of  the  warranties  and
representations  and subject to the terms and conditions  herein set forth,  the
Trust  agrees  to  sell  to  the  respective   Underwriters   and  each  of  the
Underwriters,  severally and not jointly,  agrees to purchase from the Trust the
aggregate  number of Firm Shares set forth opposite the name of such Underwriter
in  Schedule  A attached  hereto in each case at a  purchase  price of $ [ ] per
Share.  The Trust is advised by you that the  Underwriters  intend (i) to make a
public  offering of their  respective  portions of the Firm Shares as soon after
the  effective  date  of the  Registration  Statement  as in  your  judgment  is
advisable  and (ii)  initially to offer the Firm Shares upon the terms set forth
in the  Prospectus.  You may from time to time  increase or decrease  the public
offering  price  after the  initial  public  offering  to such extent as you may
determine.

                In addition, the Trust hereby grants to the several Underwriters
the option to purchase, and upon the basis of the warranties and representations
and subject to the terms and conditions herein set forth, the Underwriters shall
have the right to purchase,  severally and not jointly,  from the Trust, ratably
in  accordance  with the number of Firm Shares to be  purchased by each of them,
all or a  portion  of  the  Additional  Shares  as may  be  necessary  to  cover
over-allotments  made in connection with the offering of the Firm Shares, at the
same purchase  price per share to be paid by the  Underwriters  to the Trust for
the Firm  Shares.  This option may be  exercised by you on behalf of the several
Underwriters  at any time,  and from time to time, on or before the  forty-fifth
day following the date hereof, by written notice to the Trust. Such notice shall
set forth the aggregate  number of  Additional  Shares as to which the option is
being  exercised,  and the date and time when the  Additional  Shares  are to be
delivered (such date and time being herein referred to as the Additional Time of
Purchase);  PROVIDED, HOWEVER, that the Additional Time of Purchase shall not be
earlier than the Time of Purchase (as defined below) nor earlier than the second
business day(1) after the date on which the option shall have been exercised nor
later than the tenth  business day after the date on which the option shall have
been exercised.  The number of Additional  Shares to be sold to each Underwriter
shall be the number which bears the same  proportion to the aggregate  number of
Additional  Shares  being  purchased  as the  number  of Firm  Shares  set forth
opposite  the name of such  Underwriter  on Schedule A hereto bears to the total
number of Firm Shares  (subject,  in each case,  to such  adjustment  as you may
determine to eliminate fractional shares).

        2.      PAYMENT AND DELIVERY. Payment of the purchase price for the Firm
Shares  shall be made to the  Trust by  Federal  Funds  wire  transfer,  against
delivery of the  certificates  for the Firm Shares to you through the facilities
of the  Depository  Trust  Company  ("DTC") for the  respective  accounts of the
Underwriters.  Such payment and delivery  shall be made at 10:00 A.M.,  New York
City time,  on November 30, 2001 (unless  another time shall be agreed to by you
and the Trust or unless postponed in accordance with the provisions of Section 8
hereof).  The time at which such  payment  and  delivery  are  actually  made is
hereinafter  sometimes  called the "Time of  Purchase"  or the  "Closing  Date".
Certificates for the Firm Shares shall be delivered to you in definitive form in
such names and in such denominations as you shall specify on the second business
day preceding the Time of Purchase.  For the purpose of expediting  the checking
of the  certificates  for the Firm Shares by you,  the Trust agrees to make such
certificates  available to you for such  purpose at least one full  business day
preceding the Time of Purchase.

                Payment of the purchase price for the Additional Shares shall be
made at the  Additional  Time of  Purchase  in the same  manner  and at the same
office as the payment for the Firm Shares.

- --------

(1)     As used  herein  "business  day"  shall mean a day on which the New York
        Stock Exchange is open for trading.

                                     - 2 -
<PAGE>


Certificates  for the Additional  Shares shall be delivered to you in definitive
form in such names and in such  denominations as you shall specify no later than
the second  business day  preceding  the  Additional  Time of Purchase.  For the
purpose of expediting the checking of the certificates for the Additional Shares
by you,  the Trust  agrees to make such  certificates  available to you for such
purpose  at  least  one full  business  day  preceding  the  Additional  Time of
Purchase.

        3.      REPRESENTATIONS AND WARRANTIES OF THE TRUST AND THE ADVISERS.

                (a)     The  Trust  and  the  Advisers   jointly  and  severally
        represent and warrant to each of the  Underwriters as of the date hereof
        and as of the Closing Date and each Additional Time of Purchase, if any,
        referred  to in Section 2 hereof,  and agree with each  Underwriter,  as
        follows:

                        (i)     Each of the Registration  Statement and any Rule
                462(b) Registration Statement has become effective under the Act
                and  no  stop  order   suspending  the   effectiveness   of  the
                Registration Statement or any Rule 462(b) Registration Statement
                has been  issued  under  the Act,  or  order  of  suspension  or
                revocation  of  registration  pursuant  to  Section  8(e) of the
                Investment  Company Act, and no proceedings for any such purpose
                have been  instituted or are pending or, to the knowledge of the
                Trust or the Advisers,  are contemplated by the Commission,  and
                any  request  on the  part  of  the  Commission  for  additional
                information has been complied with.

                        At the respective times the Registration Statement,  any
                Rule  462(b)  Registration   Statement  and  any  post-effective
                amendments thereto became effective and at any Closing Date, the
                Registration Statement,  the Rule 462(b) Registration Statement,
                the  Notification  and any  amendments and  supplements  thereto
                complied  and will  comply  in all  material  respects  with the
                requirements  of the Act and the Investment  Company Act and did
                not and will not contain an untrue  statement of a material fact
                or omit to state a material fact  required to be stated  therein
                or  necessary  to make the  statements  therein not  misleading.
                Neither  the   Prospectus  nor  any  amendments  or  supplements
                thereto,  at the time the  Prospectus  or any such  amendment or
                supplement was issued and at any Closing Date,  included or will
                include an untrue  statement  of a  material  fact or omitted or
                will omit to state a material  fact  necessary  in order to make
                the statements  therein, in the light of the circumstances under
                which they were made, not misleading.  If Rule 434 of the Act is
                used,  the Trust will comply with the  requirements  of Rule 434
                and the Prospectus shall not be "materially different",  as such
                term is used in Rule 434,  from the  prospectus  included in the
                Registration Statement at the time it became effective.

                        Each preliminary  prospectus and the prospectus filed as
                part of the  Registration  Statement as  originally  filed or as
                part of any  amendment  thereto,  or filed  pursuant to Rule 497
                under the Act,  complied when so filed in all material  respects
                with the Rules and Regulations and each  preliminary  prospectus
                and the  Prospectus  delivered  to the  Underwriters  for use in
                connection   with   this   offering   was   identical   to   the
                electronically   transmitted   copies  thereof  filed  with  the
                Commission  pursuant to its Electronic  Data Gathering  Analysis
                and Retrieval System  ("EDGAR"),  except to the extent permitted
                by Regulation S-T.

                        If a Rule 462(b)  Registration  Statement is required in
                connection  with the offering and sale of the Shares,  the Trust
                has  complied or will comply with the  requirements  of Rule 111
                under the Act relating to the payment of filing fees thereof.

                                     - 3 -
<PAGE>


                        (ii)    The  accountants  who certified the statement of
                assets and liabilities  included in the  Registration  Statement
                are independent public accountants as required by the Act.

                        (iii)   The statement of assets and liabilities included
                in the Registration Statement and the Prospectus,  together with
                the related notes, presents fairly the financial position of the
                Trust at the date indicated; said statement has been prepared in
                conformity  with  generally   accepted   accounting   principles
                ("GAAP").

                        (iv)    To  the  extent  estimated  or  projected,  such
                estimates or projections  set forth in the Prospectus in the Fee
                Table are  reasonably  believed to be attainable  and reasonably
                based.

                        (v)     Since   the   respective   dates   as  of  which
                information  is  given  in the  Registration  Statement  and the
                Prospectus,  except as otherwise  stated therein,  (A) there has
                been no material  adverse change in the condition,  financial or
                otherwise,  or in the  earnings,  business  affairs or  business
                prospects  of the Trust,  whether or not arising in the ordinary
                course of business (a "Material Adverse Effect"), (B) there have
                been no transactions entered into by the Trust, other than those
                in the  ordinary  course of business,  which are  material  with
                respect  to the  Trust,  and (C) there has been no  dividend  or
                distribution of any kind declared,  paid or made by the Trust on
                any class of its capital stock other than  dividends made in the
                ordinary  course of  business  prior to the  Additional  Time of
                Purchase.

                        (vi)    The Trust has been duly organized and is validly
                existing as a business  trust in good standing under the laws of
                the State of Delaware and has business trust power and authority
                to own,  lease and  operate  its  properties  and to conduct its
                business as  described in the  Prospectus  and to enter into and
                perform its obligations  under this Agreement;  and the Trust is
                duly qualified as a foreign business trust to transact  business
                and is in good standing in each other jurisdiction in which such
                qualification is required, whether by reason of the ownership or
                leasing of property or the conduct of business, except where the
                failure so to qualify or to be in good standing would not result
                in a Material Adverse Effect.

                        (vii)   The Trust has no subsidiaries.

                        (viii)  The Trust is duly registered with the Commission
                under the  Investment  Company Act as a  closed-end  diversified
                management  investment  company,  and no order of  suspension or
                revocation of such  registration  has been issued or proceedings
                therefor initiated or threatened by the Commission.

                        (ix)    No person is  serving  or acting as an  officer,
                trustee or investment  adviser of the Trust except in accordance
                with  the  provisions  of the  Investment  Company  Act  and the
                Investment  Advisers Act of 1940, as amended,  and the rules and
                regulations   thereunder,   (the  "Advisers  Act").   Except  as
                disclosed in the  Registration  Statement and the Prospectus (or
                any amendment or  supplement  to either of them),  no trustee of
                the  Trust  is  an  "interested   person"  (as  defined  in  the
                Investment  Company Act) of the Trust or an "affiliated  person"
                (as defined in the Investment Company Act) of any Underwriter.

                        (x)     The authorized,  issued and  outstanding  common
                shares of  beneficial  interest  of the Trust is as set forth in
                the Prospectus as of the date thereof under the

                                     - 4 -
<PAGE>


                caption  "Description  of  Shares."  All issued and  outstanding
                common shares of beneficial interest of the Trust have been duly
                authorized   and   validly   issued   and  are  fully  paid  and
                non-assessable,   except  as   provided   for  in  the   Trust's
                declaration  of  trust,  and  have  been  offered  and  sold  or
                exchanged by the Trust in compliance  with all  applicable  laws
                (including,  without  limitation,  federal and state  securities
                laws);  none of the  outstanding  common  shares  of  beneficial
                interest of the Trust was issued in violation of the  preemptive
                or other similar rights of any securityholder of the Trust.

                        (xi)    The Shares to be purchased  by the  Underwriters
                from the Trust have been duly  authorized  for issuance and sale
                to the Underwriters  pursuant to this Agreement and, when issued
                and delivered by the Trust  pursuant to this  Agreement  against
                payment of the consideration  set forth herein,  will be validly
                issued and fully paid and non-assessable, except as provided for
                in the Trust's  declaration of trust.  The Shares conform in all
                material  respects to all statements  relating thereto contained
                in the Prospectus and such description  conforms in all material
                respects to the rights set forth in the instruments defining the
                same;  no holder  of the  Shares  will be  subject  to  personal
                liability by reason of being such a holder;  and the issuance of
                the Shares is not  subject to the  preemptive  or other  similar
                rights of any securityholder of the Trust.

                        (xii)   The Trust is not in violation of its declaration
                of  trust  or  by-laws,  or in  default  in the  performance  or
                observance of any obligation,  agreement,  covenant or condition
                contained in any contract,  indenture,  mortgage, deed of trust,
                loan or credit  agreement,  note,  lease or other  agreement  or
                instrument  to which it is a party or by which it may be  bound,
                or to  which  any of the  property  or  assets  of the  Trust is
                subject (collectively,  "Agreements and Instruments") except for
                such  violations or defaults that would not result in a Material
                Adverse Effect;  and the execution,  delivery and performance of
                this  Agreement,  the  Management  Agreement,  the  Sub-Advisory
                Agreement,  the  Custodian  Agreement  and the  Transfer  Agency
                Agreement and the consummation of the transactions  contemplated
                herein and in the Registration Statement (including the issuance
                and sale of the Shares and the use of the proceeds from the sale
                of the Shares as described in the  Prospectus  under the caption
                "Use  of  Proceeds")  and  compliance  by  the  Trust  with  its
                obligations hereunder have been duly authorized by all necessary
                corporate  action  and do not  and  will  not,  whether  with or
                without  the  giving  of  notice  or  passage  of time or  both,
                conflict with or constitute a breach of, or default or Repayment
                Event (as defined  below)  under,  or result in the  creation or
                imposition of any lien,  charge or encumbrance upon any property
                or  assets  of  the  Trust   pursuant  to,  the  Agreements  and
                Instruments (except for such conflicts,  breaches or defaults or
                liens,  charges  or  encumbrances  that  would  not  result in a
                Material  Adverse  Effect),  nor will such action  result in any
                violation  of the  provisions  of the  declaration  of  trust or
                by-laws  of the  Trust or any  applicable  law,  statute,  rule,
                regulation,  judgment,  order, writ or decree of any government,
                government instrumentality or court, domestic or foreign, having
                jurisdiction over the Trust or any of its assets,  properties or
                operations.  As used herein, a "Repayment Event" means any event
                or  condition  which gives the holder of any note,  debenture or
                other  evidence of  indebtedness  (or any person  acting on such
                holder's behalf) the right to require the repurchase, redemption
                or  repayment  of all or a portion of such  indebtedness  by the
                Trust.

                        (xiii)  There is no action, suit, proceeding, inquiry or
                investigation  before or  brought  by any court or  governmental
                agency or body,  domestic or foreign,  now  pending,  or, to the
                knowledge of the Trust or the Advisers,  threatened,  against or
                affecting  the Trust,  which is required to be  disclosed in the
                Registration Statement (other than as

                                     - 5 -
<PAGE>

                disclosed  therein),  or which might  reasonably  be expected to
                result in a Material  Adverse Effect,  or which might reasonably
                be expected to materially and adversely affect the properties or
                assets  of the  Trust or the  consummation  of the  transactions
                contemplated  in this Agreement or the  performance by the Trust
                of its obligations hereunder. The aggregate of all pending legal
                or governmental  proceedings to which the Trust is a party or of
                which any of its property or assets is the subject which are not
                described  in the  Registration  Statement,  including  ordinary
                routine  litigation  incidental  to  the  business,   could  not
                reasonably be expected to result in a Material Adverse Effect.

                        (xiv)   There are no contracts  or  documents  which are
                required to be  described in the  Registration  Statement or the
                Prospectus or to be filed as exhibits  thereto by the Act or the
                Investment  Company  Act which  have not been so  described  and
                filed as required.

                        (xv)    The Trust owns or  possesses,  or can acquire on
                reasonable  terms,  adequate patents,  patent rights,  licenses,
                inventions,  copyrights,  know-how  (including trade secrets and
                other unpatented and/or unpatentable proprietary or confidential
                information, systems or procedures),  trademarks, service marks,
                trade  names  or  other  intellectual  property   (collectively,
                "Intellectual  Property") necessary to carry on the business now
                operated by the Trust, and the Trust has not received any notice
                or is not  otherwise  aware of any  infringement  of or conflict
                with asserted rights of others with respect to any  Intellectual
                Property or of any facts or circumstances which would render any
                Intellectual  Property  invalid or  inadequate  to  protect  the
                interest  of  the  Trust  therein,  and  which  infringement  or
                conflict (if the subject of any unfavorable decision,  ruling or
                finding)  or  invalidity  or   inadequacy,   singly  or  in  the
                aggregate,  would result in a Material Adverse Effect;  provided
                that the Trust's right to use the name "BlackRock" is limited as
                set forth in Section 16 of the Management Agreement.

                        (xvi)   No  filing  with,  or  authorization,  approval,
                consent, license, order,  registration,  qualification or decree
                of, any court or  governmental  authority or agency is necessary
                or required for the  performance by the Trust of its obligations
                hereunder, in connection with the offering,  issuance or sale of
                the Shares  hereunder or the  consummation  of the  transactions
                contemplated by this Agreement, except such as have been already
                obtained or as may be  required  under the Act,  the  Investment
                Company Act,  the  Securities  Exchange Act of 1934,  as amended
                (the "1934 Act"), or state securities laws.

                        (xvii)  The  Trust  possesses  such  permits,  licenses,
                approvals,  consents  and  other  authorizations  (collectively,
                "Governmental  Licenses")  issued  by the  appropriate  federal,
                state, local or foreign regulatory  agencies or bodies necessary
                to  operate  its  properties  and to  conduct  the  business  as
                contemplated in the Prospectus;  the Trust is in compliance with
                the  terms and  conditions  of all such  Governmental  Licenses,
                except  where the failure so to comply  would not,  singly or in
                the  aggregate,  have  a  Material  Adverse  Effect;  all of the
                Governmental  Licenses  are valid and in full force and  effect,
                except when the invalidity of such Governmental  Licenses or the
                failure of such  Governmental  Licenses  to be in full force and
                effect would not have a Material  Adverse Effect;  and the Trust
                has not  received  any  notice of  proceedings  relating  to the
                revocation or  modification  of any such  Governmental  Licenses
                which,  singly  or  in  the  aggregate,  if  the  subject  of an
                unfavorable  decision,  ruling  or  finding,  would  result in a
                Material Adverse Effect.

                                     - 6 -
<PAGE>


                        (xviii) Any  advertising,   sales  literature  or  other
                promotional material (including "prospectus  wrappers",  "broker
                kits," "road show slides" and "road show scripts") authorized in
                writing  by or  prepared  by the Trust or the  Advisers  used in
                connection with the public offering of the Shares (collectively,
                "sales  material")  does not  contain an untrue  statement  of a
                material  fact or omit to state a material  fact  required to be
                stated therein or necessary to make the statements  therein,  in
                the light of the  circumstances  under which they were made, not
                misleading.  Moreover,  all  sales  material  complied  and will
                comply in all material respects with the applicable requirements
                of the  Act,  the  Investment  Company  Act  and the  rules  and
                interpretations  of  the  National   Association  of  Securities
                Dealers, Inc. ("NASD").

                        (xix)   The Trust  intends to direct the  investment  of
                the  proceeds  of the  offering  described  in the  Registration
                Statement in such a manner as to comply with the requirements of
                Subchapter  M of the Internal  Revenue Code of 1986,  as amended
                ("Subchapter M of the Code" and the "Code,"  respectively),  and
                intends to  qualify  as a  regulated  investment  company  under
                Subchapter M of the Code.

                        (xx)    This Agreement,  the Management  Agreement,  the
                Sub-Advisory Agreement, the Custodian Agreement and the Transfer
                Agency Agreement have each been duly authorized by all requisite
                action on the part of the Trust,  executed and  delivered by the
                Trust, as of the dates noted therein, and each complies with all
                applicable  provisions of the Investment  Company Act.  Assuming
                due  authorization,  execution and delivery by the other parties
                thereto with respect to the Custodian Agreement and the Transfer
                Agency  Agreement,   each  of  the  Management  Agreement,   the
                Sub-Advisory Agreement, the Custodian Agreement and the Transfer
                Agency  Agreement  constitutes a valid and binding  agreement of
                the Trust,  enforceable in accordance with its terms,  except as
                affected  by  bankruptcy,   insolvency,  fraudulent  conveyance,
                reorganization, moratorium and other similar laws relating to or
                affecting   creditors'  rights   generally,   general  equitable
                principles  (whether  considered in a proceeding in equity or at
                law).

                        (xxi)   There are no persons with registration rights or
                other similar rights to have any securities  registered pursuant
                to the  Registration  Statement or otherwise  registered  by the
                Trust under the Act.

                        (xxii)  The  Shares  have  been  duly   authorized   for
                listing, upon notice of issuance, on the New York Stock Exchange
                ("NYSE")  and the  Trust's  registration  statement  on Form 8-A
                under the 1934 Act has become effective.

                (b)     The Advisers  represent and warrant to each  Underwriter
        as of the date hereof and as of the Closing Date  referred to in Section
        2 hereof as follows:

                        (i)     Each of the Advisers has been duly organized and
                is validly  existing and in good standing as corporations  under
                the laws of the State of Delaware with full corporate  power and
                authority  to own,  lease  and  operate  its  properties  and to
                conduct its business as described in the  Prospectus and each is
                duly qualified as a foreign corporation to transact business and
                is in good  standing  in each other  jurisdiction  in which such
                qualification is required.

                        (ii)    Each of Advisers is duly  registered and in good
                standing with the Commission as an investment  adviser under the
                Advisers  Act, and is not  prohibited by

                                     - 7 -
<PAGE>


                the Advisers Act or the Investment Company Act, or the rules and
                regulations  under such acts,  from acting under the  Management
                Agreement  and  the  Sub-Advisory  Agreement  for the  Trust  as
                contemplated by the Prospectus.

                        (iii)   The   description   of  each   Adviser   in  the
                Registration  Statement and the Prospectus (and any amendment or
                supplement  to  either  of  them)  complied  and  comply  in all
                material respects with the provisions of the Act, the Investment
                Company  Act and the  Advisers  Act and is true and  correct and
                does not contain any untrue statement of a material fact or omit
                to state any  material  fact  required  to be stated  therein or
                necessary in order to make the statements  therein,  in light of
                the circumstances under which they were made, not misleading.

                        (iv)    Each of the Advisers has the financial resources
                available to it necessary  for the  performance  of its services
                and  obligations  as   contemplated  in  the  Prospectus,   this
                Agreement and under the respective  Management Agreement and the
                Sub-Advisory Agreement to which it is a party.

                        (v)     This Agreement,  the Management  Agreement,  the
                Sub-Advisory  Agreement and the Shareholder Servicing Agreement,
                by and  between  UBS  Warburg  LLC  and  BAI  (the  "Shareholder
                Servicing Agreement"), have each been duly authorized,  executed
                and delivered by each  respective  Adviser,  and the  Management
                Agreement,   the  Sub-Advisory  Agreement  and  the  Shareholder
                Servicing   Agreement  each   constitute  a  valid  and  binding
                obligation of each respective Adviser, enforceable in accordance
                with its terms,  except as affected by  bankruptcy,  insolvency,
                fraudulent  conveyance,  reorganization,  moratorium  and  other
                similar  laws  relating  to  or  affecting   creditors'   rights
                generally and general equitable  principles  (whether considered
                in a proceeding in equity or at law);  and neither the execution
                and delivery of this Agreement,  the Management  Agreement,  the
                Sub-Advisory  Agreement or the Shareholder  Servicing  Agreement
                nor the performance by either of the Advisers of its obligations
                hereunder  or  thereunder  will  conflict  with,  or result in a
                breach  of any of the terms and  provisions  of, or  constitute,
                with or without the giving of notice or lapse of time or both, a
                default  under,  any  agreement  or  instrument  to which either
                Adviser is a party or by which it is bound,  the  certificate of
                incorporation,  the by-laws or other organizational documents of
                each of the Advisers,  or to each  Adviser's  knowledge,  by any
                law, order,  decree, rule or regulation  applicable to it of any
                jurisdiction,   court,   federal  or  state   regulatory   body,
                administrative agency or other governmental body, stock exchange
                or securities  association having jurisdiction over the Advisers
                or their  respective  properties or operations;  and no consent,
                approval,  authorization  or order of any court or  governmental
                authority  or agency is  required  for the  consummation  by the
                Advisers of the transactions contemplated by this Agreement, the
                Management   Agreement,   the  Sub-Advisory   Agreement  or  the
                Shareholder Servicing Agreement, except as have been obtained or
                may be required under the Act, the  Investment  Company Act, the
                1934 Act or  state  securities  laws.  The  representations  and
                warranties  made by the Advisers in this paragraph in regards to
                the  Shareholder  Servicing  Agreement  are made  only as of the
                Closing Date.

                        (vi)    Since   the   respective   dates   as  of  which
                information  is  given  in the  Registration  Statement  and the
                Prospectus,  except as otherwise  stated therein,  there has not
                occurred any event which should reasonably be expected to have a
                material  adverse  effect on the  ability  of either  Adviser to
                perform its respective  obligations under this Agreement and the
                respective  Management  Agreement and Sub-Advisory  Agreement to
                which it is a party.

                                     - 8 -
<PAGE>


                        (vii)   There is no action, suit, proceeding, inquiry or
                investigation  before or  brought  by any court or  governmental
                agency or body,  domestic or foreign,  now  pending,  or, to the
                knowledge  of the  Advisers,  threatened  against  or  affecting
                either of the Advisers or any  "affiliated  person" of either of
                the Advisers (as such term is defined in the Investment  Company
                Act) or any  partners,  directors,  officers or employees of the
                foregoing,  whether  or not  arising in the  ordinary  course of
                business,  which might  reasonably  be expected to result in any
                material   adverse  change  in  the   condition,   financial  or
                otherwise,  or earnings,  business affairs or business prospects
                of either of the Advisers,  materially and adversely  affect the
                properties  or assets of either of the  Advisers  or  materially
                impair or adversely affect the ability of either of the Advisers
                to function as an investment  adviser or perform its obligations
                under the Management Agreement or the Sub-Advisory Agreement, or
                which is required to be disclosed in the Registration  Statement
                and the Prospectus.

                        (viii)  Each   Adviser  is  not  in   violation  of  its
                certificate of  incorporation,  by-laws or other  organizational
                documents  or in  default  under  any  agreement,  indenture  or
                instrument except for such violations or defaults that would not
                result in a Material Adverse Effect on the respective Adviser or
                the Trust.

                (c)     Any  certificate  signed by any  officer of the Trust or
        the  Advisers  delivered  to the  Representative  or to counsel  for the
        Underwriters  shall be deemed a representation and warranty by the Trust
        or the  Advisers,  as the case  may be,  to each  Underwriter  as to the
        matters covered thereby.

