BLACKROCK LIMITED DURATION INCOME TRUST (Form: N-2/A, Received: 06/20/2003 17:04:11)

Sales load paid by you (as a percentage of offering price)

Offering Expenses borne by the Trust (as a percentage of offering price) ⁽¹⁾

Dividend reinvestment plan fees

As filed with the Securities and Exchange Commission on June 20, 2003

Securities Act Registration No. 333-105352
Investment Company Registration No. 811-21349

SECURITIES AND EXCHANGE COMMISSION

Washgington, D.C. 20549

FORM N-2


REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1

BlackRock Limited Duration Income 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)

Robert S. Kapito, President
BlackRock Limited Duration Income Trust
40 East 52 ^nd 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				Leonard B. Mackey, Jr., Esq. Clifford Chance US LLP 200 Park Avenue New York, New York 10166-0153

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



Title of Securities Being Registered	Amount Being Registered	Proposed Maximum Offering Price per Unit		Proposed Maximum Aggregate Offering Price			Registration Fee
Common Shares, $.001 par value	4,000,000 shares	$	20.00	$	80,000,000	⁽¹⁾	$	6,480	⁽²⁾


(1)	Estimated solely for the purposes of calculating the registration fee.


(2)	$81.00 previously paid.

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

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

Subject to Completion
Preliminary Prospectus dated June 20, 2003

PROSPECTUS

BlackRock Limited Duration Income Trust

Common Shares

$20.00 per share

Investment Objective. BlackRock Limited Duration Income Trust (the "Trust") is a newly organized, diversified, closed-end management investment company. The Trust's investment objective is to provide current income and capital appreciation.

Duration and Credit Quality . Generally, BlackRock Advisors, Inc. ("BlackRock Advisors" or the "Advisor"), the Trust's investment advisor, and BlackRock Financial Management Inc. ("BlackRock Financial Management" or the "Sub-Advisor" and, together with the Advisor, "BlackRock") expect the Trust to maintain a duration of less than five years (including the effect of anticipated leverage), although the Trust's average duration may be longer at any time or from time to time depending on market conditions. The Trust initially expects to have a duration of approximately four years (including the effect of anticipated leverage). 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 Standard & Poor's Ratings Group ("S&P") or Fitch Ratings ("Fitch"), Baa3 as determined by Moody's Investors Service, Inc. ("Moody's") or, if unrated, determined to be of comparable quality by BlackRock, however, subsequently the weighted average credit quality of the Trust could be below investment grade.

Portfolio Contents . The Trust pursues its objective by investing primarily in three distinct asset classes:

•

intermediate duration, investment grade corporate bonds, mortgage-related securities and asset-backed securities and U.S. Government and agency securities;

•

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

•

U.S. dollar-denominated securities of U.S. and non-U.S. issuers rated below investment grade, and to a limited extent, in non-U.S. dollar denominated securities of non-U.S. issuers rated below investment grade ("Non-Investment Grade Bonds").

The Trust anticipates that, under current market conditions, approximately 70% of its initial portfolio will consist of below investment grade debt securities. Non-Investment Grade Bonds, commonly referred to as "junk bonds," are bonds that are rated below investment grade by each of the national rating agencies that cover the security, or, if unrated, are determined to be of comparable quality by BlackRock. S&P and Fitch consider securities rated below BBB– to be below investment grade and Moody's considers securities rated below Baa3 to be below investment grade. Senior Loans in which the Trust invests are also typically of below investment grade quality. Securities of below investment grade quality are regarded as having predominately speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. 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 objective.

(continued on following page)

Investing in the common shares involves risks that are described in the "Risks" section beginning on page 31 of this prospectus.


	Per Share		Total ⁽¹⁾
Public offering price	$	20.00	$
Sales load ⁽²⁾	$	.90	$
Estimated offering expenses ⁽³⁾	$	.04	$
Proceeds, after expenses, to the Trust	$	19.06	$


	⁽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 overallotments, if any. If such option is exercised in full, the total public offering price, sales load, estimated offering expenses and proceeds to the Trust will be $ , $ , $ and $ , respectively. See "Underwriting."


	⁽²⁾	The Trust has agreed to pay the underwriters $.0067 per common share as a partial reimbursement of expenses incurred in connection with the offering. See "Underwriting."


	⁽³⁾	The Trust will pay organizational expenses and offering costs of the Trust (other than the sales load) up to an aggregate of $.04 per share of the Trust's common shares. This amount includes the $.0067 reimbursement of expenses to the underwriters and may also include a reimbursement of BlackRock's expenses incurred in connection with the offering of the Trust. BlackRock has agreed to pay such organizational expenses and offering costs of the Trust to the extent they exceed $.04 per share of the Trust's common shares. The organizational and offering expenses to be incurred by the Trust are estimated to be $1,276,358 (including amounts incurred by BlackRock on behalf of the Trust).

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.

The common shares will be ready for delivery on or about , 2003.

Merrill Lynch & Co.

UBS Investment Bank

A.G. Edwards & Sons, Inc.


Prudential Securities			Wachovia Securities
Legg Mason Wood Walker Incorporated	RBC Capital Markets		Wells Fargo Securities, LLC
Advest, Inc.	Robert W. Baird & Co.		H&R Block Financial Advisors, Inc.
Fannestock & Co. Inc.	J.J.B. Hilliard, W.L. Lyons, Inc.		Janney Montgomery Scott LLC
Quick & Reilly, Inc.		Stifel, Nicolaus & Company Incorporated

The date of this prospectus is , 2003.

(continued from previous page)

Borrowings . The Trust currently anticipates using leverage, primarily by borrowing funds, in an aggregate amount of approximately 33 1/3% of the Trust's Managed Assets (as defined herein) 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 leverage by borrowing funds and other forms of leverage techniques can create risks to the common shareholders.

No Prior History . Because the Trust is newly organized, its common shares have no history of public trading. Common 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 common shares in a relatively short period after completion of the public offering. The Trust's common shares are expected to be listed on the New York Stock Exchange under the symbol "BLW".

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

TABLE OF CONTENTS


Prospectus Summary					5
Summary of Trust Expenses					19
The Trust					21
Use of Proceeds					21
The Trust's Investments					21
Portfolio Securities					23
Borrowings and Preferred Shares					28
Risks					31
How the Trust Manages Risk					38
Management of the Trust					39
Net Asset Value					41
Distributions					42
Dividend Reinvestment Plan					42
Description of Shares					44
Certain Provisions in the Agreement and Declaration of Trust					46
Closed-End Trust Structure					48
Repurchase of Shares					48
Federal Income Tax Matters					49
Underwriting					51
Custodian and Transfer Agent					53
Legal Opinions					53
Table of Contents for the Statement of Additional Information					54

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.

You should read the prospectus, which contains important information about the Trust, before deciding whether to invest in the common shares and retain it for future reference. A Statement of Additional Information, dated , 2003, containing additional information about the Trust, has been filed with the Securities and Exchange Commission and is incorporated by reference in its entirety into this prospectus. You may request a free copy of the Statement of Additional Information, the table of contents of which is on page 54 of this prospectus, by calling (888) 825-2257 or by writing to the Trust, or obtain a copy (and other information regarding the Trust) from the Securities and Exchange Commission's web site (http://www.sec.gov).

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

Until , 2003 (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.

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.

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 Limited Duration Income Trust is a newly organized, diversified, closed-end management investment company. Throughout the prospectus, we refer to BlackRock Limited Duration Income 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 Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Securities LLC and A.G. Edwards & Sons, Inc. 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 $.04 per share. See "Underwriting."


Investment Objective


		The Trust's investment objective is to provide current income and capital appreciation. The Trust is designed for investors willing to assume additional risk in return for the potential for current income and capital appreciation.


		It is expected that the Trust normally will have an average portfolio duration of less than five years (including the effect of anticipated leverage), although it may be longer at any time or from time to time depending on market conditions. The Trust is intended to have a relatively low level of interest rate risk compared to investment portfolios of similar credit quality but with longer durations. Certain of the Trust's other strategies, however, may result in an above average amount of risk and volatility or loss of principal. Therefore, this type of investment may be inappropriate for your risk profile. There is no assurance that the Trust will achieve its investment objective. The Trust is not intended as a complete investment program.


Investment Policies		The Trust will pursue its objective by investing primarily in three distinct asset classes:


	•	intermediate duration, investment grade corporate bonds, mortgage-related securities and asset-backed securities and U.S. government and agency securities;


	•	Senior Loans; and


	•	Non-Investment Grade Bonds.


		BlackRock has broad discretion to allocate the Trust's assets among the three principal asset classes.


		Non-Investment Grade Bonds, commonly referred to as "junk bonds," are bonds that are rated below investment grade by each of the national rating agencies that cover the security, or, if unrated, are determined to be of comparable quality by BlackRock. S&P and Fitch consider securities rated below BBB– to be below investment grade and Moody's considers securities rated below Baa3 to be below investment grade. Senior Loans in which the Trust invests are also typically of below investment grade quality.


		It is expected that the Trust normally will have an average portfolio duration of less than five years (including the effect of anticipated leverage), although it may be longer at any time or from time to time depending on market conditions. The Trust initially expects to have a duration of approximately four 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 of changes in market rates of interest, based on the weighted average timing of the instrument's expected principal and interest payments. Specifically, duration measures the anticipated percentage change in net asset value that is expected for every percentage point change in interest rates. The two have an inverse relationship. For example, a duration of five years means that a 1% decrease in interest rates will increase the net asset value of the portfolio by approximately 5%; if interest rates increase by 1%, the net asset value will decrease by 5%. Duration differs from maturity in that it takes into account a security's yield, coupon payments, principal payments and call features 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 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 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. The Trust anticipates that, under current market conditions, approximately 70% of its initial portfolio will consist of below investment grade debt securities.


		The Trust may invest without limitation in U.S. dollar denominated securities of U.S. and non-U.S. issuers, and to a limited extent, in non-U.S. dollar denominated securities of non-U.S. issuers, including up to 20% of its Managed Assets in issuers located in emerging market countries. Foreign investing may entail significant risks. See "Risks— Foreign Investing" below.


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.


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


		In selecting 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:


	•	credit research on the issuers' financial strength;


	•	assessment of the issuers' ability to meet principal and interest payments;


	•	general industry trends;


	•	the issuers' managerial strength;


	•	changing financial conditions;


	•	borrowing requirements or debt maturity schedules; and


	•	the issuers' responsiveness to changes 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.


Risk Management		BlackRock's style is designed with the objective of generating excess returns with lower risk than the Trust's benchmarks and competitors. The use of advanced analytics provides real-time analysis of a vast array of risk measures designed to measure the potential impact of various sector and security strategies on total return. BlackRock uses these tools to seek to add consistent value and control performance volatility consistent with the Trust's investments. BlackRock's approach to credit risk incorporates a combination of sector-based, top-down macro-analysis of industry sectors to determine relative weightings with a name-specific (issuer-specific), bottom-up detailed credit analysis of issuers and structures. The sector-based approach focuses on rotating into sectors that are undervalued and exiting sectors when fundamentals or technicals become unattractive. The name-specific approach focuses on identifying special opportunities where the market undervalues a credit, and devoting concentrated resources to research the credit and monitor the position. BlackRock's analytical process focuses on anticipating change in credit trends before market recognition. Credit research is a critical, independent element of BlackRock's process.


		BlackRock's approach to managing high yield investments is to apply its risk management framework by using proprietary technology and value-oriented security selection to identify the securities that are expected to deliver the highest yield for the amount of risk assumed.


	•	The Trust's investment strategy emphasizes risk management through the following process: creating a diversified portfolio of securities within various sectors of the high yield market;


	•	performing sector analysis to determine the sectors which BlackRock expects to have stable or improving credit quality in the future;


	•	performing individual, company-by-company credit research to seek to select securities which BlackRock believes will be able to meet their debt obligations; and


	•	utilizing the expertise and experience of BlackRock's portfolio management team to make investment decisions.


Borrowings and Preferred Shares		The Trust currently anticipates using leverage, primarily by borrowing funds, in an aggregate amount of up to 33 1/3% of the Trust's 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, dollar rolls and through the issuance of preferred shares of beneficial interest ("Preferred Shares"). Leverage involves greater risks. The Trust's leveraging strategy may not be successful. See "Risks—Leverage."


		The money the Trust obtains through leverage is expected to be primarily invested in securities of intermediate maturity that will generally pay fixed rates of interest over the life of the securities, with a portion of such money being invested in securities that will pay interest at a rate that will be reset from time to time. 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 securities 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:


	•	engaging in interest rate and credit derivatives transactions;


	•	engaging in foreign currency transactions in connection with the Trust's investment in non-U.S. dollar denominated securities;


	•	using options and financial futures;


	•	making forward commitments; and


	•	lending the Trust's portfolio securities.


Investment Advisor		BlackRock Advisors, as the Trust's investment advisor, and BlackRock Advisors' affiliate, BlackRock Financial Management, as sub-advisor, will provide certain day-to-day investment management services to the Trust. BlackRock Advisors and BlackRock Financial Management both are wholly owned subsidiaries of BlackRock, Inc., which is one of the largest publicly-traded asset management firms in the world with approximately $274 billion under management as of March 31, 2003. The BlackRock organization has over 14 years of experience managing closed-end funds and, as of March 31, 2003, advised a closed-end family of 44 active funds with approximately $11.3 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 an indirect, majority-owned subsidiary 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 .55% of the average weekly value of the Trust's Managed Assets. "Managed Assets" means the total assets of the Trust (including any assets attributable to leverage) minus the sum of accrued liabilities (other than debt representing financial leverage). The liquidation preference of any Preferred Shares issued by the Trust is not a liability.


Distributions		Commencing with the Trust's initial dividend, the Trust intends to make regular monthly cash distributions 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, the taxable gain net income, if any, on its investments. If the Trust realizes a long-term capital gain, it will be required to allocate such gain between the common shares and any Preferred Shares issued by the Trust in proportion to the total dividends paid to each class for the year in which the income is realized. See "Distributions" and "Borrowings and Preferred Shares."


Listing		The common shares are expected to be listed on the New York Stock Exchange, subject to notice of issuance, under the trading or "ticker" symbol "BLW". See "Description of Shares—Common Shares."


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


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.


		Non-Investment Grade Securities Risk . If current market conditions persists, the Trust expects that approximately 70% of its initial portfolio will consist of below investment grade debt securities. In addition, under normal market conditions, a significant portion of the Trust's assets will be invested in Non-Investment Grade Bonds, which are commonly referred to as "junk bonds." With its portfolio consisting predominantly of below investment grade debt securities, the Trust is exposed to greater risks than a fund that owns higher grade securities. Because of the substantial risks associated with lower grade securities, 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.


		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 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."


		Credit Risk . Credit risk refers to an issuer's ability to make payments of principal and interest when they are due. Because the Trust will own securities with low credit quality, it will be subject to a high level of credit risk. The credit quality of such securities is considered speculative by rating agencies with respect to the issuer's ability to pay interest or principal. The prices of lower grade securities are more sensitive to negative corporate developments, such as a decline in profits, or adverse economic conditions, such as a recession, than are the prices of higher grade securities. Securities that have longer maturities or that do not make regular interest payments also fluctuate more in price in response to negative corporate or economic news. Therefore, lower grade securities may experience high default rates, which would mean that the Trust may lose some of its investment in such securities, which would adversely affect the Trust's net


		asset value and ability to make distributions. The effects of this default risk are significantly greater for the holders of lower grade securities because these securities often are unsecured and subordinated to the payment rights of other creditors of the issuer.


		Interest Rate Risk . 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 already held by the Trust can be expected to rise. Conversely, when interest rates rise, the value of existing fixed-rate portfolio securities can be expected to decline. Because market interest rates are currently near their lowest levels in many years, there is a greater than normal risk that the Trust's portfolio will decline in value due to rising interest rates. Fluctuations in the value of fixed-rate securities will not affect interest income on existing securities but will be reflected in the Trust's net asset value. Fixed-rate securities with longer durations tend to be more sensitive to changes in interest rates than securities with shorter durations, usually making them more volatile. Because the Trust will normally have a dollar-weighted average duration of less than five years (including the effects of anticipated leverage), the common shares' net asset value and market price per common share will tend to fluctuate more in response to changes in market interest rates than if the Trust invested mainly in short-term debt securities and less than if the Trust invested mainly in longer-term debt securities. 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.


		Income Risk . The income investors receive from the Trust is based primarily on the interest it earns from its investments, which can vary widely over the short and long-term. If interest rates drop, investors' income from the Trust over time could drop as well if the Trust purchases securities with lower interest yields. In the event that the Trust increases its investment in debt securities of investment grade quality, the income investors receive from the Trust may be less than if the Trust maintained a higher percentage of its investments in lower grade securities. The Trust's income could also be affected adversely when prevailing short-term interest rates increase and the Trust is utilizing leverage, although this risk is mitigated by the Trust's investment in Senior Loans.


		Call Risk . If interest rates fall, it is possible that issuers of callable bonds with high interest coupons will "call" (or prepay) their bonds before their maturity date. If a call were exercised by the issuer during a period of declining interest rates, the Trust is likely to have to replace such called security with a lower yielding security. If that were to happen, it would decrease the Trust's net investment income.


		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.


		Foreign Securities Risk . The Trust may invest without limit in debt securities of non-U.S. issuers that are denominated in U.S. dollars or, to a limited extent, securities of non-U.S. issuers that are denominated in various foreign currencies or multinational currency units ("Foreign Securities"). Such investments involve certain risks not involved in domestic investments. Securities markets in foreign countries generally are not as developed, efficient or liquid as securities markets in the United States. Therefore, the prices of Foreign Securities often are volatile. Although the Trust will report its net asset value and pay dividends in U.S. dollars, Foreign Securities often are purchased with and make interest payments in foreign currencies. Therefore, when the Trust invests in Foreign Securities, it may be subject to foreign currency risk, 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. Certain foreign countries may impose restrictions on the ability of issuers of Foreign Securities to make payments of principal and interest to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. 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 Foreign Securities. The Trust may invest in Foreign Securities of issuers in so-called "emerging markets" (or lesser developed countries), but will not invest more than 20% of its Managed Assets in such securities. Investments in such securities are particularly speculative.


		Risks Associated with Collateralized Bond Obligations. Income from the pool of lower grade securities collateralizing the CBOs is typically separated into tranches representing different degrees of credit quality. The top tranche of CBOs, which represents the highest credit quality in the pool, has the greatest collateralization and pays the lowest interest rate. Lower CBO tranches represent lower degrees of credit quality and pay higher interest rates to compensate for the attendant risks. The bottom tranche specifically receives the residual interest payments (i.e., money that is left over after the higher tiers have been paid) rather than a fixed interest rate. The return on the lower tranches of CBOs are especially sensitive to the rate of defaults in the collateral pool, which increases the risk of the Trust losing its investments in lower CBO tranches.


		Risks Associated with 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.


		Risks Associated with CMBS. Assets underlying CMBS may relate to only a few properties or to a single property. Because the commercial mortgage loans that back a CMBS are generally not amortizing or not fully amortizing, at their maturity date repayment of the remaining principal balance or "balloon" is due and usually must be repaid through the attainment of an additional loan or sale of the property. The Trust's investments in CMBS will typically consist of CMBS that are subordinated to more senior classes of such securities ("Subordinated CMBS"). In general, Subordinated CMBS are entitled to receive repayment of principal only after all required principal payments have been made to more senior classes and have subordinate rights as to receipt of interest distributions. Such Subordinated CMBS are subject to a substantially greater risk of nonpayment than are senior classes of CMBS.


		Risks Associated with Asset-Backed Securities. Asset-backed securities involve certain risks in addition to those presented by mortgage-related securities: (1) 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; (2) 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 (3) 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.


Market Disruption		The war on Iraq and the threat of terrorist attacks worldwide have resulted in market volatility and may have long-term effects on the U.S. and worldwide financial markets and may cause further economic uncertainties in the U.S. and worldwide. The Trust does not know how long the securities markets will continue to be affected by these events and cannot predict the effects of the war or similar factors in the future on the U.S. economy and securities markets.


Leverage		Although the use of leverage by the Trust may create an opportunity for increased total return for the common shares, it also results in additional risks and can magnify the effect of any losses. If the income and gains earned on securities purchased with leverage proceeds are greater than the cost of leverage, the Trust's return will be greater than if leverage had not been used. Conversely, if the income or gains from the securities purchased with such proceeds does not cover the cost of leverage, the return to the Trust will be less than if leverage had not been used. BlackRock in its best judgment nevertheless may determine to use leverage if it expects that the benefits to the Trust's common shareholders of maintaining a leveraged position will outweigh the current reduced return. There is no assurance that a leveraging strategy will


		be successful. Leverage involves risks and special considerations for common shareholders including:


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


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


	•	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;


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


	•	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 objective and policies.


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.

