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<SEC-DOCUMENT>0000950172-04-000957.txt : 20040421
<SEC-HEADER>0000950172-04-000957.hdr.sgml : 20040421
<ACCEPTANCE-DATETIME>20040420195925
ACCESSION NUMBER:		0000950172-04-000957
CONFORMED SUBMISSION TYPE:	N-2
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20040421

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BLACKROCK GLOBAL INFLATION PROTECTED SECURITIES TRUST
		CENTRAL INDEX KEY:			0001287480
		STATE OF INCORPORATION:			DE

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-114662
		FILM NUMBER:		04743910

	MAIL ADDRESS:	
		STREET 1:		40 EAST 52ND STREET
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BLACKROCK GLOBAL INFLATION PROTECTED SECURITIES TRUST
		CENTRAL INDEX KEY:			0001287480
		STATE OF INCORPORATION:			DE

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-21566
		FILM NUMBER:		04743911

	MAIL ADDRESS:	
		STREET 1:		40 EAST 52ND STREET
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2
<SEQUENCE>1
<FILENAME>nyc454215.txt
<TEXT>
                               AS FILED WITH THE SECURITIES AND EXCHANGE
                               COMMISSION ON APRIL 20, 2004
                                        SECURITIES ACT REGISTRATION NO. 333-
                                    INVESTMENT COMPANY REGISTRATION NO. 811-

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM N-2

           REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
                          PRE-EFFECTIVE AMENDMENT NO.
                          POST-EFFECTIVE AMENDMENT NO.
                                     AND/OR
                          REGISTRATION STATEMENT UNDER
                      THE INVESTMENT COMPANY ACT OF 1940 [X]
                                 AMENDMENT NO.

        BLACKROCK VARIABLE RATE AND INFLATION PROTECTED SECURITIES 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)


                            ANNE ACKERLEY, PRESIDENT
        BLACKROCK VARIABLE RATE AND INFLATION PROTECTED SECURITIES TRUST
                              40 East 52nd Street
                            New York, New York 10022
                    (Name and Address of Agent for Service)


                                   Copies to:

                            MICHAEL K. HOFFMAN, ESQ.
                    Skadden, Arps, Slate, Meagher & Flom LLP
                               Four Times Square
                            New York, New York 10036

         APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable
after the effective date of this Registration Statement.

        CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<TABLE>
<CAPTION>
                                                               Proposed       Proposed Maximum
                                          Amount Being     Maximum Offering      Aggregate           Amount of
Title of Securities Being Registered       Registered       Price per Unit   Offering Price(1)   Registration Fee
<S>                                       <C>                   <C>              <C>                  <C>
Common Shares, $.001 par value.........   50,000 shares         $20.00           $1,000,000           $126.70

(1) Estimated solely for the purpose of calculating the registration fee.
</TABLE>

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT 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>

PROSPECTUS

[Flag]

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

                             Subject to Completion
                      Preliminary Prospectus dated , 2004

                                     Shares

        BLACKROCK VARIABLE RATE AND INFLATION PROTECTED SECURITIES TRUST
                                 Common Shares
                                $20.00 per share

INVESTMENT OBJECTIVE. BlackRock Variable Rate and Inflation Protected
Securities Trust (the "Trust") is a newly organized, non-diversified,
closed-end management investment company. The Trust seeks to maximize total
return consistent with income generation and prudent investment management.

INVESTMENT ADVISOR. The Trust's portfolio will be managed by BlackRock
Advisors, Inc., the Trust's investment advisor, and BlackRock Financial
Management, Inc., the Trust's sub-advisor (collectively, "BlackRock").

PORTFOLIO CONTENTS. The Trust pursues its objective by investing primarily in
three asset classes:

o     inflation-indexed securities issued by the U.S. Government and non-U.S.
      Governments, their agencies or instrumentalities and corporations
      ("TIPS");

o     senior, secured floating rate loans made to corporate and other business
      entities ("Senior Loans"); and

o     other variable and floating rate instruments ("Variable Debt").

         The Trust anticipates that, under current market conditions, no more
than 35% of its initial portfolio will consist of below investment grade debt
securities. Non-investment grade securities, commonly referred to as "junk
bonds," are bonds that are rated below investment grade by each of the national
rating agencies cover the security, or, if unrated, are determined to be of
comparable quality by BlackRock. Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies, Inc. ("S&P"), and Fitch Ratings ("Fitch") consider
securities rated below BBB-- to be below investment grade and Moody's Investors
Service Inc. ("Moody's") considers securities rated below Baa3 to be below
investment grade. Securities of below investment grade quality are regarded as
having predominately speculative characteristics with respect to issuer's
capacity to pay interest and repay principal. The Trust's strategies may result
in an above average amount of risk and volatility or loss of principal. The
Trust cannot ensure that it will achieve its investment objectives.

CREDIT DERIVATIVES. The Trust currently intends to use credit derivative
transactions with a notional amount equal to __% of the Trust's portfolio in an
attempt to enhance the Trust's total return. The use of derivative transactions
involves special risks. See "Risks - Strategic Transactions."

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 " ".

BORROWING. The Trust currently anticipates borrowing funds and/or issuing
preferred shares in an aggregate amount of approximately 33 1/3% of its Managed
Assets (as defined below) 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.

         BEFORE BUYING ANY COMMON SHARES YOU SHOULD READ THE DISCUSSION OF THE
MATERIAL RISKS OF INVESTING IN THE TRUST IN "RISKS" BEGINNING ON PAGE . CERTAIN
OF THESE RISKS ARE SUMMARIZED IN "PROSPECTUS SUMMARY -- SPECIAL RISK
CONSIDERATIONS" BEGINNING ON PAGE .

                                                 PER SHARE          TOTAL (1)
Price offering price..........................     $20.00           $
Sales load....................................     $                $
Estimated expenses (2)........................     $                $
Proceeds, after expenses, to the Trust........     $                $

(1)  The Trust has granted the underwriters an option to purchase up to
     additional common shares at the public offering price, less the sales
     load, within 45 days of the date of this prospectus solely to cover over
     allotments, if any. If such option is exercised in full, the total price
     to the public, sales load, estimated offering and organizational expenses
     and proceeds to the Trust will be $ , $ , $ and $ , respectively. See
     "Underwriting."

(2)  The Trust will pay organizational expenses and offering costs of the Trust
     (other than the sales load) up to an aggregate of $ per share of the
     Trust's common shares. BlackRock has agreed to pay such organizational
     expenses and offering costs of the Trust to the extent they exceed $ per
     share of the Trust's common shares. The aggregate organizational expenses
     and offering costs to be incurred by the Trust are estimated to be $
     (including amounts incurred by BlackRock on behalf of the Trust).

                     The date of this Prospectus is , 2004.

         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.

         You should read this prospectus, which contains important information
about the Trust, before deciding whether to invest, and retain it for future
reference. A Statement of Additional Information, dated , 2004, containing
additional information about the Trust, has been filed with the Securities and
Exchange Commission and is incorporated by reference in its entirety into this
prospectus. You can review the table of contents of the Statement of Additional
Information on page of this prospectus. You may request a free copy of the
Statement of Additional Information 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).

         You should rely only on the information contained or incorporated by
reference in this prospectus. The Trust has not, and the underwriters have not,
authorized any other person to provide you with different or inconsistent
information. If anyone provides you with different or inconsistent information,
you should not rely on it. The Trust is 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, and the Trust's
business, financial condition and prospects may have changed since that date.

         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.

         Until , 2004 (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

                                                                            Page

PROSPECTUS SUMMARY............................................................1
SUMMARY OF TRUST EXPENSES....................................................12
THE TRUST....................................................................13
USE OF PROCEEDS..............................................................13
THE TRUST'S INVESTMENTS......................................................13
PORTFOLIO SECURITIES.........................................................14
BORROWINGS AND PREFERRED SHARES..............................................21
RISKS    ....................................................................23
HOW THE TRUST MANAGES RISK...................................................30
MANAGEMENT OF THE TRUST......................................................30
NET ASSET VALUE..............................................................32
DISTRIBUTIONS................................................................33
DIVIDEND REINVESTMENT PLAN...................................................33
DESCRIPTION OF SHARES........................................................35
CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST.................37
CLOSED-END TRUST STRUCTURE...................................................38
REPURCHASE OF SHARES.........................................................39
FEDERAL INCOME TAX MATTERS...................................................39
UNDERWRITING.................................................................40
CUSTODIAN AND TRANSFER AGENT.................................................41
LEGAL OPINIONS...............................................................42
PRIVACY PRINCIPLES OF THE TRUST..............................................42
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION................43

<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 Variable Rate and Inflation Protected
                         Securities Trust is a newly organized,
                         non-diversified, closed-end management investment
                         company. Throughout the prospectus, we refer to
                         BlackRock Variable Rate and Inflation Protected
                         Securities 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 $20.00 per share through a group of
                         underwriters (the "Underwriters") led by
                                    . The common shares of beneficial interest
                         are called "common shares" in the rest of this
                         prospectus. You must purchase at least 100 common
                         shares ($2,000) 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 has
                         agreed to pay organizational expenses and offering
                         costs (other than sales load) that exceed $ per share.
                         See "Underwriting."

INVESTMENT OBJECTIVE     The Trust seeks to maximize total return consistent
                         with income generation and prudent investment
                         management. No assurance can be given that the Trust
                         will achieve its investment objectives.

INVESTMENT POLICIES      The Trust will pursue its objective by investing
                         primarily in three asset classes:

                         o  TIPS;

                         o  Senior Loans; and

                         o  Variable Debt.

                         BlackRock has broad discretion to allocate the Trust's
                         assets among the three principal asset classes. Under
                         the normal conditions, the Trust will invest at least
                         80% of its Managed Assets in inflation-indexed
                         securities and/or securities with a variable or
                         floating interest rate feature such as Senior Loans
                         and Variable Debt. The Trust will provide shareholders
                         with notice at least 60 days prior to changing this
                         non-fundamental policy of the Trust unless such change
                         was previously approved by shareholders. The Trust
                         currently anticipates that 50% of its initial
                         portfolio will be allocated to TIPS, 25% of its
                         portfolio will be Senior Loans and 25% of his
                         portfolio will be allocated to Variable Debt. The
                         Trust may also invest up to 20% of its Managed Assets
                         in other securities and instruments such as corporate
                         bonds, mortgage-related and asset-backed securities.

                         The Trust currently expects that the average effective
                         duration of its portfolio will range between zero and
                         10 years, although this target duration may change
                         from time to time. See "The Trust's Investments."

                         Under current market conditions, the Trust initially
                         expects to maintain a weighted average portfolio
                         credit quality of investment grade (which is at least
                         BBB- as determined by S&P or Fitch, Baa3 as determined
                         by Moody's); however, subsequently the weighted
                         average credit quality of the Trust could be below
                         investment grade. For this purpose, when a security is
                         rated by more than one of these ratings agencies,
                         BlackRock generally will use the highest rating, and
                         if a security is unrated, it will be treated as having
                         a credit rating as determined by BlackRock. Within
                         this general guideline, the Trust may invest in
                         individual securities of any credit quality. The Trust
                         anticipates that, under current market conditions, no
                         more than 35% of its initial portfolio will consist of
                         below investment grade debt securities.

                         The Trust currently intends to use credit derivative
                         transactions with a notional amount equal to __% of
                         the Trust's portfolio in an attempt to enhance the
                         Trust's total return. The use of derivative
                         transactions involves special risks. See "Risks -
                         Strategic Transactions."

                         The Trust may invest without limitation in U.S. dollar
                         denominated securities of U.S. and non-U.S. issuers,
                         and in non-U.S. dollar denominated securities of
                         non-U.S. issuers. Foreign markets investing may entail
                         significant risks. See "Risks--Non-U.S. Securities
                         Risk".

INVESTMENT STRATEGY      BlackRock applies the same controlled-duration, active
                         relative value sector rotation style to the management
                         of all its fixed income mandates. 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 overvalued 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. In the
                         management of a global inflation-indexed security
                         portfolio, there are a number of market opportunities
                         that BlackRock seeks to capture. These include:
                         duration and yield curve positioning, technical
                         supply/demand anomalies, seasonal factors related to
                         the relevant country's inflation indicators,
                         break-even spreads between inflation-indexed
                         securities and nominal securities, and sector
                         allocation. BlackRock compares nominal yields with
                         real yields, factoring in its views on inflation. If
                         the yield spread is less than the inflation rate, then
                         inflation-indexed securities are considered to trade
                         cheaply to nominal bonds and may have greater relative
                         value. In selecting non-inflation indexed securities
                         for the Trust's portfolio, BlackRock will seek to
                         identify issuers and industries that BlackRock
                         believes are likely to experience stable or improving
                         financial conditions. BlackRock believes this strategy
                         should enhance the Trust's ability to seek total
                         return. BlackRock's analysis includes:

                         o  credit research on the issuers' financial strength;
                         o  assessment of the issuers' ability to meet
                            principal and interest payments;
                         o  general industry trends;
                         o  the issuers' managerial strength;
                         o  changing financial conditions;
                         o  borrowing requirements or debt maturity schedules;
                            and
                         o  the issuers' responsiveness to change in business
                            conditions and interest rates.

                         BlackRock considers relative values among issuers
                         based on anticipated cash flow, interest or dividend
                         coverage, asset coverage and earnings prospects. In
                         certain market conditions, the Trust may implement
                         various temporary "defensive" strategies at times when
                         BlackRock determines that conditions in the markets
                         make pursuing the Trust's basic investment strategy
                         inconsistent with the best interests of its
                         shareholders. These strategies may include investing
                         all or a portion of the Trust's assets in
                         higher-quality, short-term income securities.

BORROWINGS AND
PREFERRED SHARES         The Trust currently anticipates borrowing funds and/or
                         issuing preferred shares of beneficial interest
                         ("Preferred Shares") in an aggregate amount of up to
                         33 1/3% of its Managed Assets to buy additional
                         securities. This practice is known as "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.
                         The Trust's leveraging strategy may not be successful.
                         See "Risks--Leverage Risk."

                         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."

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

                         o  engaging in interest rate transactions;

                         o  using options and financial futures;

                         o  making forward commitments; and

                         o  lending the Trust's portfolio securities.

INVESTMENT ADVISOR       BlackRock Advisors, Inc. ("BlackRock Advisors" or the
                         "Advisor"), as the Trust's investment advisor, and
                         BlackRock Advisors' affiliate, BlackRock Financial
                         Management Inc. ("BlackRock Financial Management" or
                         the "Sub-Advisor"), 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 asset management firms in the world
                         with approximately $321 billion under management as of
                         March 31, 2004. The BlackRock organization has over 16
                         years of experience managing closed-end funds. As of
                         March 31, 2004, BlackRock advised a closed-end family
                         of 50 active funds with approximately $14.7 billion in
                         assets. Clients are served from the company's
                         headquarters in New York City, as well as offices in
                         Wilmington, San Francisco, Boston, Edinburgh, Tokyo and
                         Hong Kong. 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. BlackRock Advisors will receive an
                         annual fee, payable monthly, in a maximum amount equal
                         to % 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.

DISTRIBUTIONS            Commencing with the Trust's initial dividend, the
                         Trust intends to make regular monthly cash
                         distributions of all or a portion of its net
                         investment income to common shareholders. 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 pay common shareholders at least
                         annually all, or a portion of, its net investment
                         income after the payment of dividends and interest, if
                         any, owed with respect to any outstanding Preferred
                         Shares or other forms of leverage utilized by the
                         Trust. 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                  It is currently anticipated that the Trust's common
                         shares will be listed on the New York Stock Exchange
                         under the symbol " ". See "Description of
                         Shares--Common Shares."

CUSTODIAN AND
TRANSFER AGENT                         will serve as the Trust's custodian
                         and will serve as the Trust's transfer agent. See
                         "Custodian and Transfer Agent."

SPECIAL RISK
CONSIDERATIONS           No Operating History. The Trust is a newly organized,
                         closed-end management investment company with no
                         operating history.

                         Market Discount Risk. 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
                         may invest in lower grade securities 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 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.

                         Risks Relating to Inflation-Indexed Securities. The
                         value of inflation-indexed securities such as U.S.
                         Treasury Inflation Protected Securities ("U.S. TIPS")
                         generally fluctuates in response to changes in real
                         interest rates, which are in turn tied to the
                         relationship between nominal interest rates and the
                         rate of inflation. Therefore, if inflation were to
                         rise at a faster rate than nominal interest rates,
                         real interest rates might decline, leading to an
                         increase in value of inflation-indexed securities. In
                         contrast, if nominal interest rates increased at a
                         faster rate than inflation, real interest rates might
                         rise, leading to a decrease in value of
                         inflation-indexed securities. In addition, because the
                         principal amount of inflation-indexed securities would
                         be adjusted downward during a period of deflation, the
                         Trust will be subject to deflation risk with respect
                         to its investments in these securities. If the Trust
                         purchases inflation-indexed securities in the
                         secondary market whose principal values have been
                         adjusted upward due to inflation since issuance, the
                         Trust may experience a loss if there is a subsequent
                         period of deflation. If inflation is lower than
                         expected during the period the Trust holds
                         inflation-indexed securities, the Trust may earn less
                         on the securities than on conventional bonds. Any
                         increase in principal value of inflation-indexed
                         securities caused by an increase in the index is
                         taxable in the year the increase occurs, even though
                         the Trust will not receive cash representing the
                         increase at that time. As a result, the Trust could be
                         required at times to liquidate other investments,
                         including when it is not advantageous to do so, in
                         order to satisfy its distribution requirements as a
                         regulated investment company under the Code. See "Tax
                         Matters." To the extent the Trust purchases
                         inflation-indexed bonds offered by foreign issuers,
                         the rate of inflation measured by the foreign
                         inflation index may not be correlated to the rate of
                         inflation in the United States. In that case, such
                         investments would not provide protection against
                         inflation in the United States.

                         The daily adjustment of the principal value of U.S.
                         TIPS is currently tied to the non-seasonally adjusted
                         CPI-U, which is calculated monthly by the U.S. Bureau
                         of Labor Statistics. The CPI-U is a measurement of
                         changes in the cost of living, made up of components
                         such as housing, food, transportation and energy.
                         Inflation-indexed securities issued by foreign
                         governments are generally adjusted using a comparable
                         inflation index calculated by the government. There
                         can no assurance that such indices will accurately
                         measure the real rate of inflation in the prices of
                         goods and services.

                         The market for inflation-indexed securities and
                         related instruments is relatively new and is still
                         developing. For this reason, the market may, at times,
                         have relatively low trading volume, which could result
                         in lower liquidity and increased volatility in prices.

                         Senior Loans Risk. The risks associated with Senior
                         Loans are similar to the risks of non-investment grade
                         bonds, although Senior Loans are typically senior and
                         secured in contrast to non-investment grade bonds,
                         which are often subordinated and unsecured. Senior
                         Loans' higher standing has historically resulted in
                         generally higher recoveries in the event of a
                         corporate reorganization. In addition, because their
                         interest rates are adjusted for changes in short-term
                         interest rates, Senior Loans generally have less
                         interest rate risk than non-investment grade bonds,
                         which are typically fixed rate. The Trust's
                         investments in Senior Loans are typically below
                         investment grade and are considered speculative
                         because of the credit risk of their issuers. Such
                         companies are more likely to default on their payments
                         of interest and principal owed to the Trust, and such
                         defaults could reduce the Trust's net asset value and
                         income distributions. An economic downturn generally
                         leads to a higher non-payment rate, and a Senior Loan
                         may lose significant value before a default occurs.
                         Moreover, any specific collateral used to secure a
                         Senior Loan may decline in value or become illiquid,
                         which would adversely affect the Senior Loan's value.

                         Economic and other events (whether real or perceived)
                         can reduce the demand for certain Senior Loans or
                         Senior Loans generally, which may reduce market prices
                         and cause the Trust's net asset value per share to
                         fall. The frequency and magnitude of such changes
                         cannot be predicted.

                         Senior Loans and other debt securities are also
                         subject to the risk of price declines and to increases
                         in prevailing interest rates, although floating-rate
                         debt instruments are substantially less exposed to
                         this risk than fixed-rate debt instruments. No active
                         trading market may exist for certain Senior Loans,
                         which may impair the ability of the Trust to realize
                         full value in the event of the need to liquidate such
                         assets. Adverse market conditions may impair the
                         liquidity of some actively traded Senior Loans.

                         Senior Loans hold the most senior position in the
                         capital structure of a business entity and are
                         typically secured with specific collateral and have a
                         claim on the assets and/or stock of the Borrower (as
                         defined herein) that is senior to that held by
                         subordinated debt holders and stockholders of the
                         Borrower. Senior Loans typically have a stated term of
                         between five and nine years, and have rates of
                         interest which typically are redetermined either
                         daily, monthly, quarterly, or semi-annually. Longer
                         interest rate reset periods generally increase
                         fluctuations in the Trust's net asset value as a
                         result of changes in market interest rates. Senior
                         Loans and other floating-rate debt instruments are
                         subject to the risk of non-payment of scheduled
                         interest or principal. Such non-payment would result
                         in a reduction of income to the Trust, a reduction in
                         the value of the investment and a potential decrease
                         in the net asset value of the Trust. For a more
                         detailed discussion of the characteristics and risks
                         associated with Senior Loans, see "Portfolio
                         Securities--Senior Loans" and "Risks--Senior Loans."

                         Variable and Floating Securities Risk. 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. 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. See "Variable and Floating
                         Securities 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. 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 bonds held by the Trust,
                         reducing return to the holders of common shares. There
                         is no assurance that a leveraging strategy will be
                         successful. Leverage involves risks and special
                         considerations for common shareholders including:

                         o  the likelihood of greater volatility of net asset
                            value, market price and dividend rate of the common
                            shares than a comparable portfolio without
                            leverage;

                         o  the risk that fluctuations in interest rates on
                            borrowings and short-term debt or in the interest
                            or dividend rates on any leverage that the Trust
                            must pay will reduce the return to the common
                            shareholders;

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

                         o  when the Trust uses financial leverage, the
                            investment advisory fees payable to BlackRock will
                            be higher than if the Trust did not use leverage;
                            and

                         o  leverage may increase operating costs, which may
                            reduce total return.

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

                         Credit Derivatives Risk. The use of credit
                         derivatives is a highly specialized activity which
                         involves strategies and risks different from those
                         associated with ordinary portfolio security
                         transactions. If BlackRock is incorrect in its
                         forecasts of default risks, market spreads or other
                         applicable factors, the investment performance of the
                         Trust would diminish compared with what it would have
                         been if these techniques were not used. Moreover,
                         even if BlackRock is correct in its forecasts, there
                         is a risk that a credit derivative position may
                         correlate imperfectly with the price of the asset or
                         liability being protected. There is no limit on the
                         amount of credit derivative transactions that may be
                         entered into by the Trust. The Trust's risk of loss
                         in a credit derivative transaction varies with the
                         form of the transaction. For example, if the Trust
                         purchases a default option on a security, and if no
                         default occurs with respect to the security, the
                         Trust's loss is limited to the premium it paid for
                         the default option. In contrast, if there is a
                         default by the grantor of a default option, the
                         Trust's loss will include both the premium that it
                         paid for the option and the decline in value of the
                         underlying security that the default option
                         protected.

                         Interest Rate Risk. In addition to the interest rate
                         risk associated with inflation-indexed securities
                         discussed above, other securities held in the Trust's
                         portfolio could be affected by interest rate
                         fluctuations. The value of Trust common shares will
                         usually change in response to interest rate
                         fluctuations. When interest rates decline, the value
                         of fixed-rate securities can be expected to rise.
                         Conversely, when interest rates rise, the value of
                         fixed-rate securities can be expected to decline.
                         Although changes in prevailing interest rates can be
                         expected to cause some fluctuations in the value of
                         variable and floating rate securities (due to the fact
                         that rates only reset periodically), the values of
                         these securities are substantially less sensitive to
                         changes in market interest rates than fixed-rate
                         instruments. Fluctuations in the value of the Trust's
                         securities will not affect interest income on existing
                         securities but will be reflected in the Trust's net
                         asset value. The Trust may utilize certain strategies,
                         including taking positions in futures or interest rate
                         swaps, for the purpose of reducing the interest rate
                         sensitivity of the portfolio and decreasing the
                         Trust's exposure to interest rate risk, although there
                         is no assurance that it will do so or that such
                         strategies will be successful.

                         Non-Investment Grade Securities Risk. The Trust may
                         invest in securities that are below investment grade,
                         which are commonly referred to as "junk bonds."
                         Investments in lower grade securities will expose the
                         Trust to greater risks than if the Trust owned only
                         higher grade securities. Because of the substantial
                         risks associated with lower grade securities, you
                         could lose money on your investment in shares of the
                         Trust, both in the short-term and the long-term.

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

                         Credit Risk. Credit risk is the risk that one or more
                         securities in the Trust's portfolio will decline in
                         price, or fail to pay interest or principal when due,
                         because the issuer of the security experiences a
                         decline in its financial status. Under normal
                         circumstances, the Trust may invest a substantial
                         portion, but no more than 35%, (measured at the time
                         of investment) of its Managed Assets in securities
                         that are rated Ba/BB or B or that are unrated but
                         judged to be of comparable quality by BlackRock. The
                         prices of these lower grade securities are more
                         sensitive to negative developments, such as a decline
                         in the issuer's revenues or a general economic
                         downturn, than are the prices of higher grade
                         securities. Securities of below investment grade
                         quality are predominantly speculative with respect to
                         the issuer's capacity to pay interest and repay
                         principal when due and therefore involve a greater
                         risk of default. In addition, the Trust's use of
                         credit derivatives will expose it to additional risk
                         in the event that the bonds underlying the derivatives
                         default.

                         Non-U.S. Securities Risk. The Trust will invest in
                         inflation-indexed and other securities of non-U.S.
                         issuers ("Non-U.S. Securities"). Such investments
                         involve certain risks not involved in domestic
                         investments. Securities markets in foreign countries
                         often are not as developed, efficient or liquid as
                         securities markets in the United States. Therefore,
                         the prices of Non-U.S. Securities often are volatile.
                         Certain foreign countries may impose restrictions on
                         the ability of issuers of Non-U.S. Securities to make
                         payments of principal and interest to investors
                         located outside the country. In addition, the Trust
                         will be subject to risks associated with adverse
                         political and economic developments in foreign
                         countries, which could cause the Trust to lose money
                         on its investments in Non-U.S. Securities. See "Risks
                         - Non-U.S. Securities Risk".