        4.      CERTAIN COVENANTS OF THE TRUST AND THE ADVISERS

                (a)     The  Trust  and the  Advisers,  jointly  and  severally,
        covenant with each Underwriter as follows:

                        (i)     The Trust,  subject to  Section  4(a)(ii),  will
                comply  with  the  requirements  of Rule  430A or Rule  434,  as
                applicable,    and   will    notify   UBS   Warburg   LLC   (the
                "Representative") immediately, and confirm the notice in writing
                or by sending any relevant copies of the following  documents to
                the Representative, (i) when any post-effective amendment to the
                Registration Statement shall become effective, or any supplement
                to the  Prospectus  or any  amended  Prospectus  shall have been
                filed,  (ii) of the receipt of any comments from the Commission,
                (iii) of any request by the  Commission for any amendment to the
                Registration  Statement or any  amendment or  supplement  to the
                Prospectus  or  for  additional  information,  and  (iv)  of the
                issuance  by the  Commission  of any stop order  suspending  the
                effectiveness  of the  Registration  Statement  or of any  order
                preventing or suspending the use of any preliminary  prospectus,
                or of the  suspension  of the  qualification  of the  Shares for
                offering or sale in any  jurisdiction,  or of the  initiation or
                threatening of any  proceedings  for any of such  purposes.  The
                Trust will  promptly  effect the filings  necessary  pursuant to
                Rule  497 of the  Act and  will  take  such  steps  as it  deems
                necessary to ascertain  promptly  whether the form of prospectus
                transmitted for filing under Rule 497 was received for filing by
                the  Commission  and,  in the  event  that it was  not,  it will
                promptly  file  such  prospectus.  The  Trust  will  make  every
                reasonable  effort to prevent the issuance of any stop order, or
                order of suspension or  revocation of  registration  pursuant to
                Section 8(e) of the  Investment  Company  Act,  and, if any such
                stop order or order of suspension or revocation of  registration
                is  issued,  to  obtain  the  lifting  thereof  at the  earliest
                possible moment.

                                     - 9 -
<PAGE>


                        (ii)    The Trust will give the Representative notice of
                its   intention  to  file  or  prepare  any   amendment  to  the
                Registration  Statement (including any filing under Rule 462(b))
                or  any   amendment,   supplement  or  revision  to  either  the
                prospectus included in the Registration Statement at the time it
                became  effective  or  to  the  Prospectus,   will  furnish  the
                Representative  with copies of any such  documents a  reasonable
                amount of time prior to such proposed filing or use, as the case
                may be, and will not file or use any such  document to which the
                Representative or counsel for the Underwriters shall object.

                        (iii)   The Trust has  furnished  or will deliver to the
                Representative and counsel for the Underwriters, without charge,
                signed copies of the Registration  Statement as originally filed
                and  of  each  amendment  thereto   (including   exhibits  filed
                therewith  or  incorporated  by  reference  therein)  and signed
                copies of all consents  and  certificates  of experts,  and will
                also deliver to the Representative,  without charge, a conformed
                copy of the  Registration  Statement as originally  filed and of
                each  amendment  thereto  (without  exhibits)  for  each  of the
                Underwriters.  The copies of the Registration Statement and each
                amendment   thereto   furnished  to  the  Underwriters  will  be
                identical to the electronically transmitted copies thereof filed
                with the  Commission  pursuant  to EDGAR,  except to the  extent
                permitted by Regulation S-T.

                        (iv)    The Trust  has  delivered  to each  Underwriter,
                without charge, as many copies of each preliminary prospectus as
                such  Underwriter  reasonably  requested,  and the Trust  hereby
                consents to the use of such copies for purposes permitted by the
                Act. The Trust will furnish to each Underwriter, without charge,
                during  the  period  when  the  Prospectus  is  required  to  be
                delivered  under the Act or the 1934 Act,  such number of copies
                of  the  Prospectus  (as  amended  or   supplemented)   as  such
                Underwriter  may  reasonably  request.  The  Prospectus  and any
                amendments or supplements  thereto furnished to the Underwriters
                will  be  identical  to the  electronically  transmitted  copies
                thereof filed with the Commission  pursuant to EDGAR,  except to
                the extent permitted by Regulation S-T.

                        (v)     If at any time when a prospectus  is required by
                the Act to be delivered in connection  with sales of the Shares,
                any event  shall occur or  condition  shall exist as a result of
                which  it is  necessary,  in the  opinion  of  counsel  for  the
                Underwriters  or  for  the  Trust,  to  amend  the  Registration
                Statement or amend or  supplement  the  Prospectus in order that
                the  Prospectus  will not  include  any untrue  statements  of a
                material  fact or omit to state a  material  fact  necessary  in
                order to make the statements therein not misleading in the light
                of the  circumstances  existing at the time it is delivered to a
                purchaser,  or if it shall be necessary,  in the opinion of such
                counsel, at any such time to amend the Registration Statement or
                amend or supplement  the  Prospectus in order to comply with the
                requirements  of the Act,  the Trust will  promptly  prepare and
                file with the  Commission,  subject  to Section  3(a)(ii),  such
                amendment  or  supplement  as may be  necessary  to correct such
                statement or omission or to make the  Registration  Statement or
                the Prospectus comply with such requirements, and the Trust will
                furnish  to the  Underwriters  such  number  of  copies  of such
                amendment  or  supplement  as the  Underwriters  may  reasonably
                request.

                        (vi)    The  Trust  will  use  its  best   efforts,   in
                cooperation  with the  Underwriters,  to qualify  the Shares for
                offering and sale under the applicable  securities  laws of such
                states  and  other  jurisdictions  of the  United  States as the
                Representative may designate and to maintain such qualifications
                in effect  for a period of not less than one year from the later
                of the effective date of the Registration Statement and any Rule
                462(b)

                                     - 10 -
<PAGE>


                Registration Statement;  provided, however, that the Trust shall
                not be  obligated  to file any  general  consent  to  service of
                process or to qualify as a foreign business trust or as a dealer
                in  securities  in  any  jurisdiction  in  which  it is  not  so
                qualified  or to subject  itself to taxation in respect of doing
                business in any  jurisdiction  in which it is not  otherwise  so
                subject.  In each  jurisdiction in which the Shares have been so
                qualified,  the Trust will file such  statements  and reports as
                may be  required  by the laws of such  jurisdiction  to continue
                such  qualification  in effect for a period of not less than one
                year from the effective date of the  Registration  Statement and
                any Rule 462(b) Registration Statement.

                        (vii)   The Trust will timely file such reports pursuant
                to the 1934  Act as are  necessary  in  order to make  generally
                available  to its  security  holders as soon as  practicable  an
                earnings  statement  for the  purposes  of, and to  provide  the
                benefits contemplated by, the last paragraph of Section 11(a) of
                the Act.

                        (viii)  The Trust will use the net proceeds  received by
                it from the sale of the  Shares in the manner  specified  in the
                Prospectus under "Use of Proceeds".

                        (ix)    The Trust will use its  reasonable  best efforts
                to effect  the  listing  of the  Shares on the NYSE,  subject to
                notice of issuance,  concurrently  with the effectiveness of the
                Registration Statement.

                        (x)     During a period of 180 days from the date of the
                Prospectus,  the Trust  will  not,  without  the  prior  written
                consent  of the  Representative,  (A)  directly  or  indirectly,
                offer,  pledge,  sell,  contract  to sell,  sell any  option  or
                contract to  purchase,  purchase any option or contract to sell,
                grant any  option,  right or warrant to  purchase  or  otherwise
                transfer or dispose of Shares or any securities convertible into
                or   exercisable  or   exchangeable   for  Shares  or  file  any
                registration  statement under the Act with respect to any of the
                foregoing  or (B) enter into any swap or any other  agreement or
                any transaction that transfers, in whole or in part, directly or
                indirectly, the economic consequence of ownership of the Shares,
                whether any such swap or transaction  described in clause (A) or
                (B) above is to be settled by  delivery  of Shares or such other
                securities,  in cash or otherwise.  The foregoing sentence shall
                not apply to (1) the Shares to be sold  hereunder  or (2) Shares
                issued pursuant to any dividend reinvestment plan.

                        (xi)    The Trust, during the period when the Prospectus
                is required to be delivered  under the Act or the 1934 Act, will
                file all  documents  required  to be filed  with the  Commission
                pursuant to the  Investment  Company Act and the 1934 Act within
                the  time  periods  required  by  the  Investment  Company  Act,
                respectively.

                        (xii)   The Trust will comply with the  requirements  of
                Subchapter  M of the Code to qualify as a  regulated  investment
                company under the Code.

                        (xiii)  The  Trust  will  not  (a)  take,   directly  or
                indirectly,  any  action  designed  to cause or to result in, or
                that  might   reasonably   be   expected  to   constitute,   the
                stabilization  or  manipulation  of the price of any security of
                the Trust to  facilitate  the sale or resale of the Shares,  and
                (b) until the Closing  Date (i) sell,  bid for or  purchase  the
                Shares  or  pay  any  person  any  compensation  for  soliciting
                purchases  of the  Shares  or (ii)  pay or  agree  to pay to any
                person any compensation  for soliciting  another to purchase any
                other securities of the Trust.

                                     - 11 -
<PAGE>


                        (xiv)   If the Trust  elects  to rely upon Rule  462(b),
                the Trust shall file a Rule 462(b)  Registration  Statement with
                the  Commission in compliance  with Rule 462(b) by no later than
                10:00 P.M., Washington, D.C. time, on the day following the date
                of this  Agreement,  and the  Trust  shall at the time of filing
                either pay to the  Commission the filing fee for the Rule 462(b)
                Registration Statement or give irrevocable  instructions for the
                payment of such fee pursuant to Rule 111(b) under the Act.

                        (xv)    The Trust will pay all costs, expenses, fees and
                taxes (other than any transfer taxes and fees and  disbursements
                of  counsel  for the  Underwriters  except  as set  forth  under
                Section 5 hereof and (iii),  (iv) and (vi) below) in  connection
                with  (i)  the  preparation  and  filing  of  the   Registration
                Statement, each preliminary prospectus,  the Prospectus, and any
                amendments  or  supplements   thereto,   and  the  printing  and
                furnishing of copies of each thereof to the  Underwriters and to
                dealers  (including  costs of mailing  and  shipment),  (ii) the
                registration,  issue, sale and delivery of the Shares, (iii) the
                producing,  word  processing  and/or printing of this Agreement,
                any Agreement Among  Underwriters,  any dealer  agreements,  any
                Powers  of  Attorney  and  any  closing   documents   (including
                compilations  thereof) and the reproduction  and/or printing and
                furnishing  of copies of each  thereof to the  Underwriters  and
                (except  closing  documents)  to  dealers  (including  costs  of
                mailing and shipment),  (iv) the qualification of the Shares for
                offering  and sale  under  state laws and the  determination  of
                their  eligibility  for investment  under state law as aforesaid
                (including   the   legal   fees  and   filing   fees  and  other
                disbursements of counsel for the  Underwriters) and the printing
                and  furnishing  of  copies  of any  blue sky  surveys  or legal
                investment  surveys to the Underwriters and to dealers,  (v) any
                listing   of  the   Shares  on  any   securities   exchange   or
                qualification  of the  Shares  for  quotation  on NASDAQ and any
                registration thereof under the Exchange Act, (vi) any filing for
                review  of the  public  offering  of the  Shares by the NASD and
                (vii)  the   performance   of  the  Trust's  other   obligations
                hereunder.  BAI has agreed to pay  organizational  expenses  and
                offering  costs (other than sales load) of the Trust that exceed
                $.03 per Common Share.

        5.      REIMBURSEMENT OF UNDERWRITERS'  EXPENSES.  If the Shares are not
delivered for any reason other than the  termination of this Agreement  pursuant
to the first two paragraphs of Section 7 hereof or the default by one or more of
the Underwriters in its or their  respective  obligations  hereunder,  the Trust
shall, in addition to paying the amounts  described in Section  4(a)(xv) hereof,
reimburse the Underwriters for all of their  out-of-pocket  expenses,  including
the fees and disbursements of their counsel.

        6.      CONDITIONS OF UNDERWRITERS' OBLIGATIONS.  The obligations of the
several  Underwriters  hereunder  are subject to the  accuracy  in all  material
respects of the  representations  and  warranties  of the Trust and the Advisers
contained in Section 3 hereof or in  certificates of any officer of the Trust or
the Advisers  delivered pursuant to the provisions hereof, to the performance by
the Trust and the Advisers of their respective  covenants and other  obligations
hereunder, and to the following further conditions:

                (a)     The  Registration  Statement,  including any Rule 462(b)
        Registration Statement,  has become effective and at the Closing Date no
        stop order suspending the  effectiveness  of the Registration  Statement
        shall have been  issued  under the Act,  no notice or order  pursuant to
        Section 8(e) of the Investment  Company Act shall have been issued,  and
        no  proceedings  with  respect to either  shall have been  initiated  or
        threatened  by the  Commission,  and  any  request  on the  part  of the
        Commission for additional  information  shall have been complied with to
        the reasonable satisfaction of counsel to the Underwriters. A prospectus
        containing  the Rule 430A  information  shall  have been  filed with the
        Commission in accordance  with Rule 497 (or a  post-effective  amendment
        providing such information shall have been filed and declared  effective
        in accordance with the requirements of Rule 430A).

                                     - 12 -
<PAGE>


                (b)     No amendment or supplement to the Registration Statement
        or  Prospectus  shall  be  filed  prior  to the  time  the  Registration
        Statement becomes effective to which you object in writing.

                (c)     The Registration  Statement shall become effective at or
        before  5:00 P.M.,  New York City time,  on the date of this  Agreement,
        unless a later time (but not later  than 5:00 P.M.,  New York City time,
        on the second full business day after the date of this Agreement)  shall
        be agreed to by the Trust and you in writing or by telephone,  confirmed
        in writing;  PROVIDED,  HOWEVER, that the Trust and you and any group of
        Underwriters,  including  you, who have agreed  hereunder to purchase in
        the  aggregate  at least  50% of the Firm  Shares  may from time to time
        agree on a later date.

                (d)     Prior to the Time of Purchase, or the Additional Time of
        Purchase,  as the case may be,  (i) no stop  order  with  respect to the
        effectiveness of the Registration Statement shall have been issued under
        the Act or proceedings  initiated under Section 8(d) or 8(e) of the Act;
        (ii)  the  Registration   Statement  and  all  amendments   thereto,  or
        modifications  thereof, if any, shall not contain an untrue statement of
        a material  fact or omit to state a material  fact required to be stated
        therein or necessary to make the statements therein not misleading;  and
        (iii) the  Prospectus  and all  amendments or  supplements  thereto,  or
        modifications  thereof, if any, shall not contain an untrue statement of
        a material  fact or omit to state a material  fact required to be stated
        therein or necessary to make the statements therein, in the light of the
        circumstances under which they are made, not misleading.

                (e)     At the  Closing  Date,  the  Representative  shall  have
        received  the  favorable  opinions,  dated as of the  Closing  Date,  of
        Skadden,  Arps,  Slate,  Meagher & Flom LLP,  counsel for the Trust, and
        Daniel R.  Waltcher,  counsel for the  Advisers,  in form and  substance
        satisfactory  to counsel for the  Underwriters,  together with signed or
        reproduced  copies of such  letters  for each of the other  Underwriters
        substantially  to the  effect  set forth in EXHIBIT A hereto and to such
        further effect as counsel to the Underwriters may reasonably request.

                (f)     At the  Closing  Date,  the  Representative  shall  have
        received  the  favorable  opinion,  dated  as of the  Closing  Date,  of
        Clifford  Chance  Rogers  & Wells  LLP,  counsel  for the  Underwriters,
        together with signed or reproduced copies of such letter for each of the
        other  Underwriters with respect to the matters set forth in clauses (A)
        (i), (ii),  (vi), (vii) (solely as to preemptive or other similar rights
        arising  by  operation  of law or under the  charter  or  by-laws of the
        Trust),  (viii) through (x),  inclusive,  (xii), (xiv) (solely as to the
        information in the  Prospectus  under  "Description  of Shares") and the
        last paragraph of EXHIBIT A hereto.  In giving such opinion such counsel
        may rely, as to all matters governed by the laws of jurisdictions  other
        than the law of the State of New York and the  federal law of the United
        States, upon the opinions of counsel satisfactory to the Representative.
        Such  counsel  may also state  that,  insofar as such  opinion  involves
        factual matters,  they have relied, to the extent they deem proper, upon
        certificates  of  officers  of the  Trust  and  certificates  of  public
        officials.

                (g)     At the Closing  Date,  there shall not have been,  since
        the date hereof or since the respective dates as of which information is
        given in the Prospectus,  any material  adverse change in the condition,
        financial or  otherwise,  or in the earnings or business  affairs of the
        Trust,  whether or not arising in the ordinary  course of business,  and
        the  Representative   shall  have  received  a  certificate  of  a  duly
        authorized officer of the Trust and of the Treasurer of the Trust and of
        the  President or a Vice  President or Managing  Director of each of the
        Advisers, dated as of the Closing Date, to the effect that (i) there has
        been no such  material  adverse  change,  (ii) the  representations  and
        warranties  in Sections  3(a) and (b) hereof are true and correct in all
        material

                                     - 13 -
<PAGE>


        respects with the same force and effect as though  expressly made at and
        as of the  Closing  Date,  (iii)  each of the  Trust  and the  Advisers,
        respectively,  has complied in all material respects with all agreements
        and satisfied in all material  respects all conditions on its part to be
        performed or satisfied at or prior to the Closing Date, and (iv) no stop
        order suspending the  effectiveness of the  Registration  Statement,  or
        order of suspension or  revocation of  registration  pursuant to Section
        8(e) of the  Investment  Company Act, has been issued and no proceedings
        for  any  such  purpose  have  been  instituted  or are  pending  or are
        contemplated by the Commission.

                (h)     At the  time of the  execution  of this  Agreement,  the
        Representative  shall have  received from Deloitte & Touche LLP a letter
        dated   such  date,   in  form  and   substance   satisfactory   to  the
        Representative, together with signed or reproduced copies of such letter
        for each of the other Underwriters containing statements and information
        of the type  ordinarily  included in accountants'  "comfort  letters" to
        underwriters  with  respect  to the  financial  statements  and  certain
        financial  information  contained in the Registration  Statement and the
        Prospectus.

                (i)     At the  Closing  Date,  the  Representative  shall  have
        received  from  Deloitte & Touche LLP a letter,  dated as of the Closing
        Date, to the effect that they reaffirm the statements made in the letter
        furnished  pursuant to subsection  (e) of this Section,  except that the
        specified  date referred to shall be a date not more than three business
        days prior to The Closing Date.

                (j)     At the Closing Date, the Shares shall have been approved
        for listing on the NYSE, subject only to official notice of issuance.

                (k)     The  NASD  has  confirmed  that  it has not  raised  any
        objection  with  respect  to  the  fairness  and  reasonableness  of the
        underwriting terms and arrangements.

                (l)     In the event that the Underwriters exercise their option
        provided  in  Section 1 hereof to  purchase  all or any  portion  of the
        Additional  Shares,  the  representations  and  warranties  of the Trust
        contained herein and the statements in any certificates furnished by the
        Trust  hereunder shall be true and correct as of each Additional Time of
        Purchase  and,  at  the  relevant  Additional  Time  of  Purchase,   the
        Representative shall have received:

                        (i)     Certificates,  dated  such  Additional  Time  of
                Purchase,  of a duly authorized  officer of the Trust and of the
                Treasurer of the Trust and of the President or a Vice  President
                or Managing Director of each of the Advisers confirming that the
                information  contained in the  certificate  delivered by each of
                them at the Closing Date pursuant to Section 6(d) hereof remains
                true and correct in all material  respects as of such Additional
                Time of Purchase.

                        (ii)    The favorable  opinion of Skadden,  Arps, Slate,
                Meagher  & Flom  LLP,  counsel  for the  Trust,  and  Daniel  R.
                Waltcher,  counsel  for  the  Advisers,  in form  and  substance
                satisfactory  to  counsel  for  the  Underwriters,   dated  such
                Additional Time of Purchase,  relating to the Additional  Shares
                to  be  purchased  on  such  Additional  Time  of  Purchase  and
                otherwise to the same effect as the opinion  required by Section
                6(b) hereof.

                        (iii)   The favorable  opinion of Clifford Chance Rogers
                & Wells LLP, counsel for the Underwriters, dated such Additional
                Time  of  Purchase,  relating  to the  Additional  Shares  to be
                purchased on such  Additional  Time of Purchase and otherwise to
                the same effect as the opinion required by Section 6(c) hereof.

                                     - 14 -
<PAGE>


                        (iv)    A letter from Deloitte & Touche LLP, in form and
                substance  satisfactory  to the  Representative  and dated  such
                Additional Time of Purchase,  substantially in the same form and
                substance as the letter furnished to the Representative pursuant
                to Section 6(f) hereof,  except that the "specified date" in the
                letter furnished  pursuant to this paragraph shall be a date not
                more than five days prior to such Additional Time of Purchase.

                (m)     At the  Closing  Date  and at  each  Additional  Time of
        Purchase,  counsel for the  Underwriters  shall have been furnished with
        such  documents  and  opinions  as they may  reasonably  require for the
        purpose  of  enabling  them to pass  upon the  issuance  and sale of the
        Shares as herein  contemplated,  or in order to evidence the accuracy of
        any of the  representations or warranties,  or the fulfillment of any of
        the conditions, herein contained; and all proceedings taken by the Trust
        and the Advisers in connection with the organization and registration of
        the Trust under the Investment  Company Act and the issuance and sale of
        the  Shares as herein  contemplated  shall be  satisfactory  in form and
        substance to the Representative and counsel for the Underwriters.

        7.      EFFECTIVE DATE OF AGREEMENT;  TERMINATION.  This Agreement shall
become effective (i) if Rule 430A under the Act is not used, when you shall have
received  notification of the  effectiveness of the Registration  Statement,  or
(ii) if Rule 430A under the Act is used,  when the parties  hereto have executed
and delivered this Agreement.

                The obligations of the several  Underwriters  hereunder shall be
subject  to  termination  in the  absolute  discretion  of you or any  group  of
Underwriters  (which  may  include  you)  which has  agreed to  purchase  in the
aggregate  at least 50% of the Firm  Shares,  if, since the time of execution of
this Agreement or the respective  dates as of which  information is given in the
Registration  Statement and Prospectus,  (y) there has been any material adverse
change,  financial or otherwise  (other than as referred to in the  Registration
Statement and Prospectus), in the operations, business or condition of the Trust
and its subsidiaries  taken as a whole,  which would, in your judgment or in the
judgment  of such group of  Underwriters,  make it  impracticable  to market the
Shares, or (z) if, at any time prior to the Time of Purchase or, with respect to
the purchase of any Additional Shares,  the Additional Time of Purchase,  as the
case may be, trading in securities on the New York Stock Exchange,  the American
Stock  Exchange  or the Nasdaq  National  Market  shall have been  suspended  or
limitations or minimum prices shall have been  established on the New York Stock
Exchange,  the American Stock Exchange or the Nasdaq  National  Market,  or if a
banking  moratorium  shall have been declared either by the United States or New
York State  authorities,  or if the United  States  shall have  declared  war in
accordance  with its  constitutional  processes or there shall have occurred any
material   outbreak  or  escalation  of   hostilities   or  other   national  or
international  calamity  or  crisis  of  such  magnitude  in its  effect  on the
financial  markets of the United  States as, in your judgment or in the judgment
of such group of Underwriters, to make it impracticable to market the Shares.

                If you or any group of  Underwriters  elects to  terminate  this
Agreement  as provided in this  Section 7, the Trust and each other  Underwriter
shall be notified promptly by letter or telegram.

                If the sale to the  Underwriters of the Shares,  as contemplated
by this  Agreement,  is not  carried  out by the  Underwriters  for  any  reason
permitted  under this  Agreement  or if such sale is not carried out because the
Trust  shall be unable to comply  with any of the terms of this  Agreement,  the
Trust  shall not be under any  obligation  or  liability  under  this  Agreement
(except to the extent provided in Sections  4(a)(xv),  5 and 9 hereof),  and the
Underwriters  shall be under no  obligation or liability to the Trust under this
Agreement  (except to the extent provided in Section 9 hereof) or to one another
hereunder.

                                     - 15 -
<PAGE>


        8.      INCREASE IN UNDERWRITERS' COMMITMENTS. Subject to Sections 6 and
7, if any Underwriter shall default in its obligation to take up and pay for the
Firm  Shares  to be  purchased  by it  hereunder  (otherwise  than  for a reason
sufficient to justify the  termination of this Agreement under the provisions of
Section 7 hereof) and if the number of Firm  Shares  which all  Underwriters  so
defaulting  shall have  agreed but failed to take up and pay for does not exceed
10% of the total number of Firm Shares,  the  non-defaulting  Underwriters shall
take up and pay for (in addition to the aggregate number of Firm Shares they are
obligated  to  purchase  pursuant to Section 1 hereof) the number of Firm Shares
agreed to be  purchased  by all such  defaulting  Underwriters,  as  hereinafter
provided.  Such  Shares  shall be  taken up and paid for by such  non-defaulting
Underwriter or  Underwriters in such amount or amounts as you may designate with
the  consent  of  each  Underwriter  so  designated  or,  in the  event  no such
designation  is  made,  such  Shares  shall  be  taken  up and  paid  for by all
non-defaulting  Underwriters  pro rata in proportion to the aggregate  number of
Firm  Shares  set  opposite  the names of such  non-defaulting  Underwriters  in
Schedule A.

                Without   relieving   any   defaulting   Underwriter   from  its
obligations  hereunder,  the Trust agrees with the  non-defaulting  Underwriters
that it will not sell any Firm  Shares  hereunder  unless all of the Firm Shares
are purchased by the  Underwriters (or by substituted  Underwriters  selected by
you with the approval of the Trust or selected by the Trust with your approval).

                If a new  Underwriter  or  Underwriters  are  substituted by the
Underwriters  or by the Trust for a defaulting  Underwriter or  Underwriters  in
accordance with the foregoing  provision,  the Trust or you shall have the right
to postpone the Time of Purchase for a period not  exceeding  five business days
in order that any necessary changes in the Registration Statement and Prospectus
and other documents may be effected.

                The term  Underwriter as used in this  Agreement  shall refer to
and include any Underwriter substituted under this Section 8 with like effect as
if such substituted Underwriter had originally been named in Schedule A.

                If  the  aggregate   number  of  Shares  which  the   defaulting
Underwriter or Underwriters  agreed to purchase  exceeds 10% of the total number
of Shares which all Underwriters  agreed to purchase  hereunder,  and if neither
the non-defaulting Underwriters nor the Trust shall make arrangements within the
five  business day period  stated above for the purchase of all the Shares which
the defaulting  Underwriter or Underwriters agreed to purchase  hereunder,  this
Agreement  shall be  terminated  without  further  act or deed and  without  any
liability on the part of the Trust to any non-defaulting Underwriter and without
any  liability  on the  part of any  non-defaulting  Underwriter  to the  Trust.
Nothing in this  paragraph,  and no action taken  hereunder,  shall  relieve any
defaulting  Underwriter  from  liability  in  respect  of any  default  of  such
Underwriter under this Agreement.