SUMMARY OF TRUST EXPENSES

The following table assumes the use of leverage through borrowing or other forms of leverage in an amount equal to 33 1/3% of the Trust's Managed Assets, and shows Trust expenses as a percentage of net assets attributable to common shares. Under normal market conditions, the Trust currently anticipates borrowing funds in an aggregate amount of approximately 33 1/3% of its Managed Assets to purchase additional securities. Although the Trust currently has no intention to issue Preferred Shares, the Trust retains the flexibility to use leverage through the issuance of Preferred Shares. If the Trust issues Preferred Shares, the Trust's borrowing limit will be proportionately reduced so that the Trust's aggregate leverage will not exceed 33 1/3% of the Trust's Managed Assets.

Shareholder Transaction Expenses:


	Percentage of Net Assets Attributable to Common Shares (Assumes Leverage Securities Are Issued)
Annual Expenses
Management fees		.82	%
Interest expense		.68	% ⁽³⁾
Other expenses		.20	% ⁽⁴⁾
Total net annual expenses		1.70	% ⁽⁵⁾

⁽¹⁾

The Trust will pay organizational expenses and offering costs of the Trust (other than the sales load) up to an aggregate of $.04 per share of the Trust's common shares. This amount includes the $.0067 reimbursement of expenses to the underwriters and may also include a reimbursement of BlackRock's expenses incurred in connection with the offering of the Trust. BlackRock has agreed to pay such organizational expenses and offering costs of the Trust to the extent they exceed $.04 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 associated with borrowing.

⁽⁴⁾

If the Trust offers Preferred Shares, the costs of that offering, estimated to be approximately 1.25% of the total dollar amount of the Preferred shares offering (including the sales load paid to the underwriters for the Preferred Shares offering), will be borne immediately by the holders of the common shares and result in a reduction of the net asset value of the common shares (such costs are not currently reflected in the table).

⁽⁵⁾

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 employed. This will be the case, for instance, prior to the Trust's expected use of leverage. 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 Use of Leverage)
Annual Expenses
Management fees		.55	%
Other expenses		.20	%
Total annual expenses		.75	%

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 annual expenses" are based on estimated amounts for the Trust's first year of operations and assume that the Trust issues 10,000,000 common shares. If the Trust issues fewer common shares, all other things being equal, these expenses would increase. See "Management of the Trust" and "Dividend Reinvestment Plan."

The following example illustrates the expenses (including the sales load of $45) that you would pay on a $1,000 investment in common shares, assuming (1) total annual expenses of 1.70% 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	$	62	$	96	$	133	$	237

⁽¹⁾

The example should not be considered a representation of future expenses. The example assumes that the estimated "Other expenses" set forth in the Annual Expenses table are accurate and that all dividends and distributions are reinvested at net asset value. Actual expenses may be greater or less than those assumed. Moreover, the Trust's actual rate of return may be greater or less than the hypothetical 5% return shown in the example.

THE TRUST

The Trust is a newly organized, diversified, closed-end management investment company registered under the Investment Company Act. The Trust was organized as a Delaware statutory trust on May 16, 2003, pursuant to an Agreement and Declaration of Trust, as subsequently amended and restated, 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 objective and policies as stated below. We currently anticipate that the Trust will be able to invest substantially all of the net proceeds in debt securities that meet the Trust's investment objective and policies within approximately three months after the completion of the offering. Pending such investment, it is anticipated that the proceeds will be invested in short-term securities.

THE TRUST'S INVESTMENTS

Investment Objective

The Trust's investment objective is to provide current income and capital appreciation. The Trust pursues its objective by investing primarily in three distinct asset classes:

•

intermediate duration, investment grade corporate bonds, mortgage related securities and asset-backed securities and U.S. Government and agency securities;

•

Senior Loans; and

•

Non-Investment Grade Bonds.

Non-Investment Grade Bonds, commonly referred to as "junk bonds," are bonds that are rated below investment grade by each of the national rating agencies that cover the security, or, if unrated, are determined to be of comparable quality by BlackRock. S&P and Fitch consider securities rated below BBB– to be below investment grade and Moody's considers securities rated below Baa3 to be below investment grade. Many Senior Loans in which the Trust may invest are also of below investment grade quality. BlackRock has broad discretion to allocate the Trust's assets among the three principal asset classes.

Investment Policies

It is expected that the Trust normally will have an average portfolio duration of less than five years (including the effect of anticipated leverage), although it may be longer at any time from time to time depending on market conditions. The Trust initially expects to have a duration of approximately four 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. If current market conditions persist, the Trust expects that approximately 70% 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 (approximately 40% in Ba/BB and 30% in B). 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, to a limited extent, non-U.S. dollar-denominated securities of non-U.S. issuers including up to 20% of its Managed Assets in issuers located in emerging market countries. Investing in Foreign Securities may entail significant risks. See "Risk—Foreign Securities" below.

In selecting income 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 that this strategy should enhance the Trust's ability to seek current income and capital appreciation. BlackRock's analysis may include consideration of general industry trends, the issuer's managerial strength, changing financial condition, borrowing requirements or debt maturity schedules and its responsiveness to changes in business conditions and interest rates. BlackRock may also consider relative values based on anticipated cash flow, interest or dividend coverage, asset coverage, capital structures and earnings prospects. In managing the assets of the Trust, BlackRock will utilize an active management approach that stresses the flexibility to reallocate investments as appropriate. BlackRock will diversify the Trust's portfolio of assets in an effort to minimize exposure to individual securities, issuers and industries. BlackRock may also use advanced and proprietary hedging and risk management techniques for the Trust although it does not intend to do so to any significant degree. See "Risks—Other Investment Management Techniques" and the Statement of Additional Information under "Other Investment Policies and Techniques—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 higher-quality debt securities or U.S. Government obligations and high-quality, short-term debt securities.

The Trust expects to utilize financial leverage through borrowings, including the issuance of debt securities, the issuance of Preferred Shares or through other transactions, such as reverse repurchase agreements and dollar rolls, which have the effect of financial leverage. The Trust intends to utilize financial leverage in an initial amount equal to approximately 33 1/3% of its Managed Assets (including the amount obtained through leverage). The Trust generally will not utilize leverage if it anticipates that the Trust's leveraged capital structure would result in a lower return to shareholders than that obtainable over time with an unleveraged capital structure. Use of financial leverage creates an opportunity for total return for the shareholders, but at the same time, creates special risks and there can be no assurance that a leveraging strategy will be successful during any period in which it is employed. See "Borrowings and Preferred Shares" and "Risks—Leverage."

PORTFOLIO 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.

Lower Grade Securities

The Trust anticipates that, under normal market conditions, a significant portion 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.

Foreign Securities

The Trust may invest without limitation in Foreign Securities, which may include debt securities issued by foreign governments and other sovereign entities and debt securities issued by foreign corporations or supranational entities and securities denominated in U.S. dollars or, to a limited extent, in foreign currencies or multinational currency units. The Trust may invest in Brady Bonds and other sovereign debt of countries that have restructured or are in the process of restructuring their debt pursuant to the Brady Plan, which are viewed as speculative investments. The Trust may invest in Foreign Securities of emerging market issuers, but investments in such securities will not comprise more than 20% of the Trust's Managed Assets. Foreign securities markets generally are not as developed or efficient as those in the United States. Securities of some foreign 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 will be subject to additional risks, 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.

Since Foreign Securities may be purchased with and payable in of foreign currencies, the value of these assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency rates and exchange control regulations.

U.S. Government Securities

The Trust may invest in debt securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities including but not limited to: (1) U.S. Treasury obligations, which differ in their interest rates, maturities and times of issuance, such as U.S. Treasury bills (maturity of one year or less), U.S. Treasury notes (maturity of one to ten years), and U.S. Treasury bonds (generally maturities of greater than ten years), including the principal components or the interest components issued by the U.S. Government under the separate trading of registered interest and principal securities program (i.e., "STRIPS"), all of which are backed by the full faith and credit of the United States; and (2) obligations issued or guaranteed by U.S. Government agencies or instrumentalities, including government guaranteed mortgage-related securities, some of which are backed by the full faith and credit of the U.S. Treasury, some of which are supported by the right of the issuer to borrow from the U.S. Government and some of which are backed only by the credit of the issuer itself.

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.

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.

Senior Loans

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, the 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 Loan Risk."

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 exclusively 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 corporate 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 corporate borrower. Such indebtedness may be secured or unsecured. Loan participations typically represent direct participations in a loan to a corporate 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 corporate 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.

Collateralized Bond Obligations

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

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 objective, no assurance can be given that these practices will achieve this result.

The Trust may purchase and sell derivative instruments such as exchange-listed and over-the-counter put and call options on securities, financial futures, equity, fixed-income and interest rate indices, and other financial instruments, purchase and sell financial futures contracts and options thereon, enter into various interest rate transactions such as swaps, caps, floors or collars and enter into various currency transactions such as currency forward contracts, currency futures contracts, currency swaps or options on currency or currency futures or credit transactions and credit default swaps. The Trust also may purchase derivative instruments that combine features of these instruments. Collectively, all of the above are referred to as "Strategic Transactions." The Trust generally seeks to use Strategic Transactions as a portfolio management or hedging technique to seek to protect against possible adverse changes in the market value of securities held in or to be purchased for the Trust's portfolio, protect the value of the Trust's portfolio, facilitate the sale of certain securities for investment purposes, manage the effective interest rate exposure of the Trust, protect against changes in currency exchange rates, manage the effective maturity or duration of the Trust's portfolio, or establish positions in the derivatives markets as a temporary substitute for purchasing or selling particular securities. The Trust may use Strategic Transactions to enhance potential gain, although 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.

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

BORROWINGS AND PREFERRED SHARES

The Trust currently anticipates borrowing funds and/or issuing debt securities or 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 as BlackRock may from time to time determine. Of these investment techniques, the Trust expects primarily to use reverse repurchase agreements and dollar rolls. Changes in the value of the Trust's investment portfolio, including securities 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 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 Trust is authorized to issue Preferred Shares in an amount up to 50% of its total assets, the Trust anticipates that under current market conditions it would not offer Preferred Shares representing more than 33 1/3% 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. If Preferred Shares are issued, however, the Trust's borrowing limit will be proportionately reduced so that the Trust's aggregate leverage will not exceed 33 1/3% of the Trust's Managed Assets. The Preferred Shares would have complete priority upon distribution of assets over the common shares. The issuance of Preferred Shares would 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 debt securities of intermediate duration. The Preferred Shares will pay adjustable rate dividends based on shorter-term interest rates, which would be redetermined periodically by an auction process. The adjustment period for Preferred Share dividends could be as short as one day or as long as a year or more. So long as the Trust's portfolio is invested in securities that provide a higher rate of return than the dividend rate of the Preferred Shares, after taking expenses into consideration, the leverage will cause you to receive a higher rate of income than if the Trust were not leveraged.

Under the Investment Company Act, the Trust is not permitted to issue Preferred Shares unless, immediately after such issuance, the value of the Trust's total net assets 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). 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 such liquidation value. 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 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 would cause the Trust to incur related transaction costs and could result in capital losses to the Trust. Prohibitions on dividends and other distributions on the common shares could impair the Trust's ability to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended (the "Code"). If the Trust has Preferred Shares outstanding, two of the Trust's trustees will be elected by the holders of Preferred Shares voting separately as a class. The remaining trustees of the Trust will be elected by holders of common shares and Preferred Shares voting together as a single class. In the event the Trust failed to pay dividends on Preferred Shares for two years, holders of Preferred Shares would be entitled to elect a majority of the trustees of the Trust.

Credit Facilities

The Trust may borrow money from commercial banks for investment purposes in an amount up to 33 1/3% of the Trust's Managed Assets (inclusive of the amount borrowed). The terms of any agreements relating to such a credit facility have not been determined and are subject to definitive agreement and other conditions, but the Trust anticipates that any such credit facility would have terms substantially similar to the following: (i) a final maturity not expected to exceed three years, subject to possible extension by the Trust; (ii) with respect to each draw under the facility, an interest rate equal to the lesser of LIBOR plus a stated premium or an alternate rate on the outstanding amount of each such draw, reset over periods ranging from one to six months; (iii) payment by the Trust of certain fees and expenses including an underwriting fee, a commitment fee on the average undrawn amount of the facility, an ongoing administration fee and the expenses of the lenders under the facility incurred in connection therewith. The facility would not be expected to be convertible into any other securities of the Trust, outstanding amounts are expected to be prepayable by the Trust prior to final maturity without significant penalty and there are not expected to be any sinking fund or mandatory retirement provisions. Outstanding amounts would be payable at maturity or such earlier times as required by the agreement. The Trust may be required to prepay outstanding amounts under any facility or incur a penalty rate of interest in the event of the occurrence of certain events of default. The Trust would expect to indemnify the lenders under the facility against liabilities they may incur in connection with the facility. In addition the Trust would expect that such a credit facility would contain certain covenants which, among other things, likely will limit the Trust's ability to pay dividends in certain circumstances, incur additional debt, change its fundamental investment policies and engage in certain transactions including mergers and consolidations, and may require asset coverage ratios in addition to those required by the Investment Company Act. The Trust may be required to pledge its assets and to maintain a portion of its assets in cash or high grade securities as a reserve against interest or principal payments and expenses. The Trust expects that any credit facility would have customary covenant, negative covenant and default provisions. There can be no assurance that the Trust will enter into an agreement for a credit facility on terms and conditions representative of the foregoing, or that additional material terms will not apply. In addition, if entered into, any credit facility may in the future be replaced or refinanced by one or more credit facilities having substantially different terms or by the issuance of preferred shares or debt securities.

General

The concept of leveraging is based on the premise that the cost of the assets to be obtained from leverage will be based on short term rates, which normally will be lower than the return earned by the Trust on its longer term portfolio investments. Because the total assets of the Trust (including the assets obtained from leverage) will be invested in the higher yielding portfolio investments or portfolio investments with the potential for higher total return, the holders of common shares will normally be the beneficiaries of the incremental return. Should the differential between the underlying assets and cost of leverage narrow, the incremental return "pick up" will be reduced. Furthermore, if long term rates rise, the net asset value of the common shares will reflect the decline in the value of portfolio holdings resulting therefrom.

Leverage creates risks for holders of the shares, including the likelihood of greater volatility of net asset value and market price of the common shares, and the risk that fluctuations in interest rates on borrowings and debt or in the dividend rates on any Preferred Share may affect the return to the holders of the common shares. To the extent total return derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Trust's return on its common shares will be greater than if leverage had not been used. Conversely, if the total return from the securities purchased with such funds is not sufficient to cover the cost of leverage, the Trust's return on its common shares will be less than if leverage had not been used, and therefore the amount available for distribution to common shareholders as dividends and other distributions will be reduced. In the latter case, BlackRock in its best judgment nevertheless may determine to maintain the Trust's leveraged position if it expects that the benefits to the Trust's common shareholders of maintaining the leveraged position will outweigh the current reduced return.

The fee paid to BlackRock will be calculated on the basis of the Trust's Managed Assets, including proceeds from borrowings for leverage and the issuance of Preferred Shares. During periods in which the Trust is utilizing financial leverage, the investment advisory fees payable to BlackRock will be higher than if the Trust did not utilize a leveraged capital structure. The use of leverage creates risks and involves special considerations. See "Risks—Leverage."

Certain types of borrowings may result in the Trust being subject to covenants in credit agreements relating to asset coverage and portfolio 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 portfolio composition requirements that are more stringent than those imposed by the Investment Company Act. 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 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 leverage will represent approximately 33 1/3% of the Trust's Managed Assets, that the Trust does not issue any Preferred Shares and the interest paid on the leverage is a blended annual average rate of 1.35%, the income generated by the Trust's portfolio (net of estimated expenses) must exceed .68% in order to cover the interest payments related to the leverage. Of course, these numbers are merely estimates used for illustration. Actual interest rates on leverage will vary frequently and may be significantly higher or lower than the rate estimated above.

The following table is furnished in response to requirements of the Securities and Exchange Commission. It is designed to illustrate the effect of leverage on common share total return, assuming investment portfolio total returns (comprised of income and changes in the value of debt securities held in the Trust's portfolio) of –10%, –5%, 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced by the Trust. See "Risks." The table further reflects leverage representing 33 1/3% of the Trust's Managed Assets and the Trust's currently projected blended annual average leverage interest rate of 1.35%.


Assumed Portfolio Total Return (Net of Expenses)	(10	)%	(5	)%	0 %			5	%	10	%
Common Share Total Return	(15.67	)%	(8.17	)%		(.67	)%	6.82	%	14.32	%

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 interest on debt and/or dividends on Preferred Shares) and gains or losses on the value of the securities the Trust owns. As required by Securities and Exchange Commission rules, the table assumes that the Trust is more likely to suffer capital losses than to enjoy total return. 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 investments.

Until the Trust borrows or issues Preferred Shares, the Trust's shares will not be leveraged, and the risks and special considerations related to leverage described in this prospectus will not apply. Such leveraging of the shares cannot be fully achieved until the proceeds resulting from the use of leverage have been invested in longer-term debt instruments in accordance with the Trust's investment objective and policies.

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, 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 4.5% sales load charge and organizational expenses and offering costs paid by the Trust.

Lower Grade Securities

Initially, the majority of the Trust's assets will be invested in below investment grade debt securities, including Non-Investment Grade Bonds which are commonly referred to as "junk bonds." With its portfolio consisting predominantly of below investment grade debt securities, the Trust is exposed to greater risks than a fund that owns higher grade securities. Because of the substantial risks associated with lower grade securities, you could lose money on your investment in shares of the Trust, both in the short term and the long term.

Credit Risk

Credit risk refers to an issuer's ability to make payments of principal and interest when they are due. Because the Trust will own securities with low credit quality, it will be subject to a high level of credit risk. The credit quality of such securities is considered speculative by rating agencies with respect to the issuer's ability to pay interest or principal. The prices of lower grade securities are more sensitive to negative corporate developments, such as a decline in profits, or adverse economic conditions, such as a recession, than are the prices of higher grade securities. Securities that have longer maturities or that do not make regular interest payments also fluctuate more in price in response to negative corporate or economic news. Therefore, lower grade securities may experience high default rates, which would mean that the Trust may lose some of its investment in such securities, which would adversely affect the Trust's net asset value and ability to make distributions. The effects of this default risk are significantly greater for the holders of lower grade securities (other than Senior Loans) because these securities often are unsecured and subordinated to the payment rights of other creditors of the issuer.

Interest Rate Risk

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 already held by the Trust can be expected to rise. Conversely, when interest rates rise, the value of existing fixed-rate portfolio securities can be expected to decline. Because market interest rates are currently near their lowest levels in many years, there is a greater than normal risk that the Trust's portfolio will decline in value due to rising interest rates. Fluctuations in the value of fixed-rate securities will not affect interest income on existing securities but will be reflected in the Trust's net asset value. Fixed-rate securities with longer durations tend to be more sensitive to changes in interest rates than securities with shorter durations, usually making them more volatile. Because the Trust will normally have a dollar-weighted average duration of less than five years (including the effects of anticipated leverage), the common shares' net asset value and market price per common share will tend to fluctuate more in response to

changes in market interest rates than if the Trust invested mainly in short-term debt securities and less than if the Trust invested mainly in longer-term debt securities. 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.

Income Risk

The income investors receive from the Trust is based primarily on the interest it earns from its investments, which can vary widely over the short and long term. If interest rates drop, investors' income from the Trust over time could drop as well if the Trust purchases securities with lower interest yields. In the event that the Trust increases its investment in debt securities of investment grade quality, the income investors receive from the Trust may be less than if the Trust maintained a higher percentage of its investments in high-risk, high yield bonds.

Call Risk

If interest rates fall, it is possible that issuers of callable bonds with high interest coupons will "call" (or prepay) their bonds before their maturity date. If a call were exercised by the issuer during a period of declining interest rates, the Trust is likely to have to replace such called security with a lower yielding security. If that were to happen, it would decrease the Trust's net investment income.

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.

Senior Loans

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.

Collateralized Bond Obligations

Income from the pool of lower grade securities collateralizing CBOs is typically separated into tranches representing different degrees of credit quality. The top tranche of CBOs, which represents the highest credit quality in the pool, has the greatest collateralization and pays the lowest interest rate. Lower CBO tranches represent lower degrees of credit quality and pay higher interest rates to compensate for the attendant risks. The bottom tranche specifically receives the residual interest payments (i.e., money that is left over after the higher tiers have been paid) rather than a fixed interest rate. The return on the lower tranches of CBOs are especially sensitive to the rate of defaults in the collateral pool, which increases the risk of the Trust losing its investments in lower CBO tranches.

Mortgage-Related and Asset-Backed Securities

The Trust may invest in residential and commercial mortgage-related and other asset-backed securities issued by governmental entities and private issuers including investments in commercial mortgage-related securities. These securities entail considerable risk, i.e., credit risk, market risk, prepayment risk and interest rate risk.