                         Foreign Currency Risk. Because the Trust may invest in
                         securities denominated or quoted in currencies other
                         than the U.S. dollar, changes in foreign currency
                         exchange rates may affect the value of securities in
                         the Trust and the unrealized appreciation or
                         depreciation of investments. Currencies of certain
                         countries may be volatile and therefore may affect the
                         value of securities denominated in such currencies,
                         which means that the Trust's net asset value could
                         decline as a result of changes in the exchange rates
                         between foreign currencies and the U.S. dollar. See
                         "Risks--Foreign Currency Risk."

                         Mortgage-related Securities. The risks associated with
                         mortgage-related securities include: (1) credit risk
                         associated with the performance of the underlying
                         mortgage properties and of the borrowers owning these
                         properties; (2) adverse changes in economic conditions
                         and circumstances, which are more likely to have an
                         adverse impact on mortgage-related securities secured
                         by loans on certain types of commercial properties
                         than on those secured by loans on residential
                         properties; (3) prepayment risk, which can lead to
                         significant fluctuations in value of the
                         mortgage-related security; (4) loss of all or part of
                         the premium, if any, paid; and (5) decline in the
                         market value of the security, whether resulting from
                         changes in interest rates or prepayments on the
                         underlying mortgage collateral.

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

                         Strategic Transactions Risk. Strategic Transactions in
                         which the Trust may engage also involve certain risks
                         and special considerations, including engaging in
                         hedging and risk management transactions such as
                         interest rate and foreign currency transactions,
                         options, futures, swaps and other derivatives
                         transactions. Strategic Transactions will be entered
                         into to seek to manage the risks of the Trust's
                         portfolio of securities, but may have the effect of
                         limiting the gains from favorable market movements.
                         Strategic Transactions involve risks, including (1)
                         that the loss on the Strategic Transaction position
                         may be larger than the gain in the portfolio position
                         being hedged and (2) that the derivative instruments
                         used in Strategic Transactions may not be liquid and
                         may require the Trust to pay additional amounts of
                         money. Successful use of Strategic Transactions
                         depends on BlackRock's ability to predict correctly
                         market movements which, of course, cannot be assured.
                         Losses on Strategic Transactions may reduce the
                         Trust's net asset value and its ability to pay
                         dividends if they are not offset by gains on the
                         portfolio positions being hedged. The Trust may also
                         lend the securities it owns to others, which allows
                         the Trust the opportunity to earn additional income.
                         Although the Trust will require the borrower of the
                         securities to post collateral for the loan and the
                         terms of the loan will require that the Trust be able
                         to reacquire the loaned securities if certain events
                         occur, the Trust is still subject to the risk that the
                         borrower of the securities may default, which could
                         result in the Trust losing money, which would result
                         in a decline in the Trust's net asset value. The Trust
                         may also purchase securities for delayed settlement.
                         This means that the Trust is generally obligated to
                         purchase the securities at a future date for a set
                         purchase price, regardless of whether the value of the
                         securities is more or less than the purchase price at
                         the time of settlement.

                         Market Disruption Risk. The war with Iraq, its
                         aftermath and the continuing occupation of the country
                         by coalition forces are likely to have a substantial
                         impact on the U.S. and world economies and securities
                         markets. The duration and nature of the war and
                         occupation and the potential costs of rebuilding the
                         Iraqi infrastructure and political systems cannot be
                         predicted with any certainty. The war and occupation,
                         terrorism and related geopolitical risks have led, and
                         may in the future lead, to increased short-term market
                         volatility and may have adverse long-term effects on
                         U.S. and world economies and markets generally. Those
                         events could also have an acute effect on individual
                         issuers or related groups of issuers. These risks
                         could also adversely affect securities markets,
                         interest rates, auctions, secondary trading, ratings,
                         credit risk, inflation, deflation and other factors
                         relating to the common shares.

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.

<PAGE>

                           SUMMARY OF TRUST EXPENSES

         The following table assumes leverage in an amount equal to 33 1/3% of
the Trust's Managed Assets (after incurring leverage), and shows 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)...            %
     Offering/Organizational Expenses borne by the Trust
     (as a percentage of offering price)(1)                                   %
     Dividend reinvestment plan fees..............................      None(2)


                                                      PERCENTAGE OF NET ASSETS
                                                   ATTRIBUTABLE TO COMMON SHARES
                                                     (ASSUMES LEVERAGE INCURRED)
ANNUAL EXPENSES
     Management fees..............................
                                                                     %
     Interest expense.............................                   % (3)
     Other expenses...............................                   %
          Total net annual expenses...............                   % (4)

(1)  The Trust will pay organizational expenses and offering costs of the Trust
     (other than the sales load) up to an aggregate of $ per share of the
     Trust's common shares. BlackRock has agreed to pay such organizational
     expenses and offering costs of the Trust to the extent they exceed $ per
     share of the Trust's common shares.
(2)  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.
(3)  Includes the anticipated cost of leverage.
(4)  The table presented below in this footnote estimates what the Trust's
     annual expenses would be stated as percentages of the Trust's net assets
     attributable to common shares. This table assumes the Trust is the same
     size as in the table above, but unlike that table above, assumes that no
     leverage is incurred. In accordance with these assumptions, the Trust's
     expenses would be estimated to be as follows:

                                                     PERCENTAGE OF NET ASSETS
                                                  ATTRIBUTABLE TO COMMON SHARES
                                                  (ASSUMES NO LEVERAGE INCURRED)
ANNUAL EXPENSES
     Management fees..............................               %
     Other expenses...............................               %
          Total net annual expenses...............               %


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 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 $  )
that you would pay on a $1,000 investment in common shares, assuming(1) total
annual expenses of % of net assets attributable to common shares and (2) a 5%
annual return:(1)

                                    1 YEAR     3 YEARS      5 YEARS     10 YEARS

Total Expenses Incurred...........     $          $            $            $

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


(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, non-diversified, closed-end management
investment company registered under the Investment Company Act. The Trust was
organized as a Delaware statutory trust on April 20, 2004, 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 overallotment option in
full) after payment of the estimated organizational expenses and offering
costs. The Trust will invest the net proceeds of the offering in accordance
with the Trust's investment objectives and policies as stated below. We
currently anticipate that the Trust will be able to invest substantially all of
the net proceeds in securities that meet the Trust's investment objectives and
policies within approximately three months after the completion of this
offering. Pending such investment, it is anticipated that the proceeds will be
invested in short-term securities.


                            THE TRUST'S INVESTMENTS

INVESTMENT OBJECTIVE

         The Trust seeks to maximize total return consistent with income
generation and prudent investment management. The Trust pursues its objective
by investing primarily in three asset classes:

         o  TIPS;

         o  Senior Loans; and

         o  Variable Debt

INVESTMENT POLICIES

         BlackRock retains broad discretion to allocate the Trust's
investments among three distinct asset classes: TIPS, Senior Loans and
Variable Debt. Under normal market conditions, the Trust will invest at least
80% of its total Managed Assets in inflation-indexed securities and/or
securities with a variable or floating interest rate feature such as Senior
Loans and Variable Debt. The Trust will provide shareholders with notice at
least 60 days prior to changing this non-fundamental policy of the Trust
unless such change was previously approved by shareholders. It is currently
anticipated that initially 50% of the Trust's portfolio will be allocated to
TIPS, 25% of the Trust's portfolio will be allocated to Senior Loans and 25%
of the Trust's portfolio will be allocated to Variable Debt. The Trust may
also invest up to 20% of its Managed Assets in other securities such as
corporate bonds, mortgage-backed and asset-backed securities.

         The Trust currently expects that the average effective duration of its
portfolio will range between zero and 10 years, although this target duration
may change from time to time depending on market conditions. The Trust
initially expects to have a duration of approximately years (including the
effect of anticipated leverage). In comparison to maturity (which is the date
on which the issuer of a debt instrument is obligated to repay the principal
amount), duration is a measure of the price volatility of a debt instrument as
a result in changes in market rates of interest, based on the weighted average
timing of the instrument's expected principal and interest payments. Duration
differs from maturity in that it takes into account a security's yield, coupon
payments and its principal payments in addition to the amount of time until the
security finally matures. As the value of a security changes over time, so will
its duration. Prices of securities with longer durations tend to be more
sensitive to interest rate changes than securities with shorter durations. In
general, a portfolio of securities with a longer duration can be expected to be
more sensitive to interest rate changes than a portfolio with a shorter
duration.

         Under current market conditions, the Trust initially expects to
maintain a weighted average portfolio credit quality of investment grade (which
is BBB- as determined by S&P or Fitch, Baa3 as determined by Moody's); however,
subsequently the weighted average credit quality of the Trust could be below
investment grade. For this purpose, when a security is rated by more than one
of these rating agencies, BlackRock generally will use the highest rating, and
if a security is unrated, it will be treated as having a credit rating as
determined by BlackRock. Within this general guideline, the Trust may invest in
individual securities of any credit quality. Under current market conditions,
the Trust expects that no more than 35% of its initial portfolio will consist
of below investment grade debt securities, rated as such at the time of
investment, meaning that such bonds are rated by national rating agencies below
the four highest grades or are unrated but judged to be of comparable quality
by BlackRock. The remainder of the Trust's assets will be invested in
investment grade debt securities.

         The foregoing credit quality policies apply only at the time a
security is purchased, and the Trust is not required to dispose of a security
in the event that a rating agency downgrades its assessment of the credit
characteristics of a particular issue or withdraws its assessment. In
determining whether to retain or sell such a security, 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.

         The Trust may invest without limitation in U.S. dollar denominated
securities of non-U.S. issuers and in non-U.S. dollar-denominated securities of
non-U.S. issuers. Investing in Non-U.S. Securities may entail significant
risks. See "Risks--Non-U.S. Securities Risk."

         The Trust currently intends to use credit derivative transactions with
a notional amount equal to __% of the Trust's portfolio in an attempt to
enhance the Trust's total return. The use of derivative transactions involves
special risks. See "Risks - Strategic Transactions."

         The Trust may implement various temporary "defensive" strategies at
times when BlackRock determines that conditions in the markets make pursuing
the Trust's basic investment strategy inconsistent with the best interests of
its shareholders. These strategies may include investing all or a portion of
the Trust's assets in U.S. Government obligations and high-quality, short-term
debt securities.

         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
Managed Assets. See "Risks--Leverage."


                              PORTFOLIO SECURITIES

INFLATION-INDEXED SECURITIES

         General. Inflation-indexed securities are fixed income securities that
have their principal amounts and/or interest payments adjusted to track changes
in an official inflation measure. The U.S. Treasury currently uses the CPI-U as
the inflation measure. Inflation-indexed securities issued by a foreign
government are generally adjusted to reflect a comparable inflation index,
calculated by that government. If the Trust purchases inflation-indexed
securities offered by foreign issuers, the rate of inflation measured by the
foreign inflation index may not be correlated to the rate of inflation in the
United States.

         Inflation-indexed securities are fixed income securities or other
instruments whose principal value is periodically adjusted according to the
rate of inflation. Two structures are common. The U.S. Treasury and some other
issuers use a structure that accrues inflation into the principal value of the
bond. Most other issuers, including non U.S. governments, their agencies or
instrumentalities and corporations pay out the index accruals as part of a
semi-annual coupon.

          Typically, if the periodic adjustment rate measuring inflation on an
inflation-indexed security falls, the principal value of the security will be
adjusted downward, and, consequently, the interest payable on these securities
(calculated with respect to a smaller principal amount) will be reduced.
Repayment of the original bond principal on maturity (as adjusted for
inflation) may be guaranteed even during a period of deflation. However, the
current market value of the security is typically not guaranteed and will
fluctuate. The Trust may also invest in other inflation related securities that
may or may not provide a similar guarantee. If a guarantee of principal is not
provided, the adjusted principal value of the securities repaid at maturity may
be less than the original principal.

         The value of inflation-indexed bonds is expected to change in response
to changes in real interest rates. Real interest rates, in turn, are tied to
the relationship between nominal interest rates and the rate of inflation.
Therefore, if inflation were to rise at a faster rate than nominal interest
rates, real interest rates might decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increased at a
faster rate than inflation, real interest rates might rise, leading to a
decrease in value of inflation-indexed bonds. There can be no assurance,
however, that the value of inflation-indexed bonds will be directly correlated
to changes in interest rates. While these securities are expected to be
protected from long-term inflationary trends, short-term increases in inflation
may lead to a decline in value. If interest rates rise due to reasons other
than inflation (for example, due to changes in currency exchange rates),
investors in these securities may not be protected to the extent that the
increase is not reflected in the security's inflation measure.

         The Trust will also invest in inflation-indexed securities with other
structures or characteristics as such securities become available in the
market. It is currently expected that other types of inflation-indexed
securities would have characteristics similar to those described above.

         In order to satisfy a requirement for qualification as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), an investment company, such as the Trust, must distribute each year at
least 90% of its investment company taxable income and tax-exempt income, if
any, income, including the original issue discount accrued on U.S.
inflation-indexed bonds. For federal income tax purposes, any increase in the
principal amount of an inflation-indexed bond will be original issue discount
which is taxable as ordinary income in the year accrued, even though investors
do not receive their principal, including any increases thereto, until
maturity. See "Federal Income Tax Matters" below. Because the Trust will not,
on a current basis, receive cash payments from the issuer of these securities
in respect of accrued original issue discount, in some years the Trust may have
to distribute cash obtained from selling other portfolio holdings of the Trust.
In some circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for the Trust to sell securities at such time.

         Under many market conditions, investments in inflation-indexed bonds
may be illiquid, making it difficult for the Trust to dispose of them or
determine their current value.

         U.S. TIPS. A substantial portion of the Trust's total assets may be
invested in U.S. TIPS. U.S. TIPS are fixed income securities issued by the U.S.
Department of Treasury, the principal amounts of which are adjusted daily based
upon changes in the rate of inflation (currently represented by the
non-seasonally adjusted CPI-U, calculated with a three-month lag). The CPI-U
calculated by the U.S. Treasury for the first day of each calendar month is the
CPI-U for the third preceding calendar month. For example, the CPI-U used for
April 1 in any year is the CPI-U for January of that year, which is reported in
February. The factor used to calculate the principal amount of a U.S. TIPS each
day is determined by a linear interpolation between the CPI-U for the first day
of the month and the CPI-U on the first day of the next month.

         The interest rate on U.S. TIPS is fixed at issuance, but over the life
of the bond, this interest may be paid on an increasing or decreasing principal
value that has been adjusted for inflation. Repayment of the original bond
principal upon maturity (as adjusted for inflation) is guaranteed even during a
period of deflation. However, because the principal amount of U.S. TIPS would
be adjusted downward during a period of deflation, the Trust will be subject to
deflation risk with respect to its investments in these securities. In
addition, the current market value of the bonds is not guaranteed and will
fluctuate. If the Trust purchases U.S. TIPS in the secondary market whose
principal values have been adjusted upward due to inflation since issuance, the
Trust may experience a loss if there is a subsequent period of deflation. If
inflation is lower than expected during the period the Trust holds a U.S. TIPS,
the Trust may earn less on the security than on a conventional bond.

         The U.S. Treasury currently issues U.S. TIPS in only ten-year
maturities, although it is possible that U.S. TIPS with other maturities will
be issued in the future. U.S. TIPS have previously been issued with maturities
of five, ten and thirty years. U.S. TIPS pay interest on a semi-annual basis,
equal to a fixed percentage of the inflation-adjusted principal amount.

SENIOR LOANS RISK

         Senior Loans hold the most senior position in the capital structure of
a business entity (the "Borrower"), are typically secured with specific
collateral and have a claim on the assets and/or stock of the Borrower that is
senior to that held by subordinated debt holders and stockholders of the
Borrower. The proceeds of Senior Loans primarily are used to finance leveraged
buyouts, recapitalizations, mergers, acquisitions, stock repurchases,
refinancings and to finance internal growth and for other corporate purposes.
Senior Loans typically have rates of interest which are redetermined either
daily, monthly, quarterly or semi-annually by reference to a base lending rate,
plus a premium or credit spread. These base lending rates are primarily the
London-Interbank Offered Rate ("LIBOR"), and secondarily the prime rate offered
by one or more major United States banks (the "Prime Rate") and the certificate
of deposit ("CD") rate or other base lending rates used by commercial lenders.
The Trust may also purchase unsecured loans, other floating rate debt
securities, and credit-linked notes.

         Senior Loans typically have a stated term of between five and nine
years, and have rates of interest which typically are redetermined either
daily, monthly, quarterly, or semi-annually. Longer interest rate reset periods
generally increase fluctuations in the Trust's net asset value as a result of
changes in market interest rates. The Trust is not subject to any restrictions
with respect to the maturity of Senior Loans held in its portfolio. As a
result, as short-term interest rates increase, interest payable to the Trust
from its investments in Senior Loans should increase, and as short-term
interest rates decrease, interest payable to the Trust from its investments in
Senior Loans should decrease. Because of prepayments, BlackRock expects the
average life of Senior Loans to be shorter than the stated maturity.

         Senior Loans and other floating-rate debt instruments are subject to
the risk of non-payment of scheduled interest or principal. Such non-payment
would result in a reduction of income to the Trust, a reduction in the value of
the investment and a potential decrease in the net asset value of the Trust.
There can be no assurance that the liquidation of any collateral securing a
Senior Loan would satisfy the Borrower's obligation in the event of non-payment
of scheduled interest or principal payments, or that such collateral could be
readily liquidated. In the event of bankruptcy of a Borrower, the Trust could
experience delays or limitations with respect to its ability to realize the
benefits of the collateral securing a Senior Loan. The collateral securing a
Senior Loan may lose all or substantially all of its value in the event of
bankruptcy of a Borrower. Some Senior Loans are subject to the risk that a
court, pursuant to fraudulent conveyance or other similar laws, could
subordinate such Senior Loans to presently existing or future indebtedness of
the Borrower or take other action detrimental to the holders of Senior Loans
including, in certain circumstances, invalidating such Senior Loans or causing
interest previously paid to be refunded to the Borrower. If interest were
required to be refunded, it could negatively affect the Trust's performance.

         Many Senior Loans in which the Trust will invest may not be rated by a
rating agency, will not be registered with the Securities and Exchange
Commission or any state securities commission and will not be listed on any
national securities exchange. The amount of public information available with
respect to Senior Loans will generally be less extensive than that available
for registered or exchange listed securities. In evaluating the
creditworthiness of Borrowers, BlackRock will consider, and may rely in part,
on analyses performed by others. Borrowers may have outstanding debt
obligations that are rated below investment grade by a rating agency. Many of
the Senior Loans in the Trust will have been assigned ratings below investment
grade by independent rating agencies. In the event Senior Loans are not rated,
they are likely to be the equivalent of below investment grade quality. Because
of the protective features of Senior Loans, BlackRock believes that Senior
Loans tend to have more favorable loss recovery rates as compared to more
junior types of below investment grade debt obligations. BlackRock does not
view ratings as the determinative factor in its investment decisions and relies
more upon its credit analysis abilities than upon ratings.

         No active trading market may exist for some Senior Loans and some
loans may be subject to restrictions on resale. A secondary market may be
subject to irregular trading activity, wide bid/ask spreads and extended trade
settlement periods, which may impair the ability to realize full value and thus
cause a material decline in the Trust's net asset value. In addition, the Trust
may not be able to readily dispose of its Senior Loans at prices that
approximate those at which the Trust could sell such loans if they were more
widely-traded and, as a result of such illiquidity, the Trust may have to sell
other investments or engage in borrowing transactions if necessary to raise
cash to meet its obligations. During periods of limited supply and liquidity of
Senior Loans, the Trust's yield may be lower. See "Risks--Liquidity Risk" and
"Risks--Senior Loans."

         When interest rates decline, the value of a fund invested in
fixed-rate obligations can be expected to rise. Conversely, when interest rates
rise, the value of a fund invested in fixed-rate obligations can be expected to
decline. Although changes in prevailing interest rates can be expected to cause
some fluctuations in the value of Senior Loans (due to the fact that floating
rates on Senior Loans only reset periodically), the value of Senior Loans is
substantially less sensitive to changes in market interest rates than
fixed-rate instruments. As a result, BlackRock expects the Trust's policy of
investing a portion of its assets in floating-rate Senior Loans will make the
Trust less volatile and less sensitive to changes in market interest rates than
if the Trust invested in fixed-rate obligations. Similarly, a sudden and
significant increase in market interest rates may cause a decline in the value
of these investments and in the Trust's net asset value. Other factors
(including, but not limited to, rating downgrades, credit deterioration, a
large downward movement in stock prices, a disparity in supply and demand of
certain securities or market conditions that reduce liquidity) can reduce the
value of Senior Loans and other debt obligations, impairing the Trust's net
asset value.

         The Trust may purchase and retain in its portfolio a Senior Loan where
the Borrower has experienced, or may be perceived to be likely to experience,
credit problems, including involvement in or recent emergence from bankruptcy
reorganization proceedings or other forms of debt restructuring. Such
investments may provide opportunities for enhanced income as well as capital
appreciation. At times, in connection with the restructuring of a Senior Loan
either outside of bankruptcy court or in the context of bankruptcy court
proceedings, the Trust may determine or be required to accept equity securities
or junior debt securities in exchange for all or a portion of a Senior Loan.

         The Trust may purchase Senior Loans on a direct assignment basis. If
the Trust purchases a Senior Loan on direct assignment, it typically succeeds
to all the rights and obligations under the loan agreement of the assigning
lender and becomes a lender under the loan agreement with the same rights and
obligations as the assigning lender. The Trust may also purchase, without
limitation, participations in Senior Loans. The participation by the Trust in a
lender's portion of a Senior Loan typically will result in the Trust having a
contractual relationship only with such lender, not with the Borrower. As a
result, the Trust may 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 only upon receipt by such lender of payments from the
Borrower. Such indebtedness may be secured or unsecured. Loan participations
typically represent direct participations in a loan to a Borrower, and
generally are offered by banks or other financial institutions or lending
syndicates. The Trust may participate in such syndications, or can buy part of
a loan, becoming a part lender. When purchasing loan participations, the Trust
assumes the credit risk associated with the Borrower and may assume the credit
risk associated with an interposed bank or other financial intermediary. The
participation interests in which the Trust intends to invest may not be rated
by any nationally recognized rating service. Given the current structure of the
markets for loan participations and assignments, the Trust expects to treat
these securities as illiquid.

         BlackRock may use an independent pricing service or prices provided by
dealers to value most loans and other debt securities at their market value.
BlackRock may use the fair value method to value Senior Loans or other
securities if market quotations for them are not readily available or are
deemed unreliable.

VARIABLE AND FLOATING RATE SECURITIES

         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 its
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.

         BlackRock will consider the earning power, cash flows and liquidity
ratios of the issuers and guarantors and, if the instruments are subject to a
demand feature, will monitor their financial status to meet payment on demand.
Such instruments may include variable amount master demand notes that permit
the indebtedness thereunder to vary in addition to providing for periodic
adjustments in the interest rate. The absence of an active secondary market
with respect to particular variable and floating rate instruments could make it
difficult for the Trust to dispose of a variable or floating rate note if the
issuer defaulted on its payment obligation or during periods that the Trust is
not entitled to exercise its demand rights, and the Trust could, for these or
other reasons, suffer a loss with respect to such instruments. In determining
average-weighted 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.

CREDIT DERIVATIVES

         The Trust may engage in credit derivative transactions. There are two
broad categories of credit derivatives: default price risk derivatives and
market spread derivatives. Default price risk derivatives are linked to the
price of reference securities or loans after a default by the issuer or
borrower, respectively. Market spread derivatives are based on the risk that
changes in market factors, such as credit spreads, can cause a decline in the
value of a security, loan or index. There are three basic transactional forms
for credit derivatives: swaps, options and structured instruments. The Trust
currently intends to invest primarily in credit default swaps. A credit default
swap is an agreement between two counterparties that allows one counterparty
(the "seller") to be "long" a third party credit risk and the other party (the
"buyer") to be "short" the credit risk. Typically, the seller agrees to make
regular fixed payments to the buyer with the same frequency as the underlying
reference bond. In exchange, the seller typically has the right upon default of
the underlying bond to put the bond to the buyer in exchange for the bond's par
value plus interest.

NON-INVESTMENT GRADE SECURITIES

         The Trust anticipates that, under normal market conditions, a
significant portion, but no more than 35%, of its Managed Assets will be
invested in securities rated below investment grade, such as those rated Ba or
lower by Moody's and BB or lower by S&P or securities comparably rated by other
rating agencies or in unrated securities determined by BlackRock to be of
comparable quality. Securities rated Ba by Moody's are judged to have
speculative elements, their future cannot be considered as well assured and
often the protection of interest and principal payments may be very moderate.
Securities rated BB by S&P or Fitch are regarded as having predominantly
speculative characteristics and, while such obligations have less near-term
vulnerability to default than other speculative grade debt, they face major
ongoing uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely interest and
principal payments. Securities rated C by Moody's are regarded as having
extremely poor prospects of ever attaining any real investment standing.
Securities rated D by S&P are in default and the payment of interest and/or
repayment of principal is in arrears. When BlackRock believes it to be in the
best interests of the Trust's shareholders, the Trust will reduce its
investment in lower grade securities and, in certain market conditions, the
Trust may invest none of its assets in lower grade securities. Percentage
limitations described in this prospectus are as of the time of investment by
the Trust and could thereafter be exceeded as a result of market value
fluctuations of the Trust's portfolio.

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

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

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

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

CORPORATE BONDS

The Trust may 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.

ASSET-BACKED SECURITIES

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

MORTGAGE-RELATED SECURITIES

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

STRATEGIC TRANSACTIONS

         In addition to credit derivatives, the Trust may, but is not required
to, use various strategic transactions described below to generate total
return, 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
objectives, 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 or risk management 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 the
Trust will commit variation margin for Strategic Transactions that involve
futures contracts in accordance with the rules of the Commodity Futures Trading
Commission.

         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 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.

NON-U.S. SECURITIES

         The Trust currently anticipates that it will invest a substantial
portion of its Managed Assets in securities issued by foreign countries, their
agencies or instrumentalities or by non-U.S. companies, although such
percentage may change from time to time. The Trust will consider a company a
U.S. company and not a foreign company if it meets one or more of the following
tests: (i) such company was organized in the U.S.; (ii) such company's primary
business office is in the U.S.; (iii) the principal trading market for such
company's assets are located in the U.S.; (iv) 50% or more of such company's
assets are located in the U.S.; or (v) 50% or more of such issuer's revenues
are derived from the U.S. Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of some
non-U.S. issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times, volatility
of price can be greater than in the United States.

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

OTHER INVESTMENT COMPANIES

         The Trust may invest up to 10% of its Managed Assets in securities of
other open- or closed-end investment companies that invest primarily in
securities 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.