        9.      INDEMNITY AND CONTRIBUTION.

                (a)     Each  of  the  Trust  and  the  Advisers,   jointly  and
        severally,   agrees  to   indemnify,   defend  and  hold  harmless  each
        Underwriter,  its trustees,  partners,  directors and officers,  and any
        person who controls any Underwriter  within the meaning of Section 15 of
        the Act or  Section  20 of the  Exchange  Act,  and the  successors  and
        assigns  of all of the  foregoing  persons  from and  against  any loss,
        damage,  expense,  liability or claim  (including the reasonable cost of
        investigation) which, jointly or severally,  any such Underwriter or any
        such person may incur under the Act, the Exchange Act, the common law or
        otherwise,  insofar as such loss,  damage,  expense,  liability or claim
        arises out of or is based upon any untrue  statement  or alleged  untrue
        statement of a material fact contained in the Registration Statement (or
        in the Registration Statement as amended by any post-effective amendment
        thereof by the Trust) or in a Prospectus

                                     - 16 -
<PAGE>


        (the term  Prospectus  for the purpose of this Section 9 being deemed to
        include any preliminary prospectus, the Prospectus and the Prospectus as
        amended or supplemented by the Trust), or arises out of or is based upon
        any omission or alleged omission to state a material fact required to be
        stated in either such Registration  Statement or Prospectus or necessary
        to make the statements  made therein not  misleading,  except insofar as
        any such loss, damage,  expense,  liability or claim arises out of or is
        based  upon any  untrue  statement  or  alleged  untrue  statement  of a
        material fact contained in and in conformity with information  furnished
        in writing by or on behalf of any  Underwriter  through you to the Trust
        or the Adviser,  expressly for use with reference to such Underwriter in
        such  Registration  Statement or such  Prospectus or arises out of or is
        based upon any omission or alleged  omission to state a material fact in
        connection  with  such  information   required  to  be  stated  in  such
        Registration  Statement  or such  Prospectus  or  necessary to make such
        information  not  misleading,  PROVIDED,  HOWEVER,  that  the  indemnity
        agreement   contained  in  this  subsection  (a)  with  respect  to  any
        preliminary prospectus or amended preliminary prospectus shall not inure
        to the  benefit  of any  Underwriter  (or to the  benefit  of any person
        controlling  such  Underwriter)  from whom the person asserting any such
        loss, damage, expense,  liability or claim purchased the Shares which is
        the subject thereof if the Prospectus  corrected any such alleged untrue
        statement or omission and if such  Underwriter  failed to send or give a
        copy of the  Prospectus  to  such  person  at or  prior  to the  written
        confirmation  of the sale of such  Shares  to such  person,  unless  the
        failure is the result of noncompliance by the Company with paragraph (h)
        of Section 4 hereof.

                If any action, suit or proceeding (together,  a "Proceeding") is
        brought  against an  Underwriter  or any such person in respect of which
        indemnity  may be sought  against the Trust or the Advisers  pursuant to
        the foregoing paragraph,  such Underwriter or such person shall promptly
        notify the Trust and the Advisers in writing of the  institution of such
        Proceeding  and the Trust or the  Advisers  shall  assume the defense of
        such  Proceeding,   including  the  employment  of  counsel   reasonably
        satisfactory  to such  indemnified  party  and  payment  of all fees and
        expenses; PROVIDED, HOWEVER, that the omission to so notify the Trust or
        the  Advisers  shall  not  relieve  the Trust or the  Advisers  from any
        liability which the Trust or the Advisers may have to any Underwriter or
        any such person or otherwise. Such Underwriter or such person shall have
        the right to employ its or their own  counsel in any such case,  but the
        fees  and  expenses  of such  counsel  shall be at the  expense  of such
        Underwriter  or of such person  unless the  employment  of such  counsel
        shall have been  authorized in writing by the Trust or the Advisers,  as
        the case may be, in  connection  with the defense of such  Proceeding or
        the Trust or the Advisers shall not have,  within a reasonable period of
        time in light of the  circumstances,  employed counsel to have charge of
        the  defense of such  Proceeding  or such  indemnified  party or parties
        shall have reasonably  concluded that there may be defenses available to
        it or them which are different  from,  additional to or in conflict with
        those  available to the Trust or the Advisers (in which case neither the
        Trust nor the  Advisers  shall have the right to direct  the  defense of
        such Proceeding on behalf of the indemnified  party or parties),  in any
        of which  events such fees and  expenses  shall be borne by the Trust or
        the Advisers and paid as incurred (it being  understood,  however,  that
        the Trust or the  Advisers  shall not be liable for the expenses of more
        than one separate  counsel (in addition to any local counsel) in any one
        Proceeding  or series of related  Proceedings  in the same  jurisdiction
        representing   the   indemnified   parties   who  are  parties  to  such
        Proceeding).  Neither the Trust nor the Adviser  shall be liable for any
        settlement of any Proceeding effected without its written consent but if
        settled with the written consent of the Trust or the Advisers, the Trust
        or the  Advisers,  as the  case  may be,  agree  to  indemnify  and hold
        harmless any  Underwriter  and any such person from and against any loss
        or liability by reason of such settlement. Notwithstanding the foregoing
        sentence,  if at any time an  indemnified  party shall have requested an
        indemnifying  party to  reimburse  the  indemnified  party  for fees and
        expenses  of counsel as  contemplated  by the  second  sentence  of this
        paragraph,  then the  indemnifying  party agrees that it shall be liable
        for any  settlement  of any

                                     - 17 -
<PAGE>


        Proceeding  effected  without its written consent if (i) such settlement
        is  entered  into more  than 60  business  days  after  receipt  by such
        indemnifying  party of the  aforesaid  request,  (ii) such  indemnifying
        party shall not have reimbursed the indemnified party in accordance with
        such  request  prior  to the  date of such  settlement  and  (iii)  such
        indemnified  party shall have given the  indemnifying  party at least 30
        days' prior notice of its  intention to settle.  No  indemnifying  party
        shall,  without  the prior  written  consent of the  indemnified  party,
        effect any settlement of any pending or threatened Proceeding in respect
        of  which  any  indemnified  party  is or could  have  been a party  and
        indemnity could have been sought  hereunder by such  indemnified  party,
        unless  such  settlement  includes  an  unconditional  release  of  such
        indemnified  party from all  liability  on claims  that are the  subject
        matter of such  Proceeding  and does not include an  admission of fault,
        culpability  or a failure  to act,  by or on behalf of such  indemnified
        party.

                (b)     Each Underwriter  severally agrees to indemnify,  defend
        and  hold  harmless  the  Trust  and the  Advisers,  and  each of  their
        respective trustees, directors and officers, and any person who controls
        the Trust or the Advisers within the meaning of Section 15 of the Act or
        Section 20 of the Exchange Act, and the successors and assigns of all of
        the  foregoing  persons  from and  against  any loss,  damage,  expense,
        liability or claim  (including  the  reasonable  cost of  investigation)
        which,  jointly  or  severally,  the Trust or the  Advisers  or any such
        person may incur  under the Act,  the  Exchange  Act,  the common law or
        otherwise,  insofar as such loss,  damage,  expense,  liability or claim
        arises out of or is based upon any untrue  statement  or alleged  untrue
        statement  of a  material  fact  contained  in  and in  conformity  with
        information  furnished  in writing  by or on behalf of such  Underwriter
        through  you to the  Trust  or  the  Advisers  expressly  for  use  with
        reference to such Underwriter in the  Registration  Statement (or in the
        Registration  Statement  as  amended  by  any  post-effective  amendment
        thereof by the Trust) or in a  Prospectus,  or arises out of or is based
        upon any  omission  or  alleged  omission  to state a  material  fact in
        connection  with  such  information   required  to  be  stated  in  such
        Registration  Statement  or such  Prospectus  or  necessary to make such
        information not misleading.

                If any Proceeding is brought against the Trust,  the Advisers or
        any such person in respect of which  indemnity may be sought against any
        Underwriter pursuant to the foregoing paragraph, the Trust, the Advisers
        or such person shall promptly notify such  Underwriter in writing of the
        institution  of such  Proceeding and such  Underwriter  shall assume the
        defense  of  such  Proceeding,   including  the  employment  of  counsel
        reasonably  satisfactory  to such  indemnified  party and payment of all
        fees and  expenses;  PROVIDED,  HOWEVER,  that the omission to so notify
        such  Underwriter  shall not relieve such Underwriter from any liability
        which such  Underwriter may have to the Trust,  the Advisers or any such
        person or otherwise.  The Trust,  the Advisers or such person shall have
        the right to employ its own  counsel in any such case,  but the fees and
        expenses  of such  counsel  shall be at the  expense of the  Trust,  the
        Advisers or such person unless the employment of such counsel shall have
        been  authorized in writing by such  Underwriter in connection  with the
        defense of such Proceeding or such Underwriter  shall not have, within a
        reasonable  period  of  time in  light  of the  circumstances,  employed
        counsel  to  have  charge  of the  defense  of such  Proceeding  or such
        indemnified party or parties shall have reasonably  concluded that there
        may be  defenses  available  to it or them which are  different  from or
        additional  to or in conflict with those  available to such  Underwriter
        (in which case such  Underwriter  shall not have the right to direct the
        defense  of such  Proceeding  on  behalf  of the  indemnified  party  or
        parties,  but such Underwriter may employ counsel and participate in the
        defense  thereof but the fees and expenses of such  counsel  shall be at
        the expense of such  Underwriter),  in any of which events such fees and
        expenses  shall be borne by such  Underwriter  and paid as incurred  (it
        being understood, however, that such Underwriter shall not be liable for
        the expenses of more than one separate counsel (in addition to any local
        counsel) in any one  Proceeding or series of related  Proceedings in the
        same jurisdiction  representing the indemnified  parties who are parties
        to such

                                     - 18 -
<PAGE>


        Proceeding).  No  Underwriter  shall be liable for any settlement of any
        such Proceeding effected without the written consent of such Underwriter
        but if  settled  with the  written  consent  of such  Underwriter,  such
        Underwriter  agrees  to  indemnify  and hold  harmless  the  Trust,  the
        Advisers  and any such person from and against any loss or  liability by
        reason of such settlement. Notwithstanding the foregoing sentence, if at
        any time an indemnified party shall have requested an indemnifying party
        to reimburse the  indemnified  party for fees and expenses of counsel as
        contemplated  by  the  second  sentence  of  this  paragraph,  then  the
        indemnifying  party agrees that it shall be liable for any settlement of
        any  Proceeding  effected  without  its  written  consent  if  (i)  such
        settlement  is entered into more than 60 business  days after receipt by
        such indemnifying party of the aforesaid request, (ii) such indemnifying
        party shall not have reimbursed the indemnified party in accordance with
        such  request  prior  to the  date of such  settlement  and  (iii)  such
        indemnified  party shall have given the  indemnifying  party at least 30
        days' prior notice of its  intention to settle.  No  indemnifying  party
        shall,  without  the prior  written  consent of the  indemnified  party,
        effect any settlement of any pending or threatened Proceeding in respect
        of  which  any  indemnified  party  is or could  have  been a party  and
        indemnity could have been sought  hereunder by such  indemnified  party,
        unless  such  settlement  includes  an  unconditional  release  of  such
        indemnified  party from all  liability  on claims  that are the  subject
        matter of such Proceeding.

                (c)     In addition to the foregoing indemnification,  the Trust
        and the Advisers  also,  jointly and  severally,  agree to indemnify and
        hold harmless each Underwriter and each person, if any, who controls any
        Underwriter  within the meaning of Section 15 of the 1933 Act or Section
        20 of the 1934 Act, against any and all loss,  liability,  claim, damage
        and expense  described in the  indemnity  contained in Section  9(a), as
        limited by the  proviso  set forth  therein,  with  respect to any sales
        material.

                (d)     If the indemnification provided for in this Section 9 is
        unavailable to an  indemnified  party under  subsections  (a) and (b) of
        this Section 9 in respect of any losses, damages, expenses,  liabilities
        or claims referred to therein, then each applicable  indemnifying party,
        in lieu of indemnifying such indemnified  party, shall contribute to the
        amount  paid or  payable by such  indemnified  party as a result of such
        losses, damages, expenses,  liabilities or claims (i) in such proportion
        as is appropriate to reflect the relative benefits received by the Trust
        and the Advisers on the one hand and the  Underwriters on the other hand
        from the  offering of the Shares or (ii) if the  allocation  provided by
        clause (i) above is not permitted by applicable  law, in such proportion
        as is appropriate to reflect not only the relative  benefits referred to
        in clause  (i) above  but also the  relative  fault of the Trust and the
        Advisers  on the  one  hand  and of the  Underwriters  on the  other  in
        connection  with the  statements  or  omissions  which  resulted in such
        losses, damages,  expenses,  liabilities or claims, as well as any other
        relevant equitable considerations. The relative benefits received by the
        Trust and the Advisers on the one hand and the Underwriters on the other
        shall be deemed to be in the same  respective  proportions  as the total
        proceeds   from  the  offering  (net  of   underwriting   discounts  and
        commissions but before deducting expenses) received by the Trust and the
        total   underwriting   discounts   and   commissions   received  by  the
        Underwriters, bear to the aggregate public offering price of the Shares.
        The relative  fault of the Trust and the Advisers on the one hand and of
        the Underwriters on the other shall be determined by reference to, among
        other things,  whether the untrue  statement or alleged untrue statement
        of  a  material  fact  or  omission  or  alleged   omission  relates  to
        information supplied by the Trust or the Advisors or by the Underwriters
        and the parties' relative intent,  knowledge,  access to information and
        opportunity to correct or prevent such statement or omission. The amount
        paid or payable by a party as a result of the losses, damages, expenses,
        liabilities and claims referred to in this subsection shall be deemed to
        include any legal or other fees or expenses  reasonably incurred by such
        party in connection with investigating, preparing to defend or defending
        any Proceeding.

                                     - 19 -
<PAGE>


                (e)     The Trust, the Advisers and the Underwriters  agree that
        it would not be just and  equitable  if  contribution  pursuant  to this
        Section  9  were  determined  by  pro  rata  allocation   (even  if  the
        Underwriters  were  treated as one entity  for such  purpose)  or by any
        other method of  allocation  that does not take account of the equitable
        considerations referred to in subsection (c) above.  Notwithstanding the
        provisions  of this  Section  9, no  Underwriter  shall be  required  to
        contribute  any amount in excess of the amount by which the total  price
        at which the Shares  underwritten by such Underwriter and distributed to
        the public were  offered to the public  exceeds the amount of any damage
        which such  Underwriter  has otherwise been required to pay by reason of
        such untrue statement or alleged untrue statement or omission or alleged
        omission. No person guilty of fraudulent  misrepresentation  (within the
        meaning of Section  11(f) of the Act) shall be entitled to  contribution
        from any person who was not guilty of such fraudulent misrepresentation.
        The Underwriters'  obligations to contribute  pursuant to this Section 9
        are several in proportion to their respective  underwriting  commitments
        and not joint.

                (f)     The indemnity and contribution  agreements  contained in
        this Section 9 and the covenants,  warranties and representations of the
        Trust  contained in this Agreement shall remain in full force and effect
        regardless of any investigation made by or on behalf of any Underwriter,
        its  partners,  directors  or  officers  or any person  (including  each
        partner,   officer  or  director  of  such   person)  who  controls  any
        Underwriter within the meaning of Section 15 of the Act or Section 20 of
        the Exchange Act, or by or on behalf of the Trust or the  Advisers,  its
        trustees,  directors or officers or any person who controls the Trust or
        the  Advisers  within the meaning of Section 15 of the Act or Section 20
        of the Exchange Act, and shall survive any termination of this Agreement
        or the issuance  and delivery of the Shares.  The Trust and the Advisers
        and  each  Underwriter  agree  promptly  to  notify  each  other  of the
        commencement of any Proceeding against it and, in the case of the Trust,
        against  any of the  Trust's  or the  Advisers'  trustees,  officers  or
        directors in connection with the issuance and sale of the Shares,  or in
        connection with the Registration Statement or Prospectus.

        10.     NOTICES.  Except as otherwise herein  provided,  all statements,
requests,  notices and agreements  shall be in writing or by telegram and, if to
the  Underwriters,  shall be  sufficient in all respects if delivered or sent to
UBS  Warburg  LLC,  299 Park  Avenue,  New  York,  N.Y.  10171-0026,  Attention:
Syndicate  Department  and, if to the Trust or Advisers,  shall be sufficient in
all  respects  if  delivered  or sent to the Trust at the  offices of  BlackRock
Financial  Management,  Inc.  at 345 Park  Avenue,  New  York,  New York  10154,
Attention: Ralph L. Schlosstein.

        11.     GOVERNING  LAW;  CONSTRUCTION.  This  Agreement  and any  claim,
counterclaim  or dispute of any kind or nature  whatsoever  arising out of or in
any way relating to this Agreement ("Claim"),  directly or indirectly,  shall be
governed by, and  construed  in  accordance  with,  the laws of the State of New
York.  The Section  headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.

        12.     SUBMISSION TO JURISDICTION.  Except as set forth below, no Claim
may be commenced,  prosecuted or continued in any court other than the courts of
the  State of New York  located  in the  City and  County  of New York or in the
United States District Court for the Southern District of New York, which courts
shall have jurisdiction over the adjudication of such matters, and the Trust and
Advisers  consent to the  jurisdiction of such courts and personal  service with
respect thereto. The Trust and Advisers hereby consent to personal jurisdiction,
service  and venue in any court in which any Claim  arising out of or in any way
relating to this Agreement is brought by any third party against UBS Warburg LLC
or any indemnified party. Each of UBS Warburg LLC and the Trust and Advisers (on
its behalf  and, to the extent  permitted  by  applicable  law, on behalf of its
stockholders  and  affiliates)  waives all right to trial by jury in any action,
proceeding or counterclaim  (whether based upon contract,  tort or otherwise) in

                                     - 20 -
<PAGE>


any way arising out of or relating  to this  Agreement.  The Trust and  Advisers
agree that a final  judgment  in any such  action,  proceeding  or  counterclaim
brought in any such court shall be conclusive  and binding upon the Trust or the
Advisers,  as the case may be, and may be  enforced  in any other  courts in the
jurisdiction  of which the Trust or the Advisers,  as the case may be, is or may
be subject, by suit upon such judgment.

        13.     PARTIES AT INTEREST. The Agreement herein set forth has been and
is made  solely  for the  benefit  of the  Underwriters  and the  Trust  and the
Advisers and to the extent provided in Section 9 hereof the controlling persons,
directors  and  officers  referred  to in such  section,  and  their  respective
successors,   assigns,   heirs,  personal   representatives  and  executors  and
administrators.  No  other  person,  partnership,   association  or  corporation
(including a purchaser,  as such purchaser,  from any of the Underwriters) shall
acquire or have any right under or by virtue of this Agreement.

        14.     COUNTERPARTS. This Agreement may be signed by the parties in one
or more counterparts  which together shall constitute one and the same agreement
among the parties.

        15.     SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Underwriters and the Trust and the Advisers and their successors and assigns and
any  successor  or assign of any  substantial  portion  of the  Trust's  and the
Advisers' and any of the Underwriters' respective businesses and/or assets.

                                     - 21 -
<PAGE>


                If the foregoing  correctly sets forth the  understanding  among
the Trust,  the Advisers and the  Underwriters,  please so indicate in the space
provided below for the purpose,  whereupon this letter and your acceptance shall
constitute  a  binding   agreement  among  the  Trust,   the  Advisers  and  the
Underwriters, severally.

                                        Very truly yours,

                                        BlackRock Core Bond Trust

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        BlackRock Advisors, Inc.

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        BlackRock Financial Management, Inc.

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

Accepted and agreed to as of the
date first above written, on
behalf of itself and the
other several Underwriters
named in Schedule A

UBS WARBURG LLC

By:      UBS WARBURG LLC


By:
   --------------------------
   Name:
   Title:

                                     - 22 -
<PAGE>


                                   SCHEDULE A


                                                                      NUMBER OF
                          UNDERWRITER                                FIRM SHARES
                          -----------                                -----------
UBS Warburg LLC................................................
Deutsche Banc Alex. Brown Inc..................................
Prudential Securities Incorporated.............................
First Union Securities, Inc....................................
Gruntal & Co., L.L.C...........................................
J.J.B. Hilliard, W.L. Lyons, Inc...............................
Wells Fargo Van Kasper, LLC....................................
         Total.................................................

                                      A-1
<PAGE>


                                                                       Exhibit A

                    FORM OF OPINION OF TRUST'S AND ADVISERS'
                       COUNSEL TO BE DELIVERED PURSUANT TO
                                  SECTION 6(e)

        (A)     With respect to the Trust:

                        (i)     The Trust has been duly organized and is validly
                existing as a business  trust in good standing under the laws of
                the State of Delaware.

                        (ii)    The Trust has business trust power and authority
                to own,  lease and  operate  its  properties  and to conduct its
                business as  described in the  Prospectus  and to enter into and
                perform its obligations under the Purchase Agreement.

                        (iii)   The  Trust  is  duly   qualified  as  a  foreign
                business  trust to transact  business and is in good standing in
                each other jurisdiction in which such qualification is required,
                whether by reason of the ownership or leasing of property or the
                conduct of  business,  except where the failure so to qualify or
                to be in good  standing  would not result in a Material  Adverse
                Effect.

                        (iv)    To the best of our knowledge, the Trust does not
                have any subsidiaries.

                        (v)     The authorized, issued and outstanding shares of
                beneficial  interest  of  the  Trust  is as  set  forth  in  the
                Prospectus  under the caption  "Description  of shares -- Common
                Shares" (except for subsequent  issuances,  if any,  pursuant to
                the Purchase  Agreement);  all issued and outstanding  shares of
                beneficial  interest of the Trust have been duly  authorized and
                validly issued and are fully paid and non-assessable,  except as
                provided for in the Trust's  declaration of trust, and have been
                offered and sold or  exchanged by the Trust in  compliance  with
                all applicable laws (including,  without limitation, federal and
                state  securities  laws); the Shares conform as to legal matters
                to all statements  relating thereto  contained in the Prospectus
                and such  description  conforms  to the  rights set forth in the
                instruments  defining  the  same;  and  none of the  outstanding
                shares  of  beneficial  interest  of the  Trust  was  issued  in
                violation  of the  preemptive  or other  similar  rights  of any
                securityholder of the Trust.

                        (vi)    The Shares to be purchased  by the  Underwriters
                from the Trust have been duly  authorized  for issuance and sale
                to the Underwriters pursuant to the Purchase Agreement and, when
                issued  and  delivered  by the Trust  pursuant  to the  Purchase
                Agreement  against payment of the consideration set forth in the
                Purchase  Agreement,  will be validly  issued and fully paid and
                non-assessable,   except  as   provided   for  in  the   Trust's
                declaration of trust,  and no holder of the Shares is or will be
                subject to personal liability by reason of being such a holder.

                        (vii)   The  issuance  of the  Shares is not  subject to
                preemptive or other similar rights of any  securityholder of the
                Trust.

                        (viii)  The Purchase Agreement has been duly authorized,
                executed and delivered by the Trust.

                        (ix)    The Registration  Statement,  including any Rule
                462(b) Registration Statement, has been declared effective under
                the Act; any required filing of the

                                      A-1
<PAGE>


                Prospectus  pursuant to Rule 497(c) or Rule 497(h) has been made
                in the manner and within the time  period  required by Rule 497;
                and, to the best of our knowledge,  no stop order suspending the
                effectiveness of the  Registration  Statement or any Rule 462(b)
                Registration  Statement  has been issued under the Act,  and, to
                the best of our knowledge,  no order of suspension or revocation
                of  registration  pursuant  to  Section  8(e) of the  Investment
                Company Act has been  issued,  and no  proceedings  for any such
                purpose have been instituted or are pending or threatened by the
                Commission.

                        (x)     The Registration  Statement,  including any Rule
                462(b) Registration Statement, the Rule 430A Information and the
                Rule 434  Information,  as  applicable,  the Prospectus and each
                amendment  or  supplement  to  the  Registration  Statement  and
                Prospectus  as of their  respective  effective  or  issue  dates
                (other than the financial  statements and  supporting  schedules
                included  therein  or  omitted  therefrom,  as to  which we need
                express no opinion),  and the notification on Form N-8A complied
                as to form in all material respects with the requirements of the
                Act, the Investment Company Act and the Rules and Regulations.

                        (xi)    If Rule 434 has been relied upon, the Prospectus
                was not  "materially  different,"  as such  term is used in Rule
                434, from the prospectus included in the Registration  Statement
                at the time it became effective.

                        (xii)   The form of  certificate  used to  evidence  the
                Shares  complies in all material  respects  with all  applicable
                statutory requirements,  with any applicable requirements of the
                declaration   of  trust  and   by-laws  of  the  Trust  and  the
                requirements of the New York Stock Exchange.

                        (xiii)  To the  best  of  our  knowledge,  there  is not
                pending or threatened any action, suit,  proceeding,  inquiry or
                investigation,  to which the  Trust is a party,  or to which the
                property of the Trust is subject, before or brought by any court
                or governmental agency or body, domestic or foreign, which might
                reasonably be expected to result in a Material  Adverse  Effect,
                or  which  might   reasonably  be  expected  to  materially  and
                adversely  affect the  properties  or assets of the Trust or the
                consummation  of the  transactions  contemplated in the Purchase
                Agreement  or the  performance  by the Trust of its  obligations
                thereunder.

                        (xiv)   The   information   in  the   Prospectus   under
                "Description   of  shares"   and  "Tax   matters"   and  in  the
                Registration  Statement under Item 29 (Indemnification),  to the
                extent that it  constitutes  matters of law,  summaries of legal
                matters,  the Trust's  declaration of trust and by-laws or legal
                proceedings,  or legal conclusions,  has been reviewed by us and
                is correct in all material respects.

                        (xv)    Each   of   the   Management   Agreement,    the
                Sub-Advisory  Agreement,  the Custodian Agreement,  the Transfer
                Agency  Agreement  and  the  Purchase  Agreement  comply  in all
                material   respects  with  all  applicable   provisions  of  the
                Investment  Company Act, Advisers Act, the Rules and Regulations
                and the Advisers Act Rules and Regulations.

                        (xvi)   The Trust is duly registered with the Commission
                under the  Investment  Company Act as a closed-end,  diversified
                management   investment  company;   and,  to  the  best  of  our
                knowledge,   no  order  of  suspension  or  revocation  of  such
                registration has been issued or proceedings  therefor  initiated
                or threatened by the Commission.