Risks Associated With Mortgage-Related Securities

The risks associated with mortgage-related securities include:

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

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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;

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

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

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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:

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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;

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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;

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

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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 CMBS

The Trust's investments in CMBS will typically consist of CMBS that are subordinated to more senior classes of such securities ("Subordinated CMBS"). Assets underlying CMBS may relate to only a few properties or to a single property. Because the commercial mortgage loans that back a CMBS are generally not amortizing or not fully amortizing, at their maturity date repayment of the remaining principal balance or "balloon" is due and usually must be repaid through the attainment of an additional loan or sale of the property. If the commercial borrower is unable to refinance or attain an additional loan or the property is sold at below the remaining principal amount of the mortgage, the result could be a decline in the value, and thus the price, of the related CMBS (which decline could be greater in the case of a Subordinated CMBS).

CMBS generally are structured to protect the senior class investors against potential losses on the underlying mortgage loans. This is generally provided by having the Subordinated CMBS take the first loss on any defaults on the underlying commercial mortgage loans. In general, Subordinated CMBS are entitled to receive repayment of principal only after all required principal payments have been made to more senior classes and have subordinate rights as to receipt of interest distributions. Such Subordinated CMBS are subject to a substantially greater risk of nonpayment than are senior classes of CMBS. Even within a class of subordinated securities, most CMBS are structured with a hierarchy of levels (or "loss positions"). Loss positions are the order in which non-recoverable losses of principal are applied to the securities within a given structure.

Risks Associated with Asset-Backed Securities

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

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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;

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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

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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.

Foreign Securities

Under current market conditions, the Trust may invest without limitation in Foreign Securities. However, the Trust can hold no more than 10% of the Trust's Managed Assets in Foreign Securities denominated in foreign currencies. The Trust's investment in Foreign Securities may include debt securities issued by foreign governments and other sovereign entities, Brady Bonds, and debt securities issued by foreign corporations and supranational entities. The Trust may hold Foreign Securities of issuers in so-called "emerging markets" (or lesser developed countries), but will not invest more than 20% of its Managed Assets in such emerging market securities. Investments in emerging market securities are particularly speculative.

Investing in Foreign Securities may involve certain risks not involved in domestic investments, including, but not limited to:

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fluctuations in foreign exchange rates;

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future foreign economic, financial, political and social developments;

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different legal systems;

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the possible imposition of exchange controls or other foreign governmental laws or restrictions;

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lower trading volume;

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much greater price volatility and illiquidity of certain foreign securities markets;

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different trading and settlement practices;

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less governmental supervision;

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changes in currency exchange rates;

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high and volatile rates of inflation;

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fluctuating interest rates;

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less publicly available information; and

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different accounting, auditing and financial record-keeping standards and requirements.

Investments in foreign sovereign debt securities, especially in emerging market countries, will expose the Trust to the direct or indirect consequences of political, social or economic changes in the countries that issue the securities or in which the issuers are located. Certain countries in which the Trust may invest, especially emerging market countries, 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:

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the possibility of expropriation of assets;

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confiscatory taxation;

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difficulty in obtaining or enforcing a court judgment;

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economic, political or social instability; and

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diplomatic developments that could affect investments in those countries.

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. Certain investments in Foreign Securities also may be subject to foreign withholding taxes. These risks often are heightened for investments in smaller, emerging capital markets. In addition, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as:

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growth of gross domestic product;

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rates of inflation;

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capital reinvestment;

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resources;

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self-sufficiency; and

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balance of payments position.

Investing in securities of companies in emerging markets may entail special risks relating to potential political and economic instability and the risks of expropriation, nationalization, confiscation or the imposition of restrictions on foreign investment, convertibility of currencies into U.S. dollars, the lack of hedging instruments, and on repatriation of capital invested. Emerging securities markets are substantially smaller, less developed, less liquid and more volatile than the major securities markets. The limited size of emerging securities markets and limited trading value compared to the volume of trading in U.S. securities could cause prices to be erratic for reasons apart from factors that affect the quality of the securities. For example, limited market size may cause prices to be unduly influenced by traders who control large positions. Adverse publicity and investors' perceptions, whether or not based on fundamental analysis, may decrease the value and liquidity of portfolio securities, especially in these markets. In addition, securities traded in certain emerging markets may

be subject to risks due to the inexperience of financial intermediaries, a lack of modern technology, the lack of a sufficient capital base to expand business operations, and the possibility of temporary or permanent termination of trading. Settlement mechanisms in emerging securities markets may be less efficient and reliable than in more developed markets. Many emerging market countries have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates and corresponding currency devaluations have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries. The Trust may hold any Foreign Securities of emerging market issuers, but such securities will not comprise more than 20% of the Trust's Managed Assets.

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.

Market Disruption

The war on Iraq and the threat of terrorist attacks worldwide have resulted in market volatility and may have long-term effects on the U.S. and worldwide financial markets and may cause further economic uncertainties in the U.S. and worldwide. The Trust does not know how long the securities markets will continue to be affected by these events and cannot predict the effects of the war or similar factors in the future on the U.S. economy and securities markets.

Leverage

Although the use of leverage by the Trust may create an opportunity for higher total return for the common shares, it also results in additional risks and can magnify the effect of any losses. If the income and gains earned on securities purchased with leverage proceeds are greater than the cost of leverage, the Trust's return on its common shares will be greater than if leverage had not been used. Conversely, if the income or gains from the securities purchased with such proceeds does not cover the cost of leverage, the return on the Trust's common shares will be less than if leverage had not been used. BlackRock in its best judgment nevertheless may determine to continue to use leverage if it expects that the benefits to the Trust's shareholders of maintaining the leveraged position will outweigh the current reduced return. There is no assurance that a leveraging strategy will be successful. Leverage involves risks and special considerations for common shareholders including:

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

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

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the effect of leverage in a declining market, which is likely to cause 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;

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when the Trust uses financial leverage, the investment advisory fees payable to BlackRock will be higher than if the Trust did not use leverage. See "Management of the Trust"; and

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leverage may increase operating costs, which may reduce the Trust's 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 stock 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. 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 objective and policies.

Other Investment Management Techniques

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 more than 25% of its Managed Assets in securities of issuers in any one industry. In addition, with respect to 75% of its Managed Assets, the Trust may not invest more than 5% of the value of its Managed Assets in the securities of any single issuer or purchase more than 10% of the outstanding voting securities of any one issuer (excluding the US government, its agencies or instrumentalities).

The Trust may become subject to guidelines which are more limiting than its investment restrictions in order to obtain and maintain ratings from Moody's or S&P or other 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 objective. See "Investment Objective and Policies" in the Statement of Additional Information for a complete list of the fundamental and non-fundamental investment policies of the Trust.

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 unwinding 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 $274 billion of assets under management as of March 31, 2003. 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 ^SM and BlackRock Provident Institutional Funds. In addition, BlackRock provides risk management and investment system services to institutional investors under the BlackRock Solutions name.

The BlackRock organization has over 14 years of experience managing closed-end funds and, as of March 31, 2003, advised a closed-end family of 44 active funds with approximately $11.3 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 an indirect, majority-owned subsidiary 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

With respect to fixed income portfolio management in general, 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 involves

researching and investing in sectors of the fixed income market that BlackRock believes are fairly valued or undervalued. 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 have been doing this since the inception of their fixed income products in 1988.

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

BlackRock's disciplined investment process seeks to add value through:

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controlling portfolio duration within a narrow band relative to a benchmark index;

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relative value sector/sub-sector rotation and security selection;

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rigorous quantitative analysis to the valuation of each security and of the portfolio as a whole;

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intense credit analysis and review; and

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the judgment of experienced portfolio managers.

The technology that enables BlackRock to implement its investment strategies is constantly improving. BlackRock's commitment to maintaining its state-of-the-art analytics in the most cost efficient way is manifest in:

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the development of proprietary tools;

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the purchase of tools such as RiskMetrics ^TM ; and

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the integration of all of these tools into a unique portfolio level risk management system. By continually updating analytics and systems, BlackRock is able to better quantify and evaluate the risk of each investment decision.

BlackRock's approach to credit risk incorporates a combination of sector-based, top-down macro-analysis of industry sectors to determine relative weightings with a name-specific (issuer-specific), bottom-up detailed credit analysis of issuers and structures. The sector-based approach focuses on rotating into sectors that are undervalued and exiting sectors when fundamentals or technicals become unattractive. The name-specific approach focuses on identifying special opportunities where the market undervalues a credit, and devoting concentrated resources to research the credit and monitor the position. BlackRock's analytical process focuses on anticipating change in credit trends before market recognition. Credit research is a critical, independent element of BlackRock's process.

BlackRock's Portfolio Management Team

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

Scott Amero, Managing Director and fixed income portfolio manager, is co-head of fixed income portfolio management and co-head of taxable credit research. He is a member of the Management Committee, Investment Strategy Group, and Fixed Income Operating Committee. Mr. Amero has primary responsibility for managing client portfolios, specializing in mortgage-backed and investment grade corporate securities.

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

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

Dennis M. Schaney, Managing Director and fixed income portfolio manager, is a member of the Fixed Income Operating Committee and Investment Strategy Group. He is head of the high yield team and co-head of the taxable credit research group. His responsibilities include developing and implementing strategies in the high yield sector of the fixed income markets.

Prior to joining BlackRock in 1998, Mr. Schaney spent nine years with Merrill Lynch where he was a Managing Director in the firm's Global Fixed Income Research and Economics Department. During the time that Mr. Schaney managed Merrill's Corporate and Municipal Bond Research Departments, the group became the top-ranked Fixed Income Research Department according to industry polls. Mr. Schaney's specific sector specialties included the media, entertainment, and cable sectors for both the high yield and investment grade markets for which he was named to Institutional Investor's All American Fixed Income Team for five of the last six years. In addition, throughout his career, Mr. Schaney has covered the auto, transportation, technology and aerospace industries. Mr. Schaney began his investment career with Standard and Poor's, followed by four years with The First Boston Corporation; two years as an analyst in the firm's Fixed Income and Research Department and two years as a Vice President in the firm's Investment Banking Department.

Mr. Schaney earned a BS degree in finance from the University of Bridgeport in 1980 and an MS degree in financial management from Fairfield University in 1995. He is a member of the Fixed Income Analyst Society.

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 .55% of the average weekly value of the Trust's Managed Assets (the "management fee"). The Trust will also reimburse BlackRock Advisors for certain expenses BlackRock Advisors incurs in connection with performing 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 as of the close of the regular trading session on the New York Stock Exchange no less frequently than

on the Thursday of each week and on the last business day of each month. In the event that any Thursday is not a business day or it is not practicable to calculate the Trust's net asset value on any business day for which a calculation is required, the net asset value will be calculated on a date determined by BlackRock Advisors. The Trust calculates net asset value per common share by subtracting the Trust's liabilities (including accrued expenses, dividends payable and any borrowings of the Trust), the liquidation value of any outstanding Preferred Shares and the amount of outstanding debt of the Trust from the Trust's Managed Assets (the value of the securities the Trust holds plus cash or other assets, including interest accrued but not yet received) and dividing the result by the total number of common shares of the Trust outstanding.

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

DISTRIBUTIONS

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

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

DIVIDEND REINVESTMENT PLAN

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

otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution. Some brokers may automatically elect to receive cash on your behalf and may re-invest that cash in additional common shares of the Trust for you. If you wish for all dividends declared on your common shares of the Trust to be automatically reinvested pursuant to the Plan, please contact your broker.

The Plan Agent will open an account for each common shareholder under the Plan in the same name in which such common shareholder's common shares are registered. Whenever the Trust declares a dividend or other distribution (together, a "dividend") payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in common shares. The common shares will be acquired by the Plan Agent for the participants' accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized common shares from the Trust ("newly issued common shares") or (ii) by purchase of outstanding common shares on the open market ("open-market purchases") on the New York Stock Exchange or elsewhere.

If, on the payment date for any dividend, the 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 EquiServe Trust Company, N.A., P.O. Box 43010, Providence, Rhode Island 02940-3010, or EquiServe Trust Company, N.A. 150 Royall Street, Canton, Massachusetts 02021., Phone: (800) 699-1236.

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 May 16, 2003, as subsequently amended and restated. 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.

The Trust's common shares are expected to be listed on the New York Stock Exchange under the symbol "BLW".

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 redetermination of the dividend rate at relatively short intervals through an auction, remarketing or other procedure. The Trust also believes that it is likely that the liquidation preference, voting rights and redemption provisions of the Preferred Shares will be similar to those stated below.

Liquidation Preference

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

Voting Rights

The Investment Company Act requires that the holders of any Preferred Shares, voting separately as a single class, have the right to elect at least two trustees at all times. The remaining trustees will be elected by holders of common shares and Preferred Shares, voting together as a single class. In addition, subject to the prior rights, if any, of the holders of any other class of senior securities outstanding, the holders of any Preferred Shares have the right to elect a majority of the trustees of

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

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

Redemption, Purchase and Sale of Preferred Shares By the Trust

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

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

CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST

The Agreement and Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Trust or to change the composition of its board of trustees. This could have the effect of depriving shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control over the Trust. Such attempts could have the effect of increasing the expenses of the Trust and disrupting the normal operation of the Trust. The board of trustees is divided into three classes, with the terms of one class expiring at each annual meeting of shareholders. At each annual meeting, one class of trustees is elected to a three-year term. This provision could delay for up to two years the replacement of a majority of the board of trustees. A trustee may be removed from office by the action of a majority of the remaining trustees followed by a vote of the holders of at least 75% of the shares then entitled to vote for the election of the respective trustee.

In addition, the Trust's Agreement and Declaration of Trust requires the favorable vote of a majority of the Trust's board of trustees followed by the favorable vote of the holders of at least 75% of the outstanding shares of each affected class or series of the Trust, voting separately as a class or series, to approve, adopt or authorize certain transactions with 5% or greater holders of a class or series of shares and their associates, unless the transaction has been approved by at least 80% of the

trustees, in which case "a majority of the outstanding voting securities" (as defined in the Investment Company Act) of the Trust shall be required. For purposes of these provisions, a 5% or greater holder of a class or series of shares (a "Principal Shareholder") refers to any person who, whether directly or indirectly and whether alone or together with its affiliates and associates, beneficially owns 5% or more of the outstanding shares of any class or series of shares of beneficial interest of the Trust.

The 5% holder transactions subject to these special approval requirements are:

•

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

•

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

•

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

•

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

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

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

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

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

CLOSED-END TRUST STRUCTURE

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

Dividends paid by the Trust from its ordinary income or from an excess of net short-term capital gains over net long-term capital losses (together referred to hereinafter as "ordinary income dividends") are taxable to shareholders as ordinary income to the extent of the Trust's earning and profits. Such dividends (if designated by the Trust) will qualify, under the recently enacted Jobs and Growth Tax Relief Reconciliation Act of 2003 (effective for taxable years after December 31, 2002 through December 31, 2008) ("2003 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 general, distributions will not be eligible for a dividends received deduction allowed to corporations under the Code and will generally not qualify for the reduced rate on qualified dividend income. 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. Under the 2003 Tax Act, 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.

amounts credited as an undistributed capital gain dividend) by the shareholder. A loss realized on a sale or exchange of shares of the Trust will be disallowed if other Trust shares are acquired (whether through the automatic reinvestment of dividends or otherwise) within a 61-day period beginning 30 days before and ending 30 days after the date that the shares are disposed of. In such case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. Present law taxes both long-term and short-term capital gains of corporations at the rates applicable to ordinary income. For non-corporate taxpayers, however, short-term capital gains 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 , 2003, each Underwriter named below, for which Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), UBS Securities LLC and A.G. Edwards & Sons, Inc. are acting as representatives, 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.


Underwriter				Number of Common Shares
Merrill Lynch, Pierce, Fenner & Smith Incorporated
UBS Securities LLC
A.G. Edwards & Sons, Inc.
Prudential Securities Incorporated
Wachovia Securities, LLC
Legg Mason Wood Walker, Incorporated
RBC Dain Rauscher Inc.
Wells Fargo Securities, LLC
Advest, Inc.
Robert W. Baird & Co. Incorporated
H&R Block Financial Advisors, Inc.
Fahnestock & Co. Inc.
J.J.B. Hilliard, W.L. Lyons, Inc.
Janney Montgomery Scott LLC
Quick & Reilly, Inc.
Stifel, Nicolaus, & Company, Incorporated

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 $.90 per share is equal to 4.5% 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	$	.90	$
Proceeds, before expenses, to the Trust	$	19.10	$

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 180 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.

BlackRock has also agreed to pay a fee to Merrill Lynch payable quarterly at the annual rate of .15% of the Trust's Managed Assets during the continuance of the Investment Management Agreement or other advisory agreements between BlackRock and the Trust. Merrill Lynch has agreed to provide certain after-market shareholder support services designed to maintain the visibility of the Trust on an ongoing basis, and Merrill Lynch has additionally agreed to provide relevant information, studies or reports regarding the Trust and the closed-end investment company industry and asset management industry. BlackRock may also offer to pay certain other Underwriters ("Qualifying Underwriters") that reach a specified sales threshold an additional commission payable from BlackRock's own assets at an annual rate of .10% of the Trust's Managed Assets attributable to the common shares sold by such Underwriters in this offering. BlackRock reserves the right to lower or waive the specified sales threshold with respect to any Underwriter, in its sole discretion. In consideration for such payment, the Qualifying Underwriters will provide certain informational services on an ongoing basis. Such payments will be paid quarterly and will continue for the duration of the Investment Management Agreement or other advisory agreements between BlackRock and the Trust. The sum amount of the fee payable to Merrill Lynch, any fees payable to Qualifying Underwriters, plus the amount paid by the Trust as the $.0067 per common share reimbursement to the Underwriters, will not exceed 4.5% of the aggregate initial offering price of the common shares offered hereby; provided, that in determining when the maximum amount has been paid, the value of each of the quarterly payments shall be discounted at the annual rate of 10% to the closing date of this offering.

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

The principal business address of Merrill Lynch, Pierce, Fenner & Smith Incorporated is 4 World Financial Center, New York, New York 10080. The principal business address of UBS Securities LLC is 299 Park Avenue, New York, New York 10171. The principal business address of A.G. Edwards & Sons, Inc. is 1 North Jefferson Avenue, St. Louis, Missouri 63103.

CUSTODIAN AND TRANSFER AGENT

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

LEGAL OPINIONS

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

TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION


	Page
Use of Proceeds		B-2
Investment Objective and Policies		B-2
Investment Policies and Techniques		B-4
Other Investment Policies and Techniques		B-19
Management of the Trust		B-21
Portfolio Transactions and Brokerage		B-28
Description of Shares		B-29
Repurchase of Common Shares		B-30
U.S. Federal Income Tax Matters		B-31
Performance Related and Comparative Information		B-36
Experts		B-39
Additional Information		B-39
Independent Auditors Report		F-1
Financial Statements		F-2
APPENDIX A Ratings of Investments		A-1
APPENDIX B General Characteristics and Risks of Strategic Transactions		B-1

Through and including , 2003 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, 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.

BlackRock Limited Duration Income Trust

Common Shares
$20.00 per share

P R O S P E C T U S

Merrill Lynch & Co.
UBS Investment Bank
A.G. Edwards & Sons, Inc.
Prudential Securities
Wachovia Securities
Legg Mason Wood Walker
Incorporated
RBC Capital Markets
Wells Fargo Securities, LLC
Advest, Inc.
Robert W. Baird & Co.
H&R Block Financial Advisors, Inc.
Fahnestock & Co. Inc.
J.J.B. Hilliard, W.L. Lyons, Inc.
Janney Montgomery Scott LLC
Quick & Reilly, Inc.
Stifel, Nicolaus & Company
Incorporated

June , 2003

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

Subject to Completion

Dated June , 2003

BLACKROCK LIMITED DURATION INCOME TRUST

STATEMENT OF ADDITIONAL INFORMATION

BlackRock Limited Duration Income Trust (the "Trust") is a newly organized, diversified, closed-end management investment company. This Statement of Additional Information relating to common shares does not constitute a prospectus, but should be read in conjunction with the prospectus relating thereto dated , 2003. This Statement of Additional Information does not include all information that a prospective investor should consider before purchasing common shares, and investors should obtain and read the prospectus prior to purchasing such shares. A copy of the prospectus may be obtained without charge by calling (888) 825-2257. You may also obtain a copy of the prospectus on the Securities and Exchange Commission's web site (http://www.sec.gov). Capitalized terms used but not defined in this Statement of Additional Information have the meanings ascribed to them in the prospectus.

TABLE OF CONTENTS


	Page
Use of Proceeds		B-2
Investment Objective and Policies		B-2
Investment Policies and Techniques		B-4
Other Investment Policies and Techniques		B-19
Management of the Trust		B-21
Portfolio Transactions and Brokerage		B-28
Description of Shares		B-29
Repurchase of Common Shares		B-30
U.S. Federal Income Tax Matters		B-31
Performance Related and Comparative Information		B-36
Experts		B-39
Additional Information		B-39
Independent Auditors Report		F-1
Financial Statements		F-2
APPENDIX A Ratings of Investments		A-1
APPENDIX B General Characteristics and Risks of Strategic Transactions		B-1

This Statement of Additional Information is dated , 2003.