                        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 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 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. 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 is 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 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 Managed Assets. The Preferred Shares would have complete priority upon
distribution 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 re-determined 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 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 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?% of the
Trust's Managed Assets, the interest and dividends paid on the leverage is a
blended annual average rate of ___%, the income generated by the Trust's
portfolio (net of estimated expenses) must exceed ___% 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, 33 1/3% of the Trust's Managed
Assets, net of expenses, Trust's currently projected blended average annual
leverage dividend and interest rate of _____%.

<TABLE>
<CAPTION>
<S>                                                          <C>          <C>          <C>        <C>        <C>
Assumed Portfolio Total Return (Net of Expenses).....        (10 )%       (5 )%        0 %        5 %        10 %
Common Share Total Return............................           %            %           %          %          %
</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, and dividends paid on, the common shares will
fluctuate with and be affected by, among other things, the risks described
below.

NEWLY ORGANIZED

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

MARKET DISCOUNT RISK

         As with any stock, the price of the Trust's common shares will
fluctuate with market conditions and other factors. If common shares are sold,
the price received may be more or less than the original investment. Whether
investors will realize gains or losses upon the sale of common shares of the
Trust will not depend directly upon the Trust's net asset value, but will
depend upon the market price of the common shares at the time of sale. Since
the market price of the common shares will be affected by such factors as the
relative demand for and supply of the common shares in the market, general
market and economic conditions and other factors beyond the control of the
Trust, the Trust cannot predict whether the common shares will trade at, below
or above net asset value or at, below or above the public offering price.
Common shares are designed for long-term investors and should not be treated as
trading vehicles. Common shares of closed-end management investment companies
frequently trade at a discount from their net asset value. The Trust's common
shares may trade at a price that is less than the initial offering price. This
risk may be greater for investors who sell their common shares in a relatively
short period of time after completion of the initial offer because net asset
value will be reduced immediately following the initial offering by a
         % sales load charge and organizational expenses and offering costs
paid by the Trust.

RISKS RELATING TO INFLATION-INDEXED SECURITIES.

         The value of inflation-protected securities such as U.S. TIPS
generally fluctuates in response to changes in real interest rates, which are
in turn tied to the relationship between nominal interest rates and the rate of
inflation. Therefore, if inflation were to rise at a faster rate than nominal
interest rates, real interest rates might decline, leading to an increase in
value of inflation-indexed securities. In contrast, if nominal interest rates
increased at a faster rate than inflation, real interest rates might rise,
leading to a decrease in value of inflation-indexed securities. In addition,
because the principal amount of inflation-indexed securities would be adjusted
downward during a period of deflation, the Trust will be subject to deflation
risk with respect to its investments in these securities. If the Trust
purchases inflation-indexed securities in the secondary market whose principal
values have been adjusted upward due to inflation since issuance, the Trust may
experience a loss if there is a subsequent period of deflation. If inflation is
lower than expected during the period the Trust holds inflated-indexed
securities, the Trust may earn less on the securities than on conventional
bonds. Any increase in principal value of inflation-indexed securities caused
by an increase in the index is taxable as ordinary income in the year the
increase occurs, even though the Trust will not receive cash representing the
increase at that time. As a result, the Trust could be required at times to
liquidate other investments, including when it is not advantageous to do so, in
order to satisfy its distribution requirements as a regulated investment
company under the Code. See "Federal Tax Matters." To the extent that the Trust
purchases inflation-indexed bonds offered by foreign issuers, the rate of
inflation measured by the foreign inflation index may not be correlated to the
rate of inflation in the United States. In that case, such investments would
not provide protection against inflation in the United States.

         The daily adjustment of the principal value of U.S. TIPS is currently
tied to the non-seasonally adjusted CPI-U, which is calculated monthly by the
U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in the
cost of living, made up of components such as housing, food, transportation and
energy. Inflation-indexed securities issued by foreign governments are
generally adjusted using a comparable inflation index calculated by the
government. There can no assurance that such indices will accurately measure
the real rate of inflation in the prices of goods and services.

         The market for inflation-indexed bonds and related instruments is
relatively new and is still developing. For this reason, the market may, at
times, have relatively low trading volume, which could result in lower
liquidity and increased volatility in prices.

SENIOR LOANS RISK

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

VARIABLE AND FLOATING RATE SECURITIES RISK

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. The Trust may invest in inverse floaters
which may be considered to be leveraged to the extent that their 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.

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.

         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 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.

CREDIT DERIVATIVES RISK

         The use of credit derivatives is a highly specialized activity which
involves strategies and risks different from those associated with ordinary
portfolio security transactions. If BlackRock is incorrect in its forecasts of
default risks, market spreads or other applicable factors, the investment
performance of the Trust would diminish compared with what it would have been
if these techniques were not used. Moreover, even if BlackRock is correct in
its forecasts, there is a risk that a credit derivative position may correlate
imperfectly with the price of the asset or liability being protected. There is
no limit on the amount of credit derivative transactions that may be entered
into by the Trust. The Trust's risk of loss in a credit derivative transaction
varies with the form of the transaction. For example, if the Trust purchases a
default option on a security, and if no default occurs with respect to the
security, the Trust's loss is limited to the premium it paid for the default
option. In contrast, if there is a default by the grantor of a default option,
the Trust's loss will include both the premium that it paid for the option and
the decline in value of the underlying security that the default option
protected.

INTEREST RATE RISK

         In addition to the interest rate risk associated with
inflation-indexed securities discussed above, the other securities held in the
Trust's portfolio could be affected by interest rate fluctuations. The value of
Trust common shares will usually change in response to interest rate
fluctuations. When interest rates decline, the value of fixed-rate securities
can be expected to rise. Conversely, when interest rates rise, the value of
fixed-rate securities can be expected to decline. Although changes in
prevailing interest rates can be expected to cause some fluctuations in the
value of variable and floating rate securities (due to the fact that rates only
reset periodically), the values of these securities are substantially less
sensitive to changes in market interest rates than fixed-rate instruments.
Fluctuations in the value of the Trust's securities will not affect interest
income on existing securities but will be reflected in the Trust's net asset
value. The Trust may utilize certain strategies, including taking positions in
futures or interest rate swaps, for the purpose of reducing the interest rate
sensitivity of the portfolio and decreasing the Trust's exposure to interest
rate risk, although there is no assurance that it will do so or that such
strategies will be successful. The Trust is intended to have a relatively low
level of interest rate risk.

CREDIT RISK

         Credit risk is the risk that an issuer of a security will become
unable to meet its obligation to make interest and principal payments. In
general, lower rated municipal securities 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. Under
normal circumstances, the Trust may invest a substantial portion, but no more
than 35% of its Managed Assets in securities that are rated Ba/BB or B by
Moody's, S&P or Fitch or that are unrated but judged to be of comparable
quality by BlackRock. Securities rated Ba/BB or B are regarded as having
predominately speculative characteristics with respect to the issuer's capacity
to pay interest and repay principal, and these securities are commonly referred
to as "junk bonds." These securities are subject to a greater risk of default.
The prices of these lower grade securities are more sensitive to negative
developments, such as a decline in the issuer's revenues or a general economic
downturn, than are the prices of higher grade securities. Lower grade
securities tend to be less liquid than investment grade securities. The market
values of lower grade securities tend to be more volatile than investment grade
securities. In addition, the Trust's use of credit derivatives will expose it
to additional risk in the event that the bonds underlying the derivative
default. In addition, the Trust's use of credit derivatives will expose it to
additional risk in the event that the bonds underlying the derivatives default.

 NON-U.S. SECURITIES RISK

         Investing in non-U.S. securities may involve certain risks not
involved in domestic investments, including, but not limited to: (1) future
foreign economic, financial, political and social developments; (2) different
legal systems; (3) the possible imposition of exchange controls or other
foreign governmental laws or restrictions; (4) lower trading volume; (5) much
greater price volatility and illiquidity of certain foreign securities markets;
(6) different trading and settlement practices; (7) less governmental
supervision; (8) high and volatile rates of inflation; (9) fluctuating interest
rates; (10) less publicly available information; and (11) different accounting,
auditing and financial record keeping standards and requirements.

         Certain countries in which the Trust may invest historically have
experienced, and may continue to experience, high rates of inflation, high
interest rates, exchange rate fluctuations, large amounts of external debt,
balance of payments and trade difficulties and extreme poverty and
unemployment. Many of these countries are also characterized by political
uncertainty and instability. The cost of servicing external debt will generally
be adversely affected by rising international interest rates because many
external debt obligations bear interest at rates which are adjusted based upon
international interest rates. In addition, with respect to certain foreign
countries, there is a risk of: (1) the possibility of expropriation of assets;
(2) confiscatory taxation; (3) difficulty in obtaining or enforcing a court
judgment; (4) economic, political or social instability; and (5) diplomatic
developments that could affect investments in those countries. Certain
investments in foreign securities also may be subject to foreign withholding
taxes. Dividend income from foreign corporations may not be eligible for the
reduced rate for qualified dividend income. In addition, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as: (1) growth of gross domestic product; (2) rates of inflation; (3)
capital reinvestment; (4) resources; (5) self-sufficiency; and (6) balance of
payments position.

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

FOREIGN CURRENCY RISK

         Because the Trust may invest in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates may affect the value of securities in the Trust and the unrealized
appreciation or depreciation of investments. Currencies of certain countries
may be volatile and therefore may affect the value of securities denominated in
such currencies, which means that the Trust's net asset value could decline as
a result of changes in the exchange rates between foreign currencies and the
U.S. dollar.

RISKS ASSOCIATED WITH MORTGAGE-RELATED SECURITIES

         The risks associated with mortgage-related securities include:

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

o     adverse changes in economic conditions and circumstances, which are more
      likely to have an adverse impact on mortgage-related securities secured
      by loans on certain types of commercial properties than on those secured
      by loans on residential properties;

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

o     loss of all or part of the premium, if any, paid; and

o     decline in the market value of the security, whether resulting from
      changes in interest rates or prepayments on the underlying mortgage
      collateral.

PREPAYMENT RISKS

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

o     the relationship between prepayments and interest rates may give some
      lower grade mortgage-related and asset-backed securities less potential
      for growth in value than conventional bonds with comparable maturities;

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

o     because of these and other reasons, mortgage-related or asset-backed
      security's total return and maturity may be difficult to predict; and

o     to the extent that the Trust purchases mortgage-related or asset-backed
      securities at a premium, prepayments may result in loss of the Trust's
      principal investment to the extent of premium paid.

RISKS ASSOCIATED WITH ASSET-BACKED SECURITIES

Asset-backed securities involve certain risks in addition to those presented by
mortgage-related securities:

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

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

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

NON-INVESTMENT GRADE SECURITIES RISK

         The Trust may invest in securities that are below investment grade,
which are commonly referred to as "junk bonds." Investments in lower grade
securities will expose the Trust to greater risks than if the Trust owned only
higher grade securities. Because of the substantial risks associated with lower
grade securities, you could lose money on your investment in shares of the
Trust, both in the short-term and the long-term.

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

         Securities rated Ba by Moody's are judged to have speculative
elements, their future cannot be considered as well assured and often the
protection of interest and principal payments may be very moderate. Securities
rated BB by S&P or Fitch are regarded as having predominantly speculative
characteristics and, while such obligations have less near-term vulnerability
to default than other speculative grade debt, they face major ongoing
uncertainties or exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments. Securities rated C by Moody's are regarded as having extremely poor
prospects of ever attaining any real investment standing. Securities rated D by
S&P are in default and the payment of interest and/or repayment of principal is
in arrears.

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

LIQUIDITY RISK

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

MARKET DISRUPTION RISK

         The war with Iraq, its aftermath and the continuing occupation of the
country by coalition forces are likely to have a substantial impact on the U.S.
and world economies and securities markets. The duration and nature of the war
and occupation and the potential costs of rebuilding the Iraqi infrastructure
and political systems cannot be predicted with any certainty. The war and
occupation, terrorism and related geopolitical risks have led, and may in the
future lead, to increased short-term market volatility and may have adverse
long-term effects on U.S. and world economies and markets generally. Those
events could also have an acute effect on individual issuers or related groups
of issuers. These risks could also adversely affect securities markets,
interest rates, auctions, secondary trading, ratings, credit risk, inflation,
deflation and other factors relating to the common shares.

STRATEGIC TRANSACTIONS RISKS

         Strategic Transactions in which the Trust may engage also involve
certain risks and special considerations, including engaging in hedging and
risk management transactions such as interest rate and foreign currency
transactions, options, futures, swaps and other derivatives transactions.
Strategic Transactions will be entered into to seek to manage the risks of the
Trust's portfolio of securities, but may have the effect of limiting the gains
from favorable market movements. Strategic Transactions involve risks,
including (1) that the loss on the Strategic Transaction position may be larger
than the gain in the portfolio position being hedged and (2) that the
derivative instruments used in Strategic Transactions may not be liquid and may
require the Trust to pay additional amounts of money. Successful use of
Strategic Transactions depends on BlackRock's ability to predict correctly
market movements which, of course, cannot be assured. Losses on Strategic
Transactions may reduce the Trust's net asset value and its ability to pay
dividends if they are not offset by gains on the portfolio positions being
hedged. The Trust may also lend the securities it owns to others, which allows
the Trust the opportunity to earn additional income. Although the Trust will
require the borrower of the securities to post collateral for the loan and the
terms of the loan will require that the Trust be able to reacquire the loaned
securities if certain events occur, the Trust is still subject to the risk that
the borrower of the securities may default, which could result in the Trust
losing money, which would result in a decline in the Trust's net asset value.
The Trust may also purchase securities for delayed settlement. This means that
the Trust is generally obligated to purchase the securities at a future date
for a set purchase price, regardless of whether the value of the securities is
more or less than the purchase price at the time of settlement.

ANTI-TAKEOVER PROVISIONS

         The Trust's Agreement and Declaration of Trust contains provisions
limiting (1) the ability of other entities or persons to acquire control of the
Trust, (2) the Trust's freedom to engage in certain transactions, and (3) the
ability of the Trust's board of trustees or shareholders to amend the Trust's
Agreement and Declaration of Trust. These provisions of the Trust's Agreement
and Declaration of Trust may be regarded as "anti-takeover" provisions. These
provisions could have the effect of depriving the shareholders of opportunities
to sell their common shares at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of the Trust in a
tender offer or similar transaction. See "Certain Provisions in the Agreement
and Declaration of Trust."


                           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 25% or more
of the value of its total assets in any one industry, provided that securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities will not be considered to represent an industry.

         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 or another rating agency on the Preferred Shares that it intends
to issue. 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 objectives. 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.

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 Preferred Shares or unwind other leverage transactions. The Trust
may also attempt to reduce the leverage by redeeming or otherwise purchasing
Preferred Shares. As explained above under "Risks--Leverage," 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.

STRATEGIC TRANSACTIONS

         The Trust may use various investment strategies designed to limit the
risk of bond price fluctuations and to preserve capital. These 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 will
be eight trustees of the Trust. A majority of the trustees will not be
"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 acts as the Trust's investment advisor. BlackRock
Financial Management acts as the Trust's sub-advisor. BlackRock Advisors,
located at 100 Bellevue Parkway, Wilmington, Delaware 19809, and BlackRock
Financial Management, located at 40 East 52nd Street, New York, New York 10022,
are wholly owned subsidiaries of BlackRock, Inc., which is one of the largest
publicly traded investment management firms in the United States with
approximately $321 billion of assets under management as of March 31, 2004.
BlackRock manages assets on behalf of institutional and individual investors
worldwide through a variety of equity, fixed income, liquidity and alternative
investment products, including the BlackRock FundsSM and BlackRock Liquidity
Funds. In addition, BlackRock provides risk management and investment system
services to institutional investors under the BlackRock Solutions name.

         The BlackRock organization has over 16 years of experience managing
closed-end funds. As of March 31, 2004, advised a closed-end family of 50
active funds with approximately $14.7 billion in assets. Clients are served
from the company's headquarters in New York City, as well as offices in
Wilmington, San Francisco, Boston, Edinburgh, Tokyo and Hong Kong. BlackRock,
Inc. is a member of The PNC Financial Services Group, Inc., one of the largest
diversified financial services organizations in the United States, and is
majority-owned by PNC and by BlackRock employees.

INVESTMENT PHILOSOPHY

         BlackRock applies the same controlled-duration, active relative value
sector rotation style to the management of all its fixed income mandates.
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 overvalued 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 global inflation-indexed security strategy is an extension
of its overall fixed income philosophy and capabilities. BlackRock has
extensive experience in managing inflation-indexed securities and was involved
in the US Treasury's initial discussions on inflation-indexed securities.
BlackRock has become an active participant in the global inflation-indexed
security market, and its analytics are designed to support this specialty area.
BlackRock has modeled the risk characteristics of inflation-indexed securities
since their issuance, including the determination of various duration measures,
and calculate a range of risk measures that gauge interest rate risk, yield
curve risk, liquidity risk, and credit risk. In addition to managing dedicated
inflation-indexed securities portfolios, BlackRock purchases inflation-indexed
securities for our broader market mandates. BlackRock is one of the largest
investment managers of real return bonds.

         In the management of a global inflation-indexed security portfolio,
there are a number of market opportunities that BlackRock seeks to capture.
These include: duration and yield curve positioning, technical supply/demand
anomalies, seasonal factors related to the relevant country's inflation
indicators, break-even spreads between inflation-indexed securities and nominal
securities, and sector allocation. BlackRock compares nominal yields with real
yields, factoring in its views on inflation. If the yield spread is less than
the inflation rate, then inflation-indexed securities are considered to trade
cheaply to nominal bonds and may have greater relative value.

         In selecting non-inflation indexed securities for the Trust's
portfolio, BlackRock will seek to identify issuers and industries that
BlackRock believes are likely to experience stable or improving financial
conditions. BlackRock believes this strategy should enhance the Trust's ability
to seek total return. BlackRock's analysis includes:

         o  credit research on the issuers' financial strength;
         o  assessment of the issuers' ability to meet principal and interest
            payments;
         o  general industry trends;
         o  the issuers' managerial strenght;
         o  changing financial conditions;
         o  borrowing requirements or debt maturity schedules; and
         o  the issuers' responsiveness to change in business conditions and
            interest rates.

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

         The BlackRock organization's philosophy has not changed since the
inception of the firm. The technology that enables BlackRock to implement its
investment strategies, however, is constantly evolving. BlackRock's commitment
to maintaining and developing its state-of-the-art analytics in the most
efficient manner is manifest in (1) the development of proprietary tools, (2)
the use of external tools to assist in its analysis, and (3) the integration of
all of these tools into a unique portfolio level risk management system. By
continually updating our analytics and systems, BlackRock attempts to better
quantify and evaluate the risk of each investment decision.

         BlackRock's style is designed with the objective of generating excess
returns with lower risk than its benchmarks and competitors. The use of these
advanced analytics attempts to provide real time analysis of a vast array of
risk measures designed to measure the potential impact of various strategies on
total return. As a result BlackRock seeks to add consistent value and control
performance volatility consistent with the Trust's investments.

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.

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 % 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 certain 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.

         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 daily on each day that the New
York Stock Exchange is open for business as of the close of the regular trading
session on the New York Stock Exchange. The Trust calculates net asset value
per common share by subtracting liabilities (including accrued expenses or
dividends) from the total assets of the Trust (the value of the securities 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.

         The Trust values its securities primarily by using market quotations.
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. Short-term
debt securities having a remaining maturity of 60 days or less when purchased
and debt securities originally purchased with maturities in excess of 60 days
but which currently have maturities of 60 days or less may be valued at cost
adjusted for amortization of premiums and accretion of discounts. 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.


                                 DISTRIBUTIONS

         Commencing with the Trust's initial dividend, the Trust intends to
make regular monthly cash distributions of all or a portion of its net
investment income to common shareholders. 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. The Trust will
pay common shareholders at least annually all, or a portion of, its net
investment income after the payment of dividends and interest, if any, owed
with respect to any outstanding Preferred Shares or other forms of leverage
utilized by the Trust. 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.

         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 (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 , 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
                                     , 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 market price per common
share plus estimated brokerage commissions is greater than the net asset value
per common share (such condition being referred to herein as "market premium"),
the Plan Agent will invest the dividend amount in newly issued common shares,
including fractions, on behalf of the participants. The number of newly issued
common shares to be credited to each participant's account will be determined
by dividing the dollar amount of the dividend by the net asset value per common
share on the payment date; provided that, if the net asset value per common
share is less than 95% of the market price per common share on the payment
date, the dollar amount of the dividend will be divided by 95% of the market
price per common share on the payment date.

         If, on the payment date for any dividend, the net asset value per
common share is greater than the market value per common share plus estimated
brokerage commissions (such condition being referred to herein as "market
discount"), 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
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
of a 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, 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; provided that,
if the net asset value per common share is less than 95% of the market price
per common share on the payment date, the dollar amount of the dividend will be
divided by 95% of the market price per common share on the payment 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 "Federal Income Tax Matters."
Participants that request a sale of shares through the Plan Agent are subject
to $2.50 sales fee and a $0.15 per share sold brokerage commission.

         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                                          .


                             DESCRIPTION OF SHARES

COMMON SHARES

         The Trust is an unincorporated statutory trust organized under the laws
of Delaware pursuant to an Agreement and Declaration of Trust dated as of April
20, 2004. 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
common shares.

         The Trust has no present intention of offering any additional shares
other than the 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.

         It is anticipated that the Trust's common shares will be listed on the
New York Stock Exchange under the symbol " ".

         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 organizational
expenses and offering costs 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 in 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."

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 33 1/3% of the Trust's 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
re-determination 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.

         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 not less than 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 the outstanding shares of all outstanding classes or series
of beneficial interest of the Trust 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 5% or greater holder of the outstanding shares of all outstanding
classes or series of beneficial interest of the Trust (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 all outstanding classes or series 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;
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 2% of the total assets of the
      Trust, 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 2% of the total assets of the Trust, 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 not
less than 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
objectives and policies. Therefore, you should assume that it is not likely
that the board of trustees would vote to convert the Trust to an open-end fund.

         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.

         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, non-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 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.


                           FEDERAL INCOME TAX MATTERS


         The following discussion is a brief summary of certain U.S. federal
income tax considerations affecting the Trust and its shareholders. 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 (including shareholders who hold large
positions in the Trust) and the discussion set forth herein does not constitute
tax advice. Investors are urged to consult their own tax advisors 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 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 (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
(ii) 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
investment company taxable 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 hereinafter as "ordinary income dividends") are taxable to
shareholders as ordinary income to the extent of the Trust's earning and
profits. Due to the Trust's expected investments, in general, distributions
will not be eligible for a dividends received deduction allowed to corporations
and will not qualify for the reduced rate on qualified dividend income allowed
to individuals. 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. The maximum tax rate on net
long-term capital gain of individuals is reduced generally from 20% to 15% (5%
for individuals in lower brackets) for such gain realized after May 6, 2003 and
before January 1, 2009. 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
qualified dividend income or capital gain dividends and other distributions.

         The sale or other disposition of common shares of the Trust will
generally 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 substantially identical 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, short-term capital gains will currently be taxed at
the maximum rate of 35% applicable to ordinary income while long-term capital
gains generally will be taxed at a maximum rate of 15%.

         Dividends and other taxable distributions are taxable to shareholders
even though they are reinvested in additional shares of the Trust. 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 TAX ADVISORS REGARDING SPECIFIC QUESTIONS AS TO US FEDERAL,
FOREIGN, STATE, LOCAL INCOME OR OTHER TAXES.


                                  UNDERWRITING

         Subject to the terms and conditions stated in the purchase agreement
dated , 2004, each Underwriter named below, for which is acting as a
representative, has severally agreed to purchase, and the Trust has agreed to
sell to such Underwriter the number of common shares set forth opposite the
name of such Underwriter.

                                                       NUMBER OF
UNDERWRITER                                          COMMON SHARES
- --------------------------------------------- -----------------------------

Total....................................

         The purchase agreement provides that the obligations of the
Underwriters to purchase the shares included in this offering are subject to
the approval of certain legal matters by counsel and certain other conditions.
The Underwriters are obligated to purchase all the common shares sold under the
purchase agreement if any of the common shares are purchased. In the purchase
agreement, the Trust, the Advisor and the Sub-Advisor have agreed to indemnify
the Underwriters against certain liabilities, including liabilities arising
under the Securities Act of 1933, as amended, or to contribute payments the
Underwriters may be required to make for any of those liabilities.

         The Underwriters propose to initially offer some of the common shares
directly to the public at the public offering price set forth on the cover page
of this prospectus and some of the common shares to certain dealers at the
public offering price less a concession not in excess of $ per share. The sales
load the Trust will pay of $ per share is equal to % of the initial offering
price. The Underwriters may allow, and the dealers may reallow, a discount in
excess of $ per share on sales to other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.

         The following table shows the public offering price, sales load and
proceeds before expenses to the Trust. The information assumes either no
exercise or full exercise by the Underwriters of their overallotment option.

                                                PER SHARE     WITHOUT OPTION
Public offering price                           $ 20.00         $
Sales load                                      $               $
Proceeds, before expenses, to the Trust         $               $

         The Trust will pay organizational expenses and offering costs of the
Trust (other than the sales load) up to an aggregate of $ per share of the
Trust's common shares. BlackRock has agreed to pay such organizational expenses
and offering costs of the Trust to the extent they exceed $ per share of the
Trust's common shares. The organizational and offering expenses to be incurred
by the Trust are estimated to be $ (including amounts incurred by BlackRock on
behalf of the Trust).

         The Trust has granted the Underwriters an option to purchase up to
additional common shares at the public offering price, less the sales load,
within 45 days from the date of this prospectus solely to cover any
overallotments. If the Underwriters exercise this option, each will be
obligated, subject to conditions contained in the purchase agreement, to
purchase a number of additional shares proportionate to that Underwriter's
initial amount reflected in the above table.

         If the Underwriters create a short position in shares of common stock
in connection with the offering, i.e., if they sell more shares of common stock
than are listed on the cover of this prospectus, the representatives may reduce
that short position by purchasing shares of common stock in the open market.
The representatives may also elect to reduce any short position by exercising
all or part of the overallotment option described above. The Underwriters may
also impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of shares of common stock are
repurchased by the syndicate in stabilizing or covering transactions. Purchase
of shares of common stock to stabilize the price or to reduce a short position
may cause the common stock to be higher than it might be in the absence of such
purchases.

         The Trust has agreed not to offer or sell any additional common shares
for a period of days after the date of the purchase agreement without the prior
written consent of the Underwriters, except for the sale of the common shares
to the Underwriters pursuant to the purchase agreement.