                                      A-2
<PAGE>


                        (xvii)  To the  best  of our  knowledge,  no  person  is
                serving  as an  officer,  trustee or  investment  adviser of the
                Trust except in accordance  with the Investment  Company Act and
                the Rules and  Regulations  and the Investment  Advisers Act and
                the Advisers Act Rules and  Regulations.  Except as disclosed in
                the  Registration  Statement and Prospectus (or any amendment or
                supplement to either of them), to the best of our knowledge,  no
                trustee of the Trust is an  "interested  person"  (as defined in
                the  Investment  Company  Act) of the  Trust  or an  "affiliated
                person"  (as  defined  in  the  Investment  Company  Act)  of an
                Underwriter.

                        (xviii) There are no  statutes or  regulations  that are
                required  to  be  described  in  the  Prospectus  that  are  not
                described as required.

                        (xix)   All descriptions in the  Registration  Statement
                of contracts  and other  documents to which the Trust is a party
                are  accurate  in all  material  respects.  To the  best  of our
                knowledge,  there  are  no  franchises,  contracts,  indentures,
                mortgages,  loan agreements,  notes, leases or other instruments
                required to be  described  or  referred  to in the  Registration
                Statement  or to be filed as exhibits  thereto  other than those
                described  or  referred to therein or filed or  incorporated  by
                reference as exhibits thereto,  and the descriptions  thereof or
                references thereto are correct in all material respects.

                        (xx)    To the best of our  knowledge,  the Trust is not
                in  violation  of its  declaration  of trust or  by-laws  and no
                default by the Trust exists in the due performance or observance
                of any  material  obligation,  agreement,  covenant or condition
                contained in any contract, indenture,  mortgage, loan agreement,
                note,  lease or other  agreement or instrument that is described
                or referred to in the  Registration  Statement or the Prospectus
                or filed or  incorporated  by  reference  as an  exhibit  to the
                Registration Statement.

                        (xxi)   No  filing  with,  or  authorization,  approval,
                consent, license, order,  registration,  qualification or decree
                of, any court or  governmental  authority or agency  (other than
                under the Act, the 1934 Act, the Investment  Company Act and the
                Rules and  Regulations,  which have been obtained,  or as may be
                required  under the  securities  or blue sky laws of the various
                states,  as to which we need express no opinion) is necessary or
                required in connection with the due authorization, execution and
                delivery of the Purchase Agreement or for the offering, issuance
                or sale of the Shares or the  consummation  of the  transactions
                contemplated by this Agreement.

                        (xxii)  The execution,  delivery and  performance of the
                Purchase  Agreement  and the  consummation  of the  transactions
                contemplated in the Purchase  Agreement and in the  Registration
                Statement (including the issuance and sale of the Shares and the
                use of the proceeds  from the sale of the Shares as described in
                the  Prospectus   under  the  caption  "Use  of  Proceeds")  and
                compliance by the Trust with its obligations  under the Purchase
                Agreement  do not and will  not,  whether  with or  without  the
                giving  of  notice  or lapse of time or both,  conflict  with or
                constitute  a breach  of,  or  default  or  Repayment  Event (as
                defined in Section 1(a)(xii) of the Purchase Agreement) under or
                result in the  creation  or  imposition  of any lien,  charge or
                encumbrance upon any property or assets of the Trust pursuant to
                any contract, indenture, mortgage, deed of trust, loan or credit
                agreement,  note,  lease or any other  agreement or  instrument,
                known to us, to which the Trust is a party or by which it or any
                of them may be bound,  or to which any of the property or assets
                of the  Trust is  subject,  nor will such  action  result in any
                violation  of the  provisions  of the  charter or by-laws of the
                Trust,  or  any  applicable  law,  statute,   rule,  regulation,
                judgment, order, writ or decree, known to us, of any government,
                government

                                      A-3
<PAGE>


                instrumentality   or  court,   domestic   or   foreign,   having
                jurisdiction over the Trust or any of its properties,  assets or
                operations.

                        (xxiii) The   Purchase    Agreement,    the   Management
                Agreement,  the Sub-Advisory Agreement,  the Custodian Agreement
                and the Transfer Agency Agreement have each been duly authorized
                by all requisite  action on the part of the Trust,  executed and
                delivered by the Trust, as of the dates noted therein.  Assuming
                due  authorization,  execution and delivery by the other parties
                thereto with respect to the Custodian Agreement and the Transfer
                Agency  Agreement,   each  of  the  Management  Agreement,   the
                Sub-Advisory Agreement, the Custodian Agreement and the Transfer
                Agency  Agreement  constitutes a valid and binding  agreement of
                the Trust,  enforceable in accordance with its terms,  except as
                affected  by  bankruptcy,   insolvency,  fraudulent  conveyance,
                reorganization, moratorium and other similar laws relating to or
                affecting   creditors'  rights   generally,   general  equitable
                principles  (whether  considered in a proceeding in equity or at
                law) and an implied covenant of good faith and fair dealing.

        (B)     With respect to the Advisers:

                        (i)     Each  Adviser  has been  duly  organized  and is
                validly  existing as a corporation  in good  standing  under the
                laws of the State of Delaware.

                        (ii)    Each  Adviser  has  full  corporate   power  and
                authority  to own,  lease  and  operate  its  properties  and to
                conduct its business as described in the Prospectus and to enter
                into and perform its obligations under the Purchase Agreement.

                        (iii)   Each  Adviser  is duly  qualified  as a  foreign
                corporation to transact business and is in good standing in each
                other  jurisdiction  in which such  qualification  is  required,
                whether by reason of the ownership or leasing of property or the
                conduct  of  business,  except  where the  failure to so qualify
                would not result in a Material Adverse Effect.

                        (iv)    Each  Adviser  is  duly   registered   with  the
                Commission as an  investment  adviser under the Advisers Act and
                is not  prohibited  by the Advisers  Act, the Advisers Act Rules
                and  Regulations,  the  Investment  Company Act or the Rules and
                Regulations  from acting under the Management  Agreement for the
                Trust as contemplated by the Prospectus.

                        (v)     The Purchase Agreement, the Management Agreement
                and  the  Sub-Advisory  Agreement  have  been  duly  authorized,
                executed  and  delivered  by the  respective  Adviser,  and  the
                Management   Agreement  and  the  Sub-Advisory   Agreement  each
                constitutes  a valid and binding  obligation  of the  respective
                Adviser,  enforceable  in accordance  with its terms,  except as
                affected  by  bankruptcy,   insolvency,  fraudulent  conveyance,
                reorganization, moratorium and other similar laws relating to or
                affecting  creditors'  rights  generally  and general  equitable
                principles  (whether  considered in a proceeding in equity or at
                law).

                        (vi)    To the  best  of  our  knowledge,  there  is not
                pending or threatened any action, suit,  proceeding,  inquiry or
                investigation,  to which the Advisers  are a party,  or to which
                the  property of the  Advisers is subject,  before or brought by
                any court or governmental  agency or body,  domestic or foreign,
                which might  reasonably  be  expected to result in any  material
                adverse change in the condition, financial or otherwise, in the

                                      A-4
<PAGE>


                earnings,   business  affairs  or  business   prospects  of  the
                Advisers,  materially  and  adversely  affect the  properties or
                assets of the Advisers or materially  impair or adversely affect
                the ability of the Advisers to function as an investment adviser
                or perform its obligations under the Management Agreement or the
                Sub-Advisory  Agreement, or which is required to be disclosed in
                the Registration Statement or the Prospectus.

                        (vii)   To the  best  of  our  knowledge,  there  are no
                franchises,  contracts, indentures,  mortgages, loan agreements,
                notes,  leases or other instruments  required to be described or
                referred  to in the  Registration  Statement  or to be  filed as
                exhibits  thereto  other than those  described  or  referred  to
                therein  or filed  or  incorporated  by  reference  as  exhibits
                thereto,  and the descriptions thereof or references thereto are
                correct in all material respects.

                        (viii)  To the best of our  knowledge,  each  Adviser is
                not in violation of its certificate of incorporation, by-laws or
                other  organizational  documents  and no default by the Advisers
                exists in the due  performance  or  observance  of any  material
                obligation,  agreement,  covenant or condition  contained in any
                contract,  indenture,  mortgage, loan agreement,  note, lease or
                other  agreement or instrument  that is described or referred to
                in the  Registration  Statement  or the  Prospectus  or filed or
                incorporated  by  reference  as an exhibit  to the  Registration
                Statement.

                        (ix)    No  filing  with,  or  authorization,  approval,
                consent, license, order,  registration,  qualification or decree
                of, any court or governmental  authority or agency,  domestic or
                foreign  (other than under the Act, the  Investment  Company Act
                and the Rules and Regulations,  which have been obtained,  or as
                may be  required  under the  securities  or blue sky laws of the
                various  states,  as to which we need  express  no  opinion)  is
                necessary or required in connection with the due  authorization,
                execution and delivery of the Purchase Agreement.

                        (x)     The execution,  delivery and  performance of the
                Purchase  Agreement  and the  consummation  of the  transactions
                contemplated in the Purchase  Agreement and in the  Registration
                Statement and compliance by the Advisers with their  obligations
                under the Purchase  Agreement do not and will not,  whether with
                or  without  the  giving  of  notice  or  lapse of time or both,
                conflict with or constitute a breach of, or default or Repayment
                Event  (as  defined  in  Section   1(a)(xii)   of  the  Purchase
                Agreement)  under or result in the creation or imposition of any
                lien,  charge or encumbrance  upon any property or assets of the
                Advisers pursuant to any contract, indenture,  mortgage, deed of
                trust,  loan or  credit  agreement,  note,  lease  or any  other
                agreement or instrument, known to us, to which the Advisers is a
                party or by which  it or any of them may be  bound,  or to which
                any of the property or assets of the Advisers is subject (except
                for such  conflicts,  breaches or defaults or liens,  charges or
                encumbrances that would not have a Material Adverse Effect), nor
                will such action  result in any  violation of the  provisions of
                the charter or by-laws of the Advisers,  or any applicable  law,
                statute,  rule,  regulation,  judgment,  order,  writ or decree,
                known to us, of any government,  government  instrumentality  or
                court,  domestic  or  foreign,   having  jurisdiction  over  the
                Advisers or any of its properties, assets or operations.

        In addition, we have participated in the preparation of the Registration
Statement  and the  Prospectus  and  participated  in  discussions  with certain
officers,  trustees and  employees of the Trust,  representatives  of Deloitte &
Touche LLP, the independent accountants who examined the statement of assets and
liabilities  of  the  Trust  included  or   incorporated  by  reference  in  the
Registration Statement and

                                      A-5
<PAGE>


the Prospectus,  and you and your  representatives  and we have reviewed certain
Trust records and documents.  While we have not  independently  verified and are
not  passing  upon,  and do not assume any  responsibility  for,  the  accuracy,
completeness  or  fairness  of the  information  contained  in the  Registration
Statement  and the  Prospectus,  except to the extent  necessary to enable us to
give the opinions  with  respect to the Trust in  paragraphs  (A)(v),  (xiv) and
(xix), on the basis of such  participation  and review,  nothing has come to our
attention that would lead us to believe that the Registration  Statement (except
for financial statements, supporting schedules and other financial data included
therein or omitted therefrom and for statistical  information  derived from such
financial statements,  supporting schedules or other financial data, as to which
we do not express any belief),  at the time such  Registration  Statement became
effective,  contained an untrue statement of a material fact or omitted to state
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements  therein not misleading or that the Prospectus  (except for financial
statements,  supporting  schedules and other financial data included  therein or
omitted  therefrom and for statistical  information  derived from such financial
statements,  supporting schedules or other financial data, as to which we do not
express any belief),  at the time the Prospectus  was issued,  or at the Closing
Date,  included or includes an untrue statement of a material fact or omitted or
omits to  state a  material  fact  necessary  in  order  to make the  statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.

                                      A-6

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2J
<SEQUENCE>5
<FILENAME>c22094_ex99-2j.txt
<DESCRIPTION>CUSTODIAN CONTRACT
<TEXT>

                                                                     Exhibit (j)

                               CUSTODIAN CONTRACT


        This  Contract is made as of November  __, 2001 between  BlackRock  Core
Bond Trust, a business trust  organized and existing under the laws of the State
of Delaware,  having its  principal  place of business at 100 Bellevue  Parkway,
Wilmington,  Delaware 19809 hereinafter called the "Fund", and State Street Bank
and Trust Company, a Massachusetts trust company,  having its principal place of
business at 225  Franklin  Street,  Boston,  Massachusetts,  02110,  hereinafter
called the "Custodian",

        WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:


1.      EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT

        The Fund hereby  employs the  Custodian  as the  custodian of its assets
pursuant to the provisions of the Fund's agreement and declaration of trust (the
"Declaration  of  Trust").  The Fund  agrees to  deliver  to the  Custodian  all
securities  and cash  owned by it,  and all  payments  of  income,  payments  of
principal or capital distributions received by it with respect to all securities
owned by the Fund from time to time, and the cash  consideration  received by it
for such new or treasury shares of beneficial interest ("Shares") of the Fund as
may be issued or sold from time to time. The Custodian  shall not be responsible
for any  property of the Fund held or received by the Fund and not  delivered to
the Custodian.

        Upon receipt of "Proper Instructions" (within the meaning of Article 6),
the  Custodian  shall from time to time employ one or more  sub-custodians,  but
only in accordance  with an applicable vote by the board of trustees of the Fund
(the  "Board"),  and  provided  that the  Custodian  shall  have no more or less
responsibility  or  liability to the Fund on account of any actions or omissions
of  any  sub-custodian  so  employed  than  any  such  sub-custodian  has to the
Custodian.


2.      DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
        CUSTODIAN

2.1     HOLDING  SECURITIES.  The Custodian shall hold and physically  segregate
        for the  account  of the  Fund  all  non-cash  property,  including  all
        securities  owned by the  Fund,  other  than (a)  securities  which  are
        maintained  pursuant to Section 2.8 in a clearing agency registered with
        the U.S.  Securities and Exchange  Commission  (the "SEC") under Section
        17A of the Securities  Exchange Act of 1934 (the "Exchange Act"),  which
        acts as a securities depository,  or in the book-entry system authorized
        by the U.S.  Department  of the  Treasury and certain  federal  agencies
        (each, a "Securities  System") and (b) commercial paper of an issuer for
        which  State  Street Bank and Trust  Company  acts as issuing and paying
        agent

<PAGE>


        ("Direct  Paper")  which is deposited  and/or  maintained  in the Direct
        Paper System of the Custodian  (the "Direct Paper  System")  pursuant to
        Section 2.9.

2.2     DELIVERY  OF  SECURITIES.   The  Custodian  shall  release  and  deliver
        securities  owned by the Fund held by the  Custodian  or in a Securities
        System account of the Custodian  ("Securities System Account") or in the
        Custodian's Direct Paper book entry system account ("Direct Paper System
        Account")  only  upon  receipt  of  Proper  Instructions,  which  may be
        continuing instructions when deemed appropriate by the parties, and only
        in the following cases:

        1)      Upon sale of such  securities  for the  account  of the Fund and
                receipt of payment therefor;

        2)      Upon the receipt of payment in  connection  with any  repurchase
                agreement related to such securities entered into by the Fund;

        3)      In the case of a sale effected through a Securities  System,  in
                accordance with the provisions of Section 2.8 hereof;

        4)      To the  depository  agent in  connection  with  tender  or other
                similar offers for securities of the Fund;

        5)      To the  issuer  thereof or its agent  when such  securities  are
                called, redeemed,  retired or otherwise become payable; provided
                that, in any such case, the cash or other consideration is to be
                delivered to the Custodian;

        6)      To the issuer thereof,  or its agent, for transfer into the name
                of the Fund or into the name of any  nominee or  nominees of the
                Custodian  or  into  the  name  or  nominee  name  of any  agent
                appointed  pursuant  to Section  2.7 or into the name or nominee
                name of any  sub-custodian  appointed  pursuant to Article 1; or
                for exchange for a different  number of bonds,  certificates  or
                other  evidence  representing  the same aggregate face amount or
                number  of  units;  PROVIDED  that,  in any such  case,  the new
                securities are to be delivered to the Custodian;

        7)      Upon the sale of such securities for the account of the Fund, to
                the  broker  or its  clearing  agent,  against  a  receipt,  for
                examination  in  accordance  with  "street   delivery"   custom;
                provided  that in any such  case,  the  Custodian  shall have no
                responsibility  or  liability  for any  loss  arising  from  the
                delivery of such securities prior to receiving  payment for such
                securities   except  as  may  arise  from  the  Custodian's  own
                negligence or willful misconduct;

        8)      For  exchange  or  conversion  pursuant  to any plan of  merger,
                consolidation, recapitalization,  reorganization or readjustment
                of the securities of the issuer of such securities,  or pursuant
                to provisions for conversion  contained in such  securities,  or
                pursuant to any deposit  agreement;  provided  that, in any such
                case,  the new  securities and cash, if any, are to be delivered
                to the Custodian;

                                       2
<PAGE>


        9)      In the case of  warrants,  rights  or  similar  securities,  the
                surrender  thereof in the exercise of such  warrants,  rights or
                similar  securities  or the  surrender  of interim  receipts  or
                temporary securities for definitive  securities;  provided that,
                in any such case, the new securities and cash, if any, are to be
                delivered to the Custodian;

        10)     For delivery in connection  with any loans of securities made by
                the Fund,  BUT ONLY against  receipt of adequate  collateral  as
                agreed  upon  from time to time by the  Custodian  and the Fund,
                which  may be in the form of cash or  obligations  issued by the
                United  States  government,  its agencies or  instrumentalities,
                except that in connection with any loans for which collateral is
                to be  credited  to the  Custodian's  account in the  book-entry
                system  authorized by the U.S.  Department of the Treasury,  the
                Custodian  will  not be  held  liable  or  responsible  for  the
                delivery of securities owned by the Fund prior to the receipt of
                such collateral;

        11)     For delivery as security in  connection  with any  borrowings by
                the Fund  requiring  a pledge of  assets  by the Fund,  BUT ONLY
                against receipt of amounts borrowed;

        12)     For delivery in accordance  with the provisions of any agreement
                among the Fund,  the  Custodian and a  broker-dealer  registered
                under the Exchange Act and a member of The National  Association
                of Securities  Dealers,  Inc.  ("NASD"),  relating to compliance
                with the rules of The Options  Clearing  Corporation  and of any
                registered  national  securities  exchange,  or of  any  similar
                organization  or   organizations,   regarding  escrow  or  other
                arrangements in connection with transactions by the Fund;

        13)     For delivery in accordance  with the provisions of any agreement
                among the Fund, the Custodian, and a Futures Commission Merchant
                registered  under  the  Commodity   Exchange  Act,  relating  to
                compliance  with the  rules  of the  Commodity  Futures  Trading
                Commission  (the  "CFTC")  and/or any  Contract  Market,  or any
                similar   organization  or   organizations,   regarding  account
                deposits in connection with transactions by the Fund;

        14)     For any other  proper  purpose,  BUT ONLY upon receipt of Proper
                Instructions  specifying  the  securities  of  the  Fund  to  be
                delivered,  setting forth the purpose for which such delivery is
                to be made,  declaring such purpose to be a proper purpose,  and
                naming the person or persons to whom delivery of such securities
                shall be made.

2.3     REGISTRATION OF SECURITIES. Securities held by the Custodian (other than
        bearer securities) shall be registered in the name of the Fund or in the
        name of any nominee of the Fund or of any nominee of the Custodian which
        nominee shall be assigned  exclusively to the Fund,  UNLESS the Fund has
        authorized in writing the  appointment of a nominee to be used in common
        with other  registered  investment  companies having the same investment
        adviser  as the  Fund,  or in the  name or  nominee  name  of any  agent
        appointed  pursuant to Section 2.7 or


                                       3
<PAGE>


        in the name or nominee name of any sub-custodian  appointed  pursuant to
        Article 1. All  securities  accepted by the  Custodian  on behalf of the
        Fund under the terms of this Contract shall be in "street name" or other
        good  delivery  form.  If,  however,  the Fund directs the  Custodian to
        maintain  securities in "street name",  the Custodian  shall utilize its
        best  efforts  only  to  timely  collect  income  due  the  Fund on such
        securities  and to  notify  the  Fund on a best  efforts  basis  only of
        relevant corporate actions including,  without  limitation,  pendency of
        calls, maturities, tender or exchange offers.

2.4     BANK  ACCOUNTS.  The  Custodian  shall open and maintain a separate bank
        account or  accounts in the name of the Fund,  subject  only to draft or
        order by the Custodian  acting  pursuant to the terms of this  Contract,
        and shall hold in such  account or accounts,  subject to the  provisions
        hereof,  all cash  received  by it from or for the  account of the Fund,
        other than cash maintained by the Fund in a bank account established and
        used in accordance  with Rule 17f-3 under the Investment  Company Act of
        1940,  as amended (the "1940 Act").  Funds held by the Custodian for the
        Fund may be  deposited  by it to its credit as  Custodian in the banking
        department of the Custodian or in such other banks or trust companies as
        it may in its discretion deem necessary or desirable; PROVIDED, however,
        that every such bank or trust  company  shall be  qualified  to act as a
        custodian  under the 1940 Act and that  each such bank or trust  company
        and the funds to be deposited with each such bank or trust company shall
        be approved  by vote of a majority of the Board of the Fund.  Such funds
        shall be  deposited by the  Custodian  in its capacity as Custodian  and
        shall be withdrawable by the Custodian only in that capacity.

2.5     COLLECTION  OF INCOME.  Subject to the  provisions  of Section  2.3, the
        Custodian  shall collect on a timely basis all income and other payments
        with respect to registered  securities  held hereunder to which the Fund
        shall be entitled  either by law or pursuant to custom in the securities
        business,  and shall  collect  on a timely  basis all  income  and other
        payments with respect to bearer securities if, on the date of payment by
        the  issuer,  such  securities  are held by the  Custodian  or its agent
        thereof  and shall  credit  such  income,  as  collected,  to the Fund's
        custodian account. Without limiting the generality of the foregoing, the
        Custodian  shall  detach and  present  for payment all coupons and other
        income  items  requiring  presentation  as and when they  become due and
        shall collect interest when due on securities held hereunder. Income due
        the Fund on securities  loaned pursuant to the provisions of Section 2.2
        (10) shall be the responsibility of the Fund. The Custodian will have no
        duty or  responsibility in connection  therewith,  other than to provide
        the Fund with such information or data as may be necessary to assist the
        Fund in arranging for the timely delivery to the Custodian of the income
        to which the Fund is properly entitled.

2.6     PAYMENT OF FUND MONIES. Upon receipt of Proper  Instructions,  which may
        be continuing  instructions when deemed appropriate by the parties,  the
        Custodian shall pay out monies of the Fund in the following cases only:

        1)      Upon the purchase of securities,  options,  futures contracts or
                options on  futures  contracts  for the  account of the Fund but
                only (a) against the delivery of such  securities or evidence of
                title to such options, futures contracts or options on futures

                                       4
<PAGE>


                contracts to the Custodian  (or any bank,  banking firm or trust
                company  doing  business in the United States or abroad which is
                qualified  under the 1940 Act to act as a custodian and has been
                designated  by the  Custodian  as its  agent  for this  purpose)
                registered  in the name of the Fund or in the name of a  nominee
                of the Custodian  referred to in Section 2.3 hereof or in proper
                form  for  transfer;  (b) in the  case  of a  purchase  effected
                through a Securities  System,  in accordance with the conditions
                set forth in Section 2.8  hereof;  (c) in the case of a purchase
                involving  the  Direct  Paper  System,  in  accordance  with the
                conditions  set  forth  in  Section  2.11;  (d) in the  case  of
                repurchase  agreements  entered  into  between  the Fund and the
                Custodian, or another bank, or a broker-dealer which is a member
                of NASD,  (i)  against  delivery  of the  securities  either  in
                certificate  form or through an entry  crediting the Custodian's
                account at the Federal Reserve Bank with such securities or (ii)
                against delivery of the receipt evidencing  purchase by the Fund
                of securities owned by the Custodian along with written evidence
                of the agreement by the Custodian to repurchase  such securities
                from the Fund or (e) for transfer to a time  deposit  account of
                the Fund in any bank;  such  transfer  may be effected  prior to
                receipt of a  confirmation  from a broker and/or the  applicable
                bank pursuant to Proper Instructions as defined in Article 6;

        2)      In  connection  with   conversion,   exchange  or  surrender  of
                securities owned by the Fund as set forth in Section 2.2 hereof;

        3)      For the  payment of any  expense or  liability  incurred  by the
                Fund,  including but not limited to the  following  payments for
                the  account  of the Fund:  interest,  taxes,  management  fees,
                accounting  fees,  transfer  agent and legal fees, and operating
                expenses of the Fund  whether or not such  expenses are to be in
                whole or part capitalized or treated as deferred expenses;

        4)      For  the  payment  of any  dividends  declared  pursuant  to the
                governing documents of the Fund;

        5)      For  payment of the amount of  dividends  received in respect of
                securities sold short;

        6)      For any other  proper  purpose,  BUT ONLY upon receipt of Proper
                Instructions  specifying  the  amount of such  payment,  setting
                forth  the  purpose  for  which  such  payment  is to  be  made,
                declaring  such purpose to be a proper  purpose,  and naming the
                person or persons to whom such payment is to be made.

2.7     APPOINTMENT  OF AGENTS.  The  Custodian  may at any time or times in its
        discretion  appoint (and may at any time remove) any other bank or trust
        company  which  is  itself  qualified  under  the  1940  Act to act as a
        custodian,  as its  agent to carry  out such of the  provisions  of this
        Article  2 as the  Custodian  may from  time to time  direct;  PROVIDED,
        however,  that the  appointment  of any  agent  shall  not  relieve  the
        Custodian of its responsibilities or liabilities hereunder.