USE OF PROCEEDS

The net proceeds will be invested in accordance with the Trust's investment objective and policies during a period currently expected to be three months, but not to exceed six months from the closing of this Offering. Pending such investment, the net proceeds may be invested in short-term securities. If necessary, the Trust may also purchase, as temporary investments, securities of other open- or closed-end investment companies that invest primarily in debt securities of the type in which the Trust may invest directly.

INVESTMENT OBJECTIVE AND POLICIES

Investment Restrictions

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

(1) purchase any security if as a result 25% or more of the total assets of the Trust would be invested in the securities of issuers having their principal business activities in the same industry (with respect to loan participations in which the Trust may invest, the Trust intends to treat as "issuers" the corporate borrower, the bank selling such participation interests and any other person interpositioned between the bank and the Trust);

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

(3) purchase commodities or commodity contracts, except that the Trust may purchase and sell options, futures contracts and options thereon and may engage in interest rate and foreign currency transactions;

(4) purchase, hold or deal in real estate or real estate mortgage loans, or oil, gas or other mineral leases or exploration or development programs, except that the Trust may (a) purchase and sell securities that are secured by, or issued by companies that invest or deal in, real estate, oil, gas or other minerals, or interests therein and (b) hold or sell any such assets acquired in connection with its investment in portfolio securities;

(5) issue senior securities or borrow money, except as permitted by the Investment Company Act;

(6) make loans to others, except through the purchase of debt obligations (including Senior Loans), the entry into repurchase agreements and the lending of its portfolio securities; and

(7) act as an underwriter of securities of other issuers, except to the extent the Trust may be deemed an underwriter under the Securities Act, by virtue of its purchase or sale of portfolio securities.

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

For purposes of applying the limitation set forth in subparagraphs (1) and (2) above, securities of the U.S. Government, its agencies, or instrumentalities, and securities backed by the credit of a governmental entity are not considered to represent industries. However, obligations backed only by the assets and revenues of non-governmental issuers may for this purpose be deemed to be issued by such non-governmental issuers.

All other investment policies of the Trust are considered non-fundamental and may be changed by the board of trustees without prior approval of the Trust's outstanding voting shares.

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In addition to the foregoing fundamental investment policies, the Trust is also subject to the following non-fundamental restrictions and policies, which may be changed by the board of trustees. The Trust may not:

(1) make any short sale of securities except in conformity with applicable laws, rules and regulations and unless after giving effect to such sale, the market value of all securities sold short does not exceed 25% of the value of the Trust's Managed 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; or

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

Under the Investment Company Act, the Trust may invest up to 10% of its Managed Assets in the aggregate in shares of other investment companies and up to 5% of its Managed Assets in any one investment company, provided the investment does not represent more than 3% of the voting stock of the acquired investment company at the time such shares are purchased. As a shareholder in any investment company, the Trust will bear its ratable share of that investment company's expenses, and would remain subject to payment of the Trust's advisory fees and other expenses with respect to assets so invested. Holders of common shares would therefore be subject to duplicative expenses to the extent the Trust invests in other investment companies. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to the same leverage risks described herein and in the prospectus. As described in the prospectus in the section entitled "Risks," the net asset value and market value of leveraged shares will be more volatile and the yield to shareholders will tend to fluctuate more than the yield generated by unleveraged shares.

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

In addition, to comply with federal tax requirements for qualification as a "regulated investment company," the Trust's investments will be limited in a manner such that at the close of each quarter of each tax year, (a) no more than 25% of the value of the Trust's Managed 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 Managed Assets, no more than 5% of its Managed Assets are invested in the securities (other than United States government securities or securities of other regulated investment companies) of a single issuer. These tax-related limitations may be changed by the Trustees to the extent appropriate in light of changes to applicable tax requirements.

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

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INVESTMENT POLICIES AND TECHNIQUES

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

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,

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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.

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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 Internal Revenue Code of 1986, as amended (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

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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.

Variable and Floating Rate Instruments

Variable and floating rate securities provide for a periodic adjustment in the interest rate paid on the obligations. The terms of such obligations provide that interest rates are adjusted periodically based upon an interest rate adjustment index as provided in the respective obligations. The adjustment intervals may be regular, and range from daily up to annually, or may be event-based, such as based on a change in the prime rate.

The Trust may invest in floating rate debt instruments ("floaters"). The interest rate on a floater is a variable rate which is tied to another interest rate, such as a money-market index or Treasury bill rate. The interest rate on a floater resets periodically, typically every six months. Because of the interest rate reset feature, floaters provide the Trust with a certain degree of protection against rises in interest rates, although the Trust will participate in any declines in interest rates as well. The Trust also may invest in inverse floating rate debt instruments ("inverse floaters"). The interest rate on an inverse floater resets in the opposite direction from the market rate of interest to which the inverse floater is indexed or inversely to a multiple of the applicable index. An inverse floating rate security may exhibit greater price volatility than a fixed rate obligation of similar credit quality.

Stripped Securities

The Trust may invest in zero-coupon U.S. Treasury securities, which are Treasury notes and bonds that have been stripped of their unmatured interest coupons, the coupons themselves and receipts or certificates representing interests in such stripped debt obligations and coupons. Such stripped securities also are issued by corporations and financial institutions which constitute a proportionate ownership of the issuer's pool of underlying U.S. Treasury securities. A stripped security pays no interest to its holder during its life and is sold at a discount to its face value at maturity. The market prices of such securities generally are more volatile than the market prices of securities that pay interest periodically and are likely to respond to a greater degree to changes in interest rates than coupon securities having similar maturities and credit qualities.

U.S. Government Securities

Securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities include, but are not limited to U.S. Treasury securities that differ in their interest rates, maturities and times of issuance. Some obligations issued or guaranteed by U.S. Government agencies and instrumentalities are supported by the full faith and credit of the U.S. Treasury; others by the right of the issuer to borrow from the Treasury; others by discretionary authority of the U.S. Government to purchase certain obligations of the agency or instrumentality; and others only by the credit of the agency or instrumentality. These securities bear fixed, floating or variable rates of interest. While the U.S. Government provides financial support to such U.S. Government-sponsored agencies and instrumentalities, no assurance can be given that it will always do so since it is not so obligated by law.

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Premium Securities

The Trust may invest in income securities bearing coupon rates higher than prevailing market rates. Such "premium" securities are typically purchased at prices greater than the principal amounts payable on maturity. The Trust will not amortize the premium paid for such securities in calculating its net investment income. As a result, in such cases the purchase of such securities provides the Trust a higher level of investment income distributable to shareholders on a current basis than if the Trust purchased securities bearing current market rates of interest. Although such securities bear coupon rates higher than prevailing market rates, because they are purchased at a price in excess of par value, the yield earned by the Trust on such investments may not exceed prevailing market yields. If an issuer were to redeem securities held by the Trust during a time of declining interest rates, the Trust may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. If securities purchased by the Trust at a premium are called or sold prior to maturity, the Trust will recognize a capital loss to the extent the call or sale price is less than the purchase price. Additionally, the Trust will recognize a capital loss if it holds such securities to maturity.

Brady Bonds

The Trust may invest in Brady Bonds and other sovereign debt of countries that have restructured or are in the process of restructuring sovereign debt pursuant to the Brady Plan. "Brady Bonds" are income securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. The Brady Plan framework contemplates the exchange of commercial bank debt for newly issued Brady Bonds. Brady Bonds may also be issued in respect of new money being advanced by existing lenders in connection with the debt restructuring. Certain Brady Bonds have been collaterized as to principal due at maturity by U.S. Treasury zero coupon bonds with a maturity equal to the final maturity of such Brady Bonds.

Agreements implemented under the Brady Plan are designed to achieve debt and debt-service reduction through specific options negotiated by a debtor nation with its creditors. As a result, the financial packages offered by each country differ. Brady Bonds issued include bonds issued at 100% of face value of such debt, which carry a below-market stated rate of interest (generally known as par bonds), bonds issued at a discount from the face value of such debt (generally known as discount bonds), bonds bearing an interest rate which increases over time and bonds issued in exchange for the advancement of new money by existing lenders.

In light of the risk of Brady Bonds including, among other factors, the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, investments in Brady Bonds are to be viewed as speculative. The Trust may purchase Brady Bonds with no or limited collaterization, and will be relying for payment of interest and (except in the case of principal collaterized Brady Bonds) principal primarily on the willingness and ability of the foreign government to make payment in accordance with terms of the Brady Bonds. Many of the Brady Bonds and other income securities in which the Trust invests are likely to be acquired at a discount.

Other Sovereign-Related Debt

The Trust may invest in other sovereign-related debt obligations, including obligations of supranational entities. Such investments may include participations and assignments of sovereign bank debt, restructured external debt that has not undergone a Brady-style debt exchange, and internal government debt.

The sovereign-related income securities in which the Trust may invest generally consist of obligations issued or backed by national, state or provincial governments or similar political subdivisions or central banks in foreign countries. Sovereign-related income securities also include debt obligations of supranational entities, which include international organizations designated or backed by governmental entities to promote economic reconstruction or development, international

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banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the World Bank), the European Coal and Steel Community, the Asian Development Bank and the InterAmerican Development Bank.

Sovereign-related income securities also include income securities of "quasi-governmental agencies" and income securities denominated in multinational currency units of an issuer (including supranational issuers). Income securities of quasi-governmental agencies are issued by entities owned by either a national, state or equivalent government or are obligations of a political unit that is not backed by the national government's full faith and credit and general taxing powers.

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

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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

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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.

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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.

Treasury Inflation-Protected Securities

The Trust may invest in U.S. Treasury inflation-protected securities ("TIPS") that are designed to provide an investment vehicle that is not vulnerable to inflation. The coupon interest rate as a percentage of principal for these securities is established in an open auction process and then remains constant over the life of the security. The principal value rises or falls semi-annually based upon changes in the Consumer Price Index. If inflation occurs, the principal and interest payments on TIPS are adjusted to protect investors from inflationary loss. If deflation occurs, the principal and interest payments will be adjusted downwards, although the principal will not fall below its face amount at maturity. Holders of TIPS are taxed on the interest income received, as well as on the increase in principal that is due to the inflation adjustment. As a result, the after-tax annual yield on TIPS is lower than the after-tax annual yield on a fixed-principal Treasury of the same maturity. TIPS are expected to show less market risk/price volatility as interest rates rise and fall than a fixed-principal Treasury security of the same maturity. Even though TIPS should experience less market volatility than regular fixed-principal instruments, they should not be viewed as a surrogate for a money market instrument or other cash equivalents.

Pay-In-Kind Bonds

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

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Structured Investments

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

The Trust is permitted to invest in a class of Structured Investments that is either subordinated or not subordinated to the right of payment of another class. Subordinated Structured Investments typically have higher yields and present greater risks than unsubordinated Structured Investments, Certain issuers of Structured Investments may be deemed to be "investment companies" as defined in the Investment Company Act. As a result, the Trust's investment in these Structured Investments may be limited by the restrictions contained in the Investment Company Act. Structured Investments are typically sold in private placement transaction, and there currently is no active trading market for Structured Investments.

Project Loans

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

Preferred Stock

The Trust may invest in preferred stocks. Preferred stock has a preference over common stock in liquidation (and generally dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer's board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Money Market Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks

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

The Trust may purchase obligations of U.S. banks and savings and loan associations and dollar-denominated obligations of U.S. subsidiaries and branches of foreign banks, such as certificates of deposit (including marketable variable rate certificates of deposit) and bankers' acceptances. Bank certificates of deposit will only be acquired by the Trust if the bank has assets in excess of $1 billion.

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The Trust may invest in debt obligations of domestic or foreign corporations and banks, and may acquire commercial obligations issued by Canadian corporations and Canadian counterparts of U.S. corporations, as well as Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer. The Trust may also make interest-bearing savings deposits in commercial and savings banks.

Supranational Organization Obligations

The Trust may purchase debt securities of supranational organizations such as the European Coal and Steel Community, the European Economic Community and the World Bank, which are chartered to promote economic development.

Guaranteed Investment Contracts

The Trust may make limited investments in guaranteed investment contracts ("GICs") issued by highly rated U.S. insurance companies. Under these contracts, the Trust makes cash contributions to a deposit fund of the insurance company's general account. The insurance company then credits to the Trust, on a monthly basis, interest which is based on an index (such as the Salomon Brothers CD Index), but is guaranteed not to be less than a certain minimum rate.

Duration Management and Other Management Techniques

Consistent with its investment objective and policies as set forth herein, the Trust may also enter into certain hedging 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, financial 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 debt 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 or to establish a position in the securities markets as a temporary substitute for purchasing particular securities. Any or all of these techniques 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 Strategic Transactions that the Trust may use are described below. The ability of the Trust to hedge successfully will depend on BlackRock's ability to predict pertinent market movements, which cannot be assured.

Interest rate transactions . Among the Strategic Transactions into which the Trust may enter 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 hedging 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 hedging 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 entered into for good faith hedging purposes, BlackRock and the Trust believe such obligations do not constitute senior securities and, accordingly,

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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 segregate with a custodian an amount of cash or liquid securities having an aggregate net asset value 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 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.

Futures contracts and options on futures contracts . In connection with its hedging and other risk management strategies, the Trust may also enter into contracts for the purchase or sale for future delivery ("future contracts") of debt securities, aggregates of debt securities, financial indices, and U.S. Government debt securities or options on the foregoing to hedge the value of its portfolio securities that might result from a change in interest rates or market movements. The Trust will engage in such transactions only for bona fide hedging, risk management and other appropriate portfolio management purposes. In each case the Trust will engage in such transactions, in accordance with the rules and regulations of the Commodity Futures Trading Commission.

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 hedged. 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 hedged.

Calls on securities, indices and futures Contracts . In order to enhance income or reduce fluctuations in net asset value, the Trust may sell or purchase call options ("calls") on securities and indices based upon the prices of debt securities that are traded on U.S. securities exchanges and on 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 the underlying instrument or index at a fixed price. Calls on futures contracts on securities written by the Trust must also be covered by assets or instruments acceptable under applicable segregation and coverage requirements.

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Puts on securities, indices and futures contracts . As with calls, the Trust may purchase put options ("puts") on Securities (whether or not it holds such securities in its portfolio). For the same purposes, the Trust may also sell puts on securities financial indices and puts on futures contracts on securities if the Trust's contingent obligations on such puts are secured by segregated assets consisting of cash or liquid high grade debt securities having a value not less than the exercise price. The Trust will not sell puts if, as a result, more than 50% of the Trust's assets would be required to cover its potential obligation under its hedging and other investment transactions. In selling puts, there is a risk that the Trust may be required to buy the underlying instrument or index at higher than the current market price.

Appendix B contains further information about the characteristics, risk and possible benefits of Strategic Transactions and the Trust's other policies and limitations (which are not fundamental policies) relating to investment by the Trust in futures contracts and options. The principal risks relating to the use of futures and other Strategic Transactions are: (i) less than perfect correlation between the prices of the hedging instrument and the market value of the securities in the Trust's portfolio; (ii) possible lack of a liquid secondary market for closing out a position in such instruments; (iii) losses resulting from interest rate or other market movements not anticipated by BlackRock; and (iv) the obligation to meet additional variation margin or other payment requirements.

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

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

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

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

The cost to the Trust of engaging in forward currency contracts varies with factors such as the currency involved, the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually entered into on a principal basis, no fees or commissions are involved. When the Trust enters into a forward currency contract, it relies on the

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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.

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

Short Sales

The Trust may make short sales of bonds. A short sale is a transaction in which the Trust sells a security it does not own in anticipation that the market price of that security will decline. The Trust may make short sales to hedge positions, for duration and risk management, in order to maintain portfolio flexibility or to enhance income or gain.

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

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

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

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

Borrowing

The Trust reserves the right to borrow funds to the extent permitted as described under the caption "Investment Objectives and Policies—Investment Restrictions." The proceeds of borrowings

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may be used for any valid purpose including, without limitation, liquidity, investments and repurchases of shares of the Trust. Borrowing is a form of leverage and, in that respect, entails risks comparable to those associated with the issuance of Preferred Shares.

Reverse Repurchase Agreements

The Trust may enter into reverse repurchase agreements with respect to its portfolio investments subject to the investment restrictions set forth herein. Reverse repurchase agreements involve the sale of securities held by the Trust with an agreement by the Trust to repurchase the securities at an agreed upon price, date and interest payment. The use by the Trust of reverse repurchase agreements involves many of the same risks of leverage described under "Risks—Leverage" since the proceeds derived from such reverse repurchase agreements may be invested in additional securities. At the time the Trust enters into a reverse repurchase agreement, it may establish and maintain a segregated account with the custodian containing 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 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. 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, 33% of the value of its Managed Assets.

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

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OTHER INVESTMENT POLICIES AND TECHNIQUES

Restricted and Illiquid Securities

When purchasing securities that have not been registered under 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 segregate with the custodian 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

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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.

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 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 33 1/3% of the value of the Trust's Managed Assets (including such loans). Loan arrangements made by the Trust will comply with all other applicable regulatory requirements, including the rules of the New York Stock Exchange, 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.

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

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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.

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 and certain scheduled waivers of investment advisory fees were approved by Trust's board of trustees at an in person meeting of the board of trustees held on May 22, 2003, 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, the nature and quality of services to be provided by BlackRock Advisors, the profitability to BlackRock Advisors of its relationship with the Trust, economics of scale and comparative fees and expense ratios. This agreement provides for the Trust to pay a management fee at an annual rate equal to 0.55% of the average weekly value of the Trust's Managed Assets . The investment management agreement was approved by the sole common shareholder of the Trust as of , 2003 . The investment management agreement will continue in effect for a period of two years from its effective date, and if not sooner terminated, will continue in effect for successive periods of 12 months thereafter, provided that each continuance is specifically approved at least annually by both (1) the vote of a majority of the Trust's board of trustees or the vote of a majority of the outstanding voting securities of the Trust (as such term is defined in the Investment Company Act) and (2) by the vote of a majority of the trustees who are not parties to the investment management agreement or interested persons (as such term is defined in the Investment Company Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval. The investment management agreement may be terminated as a whole at any time by the Trust, without the payment of any penalty, upon the vote of a majority of the Trust's board of trustees or a majority of the outstanding voting securities of the Trust or by BlackRock Advisors, on 60 days' written notice by either party to the other. The investment management agreement will terminate automatically in the event of its assignment (as such term is defined in the Investment Company Act and the rules thereunder).

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Sub-Investment Advisory Agreement

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

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

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

The sub-investment advisory agreement was approved by the Trust's board of trustees at an in person meeting of the board of trustees held on May 22, 2003, 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, the nature and quality of services to be provided by BlackRock Financial Management, the profitability to BlackRock Financial Management of its relationship with the Trust, economies of scale and comparative fees and expense ratios.

The sub-investment advisory agreement was approved by the sole common shareholder of the Trust as of , 2003. 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. The following is a list of the trustees and officers of the Trust and their present positions and principal occupations during the past five years. Trustees who are interested persons of the Trust (as defined in the Investment Company Act) are denoted by an asterisk (*). Trustees who are independent trustees (as defined in the Investment Company Act) (the "Independent Trustees") are denoted without an asterisk. The business address of the Trust, BlackRock Advisors and their board members and officers is 100 Bellevue Parkway, Wilmington, Delaware 19809, unless specified otherwise below.

The trustees listed below are either trustees or directors of other closed-end funds in which BlackRock Advisors acts as investment advisor.

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Name, Address, Age and Position(s) Held with Registrant

Term of
Office and
Length of
Time Served

Principal Occupation
During The Past Five Years and Other Affiliations

Number of
Portfolios in
Fund Complex
Overseen by
Trustee or
Nominee for
Trustee

Other Directorships
held by Trustee

INDEPENDENT TRUSTEES:

Andrew F. Brimmer
P.O. Box 4546
New York, NY 10163
Age: 76
Trustee

3 years ⁽¹⁾⁽²⁾

President of Brimmer & Company, Inc., a Washington, D.C.-based economic and financial consulting firm. Wilmer D. Barrett Professor of Economics, University of Massachusetts — Amherst. Formerly member of the Board of Governors of the Federal Reserve System. Former Chairman, District of Columbia Financial Control Board. Lead Trustee and Chairman of the Audit Committee of each of the closed-end trusts of which BlackRock Advisors Inc. acts as investment advisor.

Director of CarrAmerica Realty Corporation and Borg-Warner Automotive. Former Director of AirBorne Express, BankAmerica Corporation (Bank of America), Bell South Corporation, College Retirement Equities Fund (Trustee), Commodity Exchange, Inc. (Public Governor), Connecticut Mutual Life Insurance Company, E.I. du Pont de Nemours & Company, Equitable Life Assurance Society of the United States, Gannett Company, Mercedes-Benz of North America, NCM Financial Corporation (American Security Bank), NCM Capital Management, Navistar International Corporation, PHH Corp. and UAL Corporation (United Airlines).