         The Trust anticipates that the Underwriters may from time to time act
as brokers or dealers in executing the Trust's portfolio transactions after
they have ceased to be Underwriters. The Underwriters are active Underwriters
of, and dealers in, securities and therefore can be expected to engage in
portfolio transactions with the Trust.

         PNC Capital Markets, Inc. and J.J.B. Hilliard, W.L. Lyons, Inc., two
of the Underwriters, are affiliates of BlackRock.

         The principal business address of
is                        .


                          CUSTODIAN AND TRANSFER AGENT

         The custodian of the assets of the Trust is . The Custodian performs
custodial, fund accounting and portfolio accounting services. 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                               .
                             may rely as to certain matters of Delaware law on
the opinion of Skadden, Arps, Slate, Meagher & Flom
LLP.


                        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.



                           TABLE OF CONTENTS FOR THE
                      STATEMENT OF ADDITIONAL INFORMATION



                               TABLE OF CONTENTS

Use of Proceeds..........................................................2
Investment ObjectiveS and Policies.......................................2
Investment Policies and Techniques.......................................4
Other Investment Policies and Techniques................................15
Other Investment Policies and Techniques................................17
Management of the Trust.................................................18
Portfolio Transactions and Brokerage....................................23
Description of Shares...................................................25
Repurchase of Common Shares.............................................25
Tax Matters.............................................................26
Experts  ...............................................................30
Additional Information..................................................30
Independent Auditors' Report.............................................1
Financial Statements ..................................................F-2
APPENDIX A General Characteristics
 and Risks of Strategic Transactions ..................................A-1
APPENDIX B Proxy Voting Procedures ....................................B-1

<PAGE>

                                     Shares

        BlackRock Variable Rate and Inflation Protected Securities Trust

                                  Common Shares


                                $20.00 per share


                               P R O S P E C T U S


<PAGE>



                       STATEMENT OF ADDITIONAL INFORMATION

         BlackRock Variable Rate and Inflation Protected Securities Trust (the
"Trust") is a non-diversified, closed-end management investment company with no
operating history. 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, 2004. This Statement of Additional
Information, which is not a prospectus, 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

Use of Proceeds...............................................................2
Investment ObjectiveS and Policies............................................2
Investment Policies and Techniques............................................4
Other Investment Policies and Techniques.....................................15
Other Investment Policies and Techniques.....................................15
Management of the Trust......................................................15
Portfolio Transactions and Brokerage.........................................15
Description of Shares........................................................15
Repurchase of Common Shares..................................................15
Tax Matters..................................................................15
Experts......................................................................15
Additional Information.......................................................15
Independent Auditors' Report.................................................15
Financial Statements........................................................F-2
APPENDIX A General Characteristics and Risks of Strategic Transactions......A-1
APPENDIX B Proxy Voting Procedures..........................................B-1



            This Statement of Additional Information is dated , 2004.



<PAGE>


                                 Use of Proceeds

         Pending investment in securities that meet the Trust's investment
objectives and policies, the net proceeds of this offering will be invested in
short-term debt securities of the type described under "Investment Policies and
Techniques--Short-Term Debt Securities." We currently anticipate that the Trust
will be able to invest primarily in securities that meet the Trust's investment
objectives and policies within approximately three months after the completion
of this offering.

                       Investment ObjectiveS and Policies

         The Trust seeks to maximize total return consistent with income
generation and prudent investment management. The Trust attempts to achieve its
objective by investing primarily in TIPS, Senior Loans and Variable Debt.

Investment Restrictions

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

                           (1) invest 25% or more of the value of its total
         assets in any one industry, provided that securities issued or
         guaranteed by the U.S. Government and non-U.S. governments, their
         agencies or instrumentalities, and corporations will not be considered
         to represent an industry;

                           (2) 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;

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

                           (4) 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;

                           (5) purchase or sell real estate, except that the
         Trust may invest in securities of companies that deal in real estate or
         are engaged in the real estate business, including REITs and real
         estate operating companies, and instruments secured by real estate or
         interests therein and the Trust may acquire, hold and sell real estate
         acquired through default, liquidation, or other distributions of an
         interest in real estate as a result of the Trust's ownership of such
         other assets; or

                           (6) 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.

         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 assets and
         the Trust's aggregate short sales of a particular class of securities
         of an issuer 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. Under the Investment
         Company Act, the Trust may invest up to 10% of its total assets in the
         aggregate in shares of other investment companies and up to 5% of its
         total assets in any one investment company, provided the investment
         does not represent more than 3% of the voting stock of the acquired
         investment company at the time such shares are purchased. As a
         shareholder in any investment company, the Trust will bear its ratable
         share of that investment company's expenses, and will remain subject to
         payment of the Trust's advisory fees and other expenses with respect to
         assets so invested. Holders of common shares will 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; or

                           (3) under normal market conditions, invest less than
         80% of its total assets in securities that are not inflation-indexed
         securities and/or a variable or floating rate feature such as Senior
         Loans and Variable Debt. The Trust will provide shareholders with
         notice at least 60 days prior to changing this non-fundamental policy
         of the Trust unless such change was previously approved by
         shareholders.

         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 taxable year, (a) no more
than 25% of the value of the Trust's total assets are invested in the securities
(other than U.S. 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 assets, no more than 5% of
its total assets are invested in the securities (other than U.S. Government
securities or securities of other regulated investment companies) of a single
issuer and no investment represents more than 10% of the outstanding voting
securities of such issuer. These tax-related limitations may be changed by the
trustees to the extent appropriate in light of changes to applicable tax
requirements.

         The percentage limitations applicable to the Trust's portfolio
described in this prospectus apply only at the time of investment and the Trust
will not be required to sell securities due to subsequent changes in the value
of securities it owns.

<PAGE>


                       Investment Policies and Techniques

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

Short-Term Debt Securities

         For temporary defensive proposes or to keep cash on hand, the Trust may
invest up to 100% of its Managed Assets in cash equivalents and short-term debt
securities. Short-term debt 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 GNMA, 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 Tennessee Valley
         Authority, whose securities are supported by the right of the agency to
         borrow from the U.S. Treasury; (c) the FNMA, 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.

                           (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. 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 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.

Non-Investment Grade Securities

         The Trust may invest in securities rated below investment grade such as
those rated Ba or below by Moody's or BB or below by S&P or Fitch or securities
comparably rated by other rating agencies or in unrated securities determined by
BlackRock to be of comparable quality. Securities rated Ba and below by Moody's
and Fitch are judged to have speculative elements; their future cannot be
considered as well assured and often the protection of interest and principle
payments may be very moderate. Securities rated BB by S&P are regarded as having
predominantly speculative characteristics and, while such obligations have less
near-term vulnerability to default than other speculative grade debt, they face
major ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to meet timely
interest and principal payments.

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

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

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

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

Mortgage-Related and Asset-Backed Securities

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

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

         The Trust may invest in Subordinated CMBS issued or sponsored by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Subordinated
CMBS have no governmental guarantee, and are subordinated in some manner as to
the payment of principal and/or interest to the holders of more senior
Mortgage-Related Securities arising out of the same pool of mortgages. The
holders of Subordinated CMBS typically are compensated with a higher stated
yield than are the holders of more senior Mortgage-Related Securities. On the
other hand, Subordinated CMBS typically subject the holder to greater risk than
senior CMBS and tend to be rated in a lower rating category, and frequently a
substantially lower rating category, than the senior CMBS issued in respect of
the same mortgage pool. Subordinated CMBS generally are likely to be more
sensitive to changes in prepayment and interest rates and the market for such
securities may be less liquid than is the case for traditional fixed-income
securities and senior Mortgage-Related Securities.

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

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

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

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

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

         Private Entity Securities. These Mortgage-Related Securities are issued
by commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely payment
of principal and interest on Mortgage-Related Securities backed by pools created
by non-governmental issuers often is supported partially by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance. The insurance and guarantees are issued by government entities,
private insurers and the mortgage poolers. There can be no assurance that the
private insurers or mortgage poolers can meet their obligations under the
policies, so that if the issuers default on their obligations the holders of the
security could sustain a loss. No insurance or guarantee covers the Trust or the
price of the Trust's shares. Mortgage-Related Securities issued by
non-governmental issuers generally offer a higher rate of interest than
government-agency and government-related securities because there are no direct
or indirect government guarantees of payment.

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

         Stripped Mortgage-Backed Securities. The Trust also may invest in
Stripped Mortgage-Backed Securities. Stripped Mortgage-Backed Securities are
created by segregating the cash flows from underlying mortgage loans or mortgage
securities to create two or more new securities, each with a specified
percentage of the underlying security's principal or interest payments. Mortgage
securities may be partially stripped so that each investor class receives some
interest and some principal. When securities are completely stripped, however,
all of the interest is distributed to holders of one type of security, known as
an interest-only security, or IO, and all of the principal is distributed to
holders of another type of security known as a principal-only security, or PO.
Strips can be created in a pass-through structure or as tranches of a CMO. The
yields to maturity on IOs and POs are very sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets. If
the underlying mortgage assets experience greater than anticipated prepayments
of principal, the Trust may not fully recoup its initial investment in IOs.
Conversely, if the underlying mortgage assets experience less than anticipated
prepayments of principal, the yield on POs could be materially and adversely
affected.

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

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

Senior Loans

         A Senior Loan is typically originated, negotiated and structured by a
U.S. or foreign commercial bank, insurance company, finance company or other
financial institution (the "Agent") for a group of loan investors ("Loan
Investors"). The Agent typically administers and enforces the Senior Loan on
behalf of the other Loan Investors in the syndicate. In addition, an
institution, typically but not always the Agent, holds any collateral on behalf
of the Loan Investors.

         Senior Loans primarily include senior floating rate loans to
corporations and secondarily institutionally traded senior floating rate debt
obligations issued by an asset-backed pool, and interests therein. Loan
interests primarily take the form of assignments purchased in the primary or
secondary market. Loan interests may also take the form of participation
interests in a Senior Loan. Such loan interests may be acquired from U.S. or
foreign commercial banks, insurance companies, finance companies or other
financial institutions who have made loans or are Loan Investors or from other
investors in loan interests.

         The Trust may purchase "Assignments" from the Agent or other Loan
Investors. The purchaser of an Assignment typically succeeds to all the rights
and obligations under the Loan Agreement (as defined herein) of the assigning
Loan Investor and becomes a Loan Investor under the Loan Agreement with the same
rights and obligations as the assigning Loan Investor. Assignments may, however,
be arranged through private negotiations between potential assignees and
potential assignors, and the rights and obligations acquired by the purchaser of
an Assignment may differ from, and be more limited than, those held by the
assigning Loan Investor.

         The Trust also may invest in "Participations." Participations by the
Trust in a Loan Investor's portion of a Senior Loan typically will result in the
Trust having a contractual relationship only with such Loan Investor, not with
the Borrower. As a result, the Trust may have the right to receive payments of
principal, interest and any fees to which it is entitled only from the Loan
Investor selling the Participation and only upon receipt by such Loan Investor
of such payments from the Borrower. In connection with purchasing
Participations, the Trust generally will have no right to enforce compliance by
the Borrower with the terms of the loan agreement, nor any rights with respect
to any funds acquired by other Loan Investors through set-off against the
Borrower and the Trust may not directly benefit from the collateral supporting
the Senior Loan in which it has purchased the Participation. As a result, the
Trust may assume the credit risk of both the Borrower and the Loan Investor
selling the Participation. In the event of the insolvency of the Loan Investor
selling a Participation, the Trust may be treated as a general creditor of such
Loan Investor. The selling Loan Investors and other persons interpositioned
between such Loan Investors and the Trust with respect to such Participations
will likely conduct their principal business activities in the banking, finance
and financial services industries. Persons engaged in such industries may be
more susceptible to, among other things, fluctuations in interest rates, changes
in the Federal Open Market Committee's monetary policy, governmental regulations
concerning such industries and concerning capital raising activities generally
and fluctuations in the financial markets generally.

         The Trust will only acquire Participations if the Loan Investor selling
the Participation, and any other persons interpositioned between the Trust and
the Loan Investor, at the time of investment has outstanding debt or deposit
obligations rated investment grade (BBB or A-3 or higher by S&P or Baa or P-3 or
higher by Moody's or comparably rated by another nationally recognized rating
agency) or determined by BlackRock to be of comparable quality. The effect of
industry characteristics and market compositions may be more pronounced.
Indebtedness of companies whose creditworthiness is poor involves substantially
greater risks, and may be highly speculative. Some companies may never pay off
their indebtedness, or may pay only a small fraction of the amount owed.
Consequently, when investing in indebtedness of companies with poor credit, the
Trust bears a substantial risk of losing the entire amount invested.

         In order to borrow money pursuant to a Senior Loan, a Borrower will
frequently, for the term of the Senior Loan, pledge collateral, including but
not limited to, (i) working capital assets, such as accounts receivable and
inventory; (ii) tangible fixed assets, such as real property, buildings and
equipment; (iii) intangible assets, such as trademarks and patent rights (but
excluding goodwill); and (iv) security interests in shares of stock of
subsidiaries or affiliates. In the case of Senior Loans made to non-public
companies, the company's shareholders or owners may provide collateral in the
form of secured guarantees and/or security interests in assets that they own. In
many instances, a Senior Loan may be secured only by stock in the Borrower or
its subsidiaries. Collateral may consist of assets that may not be readily
liquidated, and there is no assurance that the liquidation of such assets would
satisfy fully a Borrower's obligations under a Senior Loan.

         In the process of buying, selling and holding Senior Loans, the Trust
may receive and/or pay certain fees. These fees are in addition to interest
payments received and may include facility fees, commitment fees, amendment
fees, commissions and prepayment penalty fees. When the Trust buys a Senior Loan
it may receive a facility fee and when it sells a Senior Loan it may pay a
facility fee. On an ongoing basis, the Trust may receive a commitment fee based
on the undrawn portion of the underlying line of credit portion of a Senior
Loan. In certain circumstances, the Trust may receive a prepayment penalty fee
upon the prepayment of a Senior Loan by a Borrower. Other fees received by the
Trust may include covenant waiver fees and covenant modification fees.

         A Borrower must comply with various restrictive covenants contained in
a loan agreement or note purchase agreement between the Borrower and the holders
of the Senior Loan (the "Loan Agreement"). Such covenants, in addition to
requiring the scheduled payment of interest and principal, may include
restrictions on dividend payments and other distributions to stockholders,
provisions requiring the Borrower to maintain specific minimum financial ratios,
and limits on total debt. In addition, the Loan Agreement may contain a covenant
requiring the Borrower to prepay the Loan with any free cash flow. Free cash
flow is generally defined as net cash flow after scheduled debt service payments
and permitted capital expenditures, and includes the proceeds from asset
dispositions or sales of securities. A breach of a covenant which is not waived
by the Agent, or by the Loan Investors directly, as the case may be, is normally
an event of acceleration; i.e., the Agent, or the Loan Investors directly, as
the case may be, has the right to call the outstanding Senior Loan. The typical
practice of an Agent or a Loan Investor in relying exclusively or primarily on
reports from the Borrower to monitor the Borrower's compliance with covenants
may involve a risk of fraud by the Borrower. In the case of a Senior Loan in the
form of a Participation, the agreement between the buyer and seller may limit
the rights of the holder to vote on certain changes which may be made to the
Loan Agreement, such as waiving a breach of a covenant. However, the holder of
the Participation will, in almost all cases, have the right to vote on certain
fundamental issues such as changes in principal amount, payment dates and
interest rate.

         In a typical Senior Loan the Agent administers the terms of the Loan
Agreement. In such cases, the Agent is normally responsible for the collection
of principal and interest payments from the Borrower and the apportionment of
these payments to the credit of all institutions which are parties to the Loan
Agreement. The Trust will generally rely upon the Agent or an intermediate
participant to receive and forward to the Trust its portion of the principal and
interest payments on the Senior Loan. Furthermore, unless under the terms of a
Participation Agreement the Trust has direct recourse against the Borrower, the
Trust will rely on the Agent and the other Loan Investors to use appropriate
credit remedies against the Borrower. The Agent is typically responsible for
monitoring compliance with covenants contained in the Loan Agreement based upon
reports prepared by the Borrower. The seller of the Senior Loan usually does,
but is often not obligated to, notify holders of Senior Loans of any failures of
compliance. The Agent may monitor the value of the collateral and, if the value
of the collateral declines, may accelerate the Senior Loan, may give the
Borrower an opportunity to provide additional collateral or may seek other
protection for the benefit of the participants in the Senior Loan. The Agent is
compensated by the Borrower for providing these services under a Loan Agreement,
and such compensation may include special fees paid upon structuring and funding
the Senior Loan and other fees paid on a continuing basis. With respect to
Senior Loans for which the Agent does not perform such administrative and
enforcement functions, the Trust will perform such tasks on its own behalf,
although a collateral bank will typically hold any collateral on behalf of the
Trust and the other Loan Investors pursuant to the applicable Loan Agreement.

         A financial institution's appointment as Agent may usually be
terminated in the event that it fails to observe the requisite standard of care
or becomes insolvent, enters Federal Deposit Insurance Corporation ("FDIC")
receivership, or, if not FDIC insured, enters into bankruptcy proceedings. A
successor Agent would generally be appointed to replace the terminated Agent,
and assets held by the Agent under the Loan Agreement should remain available to
holders of Senior Loans. However, if assets held by the Agent for the benefit of
the Trust were determined to be subject to the claims of the Agent's general
creditors, the Trust might incur certain costs and delays in realizing payment
on a Senior Loan, or suffer a loss of principal and/or interest. In situations
involving intermediate participants similar risks may arise.

         Senior Loans will usually require, in addition to scheduled payments of
interest and principal, the prepayment of the Senior Loan from free cash flow,
as defined above. The degree to which Borrowers prepay Senior Loans, whether as
a contractual requirement or at their election, may be affected by general
business conditions, the financial condition of the Borrower and competitive
conditions among Loan Investors, among others. As such, prepayments cannot be
predicted with accuracy. Upon a prepayment, either in part or in full, the
actual outstanding debt on which the Trust derives interest income will be
reduced. However, the Trust may receive both a prepayment penalty fee from the
prepaying Borrower and a facility fee upon the purchase of a new Senior Loan
with the proceeds from the prepayment of the former. Prepayments generally will
not materially affect the Trust's performance because the Trust typically is
able to reinvest prepayments in other Senior Loans that have similar yields and
because receipt of such fees may mitigate any adverse impact on the Trust's
yield.

         From time to time BlackRock and its affiliates may borrow money from
various banks in connection with their business activities. Such banks may also
sell interests in Senior Loans to or acquire them from the Trust or may be
intermediate participants with respect to Senior Loans in which the Trust owns
interests. Such banks may also act as Agents for Senior Loans held by the Trust.

         The Trust may acquire interests in Senior Loans which are designed to
provide temporary or "bridge" financing to a Borrower pending the sale of
identified assets or the arrangement of longer-term loans or the issuance and
sale of debt obligations. The Trust may also invest in Senior Loans of Borrowers
that have obtained bridge loans from other parties. A Borrower's use of bridge
loans involves a risk that the Borrower may be unable to locate permanent
financing to replace the bridge loan, which may impair the Borrower's perceived
creditworthiness.

         The Trust will be subject to the risk that collateral securing a loan
will decline in value or have no value. Such a decline, whether as a result of
bankruptcy proceedings or otherwise, could cause the Senior Loan to be
undercollateralized or unsecured. In most credit agreements there is no formal
requirement to pledge additional collateral. In addition, the Trust may invest
in Senior Loans guaranteed by, or secured by assets of, shareholders or owners,
even if the Senior Loans are not otherwise collateralized by assets of the
Borrower; provided, however, that such guarantees are fully secured. There may
be temporary periods when the principal asset held by a Borrower is the stock of
a related company, which may not legally be pledged to secure a Senior Loan. On
occasions when such stock cannot be pledged, the Senior Loan will be temporarily
unsecured until the stock can be pledged or is exchanged for or replaced by
other assets, which will be pledged as security for the Senior Loan. However,
the Borrower's ability to dispose of such securities, other than in connection
with such pledge or replacement, will be strictly limited for the protection of
the holders of Senior Loans and, indirectly, Senior Loans themselves.

         If a Borrower becomes involved in bankruptcy proceedings, a court may
invalidate the Trust's security interest in the loan collateral or subordinate
the Trust's rights under the Senior Loan to the interests of the Borrower's
unsecured creditors or cause interest previously paid to be refunded to the
Borrower. If a court required interest to be refunded, it could negatively
affect the Trust's performance. Such action by a court could be based, for
example, on a "fraudulent conveyance" claim to the effect that the Borrower did
not receive fair consideration for granting the security interest in the loan
collateral to the Trust. For Senior Loans made in connection with a highly
leveraged transaction, consideration for granting a security interest may be
deemed inadequate if the proceeds of the Loan were not received or retained by
the Borrower, but were instead paid to other persons (such as shareholders of
the Borrower) in an amount which left the Borrower insolvent or without
sufficient working capital. There are also other events, such as the failure to
perfect a security interest due to faulty documentation or faulty official
filings, which could lead to the invalidation of the Trust's security interest
in loan collateral. If the Trust's security interest in loan collateral is
invalidated or the Senior Loan is subordinated to other debt of a Borrower in
bankruptcy or other proceedings, the Trust would have substantially lower
recovery, and perhaps no recovery on the full amount of the principal and
interest due on the Loan.

         The Trust may acquire warrants and other equity securities as part of a
unit combining a Senior Loan and equity securities of a Borrower or its
affiliates. The acquisition of such equity securities will only be incidental to
the Trust's purchase of a Senior Loan. The Trust may also acquire equity
securities or debt securities (including non-dollar denominated debt securities)
issued in exchange for a Senior Loan or issued in connection with the debt
restructuring or reorganization of a Borrower, or if such acquisition, in the
judgment of BlackRock, may enhance the value of a Senior Loan or would otherwise
be consistent with the Trust's investment policies.

Duration and Risk Management

         Consistent with its investment objectives and policies set forth
herein, the Trust may also enter into certain duration and risk management
transactions. In particular, the Trust may purchase and sell futures contracts,
exchange listed and over-the-counter put and call options on securities, equity
and other indices and futures contracts, forward foreign currency contracts, and
may enter into various interest rate transactions (collectively, "Strategic
Transactions"). Strategic Transactions may be used to attempt to protect against
possible changes in the market value of the Trust's portfolio resulting from
fluctuations in the securities markets and changes in interest rates, to protect
the Trust's unrealized gains in the value of its portfolio securities, to
facilitate the sale of such securities for investment purposes and to establish
a position in the securities markets as a temporary substitute for purchasing
particular securities. Any or all of these Strategic Transactions may be used at
any time. There is no particular strategy that requires use of one technique
rather than another. Use of any Strategic Transaction is a function of market
conditions. The 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. The Strategic
Transactions that the Trust may use are described below. Although the Trust
recognizes it is not likely that it will use certain of these strategies in
light of its investment policies, it nevertheless describes them here because
the Trust may seek to use these strategies in certain circumstances.

         Futures Contracts and Options on Futures Contracts. In connection with
its duration and other risk management strategies, the Trust may also enter into
contracts for the purchase or sale for future delivery ("futures contracts") of
securities, aggregates of securities or indices or prices thereof, other
financial indices and U.S. government debt securities or options on the above.
The Trust will engage in such transactions only for bona fide duration, risk
management and other portfolio management purposes.

         Forward Foreign 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, the
Trust 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. 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.

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

         Puts on Securities, Indices and Futures Contracts. As with calls, the
Trust may purchase put options ("puts") that relate to securities (whether or
not it holds such securities in its portfolio), indices or futures contracts.
For the same purposes, the Trust may also sell puts on securities, 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 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 total 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.

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

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

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

         Appendix A contains further information about the characteristics,
risks and possible benefits of Strategic Transactions 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 Strategic Transactions 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.

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

Short Sales

         The Trust may make short sales of securities. 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 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
designate on its books and records 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 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 "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.

                    OTHER INVESTMENT POLICIES AND TECHNIQUES

Restricted and Illiquid Securities

         When purchasing securities that have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and are not readily
marketable, the Trust will endeavor, to the extent practicable, to obtain the
right to registration at the expense of the issuer. Generally, there will be a
lapse of time between the Trust's decision to sell any such security and the
registration of the security permitting sale. During any such period, the price
of the securities will be subject to market fluctuations. In addition, the Trust
may not be able to readily dispose of such securities at prices that approximate
those at which the Trust could sell such securities if they were more widely
traded and, as a result of such illiquidity, the Trust may have to sell other
investments or engage in borrowing transactions if necessary to raise cash to
meet its obligations.

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

When-Issued and Forward Commitment Securities

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

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

Rights Offerings and Warrants To Purchase

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

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 designate on its books and records liquid
instruments having a value not less than the repurchase price (including accrued
interest). If the Trust establishes and maintains such a segregated account, a
reverse repurchase agreement will not be considered a borrowing by the Trust;
however, under certain circumstances in which the Trust does not establish and
maintain such a segregated account, such reverse repurchase agreement will be
considered a borrowing for the purpose of the Trust's limitation on borrowings.
The use by the Trust of reverse repurchase agreements involves many of the same
risks of leverage since the proceeds derived from such reverse 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 Trusts 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 Trusts 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 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.

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.

Lending of Securities

         The Trust may lend its portfolio securities to banks or dealers which
meet the creditworthiness standards established by the board of trustees of the
Trust ("Qualified Institutions"). By lending its portfolio securities, the Trust
attempts to increase its income through the receipt of interest on the loan. Any
gain or loss in the market price of the securities loaned that may occur during
the term of the loan will be for the account of the Trust. The Trust may lend
its portfolio securities so long as the terms and the structure of such loans
are not inconsistent with requirements of the Investment Company Act, which
currently require that (i) the borrower pledge and maintain with the Trust
collateral consisting of cash, a letter of credit issued by a domestic U.S.
bank, or securities issued or guaranteed by the U.S. government having a value
at all times not less than 100% of the value of the securities loaned, (ii) the
borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the value of the loan is "marked to the market" on a daily basis),
(iii) the loan be made subject to termination by the Trust at any time and (iv)
the Trust receive reasonable interest on the loan (which may include the Trust's
investing any cash collateral in interest bearing short term investments), any
distributions on the loaned securities and any increase in their market value.
The Trust will not lend portfolio securities if, as a result, the aggregate of
such loans exceeds 331/3% of the value of the Trust's total assets (including
such loans). Loan arrangements made by the Trust will comply with all other
applicable regulatory requirements, including the rules of the New York Stock
Exchange, which rules presently require the borrower, after notice, to redeliver
the securities within the normal settlement time of five business days. All
relevant facts and circumstances, including the creditworthiness of the
Qualified Institution, will be monitored by BlackRock, and will be considered in
making decisions with respect to lending securities, subject to review by the
Trust's board of trustees.