                                       5
<PAGE>


2.8     DEPOSIT OF SECURITIES IN SECURITIES  SYSTEMS.  The Custodian may deposit
        and/or maintain  securities owned by the Fund in a Securities  System in
        accordance  with  applicable  Federal  Reserve  Board  and SEC rules and
        regulations, if any, and subject to the following provisions:

        1)      The  Custodian  may keep  securities of the Fund in a Securities
                System  provided  that  such  securities  are  represented  in a
                Securities  System Account which shall not include any assets of
                the Custodian  other than assets held as a fiduciary,  custodian
                or otherwise for customers;

        2)      The records of the  Custodian  with respect to securities of the
                Fund which are maintained in a Securities  System shall identify
                by book-entry those securities belonging to the Fund;

        3)      The Custodian shall pay for securities purchased for the account
                of the Fund  upon (i)  receipt  of  advice  from the  Securities
                System  that  such  securities  have  been  transferred  to  the
                Securities  System  Account,  and (ii) the making of an entry on
                the  records  of the  Custodian  to  reflect  such  payment  and
                transfer  for the  account  of the  Fund.  The  Custodian  shall
                transfer  securities  sold for the  account of the Fund upon (i)
                receipt of advice from the  Securities  System that  payment for
                such  securities has been  transferred to the Securities  System
                Account,  and (ii) the making of an entry on the  records of the
                Custodian to reflect  such  transfer and payment for the account
                of the Fund. Copies of all advices from the Securities System of
                transfers  of  securities  for the  account  of the  Fund  shall
                identify the Fund, be  maintained  for the Fund by the Custodian
                and be provided to the Fund at its request.  Upon  request,  the
                Custodian  shall furnish the Fund  confirmation of each transfer
                to or from the  account  of the  Fund in the  form of a  written
                advice or notice and shall  furnish to the Fund  copies of daily
                transaction  sheets  reflecting  each day's  transactions in the
                Securities System for the account of the Fund;

        4)      The Custodian shall provide the Fund with any report obtained by
                the  Custodian on the  Securities  System's  accounting  system,
                internal  accounting  control and  procedures  for  safeguarding
                securities deposited in the Securities System;

        5)      Anything to the contrary in this Contract  notwithstanding,  the
                Custodian  shall be liable to the Fund for any loss or damage to
                the Fund resulting  from use of the Securities  System by reason
                of any negligence, misfeasance or misconduct of the Custodian or
                any of its  agents or of any of its or their  employees  or from
                failure  of  the   Custodian   or  any  such  agent  to  enforce
                effectively  such rights as it may have  against the  Securities
                System;  at the election of the Fund, it shall be entitled to be
                subrogated  to the rights of the  Custodian  with respect to any
                claim  against the  Securities  System or any other person which
                the  Custodian  may have as a  consequence  of any such  loss or
                damage  if and to the  extent  that the  Fund has not been  made
                whole for any such loss or damage.

                                       6
<PAGE>


2.9     FUND ASSETS HELD IN THE CUSTODIAN'S  DIRECT PAPER SYSTEM.  The Custodian
        may deposit and/or maintain  securities  owned by the Fund in the Direct
        Paper System of the Custodian subject to the following provisions:

        1)      No transaction relating to securities in the Direct Paper System
                will be effected in the absence of Proper Instructions;

        2)      The  Custodian  may keep  securities  of the Fund in the  Direct
                Paper System only if such  securities are  represented in Direct
                Paper System  Account  which shall not include any assets of the
                Custodian  other than assets held as a  fiduciary,  custodian or
                otherwise for customers;

        3)      The records of the  Custodian  with respect to securities of the
                Fund which are  maintained  in the  Direct  Paper  System  shall
                identify by book-entry those securities belonging to the Fund;

        4)      The Custodian shall pay for securities purchased for the account
                of the Fund upon the  making of an entry on the  records  of the
                Custodian to reflect such payment and transfer of  securities to
                the account of the Fund. The Custodian shall transfer securities
                sold for the  account of the Fund upon the making of an entry on
                the  records of the  Custodian  to  reflect  such  transfer  and
                receipt of payment for the account of the Fund;

        5)      The  Custodian  shall  furnish  the  Fund  confirmation  of each
                transfer  to or from the  account of the Fund,  in the form of a
                written  advice or notice,  of Direct Paper on the next business
                day following such transfer and shall furnish to the Fund copies
                of daily transaction sheets reflecting each day's transaction in
                the Securities System for the account of the Fund;

        6)      The  Custodian  shall  provide  the Fund with any  report on its
                system of internal accounting control as the Fund may reasonably
                request from time to time.

2.10    SEGREGATED   ACCOUNT.   The  Custodian  shall  upon  receipt  of  Proper
        Instructions  from the Fund establish and maintain a segregated  account
        or  accounts  for and on behalf  of the  Fund,  into  which  account  or
        accounts may be transferred cash and/or securities, including securities
        maintained  in an  account by the  Custodian  pursuant  to  Section  2.8
        hereof, (i) in accordance with the provisions of any agreement among the
        Fund, the Custodian and a  broker-dealer  registered  under the Exchange
        Act and a  member  of the  NASD  (or  any  futures  commission  merchant
        registered  under the Commodity  Exchange  Act),  relating to compliance
        with the rules of The Options Clearing Corporation and of any registered
        national  securities  exchange (or the CFTC or any  registered  contract
        market),  or of any similar  organization  or  organizations,  regarding
        escrow or other  arrangements  in connection  with  transactions  by the
        Fund, (ii) for purposes of segregating cash or government  securities in
        connection  with  options  purchased,  sold or  written  by the  Fund or
        commodity  futures contracts or options thereon purchased or sold by the
        Fund,  (iii)  for the  purposes  of  compliance  by the  Fund  with

                                       7
<PAGE>


        the procedures  required by Investment Company Act Release No. 10666, or
        any  subsequent   release  or  releases  of  the  SEC  relating  to  the
        maintenance of segregated  accounts by registered  investment  companies
        and (iv) for other  proper  purposes,  BUT  ONLY,  in the case of clause
        (iv),  upon receipt of Proper  Instructions  from the Fund setting forth
        the purpose or purposes of such  segregated  account and declaring  such
        purposes to be proper purposes.

2.11    OWNERSHIP  CERTIFICATES  FOR TAX PURPOSES.  The Custodian  shall execute
        ownership  and other  certificates  and  affidavits  for all federal and
        state  tax  purposes  in  connection  with  receipt  of  income or other
        payments  with  respect  to  securities  of the  Fund  held by it and in
        connection with transfers of such securities.

2.12    PROXIES.  The  Custodian  shall,  with  respect to the  securities  held
        hereunder,  cause to be promptly  executed by the  registered  holder of
        such securities,  if the securities are registered otherwise than in the
        name  of the  Fund  or a  nominee  of the  Fund,  all  proxies,  without
        indication  of the manner in which  such  proxies  are to be voted,  and
        shall promptly  deliver to the Fund such proxies,  all proxy  soliciting
        materials and all notices relating to such securities.

2.13    COMMUNICATIONS RELATING TO FUND SECURITIES. Subject to the provisions of
        Section  2.3,  the  Custodian  shall  transmit  promptly to the Fund all
        written information  (including,  without limitation,  pendency of calls
        and  maturities of securities  and  expirations  of rights in connection
        therewith and notices of exercise of call and put options written by the
        Fund and the  maturity  of futures  contracts  purchased  or sold by the
        Fund)  received by the Custodian  from issuers of the  securities  being
        held for the  Fund.  With  respect  to tender or  exchange  offers,  the
        Custodian  shall transmit  promptly to the Fund all written  information
        received by the Custodian from issuers of the securities whose tender or
        exchange is sought and from the party (or his agents)  making the tender
        or exchange  offer.  If the Fund  desires to take action with respect to
        any tender offer,  exchange offer or any other similar transaction,  the
        Fund shall notify the  Custodian at least three  business  days prior to
        the date on which the Custodian is to take such action.

2.14    REPORTS TO FUND BY INDEPENDENT  PUBLIC  ACCOUNTANTS  The Custodian shall
        provide the Fund, at such times as the Fund may reasonably require, with
        reports by independent  public  accountants  on the  accounting  system,
        internal accounting control and procedures for safeguarding  securities,
        futures contracts and options on futures contracts, including securities
        deposited  and/or  maintained  in a Securities  System,  relating to the
        services  provided by the Custodian  under this Contract;  such reports,
        shall be of sufficient scope and in sufficient detail, as may reasonably
        be  required  by the Fund,  to  provide  reasonable  assurance  that any
        material  inadequacies  would be disclosed by such examination,  and, if
        there are no such inadequacies, the reports shall so state.


3.      PROVISIONS RELATING TO RULES 17F-5 AND 17F-7

                                       8
<PAGE>


3.1.    DEFINITIONS. Capitalized terms in this Contract shall have the following
        meanings:

        "Country Risk" means all factors reasonably related to the systemic risk
        of holding  Foreign Assets in a particular  country  including,  but not
        limited to, such country's political environment, economic and financial
        infrastructure  (including any Eligible Securities  Depository operating
        in  the  country),  prevailing  or  developing  custody  and  settlement
        practices,  and laws and  regulations  applicable to the safekeeping and
        recovery of Foreign Assets held in custody in that country.

        "Eligible Foreign Custodian" has the meaning set forth in section (a)(1)
        of Rule 17f-5,  including a majority-owned  or indirect  subsidiary of a
        U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the
        requirements  of an  Eligible  Foreign  Custodian  (as set forth in Rule
        17f-5 or by other appropriate action of the SEC), or a foreign branch of
        a Bank (as  defined in  Section  2(a)(5)  of the 1940 Act)  meeting  the
        requirements  of a custodian  under  Section  17(f) of the 1940 Act; the
        term does not include any Eligible Securities Depository.

        "Eligible  Securities  Depository"  has the meaning set forth in section
        (b)(1) of Rule 17f-7.

        "Foreign Assets" means any of the Fund's investments  (including foreign
        currencies)  for which the primary  market is outside the United  States
        and such cash and cash equivalents as are reasonably necessary to effect
        the Fund's transactions in such investments.

        "Foreign Custody Manager" has the meaning set forth in section (a)(3) of
        Rule 17f-5.

3.2.    THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.

        3.2.1   DELEGATION  TO THE  CUSTODIAN AS FOREIGN  CUSTODY  MANAGER.  The
                Fund, by resolution  adopted by its Board,  hereby  delegates to
                the  Custodian,  subject  to  Section  (b) of  Rule  17f-5,  the
                responsibilities  set forth in this  Section 3.2 with respect to
                Foreign Assets held outside the United States, and the Custodian
                hereby accepts such delegation as Foreign Custody Manager of the
                Fund.

        3.2.2   COUNTRIES   COVERED.   The  Foreign  Custody  Manager  shall  be
                responsible   for  performing  the  delegated   responsibilities
                defined  below only with  respect to the  countries  and custody
                arrangements  for each such country listed on Schedule A to this
                Contract,  which list of  countries  may be amended from time to
                time by the  Fund  with the  agreement  of the  Foreign  Custody
                Manager.  The Foreign  Custody  Manager shall list on Schedule A
                the Eligible Foreign Custodians  selected by the Foreign Custody
                Manager to maintain  the Fund's  assets,  which list of Eligible
                Foreign  Custodians may be amended from time to time in the sole
                discretion of the Foreign Custody  Manager.  The Foreign Custody
                Manager  will  provide   amended   versions  of  Schedule  A  in
                accordance with Section 3.2.5 hereof.

                                       9
<PAGE>


                Upon the  receipt  by the  Foreign  Custody  Manager  of  Proper
                Instructions to open an account or to place or maintain  Foreign
                Assets in a country listed on Schedule A, and the fulfillment by
                the Fund of the applicable account opening requirements for such
                country,  the Foreign  Custody  Manager  shall be deemed to have
                been delegated by the Board  responsibility  as Foreign  Custody
                Manager with respect to that country and to have  accepted  such
                delegation.  Execution  of this  Amendment  by the Fund shall be
                deemed  to be a Proper  Instruction  to open an  account,  or to
                place or maintain  Foreign  Assets,  in each  country  listed on
                Schedule  A in which  the  Custodian  has  previously  placed or
                currently  maintains Foreign Assets pursuant to the terms of the
                Contract. Following the receipt of Proper Instructions directing
                the  Foreign  Custody  Manager to close the  account of the Fund
                with the  Eligible  Foreign  Custodian  selected  by the Foreign
                Custody Manager in a designated  country,  the delegation by the
                Board to the  Custodian  as  Foreign  Custody  Manager  for that
                country shall be deemed to have been withdrawn and the Custodian
                shall immediately cease to be the Foreign Custody Manager of the
                Fund with respect to that country.

                The Foreign  Custody  Manager may  withdraw  its  acceptance  of
                delegated  responsibilities with respect to a designated country
                upon  written  notice to the Fund.  Thirty  days (or such longer
                period to which the parties  reasonably  agree in writing) after
                receipt of any such notice by the Fund, the Custodian shall have
                no further  responsibility  in its  capacity as Foreign  Custody
                Manager to the Fund with  respect to the country as to which the
                Custodian's acceptance of delegation is withdrawn.

        3.2.3   SCOPE OF DELEGATED RESPONSIBILITIES.

                (a)     SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the
                provisions of this Section 3.2, the Foreign  Custody Manager may
                place  and  maintain  the  Foreign  Assets  in the  care  of the
                Eligible  Foreign  Custodian  selected  by the  Foreign  Custody
                Manager in each  country  listed on Schedule A, as amended  from
                time to time. In performing  its delegated  responsibilities  as
                Foreign Custody Manager to place or maintain Foreign Assets with
                an Eligible Foreign Custodian, the Foreign Custody Manager shall
                determine  that the Foreign Assets will be subject to reasonable
                care,  based on the  standards  applicable  to custodians in the
                country  in  which  the  Foreign  Assets  will  be  held by that
                Eligible  Foreign  Custodian,   after  considering  all  factors
                relevant to the safekeeping of such assets,  including,  without
                limitation the factors specified in Rule 17f-5(c)(1).

                (b)     CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS.  The Foreign
                Custody Manager shall determine that the contract  governing the
                foreign  custody   arrangements   with  each  Eligible   Foreign
                Custodian  selected by the Foreign  Custody Manager will satisfy
                the requirements of Rule 17f-5(c)(2).

                                       10
<PAGE>


                (c)     MONITORING.  In each case in which the  Foreign  Custody
                Manager  maintains  Foreign  Assets  with  an  Eligible  Foreign
                Custodian  selected by the Foreign Custody Manager,  the Foreign
                Custody  Manager  shall  establish  a system to monitor  (i) the
                appropriateness  of  maintaining  the  Foreign  Assets with such
                Eligible Foreign  Custodian and (ii) the contract  governing the
                custody arrangements  established by the Foreign Custody Manager
                with the Eligible  Foreign  Custodian.  In the event the Foreign
                Custody Manager determines that the custody arrangements with an
                Eligible  Foreign  Custodian  it  has  selected  are  no  longer
                appropriate,  the Foreign Custody Manager shall notify the Board
                in accordance with Section 3.2.5 hereunder.

        3.2.4   GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes
                of this Section  3.2,  the Board (or at the Board's  delegation,
                the Fund's  duly-authorized  investment manager) shall be deemed
                to have considered and determined to accept such Country Risk as
                is  incurred by placing and  maintaining  the Foreign  Assets in
                each  country  for which the  Custodian  is  serving  as Foreign
                Custody Manager of the Fund.

        3.2.5   REPORTING REQUIREMENTS. The Foreign Custody Manager shall report
                the  withdrawal of the Foreign  Assets from an Eligible  Foreign
                Custodian and the placement of such Foreign  Assets with another
                Eligible Foreign  Custodian by providing to the Board an amended
                Schedule  A at the  end of the  calendar  quarter  in  which  an
                amendment to such  Schedule has  occurred.  The Foreign  Custody
                Manager  shall make written  reports  notifying the Board of any
                other material change in the foreign custody arrangements of the
                Fund  described in this Section 3.2 after the  occurrence of the
                material change.

        3.2.6   STANDARD  OF CARE AS FOREIGN  CUSTODY  MANAGER  OF THE FUND.  In
                performing  the  responsibilities  delegated  to it, the Foreign
                Custody Manager agrees to exercise reasonable care, prudence and
                diligence  such  as  a  person  having  responsibility  for  the
                safekeeping  of  assets  of  management   investment   companies
                registered under the 1940 Act would exercise.

        3.2.7   REPRESENTATIONS  WITH RESPECT TO RULE 17F-5. The Foreign Custody
                Manager represents to the Fund that it is a U.S. Bank as defined
                in section  (a)(7) of Rule  17f-5.  The Fund  represents  to the
                Custodian  that the Board has  determined  that it is reasonable
                for  the  Board  to  rely  on  the   Custodian  to  perform  the
                responsibilities  delegated  pursuant  to this  Contract  to the
                Custodian as the Foreign Custody Manager of the Fund.

        3.2.8   EFFECTIVE  DATE AND  TERMINATION  OF THE  CUSTODIAN  AS  FOREIGN
                CUSTODY  MANAGER.  The Board's  delegation  to the  Custodian as
                Foreign Custody Manager of the Fund shall be effective as of the
                date hereof and shall remain in effect until  terminated  at any
                time,  without  penalty,  by written notice from the terminating
                party to the  non-terminating  party.  Termination  will  become
                effective thirty (30) days after

                                       11
<PAGE>


                receipt  by  the  non-terminating  party  of  such  notice.  The
                provisions of Section  3.2.2 hereof shall govern the  delegation
                to and  termination of the Custodian as Foreign  Custody Manager
                of the Fund with respect to designated countries.

3.3     ELIGIBLE SECURITIES DEPOSITORIES.

        3.3.1   ANALYSIS AND  MONITORING.  The  Custodian  shall (a) provide the
                Fund (or its  duly-authorized  investment  manager or investment
                adviser) with an analysis of the custody risks  associated  with
                maintaining assets with the Eligible Securities Depositories set
                forth  on  Schedule  B  hereto  in   accordance   with   section
                (a)(1)(i)(A)  of Rule  17f-7,  and (b)  monitor  such risks on a
                continuing   basis,   and  promptly  notify  the  Fund  (or  its
                duly-authorized investment manager or investment adviser) of any
                material  change  in such  risks,  in  accordance  with  section
                (a)(1)(i)(B) of Rule 17f-7.

        3.3.2   STANDARD OF CARE.  The Custodian  agrees to exercise  reasonable
                care,  prudence and diligence in performing the duties set forth
                in Section 3.3.1.

4.      DUTIES  OF THE  CUSTODIAN  WITH  RESPECT  TO  PROPERTY  OF THE FUND HELD
        OUTSIDE THE UNITED STATES.

4.1     DEFINITIONS.  Capitalized  terms  in  this  Article  4  shall  have  the
        following meanings:

        "Foreign  Securities  System"  means an Eligible  Securities  Depository
listed on Schedule B hereto.

        "Foreign  Sub-Custodian"  means a foreign banking institution serving as
an Eligible Foreign Custodian.

4.2.    HOLDING  SECURITIES.  The  Custodian  shall  identify  on its  books  as
        belonging  to the  Fund  the  foreign  securities  held by each  Foreign
        Sub-Custodian  or Foreign  Securities  System.  The  Custodian  may hold
        foreign  securities for all of its customers,  including the Fund,  with
        any Foreign  Sub-Custodian in an account that is identified as belonging
        to the Custodian  for the benefit of its  customers,  provided  however,
        that (i) the records of the Custodian with respect to foreign securities
        of the Fund which are  maintained in such account shall  identify  those
        securities  as belonging to the Fund and (ii),  to the extent  permitted
        and  customary  in the market in which the  account is  maintained,  the
        Custodian   shall  require  that  securities  so  held  by  the  Foreign
        Sub-Custodian  be held  separately  from  any  assets  of  such  Foreign
        Sub-Custodian or of other customers of such Foreign Sub-Custodian.

4.3.    FOREIGN SECURITIES SYSTEMS.  Foreign securities shall be maintained in a
        Foreign Securities System in a designated  country through  arrangements
        implemented by the Custodian or a Foreign Sub-Custodian,  as applicable,
        in such country.

                                       12
<PAGE>


4.4.    TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.

        4.4.1.  DELIVERY  OF  FOREIGN   ASSETS.   The  Custodian  or  a  Foreign
                Sub-Custodian  shall release and deliver  foreign  securities of
                the Fund held by the Custodian or such Foreign Sub-Custodian, or
                in a Foreign  Securities  System  account,  only upon receipt of
                Proper Instructions,  which may be continuing  instructions when
                deemed  appropriate  by the parties,  and only in the  following
                cases:

        (i)     Upon  the  sale  of such  foreign  securities  for  the  Fund in
                accordance with  commercially  reasonable market practice in the
                country  where  such  foreign  securities  are  held or  traded,
                including,  without limitation: (A) delivery against expectation
                of  receiving  later  payment;  or  (B) in  the  case  of a sale
                effected through a Foreign Securities System, in accordance with
                the rules  governing  the  operation  of the Foreign  Securities
                System;

        (ii)    In connection with any repurchase  agreement  related to foreign
                securities;

        (iii)   To the  depository  agent in  connection  with  tender  or other
                similar offers for foreign securities of the Fund;

        (iv)    To the issuer thereof or its agent when such foreign  securities
                are called, redeemed, retired or otherwise become payable;

        (v)     To the issuer thereof,  or its agent, for transfer into the name
                of  the  Custodian  (or  the  name  of  the  respective  Foreign
                Sub-Custodian or of any nominee of the Custodian or such Foreign
                Sub-Custodian)  or for exchange for a different number of bonds,
                certificates or other evidence  representing  the same aggregate
                face amount or number of units;

        (vi)    To  brokers,   clearing  banks  or  other  clearing  agents  for
                examination or trade execution in accordance with market custom;
                provided that in any such case the Foreign  Sub-Custodian  shall
                have no  responsibility  or liability  for any loss arising from
                the delivery of such securities  prior to receiving  payment for
                such   securities   except  as  may  arise   from  the   Foreign
                Sub-Custodian's own negligence or willful misconduct;

        (vii)   For  exchange  or  conversion  pursuant  to any plan of  merger,
                consolidation, recapitalization,  reorganization or readjustment
                of the securities of the issuer of such securities,  or pursuant
                to provisions for conversion  contained in such  securities,  or
                pursuant to any deposit agreement;

        (viii)  In the case of warrants,  rights or similar foreign  securities,
                the surrender  thereof in the exercise of such warrants,  rights
                or similar  securities or the  surrender of interim  receipts or
                temporary securities for definitive securities;

                                       13
<PAGE>


        (ix)    For delivery as security in connection with any borrowing by the
                Fund requiring a pledge of assets by the Fund;

        (x)     In  connection  with  trading in options and futures  contracts,
                including delivery as original margin and variation margin;

        (xi)    In connection with the lending of foreign securities; and

        (xii)   For  any  other  purpose,   but  only  upon  receipt  of  Proper
                Instructions  specifying the foreign  securities to be delivered
                and  naming  the  person or  persons  to whom  delivery  of such
                securities shall be made.

        4.4.2.  PAYMENT OF FUND  MONIES.  Upon  receipt of Proper  Instructions,
                which may be continuing  instructions when deemed appropriate by
                the  parties,  the  Custodian  shall  pay  out,  or  direct  the
                respective  Foreign  Sub-Custodian  or  the  respective  Foreign
                Securities  System  to  pay  out,  monies  of  the  Fund  in the
                following cases only:

        (i)     Upon the  purchase of foreign  securities  for the Fund,  unless
                otherwise  directed by Proper  Instructions,  by (A)  delivering
                money to the seller thereof or to a dealer therefor (or an agent
                for such  seller or dealer)  against  expectation  of  receiving
                later delivery of such foreign securities; or (B) in the case of
                a purchase  effected  through a Foreign  Securities  System,  in
                accordance  with  the  rules  governing  the  operation  of such
                Foreign Securities System;

        (ii)    In  connection  with the  conversion,  exchange or  surrender of
                foreign securities of the Fund;

        (iii)   For  the  payment  of any  expense  or  liability  of the  Fund,
                including but not limited to the following  payments:  interest,
                taxes,  investment  advisory fees,  transfer  agency fees,  fees
                under this  Contract,  legal fees,  accounting  fees,  and other
                operating expenses;

        (iv)    For the purchase or sale of foreign exchange or foreign exchange
                contracts for the Fund, including  transactions executed with or
                through the Custodian or its Foreign Sub-Custodians;

        (v)     In  connection  with  trading in options and futures  contracts,
                including delivery as original margin and variation margin;

        (vi)    For payment of part or all of the dividends  received in respect
                of securities sold short;

        (vii)   In   connection   with  the  borrowing  or  lending  of  foreign
                securities; and

                                       14
<PAGE>


        (viii)  For  any  other  purpose,   but  only  upon  receipt  of  Proper
                Instructions  specifying  the amount of such  payment and naming
                the person or persons to whom such payment is to be made.

        4.4.3.  MARKET  CONDITIONS.   Notwithstanding   any  provision  of  this
                Contract  to the  contrary,  settlement  and payment for Foreign
                Assets  received  for the  account of the Fund and  delivery  of
                Foreign  Assets  maintained  for the  account of the Fund may be
                effected in accordance with the customary established securities
                trading or processing practices and procedures in the country or
                market  in which  the  transaction  occurs,  including,  without
                limitation,  delivering  Foreign Assets to the purchaser thereof
                or to a dealer  therefor  (or an agent  for  such  purchaser  or
                dealer) with the expectation of receiving later payment for such
                Foreign Assets from such purchaser or dealer.

                The Custodian  shall provide to the Board the  information  with
                respect to custody and  settlement  practices  in  countries  in
                which the Custodian employs a Foreign Sub-Custodian described on
                Schedule  C  hereto  at the  time or  times  set  forth  on such
                Schedule. The Custodian may revise Schedule C from time to time,
                provided that no such  revision  shall result in the Board being
                provided  with  substantively  less  information  than  had been
                previously provided hereunder.

4.5.    REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in
        the custody of a Foreign  Sub-Custodian  (other than bearer  securities)
        shall  be  registered  in the  name of the  Fund  or in the  name of the
        Custodian or in the name of any Foreign  Sub-Custodian or in the name of
        any  nominee  of the  foregoing,  and the Fund  agrees  to hold any such
        nominee  harmless  from any  liability  as a holder  of  record  of such
        foreign securities.  The Custodian or a Foreign  Sub-Custodian shall not
        be obligated to accept  securities on behalf of the Fund under the terms
        of this Contract  unless the form of such  securities  and the manner in
        which  they are  delivered  are in  accordance  with  reasonable  market
        practice.

4.6     BANK ACCOUNTS. The Custodian shall identify on its books as belonging to
        the  Fund  cash  (including  cash  denominated  in  foreign  currencies)
        deposited with the Custodian. Where the Custodian is unable to maintain,
        or market  practice does not facilitate the  maintenance of, cash on the
        books of the Custodian,  a bank account or bank accounts shall be opened
        and  maintained  outside the United  States on behalf of the Fund with a
        Foreign Sub-Custodian. All accounts referred to in this Section shall be
        subject only to draft or order by the Custodian (or, if applicable, such
        Foreign  Sub-Custodian) acting pursuant to the terms of this Contract to
        hold cash  received  by or from or for the  account  of the  Fund.  Cash
        maintained  on the  books  of the  Custodian  (including  its  branches,
        subsidiaries and affiliates),  regardless of currency  denomination,  is
        maintained in bank accounts  established  under, and subject to the laws
        of, The Commonwealth of Massachusetts.