Richard E. Cavanagh
P.O. Box 4546
New York, NY 10163
Age: 56
Trustee

3 years ⁽¹⁾⁽²⁾

President and Chief Executive Officer of The Conference Board, Inc., a leading global business membership organization, from 1995-present. Former Executive Dean of the John F. Kennedy School of Government at Harvard University from 1988-1995. Acting Director, Harvard Center for Business and Government(1991-1993). Formerly Partner (principal) of McKinsey & Company, Inc. (1980-1988). Former Executive Director of Federal Cash Management, White House Office of Management and Budget (1977-1979). Co-author, THE WINNING PERFORMANCE (best selling management book published in 13 national editions).

Trustee Emeritus, Wesleyan University, Trustee, Airplanes Group, Aircraft Finance Trust (AFT) and Educational Testing Service (ETS). Director, Arch Chemicals, Fremont Group and The Guardian Life Insurance Company of America.

Kent Dixon
P.O. Box 4546
New York, NY 10163
Age: 65
Trustee

3 years ⁽¹⁾⁽²⁾

Consultant/Investor. Former President and Chief Executive Officer of Empire Federal Savings Bank of America and Banc PLUS Savings Association, former Chairman of the Board, President and Chief Executive Officer of Northeast Savings.

Former Director of ISFA (the owner of INVEST, a national securities brokerage service designed for banks and thrift institutions).

Frank J. Fabozzi
P.O. Box 4546
New York, NY 10163
Age: 54
Trustee

3 years ⁽¹⁾⁽²⁾

Consultant. Editor of THE JOURNAL OF PORTFOLIO MANAGEMENT and Adjunct Professor of Finance at the School of Management at Yale University. Author and editor of several books on fixed income portfolio management. Visiting Professor of Finance and Accounting at the Sloan School of Management, Massachusetts Institute of Technology from 1986 to August 1992.

Director, Guardian Mutual Funds Group (18portfolios).

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Name, Address, Age and Position(s) Held with Registrant

Term of
Office and
Length of
Time Served

Principal Occupation
During The Past Five Years and Other Affiliations

Number of
Portfolios in
Fund Complex
Overseen by
Trustee or
Nominee for
Trustee

Other Directorships
held by Trustee

James Clayburn LaForce, Jr.
P.O. Box 4546
New York, NY 10163
Age: 74
Trustee

3 years ⁽¹⁾⁽²⁾

Dean Emeritus of The John E. Anderson Graduate School of Management, University of California since July 1, 1993. Acting Dean of The School of Business, Hong Kong University of Science and Technology 1990-1993. from 1978 to September 1993, Dean of The John E. Anderson Graduate School of Management, University of California.

Director, Jacobs Engineering Group, Inc., Payden & Rygel Investment Trust, Provident Investment Counsel Funds, Advisor Series Trust, Arena Pharmaceuticals, Inc. and CancerVax Corporation.

INTERESTED TRUSTEES:

Robert S. Kapito*
Age: 46
Trustee and President

3 years ⁽¹⁾⁽²⁾

Vice Chairman of BlackRock, Inc. Head of BlackRock's Portfolio Management Group, a member of the Management Committee, the Investment Strategy Group, the Fixed Income and Global Equity Investment Strategy Group. Formerly, Vice President of the First Boston Corporation, head of its Mortgage Capital Markets Group. Currently, President and Trustee of each of the closed-end trusts which BlackRock Advisors, Inc. acts as investment advisor.

President of the Board of Directors of Periwinkle National Theatre, a national non-profit effort to help disadvantaged youth, and Chairman of the Hope & Heroes/Babies & Children's Cancer Fund.

Ralph L. Schlosstein*
Age: 52
Trustee and President

3 years ⁽¹⁾⁽²⁾

Director since 1999 and President of BlackRock, Inc. since its formation in 1998 and of BlackRock, Inc.'s predecessor entities since 1988. Member of BlackRock's Management Committee and Investment Strategy Group. Formerly, Managing Director of Lehman Brothers, Inc. and Co-head of its Mortgage and Savings Institutions Group. Currently, Chairman and Trustee of each of the closed-end trusts which BlackRock Advisors, Inc. acts as investment advisor.

Chairman and President of the BlackRock Provident Institutional Funds. Director of several of BlackRock's alternative investment vehicles. Currently, a Member of the Visiting Board of Overseers of the John F. Kennedy School of Government at Harvard University, the Financial Institutions Center Board of the Wharton School of the University of Pennsylvania, a trustee of Trinity School in New York City and a Trustee of New Visions for Public Education in New York Council. Formerly, a Director of Pulte Corporation and a Member of Fannie Mae's Advisory Council.

Walter F. Mondale ⁽³⁾
P.O. Box 4546
New York, NY 10163
Age: 75
Trustee

3 years ⁽¹⁾⁽²⁾

Partner, Dorsey & Whitney LLP, a law firm (December 1996-present, September 1987-August 1993). Formerly U.S. Ambassador to Japan (1993-1996). Formerly, Vice President of the United States, U.S. Senator and Attorney General of the State of Minnesota. 1984 Democratic Nominee for President of the United States.

*	"Interested person" of the Trust as defined in the Investment Company Act. Messrs. Kapito and Schlosstein are interested persons due to their employment with the investment advisor.

(1)	After a trustee's initial term, each trustee is expected to serve a three year term concurrent with the class of trustees for which he serves:

—

Messrs. Cavanagh and La Force, as Class I trustees, are expected to stand for re-election at the Trust's 2003 annual meeting of shareholders

—

Messrs. Schlosstein, Fabozzi and Mondale, as Class II trustees, are expected to stand for re-election at the Trust's 2004 annual meeting of shareholders

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—

Messrs. Kapito, Brimmer and Dixon, as Class III Trustees, are expected to stand for re-election at the Trust's 2005 annual meeting of shareholders

(2)	Each trustee has served in such capacity since the Trust's inception.

(3)

Mr. Mondale may be deemed an interested person of several of the Trust's principal underwriters because his law firm, Dorsey & Whitney LLP, serves as legal counsel to such principal underwriters. Because Mr. Mondale may be deemed an interested person of certain of the Trust's principal underwriters, he also may be deemed to be an interested person of the Trust during the pendency of any securities offering by the Trust in which such underwriters participate.


Name and Age	Title	Principal Occupation During the Past Five Years and Other Affiliations
OFFICERS:
Anne F. Ackerley Age: 41	Vice President	Managing Director of BlackRock, Inc. since 2000. Formerly, First 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.
Henry Gabbay Age: 55	Treasurer	Managing Director of BlackRock, Inc. and its predecessor entities.
James Kong Age: 42	Assistant Treasurer	Managing Director of BlackRock, Inc. and its predecessor entities.
Richard Shea, Esq. Age: 43	Vice President/Tax	Managing Director of BlackRock, Inc. since 2000; Chief Operating Officer and Chief Financial Officer of Anthracite Capital, Inc. since 1998. Formerly, Director of BlackRock, Inc. and its predecessor entities.
Vincent Tritto Age: 41	Secretary	Director and Assistant Secretary of BlackRock, Inc. since 2002. Formerly, Executive Director (2000-2002) and Vice President (1998-2000), Morgan Stanley & Co. Incorporated and Morgan Stanley Asset Management Inc. and officer of various Morgan Stanley-sponsored investment vehicles; Counsel (1998) and associate (1988-1997), Rogers & Wells LLP, New York, NY; Foreign Associate (1992-1994), Asahi Law Offices/Masuda & Ejiri, Tokyo, Japan.
Brian Kindelan Age: 43	Assistant Secretary	Director and Senior Counsel (since January 2001), and Vice President and Senior Counsel (1998-2000), BlackRock Advisors, Inc.; Senior Counsel, PNC Bank Corp. from May 1995 to April 1998; Associate, Stradley, Ronon, Stevens & Young, LLP from March 1990 to May 1995.

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


Name of Director	Dollar Range Of Equity Securities In The Trust(*)		Aggregate Dollar Range Of Equity Securities Overseen By Directors In The Family In All Registered Investment Companies(*)
Andrew F. Brimmer	$	0	$1-$10,000
Richard E. Cavanagh	$	0	$50,001-$100,000
Kent Dixon	$	0	over $100,000
Frank J. Fabozzi	$	0	$1-$10,000
Robert S. Kapito	$	0	over $100,000
James Clayburn La Force, Jr.	$	0	$50,001-$100,000
Walter F. Mondale	$	0	$50,001-$100,000
Ralph L. Schlosstein	$	0	$50,001-$100,000

(*)	As of December 31, 2002. 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.

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During the year ended December 31, 2002, 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, 2003, assuming the Trust will have been in existence for the full calendar year.


Name of Board Member	Estimated Compensation From The Trust			Total Compensation From The Trust And Fund Complex Paid (1)To Board Members
Dr. Andrew F. Brimmer	$	2,000	⁽²⁾	$	250,000	^(3)(4)(5)
Richard E. Cavanagh	$	2,000	⁽²⁾	$	210,000	⁽⁴⁾⁽⁵⁾
Kent Dixon	$	2,000	⁽²⁾	$	210,000	⁽⁴⁾⁽⁵⁾
Frank J. Fabozzi	$	2,000	⁽²⁾	$	190,000	⁽⁴⁾
James Clayburn La Force, Jr.	$	2,000	⁽²⁾	$	190,000	⁽⁴⁾
Walter F. Mondale	$	2,000	⁽²⁾	$	190,000	⁽⁴⁾

(1)	Estimates the total compensation to be earned by that person during the calendar year end December 31, 2003 from the closed-end funds advised by the Advisor (the "Fund Complex").

(2)	Of these amounts it is anticipated that Messrs. Brimmer, Cavanagh, Dixon, Fabozzi, La Force and Mondale 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)	Dr. Brimmer serves as "lead director" for each board of trustees/directors in the Fund Complex. For his services as lead trustee/director, Dr. Brimmer will be compensated in the amount of $40,000 per annum by the Fund Complex.

(4)	Of this amount, Messrs. Brimmer, Cavanagh, La Force, Fabozzi, Dixon and Mondale 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) $1,500 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 Dr. Brimmer 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. Brimmer, Cavanagh and Dixon 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. Brimmer, Cavanagh and Dixon 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 $23,750 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 mandatorily 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

B-26

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. Schlosstein and Kapito, 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. Brimmer, Cavanagh and Dixon. The Audit Committee acts according to the Audit Committee charter. Dr. Brimmer 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, Dr. Brimmer and Mr. Dixon, 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. Brimmer, Cavanagh, Dixon, Fabozzi, La Force, Jr. and Mondale. The Governance Committee acts in accordance with the Governance Committee charter. Dr. Brimmer 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 newly organized closed-end investment company, 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 which, in turn, has acted by written consent to select the Trust's independent auditor.

Investment Advisor and Sub-Advisor

BlackRock Advisors acts as the Trust's investment advisor and BlackRock Financial Management acts as the Trust's Subadvisor. BlackRock Advisors also performs various clerical, bookkeeping and other administrative services and selected shareholder services. 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

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approximately $274 billion of assets under management as of March 31, 2003. BlackRock manages assets on behalf of institutional and individual investors worldwide through a variety of equity, debt, liquidity and alternative investment products, including the BlackRock Funds ^SM and BlackRock Provident Institutional Funds. In addition, BlackRock provides risk management and investment system services to institutional investors under the BlackRock Solutions ^TM name.

The BlackRock organization has over 14 years of experience managing closed-end products and, as of March 31, 2003, advised a closed-end family of 44 active funds with approximately $11.3 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.

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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

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

One or more of the other investment companies or accounts which the Advisor and/or the Sub-Advisor manages may own from time to time some of the same investments as the Trust. Investment decisions for the Trust are made independently from those of such other investment companies or accounts; however, from time to time, the same investment decision may be made for more than one company or account. When two or more companies or accounts seek to purchase or sell the same securities, the securities actually purchased or sold will 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

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system may adversely affect the price or size of the position obtainable for the Trust. In other cases, however, the ability of the Trust to participate in volume transactions may produce better execution for the Trust. It is the opinion of the Trust's board of trustees that this advantage, when combined with the other benefits available due to the Advisor's or the Sub-Advisor's organization, outweighs any disadvantages that may be said to exist from exposure to simultaneous transactions.

It is not the Trust's policy to engage in transactions with the objective of seeking profits from short-term trading. It is expected that the annual portfolio turnover rate of the Trust will be approximately 100% excluding securities having a maturity of one year or less. Because it is difficult to predict accurately portfolio turnover rates, actual turnover may be higher or lower. Higher portfolio turnover results in increased Trust costs, including brokerage commissions, dealer mark-ups and other transaction costs on the sale of securities and on the reinvestment in other securities.

DESCRIPTION OF SHARES

Common Shares

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

Preferred Shares

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

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

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

Other Shares

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REPURCHASE OF COMMON SHARES

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

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

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

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

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

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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 Managed Assets which would likely have the effect of increasing the Trust's expense ratio. Any purchase by the Trust of its common shares at a time when Preferred Shares are outstanding will increase the leverage applicable to the outstanding common shares then remaining.

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

U.S. 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 larger positions in the Trust, and the discussion set forth herein does not constitute tax advice. Investors are urged to consult their tax advisors to determine the tax consequences to them of investing in the Trust.

Taxation of 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 meets the distribution requirements described below, the Trust (but not its shareholders) will not be subject to U.S. federal income tax to the extent that it distributes its net investment income and net realized capital gains. The Trust intends to distribute substantially all of such income.

In order to qualify to be taxed as a regulated investment company, the Trust must, among other things: (a) derive at least 90% of its net investment income which is its annual gross income (including tax-exempt interest) from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock or securities, or foreign currencies, or other income (including but not limited to gain from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and (b) diversify its holdings so that, at the end of each fiscal quarter of the Trust (i) at least 50% of the market value of the Trust's assets is represented by cash, cash items, U.S. government securities and securities of other regulated investment companies, and other securities, with these other securities limited, with respect to any one issuer, to an amount not greater in value than 5% of the market value of the Trust's assets, and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the market value of the Trust's assets is invested in the securities of any one issuer (other than U.S. government securities or securities of other regulated investment companies) or two or more issuers controlled by the Trust and engaged in the same, similar or related trades or businesses.

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

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deduction for dividends paid and (ii) its net tax-exempt interest (the excess of its gross tax-exempt interest over certain disallowed deductions). For purposes of satisfying the 90% distribution requirement, a distribution will not qualify if it is a "preferential" dividend (i.e., a distribution which is not fully pro rata among shares of the same class or where there is preference to one class of stock as compared with another class except to the extent that such preference exists by reason of the issuance of such shares.). The Trust may retain for investment its net capital gain (which consists of the excess of its net long-term capital gain over its net short-term capital loss). However, if the Trust retains any net capital gain or any investment company taxable income, it will be subject to tax at regular corporate rates on the amount retained. If the Trust retains any net capital gain, it may designate the retained amount as undistributed capital gains in a notice to its shareholders who, if subject to U.S. federal income tax on long-term capital gains, (i) will be required to include in income their share of such undistributed long-term capital gain and (ii) will be entitled to credit their proportionate share of the tax paid by the Trust against their U.S. federal tax liability, if any, and to claim refunds to the extent the credit exceeds such liability. For U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the Trust will be increased by the amount of undistributed capital gain included in the gross income of such shareholder less the tax deemed paid by such shareholder under clause (ii) of the preceding sentence.

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

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

The Code requires a regulated investment company to pay a nondeductible 4% excise tax to the extent the regulated investment company does not distribute, during each calendar year, 98% of its taxable income, determined on a calendar year basis, and 98% of its capital gains, determined, in general, on an October 31 year end, plus certain undistributed amounts from previous years, (i) for the dividends received deduction in the case of corporate stockholders, to the extent they consist of qualifying dividend income from U.S. corporations, and (ii) on which the Trust paid no U.S. federal income tax. While the Trust intends to distribute its income and capital gains in the manner necessary to minimize imposition of the 4% excise tax, there can be no assurance that sufficient amounts of the Trust's taxable income and capital gains will be distributed to avoid entirely the imposition of the tax. In such event, the Trust will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirements.

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If in any year the Trust should fail to qualify under Subchapter M for tax treatment as a regulated investment company, the Trust would incur a regular corporate federal income tax upon its income for the year and all distributions to its shareholders would be taxable to shareholders as ordinary dividend income to the extent of the Trust's earnings and profits. In addition, the Trust may not immediately requalify as a regulated investment company afforded special tax treatment.

Taxation of Shareholders

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. Such dividends (if designated by the Trust) will qualify, under the recently enacted Jobs and Growth Tax Relief Reconciliation Act of 2003 (effective for taxable years after December 31, 2002 through December 31, 2008) ("2003 Tax Act") (i) for the dividends received deduction in the case of corporate stockholders, to the extent they consist of qualifying dividend income from U.S. corporations, and (ii) 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 general, distributions will not be eligible for the reduced rate on qualified dividend income or a dividends received deduction allowed to corporations under the Code. 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. Under the 2003 Tax Act, 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 capital gain dividends and qualified dividend income or dividends qualifying for the dividends received deduction, if any.

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 other Trust shares are acquired (whether through the automatic reinvestment of dividends or otherwise) within a 61-day period beginning 30 days before and ending 30 days after the date that the shares are disposed of. In such case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. Present law taxes both long-term and short-term capital gains of corporations at the rates applicable to ordinary income. For non-corporate taxpayers, however, short-term capital gains 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%.

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A shareholder that is a nonresident alien individual or a foreign corporation (a "foreign investor") generally may be subject to U.S. withholding tax at the rate of 30% (or possibly a lower rate provided by an applicable tax treaty) on ordinary income dividends. Different tax consequences may result if the foreign investor is engaged in a trade or business in the United States or, in the case of an individual, is present in the United States for 183 or more days during a taxable year and certain other conditions are met.

Investments of the Trust

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

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

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

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

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each shareholder's basis in his Trust shares. These rules, however, will not apply to certain transactions entered into by the Trust primarily to reduce the risk of currency fluctuations with respect to its investments.

The Trust may invest in preferred securities or other securities the U.S. federal income tax treatment of which may not be clear or may be subject to re-characterization by the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the tax treatment expected by the Trust, it could affect the timing or character of income recognized by the Trust, requiring the Trust to purchase or sell securities, or otherwise change its portfolio, in order to comply with the tax rules applicable to regulated investment companies under the Code.

The Trust's investment in non-U.S. securities may be subject to non-U.S. withholding taxes. In that case, the Trust's yield on those securities would be decreased. Shareholders will generally not be entitled to claim a credit or deduction with respect to foreign taxes paid by the Trust.

Investments by the Trust in certain "passive foreign investment companies" could subject the Trust to 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. Elections may be available to the Trust to mitigate the effect of this provision but such elections generally accelerates the recognition of income without the receipt of cash.

The Trust may invest in REITs that hold residual interests in real estate mortgage investment conduits ("REMICs"). Under Treasury regulations that have not yet been issued, but may apply retroactively, a portion of the Trust's income from a REIT that is attributable to the REIT's residual interest in a REMIC (referred to in the Code as an "excess inclusion") will be subject to federal income tax in all events. These regulations are also expected to provide that excess inclusion income of a regulated investment company, such as the Trust, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC residual interest directly. In general, excess inclusion income (i) cannot be offset by net operating losses, (ii) will constitute unrelated business taxable income to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax exempt entity) and (iii) in the case of a foreign shareholder, will not qualify for any reduction in U.S. federal withholding tax. In addition, if at any time during any taxable year a "disqualified organization (as defined in the Code) is a record holder of a share in a regulated investment company, then the regulated investment company will be subject to a tax equal to that portion of its excess inclusion income for the taxable year that is allocable to the disqualified organization, multiplied by the highest federal income tax rate imposed on corporations. The Trust does not intend to invest in REMIC residual interests directly or in REITs, a substantial portion of the assets of which consists of residual interest in REMICs.

Certain of the Trust's investment practices are subject to special and complex federal income tax provisions that may, among other things, (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (ii) convert lower taxed long-term capital gains into higher taxed short-term capital or ordinary income, (iii) convert ordinary loss or a deduction into capital loss (the deductibility of which is more limited), (iv) cause the Trust to recognize income or gain without a corresponding receipt of cash, (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur and (vi) adversely alter the characterization of certain complex financial transactions.

The foregoing is a general summary of the provisions of the Code and the Treasury Regulations in effect as they directly govern the taxation of the Trust and its shareholders. These provisions are subject to change by legislative or administrative action, and any such change may be retroactive. Ordinary income and capital gain dividends may also be subject to state and local taxes. Certain states exempt from state income taxation dividends paid by regulated investment companies which are derived from interest on U.S. Government obligations. State law varies as to whether dividend income attributable to U.S. Government obligations is exempt from state income tax. Shareholders are urged to consult their tax advisors regarding specific questions as to U.S. federal, foreign, state, local income or other taxes.

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PERFORMANCE RELATED AND COMPARATIVE INFORMATION

About BlackRock

BlackRock is also a significant provider of risk management and advisory services that combine our capital markets expertise with our proprietary risk management systems and technology. BlackRock provides risk management services to portfolios with aggregate assets of $2.1 trillion.