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

                             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 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 at an in-person meeting of the board of trustees held on , 2004,
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 % of the average weekly value of the Trust's managed
assets. In approving this agreement the board of trustees considered, among
other things, (i) the nature and quality of the services to be provided to the
Trust by BlackRock Advisors, (ii) the Trust's fee and expense data as compared
to various benchmarks and a peer group of closed-end funds with similar
investment strategies as the Trust, (iii) BlackRock's profitability with respect
to the management of the BlackRock family of closed-end funds, and (iv) the
direct and indirect benefits to BlackRock from its relationship with the Trust.

         During its deliberations, the board of trustees focused on the
experience, resources and strengths of BlackRock Advisors in managing investment
companies that invest in U.S. Government securities and debt securities,
including U.S. TIPS, as well as other types of securities that may comprise the
Trust's portfolio. The board of trustees, based on their experience as directors
or trustees of other investment companies managed by BlackRock Advisors, also
focused on the quality of the compliance and administrative staff at BlackRock.
The board of trustees placed significant emphasis on the Trust's advisory fee
rate and anticipated expense ratios as compared to those of comparable
closed-end funds with comparable investment objectives and strategies as
provided by Lipper Inc.

         Based on the information reviewed and discussions held, the board of
trustees, including a majority of the non-interested trustees, concluded that it
was satisfied with the nature and quality of the services to be provided by
BlackRock Advisors to the Trust and that the advisory fee rate was reasonable in
relation to such services. The non-interested trustees were represented by
independent counsel who assisted them in their deliberations.

         The investment management agreement was approved by the sole common
shareholder of the Trust as of          , 2004. 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 which can be
waived by the non-terminating party. 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, %
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 at an in-person meeting of the board of trustees held on , 2004,
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). In approving this agreement the board of trustees considered,
among other things, (i) the nature and quality of the services to be provided to
the Trust by BlackRock Financial Management, (ii) the Trust's fee and expense
data as compared to various benchmarks and a peer group of closed-end funds with
similar investment strategies as the Trust, (iii) BlackRock's profitability with
respect to the management of the BlackRock family of closed-end funds, and (iv)
the direct and indirect benefits to BlackRock Financial Management from its
relationship with the Trust.

         During its deliberations, the board of trustees focused on the
experience, resources and strengths of BlackRock Financial Management in
sub-advising investment companies that invest in U.S. Government securities and
debt securities, including U.S. TIPS.

         Based on the information reviewed and the discussions the followed, the
board of trustees, including a majority of the non-interested trustees,
concluded that it was satisfied with the nature and quality of the services to
be provided by BlackRock Financial Management, Inc. to the Trust and that the
sub-advisory fee rate was reasonable in relation to such services. The
non-interested trustees were represented by independent counsel who assisted
them in their deliberations.

         The sub-investment advisory agreement was approved by the sole common
shareholder of the Trust as of           , 2004. 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 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. Anne F. Ackerley is the
sole initial Trustee of the Trust. Following is a list of her present positions
and principal occupations during the last five years. Ms. Ackerley is an
interested person of the Trust (as defined by the Investment Company Act). 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. Ms. Ackerley is an officer of other closed-end funds in which
BlackRock Advisors acts as investment adviser.

<TABLE>
<CAPTION>
                                                             Principal Occupation During the Past
Name and Age                  Title                            Five Years and Other Affiliations
- ------------                  -----                            ---------------------------------

<S>                  <C>                    <C>
Anne F. Ackerley     Sole Initial Trustee   Managing Director of BlackRock, Inc. since 2000. Formerly, First
Age: 41                                     Vice President and Chief Operating Officer, Mergers and
                                            Acquisition 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.
</TABLE>


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

<TABLE>
<CAPTION>
                                                                     Aggregate Dollar Range Of Equity Securities
                                        Dollar Range Of Equity        Overseen By Directors In The Family In All
Name of Director                      Securities In The Trust(*)          Registered Investment Companies(*)
- ----------------------------------------------------------------------------------------------------------------
<S>                                   <C>                            <C>








</TABLE>

_______________

(*)   As of December 31, 2003. The Trustees do not own shares in the Trust as
      it is a newly formed closed-end investment company.

         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, 2003, 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, 2004,
assuming the Trust will have been in existence for the full calendar year.

<TABLE>
<CAPTION>

                                       Estimated Compensation From     Total Compensation From The Trust And Fund
        Name of Board Member                    The Trust                   Complex Paid To Board Members(1)
- ----------------------------------------------------------------------------------------------------------------
<S>                                    <C>                             <C>












</TABLE>

(1)      Estimates the total compensation to be earned by that person during the
         calendar year end December 31, 2004 from the closed-end funds advised
         by the Advisor (the "Fund Complex").

(2)      Of these amounts it is anticipated that Messrs.   ,    ,    , and may
         defer $0, $0, $0, $0, $2,000 and $0, respectively, pursuant to the
         Fund Complex's deferred compensation plan in the calendar year ended
          December 31, 2003.

(3)      serves as "lead director" for each board of trustees/directors in the
         Fund Complex. For his services as lead trustee/director, will be
         compensated in the amount of $40,000 per annum by the Fund Complex.

(4)      Of this amount, Messrs.   ,   ,   , and are expected to defer $50,000,
         $50,000, $190,000, $30,000 $50,000 and $30,000, respectively, pursuant
         to the Fund Complex's deferred compensation plan.

(5)      Includes compensation for service on the Audit Committee.

         At a meeting of the Governance Committee of the board of trustees of
the BlackRock closed-end trusts held on November 25, 2002, the Independent
Trustees approved a change to their compensation to become effective January 1,
2003. Under this revised compensation plan, each Independent Trustee will
receive an annual fee calculated as follows: (i) $6,000 from each fund/trust in
the Fund Complex and (ii) $1,000 for each meeting of each board in the Fund
Complex attended by such Independent Trustee. The total annual aggregate
compensation for each Independent Trustee is capped at $190,000 per annum,
except that            will receive an additional $40,000 per annum from the
Fund Complex for acting as the lead trustee for each board of trustees/directors
in the Fund Complex and Messrs.        ,        and         will receive
an additional $20,000 per annum from the Fund Complex for their service on the
audit committee of the Fund Complex. This additional compensation to Messrs.
         ,          and will be allocated among the fund/trusts in the Fund
Complex based on their relative net assets.

         In the event that the $190,000 cap is met with respect to an
Independent Trustee, the amount of the Independent Trustee's fee borne by each
fund/trust in the Fund Complex is reduced by reference to the net assets of the
Trust relative to the other funds/trusts in the Fund Complex. In addition, the
attendance fees of each Independent Trustee 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
(excluding the per annum audit committee fee) held on a single day does not
exceed $15,834 for any Independent Trustee.

         Certain of the above fees paid to the Independent Trustees will be
subject to mandatory deferrals pursuant to the Fund Complex's deferred
compensation plan. The Independent Trustees have agreed that at least $30,000 of
their $190,000 base fee will be mandatory deferred pursuant to the Fund
Complex's deferred compensation plan. Also, members of the audit committee of
the Fund Complex will be required to defer all of the $20,000 per annum fee they
will receive for their services on the audit committee pursuant to the Fund
Complex's deferred compensation plan. Under the deferred compensation plan,
deferred amounts earn a return for the Independent Trustees as though equivalent
dollar amounts had been invested in common shares of certain other funds/trusts
in the Fund Complex selected by the Independent Trustees. This has the same
economic effect for the Independent Trustees as if they had invested the
deferred amounts in such other funds/trusts. The deferred compensation plan is
not funded and obligations thereunder represent general unsecured claims against
the general assets of a fund/trust. A fund/trust may, however, elect to invest
in common shares of those funds/trusts selected by the Independent Trustee in
order to match its deferred compensation obligations.

         The board of trustees of the Trust currently has three committees: an
Executive Committee, an Audit Committee and a Governance Committee.

         The Executive Committee consists of Messrs.        and          , and
acts in accordance with the powers permitted to such a committee under the
Agreement and Declaration of Trust and the By-Laws of the Trust. The Executive
Committee, subject to the Trust's Agreement and Declaration of Trust, By-Laws
and applicable law, acts on behalf of the full board of trustees in the
intervals between meetings of the Board.

         The Audit Committee consists of Messrs.          , and              .
The Audit Committee acts according to the Audit Committee charter. has been
appointed as Chairman of the Audit Committee. The Audit Committee is
responsible for reviewing and evaluating issues related to the accounting and
financial reporting policies of the Trust, overseeing the quality and
objectivity of the Trust's financial statements and the audit thereof and to
act as a liaison between the board of trustees and the Trust's independent
accountants. The board of trustees of the Trust has determined that the Trust
has two audit committee financial experts serving on its Audit Committee,
and             , both of whom are independent for the purpose of the
definition of audit committee financial expert as applicable to the Trust.

         The Governance Committee consists of Messrs.         ,             ,
           , and            . The Governance Committee acts in accordance with
the Governance Committee charter.             has been appointed as Chairman of
the Governance Committee. The Governance Committee consists of the Independent
Trustees and performs those functions enumerated in the Governance Committee
Charter including, but not limited to, making nominations for the appointment or
election of Independent Trustees, reviewing Independent Trustee compensation,
retirement policies and personnel training policies and administrating the
provisions of the Code of Ethics applicable to the Independent Trustees.

         No Trustee who is not an interested person of the Trust owns
beneficially or of record, any security of BlackRock Advisors or any person
(other than a registered investment company) directly or indirectly controlling,
controlled by or under common control with BlackRock Advisors.

         As the Trust is a closed-end investment company with no prior
investment operations, no meetings of the above committees have been held in the
current fiscal year, provided that the Governance Committee has acted by written
consent to form the Audit Committee and the Audit Committee has had an initial
meeting in connection with the organization of the Trust.

         No Trustee who is not an interested person of the Trust owns
beneficially or of record, any security of BlackRock Advisors or any person
(other than a registered investment company) directly or indirectly controlling,
controlled by or under common control with BlackRock Advisors.

Proxy Voting Policies

         The board of trustees of the Trust has delegated the voting of proxies
for Trust securities to BlackRock pursuant to BlackRock's proxy voting
guidelines. Under these guidelines, BlackRock will vote proxies related to Trust
securities in the best interests of the Trust and its shareholders. A copy of
BlackRock's proxy voting procedures are attached as Appendix B to this Statement
of Additional Information.

Codes of Ethics

         The Trust, the Advisor and the Sub-Advisor 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. These codes can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling the Securities and Exchange Commission at 1-202-942-8090. The code of
ethics are available on the EDGAR Database on the Securities and Exchange
Commission's web site (http://www.sec.gov), and copies of these codes may be
obtained, after paying a duplicating fee, by electronic request at the following
e-mail address: publicinfo@sec.gov, or by writing the Securities and Exchange
Commission's Public Reference Section, Washington, D.C. 20549-0102.

Investment Advisor and Sub-Advisor

         BlackRock Advisors acts as the Trust's investment advisor. BlackRock
Financial Management acts as the Trust's sub-advisor. BlackRock Advisors,
located at 100 Bellevue Parkway, Wilmington, Delaware 19809, and BlackRock
Financial Management, located at 40 East 52nd Street, New York, New York 10022,
are wholly owned subsidiaries of BlackRock, Inc., which is one of the largest
publicly traded investment management firms in the United States with
approximately $321 billion of assets under management as of March 31, 2004.
BlackRock manages assets on behalf of institutional and individual investors
worldwide through a variety of equity, fixed income, liquidity and alternative
investment products, including the BlackRock Funds and BlackRock Liquidity
Funds. In addition, BlackRock provides risk management and investment system
services to institutional investors under the BlackRock Solutions(R) name.

         The BlackRock organization has over 16 years of experience managing
closed-end products and, as of March 31, 2004, advised a closed-end family of 50
active funds with approximately $14.7 billion in assets. Clients are served from
the company's headquarters in New York City, as well as offices in Wilmington,
San Francisco, Boston, Edinburgh, Tokyo and Hong Kong. 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. The BlackRock organization
invented the term trust in 1988 and has successfully managed five consecutive
term trusts to returning principal on maturity.

                      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 Trust will generally purchase securities on a stock exchange
effected through brokers who charge a commission for their services. The Trust
may also invest in securities that 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.

         Payments of commissions to brokers who are affiliated persons of the
Trust (or affiliated persons of such persons) will be made in accordance with
Rule 17e-1 under the Investment Company Act. Commissions paid on such
transactions would be commensurate with the rate of commissions paid on similar
transactions to brokers that are not so affiliated.

         The Advisor and Sub-Advisor may, consistent with the interests of the
Trust, select brokers on the basis of the research, statistical and pricing
services they provide to the Trust and the Advisor's or Sub-Advisor's other
clients. Such research, statistical and/or pricing services must provide lawful
and appropriate assistance to the Advisor's or Sub-Advisor's investment
decision-making process in order for such research, statistical and/or pricing
services to be considered by the Advisor or Sub-Advisor in selecting a broker.
Information and research received from such brokers will be in addition to, and
not in lieu of, the services required to be performed by the Advisor and
Sub-Advisor under their respective contracts. A commission paid to such brokers
may be higher than that which another qualified broker would have charged for
effecting the same transaction, provided that the Advisor or Sub-Advisor
determines in good faith that such commission is reasonable in terms either of
the transaction or the overall responsibility of the Advisor or Sub-Advisor and
its other clients and that the total commissions paid by the Trust will be
reasonable in relation to the benefits to the Trust over the long-term. The
advisory fees that the Trust pay to the Advisor will not be reduced as a
consequence of the Advisor's or Sub-Advisor's receipt of brokerage and research
services. To the extent that portfolio transactions are used to obtain such
services, the brokerage commissions paid by the Trust will exceed those that
might otherwise be paid by an amount which cannot be presently determined. Such
services generally would be useful and of value to the Advisor or Sub-Advisor in
serving one or more of their other clients and, conversely, such services
obtained by the placement of brokerage business of other clients generally would
be useful to the Advisor and Sub-Advisor in carrying out their obligations to
the Trust. While such services are not expected to reduce the expenses of the
Advisor or Sub-Advisor, the Advisor would, through use of the services, avoid
the additional expenses which would be incurred if they should attempt to
develop comparable information through their own staffs. Commission rates for
brokerage transactions on foreign stock exchanges are generally fixed.

         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 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 less than 100%. 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. 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 prospectus
contains a detailed discussion of the common shares.

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. Whenever
Preferred Shares are outstanding, the holders of common shares will not be
entitled to receive any distributions from the Trust unless all accrued
dividends on Preferred Shares have been paid, unless asset coverage (as defined
in the Investment Company Act) with respect to Preferred Shares would be at
least 200% after giving effect to the distributions and unless certain other
requirements imposed by any rating agencies rating the Preferred Shares have
been met. The prospectus contains a discussion of the Preferred Shares it is
currently anticipated the Trust will issue.

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.

                           REPURCHASE OF COMMON SHARES

         The Trust is a closed-end management 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
de-listing 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 objectives 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 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 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

         The following discussion is a brief summary of certain U.S. federal
income tax considerations affecting the Trust and its shareholders. No attempt
is made to present a detailed explanation of all federal, state, local and
foreign tax concerns affecting the Trust and its shareholders (including
shareholders owning a large position in the Trust), and the discussions set
forth here and in the prospectus do not constitute tax advice. Investors are
urged to consult their own tax advisors with any specific questions relating to
federal, state, local and foreign taxes. The discussion reflects applicable tax
laws of the United States as of the date of this Statement of Additional
Information, which tax laws may be changed or subject to new interpretations by
the courts or the Internal Revenue Service (the "IRS") retroactively or
prospectively.

Taxation of the Trust

         The Trust intends to elect to be treated and to qualify each year as a
regulated investment company under Subchapter M of the Code (a "RIC").
Accordingly, the Trust must, among other things, (i) derive in each taxable year
at least 90% of its gross income (including tax-exempt interest) from dividends,
interest, payments with respect to certain securities loans, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income (including but not limited to gains from options, futures and forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; and (ii) diversify its holdings so that, at the end of
each quarter of each taxable year (a) at least 50% of the market value of the
Trust's total assets is represented by cash and cash items, U.S. government
securities, the securities of other RICs and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the value of the Trust's total assets and not more than 10% of the
outstanding voting securities of such issuer, and (b) not more than 25% of the
market value of the Trust's total assets is invested in the securities of any
issuer (other than U.S. government securities and the securities of other RICs)
or of any two or more issuers that the Trust controls and that are determined to
be engaged in the same business or similar or related trades or businesses.

         As a RIC, the Trust generally is not subject to U.S. federal income tax
on income and gains that it distributes each taxable year to shareholders, if it
distributes at least 90% of the sum of the Trust's (i) investment company
taxable income (which includes, among other items, dividends, interest and the
excess of any net short-term capital gain over net long-term capital loss and
other taxable income, other than any net long-term capital gain, 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). The Trust intends to distribute at
least annually substantially all of such income.

         Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the Trust level. To avoid the tax, the Trust must distribute during each
calendar year an amount at least equal to the sum of (i) 98% of its ordinary
income (not taking into account any capital gain or loss) for the calendar year,
(ii) 98% of its capital gain in excess of its capital loss (adjusted for certain
ordinary losses) for a one-year period generally ending on October 31 of the
calendar year (unless an election is made to use the Trust's fiscal year), and
(iii) certain undistributed amounts from previous years on which the Trust paid
no U.S. federal income tax. While the Trust intends to distribute any income and
capital gain 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 gain will be distributed to avoid entirely the imposition of
the tax. In that event, the Trust will be liable for the tax only on the amount
by which it does not meet the foregoing distribution requirement.

         A distribution will be treated as paid during the calendar year if it
is paid during the calendar year or declared by the Trust in October, November
or December of the year, payable to shareholders of record on a date during such
a month and paid by the Trust during January of the following year. Any such
distributions paid during January of the following year will be deemed to be
received on December 31 of the year the distributions are declared, rather than
when the distributions are received.

         If the Trust were unable to satisfy the 90% distribution requirement or
otherwise were to fail to qualify as a RIC in any year, it would be taxed in the
same manner as an ordinary corporation and distributions to the Trust's
shareholders would not be deductible by the Trust in computing its taxable
income.

The Trust's Investments

         Certain of the Trust's investment practices may subject the Trust to
special tax rules, the effect of which may be to accelerate income to the Trust,
defer the Trust's losses, cause adjustments in the holding periods of the
Trust's securities, convert long-term capital gains into short-term capital
gains and convert short-term capital losses into long-term capital losses. These
rules could therefore affect the amount, timing and character of distributions
to holders of common shares.

         Some of the debt obligations acquired by the Trust may be treated as
debt obligations that are issued with original issue discount ("OID").
Generally, the amount of OID is treated as interest income and is included in
taxable income over the term of the debt security, even through payment of the
amount is not received until a later time, usually when the debt security
matures. The Trust will invest in inflation indexed securities. Generally, an
inflation-adjusted increase in principal is required to be included in income as
OID in the year the increase occurs even though the investor will not receive
payment of amounts equal to such increase until the security matures. The Trust
will be required to distribute dividends equal to substantially all of its
investment company taxable income, including the daily accretion of inflation
adjustment income and other OID income accrued by the Trust with respect to
securities for which the Trust receives no payments in cash prior to their
maturity. The Investment Adviser may have to dispose of securities under
disadvantageous circumstances in order to generate cash to satisfy the Trust's
distribution requirements.

         If the Trust invests (directly or indirectly through a REIT) in
residual interests in REMICs a portion of the Trust's income will be subject to
U.S. federal income tax in all events. "Excess inclusion income" of the Trust
generated by a residual interest in a REMICs will be allocated to shareholders
of the Trust in proportion to the dividends received by the shareholders of the
Trust. Excess inclusion income generally (i) cannot be offset by net operating
losses, (ii) will constitute unrelated business taxable income to certain tax
exempt investors and (iii) in the case of a foreign shareholder will not qualify
for any reduction in U.S. federal withholding taxes. In addition, if the
shareholders of the Trust include a "disqualified organization" (such as certain
governments or governmental agencies) the Trust may be liable for a tax on the
excess inclusion income allocable to the disqualified organization.

         Income received by the Trust with respect to foreign securities may be
subject to withholding and other taxes imposed by foreign countries. Tax
conventions may reduce or eliminate such taxes. If the Trust invests more than
50% of its total assets in foreign securities, the Trust will elect to have its
foreign tax deduction or credit for foreign taxes paid with respect to
qualifying taxes to be taken by its shareholders instead of on its own return.
In that case, each shareholder shall include in gross income, and also treat as
paid by him, his proportionate share of the foreign taxes paid by the Trust. If
the Trust makes this election, it will furnish its shareholders with a written
notice after the close of the taxable year.

         Investments by the Trust in certain "passive foreign investment
companies" could subject the Trust to U.S. federal income tax (including
interest charges) on certain distributions or dispositions with respect to those
investments which cannot be eliminated by making distributions to shareholders.
Several elections may be available to the Trust to mitigate the effect of this
provision but the elections generally accelerate the recognition of income
without the receipt of cash.

         It is not expected that shareholders will be subject to alternative
minimum tax as a result of an investment in the Trust.

Taxation of Shareholders

         Distributions paid by the Trust from its investment company taxable
income, which includes net short-term capital gain, generally are taxable as
ordinary income to the extent of the Trust's earnings and profits. Such
distributions (if designated by the Trust) may qualify (provided holding period
and other requirements are met) (i) for the dividends received deduction
available to corporations, but only to the extent that the Trust's income
consists of dividends received from U.S. corporations and (ii) under the Jobs
and Growth Tax Relief Reconciliation Act of 2003 (effective for taxable years
after December 31, 2002 through December 31, 2008) ("Tax Act"), as qualified
dividend income eligible for the reduced maximum rate to individuals of
generally 15% (5% for individuals in lower tax brackets) to the extent that the
Trust receives qualified dividend income. Qualified dividend income is, in
general, dividend income from taxable domestic corporations and certain foreign
corporations (e.g., generally, foreign corporations incorporated in a possession
of the United States or in certain countries with a comprehensive tax treaty
with the United States, or the stock of which is readily tradable on an
established securities market in the United States).

         Due to the Trust's expected investments, in generally, distributions
will not be eligible for the dividends received deduction allowed to
corporations and will not qualify for the reduced rate on qualified dividend
income allowed to individuals.

         Distributions of net capital gain designated as capital gain dividends,
if any, are taxable to shareholders at rates applicable to long-term capital
gain, whether paid in cash or in shares, and regardless of how long the
shareholder has held the Trust's shares. Capital gain dividends are not eligible
for the dividends received deduction. Under the Tax Act, the maximum tax rate on
net capital gain of individuals is reduced generally from 20% to 15% (5% for
individuals in lower brackets) for such gain realized after May 5, 2003 and
before January 1, 2009. 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 gain to such
holder (assuming the shares are held as a capital asset). For non-corporate
taxpayers, under the Tax Act, distributions of investment company taxable income
(other than qualified dividend income) will currently be taxed at a maximum rate
of 35%, while net capital gain generally will be taxed at a maximum rate of 15%.
For corporate taxpayers, distributions of both investment company taxable income
and net capital gain are taxed at a maximum rate of 35%.

         The Trust may retain for reinvestment all or part of its net capital
gain. If any such gain is retained, the Trust will be subject to a tax of 35% of
such amount. In that event, the Trust expects to designate the retained amount
as undistributed capital gain in a notice to its shareholders, each of whom (i)
will be required to include in income for tax purposes as long-term capital gain
its share of such undistributed amounts, (ii) will be entitled to credit its
proportionate share of the tax paid by the Trust against its U.S. federal income
tax liability and to claim refunds to the extent that the credit exceeds such
liability and (iii) will increase its basis in its shares of the Trust by an
amount equal to 65% of the amount of undistributed capital gain included in such
shareholder's gross income.

         Shareholders may be entitled to offset their capital gain dividends
with capital loss. There are a number of statutory provisions affecting when
capital loss may be offset against capital gain, and limiting the use of loss
from certain investments and activities. Accordingly, shareholders with capital
loss are urged to consult their tax advisors.

         The price of shares purchased at any time may reflect the amount of a
forthcoming distribution. Those purchasing shares just prior to a distribution
will receive a distribution which will be taxable to them even though it
represents in part a return of invested capital.

         Upon a sale or exchange of shares, a shareholder will realize a taxable
gain or loss depending upon its basis in the shares. Such gain or loss will be
treated as long-term capital gain or loss if the shares have been held for more
than one year. Any loss realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced with substantially identical shares
within a 61-day period beginning 30 days before and ending 30 days after the
date that the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.

         Any loss realized by a shareholder on the sale of Trust shares held by
the shareholder for six months or less will be treated for tax purposes as a
long-term capital loss to the extent of any capital gain dividends received by
the shareholder (or amounts credited to the shareholder as an undistributed
capital gain) with respect to such shares.

         Ordinary income dividends and capital gain dividends also may be
subject to state and local taxes. Shareholders are urged to consult their own
tax advisors regarding specific questions about U.S. federal (including the
application of the alternative minimum tax rules), state, local or foreign tax
consequences to them of investing in the Trust.

         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 days or
more during a taxable year and certain other conditions are met.

         The Trust may be required to withhold federal income tax on all taxable
distributions and redemption proceeds payable to non-corporate shareholders who
fail to provide the Trust with their correct taxpayer identification number or
to make required certifications, or who have been notified by the IRS that they
are subject to backup withholding. Backup withholding is not an additional tax.
Any amounts withheld 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 applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action, either prospectively or retroactively. Persons considering an investment
in common shares should consult their own tax advisors regarding the purchase,
ownership and disposition of common shares.

                                     EXPERTS

         The Statement of Net Assets of the Trust as of           , 2004
appearing in this Statement of Additional Information has been audited
by          , 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.        ,
located at         , 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.

<PAGE>


                          INDEPENDENT AUDITORS' REPORT

To the Board of Trustees and Shareholder of BlackRock Variable Rate and
Inflation Protected Securities Trust

We have audited the accompanying statement of assets and liabilities of
BlackRock Variable Rate and Inflation Protected Securities Trust (the "Trust")
as of           , 2004, and the related statements of operations and the changes
in net assets for the period from            , 2004 (date of inception) to
            , 2004. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of BlackRock Variable Rate and
Inflation Protected Securities Trust as of               , 2004, and the results
of its operations and the changes in its net assets for the period from
            , 2004 (date of inception) to            , 2004, in conformity with
accounting principles generally accepted in the United States of America.