4.7.    COLLECTION OF INCOME.  The  Custodian  shall use  reasonable  commercial
        efforts to collect  all income and other  payments  with  respect to the
        Foreign  Assets held  hereunder  to which the Fund shall be entitled and
        shall credit such income,  as collected,  to the Fund. In the

                                       15
<PAGE>


        event that  extraordinary  measures are required to collect such income,
        the Fund and the  Custodian  shall consult as to such measures and as to
        the  compensation  and  expenses  of  the  Custodian  relating  to  such
        measures.

4.8     SHAREHOLDER RIGHTS. With respect to the foreign securities held pursuant
        to this Article 4, the Custodian will use reasonable  commercial efforts
        to  facilitate  the  exercise  of voting and other  shareholder  rights,
        subject always to the laws,  regulations and practical  constraints that
        may exist in the country  where such  securities  are  issued.  The Fund
        acknowledges  that  local  conditions,  including  lack  of  regulation,
        onerous  procedural  obligations,  lack of notice and other  factors may
        have the effect of severely limiting the ability of the Fund to exercise
        shareholder rights.

4.9.    COMMUNICATIONS  RELATING  TO FOREIGN  SECURITIES.  The  Custodian  shall
        transmit  promptly  to the Fund  written  information  with  respect  to
        materials received by the Custodian via the Foreign  Sub-Custodians from
        issuers of the foreign securities being held for the account of the Fund
        (including,  without  limitation,  pendency of calls and  maturities  of
        foreign  securities and expirations of rights in connection  therewith).
        With respect to tender or exchange offers,  the Custodian shall transmit
        promptly to the Fund  written  information  with respect to materials so
        received by the Custodian from issuers of the foreign  securities  whose
        tender or exchange  is sought or from the party (or its  agents)  making
        the tender or exchange offer.  The Custodian shall not be liable for any
        untimely  exercise  of any  tender,  exchange or other right or power in
        connection with foreign  securities or other property of the Fund at any
        time held by it  unless  (i) the  Custodian  or the  respective  Foreign
        Sub-Custodian  is in actual  possession  of such foreign  securities  or
        property and (ii) the Custodian receives Proper Instructions with regard
        to the exercise of any such right or power,  and both (i) and (ii) occur
        at least three business days prior to the date on which the Custodian is
        to take action to exercise such right or power.

4.10.   LIABILITY OF FOREIGN SUB-CUSTODIANS.

        Each  agreement  pursuant  to which  the  Custodian  employs  a  Foreign
        Sub-Custodian  shall,  to  the  extent  possible,  require  the  Foreign
        Sub-Custodian  to exercise  reasonable  care in the  performance  of its
        duties,  and to indemnify,  and hold  harmless,  the Custodian  from and
        against any loss, damage, cost, expense,  liability or claim arising out
        of or in connection with the Foreign Sub-Custodian's performance of such
        obligations.  At the election of the Fund, the Fund shall be entitled to
        be subrogated to the rights of the Custodian  with respect to any claims
        against a  Foreign  Sub-Custodian  as a  consequence  of any such  loss,
        damage, cost, expense,  liability or claim if and to the extent that the
        Fund has not been made whole for any such loss, damage,  cost,  expense,
        liability or claim.

4.11.   TAX LAW.

        The  Custodian  shall  have  no  responsibility  or  liability  for  any
        obligations  now or  hereafter  imposed on the Fund or the  Custodian as
        custodian  of the  Fund by the tax law of

                                       16
<PAGE>


        the United States or of any state or political  subdivision  thereof. It
        shall be the  responsibility  of the Fund to notify the Custodian of the
        obligations  imposed on the Fund or the  Custodian  as  custodian of the
        Fund by the tax law of countries other than those mentioned in the above
        sentence,  including  responsibility  for  withholding  and other taxes,
        assessments   or  other   governmental   charges,   certifications   and
        governmental  reporting.  The sole  responsibility of the Custodian with
        regard to such tax law shall be to use reasonable  efforts to assist the
        Fund with respect to any claim for exemption or refund under the tax law
        of countries for which the Fund has provided such information.

4.12.   LIABILITY OF CUSTODIAN.

        Except as may arise  from the  Custodian's  own  negligence  or  willful
        misconduct  or  the  negligence  or  willful  misconduct  of  a  Foreign
        Sub-Custodian,  the Custodian shall be without liability to the Fund for
        any  loss,  liability,  claim or  expense  resulting  from or  caused by
        anything which is part of Country Risk.

        The  Custodian  shall be liable for the acts or  omissions  of a Foreign
        Sub-Custodian   to  the  same  extent  as  set  forth  with  respect  to
        sub-custodians  generally in the  Contract  and,  regardless  of whether
        assets are  maintained  in the custody of a Foreign  Sub-Custodian  or a
        Foreign  Securities  System,  the Custodian  shall not be liable for any
        loss,  damage,   cost,  expense,   liability  or  claim  resulting  from
        nationalization, expropriation, currency restrictions, or acts of war or
        terrorism, or any other loss where the Sub-Custodian has otherwise acted
        with reasonable care.


5.      PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES

        The Custodian  shall receive from the  distributor of the Shares or from
the Fund's Transfer Agent (the "Transfer Agent") and deposit into the account of
the Fund such  payments as are received for Shares  thereof  issued or sold from
time to time by the Fund. The Custodian will provide timely  notification to the
Fund and the  Transfer  Agent of any receipt by it of payments for Shares of the
Fund.

        From such  funds as may be  available  for the  purpose,  the  Custodian
shall,  upon  receipt  of  instructions  from the  Transfer  Agent,  make  funds
available  for payment to holders of Shares who have  delivered  to the Transfer
Agent a request for redemption or repurchase of their Shares. In connection with
the redemption or repurchase of Shares, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of  Shares,  which  checks  have been  furnished  by the Fund to the
holder of Shares,  when  presented  to the  Custodian  in  accordance  with such
procedures  and controls as are  mutually  agreed upon from time to time between
the Fund and the Custodian.

                                       17
<PAGE>


6.      PROPER INSTRUCTIONS

        Proper  Instructions  as used  throughout  this Contract means a writing
signed or  initialed  by one or more  person or persons as the Board  shall have
from time to time  authorized.  Each such  writing  shall set forth the specific
transaction or type of transaction  involved,  including a specific statement of
the  purpose  for which such  action is  requested.  Oral  instructions  will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person  authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing.  Proper  Instructions may include  communications  effected directly
between  electro-mechanical or electronic devices provided that the instructions
are  consistent  with  the  security  procedures  agreed  to by the Fund and the
Custodian including, but not limited to, the security procedures selected by the
Fund on the Funds  Transfer  Addendum  to this  Contract.  For  purposes of this
Article,   Proper  Instructions  shall  include  instructions  received  by  the
Custodian  pursuant to any  three-party  agreement  which  requires a segregated
asset account in accordance with Section 2.10.


7.      ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY

        The Custodian may in its discretion,  without express authority from the
Fund:

        1)      make payments to itself or others for minor expenses of handling
                securities or other  similar items  relating to its duties under
                this  Contract,   PROVIDED  that  all  such  payments  shall  be
                accounted for to the Fund;

        2)      surrender   securities  in  temporary  form  for  securities  in
                definitive form;

        3)      endorse for collection,  in the name of the Fund, checks, drafts
                and other negotiable instruments; and

        4)      in  general,   attend  to  all   non-discretionary   details  in
                connection  with the  sale,  exchange,  substitution,  purchase,
                transfer and other  dealings with the securities and property of
                the Fund except as otherwise directed by the Board.


8.      EVIDENCE OF AUTHORITY

        The  Custodian  shall be  protected  in  acting  upon any  instructions,
notice, request,  consent,  certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified  copy of a vote of the Board as
conclusive evidence (a) of the authority of any person to act in accordance with
such vote or (b) of any  determination or of any action by the Board pursuant to
the  Declaration  of Trust  as  described  in such  vote,  and such  vote may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.

                                       18
<PAGE>


9.      DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
        OF NET ASSET VALUE AND NET INCOME

        The Custodian shall cooperate with and supply  necessary  information to
the entity or  entities  appointed  by the Board to keep the books of account of
the Fund and/or compute the net asset value per share of the outstanding  shares
of the Fund or, if directed in writing to do so by the Fund,  shall  itself keep
such books of  account  and/or  compute  such net asset  value per share.  If so
directed,  the Custodian shall also calculate  weekly the net income of the Fund
as described in the Fund's registration statement on Form N-2 under the 1940 Act
as filed with the SEC (the  "Registration  Statement") and shall advise the Fund
and the Transfer  Agent  weekly of the total  amounts of such net income and, if
instructed  in  writing by an  officer  of the Fund to do so,  shall  advise the
Transfer Agent periodically of the division of such net income among its various
components.  The  calculations  of the net asset  value per share and the weekly
income  of the Fund  shall be made at the time or times  described  from time to
time in the Fund's currently effective Registration Statement.


10.     RECORDS

        The  Custodian  shall with  respect to the Fund create and  maintain all
records  relating to its activities and obligations  under this Contract in such
manner  as will  meet the  obligations  of the Fund  under  the 1940  Act,  with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular  business  hours of the  Custodian  be open for  inspection  by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The  Custodian  shall,  at the Fund's  request,  supply the Fund with a
tabulation of securities  owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the  Custodian,  include  certificate  numbers in such
tabulations.


11.     OPINION OF FUND'S INDEPENDENT ACCOUNTANTS

        The Custodian  shall take all  reasonable  action,  as the Fund may from
time to time request,  to obtain from year to year  favorable  opinions from the
Fund's  independent  accountants  with  respect to its  activities  hereunder in
connection with the preparation of the Fund's Registration  Statement,  and Form
N-SAR  or  other  annual  reports  to the  SEC and  with  respect  to any  other
requirements of the SEC.


12.     COMPENSATION OF CUSTODIAN

        The  Custodian  shall be entitled  to  reasonable  compensation  for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.

                                       19
<PAGE>


13.     RESPONSIBILITY OF CUSTODIAN

        So long as and to the extent that it is in the  exercise  of  reasonable
care,  the  Custodian  shall  not be  responsible  for the  title,  validity  or
genuineness  of any  property  or evidence  of title  thereto  received by it or
delivered by it pursuant to this  Contract and shall be held  harmless in acting
upon any notice,  request,  consent,  certificate or other instrument reasonably
believed  by it to be genuine  and to be signed by the proper  party or parties,
including  any futures  commission  merchant  acting  pursuant to the terms of a
three-party  futures or options  agreement.  The Custodian  shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without  liability to the Fund for any
action  taken or  omitted by it in good faith  without  negligence.  It shall be
entitled to rely on and may act upon  advice of counsel  (who may be counsel for
the  Fund)  on all  matters,  and  shall be  without  liability  for any  action
reasonably taken or omitted pursuant to such advice.

        If the Fund  requires  the  Custodian to take any action with respect to
securities,  which action  involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being  liable for the payment of money or  incurring  liability of some
other form, the Fund, as a prerequisite  to requiring the Custodian to take such
action,  shall  provide  indemnity  to  the  Custodian  in an  amount  and  form
satisfactory to it.

        If the Fund requires the  Custodian,  its  affiliates,  subsidiaries  or
agents, to advance cash or securities for any purpose (including but not limited
to  securities  settlements  and  assumed  settlement)  or in the event that the
Custodian  or its  nominee  shall  incur  or be  assessed  any  taxes,  charges,
expenses,  assessments, claims or liabilities in connection with the performance
of this  Contract,  except  such as may  arise  from  its or its  nominee's  own
negligent action,  negligent failure to act or willful misconduct,  any property
at any time held for the  account of the Fund  shall be  security  therefor  and
should the Fund fail to repay the Custodian  promptly,  the  Custodian  shall be
entitled to utilize  available  cash and to dispose of the Fund's  assets to the
extent necessary to obtain reimbursement.

        In no event  shall the  Custodian  be liable  for  indirect,  special or
consequential damages.


14.     EFFECTIVE PERIOD, TERMINATION AND AMENDMENT

        This Contract  shall become  effective as of the date of its  execution,
shall  continue  in full  force  and  effect  until  terminated  as  hereinafter
provided,  may be amended at any time by mutual  agreement of the parties hereto
and may be terminated  by either party by an instrument in writing  delivered or
mailed,  postage prepaid to the other party, such termination to take effect not
sooner  than  thirty  (30) days  after  the date of such  delivery  or  mailing;
PROVIDED,  however,  that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state  regulations,  or any provision
of the Declaration of Trust, and further provided, that the Fund may at any time
by action of its Board (i)  substitute  another  bank or trust  company  for the
Custodian  by  giving  notice  as  described  above  to the  Custodian,  or (ii)
immediately  terminate  this  Contract  in the  event  of the  appointment  of a
conservator or receiver for the Custodian by the  Comptroller of the


                                       20
<PAGE>


Currency  or  upon  the  happening  of a  like  event  at  the  direction  of an
appropriate regulatory agency or court of competent jurisdiction.

        Upon  termination  of the Contract,  the Fund shall pay to the Custodian
such  compensation  as may be due as of the date of such  termination  and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.


15.     SUCCESSOR CUSTODIAN

        If a successor  custodian shall be appointed by the Board, the Custodian
shall,  upon termination,  deliver to such successor  custodian at the office of
the Custodian,  duly endorsed and in the form for transfer,  all securities then
held by it hereunder and shall transfer to an account of the successor custodian
all of the Fund's securities held in a Securities System.

        If no such successor custodian shall be appointed,  the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board, deliver
at the office of the  Custodian and transfer  such  securities,  funds and other
properties in accordance with such vote.

        In the event that no written order designating a successor  custodian or
certified copy of a vote of the Board shall have been delivered to the Custodian
on or before the date when such  termination  shall become  effective,  then the
Custodian shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the 1940 Act, doing business in Boston,  Massachusetts,  of
its own selection,  having an aggregate capital, surplus, and undivided profits,
as  shown by its last  published  report,  of not  less  than  $25,000,000,  all
securities, funds and other properties held by the Custodian and all instruments
held by the Custodian  relative  thereto and all other property held by it under
this Contract and to transfer to an account of such  successor  custodian all of
the Fund's securities held in any Securities  System.  Thereafter,  such bank or
trust company shall be the successor of the Custodian under this Contract.

        In the event that securities,  funds and other properties  remain in the
possession  of the  Custodian  after  the date of  termination  hereof  owing to
failure of the Fund to procure the certified  copy of the vote referred to or of
the Board to appoint a successor  custodian,  the Custodian shall be entitled to
fair  compensation for its services during such period as the Custodian  retains
possession of such securities,  funds and other properties and the provisions of
this Contract  relating to the duties and  obligations  of the  Custodian  shall
remain in full force and effect.


16.     INTERPRETIVE AND ADDITIONAL PROVISIONS

        In connection with the operation of this Contract, the Custodian and the
Fund,  may from  time to time  agree on such  provisions  interpretive  of or in
addition to the  provisions  of this  Contract as may in their joint  opinion be
consistent  with the general tenor of this Contract.  Any such  interpretive  or
additional  provisions shall be in a writing signed by both parties and shall be
annexed  hereto,  PROVIDED that no such  interpretive  or additional  provisions
shall contravene any

                                       21
<PAGE>


applicable  federal or state  regulations or any provision of the Declaration of
Trust.  No  interpretive  or  additional  provisions  made  as  provided  in the
preceding sentence shall be deemed to be an amendment of this Contract.


17.     MASSACHUSETTS LAW TO APPLY

        This Contract shall be construed and the provisions thereof  interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.


18.     PRIOR CONTRACTS

        This Contract  supersedes  and  terminates,  as of the date hereof,  all
prior  contracts  between the Fund and the Custodian  relating to the custody of
the Fund's assets.


19.     REPRODUCTION OF DOCUMENTS

        This Contract and all schedules,  exhibits,  attachments  and amendments
hereto  may  be  reproduced  by  any   photographic,   photostatic,   microfilm,
micro-card,  miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original  is in  existence  and whether or not such  reproduction  was made by a
party in the regular course of business, and that any enlargement,  facsimile or
further  reproduction  of such  reproduction  shall  likewise be  admissible  in
evidence.


20.     NOTICES

        Any  notice,  instruction  or  other  instrument  required  to be  given
hereunder  may be delivered in person to the offices of the parties as set forth
herein during normal business hours or delivered  prepaid  registered mail or by
telex,  cable or  facsimile  to the parties at the  following  addresses or such
other addresses as may be notified by any party from time to time.

                To the Fund:        BlackRock Core Bond Trust
                                    c/o BlackRock, Inc.
                                    100 Bellevue Parkway
                                    Wilmington, Delaware  19809
                                    Attention:  Jeff Wing, Vice President
                                    Telephone:  302-797-2134
                                    Facsimile:   302-797-2459

                                       22
<PAGE>


                To the Custodian:   State Street Bank and Trust Company
                                    One Heritage Drive/JPB 2S
                                    North Quincy, Massachusetts  02171
                                    Attention: William M. Marvin, Vice President
                                    Telephone: 617-985-6829
                                    Facsimile: 617-985-5271

        Such notice,  instruction  or other  instrument  shall be deemed to have
been  served  in the  case of a  registered  letter  at the  expiration  of five
business  days  after  posting,  in the case of cable  twenty-four  hours  after
dispatch  and, in the case of telex,  immediately  on dispatch  and if delivered
outside  normal  business  hours it shall be deemed to have been received at the
next time after delivery when normal  business hours commence and in the case of
cable,  telex or  facsimile  on the  business  day  after the  receipt  thereof.
Evidence that the notice was properly  addressed,  stamped and put into the post
shall be conclusive evidence of posting.


21.     REMOTE ACCESS SERVICES ADDENDUM

        The  Custodian  and the Fund  each  agree  to abide by the  terms of the
Remote Access Services Addendum attached hereto.


22.     SHAREHOLDER COMMUNICATIONS ELECTION

        SEC Rule 14b-2 requires  banks which hold  securities for the account of
customers  to  respond to  requests  by  issuers  of  securities  for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the  beneficial  owner has  expressly  objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate  whether it  authorizes  the  Custodian  to provide the Fund's name,
address,  and share position to requesting  companies whose  securities the Fund
owns. If the Fund tells the Custodian  "no", the Custodian will not provide this
information to requesting  companies.  If the Fund tells the Custodian  "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat  the Fund as  consenting  to  disclosure  of this  information  for all
securities  owned by the Fund or any funds or accounts  established by the Fund.
For the Fund's protection,  the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please  indicate  below  whether the Fund consents or objects by checking one of
the alternatives below.


        YES [ ]         The  Custodian is authorized to release the Fund's name,
                        address, and share positions.

         NO [X]         The  Custodian is not  authorized  to release the Fund's
                        name, address, and share positions.

                                       23
<PAGE>


                                 SIGNATURE PAGE


        IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly  authorized  representative  and its
seal to be hereunder affixed as of the date first above-written.


ATTEST:                              BLACKROCK CORE BOND TRUST


                                     By:
- -----------------------------------     -------------------------------------
Name:                                   Name:
                                        Title:



ATTEST:                              STATE STREET BANK AND TRUST COMPANY


                                     By:
- -----------------------------------     -------------------------------------
Stephanie L. Poster, Vice President   Joseph L. Hooley, Executive Vice President


                                       24
<PAGE>


                             FUNDS TRANSFER ADDENDUM
                                                               [GRAPHIC OMITTED]


OPERATING GUIDELINES


1.      OBLIGATION OF THE SENDER: State Street is authorized to promptly debit
Client's account(s) upon the receipt of a payment order in compliance with the
selected Security Procedure chosen for funds transfer and in the amount of money
that State Street has been instructed to transfer. State Street shall execute
payment orders in compliance with the Security Procedure and with the Client's
instructions on the execution date provided that such payment order is received
by the customary deadline for processing such a request, unless the payment
order specifies a later time. All payment orders and communications received
after this time will be deemed to have been received on the next business day.

2.      SECURITY PROCEDURE: The Client acknowledges that the Security Procedure
it has designated on the Selection Form was selected by the Client from Security
Procedures offered by State Street. The Client agrees that the Security
Procedures are reasonable and adequate for its wire transfer transactions and
agrees to be bound by any payment orders, amendments and cancellations, whether
or not authorized, issued in its name and accepted by State Street after being
confirmed by any of the selected Security Procedures. The Client also agrees to
be bound by any other valid and authorized payment order accepted by State
Street. The Client shall restrict access to confidential information relating to
the Security Procedure to authorized persons as communicated in writing to State
Street. The Client must notify State Street immediately if it has reason to
believe unauthorized persons may have obtained access to such information or of
any change in the Client's authorized personnel. State Street shall verify the
authenticity of all instructions according to the Security Procedure.

3.      ACCOUNT NUMBERS: State Street shall process all payment orders on the
basis of the account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the account
number, the account number shall take precedence and govern. Financial
institutions that receive payment orders initiated by State Street at the
instruction of the Client may also process payment orders on the basis of
account numbers, regardless of any name included in the payment order. State
Street will also rely on any financial institution identification numbers
included in any payment order, regardless of any financial institution name
included in the payment order.

4.      REJECTION: State Street reserves the right to decline to process or
delay the processing of a payment order which (a) is in excess of the collected
balance in the account to be charged at the time of State Street's receipt of
such payment order; (b) if initiating such payment order would cause State
Street, in State Street's sole judgment, to exceed any volume, aggregate dollar,
network, time, credit or similar limits upon wire transfers which are applicable
to State Street; or (c) if State Street, in good faith, is unable to satisfy
itself that the transaction has been properly authorized.

5.      CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to
act on all authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure provided that such requests are received
in a timely manner affording State Street reasonable opportunity to act.
However, State Street assumes no liability if the request for amendment or
cancellation cannot be satisfied.

6.      ERRORS: State Street shall assume no responsibility for failure to
detect any erroneous payment order provided that State Street complies with the
payment order instructions as received and State Street complies with the
Security Procedure. The Security Procedure is established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.

7.      INTEREST AND LIABILITY LIMITS: State Street shall assume no
responsibility for lost interest with respect to the refundable amount of any
unauthorized payment order, unless State Street is notified of the unauthorized
payment order within thirty (30) days of notification by State Street of the
acceptance of such payment order. In no event shall State Street be liable for
special, indirect or consequential damages, even if advised of the possibility
of such damages and even for failure to execute a payment order.

8.      AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS:
When a Client initiates or receives ACH credit and debit entries pursuant to
these Guidelines and the rules of the National Automated Clearing House
Association and the New England Clearing House Association, State Street will
act as an Originating Depository Financial Institution and/or Receiving
Depository Institution, as the case may be, with respect to such entries.
Credits given by State Street with respect to an ACH credit entry are
provisional until State Street receives final settlement for such entry from the
Federal Reserve Bank. If State Street does not receive such final settlement,
the Client agrees that State Street shall receive a refund of the amount
credited to the Client in connection with such entry, and the party making
payment to the Client via such entry shall not be deemed to have paid the amount
of the entry.

9.      CONFIRMATION STATEMENTS: Confirmation of State Street's execution of
payment orders shall ordinarily be provided within 24 hours. Notice may be
delivered through State Street's proprietary information systems, such as, but
not limited to Horizon and GlobalQuest(R), account statements, advices, or by
facsimile or callback. The Client must report any objections to the execution of
a payment order within 30 days.

<PAGE>


                             FUNDS TRANSFER ADDENDUM
                                                               [GRAPHIC OMITTED]


10.     LIABILITY ON FOREIGN ACCOUNTS: State Street shall not be required to
repay any deposit made at a non-U.S. branch of State Street, or any deposit made
with State Street and denominated in a non-U.S. dollar currency, if repayment of
such deposit or the use of assets denominated in the non-U.S. dollar currency is
prevented, prohibited or otherwise blocked due to: (a) an act of war,
insurrection or civil strife; (b) any action by a non-U.S. government or
instrumentality or authority asserting governmental, military or police power of
any kind, whether such authority be recognized as a defacto or a dejure
government, or by any entity, political or revolutionary movement or otherwise
that usurps, supervenes or otherwise materially impairs the normal operation of
civil authority; or(c) the closure of a non-U.S. branch of State Street in order
to prevent, in the reasonable judgment of State Street, harm to the employees or
property of State Street. The obligation to repay any such deposit shall not be
transferred to and may not be enforced against any other branch of State Street.

The foregoing  provisions  constitute the disclosure  required by  Massachusetts
General Laws, Chapter 167D, Section 36.

While State Street is not obligated to repay any deposit made at a non-U.S.
branch or any deposit denominated in a non-U.S. currency during the period in
which its repayment has been prevented, prohibited or otherwise blocked, State
Street will repay such deposit when and if all circumstances preventing,
prohibiting or otherwise blocking repayment cease to exist.

11.     MISCELLANEOUS: State Street and the Client agree to cooperate to attempt
to recover any funds erroneously paid to the wrong party or parties, regardless
of any fault of State Street or the Client, but the party responsible for the
erroneous payment shall bear all costs and expenses incurred in trying to effect
such recovery. These Guidelines may not be amended except by a written agreement
signed by the parties.

<PAGE>


                             FUNDS TRANSFER ADDENDUM
                                                               [GRAPHIC OMITTED]


SECURITY PROCEDURE(S) SELECTION FORM

Please select one or more of the funds transfer security procedures indicated
below.

[_] SWIFT

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is limited
to securities brokers and dealers, clearing and depository institutions,
recognized exchanges for securities, and investment management institutions.
SWIFT provides a number of security features through encryption and
authentication to protect against unauthorized access, loss or wrong delivery of
messages, transmission errors, loss of confidentiality and fraudulent changes to
messages. SWIFT is considered to be one of the most secure and efficient
networks for the delivery of funds transfer instructions. SELECTION OF THIS
SECURITY PROCEDURE WOULD BE MOST APPROPRIATE FOR EXISTING SWIFT MEMBERS.

[_] STANDING INSTRUCTIONS

Standing Instructions may be used where funds are transferred to a broker on the
Client's established list of brokers with which it engages in foreign exchange
transactions. Only the date, the currency and the currency amount are variable.
In order to establish this procedure, State Street will send to the Client a
list of the brokers that State Street has determined are used by the Client. The
Client will confirm the list in writing, and State Street will verify the
written confirmation by telephone. Standing Instructions will be subject to a
mutually agreed upon limit. If the payment order exceeds the established limit,
the Standing Instruction will be confirmed by telephone prior to execution.

[_] REMOTE BATCH TRANSMISSION

Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data
communications between the Client and State Street. Security procedures include
encryption and or the use of a test key by those individuals authorized as
Automated Batch Verifiers.

CLIENTS SELECTING THIS OPTION SHOULD HAVE AN EXISTING FACILITY FOR COMPLETING
CPU-CPU TRANSMISSIONS. THIS DELIVERY MECHANISM IS TYPICALLY USED FOR HIGH-VOLUME
BUSINESS.