Assets Under Management of Approximately $274 Billion

Fixed Income $187 billion

Liquidity $68 billion

Equity $14 billion

Alternatives $5 billion

BlackRock Snapshot

•

Approximately $274 billion in total assets under management

•

Manages money for 9 of the 10 largest U.S. companies*

•

Approximately $187 billion in fixed income assets under management

•

Manages over 40 closed-end funds totaling more than $10 billion in assets

•

Over $8 billion in high yield securities under management

•

Over $26.1 billion in intermediate securities under management

•

Approximately $1 billion of bank loan assets under management

•

Employs more than 231 professionals around the world dedicated solely to fixed income

* As ranked by Fortune magazine, according to revenues April 14, 2003

Growth of BlackRock's Fixed Income Assets Under Management

($billions)

1996 $41.1

1997 $52.5

1998 $64.8

1999 $86.4

2000 $116.9

2001 $135.2

2002 $175.6

2003 $188.1*

*As of March 31, 2003

Most investors are aware that the Federal Reserve has been aggressively cutting its key interest rate since January of 2001 in an effort to keep the economy afloat. In fact, the federal funds rate (the rate charged on overnight loans between banks) stood at a 42-year low of 1.25% as of June 18, 2003.

Why Invest in the BlackRock Limited Duration Income Trust

1. Reduced Interest Rate Exposure Through Limited Duration

Duration is considered a common gauge of the price sensitivity of a fixed income portfolio to a change in interest rates based on the weighted average timing of its underlying securities' expected principal and coupon payments.

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Specifically, duration measures the anticipated percentage change in net asset value (NAV) that is expected for every percentage point change in interest rates. And the two have an inverse relationship. For example, a duration of 4 years means that a 1% decrease in interest rates will increase the NAV of the portfolio by approximately 4%; if interest rates increase by 1%, the NAV will decrease by 4%. Generally, the longer the duration, the greater the impact a change in interest rates will have on the price of a portfolio.

With the federal funds rate now at a 42-year low of 1.25%, the risk of rising interest rates sometime in the foreseeable future is greater than normal.

The BlackRock Limited Duration Income Trust has been designed with a short duration of approximately four or five years to limit the amount of price volatility, relative to a portfolio with a longer duration, should interest rates increase.

Generally, a Shorter Duration Has the Potential to Mitigate Interest Rate Exposure


Duration	Interest Rates Fall 1%	Interest Rates Rise 1%
4 Years	NAV +4%	NAV -4%
15 Years	NAV +15%	NAV -15%

2. Diversified Portfolio with the Potential to Reduce Risk

Active Sector Rotation and Security Selection allows the flexibility to invest in multiple sectors which may reduce the concentration risk otherwise associated with investing in only one part of the market.

The Trust's management team will utilize BlackRock's time-tested process of rotating investments through nearly all major sectors of the fixed income market. The process is designed with the objective of generating excess returns with lower risk than our peers or benchmarks — emphasizing investments in potentially undervalued sectors and securities rather than making decisions based primarily on interest rate forecasts.

Sectors where the Trust may invest in Intermediate securities include:

Asset-backed securities • Investment grade corporate bonds

Mortgage-related securities • U.S. Gov't. and agency securities

Senior Loans hold the most senior position in the capital structure of a business entity and are typically secured with specific collateral by the borrower. The proceeds of Senior Loans are primarily used to finance mergers, acquisitions, stock repurchases, refinancings, internal growth and other corporate purposes.

Senior Loans have rates of interest which typically are redetermined regularly to maintain a fixed spread over widely accepted base rates. These base lending rates are primarily the London-Interbank Offered Rate ("LIBOR"), or the prime rate offered by one or more major U.S. banks.

Because their interest rates are adjusted for changes in short-term interest rates, Senior Loans generally have less interest rate risk than other fixed rate securities. As a result, BlackRock expects the Trust will be less volatile and less sensitive to changes in market interest rates than if the Trust invested exclusively in fixed-rate obligations.

High Yield Bonds (also referred to as "junk bonds") due to their highly speculative characteristics, typically offer higher yields than their investment grade counterparts to compensate for the increased amount of risk associated with investing in them. Accordingly, high yield securities may be relatively less sensitive to interest rate changes than higher quality securities of comparable maturity, because of their higher yield.

The graph below shows that high yield has outperformed during the two most recent rising interest rate periods as measured by the 10-year Treasury note.

B-37

October 1993 – September 1994


High Yield	3.03	%
Asset-Backed Securities	0.83	%
Mortgages	–1.14	%
US Agencies	–3.97	%
US Governments	–4.04	%

October 1998 – December 1999


High Yield	4.57	%
Asset-Backed Securities	2.22	%
Mortgages	2.67	%
US Agencies	–0.76	%
US Governments	–2.32	%

Source: Lehman Brothers/BlackRock Advisors, Inc. Past performance is no guarantee of future
results. (3)

(Footnote 3) Referenced Lehman Indices: The High Yield Index covers the universe of fixed-rate, non-investment grade debt. The Asset-Backed Securities Index covers five subsectors including: credit and charge cards, autos, home equity loans, utility and manufactured housing. The Mortgage-Backed Security Index covers the mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The U.S. Government Index covers securities issued by the U.S. Government (i.e., securities in the Treasury and Agency Indices). The U.S. Agency Index covers publicly issued debt of U.S. Government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. Government. Each Index shown is unmanaged and is not available for direct investment. The Trust expects to employ leverage. A leveraged portfolio may perform differently. The chart is for illustrative purposes only and does not represent the past or future performance of the Trust.

3. Attractive Monthly Income

The Trust is structured to provide enhanced monthly income potential through an efficient use of leverage.

The Trust may borrow funds and/or issue preferred shares to buy additional securities. This practice, known as "leverage," seeks to enhance return to the holders of common shares.

The Trust currently anticipates leverage in an aggregate amount of up to 33 1/3% of its total assets to buy additional securities.

However, the Trust cannot assure you that the use of leverage will result in a higher yield on its common shares. Once leverage is used, the NAV of the common shares and the yield to holders of the common shares will be more volatile.

4. Credit Quality

The Trust initially expects to have an average credit quality of investment grade, which is at least BBB– as determined by Standard & Poor's or Fitch Ratings and/or Baa3 as determined by Moody's Investors Service.

If current market conditions persist, the Trust expects that approximately 70% of its initial portfolio will consist of below investment grade debt securities. The remainder of the Trust's assets will be invested in investment grade debt securities.

5. Monthly Distributions

The Trust gives you the option of receiving monthly income in cash or conveniently reinvesting dividends. (The first dividend is expected to be declared 45 days, and paid approximately 60-90 days, after the close of the offering period.) Shareholders must opt out of the automatic reinvestment plan.

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6. Exchange-Traded Liquidity

The Trust expects to list its shares on a major stock exchange. A listing should provide the benefit of liquidity and the convenience of being able to track your investment via select newspapers or electronic services. (Like any stock, the shares of the Trust will fluctuate with market conditions and other factors. The shares are designed primarily for long-term investors, and you should not view the Trust as a vehicle for trading purposes.)

7. Experienced Management Team

As an investor of the Trust, your money will be managed by the same experienced professionals that manage BlackRock's large institutional clients' accounts. Consistent with BlackRock's team management approach, the Trust will be managed by two Portfolio Managers who have an average of 19 years of experience and are supported by 194 credit and quantitative analysts.

EXPERTS

The Statement of Net Assets of the Trust as of , 2003 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.

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INDEPENDENT AUDITORS' REPORT

The Board of Trustees and Shareholder of BlackRock Limited Duration Income Trust

We have audited the accompanying statement of assets and liabilities of BlackRock Limited Duration Income Trust (the "Trust") as of , 2003 and the related statements of operations and changes in net assets for the period from , 2003 (date of inception) to , 2003. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, such financial statements present fairly, in all material respects, the financial position of the Trust at , 2003 and the results of its operations and changes in its net assets for the period then ended, in conformity with accounting principles generally accepted in the United States of America.

F-1

BLACKROCK LIMITED DURATION INCOME TRUST

STATEMENT OF ASSETS AND LIABILITIES

, 2003

F-2

APPENDIX A

RATINGS OF INVESTMENTS

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

"Prime-1"

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

"Prime-2"

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

"Prime-3"

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


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

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


"F-1+"	Securities possess exceptionally strong credit quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.


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


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


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


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


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

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

A-1

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


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


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


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


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

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


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


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


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


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


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


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

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

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


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


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


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


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


"BB," "B," "CCC," "CC"	Debt is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation.

A-2

and "C"

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

"BB"

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


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

"CCC"

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


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


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


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


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


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

"r"

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

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

"Aaa"

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

A-3

"Aa"

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


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

"Baa"

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

"Ba," "B,"
"Caa," "Ca,"
and "C"

Bonds that possess one of these ratings provide questionable protection of interest and principal ("Ba" indicates some speculative elements; "B" indicates a general lack of characteristics of desirable investment; "Caa" represents a poor standing; "Ca" represents obligations which are speculative in a high degree; and "C" represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default. Bonds for which the security depends upon the completion of some act or the fulfillment of some condition are rated conditionally. These are bonds secured by (a) earnings of projects under construction, (b) earnings of projects unseasoned in operation experience, (c) rentals which begin when facilities are completed, or (d) payments to which some other limiting condition attaches. Parenthetical rating denotes probable credit stature upon completion of construction or elimination of basis of condition.


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

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

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


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


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


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

"BBB"
"BB," "B,"
"CCC," "DD,"
and "DP"

Debt possesses below average protection factors but such protection factors are still considered sufficient for prudent investment. Considerable variability in risk is present during economic cycles. Debt that possesses one of these ratings is considered to be below investment grade. Although below investment grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated "B" possesses the risk that obligations will not be met when due. Debt rated "CCC" is well below investment grade and has considerable uncertainty as to timely payment of principal, interest or preferred dividends. Debt rated "DD" is a defaulted debt obligation, and the rating "DP" represents preferred stock with dividend arrearages.

A-4

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

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


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


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


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

"BBB"

Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have an adverse impact on these bonds, and therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.

"BB," "B,"
"CCC,"
"CC," "C,"
"DDD,"
"DD," and
"D"

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

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

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

"BBB"


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


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

A-5


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


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


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

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

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


"AAA"	This designation represents the highest category assigned by Thomson BankWatch to long-term debt and indicates that the ability to repay principal and interest on a timely basis is extremely high.


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


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


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


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


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


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

MUNICIPAL NOTE RATINGS

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


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


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

A-6


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

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


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

"MIG-2"/
"VMIG-2"

Loans bearing this designation are of high quality, with margins of protection ample although not so large as in the preceding group. "MIG-3"/"VMIG-3" Loans bearing this designation are of favorable quality, with all security elements accounted for but lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.


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

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

A-7

APPENDIX B

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

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

B-1

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

Futures Contracts and Related Options

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

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

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

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

B-2

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

Strategic Transactions present certain risks. With respect to hedging and risk management, the variable degree of correlation between price movements of hedging instruments and price movements in the position being hedged create the possibility that losses on the hedge may be greater than gains in the value of the Trust's position. The same is true for such instruments entered into for income or gain. In addition, certain instruments and markets may not be liquid in all circumstances. As a result, in volatile markets, the Trust may not be able to close out a transaction without incurring losses substantially greater than the initial deposit. Although the contemplated use of these instruments predominantly for hedging should tend to minimize the risk of loss due to a decline in the value of the position, at the same time they tend to limit any potential gain which might result from an increase in the value of such position. The ability of the Trust to successfully utilize 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.

B-3

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits


(1)	Financial Statements


	Part A—Report of Independent Accountants. ⁽²⁾


	Part B—Statement of Assets and Liabilities. ⁽²⁾


(2)	Exhibits


(a)				Amended and Reststated Agreement and Declaration of Trust. ⁽¹⁾
(b)				Amended and Restated By-Laws. ⁽¹⁾
(c)				Inapplicable.
(d)				Form of Specimen Certificate. ⁽¹⁾
(e)				Form of Dividend Reinvestment Plan. ⁽¹⁾
(f)				Inapplicable.
(g)(1)				Form of Investment Management Agreement. ⁽²⁾
(g)(2)				Form of Sub-Investment Advisory Agreement. ⁽²⁾
(h)				Form of Purchase Agreement. ⁽²⁾
(i)				Form of Deferred Compensation Plan for Independent Trustees. ⁽¹⁾
(j)				Form of Custodian Agreement. ⁽²⁾
(k)				Form of Transfer Agency Agreement. ⁽²⁾
(l)				Opinion and Consent of Counsel to the Trust. ⁽²⁾
(m)				Inapplicable.
(n)				Consent of Independent Public Accountants. ⁽²⁾
(o)				Inapplicable.
(p)				Form of Initial Subscription Agreement. ⁽²⁾
(q)				Inapplicable.
(r)(1)				Code of Ethics of Trust. ⁽¹⁾
(r)(2)				Code of Ethics of Advisor and Sub-Advisor. ⁽¹⁾
(r)(3)				Code of Ethics of J.J.B. Hilliard, W.L. Lyons, Inc. ⁽¹⁾
(s)				Powers of Attorney. ⁽¹⁾


⁽¹⁾	Filed herewith.


⁽²⁾	To be filed by amendment.

Item 25. Marketing Arrangements

Reference is made to the Form of Purchase Agreement for the Registrant's shares of beneficial interest to be filed by amendment with this Registration Statement.

C-1

Item 26. Other Expenses of Issuance and Distribution

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


Registration fees					16,180
New York Stock Exchange listing fee					65,300
Printing (other than certificates)					200,000
Engraving and printing certificates					18,448
Accounting fees and expenses					5,000
Legal fees and expenses					260,000
NASD fee					20,500
Printing and distribution of offering related marketing materials					375,930
Miscellaneous					315,000
Total					1,276,358

Item 27. Persons Controlled by or Under Common Control With the Registrant

None.

Item 28. Number of Holders of Shares

As of July 2003

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

C-2

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 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.

C-3

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

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

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

Item 30. Business and Other Connections of Investment Advisor

Not Applicable

Item 31. Location of Accounts and Records

The Registrant's accounts, books and other documents are currently located at the offices of the Registrant, c/o BlackRock Advisors, Inc., 100 Bellevue Parkway, Wilmington, Delaware 19809, and at the offices of State Street Bank and Trust Company, the Registrant's Custodian, and EquiServe Trust Company, N.A., the Registrant's Transfer Agent.

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

C-4

(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.

C-5

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 June 2003.


								/s/ Robert S. Kapito
								Robert S. Kapito President and Chief Executive 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 June 2003.


Name		Title

/s/ Robert S. Kapito		Trustee, President and Chief Executive Officer

Robert S. Kapito

/s/ Henry Gabbay		Treasurer and Principal Financial Officer

Henry Gabbay

*		Trustee

Andrew F. Brimmer

*		Trustee

Richard E. Cavanagh

*		Trustee

Kent Dixon

*		Trustee

Frank J. Fabozzi

*		Trustee

James Clayburn La Force, Jr.

*		Trustee

Walter F. Mondale

*		Trustee

Ralph L. Schlosstein

*By: /s/ Robert S. Kapito

Robert S. Kapito Attorney-in-fact

EXHIBIT INDEX


EX-99(a)				Amended and Restated Declaration of Trust
EX-99(b)				Amended and Restated By-Laws
EX-99(d)				Form of Specimen Certificate.
EX-99(e)				Form of Dividend Reinvestment Plan.
EX-99(i)				Form of Deferred Compensation Plan for Independent Trustees
EX-99(r)(1)				Code of Ethics of Trust
EX-99(r)(2)				Code of Ethics of Advisor and Sub-Advisor
EX-99(r)(3)				Code of Ethics of J.J.B. Hilliard, W.L. Lyons, Inc
EX-99(s)				Powers of Attorney








                     BLACKROCK LIMITED DURATION INCOME TRUST








                              AMENDED AND RESTATED
                       AGREEMENT AND DECLARATION OF TRUST



















                            DATED AS OF JUNE 10, 2003



                                          TABLE OF CONTENTS



                                                                                                 Page
                                                                                                 ----

                                              ARTICLE I

                                              The Trust


1.1      Name.......................................................................................1
1.2      Definitions................................................................................2


                                             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


                                        i






                                                                                                 Page
                                                                                                 ----

                                             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



                                       ii






                                                                                                 Page
                                                                                                 ----

                                             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



                                       iii






                                                                                                 Page
                                                                                                 ----

                                             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............................................................................29
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




                                       iv



                     BLACKROCK LIMITED DURATION INCOME TRUST

                              AMENDED AND RESTATED
                       AGREEMENT AND DECLARATION OF TRUST


                  AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made
as of the 10th day of June, 2003, 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 May 16, 2003 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 Limited
Duration Income 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 deter-
mine.


                                        1



                  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 Amended and Restated 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

                                        2



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

                                        3



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 nomina tion 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

                                        4



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

                                        5



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
commu nications 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.

                                        6



                                   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.

                                        7



                  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.

                                        8



                  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

                                        9



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

                                       10



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.

                                       11



                                    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 modifi cation 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

                                       12



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 indemnifi cation. 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, restate ment 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

                                       13



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 concern ing 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.

                                       14



                  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 amend ment 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,

                                       15



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 multi ples 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

                                       16



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.

                                       17



                                   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

                                       18



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,

                                       19



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.

                                       20



                                    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 Sharehold ers 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

                                       21



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
Declara tion 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 other wise 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 chal lenger. 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

                                       22



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,
regula tion or any exchange on which Trust Shares are listed a report of
operations contain ing 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 Share holders. 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

                                       23



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 disposi tion 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, in
         demnities 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 cancella tion 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.

                                       24



                  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 of
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 amend ment 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 record able 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.

                                       25



                  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 Declara tion 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 substan tially 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

                                       26



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
corpora tion, Person or other entity which is the beneficial owner, directly or
indirectly, of five percent (5%) or more of the outstanding Shares of any class
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 acquir ing,
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.

                                       27



                               (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
         substan tial part of the assets of the Trust to any Principal
         Shareholder (except assets having an aggregate fair market value of
         less than $1,000,000, aggregating for the purpose of such computation
         all assets sold, leased or exchanged in any series of similar
         transactions within a twelve-month period.)

                               (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 $1,000,000, 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 $1,000,000, 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.

                                       28



                                   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.

                                       29



                  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 determina tion 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.

                                       30



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


                                               By:
                                                     ---------------------------
                                                     Dr. Andrew F. Brimmer
                                                     Trustee


                                               By:
                                                     ---------------------------
                                                     Richard E. Cavanagh
                                                     Trustee


                                               By:
                                                     ---------------------------
                                                     Kent Dixon
                                                     Trustee


                                               By:
                                                     ---------------------------
                                                     Frank J. Fabozzi
                                                     Trustee


                                               By:
                                                     ---------------------------
                                                     Robert S. Kapito
                                                     Trustee


                                       31



                                               By:
                                                     ---------------------------
                                                     James Clayburn LaForce, Jr.
                                                     Trustee


                                               By:
                                                     ---------------------------
                                                     Walter F. Mondale
                                                     Trustee


                                               By:
                                                     ---------------------------
                                                     Ralph L. Schlosstein
                                                     Trustee

                                       32



                              AMENDED AND RESTATED

                                     BY-LAWS

                                       OF

                     BLACKROCK LIMITED DURATION INCOME TRUST




                                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  Chairman, 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


                                        i



                     BLACKROCK LIMITED DURATION INCOME TRUST
                     ---------------------------------------
                          AMENDED AND RESTATED BY-LAWS
                          ----------------------------

                  These By-Laws are made and adopted pursuant to Section 3.9 of
the Amended and Restated Agreement and Declaration of Trust establishing
BlackRock Limited Duration Income Trust dated as of June 10, 2003, 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.

                  2.10 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

                  2.2 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


                                        2



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 Chairman, if any, 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. The Chairman, if
any, shall be a Trustee, but 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



                  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 Chairman, President, and Vice Presidents. The Chairman,
if any, shall, if present, preside at all meetings of the Shareholders and of
the Trustees and shall exercise and perform such other powers and duties as may
be from time to time assigned to such person by the Trustees. Subject to such
supervisory powers, if any, as may be given by the Trustees to the Chairman, if
any, 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
Chairman, if any, and 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
Chairman, if any, and the President shall each 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 Chair man, if any, and 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 desig nated 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


                                        4



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 neces sary 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


                                        5



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.


                                        6



                  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 power to amend or
repeal the By-Laws or adopt new By-Laws at any time; provided, however, that
By-Laws adopted by the Shareholders may, if such By-Laws so state, be altered,
amended or repealed only by the Shareholders by an affirmative vote of a
majority of the out standing voting securities of the Trust, and not by the
Trustees. 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.