<PAGE>

        BLACKROCK VARIABLE RATE AND INFLATION PROTECTED SECURITIES TRUST

                      STATEMENT OF ASSETS AND LIABILITIES

<PAGE>

        BLACKROCK VARIABLE RATE AND INFLATION PROTECTED SECURITIES TRUST

                             STATEMENT OF OPERATIONS

         For the period       , 2004 (date of inception) to       , 2004




<PAGE>


        BLACKROCK VARIABLE RATE AND INFLATION PROTECTED SECURITIES TRUST

                       STATEMENT OF CHANGES IN NET ASSETS

        For the period        , 2004 (date of inception) to        , 2004



<PAGE>


                                   APPENDIX A

                        GENERAL CHARACTERISTICS AND RISKS
                            OF STRATEGIC 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 Strategic
Transactions. 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 Strategic Transactions
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 securities
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 securities
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 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 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 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 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 to protect against anticipated 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.
The Trust currently may enter into such transactions without limit for risk
management and duration management and other portfolio strategies. The Trust may
also engage in transactions in futures contracts or related options 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 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. The above policies are
non-fundamental and may be changed by the Trust's board of trustees at any time.
Also, when required, an account of cash equivalents designated on the books and
records will be maintained and marked to market on a daily basis in an amount
equal to the market value of the contract.

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 earmarking 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 designate on its books and records an ongoing basis, cash, U.S.
government securities, or other liquid high grade debt obligations in an amount
at least equal to the Trust's obligations with respect to such instruments. Such
amounts fluctuate as the obligations increase or decrease. The earmarking
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.

Strategic Transactions Present Certain Risks. With respect to risk management,
the variable degree of correlation between price movements of instruments and
price movements in the position being hedged create the possibility that losses
on the position 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 risk management 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 Strategic
Transactions 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 Strategic Transactions will reduce net asset
value.

Regulatory Considerations. The Trust has claimed an exclusion from the term
"commodity pool operator" under the Commodity Exchange Act and, therefore, is
not subject to registration or regulation as a commodity pool operator under the
Commodity Exchange Act.

<PAGE>



                                   APPENDIX B

                             PROXY VOTING PROCEDURES



<PAGE>


                               PROXY VOTING POLICY

                                       For

                            BlackRock Advisors, Inc.
                and Its Affiliated Registered Investment Advisors

Introduction

This Proxy Voting Policy ("Policy") for BlackRock Advisors, Inc. and its
affiliated registered investment advisors ("BlackRock") reflects our duty as a
fiduciary under the Investment Advisers Act of 1940 (the "Advisers Act") to vote
proxies in the best interests of our clients. In addition, the Department of
Labor views the fiduciary act of managing ERISA plan assets to include the
voting of proxies. Proxy voting decisions must be made solely in the best
interests of the pension plan's participants and beneficiaries. The Department
of Labor has interpreted this requirement as prohibiting a fiduciary from
subordinating the retirement income interests of participants and beneficiaries
to unrelated objectives. The guidelines in this Policy have been formulated to
ensure decision-making consistent with these fiduciary responsibilities.

Any general or specific proxy voting guidelines provided by an advisory client
or its designated agent in writing will supercede the specific guidelines in
this Policy. BlackRock will disclose to our advisory clients information about
this Policy as well as disclose to our clients how they may obtain information
on how we voted their proxies. Additionally, BlackRock will maintain proxy
voting records for our advisory clients consistent with the Advisers Act. For
those of our clients that are registered investment companies, BlackRock will
disclose this Policy to the shareholders of such funds and make filings with the
Securities and Exchange Commission and make available to fund shareholders the
specific proxy votes that we cast in shareholder meetings of issuers of
portfolio securities in accordance with the rules and regulations under the
Investment Company Act of 1940.

Registered investment companies that are advised by BlackRock as well as certain
of our advisory clients may participate in securities lending programs, which
may reduce or eliminate the amount of shares eligible for voting by BlackRock in
accordance with this Policy if such shares are out on loan and cannot be
recalled in time for the vote.

Implicit in the initial decision to retain or invest in the security of a
corporation is approval of its existing corporate ownership structure, its
management, and its operations. Accordingly, proxy proposals that would change
the existing status of a corporation will be reviewed carefully and supported
only when it seems clear that the proposed changes are likely to benefit the
corporation and its shareholders. Notwithstanding this favorable predisposition,
management will be assessed on an ongoing basis both in terms of its business
capability and its dedication to the shareholders to ensure that our continued
confidence remains warranted. If it is determined that management is acting on
its own behalf instead of for the well being of the corporation, we will vote to
support shareholder proposals, unless other mitigating circumstances are
present.

Additionally, situations may arise that involve an actual or perceived conflict
of interest. For example, we may manage assets of a pension plan of a company
whose management is soliciting proxies, or a BlackRock employee involved with
managing an account may have a close relative who serves as a director or
executive of a company that is soliciting proxies regarding securities held in
such account. In all cases, the manner in which we vote proxies must be based on
our clients' best interests and not the product of a conflict.

This Policy and its attendant recommendations attempt to generalize a complex
subject. It should be clearly understood that specific fact situations,
including differing voting practices in jurisdictions outside the United States,
might warrant departure from these guidelines. In such instances, the relevant
facts will be considered, and if a vote contrary to these guidelines is
indicated it will be cast and the reasons therefor recorded in writing.

Section I of the Policy describes proxy proposals that may be characterized as
routine and lists examples of the types of proposals we would typically support.
Section II of the Policy describes various types of non-routine proposals and
provides general voting guidelines. These non-routine proposals are categorized
as those involving:

         A.  Social Issues,

         B.  Financial/Corporate Issues, and

         C.  Shareholder Rights.

Finally, Section III of the Policy describes the procedures to be followed in
casting a vote pursuant to these guidelines.



<PAGE>


                                    SECTION I

                                 ROUTINE MATTERS

Routine proxy proposals, amendments, or resolutions are typically proposed by
management and meet the following criteria:

          1.   They do not measurably change the structure, management control,
               or operation of the corporation.

          2.   They are consistent with industry standards as well as the
               corporate laws of the state of incorporation.

                              Voting Recommendation

BlackRock will normally support the following routine proposals:

          1.   To increase authorized common shares.

          2.   To increase authorized preferred shares as long as there are not
               disproportionate voting rights per preferred share.

          3.   To elect or re-elect directors.

          4.   To appoint or elect auditors.

          5.   To approve indemnification of directors and limitation of
               directors' liability.

          6.   To establish compensation levels.

          7.   To establish employee stock purchase or ownership plans.

          8.   To set time and location of annual meeting.


<PAGE>



                                   SECTION II

                              NON-ROUTINE PROPOSALS

          D.   Social Issues

Proposals in this category involve issues of social conscience. They are
typically proposed by shareholders who believe that the corporation's internally
adopted policies are ill-advised or misguided.

                              Voting Recommendation

If we have determined that management is generally socially responsible, we will
generally vote against the following shareholder proposals:

          1.   To enforce restrictive energy policies.

          2.   To place arbitrary restrictions on military contracting.

          3.   To bar or place arbitrary restrictions on trade with other
               countries.

          4.   To restrict the marketing of controversial products.

          5.   To limit corporate political activities.

          6.   To bar or restrict charitable contributions.

          7.   To enforce a general policy regarding human rights based on
               arbitrary parameters.

          8.   To enforce a general policy regarding employment practices based
               on arbitrary parameters.

          9.   To enforce a general policy regarding animal rights based on
               arbitrary parameters.

          10.  To place arbitrary restrictions on environmental practices.

          E.   Financial/Corporate Issues

Proposals in this category are usually offered by management and seek to change
a corporation's legal, business or financial structure.

                              Voting Recommendation

We will generally vote in favor of the following management proposals provided
the position of current shareholders is preserved or enhanced:

          1.   To change the state of incorporation.

          2.   To approve mergers, acquisitions or dissolution.

          3.   To institute indenture changes.

          4.   To change capitalization.

          F.   Shareholder Rights

Proposals in this category are made regularly both by management and
shareholders. They can be generalized as involving issues that transfer or
realign board or shareholder voting power.

We typically would oppose any proposal aimed solely at thwarting potential
takeover offers by requiring, for example, super-majority approval. At the same
time, we believe stability and continuity promote profitability. The guidelines
in this area seek to find a middle road, and they are no more than guidelines.
Individual proposals may have to be carefully assessed in the context of their
particular circumstances.

                              Voting Recommendation

We will generally vote for the following management proposals:

          1.   To require majority approval of shareholders in acquisitions of a
               controlling share in the corporation.

          2.   To institute staggered board of directors.

          3.   To require shareholder approval of not more than 662/3% for a
               proposed amendment to the corporation's by-laws.

          4.   To eliminate cumulative voting.

          5.   To adopt anti-greenmail charter or by-law amendments or to
               otherwise restrict a company's ability to make greenmail
               payments.

          6.   To create a dividend reinvestment program.

          7.   To eliminate preemptive rights.

          8.   To eliminate any other plan or procedure designed primarily to
               discourage a takeover or other similar action (commonly known as
               a "poison pill").

We will generally vote against the following management proposals:

          9.   To require greater than 662/3% shareholder approval for a
               proposed amendment to the corporation's by-laws ("super-majority
               provisions").

          10.  To require that an arbitrary fair price be offered to all
               shareholders that is derived from a fixed formula ("fair price
               amendments").

          11.  To authorize a new class of common stock or preferred stock which
               may have more votes per share than the existing common stock.

          12.  To prohibit replacement of existing members of the board of
               directors.

          13.  To eliminate shareholder action by written consent without a
               shareholder meeting.

          14.  To allow only the board of directors to call a shareholder
               meeting or to propose amendments to the articles of
               incorporation.

          15.  To implement any other action or procedure designed primarily to
               discourage a takeover or other similar action (commonly known as
               a "poison pill").

          16.  To limit the ability of shareholders to nominate directors.

We will generally vote for the following shareholder proposals:

          17.  To rescind share purchases rights or require that they be
               submitted for shareholder approval, but only if the vote required
               for approval is not more than 662/3%.

          18.  To opt out of state anti-takeover laws deemed to be detrimental
               to the shareholder.

          19.  To change the state of incorporation for companies operating
               under the umbrella of anti-shareholder state corporation laws if
               another state is chosen with favorable laws in this and other
               areas.

          20.  To eliminate any other plan or procedure designed primarily to
               discourage a takeover or other similar action.

          21.  To permit shareholders to participate in formulating management's
               proxy and the opportunity to discuss and evaluate management's
               director nominees, and/or to nominate shareholder nominees to the
               board.

          22.  To require that the board's audit, compensation, and/or
               nominating committees be comprised exclusively of independent
               directors.

          23.  To adopt anti-greenmail charter or by-law amendments or otherwise
               restrict a company's ability to make greenmail payments.

          24.  To create a dividend reinvestment program.

          25.  To recommend that votes to "abstain" not be considered votes
               "cast" at an annual meeting or special meeting, unless required
               by state law.

          26.  To require that "golden parachutes" be submitted for shareholder
               ratification.

We will generally vote against the following shareholder proposals:

          27.  To restore preemptive rights.

          28.  To restore cumulative voting.

          29.  To require annual election of directors or to specify tenure.

          30.  To eliminate a staggered board of directors.

          31.  To require confidential voting.

          32.  To require directors to own a minimum amount of company stock in
               order to qualify as a director or to remain on the board.

          33.  To dock director pay for failing to attend board meetings.

<PAGE>


                                   SECTION III

                                 VOTING PROCESS

         BlackRock has engaged a third-party service provider to assist us in
the voting of proxies. These guidelines have been provided to this service
provider, who then analyzes all proxy solicitations we receive for our clients
and makes recommendations to us as to how, based upon our guidelines, the
relevant votes should be cast. These recommendations are set out in a report
that is provided to the relevant Portfolio Management Group team, who must
approve the proxy vote in writing and return such written approval to the
Operations Group. If any authorized member of a Portfolio Management Group team
desires to vote in a manner that differs from the recommendations, the reason
for such differing vote shall be noted in the written approval form. A copy of
the written approval form is attached as an exhibit. The head of each relevant
Portfolio Management Group team is responsible for making sure that proxies are
voted in a timely manner. The Brokerage Allocation Committee shall receive
regular reports of all p IF THERE IS ANY POSSIBILITY THAT THE VOTE MAY INVOLVE A
MATERIAL CONFLICT OF INTEREST BECAUSE, FOR EXAMPLE, THE ISSUER SOLICITING THE
VOTE IS A BLACKROCK CLIENT OR THE MATTER BEING VOTED ON INVOLVES BLACKROCK, PNC
OR ANY AFFILIATE (INCLUDING A PORTFOLIO MANAGEMENT GROUP EMPLOYEE) OF EITHER OF
THEM, PRIOR TO APPROVING SUCH VOTE, THE BROKERAGE ALLOCATION COMMITTEE MUST BE
CONSULTED AND THE MATTER DISCUSSED. The Committee, in consultation with the
Legal and Compliance Department, shall determine whether the potential conflict
is material and if so, the appropriate method to resolve such conflict, based on
the particular facts and circumstances, the importance of the proxy issue,
whether the Portfolio Management Group team is proposing a vote that differs
from recommendations made by our third-party service provider with respect to
the issue and the nature of the conflict, so as to ensure that the voting of the
proxy is not affected by the potential conflict. If the conflict is determined
not to be material With respect to votes in connection with securities held on a
particular record date but sold from a client account prior to the holding of
the related meeting, BlackRock may take no action on proposals to be voted on in
such meeting. With respect to voting proxies of non-U.S. companies, a number of
logistical problems may arise that may have a detrimental effect on BlackRock's
ability to vote such proxies in the best interests of our clients. These
problems include, but are not limited to, (i) untimely and/or inadequate notice
of shareholder meetings, (ii) restrictions on the ability of holders outside the
issuer's jurisdiction of organization to exercise votes, (iii) requirements to
vote proxies in person, if not practicable, (iv) the imposition of restrictions
on the sale of the securities for a period of time in proximity to the
shareholder meeting, and (v) impracticable or inappropriate requirements to
provide local agents with power of attorney to facilitate the voting
instructions. Accordingly, BlackRock may determine not to vote proxies if it
believes that the restrictions or other detriments associated with such vote
outweigh the benefits that will be derived by voting on the company's proposal.

                                    * * * * *

                       Any questions regarding this Policy may be directed to
the General Counsel of BlackRock.

Approved: October 21, 1998

Revised: May 27, 2003



<PAGE>


                                     PART C

                                Other Information

Item 24.  Financial Statements And Exhibits

Financial Statements

Part A--None.

Part B--Statement of Assets and Liabilities(1)

Exhibits

(a) Agreement and Declaration of Trust(2)

(b) By-Laws(2)

(c) Inapplicable

(d) Form of Specimen Certificate(1)

(e) Dividend Reinvestment Plan(1)

(f) Inapplicable

(g) (1)Investment Management Agreement(1)

(g) (2)Sub-Investment Advisory Agreement(1)

(h) Form of Underwriting Agreement(1)

(i) Form of the BlackRock Closed-End Trusts Amended and Restated Deferred
    Compensation Plan(1)

(j) (1)Custody Agreement(1)

(j) (2)Form of Foreign Custody Manager Agreement(1)

(k) (1)Form of Stock Transfer Agency Agreement(1)

(l) Opinion and Consent of Counsel to the Trust(1)

(m) Inapplicable.

(n) Independent Auditor's Consent(1)

(o) Inapplicable.

(p) Initial Subscription Agreement(1)

(q) Inapplicable.

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

(r) (2) Code of Ethics of the Advisor and Sub-Advisor(1)

(r) (3) Code of Ethics of The PNC Financial Services Group(1)

(s) Power of Attorney(1)

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

(1) To be filed by Amendment.

(2) Filed herewith.

Item 25.  Marketing Arrangements

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

Item 26.  Other Expenses Of Issuance And Distribution

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

              Registration fee
              NYSE listing fee
              Printing (other than certificates) Engraving and printing
              certificates Accounting fees and expenses Legal fees and expenses
              NASD fee
                                 Total

Item 27.  Persons Controlled By Or Under Common Control With The Registrant

         None.

Item 28.  Number Of Holders Of Shares

         As of April 20, 2004

         Title Of Class                             Number of Record Holders
         --------------                             -----------------------
Shares of Beneficial Interest                                  0



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, 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
Trustees"), that the indemnitee is entitled to indemnification hereunder, or (2)
if such quorum is not obtainable or even if obtainable, if such majority so
directs, independent legal counsel in a written opinion 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 Investment Company Act) or any other right to which he or she
may be lawfully entitled.

(e) Subject to any limitations provided by the Investment Company Act and this
Declaration, the Trust shall have the power and authority to indemnify 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.

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 Investment Company 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 __ 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, the
Registrant's Custodian and Transfer Agent.

Item 32.  Management Services

         Not Applicable

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.

<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 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 20th day of April 2004.

                             /s/ Anne F. Ackerley
                             ------------------------------------------------
                             Anne F. Ackerley
                             Sole Initial Trustee, President, Chief Executive
                             Officer and Principal 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 20th day of April 2004.

NAME                                 TITLE

/s/ Anne F. Ackerley
- ------------------------------
Anne F. Ackerley                     Sole Initial Trustee, President, Chief
                                     Executive Officer and Principal
                                     Financial Officer


<PAGE>


INDEX TO EXHIBITS

(a) Agreement and Declaration of Trust
(b) By-Laws

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A
<SEQUENCE>3
<FILENAME>s879439.txt
<DESCRIPTION>EX. (A) - AGREEMENT & DECLARATION OF TRUST
<TEXT>
                          BLACKROCK VARIABLE RATE AND
                     INFLATION PROTECTED SECURITIES TRUST









                      AGREEMENT AND DECLARATION OF TRUST






















                          Dated as of April 20, 2004


<PAGE>


<TABLE>
<CAPTION>
                                          TABLE OF CONTENTS

                                                                                                 Page

                                              ARTICLE I

                                              The Trust

<S>                                                                                                <C>
1.1      Name.......................................................................................1
1.2      Definitions................................................................................1


                                             ARTICLE II

                                              Trustees

2.1      Number and Qualification...................................................................3
2.2      Term and Election..........................................................................4
2.3      Resignation and Removal....................................................................4
2.4      Vacancies..................................................................................5
2.5      Meetings...................................................................................5
2.6      Trustee Action by Written Consent..........................................................6
2.7      Officers...................................................................................6


                                             ARTICLE III

                                    Powers and Duties of Trustees

3.1      General....................................................................................6
3.2      Investments................................................................................7
3.3      Legal Title................................................................................7
3.4      Issuance and Repurchase of Shares..........................................................8
3.5      Borrow Money or Utilize Leverage...........................................................8
3.6      Delegation; Committees.....................................................................8
3.7      Collection and Payment.....................................................................8
3.8      Expenses...................................................................................9
3.9      By-Laws....................................................................................9
3.10     Miscellaneous Powers.......................................................................9
3.11     Further Powers............................................................................10


                                             ARTICLE IV

                         Advisory, Management and Distribution Arrangements

4.1      Advisory and Management Arrangements......................................................10
4.2      Distribution Arrangements.................................................................11
4.3      Parties to Contract.......................................................................11


                                              ARTICLE V

                                      Limitations of Liability
                                         and Indemnification

5.1      No Personal Liability of Shareholders, Trustees, etc......................................11
5.2      Mandatory Indemnification.................................................................12
5.3      No Bond Required of Trustees..............................................................14
5.4      No Duty of Investigation; Notice in Trust Instruments, etc................................14
5.5      Reliance on Experts, etc..................................................................14


                                             ARTICLE VI

                                    Shares of Beneficial Interest

6.1      Beneficial Interest.......................................................................15
6.2      Other Securities..........................................................................15
6.3      Rights of Shareholders....................................................................15
6.4      Trust Only................................................................................15
6.5      Issuance of Shares........................................................................16
6.6      Register of Shares........................................................................16
6.7      Transfer Agent and Registrar..............................................................16
6.8      Transfer of Shares........................................................................17
6.9      Notices...................................................................................17


                                             ARTICLE VII

                                             Custodians

7.1      Appointment and Duties....................................................................17
7.2      Central Certificate System................................................................18


                                            ARTICLE VIII

                                             Redemption

8.1      Redemptions...............................................................................18
8.2      Disclosure of Holding.....................................................................19


                                             ARTICLE IX

                                  Determination of Net Asset Value
                                    Net Income and Distributions

9.1      Net Asset Value...........................................................................19
9.2      Distributions to Shareholders.............................................................19
9.3      Power to Modify Foregoing Procedures......................................................20


                                              ARTICLE X

                                            Shareholders

10.1     Meetings of Shareholders..................................................................20
10.2     Voting....................................................................................20
10.3     Notice of Meeting and Record Date.........................................................21
10.4     Quorum and Required Vote..................................................................21
10.5     Proxies, etc..............................................................................22
10.6     Reports...................................................................................22
10.7     Inspection of Records.....................................................................23
10.8     Shareholder Action by Written Consent.....................................................23


                                             ARTICLE XI

                                   Duration; Termination of Trust;
                                      Amendment; Mergers, Etc.

11.1     Duration..................................................................................23
11.2     Termination...............................................................................23
11.3     Amendment Procedure.......................................................................24
11.4     Merger, Consolidation and Sale of Assets..................................................25
11.5     Subsidiaries..............................................................................25
11.6     Conversion................................................................................26
11.7     Certain Transactions......................................................................26


                                             ARTICLE XII

                                            Miscellaneous

12.1     Filing....................................................................................28
12.2     Resident Agent............................................................................28
12.3     Governing Law.............................................................................29
12.4     Counterparts..............................................................................29
12.5     Reliance by Third Parties.................................................................29
12.6     Provisions in Conflict with Law or Regulation.............................................29
</TABLE>

<PAGE>




                          BLACKROCK VARIABLE RATE AND
                     INFLATION PROTECTED SECURITIES TRUST

                      AGREEMENT AND DECLARATION OF TRUST


                  AGREEMENT AND DECLARATION OF TRUST made as of the 20th day of
April, 2004, by the Trustees hereunder, and by the holders of shares of
beneficial interest issued hereunder as hereinafter provided.

                  WHEREAS, this Trust has been formed to carry on business as
set forth more particularly hereinafter;

                  WHEREAS, this Trust is authorized to issue an unlimited number
of its shares of beneficial interest all in accordance with the provisions
hereinafter set forth;

                  WHEREAS, the Trustees have agreed to manage all property
coming into their hands as Trustees of a Delaware statutory trust in accordance
with the provisions hereinafter set forth; and

                  WHEREAS, the parties hereto intend that the Trust created by
this Declaration and the Certificate of Trust filed with the Secretary of State
of the State of Delaware on April 20, 2004 shall constitute a statutory trust
under the Delaware Statutory Trust Act and that this Declaration shall
constitute the governing instrument of such statutory trust.

                  NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities, and other assets which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of
the same upon the following terms and conditions for the benefit of the holders
from time to time of shares of beneficial interest in this Trust as hereinafter
set forth.


                                    ARTICLE I

                                    The Trust

                  1.1 Name. This Trust shall be known as the "BlackRock
Variable Rate and Inflation Protected Securities Trust" and the Trustees shall
conduct the business of the Trust under that name or any other name or names
as they may from time to time determine.

                  1.2 Definitions. As used in this Declaration, the following
terms shall have the following meanings:

                  The "1940 Act" refers to the Investment Company Act of 1940
and the rules and regulations promulgated thereunder and exemptions granted
therefrom, as amended from time to time.

                  The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person" and "Principal Underwriter" shall have the meanings given
them in the 1940 Act.

                  "By-Laws" shall mean the By-Laws of the Trust as amended from
time to time by the Trustees.

                  "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.

                  "Commission" shall mean the Securities and Exchange
Commission.

                  "Declaration" shall mean this Agreement and Declaration of
Trust, as amended, supplemented or amended and restated from time to time.

                  "Delaware Statutory Trust Statute" shall mean the provisions
of the Delaware Statutory Trust Act, 12 Del. C.ss.3801, et. seq., as such Act
may be amended from time to time.

                  "Delaware General Corporation Law" means the Delaware General
Corporation Law, 8 Del. C.ss.100, et. seq., as amended from time to time.

                  "Fundamental Policies" shall mean the investment policies and
restrictions as set forth from time to time in any Prospectus or contained in
any current Registration Statement of the Trust filed with the Commission or as
otherwise adopted by the Trustees and the Shareholders in accordance with the
requirements of the 1940 Act and designated as fundamental policies therein as
they may be amended from time to time in accordance with the requirements of the
1940 Act.

                  "Majority Shareholder Vote" shall mean a vote of "a majority
of the outstanding voting securities" (as such term is defined in the 1940 Act)
of the Trust with each class and series of Shares voting together as a single
class, except to the extent otherwise required by the 1940 Act or this
Declaration with respect to any one or more classes or series of Shares, in
which case the applicable proportion of such classes or series of Shares voting
as a separate class or series, as case may be, also will be required.

                  "Person" shall mean and include individuals, corporations,
partnerships, trusts, limited liability companies, associations, joint ventures
and other entities, whether or not legal entities, and governments and agencies
and political subdivisions thereof.

                  "Prospectus" shall mean the Prospectus of the Trust, if any,
as in effect from time to time under the Securities Act of 1933, as amended.

                  "Shareholders" shall mean as of any particular time the
holders of record of outstanding Shares of the Trust, at such time.

                  "Shares" shall mean the transferable units of beneficial
interest into which the beneficial interest in the Trust shall be divided from
time to time and includes fractions of Shares as well as whole Shares. In
addition, Shares also means any preferred shares or preferred units of
beneficial interest which may be issued from time to time, as described herein.
All references to Shares shall be deemed to be Shares of any or all series or
classes as the context may require.

                  "Trust" shall mean the trust established by this Declaration,
as amended from time to time, inclusive of each such amendment.

                  "Trust Property" shall mean as of any particular time any and
all property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust or the Trustees in such
capacity.

                  "Trustees" shall mean the signatories to this Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who at the time in question have been duly elected or
appointed and have qualified as trustees in accordance with the provisions
hereof and are then in office.


                                   ARTICLE II

                                    Trustees

                  2.1 Number and Qualification. Prior to a public offering of
Shares there may be a sole Trustee. Thereafter, the number of Trustees shall be
determined by a written instrument signed by a majority of the Trustees then in
office, provided that the number of Trustees shall be no less than two or more
than nine. No reduction in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration of his term. An
individual nominated as a Trustee shall be at least 21 years of age and not
older than 80 years of age at the time of nomination and not under legal
disability. Trustees need not own Shares and may succeed themselves in office.