[_] GLOBAL HORIZON INTERCHANGE(SM) FUNDS TRANSFER SERVICE

Global Horizon Interchange Funds Transfer Service (FTS) is a State Street
proprietary microcomputer-based wire initiation system. FTS enables Clients to
electronically transmit authenticated Fedwire, CHIPS or internal book transfer
instructions to State Street.

THIS DELIVERY MECHANISM IS MOST APPROPRIATE FOR CLIENTS WITH A LOW-TO-MEDIUM
NUMBER OF TRANSACTIONS (5-75 PER DAY), ALLOWING CLIENTS TO ENTER, BATCH, AND
REVIEW WIRE TRANSFER INSTRUCTIONS ON THEIR PC PRIOR TO RELEASE TO STATE STREET.

[_] TELEPHONE CONFIRMATION (CALLBACK)

Telephone confirmation will be used to verify all non-repetitive funds transfer
instructions received via untested facsimile or phone. This procedure requires
Clients to designate individuals as authorized initiators and authorized
verifiers. State Street will verify that the instruction contains the signature
of an authorized person and prior to execution, will contact someone other than
the originator at the Client's location to authenticate the instruction.

SELECTION OF THIS ALTERNATIVE IS APPROPRIATE FOR CLIENTS WHO DO NOT HAVE THE
CAPABILITY TO USE OTHER SECURITY PROCEDURES.

[_] REPETITIVE WIRES

For situations where funds are transferred periodically (minimum of one
instruction per calendar quarter) from an existing authorized account to the
same payee (destination bank and account number) and only the date and currency
amount are variable, a repetitive wire may be implemented. Repetitive wires will
be subject to a mutually agreed upon limit. If the payment order exceeds the
established limit, the instruction will be confirmed by telephone prior to
execution. Telephone confirmation is used to establish this process. Repetitive
wire instructions must be reconfirmed annually.

THIS ALTERNATIVE IS RECOMMENDED WHENEVER FUNDS ARE FREQUENTLY TRANSFERRED
BETWEEN THE SAME TWO ACCOUNTS.

[_] TRANSFERS INITIATED BY FACSIMILE

The Client faxes wire transfer instructions directly to State Street Mutual Fund
Services. Standard security procedure requires the use of a random number test
key for all transfers. Every six months the Client receives test key logs from
State Street. The test key contains alpha-numeric characters, which the Client
puts on each document faxed to State Street. This procedure ensures all wire
instructions received via fax are authorized by the Client.

WE PROVIDE THIS OPTION FOR CLIENTS WHO WISH TO BATCH WIRE INSTRUCTIONS AND
TRANSMIT THESE AS A GROUP TO STATE STREET MUTUAL FUND SERVICES ONCE OR SEVERAL
TIMES A DAY.

<PAGE>


                             FUNDS TRANSFER ADDENDUM
                                                               [GRAPHIC OMITTED]


[_] AUTOMATED CLEARING HOUSE (ACH)

State Street receives an automated transmission or a magnetic tape from a Client
for the initiation of payment (credit) or collection (debit) transactions
through the ACH network. The transactions contained on each transmission or tape
must be authenticated by the Client. Clients using ACH must select one or more
of the following delivery options:

[_] GLOBAL HORIZON INTERCHANGE AUTOMATED CLEARING HOUSE SERVICE

Transactions are created on a microcomputer, assembled into batches and
delivered to State Street via fully authenticated electronic transmissions in
standard NACHA formats.

[_] Transmission from Client PC to State Street Mainframe with Telephone
    Callback

[_] Transmission from Client Mainframe to State Street Mainframe with
    Telephone Callback

[_] Transmission from DST Systems to State Street Mainframe with Encryption

[_] Magnetic Tape Delivered to State Street with Telephone Callback



State Street is hereby instructed to accept funds transfer instructions only via
the delivery methods and security procedures indicated. The selected delivery
methods and security procedure(s) will be effective for payment orders initiated
by our organization.



KEY CONTACT INFORMATION

Whom shall we contact to implement your selection(s)?

CLIENT OPERATIONS CONTACT                                     ALTERNATE CONTACT

- ---------------------------------------  ---------------------------------------
            Name                                  Name

- ---------------------------------------  ---------------------------------------
            Address                               Address

- ---------------------------------------  ---------------------------------------
            City/State/Zip Code                   City/State/Zip Code

- ---------------------------------------  ---------------------------------------
            Telephone Number                      Telephone Number

- ---------------------------------------  ---------------------------------------
            Facsimile Number                      Facsimile Number

- ---------------------------------------
            SWIFT Number

- ---------------------------------------
            Telex Number


<PAGE>


                             FUNDS TRANSFER ADDENDUM
                                                               [GRAPHIC OMITTED]


INSTRUCTION(S)

TELEPHONE CONFIRMATION

FUND     BlackRock Core Bond Trust
     ---------------------------------------------------------------------------
INVESTMENT ADVISOR         BLACKROCK ADVISORS, INC.
                  --------------------------------------------------------------
SUB-ADVISOR  BLACKROCK FINANCIAL MANAGEMENT, INC.
             -------------------------------------------------------------------
AUTHORIZED INITIATORS
    Please Type or Print

PLEASE PROVIDE A LISTING OF FUND OFFICERS OR OTHER INDIVIDUALS WHO ARE CURRENTLY
AUTHORIZED TO INITIATE WIRE TRANSFER INSTRUCTIONS TO STATE STREET:

NAME                         TITLE (Specify whether     SPECIMEN SIGNATURE
                             position is with Fund
                             or Investment Adviser)

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

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

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

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

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

AUTHORIZED VERIFIERS
    Please Type or Print

PLEASE  PROVIDE A LISTING  OF FUND  OFFICERS  OR OTHER  INDIVIDUALS  WHO WILL BE
CALLED BACK TO VERIFY THE INITIATION OF REPETITIVE  WIRES OF $10 MILLION OR MORE
AND ALL NON-REPETITIVE WIRE INSTRUCTIONS:

NAME                       CALLBACK PHONE NUMBER      DOLLAR LIMITATION (IF ANY)
- -------------------------  -------------------------  --------------------------

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

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

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

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

- -------------------------  -------------------------  --------------------------
<PAGE>



             REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT


        ADDENDUM to that certain Custodian  Contract dated as of November , 2001
(the "Custodian  Agreement")  between BlackRock Core Bond Trust (the "Customer")
and  State  Street  Bank and  Trust  Company,  including  its  subsidiaries  and
affiliates ("State Street").

        State Street has developed and utilizes proprietary accounting and other
systems in conjunction  with the custodian  services which State Street provides
to the Customer.  In this regard,  State Street maintains certain information in
databases  under its  control  and  ownership  which it makes  available  to its
customers (the "Remote Access Services").

THE SERVICES

State  Street  agrees to provide the  Customer,  and its  designated  investment
advisors,  consultants  or  other  third  parties  authorized  by  State  Street
("Authorized  Designees") with access to In~SightSM as described in Exhibit A or
such  other  systems  as may be offered  from time to time (the  "System")  on a
remote basis.

SECURITY PROCEDURES

The Customer agrees to comply, and to cause its Authorized  Designees to comply,
with  remote  access   operating   standards  and   procedures   and  with  user
identification  or  other  password  control  requirements  and  other  security
procedures  as may be issued  from time to time by State  Street  for use of the
System and access to the Remote Access  Services.  The Customer agrees to advise
State  Street  immediately  in the event that it learns or has reason to believe
that any person to whom it has given  access to the System or the Remote  Access
Services has  violated or intends to violate the terms of this  Addendum and the
Customer  will  cooperate  with  State  Street in  seeking  injunctive  or other
equitable  relief.  The  Customer  agrees to  discontinue  use of the System and
Remote Access  Services,  if requested,  for any security reasons cited by State
Street.

FEES

Fees and charges for the use of the System and the Remote  Access  Services  and
related  payment  terms  shall be as set forth in the  custody  fee  schedule in
effect from time to time between the parties.  The Customer shall be responsible
for any  tariffs,  duties  or taxes  imposed  or  levied  by any  government  or
governmental agency by reason of the transactions contemplated by this Addendum,
including, without limitation,  federal, state and local taxes, use, value added
and personal property taxes (other than income, franchise or similar taxes which
may be imposed or assessed  against State  Street).  Any claimed  exemption from
such tariffs,  duties or taxes shall be supported by proper documentary evidence
delivered to State Street.

PROPRIETARY INFORMATION/INJUNCTIVE RELIEF

The  System and  Remote  Access  Services  described  herein and the  databases,
computer   programs,   screen  formats,   report  formats,   interactive  design
techniques,  formulae,  processes,  systems,  software,  know- how,  algorithms,
programs,  training aids, printed materials,  methods,  books,  records,  files,
documentation  and other  information  made  available  to the Customer by State
Street as part of the Remote  Access  Services and through the use of the System
and all copyrights, patents, trade secrets and other proprietary rights of State
Street related thereto are the exclusive,  valuable and confidential property of
State Street and its relevant  licensors (the  "Proprietary  Information").  The
Customer  agrees

                                       i
<PAGE>


on  behalf  of  itself  and its  Authorized  Designees  to keep the  Proprietary
Information  confidential  and to limit access to its employees  and  Authorized
Designees  (under a similar duty of  confidentiality)  who require access to the
System for the purposes  intended.  The foregoing shall not apply to Proprietary
Information in the public domain or required by law to be made public.

The Customer  agrees to use the Remote Access  Services only in connection  with
the proper purposes of this Addendum.  The Customer will not, and will cause its
employees and Authorized Designees not to, (i) permit any third party to use the
System or the Remote Access Services,  (ii) sell, rent, license or otherwise use
the System or the Remote Access Services in the operation of a service bureau or
for any purpose other than as expressly  authorized  under this Addendum,  (iii)
use the  System or the  Remote  Access  Services  for any  fund,  trust or other
investment  vehicle without the prior written  consent of State Street,  or (iv)
allow or cause  any  information  transmitted  from  State  Street's  databases,
including data from third party sources,  available through use of the System or
the Remote Access Services, to be published,  redistributed or retransmitted for
other than use for or on behalf of the Customer, as State Street's customer.

The Customer agrees that neither it nor its Authorized Designees will modify the
System in any way; enhance or otherwise  create  derivative works based upon the
System, nor will your or your Authorized  Designees reverse engineer,  decompile
or  otherwise  attempt  to  secure  the  source  code for all or any part of the
System.

The Customer acknowledges that the disclosure of any Proprietary Information, or
of any  information  which at law or equity ought to remain  confidential,  will
immediately  give  rise  to  continuing   irreparable  injury  to  State  Street
inadequately  compensable  in  damages  at law and that  State  Street  shall be
entitled to obtain immediate  injunctive relief against the breach or threatened
breach of any of the  foregoing  undertakings,  in  addition  to any other legal
remedies which may be available.

LIMITED WARRANTIES

State Street  represents  and warrants that it is the owner of and has the right
to grant  access  to the  System  and to  provide  the  Remote  Access  Services
contemplated herein.  Because of the nature of computer  information  technology
including,  but not limited to, the use of the  Internet,  and the  necessity of
relying upon third party sources, and data and pricing information obtained from
third parties,  the System and Remote Access  Services are provided "AS IS", and
the Customer and its Authorized  Designees  shall be solely  responsible for the
investment  decisions,  results  obtained,  regulatory  reports  and  statements
produced  using the  Remote  Access  Services.  State  Street  and its  relevant
licensors will not be liable to the Customer or its Authorized Designees for any
direct or  indirect,  special,  incidental,  punitive or  consequential  damages
arising  out of or in any way  connected  with the System or the  Remote  Access
Services,  nor shall either party be  responsible  for delays or  nonperformance
under  this  Addendum  arising  out of any cause or event  beyond  such  party's
control.

State Street will take  reasonable  steps to ensure that its products (and those
of its third-party  suppliers) reflect the available state of the art technology
to offer products that are Year 2000 compliant,  including,  but not limited to,
century  recognition of dates,  calculations that correctly compute same century
and multi century  formulas and date values,  and interface  values that reflect
the date issues  arising  between now and December 31, 2099,  and if any changes
are  required,  State Street will make the changes to its products at no cost to
you and in a  commercially  reasonable  time frame and will require  third-party
suppliers to do likewise. The Customer will do likewise for its systems.

EXCEPT AS EXPRESSLY SET FORTH IN THIS ADDENDUM, STATE STREET, FOR ITSELF AND ITS
RELEVANT LICENSORS,  EXPRESSLY  DISCLAIMS ANY AND ALL WARRANTIES

                                       ii
<PAGE>


CONCERNING THE SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS
OR IMPLIED  INCLUDING,  WITHOUT  LIMITATION,  ANY WARRANTY OF MERCHANTIBILITY OR
FITNESS FOR A PARTICULAR PURPOSE.

INFRINGEMENT

State Street will defend or, at our option,  settle any claim or action  brought
against  the  Customer  to the extent  that it is based upon an  assertion  that
access to the System or use of the Remote Access  Services by the Customer under
this  Addendum  constitutes  direct  infringement  of any patent or copyright or
misappropriation  of a trade secret,  provided that the Customer  notifies State
Street  promptly in writing of any such claim or proceeding and cooperates  with
State  Street in the defense of such claim or  proceeding.  Should the System or
the Remote  Access  Services or any part thereof  become,  or in State  Street's
opinion be likely to become,  the subject of a claim of infringement or the like
under any  applicable  patent or copyright  or trade  secret laws,  State Street
shall have the right,  at State  Street's  sole  option,  to (i) procure for the
Customer the right to continue  using the System or the Remote Access  Services,
(ii)  replace or modify the System or the  Remote  Access  Services  so that the
System or the Remote Access Services becomes  noninfringing,  or (iii) terminate
this Addendum without further obligation.

TERMINATION

Either party to the Custodian  Agreement may terminate this Addendum (i) for any
reason by giving the other  party at least  one-hundred  and  eighty  (180) days
prior written notice in the case of notice of termination by State Street to the
Customer or thirty  (30) days notice in the case of notice from the  Customer to
State Street of termination,  or (ii) immediately for failure of the other party
to comply with any  material  term and  condition  of the Addendum by giving the
other party written  notice of  termination.  This  Addendum  shall in any event
terminate  within  ninety  (90) days  after  the  termination  of the  Custodian
Agreement. In the event of termination, the Customer will return to State Street
all copies of documentation and other confidential information in its possession
or in the possession of its Authorized Designees.  The foregoing provisions with
respect to  confidentiality  and  infringement  will survive  termination  for a
period of three (3) years.

MISCELLANEOUS

This Addendum and the exhibit hereto constitute the entire  understanding of the
parties to the Custodian  Agreement with respect to access to the System and the
Remote Access Services.  This Addendum cannot be modified or altered except in a
writing  duly  executed by each of State  Street and the  Customer  and shall be
governed by and construed in  accordance  with the laws of The  Commonwealth  of
Massachusetts.

By its  execution of the Custodian  Agreement,  the Customer (a) confirms to the
Custodian  that  it  informs  all  Authorized  Designees  of the  terms  of this
Addendum;  (b)  accepts  responsibility  for its and its  Authorized  Designees'
compliance  with the terms of this Addendum;  and (c)  indemnifies and holds the
Custodian  harmless  from  and  against  any and all  costs,  expenses,  losses,
damages,  charges,  counsel  fees,  payments  and  liabilities  arising from any
failure of the Customer or any of its Authorized Designees to abide by the terms
of this Addendum.

                                      iii
<PAGE>


                                    EXHIBIT A
                                       TO
             REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT


                                  IN~SIGHT(SM)
                           System Product Description

In~Sight(SM)  provides bilateral  information  delivery,  interoperability,  and
on-line  access to State  Street.  In~Sight(SM)  allows  users a single point of
entry into State Street's  diverse  systems and  applications.  Reports and data
from systems such as Investment Policy Monitor(SM),  Multicurrency  Horizon(SM),
Securities Lending, Performance & Analytics and Electronic Trade Delivery can be
accessed through In~Sight(SM).  This Internet-enabled application is designed to
run from a Web browser  and perform  across  low-speed  data lines or  corporate
high-speed  backbones.  In~Sight(SM)  also  offers  users  a  flexible  toolset,
including  an  ad-hoc  query  function,  a  custom  graphics  package,  a report
designer,  and  a  scheduling  capability.  Data  and  reports  offered  through
In~Sight(SM)  will continue to increase in direct  proportion  with the customer
roll out,  as it is viewed as the  information  delivery  system  will grow with
State Street's customers.

                                       iv
<PAGE>


                                  STATE STREET                        SCHEDULE A
                             GLOBAL CUSTODY NETWORK
                                  SUBCUSTODIANS


COUNTRY                    SUBCUSTODIAN

Argentina                  Citibank, N.A.

Australia                  Westpac Banking Corporation

Austria                    Erste Bank der Osterreichischen Sparkassen AG

Bahrain                    HSBC Bank Middle East
                           (as delegate of the  Hongkong  and  Shanghai  Banking
                           Corporation Limited)

Bangladesh                 Standard Chartered Bank

Belgium                    Fortis Bank nv-sa

Benin                      via  Societe  Generale  de Banques en Cote  d'Ivoire,
                           Abidjan, Ivory Coast

Bermuda                    The Bank of Bermuda Limited

Bolivia                    Citibank, N. A.

Botswana                   Barclays Bank of Botswana Limited

Brazil                     Citibank, N.A.

Bulgaria                   ING Bank N.V.

Burkina Faso               via  Societe  Generale  de Banques en Cote  d'Ivoire,
                           Abidjan, Ivory Coast

Canada                     State Street Trust Company Canada

Chile                      BankBoston, N.A.

People's Republic          Hongkong and Shanghai Banking Corporation Limited,
of China                   Shanghai and Shenzhen branches

9/30/01                                1
<PAGE>


                                  STATE STREET                        SCHEDULE A
                             GLOBAL CUSTODY NETWORK
                                  SUBCUSTODIANS


COUNTRY                    SUBCUSTODIAN

Colombia                   Cititrust Colombia S.A. Sociedad Fiduciaria

Costa Rica                 Banco BCT S.A.

Croatia                    Privredna Banka Zagreb d.d

Cyprus                     The Cyprus Popular Bank Ltd.

Czech Republic             Eeskoslovenska Obchodni Banka, A.S.

Denmark                    Danske Bank A/S

Ecuador                    Citibank, N.A.

Egypt                      HSBC Bank Egypt S.A.E.
                           (as delegate of the  Hongkong  and  Shanghai  Banking
                           Corporation Limited)

Estonia                    Hansabank

Finland                    Merita Bank Plc.

France                     BNP Paribas Securities Services, S.A.

Germany                    Dresdner Bank AG

Ghana                      Barclays Bank of Ghana Limited

Greece                     National Bank of Greece S.A.

Guinea-Bissau              via  Societe  Generale  de Banques en Cote  d'Ivoire,
                           Abidjan, Ivory Coast

09/30/01                                2
<PAGE>


                                  STATE STREET                        SCHEDULE A
                             GLOBAL CUSTODY NETWORK
                                  SUBCUSTODIANS


COUNTRY                    SUBCUSTODIAN

Hong Kong                  Standard Chartered Bank

Hungary                    HVB Bank Hungary Rt.

Iceland                    Icebank Ltd.

India                      Deutsche Bank AG

                           Hongkong and Shanghai Banking Corporation Limited

Indonesia                  Standard Chartered Bank

Ireland                    Bank of Ireland

Israel                     Bank Hapoalim B.M.

Italy                      BNP Paribas Securities Services, S.A.

Ivory Coast                Societe Generale de Banques en Cote d'Ivoire

Jamaica                    Scotiabank Jamaica Trust and Merchant Bank Ltd.

Japan                      The Fuji Bank, Limited

                           Sumitomo Mitsui Banking Corporation

Jordan                     HSBC Bank Middle East
                           (as delegate of the Hongkong and Shanghai Banking
                           Corporation Limited)

Kazakhstan                 HSBC Bank Kazakhstan
                           (as delegate of the Hongkong and Shanghai Banking
                           Corporation Limited)

Kenya                      Barclays Bank of Kenya Limited

09/30/01                               3
<PAGE>
                                  STATE STREET                        SCHEDULE A
                             GLOBAL CUSTODY NETWORK
                                  SUBCUSTODIANS


COUNTRY                    SUBCUSTODIAN

Republic of Korea          Hongkong and Shanghai Banking Corporation Limited

Latvia                     A/s Hansabanka

Lebanon                    HSBC Bank Middle East
                           (as delegate of the  Hongkong  and  Shanghai  Banking
                           Corporation Limited)

Lithuania                  Vilniaus Bankas AB

Malaysia                   Standard Chartered Bank Malaysia Berhad

Mali                       via  Societe  Generale  de Banques en Cote  d'Ivoire,
                           Abidjan, Ivory Coast

Mauritius                  Hongkong and Shanghai Banking Corporation Limited

Mexico                     Citibank Mexico, S.A.

Morocco                    Banque Commerciale du Maroc

Namibia                    Standard Bank Namibia Limited               -

Netherlands                Fortis Bank (Nederland) N.V.

New Zealand                Westpac Banking Corporation

Niger                      via Societe Generale de Banques en Cote d'Ivoire,
                           Abidjan, Ivory Coast

Nigeria                    Stanbic Merchant Bank Nigeria Limited

Norway                     Christiania Bank og Kreditkasse ASA

Oman                       HSBC Bank Middle East
                           (as delegate of the  Hongkong  and  Shanghai  Banking
                           Corporation Limited)

09/30/01                               4
<PAGE>
                                  STATE STREET                        SCHEDULE A
                             GLOBAL CUSTODY NETWORK
                                  SUBCUSTODIANS


COUNTRY                    SUBCUSTODIAN

Pakistan                   Deutsche Bank AG

Palestine                  HSBC Bank Middle East
                           (as delegate of the  Hongkong  and  Shanghai  Banking
                           Corporation Limited)

Panama                     BankBoston, N.A.

Peru                       Citibank, N.A.

Philippines                Standard Chartered Bank

Poland                     Bank Handlowy w Warszawie S.A.

Portugal                   Banco Comercial Portugues

Qatar                      HSBC Bank Middle East
                           (as delegate of the  Hongkong  and  Shanghai  Banking
                           Corporation Limited)

Romania                    ING Bank N.V.

Russia                     Credit Suisse First Boston AO - Moscow
                           (as delegate of Credit Suisse First Boston - Zurich)

Senegal                    via  Societe  Generale  de Banques en Cote  d'Ivoire,
                           Abidjan, Ivory Coast

Singapore                  The Development Bank of Singapore Limited

Slovak Republic            Eeskoslovenska Obchodni Banka, A.S.

Slovenia                   Bank Austria Creditanstalt d.d. - Ljubljana

South Africa               Standard Bank of South Africa Limited

                                       5
<PAGE>


                                  STATE STREET                        SCHEDULE A
                             GLOBAL CUSTODY NETWORK
                                  SUBCUSTODIANS


COUNTRY                    SUBCUSTODIAN

Spain                      Banco Santander Central Hispano S.A.

Sri Lanka                  Hongkong and Shanghai Banking Corporation Limited

Swaziland                  Standard Bank Swaziland Limited

Sweden                     Skandinaviska Enskilda Banken

Switzerland                UBS AG

Taiwan - R.O.C.            Central Trust of China

Thailand                   Standard Chartered Bank

Togo                       via  Societe  Generale  de Banques en Cote  d'Ivoire,
                           Abidjan, Ivory Coast

Trinidad & Tobago          Republic Bank Limited

Tunisia                    Banque Internationale Arabe de Tunisie

Turkey                     Citibank, N.A.

Ukraine                    ING Bank Ukraine

United Arab Emirates       HSBC Bank Middle East
                           (as delegate of the  Hongkong  and  Shanghai  Banking
                           Corporation Limited)

United Kingdom             State Street Bank and Trust Company,  London Branch

Uruguay                    BankBoston, N.A.

09/30/01                               6
<PAGE>
                                  STATE STREET                        SCHEDULE A
                             GLOBAL CUSTODY NETWORK
                                  SUBCUSTODIANS


COUNTRY                    SUBCUSTODIAN

Venezuela                  Citibank, N.A.

Vietnam                    The Hongkong and Shanghai
                           Banking Corporation Limited

Zambia                     Barclays Bank of Zambia Limited

Zimbabwe                   Barclays Bank of Zimbabwe Limited

09/30/01                               7
<PAGE>


                                  STATE STREET                        SCHEDULE B
                             GLOBAL CUSTODY NETWORK
                   DEPOSITORIES OPERATING IN NETWORK MARKETS


COUNTRY                           DEPOSITORIES

Argentina                         Caja de Valores S.A.

Australia                         Austraclear Limited

                                  Reserve Bank Information and Transfer System

Austria                           Oesterreichische Kontrollbank AG
                                  (Wertpapiersammelbank Division)

Belgium                           Caisse Interprofessionnelle de Depots et de
                                  Virements de Titres, S.A.

                                  Banque Nationale de Belgique

Benin                             Depositaire Central - Banque de Reglement

Brazil                            Companhia Brasileira de Liquidacao e Custodia

                                  Sistema  Especial de Liquidacao e de Custodia
                                  (SELIC)

                                  Central de Custodia e de Liquidacao
                                  Financeira de Titulos Privados (CETIP)

Bulgaria                          Central Depository AD

                                  Bulgarian National Bank

Burkina Faso                      Depositaire Central - Banque de Reglement

Canada                            Canadian Depository for Securities Limited

Chile                             Deposito Central de Valores S.A.

People's Republic                 Shanghai Securities Central Clearing &
of China                          Registration Corporation

                                  Shenzhen Securities Central Clearing Co., Ltd.

09/30/01                               1
<PAGE>


                                  STATE STREET                        SCHEDULE B
                             GLOBAL CUSTODY NETWORK
                   DEPOSITORIES OPERATING IN NETWORK MARKETS


COUNTRY                            DEPOSITORIES

Colombia                           Deposito Centralizado de Valores

Costa Rica                         Central de Valores S.A.

Croatia                            Ministry of Finance

                                   National Bank of Croatia

                                   Sredisnja Depozitarna Agencija d.d.

Czech Republic                     Stredisko cennych papiru - Ceska republika

                                   Czech National Bank

Denmark                            Vaerdipapircentralen (Danish Securities
                                   Center)

Egypt                              Misr for Clearing, Settlement, and Depository
                                   S.A.E.