                                        7







         COMMON SHARES                                                       Shares
         OF BENEFICIAL INTEREST


Number   PAR VALUE $.001

         ORGANIZED UNDER THE LAWS
         OF THE STATE OF DELAWARE
         The Shares represented by this certificate may not be owned or
         transferred, directly or indirectly, by or to (I) the United States, or                   THIS CERTIFICATE
         any state or political subdivision thereof, any foreign government, any                  IS TRANSFERABLE IN
         international organization, or any agency or instrumentality of any of               BOSTON OR IN NEW YORK CITY
         the foregoing, (II) any organization (other than a farmer's cooperative
         described in ss. 521 of the Internal Revenue Code of 1988, as                 CUSIP

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



                     BLACKROCK LIMITED DURATION INCOME TRUST


         THIS CERTIFIES THAT




         IS THE OWNER OF


      FULLY PAID AND NONASSESSABLE COMMON SHARES OF BENEFICIAL INTEREST OF


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

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

         DATED:



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



                       AUTHORIZED SIGNATURE       SECRETARY           PRESIDENT






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






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




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



For Value Received _______________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE




________________________________________________________________________________


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



________________________________________________________________________________


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


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



Dated_____________________


                                 X______________________________________________


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



Signature(s) Guaranteed



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


                                        2



                                     FORM OF
                         THE BLACKROCK CLOSED-END TRUSTS

                      AUTOMATIC DIVIDEND REINVESTMENT PLAN
                             (FOR PERPETUAL TRUSTS)


                              TERMS AND CONDITIONS

         Pursuant to this Automatic Dividend Reinvestment Plan (the "Plan") of
the undersigned BlackRock Closed-End Trust (the "Trust"), unless a holder (a
"Share holder") of the Trust's common shares of beneficial interest (the "Common
Shares") otherwise elects, all dividends and distributions on such Shareholder's
Common Shares will be automatically reinvested by Equiserve Trust Company, N.A.
("Equiserve"), as agent for Shareholders in administering the Plan (the "Plan
Agent"), in additional Common Shares of the Trust. Shareholders who elect not to
participate in the Plan will receive all dividends and other distributions in
cash paid by check mailed directly to the Shareholder of record (or, if the
Common Shares are held in street or other nominee name, then to such nominee) by
Equiserve as the Dividend Disbursing Agent. Participants may elect not to
participate in the Plan and to receive all dividends and distributions in cash
by sending written instructions to Equiserve, as the 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
written notice if received by the Plan Agent not less than ten days prior to any
dividend or distribution payment date; otherwise such termination or resumption
will be effective with respect to any subsequently declared dividend or
distribution.

         The Plan Agent will open an account for each Shareholder under the Plan
in the same name in which such Shareholder's Common Shares are registered. When
ever the Trust declares a dividend or a distribution (collectively referred to
as "dividends") 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 respective 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, the primary
national securities exchange on which the common shares are traded, 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 Com mon 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 or equal to 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 each 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


                                        2




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 will maintain all Shareholders' accounts in the Plan and
furnish 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.

         In the case of Shareholders such as banks, brokers or nominees that
hold Common 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 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 as a result of dividends or capital gains distributions
payable either in Common Shares or in cash. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open- market purchases in connection with the reinvestment of dividends.

         For the avoidance of doubt, no Common Shares will be issued under the
Plan at a price less than net asset value or under any circumstance that may
violate the Investment Company Act of 1940, as amended, or any rules issued
thereunder.

VOTING

         Each Shareholder proxy will include those Common Shares purchased or
received pursuant to the Plan. The Plan Agent will forward all proxy
solicitation materials to participants and vote proxies for Common Shares held
pursuant to the Plan in accordance with the instructions of the participants.

TAXATION

         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.


                                        3




AMENDMENT OF THE PLAN

         The Plan may be amended or terminated by the Trust. 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.
Notice will be sent to Plan participants of any amendments as soon as
practicable after such action by the Trust.

INQUIRIES REGARDING THE PLAN

         All correspondence concerning the Plan should be directed to the Plan
Agent at 150 Royall Street, Canton, MA 02021, 781-575-2149.

APPLICABLE LAW

         These terms and conditions shall be governed by the laws of the State
of New York without regard to its conflicts of laws provisions.

EXECUTION

         To record the adoption of the Plan as of May 22, 2003, the Trust has
caused this Plan to be executed in the name and on behalf of each Trust by a
duly authorized officer.


                           By and on behalf of
                           BlackRock Limited Duration Income Trust


                           ----------------------------------
                           By:  Anne Ackerley
                           Title: Vice President




                                        4




                                     FORM OF
                                 BLACKROCK FUNDS
                 AMENDED AND RESTATED DEFERRED COMPENSATION PLAN

                  The Board of Trustees of each of the participating management
investment companies listed on Schedule A (as such schedule may be amended from
time to time) attached hereto and made a part hereof (each a "Participating
Fund" and collectively, the "Participating Funds"), established the BlackRock
Funds Deferred Compensation Plan, effective as of February 24, 2000. The
BlackRock Funds Deferred Compensation Plan was amended and restated effective as
of September 27, 2002 (as amended and restated, the "Plan"). The purpose of the
Plan is to provide eligible trustees of Participating Funds, the opportunity to
defer the receipt of all or a portion of the amounts payable to them as
compensation for services rendered as members of the Board of Trustees of the
respective funds.

1. DEFINITIONS

                 1.1 Definitions. Unless a different meaning is plainly implied
by the context, the following terms as used in the Plan shall have the following
meanings:

                 The term "Administrator" shall mean BlackRock Advisors, Inc.,
in its capacity as the administrator of the Plan on behalf of the Participating
Funds.

                 The term "Advisor" shall mean BlackRock Advisors, Inc. and its
affiliates.

                 The term "Board" shall mean the Board of Trustees of each
respective Participating Fund.

                 The term "Deferral Share Account" shall mean a book entry
account maintained to reflect the number and value of shares of Eligible
Investments that the Administrator determines could have been purchased with an
Eligible Trustee's Deferred Compensation as provided in this Plan and any
earnings thereon.

                 The term "Eligible Investment" shall mean a fund managed by the
Advisor and designated by the Participating Funds from time to time as an
investment medium that may be chosen by an Eligible Trustee in which such
Trustee's Deferred Compensation may be deemed to be invested, provided that any
Eligible Investment that is a term trust and also the Participating Fund from
which an Eligible Trustee's deferred compensation is paid, is not an Eligible
Investment that may be chosen by such Trustee as an investment medium for such
deferred compensation.

                  The term "Eligible Trustee" shall mean a member of the Board
who is not an "interested person" of a Participating Fund or of BlackRock, as
such term is defined




under Section 2(a)(1) of the Investment Company Act of 1940, as amended (the
"1940 Act").

                 The term "Exchange" shall mean the principal stock exchange on
which common shares of an Eligible Investment trade.

                 The term "Fair Market Value" shall mean, with respect to a
date, on a per share basis, the closing price of an Eligible Investment, as
reported on the consolidated tape of the Exchange on such date or, if the
Exchange is closed on such date, the next succeeding date on which it is open.

                 The term "Participating Funds" shall mean those registered
investment management companies for which the Advisor serves or will serve in
the future as investment manager, whether existing at the time of adoption of
the Plan or established at a later date, designated by each respective Board as
a fund from which compensation may be deferred by an Eligible Trustee.
Participating Funds shall be listed on Schedule A to the Plan, provided that
failure to list a Participating Fund on Schedule A shall not affect its status
as a Participating Fund.

                 The term "Valuation Date" shall mean the last business day of
each calendar quarter and any other day upon which the Participating Fund makes
valuations of the Deferral Share Accounts.

                 1.2 Trustees and Directors. Where appearing in the Plan,
"Trustee" shall also refer to "Director" and "Board of Trustees" shall also
refer to "Board of Directors."

                 1.3 Separate Plan for each Participating Fund. The Plan is
drafted, and shall be construed, as a separate Plan between each Eligible
Trustee and each Participating Fund.

2. DEFERRALS

                 2.1 Deferral Elections.

                         (a) An Eligible Trustee participating in the Plan (a
"Participant") may elect to defer receipt of all, or a specified dollar amount
or percentage of the compensation (including fees for attending meetings) earned
by such Eligible Trustee for serving as a member of the Board or as a member of
any committee (or subcommittee of such committee) of the Board of which such
Eligible Trustee from time to time may be a member (the "Deferred
Compensation"). Expenses of attending meetings of the Board, committees of the
Board or subcommittees of such committees or other reimbursable expenses may not
be deferred.

                                       2



                         (b) Deferrals shall be withheld from each payment of
compensation by the Participating Fund to the Participant based upon the
percentage or dollar amount elected by the Participant under Section 2.3 hereof.

                         (c) The Participant may modify the amount of such
Participant's Deferred Compensation on a prospective basis by submitting to the
Participating Fund a revised election to defer form prior to the end of the
calendar year in which the revised election is submitted. Such change will be
effective as of the first day of the calendar year following the date such
revision is submitted; provided, however, that if such modification was made on
or after October 1st, the change will not be effective until April 1st of the
following calendar year.

                 2.2 Manner of Election.

                         (a) An Eligible Trustee shall elect to participate in
the Plan and defer compensation by completing, signing and filing with the
Participating Fund an election to defer in such written form as may be
prescribed (the "Election"). The Election shall include:

                              (i) The amount or percentage of compensation to be
         deferred;

                              (ii) The method of payment of Deferred
         Compensation (i.e., in a lump sum or the number of installments);

                              (iii) The time or times of payment of the Deferred
         Compensation;

                              (iv) The Eligible Investments selected by the
         Trustee for the Deferred Compensation; and

                              (v) Any beneficiary(ies) designated by the
         Eligible Trustee pursuant to Section 3.2 of the Plan.

                 (b) Each Eligible Trustee's receipt of compensation shall be
deferred until the first to occur of any of the following events:

                              (i) The date which such Eligible Trustee ceases to
         be a Trustee of the Participating Fund;

                              (ii) A date selected by such Eligible Trustee as
         specified on the Trustee's Election;

                                       3



                              (iii) A date on which some future event occurs
         which is not within the Eligible Trustee's control, as specified on the
         Trustee's Election;

                              (iv) Upon the death of the Eligible Trustee;

                              (v) In the sole discretion of the Participating
         Fund, upon disability or financial hardship of the Eligible Trustee;

                              (vi) The effective date of the sale or liquidation
         of the Participating Fund or to comply with applicable law; or

                              (vii) Upon termination of the Plan in accordance
         with Section 4.5 hereof.

                 2.3 Period of Deferrals.

                         (a) Any Election by an Eligible Trustee pursuant to the
Plan shall be irrevocable from and after the date on which such Election is
filed with the Participating Fund and shall be effective to defer compensation
of an Eligible Trustee as follows:

                              (i) As to any Eligible Trustee in office on the
         original effective date of the Plan (prior to any amendments or
         restatements) who files an Election no later than thirty (30) days
         after such effective date, such Election shall be effective to defer
         any compensation which is earned by the Eligible Trustee after the date
         of the filing of the Election, or such effective date of the Plan, if
         later;

                              (ii) As to any individual who becomes an Eligible
         Trustee after the original effective date of the Plan and who files an
         Election within thirty (30) days of becoming an Eligible Trustee, such
         Election shall be effective to defer any compensation which is earned
         by the Eligible Trustee after the date of the filing of the Election,
         or the effective date of the Plan, if later;

                              (iii) As to any other Eligible Trustee, the
         Election shall be effective to defer any compensation that is earned
         from and after the first day of the calendar year next succeeding the
         calendar year in which the Election is filed; and

                              (iv) Any Elections in effect on the date this Plan
         is amended and restated shall remain in effect so that a Participant
         need not execute new a Election.

                                       4




                         (b) A Participant may revoke such Participant's
Election at any time by filing a written notice of termination with the
Participating Fund. Any compensation earned by the Participant after receipt of
the notice by the Participating Fund shall be paid currently and no longer
deferred as provided in the Plan.

                         (c) A Participant who has filed a notice to terminate
deferral of compensation may thereafter again file a new Election pursuant to
Section 2.2(a) hereof effective for any calendar year subsequent to the calendar
year in which the new Election is filed; provided, however, that if the notice
to terminate the deferral is filed on or after October 1st, the new Election
shall not become effective until April 1st of the following calendar year.

                 2.4 Valuation of Deferral Share Account.

                         (a) Deferred Compensation will be deferred on the date
it otherwise would have been paid to a Participant (the "Deferral Date"). Each
Participating Fund will establish a Deferral Share Account for each Participant
that will be credited with all or a portion of the Participant's Deferred
Compensation from time to time in accordance with this Plan. The amount
initially credited to a Participant's Deferral Share Account in connection with
each Deferred Compensation amount shall be determined by reference to the number
of whole shares of Eligible Investments selected by the Participant that the
Deferred Compensation could have purchased at the Fair Market Value per share of
such Eligible Investments on a date on or about the Deferral Date (less any
brokerage fees payable upon the acquisition of shares of such in the open
market). Deferred Compensation shall be credited to the Deferral Share Account
as soon as reasonably practicable after the Deferral Date, as determined by the
Administrator in its sole discretion. Deferred Compensation not credited to the
Deferral Share Account on or about the Deferral Date (e.g., because the
remaining amount is not sufficient to purchase an additional whole share of
Eligible Investments selected by the Participant or for any other reason) shall
be credited to the Deferral Share Account as soon as reasonably practicable, as
determined by the Administrator in its sole discretion (i.e., as soon as such
amount, when taken together with other uncredited amounts, is sufficient to
purchase a whole share of an Eligible Investment as selected by the
Participant).

                         (b) On each Valuation Date, each Deferral Share Account
will be credited or debited with the amount of gain or loss that would have been
recognized had the Deferral Share Account been invested in the Eligible
Investments designated by the Participant. Each Deferral Share Account will be
credited with the Fair Market Value of shares that would have been acquired
through reinvestment of dividends and capital gains distributed as if the amount
of Deferred Compensation represented by such Deferral Share Account had been
invested and reinvested in shares of the Eligible Investments designated by the
Participant. Each Participating Fund shall, from time to time, further adjust
the Participant's Deferral Share Account to reflect the value which would have

                                       5



been earned as if the amount of Deferred Compensation credited to such Deferral
Share Account had been invested and reinvested in shares of the Eligible
Investments designated by the Participant, as determined by the Administrator in
its sole discretion in accordance with this Plan.

                         (c) The Deferral Share Account shall be debited to
reflect any distributions as of the date such distributions are made in
accordance with Section 3 of the Plan.

                 2.5 Investment of Deferral Share Account.

                         (a) The Participating Funds shall from time to time
designate one or more funds eligible for investment. A Participant, at the time
of Election, shall have the right to select from the then-current list of
Eligible Investments one or more Eligible Investments in which amounts deferred
shall be deemed invested as set forth in Section 3. The Participant may select
from the Eligible Investments to which all or part of the amounts in the
Deferral Share Account shall be deemed to be invested. If, as the result of the
requirement that notional purchases of Eligible Investments be made in whole
shares as set forth in Section 2.4 or for any other reason, not all of a
Participant's Deferred Compensation has been credited to the Deferral Share
Account, the cash balance of such Deferred Compensation shall be held until the
next Valuation Date on which the Administrator determines, in its sole
discretion, that it is reasonably practicable to make a notional purchase
(debiting the cash balance of the Participant's Deferred Compensation) of one or
more Eligible Investments then selected by the Participant.

                         (b) The Participant shall make investment designations
at the time such Participant files the Election with the Participating Fund
which shall remain effective until another valid direction has been made by the
Participant as herein provided. The Participant may amend the investment
designations only once each calendar year by giving written notice at least
thirty (30) days prior to the end of such calendar year. A timely change to a
Participant's investment designation shall become effective for future Deferred
Compensation as soon as practicable following receipt of notice by the
Participating Fund.

                         (c) The Eligible Investments deemed to be made
available to the Participant, and any restrictions or limitation on the maximum
or minimum percentages of the Participant's Deferral Share Account that may be
invested in any Eligible Investment, shall be the same as from time-to-time
communicated to the Participant.

                         (d) A Participant may elect to transfer Deferred
Compensation from one Eligible Investment to a different Eligible Investment,
provided that in no event may any such election become effective sooner than six
(6) months following the last date on which Deferred Compensation was allocated
to the former Eligible Investment,

                                       6



and the Participant shall not be permitted to defer any compensation earned
after such date to such former Eligible Investment for a period of six (6)
months from the date of such transfer. A transfer election shall be made by
written notice signed by the Participant and filed with the Participating Fund.

                         (e) Notwithstanding the foregoing, the Participating
Funds may, from time to time, remove any fund from or add any fund to the list
of Eligible Investments. If the Participating Funds discontinue an Eligible
Investment, the Participant shall complete and file an election to transfer the
amounts deferred in the discontinued Eligible Investment to such other
then-current Eligible Investment. In the event that the Participant shall fail
to timely elect a new Eligible Investment, such amounts shall be transferred to
an Eligible Investment that the Participating Fund deems appropriate.

                         (f) Except as provided below, the Participant's
Deferral Share Account shall be deemed to be invested in accordance with the
Participant's Election, provided such Election conforms to the provisions of
this Section. If--

                              (i) the Participant does not furnish complete,
         written investment instructions; or

                              (ii) the written investment instructions from the
         Participant are unclear,

the Participant's Deferral Share Account shall be deemed to be invested in such
other then-current Eligible Investments as the Participating Funds shall select,
until such time as the Participant shall provide complete investment
instructions.

3. DISTRIBUTIONS FROM DEFERRAL SHARE ACCOUNT

                 3.1 Distribution Election.

                 The aggregate value of a Participant's Deferral Share Account
and any Deferred Compensation held in cash and not yet credited to a
Participant's Deferral Share Account will be paid in a lump sum or in ten (10)
or fewer annual installments, as specified in the Participant's Election (or
Elections). Distributions will be made as of the first business day of January
of the calendar year following the calendar year in which the Participant ceases
being a Trustee or on such other dates as the Participant may specify in such
Election (or Elections), which shall not be earlier than six (6) months
following the Election.

                         (a) If a Participant elects installment payments, the
unpaid balance in the Participant's Deferral Share Account shall continue to
accrue earnings and dividend equivalents, computed in accordance with the
provisions of Section 2.4, and

                                       7



shall be prorated and paid over the installment period. The amount of the first
payment shall be a fraction of the then Fair Market Value of such Participant's
Deferral Share Account, the numerator of which is one, and the denominator of
which is the total number of installments; provided that cash not yet credited
to a Participant's Deferral Share Account, if any, will be added to such amount
as a part of the first payment. The amount of each subsequent payment shall be a
fraction of the then Fair Market Value of the Participant's Deferral Share
Account remaining after the prior payment, the numerator of which is one and the
denominator of which is the total number of installments elected minus the
number of installments previously paid.

                         (b) All payments shall be in cash; provided, however,
if a lump sum payment is elected, the Participant may elect to receive payment
in full and fractional shares of the Eligible Investments selected by such
Participant at Fair Market Value at the time of payment of the amounts credited
to the Participant's Deferral Share Account; provided, further, that any
Deferred Compensation held in cash will be distributed in cash. Any such
election shall be filed in writing by the Participant with the Participating
Fund at least ten (10) business days prior to the date which such payment is to
be made.

                         (c) A Participant may at any time, and from time to
time, change any distribution election applicable to such Participant's Deferral
Share Account, provided that no election to change the timing of any
distribution shall be effective unless it is made in writing and received by the
Participating Fund at least six (6) months prior to the earlier of (i) the time
at which the Participant ceases to be a Trustee or (ii) the time such
distribution shall commence.

                 3.2 Death Prior to Complete Distribution. In the event of a
Participant's death prior to distribution of all amounts in such Participant's
Deferral Share Account, notwithstanding any Election made by the Participant and
notwithstanding any other provision set forth herein, the value of such Deferral
Share Account plus any Deferred Compensation held in cash shall be paid in a
lump sum in accordance with the provisions of the Plan as soon as reasonably
possible to the Participant's designated beneficiary(ies) (the "Beneficiary")
or, if such Beneficiary(ies) does not survive the Participant or no beneficiary
is designated, to such Participant's estate. Any Beneficiary(ies) so designated
by a Participant may be changed at any time by notice in writing from such
Participant to the Participating Fund. All payments under this subsection shall
otherwise be paid in accordance with Section 3.1 hereof.

                 3.3 Payment in Discretion of Participating Funds.

                 Amounts deferred hereunder, based on the then adjusted value
of the Participant's Deferral Share Account as of the Valuation Date next
following plus any

                                       8



Deferred Compensation held in cash, may become payable to the Participant in the
discretion of the Participating Fund:

                         (a) Disability. If the Participating Fund finds on the
basis of medical evidence satisfactory to it that the Participant is prevented
from engaging in any suitable gainful employment or occupation and that such
disability will be permanent and continuous during the remainder of such
Participant's life, the Participating Fund shall distribute the amounts in the
Participant's Deferral Share Account plus any Deferred Compensation held in cash
in a lump sum or in the number of installments previously selected by the
Participant.

                         (b) Financial Hardship. If the Participant requests and
if the Participant provides evidence of financial hardship, the Participating
Fund may, in its sole and absolute discretion, permit a distribution of all or a
portion of the Participant's Deferral Share Account plus any Deferred
Compensation held in cash prior to the date on which payments would have
commenced under Section 3.1.