                  2.2 Term and Election. The Board of Trustees shall be divided
into three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
trustees constituting the entire Board of Trustees. Within the limits above
specified, the number of the Trustees in each class shall be determined by
resolution of the Board of Trustees. The term of office of the first class shall
expire on the date of the first annual meeting of Shareholders or special
meeting in lieu thereof following the effective date of the Registration
Statement relating to the Shares under the Securities Act of 1933, as amended.
The term of office of the second class shall expire on the date of the second
annual meeting of Shareholders or special meeting in lieu thereof following the
effective date of the Registration Statement relating to the Shares under the
Securities Act of 1933, as amended. The term of office of the third class shall
expire on the date of the third annual meeting of Shareholders or special
meeting in lieu thereof following the effective date of the Registration
Statement relating to the Shares under the Securities Act of 1933, as amended.
Upon expiration of the term of office of each class as set forth above, the
number of Trustees in such class, as determined by the Board of Trustees, shall
be elected for a term expiring on the date of the third annual meeting of
Shareholders or special meeting in lieu thereof following such expiration to
succeed the Trustees whose terms of office expire. The Trustees shall be elected
at an annual meeting of the Shareholders or special meeting in lieu thereof
called for that purpose, except as provided in Section 2.3 of this Article and
each Trustee elected shall hold office until his or her successor shall have
been elected and shall have qualified. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office, or removal, of a Trustee.

                  2.3 Resignation and Removal. Any of the Trustees may resign
their trust (without need for prior or subsequent accounting) by an instrument
in writing signed by such Trustee and delivered or mailed to the Trustees or the
Chairman, if any, the President or the Secretary and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (provided the aggregate number of
Trustees after such removal shall not be less than the minimum number required
by Section 2.1 hereof) for cause only, and not without cause, and only by action
taken by a majority of the remaining Trustees followed by the holders of at
least seventy-five percent (75%) of the Shares then entitled to vote in an
election of such Trustee. Upon the resignation or removal of a Trustee, each
such resigning or removed Trustee shall execute and deliver such documents as
the remaining Trustees shall require for the purpose of conveying to the Trust
or the remaining Trustees any Trust Property held in the name of such resigning
or removed Trustee. Upon the incapacity or death of any Trustee, such Trustee's
legal representative shall execute and deliver on such Trustee's behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.

                  2.4 Vacancies. Whenever a vacancy in the Board of Trustees
shall occur, the remaining Trustees may fill such vacancy by appointing an
individual having the qualifications described in this Article by a written
instrument signed by a majority of the Trustees then in office or may leave such
vacancy unfilled or may reduce the number of Trustees; provided the aggregate
number of Trustees after such reduction shall not be less than the minimum
number required by Section 2.1 hereof; provided, further, that if the
Shareholders of any class or series of Shares are entitled separately to elect
one or more Trustees, a majority of the remaining Trustees or the sole remaining
Trustee elected by that class or series may fill any vacancy among the number of
Trustees elected by that class or series. Any vacancy created by an increase in
Trustees may be filled by the appointment of an individual having the
qualifications described in this Article made by a written instrument signed by
a majority of the Trustees then in office. No vacancy shall operate to annul
this Declaration or to revoke any existing agency created pursuant to the terms
of this Declaration. Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided herein, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by this
Declaration.

                  2.5 Meetings. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman, if any, or the President or any two
Trustees. Regular meetings of the Trustees may be held without call or notice at
a time and place fixed by the By-Laws or by resolution of the Trustees. Notice
of any other meeting shall be given by the Secretary and shall be delivered to
the Trustees orally not less than 24 hours, or in writing not less than 72
hours, before the meeting, but may be waived in writing by any Trustee either
before or after such meeting. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Trustee attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting has not been properly called or convened. A
quorum for all meetings of the Trustees shall be one-third, but not less than
two, of the Trustees. Unless provided otherwise in this Declaration and except
as required under the 1940 Act, any action of the Trustees may be taken at a
meeting by vote of a majority of the Trustees present (a quorum being present)
or without a meeting by written consent of a majority of the Trustees.

                  Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be one-third, but not less than two, of the members
thereof. Unless provided otherwise in this Declaration, any action of any such
committee may be taken at a meeting by vote of a majority of the members present
(a quorum being present) or without a meeting by written consent of all of the
members.

                  With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons in any action to be taken may
be counted for quorum purposes under this Section and shall be entitled to vote
to the extent not prohibited by the 1940 Act.

                  All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other; participation in a meeting pursuant to any such
communications system shall constitute presence in person at such meeting.

                  2.6 Trustee Action by Written Consent. Any action which may be
taken by Trustees by vote may be taken without a meeting if that number of the
Trustees, or members of a committee, as the case may be, required for approval
of such action at a meeting of the Trustees or of such committee consent to the
action in writing and the written consents are filed with the records of the
meetings of Trustees. Such consent shall be treated for all purposes as a vote
taken at a meeting of Trustees.

                  2.7 Officers. The Trustees shall elect a President, a
Secretary and a Treasurer and may elect a Chairman who shall serve at the
pleasure of the Trustees or until their successors are elected. The Trustees may
elect or appoint or may authorize the Chairman, if any, or President to appoint
such other officers or agents with such powers as the Trustees may deem to be
advisable. A Chairman shall, and the President, Secretary and Treasurer may, but
need not, be a Trustee.


                                   ARTICLE III

                          Powers and Duties of Trustees

                  3.1 General. The Trustees shall owe to the Trust and its
Shareholders the same fiduciary duties as owed by directors of corporations to
such corporations and their stockholders under the Delaware General Corporation
Law. The Trustees shall have exclusive and absolute control over the Trust
Property and over the business of the Trust to the same extent as if the
Trustees were the sole owners of the Trust Property and business in their own
right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid power. Such powers
of the Trustees may be exercised without order of or resort to any court.

                  3.2 Investments. The Trustees shall have power, subject to the
Fundamental Policies in effect from time to time with respect to the Trust to:

                           (a) manage, conduct, operate and carry on the
business of an investment company;

                           (b) subscribe for, invest in, reinvest in, purchase
or otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute
or otherwise deal in or dispose of any and all sorts of property, tangible or
intangible, including but not limited to securities of any type whatsoever,
whether equity or non-equity, of any issuer, evidences of indebtedness of any
person and any other rights, interests, instruments or property of any sort and
to exercise any and all rights, powers and privileges of ownership or interest
in respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons to exercise any of
said rights, powers and privileges in respect of any of said investments. The
Trustees shall not be limited by any law limiting the investments which may be
made by fiduciaries.

                  3.3 Legal Title. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person as nominee, custodian or pledgee, on such terms as the Trustees may
determine, provided that the interest of the Trust therein is appropriately
protected.

                  The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon his due election and qualification. Upon the ceasing of any person
to be a Trustee for any reason, such person shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.

                  3.4 Issuance and Repurchase of Shares. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in, Shares, including
Shares in fractional denominations, and, subject to the more detailed provisions
set forth in Articles VIII and IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
corporations formed under the Delaware General Corporation Law.

                  3.5 Borrow Money or Utilize Leverage. Subject to the
Fundamental Policies in effect from time to time with respect to the Trust, the
Trustees shall have the power to borrow money or otherwise obtain credit or
utilize leverage to the maximum extent permitted by law or regulation as such
may be needed from time to time and to secure the same by mortgaging, pledging
or otherwise subjecting as security the assets of the Trust, including the
lending of portfolio securities, and to endorse, guarantee, or undertake the
performance of any obligation, contract or engagement of any other person, firm,
association or corporation.

                  3.6 Delegation; Committees. The Trustees shall have the power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Trustees or otherwise as the Trustees may deem expedient, to at
least the same extent as such delegation is permitted to directors of
corporations formed under the Delaware General Corporation Law and is permitted
by the 1940 Act, as well as any further delegations the Trustees may determine
to be desirable, expedient or necessary in order to effect the purpose hereof.
The Trustees may designate one or more committees which shall have all or such
lesser portion of the authority of the entire Board of Trustees as the Trustees
shall determine from time to time except to the extent action by the entire
Board of Trustees or particular Trustees is required by the 1940 Act.

                  3.7 Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property or the Trust, the Trustees or any officer, employee
or agent of the Trust; to prosecute, defend, compromise or abandon any claims
relating to the Trust Property or the Trust, or the Trustees or any officer,
employee or agent of the Trust; to foreclose any security interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments. Except to the extent required
for a corporation formed under the Delaware General Corporation Law, the
Shareholders shall have no power to vote as to whether or not a court action,
legal proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders.

                  3.8 Expenses. The Trustees shall have power to incur and pay
out of the assets or income of the Trust any expenses which in the opinion of
the Trustees are necessary or incidental to carry out any of the purposes of
this Declaration, and the business of the Trust, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services, including legal,
underwriting, syndicating and brokerage services, as they in good faith may deem
reasonable and reimbursement for expenses reasonably incurred by themselves on
behalf of the Trust. The Trustees shall have the power, as frequently as they
may determine, to cause each Shareholder to pay directly, in advance or arrears,
for charges of distribution, of the custodian or transfer, Shareholder servicing
or similar agent, a pro rata amount as defined from time to time by the
Trustees, by setting off such charges due from such Shareholder from declared
but unpaid dividends or distributions owed such Shareholder and/or by reducing
the number of shares in the account of such Shareholder by that number of full
and/or fractional Shares which represents the outstanding amount of such charges
due from such Shareholder.

                  3.9 By-Laws. The Trustees shall have the exclusive authority
to adopt and from time to time amend or repeal By-Laws for the conduct of the
business of the Trust.

                  3.10 Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) purchase, and pay
for out of Trust Property, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisors, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (d) establish pension, profit-sharing, share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (e) make donations, irrespective of
benefit to the Trust, for charitable, religious, educational, scientific, civic
or similar purposes; (f) to the extent permitted by law, indemnify any Person
with whom the Trust has dealings, including without limitation any advisor,
administrator, manager, transfer agent, custodian, distributor or selected
dealer, or any other person as the Trustees may see fit to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the fiscal year of the Trust and the method
in which its accounts shall be kept; (i) notwithstanding the Fundamental
Policies of the Trust, convert the Trust to a master- feeder structure;
provided, however, the Trust obtains the approval of shareholders holding at
least a majority of the Trust's Shares present at a meeting of Shareholders at
which a quorum is present and (j) adopt a seal for the Trust but the absence of
such seal shall not impair the validity of any instrument executed on behalf of
the Trust.

                  3.11 Further Powers. The Trustees shall have the power to
conduct the business of the Trust and carry on its operations in any and all of
its branches and maintain offices both within and without the State of Delaware,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees. The Trustees will not be required to obtain any court order to deal
with the Trust Property.


                                   ARTICLE IV

               Advisory, Management and Distribution Arrangements

                  4.1 Advisory and Management Arrangements. Subject to the
requirements of applicable law as in effect from time to time, the Trustees may
in their discretion from time to time enter into advisory, administration or
management contracts (including, in each case, one or more sub-advisory,
sub-administration or sub-management contracts) whereby the other party to any
such contract shall undertake to furnish the Trustees such advisory,
administrative and management services, with respect to the Trust as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any provisions of this Declaration, the Trustees may authorize any advisor,
administrator or manager (subject to such general or specific instructions as
the Trustees may from time to time adopt) to effect investment transactions with
respect to the assets on behalf of the Trustees to the full extent of the power
of the Trustees to effect such transactions or may authorize any officer,
employee or Trustee to effect such transactions pursuant to recommendations of
any such advisor, administrator or manager (and all without further action by
the Trustees). Any such investment transaction shall be deemed to have been
authorized by all of the Trustees.

                  4.2 Distribution Arrangements. Subject to compliance with the
1940 Act, the Trustees may retain underwriters and/or placement agents to sell
Trust Shares. The Trustees may in their discretion from time to time enter into
one or more contracts, providing for the sale of the Shares of the Trust,
whereby the Trust may either agree to sell such Shares to the other party to the
contract or appoint such other party its sales agent for such Shares. In either
case, the contract shall be on such terms and conditions as the Trustees may in
their discretion determine not inconsistent with the provisions of this Article
IV or the By-Laws; and such contract may also provide for the repurchase or sale
of Shares of the Trust by such other party as principal or as agent of the Trust
and may provide that such other party may enter into selected dealer agreements
with registered securities dealers and brokers and servicing and similar
agreements with persons who are not registered securities dealers to further the
purposes of the distribution or repurchase of the Shares of the Trust.

                  4.3 Parties to Contract. Any contract of the character
described in Sections 4.1 and 4.2 of this Article IV or in Article VII hereof
may be entered into with any Person, although one or more of the Trustees,
officers or employees of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any Person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this Article IV
or the By-Laws. The same Person may be the other party to contracts entered into
pursuant to Sections 4.1 and 4.2 above or Article VII, and any individual may be
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts mentioned in this Section 4.3.


                                    ARTICLE V

                            Limitations of Liability
                               and Indemnification

                  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, 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
1940 Act) nor parties to the proceeding ("Disinterested Non-Party Trustees"),
that the indemnitee is entitled to indemnification hereunder, or (2) if such
quorum is not obtainable or even if obtainable, if such majority so directs,
independent legal counsel in a written opinion 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.

                  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.


                                   ARTICLE VI

                          Shares of Beneficial Interest

                  6.1 Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into an unlimited number of transferable shares of
beneficial interest, par value $.001 per share. All Shares issued in accordance
with the terms hereof, including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully paid
and, except as provided in the last sentence of Section 3.8, nonassessable when
the consideration determined by the Trustees (if any) therefor shall have been
received by the Trust.

                  6.2 Other Securities. The Trustees may, subject to the
Fundamental Policies and the requirements of the 1940 Act, authorize and issue
such other securities of the Trust as they determine to be necessary, desirable
or appropriate, having such terms, rights, preferences, privileges, limitations
and restrictions as the Trustees see fit, including preferred interests, debt
securities or other senior securities. To the extent that the Trustees authorize
and issue preferred shares of any class or series, they are hereby authorized
and empowered to amend or supplement this Declaration as they deem necessary or
appropriate, including to comply with the requirements of the 1940 Act or
requirements imposed by the rating agencies or other Persons, all without the
approval of Shareholders. Any such supplement or amendment shall be filed as is
necessary. The Trustees are also authorized to take such actions and retain such
persons as they see fit to offer and sell such securities.

                  6.3 Rights of Shareholders. The Shares shall be personal
property giving only the rights in this Declaration specifically set forth. The
ownership of the Trust Property of every description and the right to conduct
any business herein before described are vested exclusively in the Trustees, and
the Shareholders shall have no interest therein other than the beneficial
interest conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to share or assume any losses of the Trust or,
subject to the right of the Trustees to charge certain expenses directly to
Shareholders, as provided in the last sentence of Section 3.8, suffer an
assessment of any kind by virtue of their ownership of Shares. The Shares shall
not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights (except as specified in this Section 6.3, in Section 11.4 or as
specified by the Trustees when creating the Shares, as in preferred shares).

                  6.4 Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.

                  6.5 Issuance of Shares. The Trustees, in their discretion, may
from time to time without vote of the Shareholders issue Shares including
preferred shares that may have been established pursuant to Section 6.2, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times, and on such
terms as the Trustees may determine, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of, liabilities) and businesses. The Trustees may from time to time
divide or combine the Shares into a greater or lesser number without thereby
changing the proportionate beneficial interest in such Shares. Issuances and
redemptions of Shares may be made in whole Shares and/or l/l,000ths of a Share
or multiples thereof as the Trustees may determine.

                  6.6 Register of Shares. A register shall be kept at the
offices of the Trust or any transfer agent duly appointed by the Trustees under
the direction of the Trustees which shall contain the names and addresses of the
Shareholders and the number of Shares held by them respectively and a record of
all transfers thereof. Separate registers shall be established and maintained
for each class or series of Shares. Each such register shall be conclusive as to
who are the holders of the Shares of the applicable class or series of Shares
and who shall be entitled to receive dividends or distributions or otherwise to
exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled
to receive payment of any dividend or distribution, nor to have notice given to
him as herein provided, until he has given his address to a transfer agent or
such other officer or agent of the Trustees as shall keep the register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate fees therefore and rules and regulations
as to their use.

                  6.7 Transfer Agent and Registrar. The Trustees shall have
power to employ a transfer agent or transfer agents, and a registrar or
registrars, with respect to the Shares. The transfer agent or transfer agents
may keep the applicable register and record therein, the original issues and
transfers, if any, of the said Shares. Any such transfer agents and/or
registrars shall perform the duties usually performed by transfer agents and
registrars of certificates of stock in a corporation, as modified by the
Trustees.

                  6.8 Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by its agent thereto
duly authorized in writing, upon delivery to the Trustees or a transfer agent of
the Trust of a duly executed instrument of transfer, together with such evidence
of the genuineness of each such execution and authorization and of other matters
as may reasonably be required. Upon such delivery the transfer shall be recorded
on the applicable register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereof and neither the Trustees nor any transfer agent or registrar nor
any officer, employee or agent of the Trust shall be affected by any notice of
the proposed transfer.

                  Any person becoming entitled to any Shares in consequence of
the death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the applicable register of Shares as the
holder of such Shares upon production of the proper evidence thereof to the
Trustees or a transfer agent of the Trust, but until such record is made, the
Shareholder of record shall be deemed to be the holder of such for all purposes
hereof, and neither the Trustees nor any transfer agent or registrar nor any
officer or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law.

                  6.9 Notices. Any and all notices to which any Shareholder
hereunder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage prepaid, addressed to any Shareholder of
record at his last known address as recorded on the applicable register of the
Trust.


                                   ARTICLE VII

                                   Custodians

                  7.1 Appointment and Duties. The Trustees shall at all times
employ a custodian or custodians, meeting the qualifications for custodians for
portfolio securities of investment companies contained in the 1940 Act, as
custodian with respect to the assets of the Trust. Any custodian shall have
authority as agent of the Trust with respect to which it is acting as determined
by the custodian agreement or agreements, but subject to such restrictions,
limitations and other requirements, if any, as may be contained in the By-Laws
of the Trust and the 1940 Act:

                  (1) to hold the securities owned by the Trust and deliver the
         same upon written order;

                  (2) to receive any receipt for any moneys due to the Trust and
         deposit the same in its own banking department (if a bank) or elsewhere
         as the Trustees may direct;

                  (3) to disburse such funds upon orders or vouchers;

                  (4) if authorized by the Trustees, to keep the books and
         accounts of the Trust and furnish clerical and accounting services; and

                  (5) if authorized to do so by the Trustees, to compute the net
         income or net asset value of the Trust;

all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian.

                  The Trustees may also authorize each custodian to employ one
or more sub-custodians from time to time to perform such of the acts and
services of the custodian and upon such terms and conditions, as may be agreed
upon between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall meet the qualifications for
custodians contained in the 1940 Act.

                  7.2 Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other Person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class of any
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.


                                  ARTICLE VIII

                                   Redemption

                  8.1 Redemptions. The Shares of the Trust are not redeemable by
the holders.

                  8.2 Disclosure of Holding. The holders of Shares or other
securities of the Trust shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares or
other securities of the Trust as the Trustees deem necessary to comply with the
provisions of the Code, the 1940 or other applicable laws or regulations, or to
comply with the requirements of any other taxing or regulatory authority.


                                   ARTICLE IX

                        Determination of Net Asset Value
                          Net Income and Distributions

                  9.1 Net Asset Value. The net asset value of each outstanding
Share of the Trust shall be determined at such time or times on such days as the
Trustees may determine, in accordance with the 1940 Act. The method of
determination of net asset value shall be determined by the Trustees and shall
be as set forth in the Prospectus or as may otherwise be determined by the
Trustees. The power and duty to make the net asset value calculations may be
delegated by the Trustees and shall be as generally set forth in the Prospectus
or as may otherwise be determined by the Trustees.

                  9.2 Distributions to Shareholders. (a) The Trustees shall from
time to time distribute ratably among the Shareholders of any class of Shares,
or any series of any such class, in accordance with the number of outstanding
full and fractional Shares of such class or any series of such class, such
proportion of the net profits, surplus (including paid-in surplus), capital, or
assets held by the Trustees as they may deem proper or as may otherwise be
determined in accordance with this Declaration. Any such distribution may be
made in cash or property (including without limitation any type of obligations
of the Trust or any assets thereof) or Shares of any class or series or any
combination thereof, and the Trustees may distribute ratably among the
Shareholders of any class of shares or series of any such class, in accordance
with the number of outstanding full and fractional Shares of such class or any
series of such class, additional Shares of any class or series in such manner,
at such times, and on such terms as the Trustees may deem proper or as may
otherwise be determined in accordance with this Declaration.

                           (b) Distributions pursuant to this Section 9.2 may be
among the Shareholders of record of the applicable class or series of Shares at
the time of declaring a distribution or among the Shareholders of record at such
later date as the Trustees shall determine and specify.

                           (c) The Trustees may always retain from the net
profits such amount as they may deem necessary to pay the debts or expenses of
the Trust or to meet obligations of the Trust, or as they otherwise may deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business.

                           (d) Inasmuch as the computation of net income and
gains for Federal income tax purposes may vary from the computation thereof on
the books, the above provisions shall be interpreted to give the Trustees the
power in their discretion to distribute for any fiscal year as ordinary
dividends and as capital gains distributions, respectively, additional amounts
sufficient to enable the Trust to avoid or reduce liability for taxes.

                  9.3 Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article IX, the Trustees may prescribe, in
their absolute discretion except as may be required by the 1940 Act, such other
bases and times for determining the per share asset value of the Trust's Shares
or net income, or the declaration and payment of dividends and distributions as
they may deem necessary or desirable for any reason, including to enable the
Trust to comply with any provision of the 1940 Act, or any securities exchange
or association registered under the Securities Exchange Act of 1934, or any
order of exemption issued by the Commission, all as in effect now or hereafter
amended or modified.


                                    ARTICLE X

                                  Shareholders

                  10.1 Meetings of Shareholders. The Trust shall hold annual
meetings of the Shareholders (provided that the Trust's initial annual meeting
of Shareholders may occur up to one year after the completion of its initial
fiscal year). A special meeting of Shareholders may be called at any time by a
majority of the Trustees or the President and shall be called by any Trustee for
any proper purpose upon written request of Shareholders of the Trust holding in
the aggregate not less than 51% of the outstanding Shares of the Trust or class
or series of Shares having voting rights on the matter, such request specifying
the purpose or purposes for which such meeting is to be called. Any shareholder
meeting, including a Special Meeting, shall be held within or without the State
of Delaware on such day and at such time as the Trustees shall designate.

                  10.2 Voting. Shareholders shall have no power to vote on any
matter except matters on which a vote of Shareholders is required by applicable
law, this Declaration or resolution of the Trustees. Except as otherwise
provided herein, any matter required to be submitted to Shareholders and
affecting one or more classes or series of Shares shall require approval by the
required vote of all the affected classes and series of Shares voting together
as a single class; provided, however, that as to any matter with respect to
which a separate vote of any class or series of Shares is required by the 1940
Act, such requirement as to a separate vote by that class or series of Shares
shall apply in addition to a vote of all the affected classes and series voting
together as a single class. Shareholders of a particular class or series of
Shares shall not be entitled to vote on any matter that affects only one or more
other classes or series of Shares. There shall be no cumulative voting in the
election or removal of Trustees.

                  10.3 Notice of Meeting and Record Date. Notice of all meetings
of Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder of record entitled to vote
thereat at its registered address, mailed at least 10 days and not more than 90
days before the meeting or otherwise in compliance with applicable law. Only the
business stated in the notice of the meeting shall be considered at such
meeting. Any adjourned meeting may be held as adjourned one or more times
without further notice not later than 120 days after the record date. For the
purposes of determining the Shareholders who are entitled to notice of and to
vote at any meeting the Trustees may, without closing the transfer books, fix a
date not more than 90 nor less than 10 days prior to the date of such meeting of
Shareholders as a record date for the determination of the Persons to be treated
as Shareholders of record for such purposes.

                  10.4 Quorum and Required Vote. (a) The holders of a majority
of the Shares entitled to vote on any matter at a meeting present in person or
by proxy shall constitute a quorum at such meeting of the Shareholders for
purposes of conducting business on such matter. The absence from any meeting, in
person or by proxy, of a quorum of Shareholders for action upon any given matter
shall not prevent action at such meeting upon any other matter or matters which
may properly come before the meeting, if there shall be present thereat, in
person or by proxy, a quorum of Shareholders in respect of such other matters.

                           (b) Subject to any provision of applicable law, this
Declaration or a resolution of the Trustees specifying a greater or a lesser
vote requirement for the transaction of any item of business at any meeting of
Shareholders, (i) the affirmative vote of a majority of the Shares present in
person or represented by proxy and entitled to vote on the subject matter shall
be the act of the Shareholders with respect to such matter, and (ii) where a
separate vote of one or more classes or series of Shares is required on any
matter, the affirmative vote of a majority of the Shares of such class or series
of Shares present in person or represented by proxy at the meeting shall be the
act of the Shareholders of such class or series with respect to such matter.

                  10.5 Proxies, etc. At any meeting of Shareholders, any holder
of Shares entitled to vote thereat may vote by properly executed proxy, provided
that no proxy shall be voted at any meeting unless it shall have been placed on
file with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote
shall be taken. Pursuant to a resolution of a majority of the Trustees, proxies
may be solicited in the name of one or more Trustees or one or more of the
officers or employees of the Trust. No proxy shall be valid after the expiration
of 11 months from the date thereof, unless otherwise provided in the proxy. Only
Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.

                  10.6 Reports. The Trustees shall cause to be prepared at least
annually and more frequently to the extent and in the form required by law,
regulation or any exchange on which Trust Shares are listed a report of
operations containing a balance sheet and statement of income and undistributed
income of the Trust prepared in conformity with generally accepted accounting
principles and an opinion of an independent public accountant on such financial
statements. Copies of such reports shall be mailed to all Shareholders of record
within the time required by the 1940 Act, and in any event within a reasonable
period preceding the meeting of Shareholders. The Trustees shall, in addition,
furnish to the Shareholders at least semi-annually to the extent required by
law, interim reports containing an unaudited balance sheet of the Trust as of
the end of such period and an unaudited statement of income and surplus for the
period from the beginning of the current fiscal year to the end of such period.

                  10.7 Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a corporation formed under the Delaware General Corporation Law.

                  10.8 Shareholder Action by Written Consent. Any action which
may be taken by Shareholders by vote may be taken without a meeting if the
holders entitled to vote thereon of the proportion of Shares required for
approval of such action at a meeting of Shareholders pursuant to Section 10.4
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.