Estonia                            Eesti Vaartpaberite Keskdepositoorium

Finland                            Finnish Central Securities Depository

France                             Euroclear France

Germany                            Clearstream Banking AG, Frankfurt

Greece                             Bank of Greece,

                                   System   for   Monitoring   Transactions   in
                                   Securities in Book-Entry Form

                                   Apothetirion  Titlon AE - Central  Securities
                                   Depository

Guinea-Bissau                      Depositaire Central - Banque de Reglement

Hong Kong                          Hong Kong Securities Clearing Company Limited

                                   Central Moneymarkets Unit

09/30/01                                2
<PAGE>


                                  STATE STREET                        SCHEDULE B
                             GLOBAL CUSTODY NETWORK
                   DEPOSITORIES OPERATING IN NETWORK MARKETS


COUNTRY                            DEPOSITORIES

Hungary                            Kozponti Elszamolohaz es Ertektar (Budapest)
                                   Rt. (KELER)

Iceland                            Iceland Securities Depository Limited

India                              National Securities Depository Limited

                                   Central Depository Services India Limited

                                   Reserve Bank of India

Indonesia                          Bank Indonesia

                                   PT Kustodian Sentral Efek Indonesia

Israel                             Tel Aviv Stock Exchange Clearing House Ltd.
                                   (TASE Clearinghouse)

Italy                              Monte Titoli S.p.A.

Ivory Coast                        Depositaire Central - Banque de Reglement

Jamaica                            Jamaica Central Securities Depository

Japan                              Japan Securities Depository Center (JASDEC)

                                   Bank of Japan Net System

Kazakhstan                         Central Depository of Securities

Kenya                              Central Bank of Kenya

Republic of Korea                  Korea Securities Depository

09/30/01                                3
<PAGE>


                                  STATE STREET                        SCHEDULE B
                             GLOBAL CUSTODY NETWORK
                   DEPOSITORIES OPERATING IN NETWORK MARKETS


COUNTRY                            DEPOSITORIES

Latvia                             Latvian Central Depository

Lebanon                            Custodian and Clearing Center of Financial
                                   Instruments for Lebanon and the Middle East
                                   (Midclear) S.A.L.

                                   Banque du Liban

Lithuania                          Central Securities Depository of Lithuania

Malaysia                           Malaysian Central Depository Sdn. Bhd.

                                   Bank Negara Malaysia

Mali                               Depositaire Central - Banque de Reglement

Mauritius                          Central Depository and Settlement Co. Ltd.

                                   Bank of Mauritius

Mexico                             S.D. Indeval, S.A. de C.V.

Morocco                            Maroclear

Netherlands                        Nederlands Centraal Instituut voor
                                   Giraal Effectenverkeer B.V. (NECIGEF)

New Zealand                        New Zealand Central Securities Depository
                                   Limited

Niger                              Depositaire Central - Banque de Reglement

Nigeria                            Central Securities Clearing System Limited

Norway                             Verdipapirsentralen (Norwegian Central
                                   Securities Depository)

09/30/01                                4
<PAGE>


                                  STATE STREET                        SCHEDULE B
                             GLOBAL CUSTODY NETWORK
                   DEPOSITORIES OPERATING IN NETWORK MARKETS


COUNTRY                    DEPOSITORIES

Oman                       Muscat Depository & Securities Registration Company,
                           SAOC


Pakistan                   Central Depository Company of Pakistan Limited

                           State Bank of Pakistan


Palestine                  Clearing Depository and Settlement, a department
                           of the Palestine Stock Exchange


Peru                       Caja de Valores y Liquidaciones, Institucion de
                           Compensacion y Liquidacion de Valores S.A


Philippines                Philippine Central Depository, Inc.

                           Registry of Scripless Securities (ROSS) of the Bureau
                           of Treasury


Poland                     National Depository of Securities
                           (Krajowy Depozyt Papierow Wartosciowych SA)

                           Central Treasury Bills Registrar


Portugal                   INTERBOLSA - Sociedade Gestora de Sistemas de
                           Liquidacao e de Sistemas Centralizados de Valores
                           Mobiliarios, S.A.


Qatar                      Central Clearing and Registration (CCR), a
                           department of the Doha Securities Market


Romania                    National Securities Clearing, Settlement and
                           Depository Company

                           Bucharest Stock Exchange Registry Division

                           National Bank of Romania


Russia                     Vneshtorgbank, Bank for Foreign Trade of the Russian
                           Federation

09/30/01                                5
<PAGE>


                                  STATE STREET                        SCHEDULE B
                             GLOBAL CUSTODY NETWORK
                   DEPOSITORIES OPERATING IN NETWORK MARKETS


COUNTRY                  DEPOSITORIES

Senegal                  Depositaire Central - Banque de Reglement

Singapore                Central Depository (Pte) Limited

                         Monetary Authority of Singapore

                         Slovak Republic Stredisko cennych papierov SR, a.s.

                         National Bank of Slovakia

Slovenia                 KDD - Centralna klirinsko depotna druzba d.d.


South Africa             Central Depository Limited

                         Share Transactions Totally Electronic (STRATE) Ltd.


Spain                    Servicio de Compensacion y Liquidacion de Valores, S.A.

                         Banco de Espana, Central de Anotaciones en Cuenta


Sri Lanka                Central Depository System (Pvt) Limited


Sweden                   Vardepapperscentralen  VPC AB
                         (Swedish Central Securities Depository)


Switzerland              SegaIntersettle AG (SIS)


Taiwan - R.O.C.          Taiwan Securities Central Depository Co., Ltd.


Thailand                 Thailand Securities Depository Company Limited


Togo                     Depositaire Central - Banque de Reglement

09/30/01                              6
<PAGE>


                                  STATE STREET                        SCHEDULE B
                             GLOBAL CUSTODY NETWORK
                   DEPOSITORIES OPERATING IN NETWORK MARKETS


COUNTRY                  DEPOSITORIES

Tunisia                  Societe Tunisienne Interprofessionelle pour la
                         Compensation et de Depots des Valeurs Mobilieres


Turkey                   Takas ve Saklama Bankasi A.S. (TAKASBANK)

                         Central Bank of Turkey


Ukraine                  National Bank of Ukraine

                         Mizhregionalny Fondovy Souz


United Arab Emirates     Clearing and Depository System,
                         a department of theDubai Financial Market


Venezuela                Banco Central de Venezuela


Zambia                   LuSE Central Shares Depository Limited

                         Bank of Zambia


TRANSNATIONAL

Euroclear

Clearstream Banking AG

09/30/01                               7
<PAGE>


                                   SCEDULE C

                               MARKET INFORMATION

PUBLICATION/
TYPE OF INFORMATION
(SCHEDULED FREQUENCY)                             BRIEF DESCRIPTION
- ---------------------                             -----------------


THE GUIDE TO CUSTODY       An overview of settlement and safekeeping procedures,
IN WORLD MARKETS           custody practices and foreign investor considerations
(hardcopy annually and     for the markets in which State Street offers
regular website updates)   custodial services.


GLOBAL CUSTODY NETWORK     Information relating to Foreign Sub-Custodians in
REVIEW (annually)          State Street's Global Custody Network. The Review
                           stands as an integral part of the materials that
                           State Street provides to its U.S. mutual fund clients
                           to assist them in complying with SEC Rule 17f-5. The
                           Review also gives insight into State Street's market
                           expansion and Foreign Sub-Custodian selection
                           processes, as well as the procedures and controls
                           used to monitor the financial condition and
                           performance of our Foreign Sub-Custodian banks.

SECURITIES DEPOSITORY      Custody risk analyses of the Foreign Securities
REVIEW (annually)          Depositories presently operating in Network markets.
                           This publication is an integral part of the materials
                           that State Street provides to its U.S. mutual fund
                           clients to meet informational obligations created by
                           SEC Rule 17f-7.


GLOBAL LEGAL SURVEY        With respect to each market in which State Street
(annually)                 offers custodial services, opinions relating to
                           whether local law restricts (i) access of a fund's
                           independent public accountants to books and records
                           of a Foreign Sub-Custodian or Foreign Securities
                           System, (ii) a fund's ability to recover in the event
                           of bankruptcy or insolvency of a Foreign
                           Sub-Custodian or Foreign Securities System, (iii) a
                           fund's ability to recover in the event of a loss by a
                           Foreign Sub-Custodian or Foreign Securities System,
                           and (iv) the ability of a foreign investor to convert
                           cash and cash equivalents to U.S. dollars.

SUBCUSTODIAN AGREEMENTS    Copies of the contracts that State Street has entered
(annually)                 into with each Foreign Sub-Custodian that maintains
                           U.S. mutual fund assets in the markets in which State
                           Street offers custodial services.

GLOBAL MARKET BULLETIN     Information on changing settlement and custody
(daily or as necessary)    conditions in markets where State Street offers
                           custodial services. Includes changes in market and
                           tax regulations, depository developments,
                           dematerialization information, as well as other
                           market changes that may impact State Street's
                           clients.

Foreign Custody Advisories For those markets where State Street offers custodial
(as necessary)             services that exhibit special risks or
                           infrastructures impacting custody, State Street
                           issues market advisories to highlight those unique
                           market factors which might impact our ability to
                           offer recognized custody service levels.

Material Change Notices    Informational letters and accompanying materials
(presently on a quarterly  confirming State Street's foreign custody
basis or as otherwise      arrangements, including a summary of material changes
necessary)                 with Foreign Sub-Custodians that have occurred during
                           the previous quarter. The notices also identify any
                           material changes in the custodial risks associated
                           with maintaining assets with Foreign Securities
                           Depositories.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K
<SEQUENCE>6
<FILENAME>c22094_ex99-2k.txt
<DESCRIPTION>TRANSFER AGENCY AND SERVICE AGREEMENT
<TEXT>

                                                                  Exhibit (k)(1)
================================================================================



                                   REGISTRAR,

                      TRANSFER AGENCY AND SERVICE AGREEMENT

                                     between


                            BLACKROCK CORE BOND TRUST

                                       and

                          EQUISERVE TRUST COMPANY, N.A.








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



                                       1



<PAGE>









                                TABLE OF CONTENTS



ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK                         3


ARTICLE 2 FEES AND EXPENSES                                                4


ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BANK                       5


ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE TRUST                      5


ARTICLE 5 DATA ACCESS AND PROPRIETARY INFORMATION                          6


ARTICLE 6 INDEMNIFICATION                                                  7


ARTICLE 7 STANDARD OF CARE                                                 9


ARTICLE 8  COVENANTS OF THE TRUST AND THE BANK                             9


ARTICLE 9 TERMINATION OF AGREEMENT                                        10


ARTICLE 10 ASSIGNMENT                                                     10


ARTICLE 11 AMENDMENT                                                      11


ARTICLE 12 MASSACHUSETTS LAW TO APPLY                                     11


ARTICLE 13 FORCE MAJEURE                                                  11


ARTICLE 14 CONSEQUENTIAL DAMAGES                                          11


ARTICLE 15 MERGER OF AGREEMENT                                            11


                                       2
<PAGE>


                REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT


     AGREEMENT made as of the ( ) day of ( ) 2001, by and between BlackRock Core
Bond Trust, a Delaware business trust, having its principal office and place of
business at 100 Bellevue Avenue, Wilmington, Delaware 19809 (the "Trust"), and
EQUISERVE TRUST COMPANY, N.A., a national banking association having its
principal office and place of business at 150 Royall Street, Canton, MA 02021
(the "Bank").

     WHEREAS, the Trust desires to appoint the Bank as its registrar, transfer
agent, dividend disbursing agent and agent in connection with certain other
activities and the Bank desires to accept such appointment;

     NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:


ARTICLE 1   TERMS OF APPOINTMENT; DUTIES OF THE BANK

          1.01 Subject to the terms and conditions set forth in this Agreement,
the Trust hereby employs and appoints the Bank to act as, and the Bank agrees to
act as registrar, transfer agent for the Trust's authorized and issued shares of
its beneficial interest ("Shares"), dividend disbursing agent and agent in
connection with any dividend reinvestment plan as set out in the prospectus of
the Trust, corresponding to the date of this Agreement.

          1.02 The Bank agrees that it will perform the following services:

          (a) In accordance with procedures established from time to time by
agreement between the Trust and the Bank, the Bank shall:

                        (i) Issue and record the appropriate number of Shares as
                        authorized and hold such Shares in the appropriate
                        Shareholder account

                        (ii) Effect transfers of Shares by the registered owners
                        thereof upon receipt of appropriate documentation;

                        (iii) Prepare and transmit payments for dividends and
                        distributions declared by the Trust;

                                       3
<PAGE>

                        (iv) Act as agent for Shareholders pursuant to the
                        dividend reinvestment and cash purchase plan as amended
                        from time to time in accordance with the terms of the
                        agreement to be entered into between the Shareholders
                        and the Bank in substantially the form attached as
                        Exhibit A hereto;

                        (v) Issue replacement certificates for those
                        certificates alleged to have been lost, stolen or
                        destroyed upon receipt by the Bank of indemnification
                        satisfactory to the Bank and protecting the Bank and
                        protecting the Bank, and the Trust, and the Bank at its
                        option, may issue replacement certificates in place of
                        mutilated stock certificates upon presentation thereof
                        and without such indemnity.

          (b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i) perform all
of the customary services of a registrar, transfer agent, dividend disbursing
agent and agent of the dividend reinvestment and cash purchase plan as described
in Article 1 consistent with those requirements in effect as of the date of this
Agreement. The detailed definition, frequency, limitations and associated costs
(if any) set out in the attached fee schedule, include but are not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies, and mailing Shareholder reports to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts where
applicable, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all registered Shareholders.

          (c) The Bank shall provide additional services on behalf of the Trust
(i.e., escheatment services) which may be agreed upon in writing between the
Trust and the Bank.


ARTICLE 2   FEES AND EXPENSES

          2.01 For the performance by the Bank pursuant to this Agreement, the
Trust agrees to pay the Bank an annual maintenance fee as set out in the initial
fee schedule attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.02 below may be changed from time to time subject to
mutual written agreement between the Trust and the Bank.

                                       4
<PAGE>


          2.02 In addition to the fee paid under Section 2.01 above, the Trust
agrees to reimburse the Bank for out-of-pocket expenses, including but not
limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by the Bank at the request or with the consent of the
Trust, will be reimbursed by the Trust.

          2.03 The Trust agrees to pay all fees and reimbursable expenses within
five days following the receipt of the respective billing notice. Postage and
the cost of materials for mailing of dividends, proxies, Trust reports and other
mailings to all Shareholder accounts shall be advanced to the Bank by the Trust
at least seven (7) days prior to the mailing date of such materials.


ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BANK

          The Bank represents and warrants to the Trust that:

          3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.

          3.02 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.

          3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.

          3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.

          3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.


ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE TRUST

          The Trust represents and warrants to the Bank that:

          4.01 It is a corporation duly organized and existing and in good
standing under the laws of Delaware.

          4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.


                                       5
<PAGE>


          4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.

          4.04 It is a closed-end, diversified investment company registered
under the Investment Company Act of 1940, as amended.

          4.05 To the extent required by federal securities laws a registration
statement under the Securities Act of 1933, as amended is currently effective
and appropriate state securities law filings have been made with respect to all
Shares of the Trust being offered for sale; information to the contrary will
result in immediate notification to the Bank.

          4.06 It shall  make all  required  filings  under  federal  and  state
securities laws.


ARTICLE 5 DATA ACCESS AND PROPRIETARY INFORMATION

                    5.01 The Trust acknowledges that the data bases, computer
programs, screen formats, report formats, interactive design techniques, and
other information furnished to the Trust by the Bank are provided solely in
connection with the services rendered under this Agreement and constitute
copyrighted trade secrets or proprietary information of substantial value to the
Bank. Such databases, programs, formats, designs, techniques and other
information are collectively referred to below as "Proprietary Information." The
Trust agrees that it shall treat all Proprietary Information as proprietary to
the Bank and further agrees that it shall not divulge any Proprietary
Information to any person or organization except as expressly permitted
hereunder. The Trust agrees for itself and its employees and agents:

                    (a) to use such programs and databases (i) solely on the
                    Trust computers, or (ii) solely from equipment at the
                    locations agreed to between the Trust and the Bank and (iii)
                    in accordance with the Bank's applicable user documentation;

                    (b) to refrain from copying or duplicating in any way (other
                    than in the normal course of performing processing on the
                    Trusts' computers) any part of any Proprietary Information;

                                       6

<PAGE>


                    (c) to refrain from obtaining unauthorized access to any
                    programs, data or other information not owned by the Trust,
                    and if such access is accidentally obtained, to respect and
                    safeguard the same Proprietary Information;

                    (d)  to  refrain  from   causing  or  allowing   information
                    transmitted from the Bank's computer to the Trusts' terminal
                    to be retransmitted to any other computer  terminal or other
                    device  except as  expressly  permitted  by the Bank,  (such
                    permission not to be unreasonably withheld);

                    (e) that the Trust shall have access only to those
                    authorized transactions as agreed to between the Trust and
                    the Bank; and

                    (f) to honor reasonable written requests made by the Bank to
                    protect at the Bank's expense the rights of the Bank in
                    Proprietary Information at common law and under applicable
                    statues.


          5.02 If the transactions available to the Trust include the ability to
originate electronic instructions to the Bank in order to (i) effect the
transfer or movement of cash or Shares or (ii) transmit Shareholder information
or other information, then in such event the Bank shall be entitled to rely on
the validity and authenticity of such instruction without undertaking any
further inquiry as long as such instruction is undertaken in conformity with
security procedures established by the Bank from time to time.


ARTICLE 6 INDEMNIFICATION

          6.01 The Bank shall not be responsible for, and the Trust shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to:

          (a) All actions of the Bank or its agents or subcontractors required
to be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.

          (b) The Trust's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of the Trust
hereunder.

                                        7
<PAGE>


          (c) The reliance on or use by the Bank or its agents or subcontractors
of information, records, documents or services which (i) are received by the
Bank or its agents or subcontractors, and (ii) have been prepared, maintained or
performed by the Trust or any other person or firm on behalf of the Trust
including but not limited to any previous transfer agent registrar.

          (d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Trust.

          (e) The offer or sale of Shares in violation of any federal or state
securities laws requiring that such shares be registered or in violation of any
stop order or other determination or ruling by any federal or state agency with
respect to the offer or sale of such Shares; and

          6.02 At any time the Bank may apply to any officer of the Trust for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Trust for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The Bank,
its agents and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of theTrust, reasonably believed
to be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided the Bank or
its agents or subcontractors by telephone, in person, machine readable input,
telex, CRT data entry or other similar means authorized by the Trust, and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Trust. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Trust, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.

          6.03 In order that the indemnification provisions contained in this
Article 6 shall apply, upon the assertion of a claim for which the Trust may be
required to indemnify the Bank, the Bank shall promptly notify the Trust of such
assertion, and shall keep the Trust advised with respect to all developments
concerning such claim. The Trust shall have the option to participate with the
Bank in the defense of such claim or to defend against said claim in its own
name or in the name of the Bank. The


                                       8
<PAGE>



Bank shall in no case confess any claim or make any compromise in any case in
which the Trust may be required to indemnify the Bank except with the Trust's
prior written consent.


ARTICLE 7 STANDARD OF CARE

          7.01 The Bank shall at all times act in good faith and agrees to use
its best efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall not be
liable for loss or damage due to errors unless said errors are caused by its
negligence, bad faith, or willful misconduct of that of its employees.


ARTICLE 8 COVENANTS OF THE TRUST AND THE BANK

          8.01 The Trust shall promptly furnish to the Bank the following:

          (a) A certified  copy of the  resolution  of the Board of Directors of
the Trust authorizing the appointment of the Bank and the execution and delivery
of this Agreement.

          (b) A copy of the Articles of  Incorporation  and By-Laws of the Trust
and all amendments thereto.

          8.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.

          8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Trust and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Trust on and in accordance with its request.

          8.04 The Bank and the Trust agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.


                                       9

<PAGE>

          8.05 In cases of any requests or demands for the inspection of the
Shareholder records of the Trust, the Bank will endeavor to notify the Trust and
to secure instructions from an authorized officer of the Trust as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.


ARTICLE 9 TERMINATION OF AGREEMENT

          9.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.

          9.02 Should the Trust exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Trust. In the event that in connection with termination of this
Agreement, a successor to any of the Bank's duties or responsibilities under
this Agreement is designated by the Trust by written notice to the Bank, the
Bank shall, promptly upon such termination and at the expense of the Trust,
transfer all records and shall cooperate in the transfer of such duties and
responsibilities. Additionally, the Bank reserves the right to charge for any
other reasonable expenses associated with such termination and/or a charge
equivalent to the average of three (3) month's fees.


ARTICLE 10 ASSIGNMENT

          10.01 Except as provided in Section 10.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.

          10.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.

          10.03 The Bank may, without further consent on the part of the Trust,
subcontract for the performance hereof with (i) Boston EquiServe Limited
Partnership., a Delaware limited partnership ("Boston EquiServe"), which is duly
registered as a transfer agent pursuant to Section 17A(c)(2) of the Securities
Exchange Act of 1934 ("Section 17A(c)(2)"), or (ii) a Boston EquiServe affiliate
duly registered as a transfer agent pursuant to Section 17A(c)(2), provided,
however, that the Bank shall be


                                       10
<PAGE>


as fully responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.


ARTICLE 11 AMENDMENT

          11.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors of the Trust.


ARTICLE 12 MASSACHUSETTS LAW TO APPLY

          12.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.


ARTICLE 13 FORCE MAJEURE


          13.01 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.


ARTICLE 14 CONSEQUENTIAL DAMAGES

          14.01 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.


ARTICLE 15 MERGER OF AGREEMENT

          15.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.


                                       11
<PAGE>


                            BLACKROCK CORE BOND TRUST



                            BY:
                                -----------------------------------------------




                                EQUISERVE TRUST COMPANY, N.A.



                            BY:
                                -----------------------------------------------
                                Name:  Tyler Haynes
                                Title: Managing Director

                                       12

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2L
<SEQUENCE>7
<FILENAME>c22094_ex99-2l.txt
<DESCRIPTION>OPINION AND CONSENT OF COUNSEL TO THE TRUST
<TEXT>


                                                                     Exhibit (l)

                                                               November 27, 2001


BlackRock Core Bond Trust
100 Bellevue Parkway
Wilmington, Delaware19809

                          Re: BlackRock Core Bond Trust
                              Registration Statement on Form N-2
                              ----------------------------------

Ladies and Gentlemen:

            We have acted as special counsel to BlackRock Core Bond Trust, a
business trust formed under the Delaware Business Trust Act (the "Trust"), in
connection with the initial public offering by the Trust of up to 30,000,000
shares (including shares subject to an over-allotment option) of the Trust's
common shares (the "Shares") of beneficial interest, par value $0.001 per share
(the "Common Shares").

            This opinion is being furnished in accordance with the requirements
of Item 24 of the Form N-2 Registration Statement under the Securities Act of
1933, as amended (the "1933 Act"), and the Investment Company Act of 1940, as
amended (the "1940 Act").

            In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Notification of Registration of the Trust as an investment company under the
1940 Act, on Form N- 8A, dated October 18, 2001 as filed with the Securities and
Exchange Commission (the "Commission") on October 18, 2001, (ii) the
Registration Statement of the Trust on Form N-2 (File Nos. 333-71836 and
811-10543), as filed with the Commission on October 18, 2001, and as amended by
Pre-Effective Amendment No. 1 on October 25, 2001, and Pre-Effective Amendment
No. 2 on November 27, 2001, under the 1933 Act (such Registration Statement, as
so amended and proposed to be amended,

<PAGE>


BlackRock Core Bond Trust
November 27, 2001
Page 2




being hereinafter referred to as the "Registration Statement"); (iii) the form
of the Underwriting Agreement (the "Underwriting Agreement") proposed to be
entered into between the Trust, as issuer, and UBS Warburg LLC, as
representative of the several underwriters named therein (the "Underwriters"),
filed as an exhibit to the Registration Statement; (iv) a specimen certificate
representing the Common Shares; (v) the Certificate of Trust and Agreement and
Declaration of Trust of the Trust, as dated and currently in effect; (vi) the
By-Laws of the Trust, as currently in effect and (vii) certain resolutions of
the Board of Trustees of the Trust relating to the issuance and sale of the
Shares and related matters. We also have examined originals or copies, certified
or otherwise identified to our satisfaction, of such records of the Trust and
such agreements, certificates of public officials, certificates of officers or
other representatives of the Trust and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinions set forth herein.

            In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submit ted to us as originals, the conformity to original documents of
all documents submit ted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. In making our
examination of documents, we have assumed that the parties thereto, other than
the Trust, its directors and officers, had or will have the power, corporate or
other, to enter into and perform all obliga tions thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof on such parties. In rendering the opinion set forth
below, we have assumed that the share certificates representing the Shares will
conform to the specimen examined by us and will have been manually signed by an
authorized officer of the transfer agent and registrar for the Common Shares and
registered by such transfer agent and registrar. As to any facts material to the
opinions expressed herein which we have not independently established or
verified, we have relied upon statements and representations of officers and
other representa tives of the Trust and others.

<PAGE>


BlackRock Core Bond Trust
November 27, 2001
Page 3



            Members of our firm are admitted to the bar in the State of New York
and we do not express any opinion as to the laws of any jurisdiction other than
the Delaware Business Trust Act.

            Based upon and subject to the foregoing, we are of the opinion that
when (i) the Registration Statement becomes effective; (ii) the Underwriting
Agree ment has been duly executed and delivered; (iii) certificates representing
the Shares in the form of the specimen certificate examined by us have been
manually signed by an authorized officer of the transfer agent and registrar for
the Common Shares and registered by such transfer agent and registrar; and (iv)
the Shares have been deliv ered to and paid for by the Underwriters at a price
per share not less than the per share par value of the Common Shares as
contemplated by the Underwriting Agree ment, the issuance and sale of the Shares
will have been duly authorized, and the Shares will be validly issued, fully
paid and nonassessable (except as provided in the last sentence of Section 3.8
of the Amended and Restated Agreement and Declara tion of Trust).

            We hereby consent to the filing of this opinion with the Commission
as an exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Opinions" in the Registration Statement. In
giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the 1933 Act or
the rules and regula tions of the Commission.

                                                Very truly yours,



                                    /s/ Skadden, Arps, Slate, Meagher & Flom LLP

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2N
<SEQUENCE>8
<FILENAME>c22094_ex99-2n.txt
<DESCRIPTION>INDEPENDENT AUDITOR'S CONSENT
<TEXT>


                                                                     Exhibit (n)





INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Pre-Effective Amendment No. 2 to the Registration
Statement of BlackRock Core Bond Trust (Investment Company Registration No.
333-71836) of our report dated November 20, 2001, relating to the financial
statements of BlackRock Core Bond Trust as of November 19, 2001 and for the
period then ended in the Statement of Additional Information which is part of
such registration statement.

We also consent to the reference to our Firm under the heading "Experts" in the
Registration Statement.



/s/ Deloitte & Touche LLP

Boston, Massachusetts
November 27, 2001

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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