                                   ARTICLE XI

                         Duration; Termination of Trust;
                            Amendment; Mergers, Etc.

                  11.1 Duration. Subject to possible termination in accordance
with the provisions of Section 11.2 hereof, the Trust created hereby shall have
perpetual existence.

                  11.2 Termination. (a) The Trust may be dissolved, after a
majority of the Trustees have approved a resolution therefor, upon approval by
not less than 75% of the Shares of each class or series outstanding and entitled
to vote, voting as separate classes or series, unless such resolution has been
approved by 80% of the Trustees, in which case approval by a Majority
Shareholder Vote shall be required. Upon the dissolution of the Trust:

                                    (i) The Trust shall carry on no business
         except for the purpose of winding up its affairs.

                                    (ii) The Trustees shall proceed to wind up
         the affairs of the Trust and all of the powers of the Trustees under
         this Declaration shall continue until the affairs of the Trust shall
         have been wound up, including the power to fulfill or discharge the
         contracts of the Trust, collect its assets, sell, convey, assign,
         exchange, merge where the Trust is not the survivor, transfer or
         otherwise dispose of all or any part of the remaining Trust Property to
         one or more Persons at public or private sale for consideration which
         may consist in whole or in part in cash, securities or other property
         of any kind, discharge or pay its liabilities, and do all other acts
         appropriate to liquidate its business; provided that any sale,
         conveyance, assignment, exchange, merger in which the Trust is not the
         survivor, transfer or other disposition of all or substantially all the
         Trust Property of the Trust shall require approval of the principal
         terms of the transaction and the nature and amount of the consideration
         by Shareholders with the same vote as required to open-end the Trust.

                                    (iii) After paying or adequately providing
         for the payment of all liabilities, and upon receipt of such releases,
         indemnities and refunding agreements, as they deem necessary for their
         protection, the Trustees may distribute the remaining Trust Property,
         in cash or in kind or partly each, among the Shareholders according to
         their respective rights.

                           (b) After the winding up and termination of the Trust
and distribution to the Shareholders as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust an instrument in
writing setting forth the fact of such termination and shall execute and file a
certificate of cancellation with the Secretary of State of the State of
Delaware. Upon termination of the Trust, the Trustees shall thereupon be
discharged from all further liabilities and duties hereunder, and the rights and
interests of all Shareholders shall thereupon cease.

                  11.3 Amendment Procedure. (a) Except as provided in subsection
(b) of this Section 11.3, this Declaration may be amended, after a majority of
the Trustees have approved a resolution therefor, by the affirmative vote of the
holders of not less than a majority of the affected Shares. The Trustees also
may amend this Declaration without any vote of Shareholders of any class or
series to divide the Shares of the Trust into one or more classes or additional
classes, or one or more series of any such class or classes, to change the name
of the Trust or any class or series of Shares, to make any change that does not
adversely affect the relative rights or preferences of any Shareholder, as they
may deem necessary, or to conform this Declaration to the requirements of the
1940 Act or any other applicable federal laws or regulations including pursuant
to Section 6.2 or the requirements of the regulated investment company
provisions of the Code, but the Trustees shall not be liable for failing to do
so.

                           (b) No amendment may be made to Section 2.1, Section
2.2, Section 2.3, Section 3.9, Section 5.1, Section 5.2, Section 11.2(a), this
Section 11.3, Section 11.4, Section 11.6 or Section 11.7 of this Declaration and
no amendment may be made to this Declaration which would change any rights with
respect to any Shares of the Trust by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto (except that this provision shall not limit the ability of
the Trustees to authorize, and to cause the Trust to issue, other securities
pursuant to Section 6.2), except after a majority of the Trustees have approved
a resolution therefor, by the affirmative vote of the holders of not less than
seventy-five percent (75%) of the Shares of each affected class or series
outstanding, voting as separate classes or series, unless such amendment has
been approved by 80% of the Trustees, in which case approval by a Majority
Shareholder Vote shall be required. Nothing contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.

                           (c) An amendment duly adopted by the requisite vote
of the Board of Trustees and, if required, the Shareholders as aforesaid, shall
become effective at the time of such adoption or at such other time as may be
designated by the Board of Trustees or Shareholders, as the case may be. A
certification in recordable form signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the Trustees and, if
required, the Shareholders as aforesaid, or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when lodged among the records of the
Trust or at such other time designated by the Board.

                  Notwithstanding any other provision hereof, until such time as
a Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of Shares of the Trust shall have become effective,
this Declaration may be terminated or amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.

                  11.4 Merger, Consolidation and Sale of Assets. Except as
provided in Section 11.7, the Trust may merge or consolidate with any other
corporation, association, trust or other organization or may sell, lease or
exchange all or substantially all of the Trust Property or the property,
including its good will, upon such terms and conditions and for such
consideration when and as authorized by two- thirds of the Trustees and approved
by a Majority Shareholder Vote and any such merger, consolidation, sale, lease
or exchange shall be determined for all purposes to have been accomplished under
and pursuant to the statutes of the State of Delaware.

                  11.5 Subsidiaries. Without approval by Shareholders, the
Trustees may cause to be organized or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations to take
over all of the Trust Property or to carry on any business in which the Trust
shall directly or indirectly have any interest, and to sell, convey and transfer
all or a portion of the Trust Property to any such corporation, trust, limited
liability company, association or organization in exchange for the shares or
securities thereof, or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such corporation, trust,
limited liability company, partnership, association or organization, or any
corporation, partnership, trust, limited liability company, association or
organization in which the Trust holds or is about to acquire shares or any other
interests.

                  11.6 Conversion. Notwithstanding any other provisions of this
Declaration or the By-Laws of the Trust, a favorable vote of a majority of the
Trustees then in office followed by the favorable vote of the holders of not
less than seventy-five percent (75%) of the Shares of each affected class or
series outstanding, voting as separate classes or series, shall be required to
approve, adopt or authorize an amendment to this Declaration that makes the
Shares a "redeemable security" as that term is defined in the 1940 Act, unless
such amendment has been approved by 80% of the Trustees, in which case approval
by a Majority Shareholder Vote shall be required. Upon the adoption of a
proposal to convert the Trust from a "closed-end company" to an "open-end
company" as those terms are defined by the 1940 Act and the necessary amendments
to this Declaration to permit such a conversion of the Trust's outstanding
Shares entitled to vote, the Trust shall, upon complying with any requirements
of the 1940 Act and state law, become an "open-end" investment company. Such
affirmative vote or consent shall be in addition to the vote or consent of the
holders of the Shares otherwise required by law, or any agreement between the
Trust and any national securities exchange.

                  11.7 Certain Transactions. (a) Notwithstanding any other
provision of this Declaration and subject to the exceptions provided in
paragraph (d) of this Section, the types of transactions described in paragraph
(c) of this Section shall require the affirmative vote or consent of a majority
of the Trustees then in office followed by the affirmative vote of the holders
of not less than seventy-five percent (75%) of the Shares of each affected class
or series outstanding, voting as separate classes or series, when a Principal
Shareholder (as defined in paragraph (b) of this Section) is a party to the
transaction. Such affirmative vote or consent shall be in addition to the vote
or consent of the holders of Shares otherwise required by law or by the terms of
any class or series of preferred stock, whether now or hereafter authorized, or
any agreement between the Trust and any national securities exchange.

                           (b) The term "Principal Shareholder" shall mean any
corporation, Person or other entity which is the beneficial owner, directly or
indirectly, of five percent (5%) or more of the outstanding Shares of all
outstanding classes or series and shall include any affiliate or associate, as
such terms are defined in clause (ii) below, of a Principal Shareholder. For the
purposes of this Section, in addition to the Shares which a corporation, Person
or other entity beneficially owns directly, (a) any corporation, Person or other
entity shall be deemed to be the beneficial owner of any Shares (i) which it has
the right to acquire pursuant to any agreement or upon exercise of conversion
rights or warrants, or otherwise (but excluding share options granted by the
Trust) or (ii) which are beneficially owned, directly or indirectly (including
Shares deemed owned through application of clause (i) above), by any other
corporation, Person or entity with which its "affiliate" or "associate" (as
defined below) has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of Shares, or which is its
"affiliate" or "associate" as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, and (b)
the outstanding Shares shall include Shares deemed owned through application of
clauses (i) and (ii) above but shall not include any other Shares which may be
issuable pursuant to any agreement, or upon exercise of conversion rights or
warrants, or otherwise.

                           (c) This Section shall apply to the following
transactions:

                                    (i) The merger or consolidation of the Trust
         or any subsidiary of the Trust with or into any Principal Shareholder.

                                    (ii) The issuance of any securities of the
         Trust to any Principal Shareholder for cash (other than pursuant to any
         automatic dividend reinvestment plan).

                                    (iii) The sale, lease or exchange of all or
         any substantial part of the assets of the Trust to any Principal
         Shareholder (except assets having an aggregate fair market value of
         less than 2% of the total assets of the Trust, aggregating for the
         purpose of such computation all assets sold, leased or exchanged in any
         series of similar transactions within a twelve-month period.)

                                    (iv) The sale, lease or exchange to the
         Trust or any subsidiary thereof, in exchange for securities of the
         Trust, of any assets of any Principal Shareholder (except assets having
         an aggregate fair market value of less than 2% of the total assets of
         the Trust, aggregating for the purposes of such computation all assets
         sold, leased or exchanged in any series of similar transactions within
         a twelve-month period).

                           (d) The provisions of this Section shall not be
applicable to (i) any of the transactions described in paragraph (c) of this
Section if 80% of the Trustees shall by resolution have approved a memorandum of
understanding with such Principal Shareholder with respect to and substantially
consistent with such transaction, in which case approval by a Majority
Shareholder Vote shall be the only vote of Shareholders required by this
Section, or (ii) any such transaction with any entity of which a majority of the
outstanding shares of all classes and series of a stock normally entitled to
vote in elections of directors is owned of record or beneficially by the Trust
and its subsidiaries.

                           (e) The Board of Trustees shall have the power and
duty to determine for the purposes of this Section on the basis of information
known to the Trust whether (i) a corporation, person or entity beneficially owns
five percent (5%) or more of the outstanding Shares of any class or series, (ii)
a corporation, person or entity is an "affiliate" or "associate" (as defined
above) of another, (iii) the assets being acquired or leased to or by the Trust
or any subsidiary thereof constitute a substantial part of the assets of the
Trust and have an aggregate fair market value of less than 2% of the total
assets of the Trust, and (iv) the memorandum of understanding referred to in
paragraph (d) hereof is substantially consistent with the transaction covered
thereby. Any such determination shall be conclusive and binding for all purposes
of this Section.



                                   ARTICLE XII

                                  Miscellaneous

                  12.1 Filing. (a) This Declaration and any amendment or
supplement hereto shall be filed in such places as may be required or as the
Trustees deem appropriate. Each amendment or supplement shall be accompanied by
a certificate signed and acknowledged by a Trustee stating that such action was
duly taken in a manner provided herein, and shall, upon insertion in the Trust's
minute book, be conclusive evidence of all amendments contained therein. A
restated Declaration, containing the original Declaration and all amendments and
supplements theretofore made, may be executed from time to time by a majority of
the Trustees and shall, upon insertion in the Trust's minute book, be conclusive
evidence of all amendments and supplements contained therein and may thereafter
be referred to in lieu of the original Declaration and the various amendments
and supplements thereto.

                           (b) The Trustees hereby authorize and direct a
Certificate of Trust, in the form attached hereto as Exhibit A, to be executed
and filed with the Office of the Secretary of State of the State of Delaware in
accordance with the Delaware Statutory Trust Act.

                  12.2 Resident Agent. The Trust shall maintain a resident agent
in the State of Delaware, which agent shall initially be The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801 The Trustees may
designate a successor resident agent, provided, however, that such appointment
shall not become effective until written notice thereof is delivered to the
office of the Secretary of the State.

                  12.3 Governing Law. This Declaration is executed by the
Trustees and delivered in the State of Delaware and with reference to the laws
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to laws of
said State and reference shall be specifically made to the Delaware General
Corporation Law as to the construction of matters not specifically covered
herein or as to which an ambiguity exists, although such law shall not be viewed
as limiting the powers otherwise granted to the Trustees hereunder and any
ambiguity shall be viewed in favor of such powers.

                  12.4 Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.

                  12.5 Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the name of the Trust, (c) the due authorization of the
execution of any instrument or writing, (d) the form of any vote passed at a
meeting of Trustees or Shareholders, (e) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (f) the form of any By Laws
adopted by or the identity of any officers elected by the Trustees, or (g) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any person dealing with the Trustees and their successors.

                  12.6 Provisions in Conflict with Law or Regulation. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.

                           (b) If any provision of this Declaration shall be
held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration in any jurisdiction.

<PAGE>



                  IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the day and year first above written.



                                            By: /s/ Anne F. Ackerley
                                               ----------------------------
                                               Anne F. Ackerley
                                               Sole Trustee

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.B
<SEQUENCE>4
<FILENAME>s879477.txt
<DESCRIPTION>EX. (B) - BYLAWS
<TEXT>




                                    BY-LAWS

                                      OF

                          BLACKROCK VARIABLE RATE AND
                     INFLATION PROTECTED SECURITIES TRUST












                          Dated as of April 20, 2004





<PAGE>


                               TABLE OF CONTENTS
                               -----------------

                                                                           Page
                                                                           ----

ARTICLE I - Shareholder Meetings.............................................1
                  1.1  Chairman..............................................1
                  1.2  Proxies; Voting.......................................1
                  1.3  Fixing Record Dates...................................1
                  1.4  Inspectors of Election................................1
                  1.5  Records at Shareholder Meetings.......................2

ARTICLE II - Trustees........................................................2
                  2.1  Annual and Regular Meetings...........................2
                  2.2  Chairman; Records.....................................3

ARTICLE III - Officers.......................................................3
                  3.1  Officers of the Trust.................................3
                  3.2  Election and Tenure...................................3
                  3.3  Removal of Officers...................................3
                  3.4  Bonds and Surety......................................4
                  3.5  President and Vice Presidents.........................4
                  3.6  Secretary.............................................4
                  3.7  Treasurer.............................................5
                  3.8  Other Officers and Duties.............................5

ARTICLE IV - Miscellaneous...................................................5
                  4.1  Depositories..........................................5
                  4.2  Signatures............................................6
                  4.3  Seal..................................................6

ARTICLE V- Stock Transfers...................................................6
                  5.1  Transfer Agents, Registrars and the Like..............6
                  5.2  Transfer of Shares....................................6
                  5.3  Registered Shareholders...............................7

ARTICLE VI - Amendment of By-Laws............................................7
                  6.1  Amendment and Repeal of By-Laws.......................7


<PAGE>

                          BLACKROCK VARIABLE RATE AND
                          ---------------------------
                      INFLATION PROTECTED SECURITIES TRUST
                      ------------------------------------

                                    BY-LAWS
                                    -------


         These By-Laws are made and adopted pursuant to Section 3.9 of the
Agreement and Declaration of Trust establishing BlackRock Variable Rate and
Inflation Protected Securities Trust dated as of April 20, 2004, as from time
to time amended (hereinafter called the "Declaration"). All words and terms
capitalized in these By-Laws shall have the meaning or meanings set forth for
such words or terms in the Declaration.


                                   ARTICLE I

                              Shareholder Meetings
                              --------------------

         1.1 Chairman. The Chairman, if any, shall act as chairman at all
meetings of the Shareholders; in the Chairman's absence, the Trustee or
Trustees present at each meeting may elect a temporary chairman for the
meeting, who may be one of themselves.

         1.2 Proxies; Voting. Shareholders may vote either in person or by duly
executed proxy and each full share represented at the meeting shall have one
vote, all as provided in Article 10 of the Declaration.

         1.3 Fixing Record Dates. For the purpose of determining the
Shareholders who are entitled to notice of or to vote or act at any meeting,
including any adjournment thereof, or who are entitled to participate in any
dividends, or for any other proper purpose, the Trustees may from time to time,
without closing the transfer books, fix a record date in the manner provided in
Section 10.3 of the Declaration. If the Trustees do not prior to any meeting of
Shareholders so fix a record date or close the transfer books, then the date of
mailing notice of the meeting or the date upon which the dividend resolution is
adopted, as the case may be, shall be the record date.

         1.4 Inspectors of Election. In advance of any meeting of Shareholders,
the Trustees may appoint Inspectors of Election to act at the meeting or any
adjournment thereof. If Inspectors of Election are not so appointed, the
Chairman, if any, of any meeting of Shareholders may, and on the request of any
Shareholder or Shareholder proxy shall, appoint Inspectors of Election of the
meeting. The number of Inspectors of Election shall be either one or three. If
appointed at the meeting on the request of one or more Shareholders or proxies,
a majority of Shares present shall determine whether one or three Inspectors of
Election are to be appointed, but failure to allow such determination by the
Shareholders shall not affect the validity of the appointment of Inspectors of
Election. In case any person appointed as Inspector of Election fails to appear
or fails or refuses to act, the vacancy may be filled by appointment made by
the Trustees in advance of the convening of the meeting or at the meeting by
the person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies, shall
receive votes, ballots or consents, shall hear and determine all challenges and
questions in any way arising in connection with the right to vote, shall count
and tabulate all votes or consents, determine the results, and do such other
acts as may be proper to conduct the election or vote with fairness to all
Shareholders. If there are three Inspectors of Election, the decision, act or
certificate of a majority is effective in all respects as the decision, act or
certificate of all. On request of the Chairman, if any, of the meeting, or of
any Shareholder or Shareholder proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them and
shall execute a certificate of any facts found by them.

         1.5 Records at Shareholder Meetings. At each meeting of the
Shareholders, there shall be made available for inspection at a convenient time
and place during normal business hours, if requested by Shareholders, the
minutes of the last previous Annual or Special Meeting of Shareholders of the
Trust and a list of the Shareholders of the Trust, as of the record date of the
meeting or the date of closing of transfer books, as the case may be. Such list
of Shareholders shall contain the name and the address of each Shareholder in
alphabetical order and the number of Shares owned by such Shareholder.
Shareholders shall have such other rights and procedures of inspection of the
books and records of the Trust as are granted to shareholders of a Delaware
business corporation.

                                   ARTICLE II

                                    Trustees
                                    --------

         2.1 Annual and Regular Meetings. Meetings of the Trustees shall be
held from time to time upon the call of the Chairman, if any, the President,
the Secretary or any two Trustees. Regular meetings of the Trustees may be held
without call or notice and shall generally be held quarterly. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Trustees need be stated in the notice or waiver of notice of such meeting, and
no notice need be given of action proposed to be taken by unanimous written
consent.

         2.2 Chairman; Records. The Chairman, if any, shall act as chairman at
all meetings of the Trustees; in absence of a chairman, the Trustees present
shall elect one of their number to act as temporary chairman. The results of
all actions taken at a meeting of the Trustees, or by unanimous written consent
of the Trustees, shall be recorded by the person appointed by the Board of
Trustees as the meeting secretary.


                                  ARTICLE III

                                    Officers
                                    --------

         3.1 Officers of the Trust. The officers of the Trust shall consist of
a President, a Secretary, a Treasurer and such other officers or assistant
officers as may be elected or authorized by the Trustees. Any two or more of
the offices may be held by the same Person, except that the same person may not
be both President and Secretary. No other officer of the Trust need be a
Trustee.

         3.2 Election and Tenure. At the initial organization meeting, the
Trustees shall elect the Chairman, if any, President, Secretary, Treasurer and
such other officers as the Trustees shall deem necessary or appropriate in
order to carry out the business of the Trust. Such officers shall serve at the
pleasure of the Trustees or until their successors have been duly elected and
qualified. The Trustees may fill any vacancy in office or add any additional
officers at any time.

         3.3 Removal of Officers. Any officer may be removed at any time, with
or without cause, by action of a majority of the Trustees. This provision shall
not prevent the making of a contract of employment for a definite term with any
officer and shall have no effect upon any cause of action which any officer may
have as a result of removal in breach of a contract of employment. Any officer
may resign at any time by notice in writing signed by such officer and
delivered or mailed to the Chairman, if any, President, or Secretary, and such
resignation shall take effect immediately upon receipt by the Chairman, if any,
President, or Secretary, or at a later date according to the terms of such
notice in writing.

         3.4 Bonds and Surety. Any officer may be required by the Trustees to
be bonded for the faithful performance of such officer's duties in such amount
and with such sureties as the Trustees may determine.

         3.5 President and Vice Presidents. The President shall be the chief
executive officer of the Trust and, subject to the control of the Trustees,
shall have general supervision, direction and control of the business of the
Trust and of its employees and shall exercise such general powers of management
as are usually vested in the office of President of a corporation. Subject to
direction of the Trustees, the President shall each have power in the name and
on behalf of the Trust to execute any and all loans, documents, contracts,
agreements, deeds, mortgages, registration statements, applications, requests,
filings and other instruments in writing, and to employ and discharge employees
and agents of the Trust. Unless otherwise directed by the Trustees, the
President shall have full authority and power, on behalf of all of the
Trustees, to attend and to act and to vote, on behalf of the Trust at any
meetings of business organizations in which the Trust holds an interest, or to
confer such powers upon any other persons, by executing any proxies duly
authorizing such persons. The President shall have such further authorities and
duties as the Trustees shall from time to time determine. In the absence or
disability of the President, the Vice-Presidents in order of their rank as
fixed by the Trustees or, if more than one and not ranked, the Vice-President
designated by the Trustees, shall perform all of the duties of the President,
and when so acting shall have all the powers of and be subject to all of the
restrictions upon the President. Subject to the direction of the Trustees, and
of the President, each Vice-President shall have the power in the name and on
behalf of the Trust to execute any and all instruments in writing, and, in
addition, shall have such other duties and powers as shall be designated from
time to time by the Trustees or by the President.

         3.6 Secretary. The Secretary shall maintain the minutes of all
meetings of, and record all votes of, Shareholders, Trustees and the Executive
Committee, if any. The Secretary shall be custodian of the seal of the Trust,
if any, and the Secretary (and any other person so authorized by the Trustees)
shall affix the seal, or if permitted, facsimile thereof, to any instrument
executed by the Trust which would be sealed by a Delaware business corporation
executing the same or a similar instrument and shall attest the seal and the
signature or signatures of the officer or officers executing such instrument on
behalf of the Trust. The Secretary shall also perform any other duties commonly
incident to such office in a Delaware business corporation, and shall have such
other authorities and duties as the Trustees shall from time to time determine.

         3.7 Treasurer. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, funds, securities,
notes receivable and other valuable papers and documents of the Trust, and
shall have and exercise under the supervision of the Trustees and of the
President all powers and duties normally incident to the office. The Treasurer
may endorse for deposit or collection all notes, checks and other instruments
payable to the Trust or to its order. The Treasurer shall deposit all funds of
the Trust in such depositories as the Trustees shall designate. The Treasurer
shall be responsible for such disbursement of the funds of the Trust as may be
ordered by the Trustees or the President. The Treasurer shall keep accurate
account of the books of the Trust's transactions which shall be the property of
the Trust, and which together with all other property of the Trust in the
Treasurer's possession, shall be subject at all times to the inspection and
control of the Trustees. Unless the Trustees shall otherwise determine, the
Treasurer shall be the principal accounting officer of the Trust and shall also
be the principal financial officer of the Trust. The Treasurer shall have such
other duties and authorities as the Trustees shall from time to time determine.
Notwithstanding anything to the contrary herein contained, the Trustees may
authorize any adviser, administrator, manager or transfer agent to maintain
bank accounts and deposit and disburse funds of any series of the Trust on
behalf of such series.

         3.8 Other Officers and Duties. The Trustees may elect such other
officers and assistant officers as they shall from time to time determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
shall assist that officer in the duties of the office. Each officer, employee
and agent of the Trust shall have such other duties and authority as may be
conferred upon such person by the Trustees or delegated to such person by the
President.

                                   ARTICLE IV

                                 Miscellaneous
                                 -------------

         4.1 Depositories. In accordance with Section 7.1 of the Declaration,
the funds of the Trust shall be deposited in such custodians as the Trustees
shall designate and shall be drawn out on checks, drafts or other orders signed
by such officer, officers, agent or agents (including the adviser,
administrator or manager), as the Trustees may from time to time authorize.

         4.2 Signatures. All contracts and other instruments shall be executed
on behalf of the Trust by its properly authorized officers, agent or agents, as
provided in the Declaration or By-laws or as the Trustees may from time to time
by resolution provide.

         4.3 Seal. The Trust is not required to have any seal, and the adoption
or use of a seal shall be purely ornamental and be of no legal effect. The
seal, if any, of the Trust may be affixed to any instrument, and the seal and
its attestation may be lithographed, engraved or otherwise printed on any
document with the same force and effect as if it had been imprinted and affixed
manually in the same manner and with the same force and effect as if done by a
Delaware business corporation. The presence or absence of a seal shall have no
effect on the validity, enforceability or binding nature of any document or
instrument that is otherwise duly authorized, executed and delivered.

                                   ARTICLE V

                                Stock Transfers
                                ---------------

         5.1 Transfer Agents, Registrars and the Like. As provided in Section
6.7 of the Declaration, the Trustees shall have authority to employ and
compensate such transfer agents and registrars with respect to the Shares of
the Trust as the Trustees shall deem necessary or desirable. In addition, the
Trustees shall have power to employ and compensate such dividend disbursing
agents, warrant agents and agents for the reinvestment of dividends as they
shall deem necessary or desirable. Any of such agents shall have such power and
authority as is delegated to any of them by the Trustees.

         5.2 Transfer of Shares. The Shares of the Trust shall be transferable
on the books of the Trust only upon delivery to the Trustees or a transfer
agent of the Trust of proper documentation as provided in Section 6.8 of the
Declaration. The Trust, or its transfer agents, shall be authorized to refuse
any transfer unless and until presentation of such evidence as may be
reasonably required to show that the requested transfer is proper.

         5.3 Registered Shareholders. The Trust may deem and treat the holder
of record of any Shares as the absolute owner thereof for all purposes and
shall not be required to take any notice of any right or claim of right of any
other person.

                                   ARTICLE VI

                              Amendment of By-Laws
                              --------------------

         6.1 Amendment and Repeal of By-Laws. In accordance with Section 3.9 of
the Declaration, the Trustees shall have the exclusive power to amend or repeal
the By-Laws or adopt new By-Laws at any time. Action by the Trustees with
respect to the By-Laws shall be taken by an affirmative vote of a majority of
the Trustees. The Trustees shall in no event adopt By-Laws which are in
conflict with the Declaration, and any apparent inconsistency shall be
construed in favor of the related provisions in the Declaration.

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