                 3.4 Acceleration of Payments.

                         (a) In the event of the liquidation, dissolution or
winding up of a Participating Fund or the distribution of all or substantially
all of a Participating Fund's assets and property to its shareholders (for this
purpose a sale, conveyance or transfer of a Participating Fund's assets to a
trust, partnership, association or another corporation in exchange for cash,
shares or other securities with the transfer being made subject to, or with the
assumption by the transferee of, the liabilities of such Participating Fund
shall not be deemed a termination of such Participating Fund or such a
distribution), the entire unpaid balance of the Participant's Deferral Share
Account plus any Deferred Compensation held in cash of such Participating Fund
shall be paid in a lump sum as of the effective date thereof.

                         (b) The Participating Funds are empowered to accelerate
the payment of deferred amounts to all Participants and Beneficiaries in the
event that there is a change in law which would have the effect of adversely
affecting such persons rights and benefits under the Plan if acceleration did
not occur.

4. MISCELLANEOUS

                 4.1 Statements of Account.

                 The Participating Funds will furnish each Participant with a
statement setting forth the value of such Participant's Deferral Share Account
plus any Deferred Compensation held in cash as of the end of each calendar year
and all credits and debits of such Deferral Share Account or to any Deferred
Compensation held in cash during

                                       9



such year. Such statements will be furnished no later than sixty (60) days after
the end of each calendar year.

                 4.2 Rights in Deferral Share Account.

                 Credits to the Deferral Share Accounts or to any Deferred
Compensation held in cash shall (i) remain part of the general assets of the
Participating Funds, (ii) at all times be the sole and absolute property of the
Participating Funds and (iii) in no event be deemed to constitute a fund, trust
or collateral security for the payment of the Deferred Compensation to which
Participants are entitled. The right of the Participant or any Beneficiary or
estate to receive future payment of Deferred Compensation under the provisions
of the Plan shall be an unsecured claim against the general assets of the
Participating Funds, if any, available at the time of payment. A Participating
Fund shall not reserve or set aside funds for the payment of its obligations
hereunder by any form of trust, escrow, or similar arrangement. The arrangement
described in this Plan shall be "unfunded" for U.S. federal income tax purposes
and for purposes of the Employee Retirement Security Income Act of 1974, as
amended.

                 4.3 Non-Assignability.

                 The rights and benefits of Participants under the Plan and any
other person or persons to whom payments may be made pursuant to the Plan shall
not be subject to alienation, assignment, pledge, transfer or other disposition,
except as otherwise provided by law.

                 4.4 Interpretation and Administration.

                 The Participating Funds shall have the general authority to
interpret, construe and implement provisions of the Plan and to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan as
shall be from time to time, deemed advisable. Any determination by the
Participating Funds shall be final and conclusive.

                 4.5 Amendment and Termination.

                 The Participating Funds may in their sole discretion amend or
terminate the Plan at any time. No amendment or termination shall adversely
affect any then existing deferred amounts or rights under the Plan. Upon
termination of the Plan, the remaining balance of the Participant's Deferral
Share Account plus any Deferred Compensation held in cash shall be paid to the
Participant (or to a beneficiary, as the case may be), in a lump sum as soon as
practicable but no more than thirty (30) days following termination of the Plan.

                                       10



                 4.6 Incapacity.

                 If the Participating Funds shall receive satisfactory evidence
that the Participant or any Beneficiary entitled to receive any benefit under
the Plan is, at the time when such benefit becomes payable, a minor, or is
physically or mentally incompetent to receive such benefit and to give a valid
release therefor, and that another person or an institution is then maintaining
or has custody of the Participant or Beneficiary and that no guardian, committee
or other representative of the estate of the Participant or Beneficiary shall
have been duly appointed, the Participating Funds may make payment of such
benefit otherwise payable to the Participant or Beneficiary to such other person
or institution and the release of such other person or institution shall be a
valid and complete discharge for the payment of such benefit.

                 4.7 Payments Due Missing Persons.

                 The Participating Funds shall make a reasonable effort to
locate all persons entitled to benefits under the Plan. However, notwithstanding
any provisions of the Plan to the contrary, if, after a period of five (5) years
from the date such benefit shall be due, any such persons entitled to benefits
have not been located, their rights under the Plan shall stand suspended. Before
this provision becomes operative, the Participating Funds shall send a certified
letter to all such persons to their last known address advising them that their
benefits under the Plan shall be suspended. Any such suspended amounts shall be
held by the Participating Funds for a period of three (3) additional years (or a
total of eight (8) years from the time the benefits first become payable) and
thereafter, if unclaimed, such amounts shall be forfeited, subject to applicable
laws in the jurisdiction in which the respective Participating Fund is
organized.

                 4.8 Agents.

                 The Participating Funds may employ agents and provide for such
clerical, legal, actuarial, accounting, advisory or other services as they deem
necessary to perform their duties under the Plan. The Participating Funds shall
bear the cost of such services and all other expenses incurred in connection
with the administration of the Plan.

                 4.9 Governing Law.

                 All matters concerning the validity, construction and
administration of the Plan shall be governed by the laws of the state in which
the respective Participating Fund is organized.

                 4.10 Non-Guarantee of Status.

                 Nothing contained in the Plan shall be construed as a contract
or guarantee of the right of the Participant to be, or remain as, a Trustee of
any of the Participating

                                       11


Funds or to receive any, or any particular rate of, compensation from any of the
Participating Funds.

                 4.11 Counsel.

                 The Participating Funds may consult with legal counsel with
respect to the meaning or construction of the Plan, their obligations or duties
hereunder or with respect to any action or proceeding or any question of law,
and they shall be fully protected with respect to any action taken or omitted by
them in good faith pursuant to the advice of legal counsel.

                 4.12 Entire Plan.

                 The Plan contains the entire understanding between the
Participating Funds and the Participant with respect to the payment of
non-qualified elective deferred compensation by the Participating Funds to the
Participant.

                 4.13 Non-liability of Administrator and Participating Funds.

                 Interpretations of, and determinations (including factual
determinations) related to, the Plan made by the Administrator or Participating
Funds in good faith, including any determinations of the amounts of the Deferral
Share Accounts, shall be conclusive and binding upon all parties; and the
Administrator, the Participating Funds and their officers and Trustees shall not
incur any liability to the Participant for any such interpretation or
determination so made or for any other action taken by it in connection with the
Plan in good faith.

                 4.14 Successors and Assigns.

                 The Plan shall be binding upon, and shall inure to the benefit
of, the Participating Funds and their successors and assigns and to the
Participants and their heirs, executors, administrators and personal
representatives.

                 4.15 Severability.

                 In the event any one or more provisions of the Plan are held
to be invalid or unenforceable, such illegality or unenforceability shall not
affect the validity or enforceability of the other provisions hereof and such
other provisions shall remain in full force and effect unaffected by such
invalidity or unenforceability.

                 4.16 Rule 16b-3 Compliance.

                 It is the intention of the Participating Fund that all
transactions under the Plan be exempt from liability imposed by Section 16(b) of
the Securities Exchange Act of

                                       12



1934, as amended. Therefore, if any transaction under the Plan is found not to
be in compliance with Section 16(b), the provision of the Plan governing such
transaction shall be deemed amended so that the transaction does so comply and
is so exempt, to the extent permitted by law and deemed advisable by the
Participating Fund, and in all events the Plan shall be construed in favor of
its meeting the requirements of an exemption.

                                       13







                  IN WITNESS WHEREOF, each Participating Fund has caused this
Plan to be executed by one of its duly authorized officers, as of this 27th day
of September, 2002.




                                                     By:
                                                        ------------------------
                                                     Name:
                                                     Title:




Witness:
        --------------------------
Name:
Title:



                                       14



                                                                      SCHEDULE A


                                 BLACKROCK FUNDS
                           DEFERRED COMPENSATION PLAN

                               PARTICIPATING FUNDS

BlackRock Advantage Term Trust
BlackRock Broad Investment Grade 2009 Term Trust
BlackRock California Insured Municipal 2008 Term Trust
BlackRock California Insured Municipal Income Trust
BlackRock California Investment Quality Municipal Trust
BlackRock California Municipal 2018 Term Trust
BlackRock California Municipal Bond Trust
BlackRock California Municipal Income Trust
BlackRock California Municipal Income Trust II
BlackRock Core Bond Trust
BlackRock Florida Insured Municipal 2008 Term Trust
BlackRock Florida Insured Municipal Income Trust
BlackRock Florida Investment Quality Municipal Trust
BlackRock Florida Municipal Bond Trust
BlackRock Florida Municipal Income Trust
BlackRock High Yield Trust
BlackRock Income Opportunity Trust
BlackRock Income Trust
BlackRock Insured Municipal 2008 Term Trust Inc.
BlackRock Insured Municipal Income Trust
BlackRock Insured Municipal Term Trust
BlackRock Investment Quality Municipal Trust
BlackRock Investment Quality Term Trust
BlackRock Maryland Municipal Bond Trust
BlackRock Municipal 2018 Term Trust
BlackRock Municipal Bond Trust
BlackRock Municipal Income Trust
BlackRock Municipal Income Trust II
BlackRock Municipal Target Term Trust
BlackRock New Jersey Investment Quality Municipal Trust
BlackRock New Jersey Municipal Bond Trust
BlackRock New Jersey Municipal Income Trust
BlackRock New York Insured Municipal 2008 Term Trust
BlackRock New York Insured Municipal Income Trust
BlackRock New York Investment Quality Municipal Trust
BlackRock New York Municipal 2018 Term Trust
BlackRock New York Municipal Bond Trust



BlackRock New York Municipal Income Trust
BlackRock New York Municipal Income Trust II
BlackRock Pennsylvania Strategic Municipal Trust
BlackRock Preferred Opportunity Trust
BlackRock Strategic Bond Trust
BlackRock Strategic Municipal Trust
BlackRock Virginia Municipal Bond Trust Partners Balanced Trust






                                                                      SCHEDULE B

                              ELIGIBLE INVESTMENTS


You may choose from the following eligible investments:



BlackRock Advantage Term Trust
BlackRock Broad Investment Grade 2009 Term Trust
BlackRock Core Bond Trust
BlackRock High Yield Trust
BlackRock Income Opportunity Trust
BlackRock Income Trust
BlackRock Investment Quality Term Trust
BlackRock Strategic Bond Trust








                                 BLACKROCK FUNDS
                           DEFERRED COMPENSATION PLAN

                             Deferral Election Form

                  The undersigned hereby elects to participate in the Deferred
Compensation Plan ("Plan") in accordance with the elections made in this
Deferral Election Form.

1.       Amount Deferred

                  I hereby elect to defer compensation earned as a Trustee which
are earned subsequent to the date of this election, as follows:

                  [ ]  All fees; or

                  [ ]  __________% of fees.

                  [ ]  $_________ of fees.

2.       Investment Choice

                  I hereby elect to have the deferred compensation valued by an
investment in the Eligible Investments as set forth on the attachment to this
Deferral Election Form. I understand that I may change this election by giving
written notice at least thirty (30) days prior to the end of each calendar year.






3.       Time of Payment

                  I hereby elect to be paid as follows:

                  [ ]  On the first business day in January of the calendar
year following the calendar year in which I cease to be a Trustee; or

                  [ ]  On the following other date or event:

4.       Number of Payments

                  I hereby elect to receive payment as follows:

                  [ ]  Entire amount in a lump sum; or

                  [ ]  In _____________ annual installments (not to exceed 10).

                  I hereby relinquish and release any and all rights to receive
payment of the deferred amounts except in accordance with the Plan.


Executed this ___ day of, _____



                                                --------------------------------
                                                Trustee's Signature

Received and accepted by the Participating Funds:

By:
   -----------------------------------

Date:
     ---------------------------------






                                 BLACKROCK FUNDS
                           DEFERRED COMPENSATION PLAN

                           Designation of Beneficiary

The undersigned hereby designates the person or persons named below as the
beneficiary(ies) of any benefits which may become due according to the terms and
conditions of the BlackRock Funds Deferred Compensation Plan (the "Plan") in the
event of my death.

         [ ]  To my Estate: or

         [ ]  To the following beneficiaries:

         Primary:
                    ------------------------------------------------------

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

                    ------------------------------------------------------
                    (Name, address and relationship) if living, or if not
                    living at my my death, to my Estate.

         Secondary:
                    ------------------------------------------------------

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

                    ------------------------------------------------------
                    (Name, address and relationship) if living, or if not
                    living at my my death, to

I hereby revoke all prior beneficiary designation(s) made under the terms of the
Plan by execution of this form.

Executed this           day of                           , ______



                                             -----------------------------------
                                             Trustee's Signature



                         THE BLACKROCK CLOSED END TRUSTS

                                 CODE OF ETHICS


I.       Introduction.
         ------------

         The purpose of this Code of Ethics is to prevent Access Persons (as
defined below) of The BlackRock Closed End Trusts (the "Trusts") from engaging
in any act, practice or course of business prohibited by paragraph (b) of Rule
17j-l (the "Rule") under the Investment Company Act of 1940, as amended (the
"Act"). This Code of Ethics is required by paragraph (c) of the Rule. A copy of
the Rule is attached to this Code of Ethics as Appendix 1.

         Access Persons of the Trusts, in conducting their personal securities
transac tions, owe a fiduciary duty to the shareholders of the Trusts. The
fundamental standard to be followed in personal securities transactions is that
Access Persons may not take inappropriate advantage of their positions. All
personal securities transac tions by Access Persons must be conducted in such a
manner as to avoid any actual or potential conflict of interest between the
Access Person's interest and the interests of the Trusts, or any abuse of an
Access Person's position of trust and responsibility. Potential conflicts
arising from personal investment activities could include buying or selling
securities based on knowledge of the Trust's trading position or plans
(sometimes referred to as front-running), and acceptance of personal favors that
could influence trading judgments on behalf of the Trusts. While this Code of
Ethics is designed to address identified conflicts and potential conflicts, it
cannot possibly be written broadly enough to cover all potential situations and,
in this regard, Access Persons are expected to adhere not only to the letter,
but also the spirit, of the policies contained herein.


II.      Definitions.
         -----------

         In order to understand how this Code of Ethics applies to particular
persons and transactions, familiarity with the key terms and concepts used in
this Code of Ethics is necessary. Those key terms and concepts are:



         1. "Access Person" means any trustee, officer or "advisory person" of
the Trusts. A list of the Trust's Access Persons who are officers and trustees
of the Trusts is attached as Appendix 2 to this Code of Ethics and will be
updated from time to time.

         2. "Advisory person" means (a) any employee of the Trusts or of any
company in a control relationship to the Trusts, who, in connection with his
regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a "Covered Security" by the Trusts, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales; and (b) any natural person in a control relationship to the
Trusts who obtains information concerning recommendations made to the Trusts
with regard to the purchase or sale of "Covered Securities".

         3. "Beneficial ownership" has the meaning set forth in Rule 16a-1(a)(2)
of the Securities Exchange Act of 1934, as amended, a copy of which is included
as Appendix 3. The determination of direct or indirect beneficial ownership
shall apply to all securities which an Access Person has or acquires.

         4. "BlackRock" means BlackRock Advisors, Inc. the investment advisor of
the Trusts.

         5. "BlackRock Code" means the Employee Investment Transaction Policy
adopted by BlackRock and approved by the Board.

         6. "Control" has the meaning set forth in Section 2(a)(9) of the Act.

         7. "Covered Security" has the meaning set forth in Section 2(a)(36) of
the Act, except that it shall not include: direct obligations of the Government
of the United States; bankers' acceptances, bank certificates of deposit,
commercial paper, and high-quality short-term debt instruments, including
repurchase agreements; and shares issued by registered open-end investment
companies. A high-quality short- term debt instrument is one with a maturity at
issuance of less than 366 days and that is rated in one of the two highest
rating categories by a nationally recognized statistical rating organization.

         8. "Independent trustee" means a trustee of the Trusts who is not an
"interested person" of the Trusts within the meaning of Section 2(a)(19) of the
Act.

         9. "Investment Personnel" of the Trusts means (a) any employee of the
Trusts (or of any company in a control relationship to the Trusts) who, in
connection





with his or her regular functions or duties, makes or participates in making
recom mendations regarding the purchase or sale of securities by the Trusts and
(b) any natural person who controls the Trusts and who obtains information
concerning recommendations made to the Trusts regarding the purchase or sale of
securities by the Trusts.

         10. "IPO" means an offering of securities registered under the
Securities Act of 1933, the issuer or which, immediately before the
registration, was not subject to the reporting requirements of Sections 13 or
15(d) of the Securities Exchange Act.

         11. "Limited Offering" means an offering exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2), 4(6) or Rule 504, 505 or
506 under the Securities Act of 1933.

         12. "Purchase or sale of a Covered Security" includes, among other
things, the writing of an option to purchase or sell a Covered Security.


III.     Restrictions Applicable to Directors, Officers and Employees of
         BlackRock.

         1. All Directors, officers and employees of BlackRock's investment
advisory companies shall be subject to the restrictions, limitations and
reporting responsibilities set forth in the BlackRock Code, respectively, as if
fully set forth herein.

         2. Persons subject to this Section III shall not be subject to the
restrictions, limitations and reporting responsibilities set forth in Sections
IV. and V. below.


IV.      Prohibitions; Exemptions.

         1. Prohibited Purchases and Sales.

         A. No Access Person may purchase or sell, directly or indirectly, any
Covered Security in which that Access Person has, or by reason of the
transaction would acquire, any direct or indirect beneficial ownership and which
to the actual knowledge of that Access Person at the time of such purchase or
sale:

         (1) is being considered for purchase or sale by the Trusts; or


         (2) is being purchased or sold by the Trusts.

         2. Exemptions From Certain Prohibitions.

         A. The prohibited purchase and sale transactions described in paragraph
IV.1 above do not apply to the following personal securities transactions:

         (1) purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control;

         (2) purchases or sales which are non-volitional on the part of either
the Access Person or the Trusts;

         (3) purchases which are part of an automatic dividend reinvestment plan
(other than pursuant to a cash purchase plan option);

         (4) purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent the rights
were acquired from that issuer, and sales of the rights so acquired;

         (5) any purchase or sale, or series of related transactions, involving
500 shares or less in the aggregate, if the issuer has a market capitalization
(outstanding shares multiplied by the current price per share) greater than $1
billion;

         (6) any purchase or sale which the Compliance Officer of BlackRock (as
defined in the BlackRock Code) approves on the grounds that its potential harm
to the Trusts is remote.

         3. Prohibited Recommendations.

         An Access Person may not recommend the purchase or sale of any Covered
Security to or for the Trusts without having disclosed his or her interest, if
any, in such security or the issuer thereof, including without limitation:

         A. any direct or indirect beneficial ownership of any Covered Security
of such issuer, including any Covered Security received in a private securities
transac tion;

         B. any contemplated purchase or sale by such person of a Covered
Security;


         C. any position with such issuer or its affiliates; or

         D. any present or proposed business relationship between such issuer or
its affiliates and such person or any party in which such person has a
significant interest.

         4. Pre-approval of Investments in Initial
            Public Offerings or Limited Offerings.

         A. No Investment Personnel shall purchase any security (including, but
not limited to, any Covered Security) issued in an initial public offering
("IPO") or a Limited Offering unless an officer of the Trusts approves the
transaction in advance. The Secretary shall maintain a written record of any
decisions to permit these transactions, along with the reasons supporting the
decision.


V.       Reporting.

         1. Initial Holdings Reports.

         No later than ten (10) days after a person becomes an Access Person, he
or she must report to the Trusts the following information:

                           (i) the title, number of shares and principal amount
of each Covered Security in which the Access Person had any direct or indirect
benefi cial ownership when the person became an Access Person;

                           (ii) the name of any broker, dealer or bank with whom
the Access Person maintained an account in which any securities were held for
the direct or indirect benefit of the Access Person as of the date the person
became an Access Person; and

                           (iii) the date that the report is submitted by the
Access Person.

         2. Quarterly Reporting.

         A. Every Access Person shall either report to the Trusts the
information described in paragraphs B and C below with respect to transactions
in any Covered Security in which the Access Person has, or by reason of the
transaction acquires, any





direct or indirect beneficial ownership in the security or, in the alternative,
make the representation in paragraph D below.

         B. Every report shall be made not later than 10 days after the end of
the calendar quarter in which the transaction to which the report relates was
effected and shall contain the following information:

         (1) the date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the principal amount of
each Covered Security involved;

         (2) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);

         (3) the price at which the transaction was effected;

         (4) the name of the broker, dealer or bank with or through whom the
transaction was effected;

         (5) the date that the report is submitted by the Access Person; and

         (6) a description of any factors potentially relevant to an analysis of
whether the Access Person may have a conflict of interest with respect to the
transaction, including the existence of any substantial economic relationship
between the transaction and securities held or to be acquired by the Trusts.

         C. With respect to any account established by the Access Person in
which any securities were held during the quarter for the direct or indirect
benefit of the Access Person, no later than 10 days after the end of a calendar
quarter, an Access Person shall provide a report to the Trusts containing the
following informa tion:

         (1) the name of the broker, dealer or bank with whom the Access Person
established the account;

         (2) the date the account was established; and

         (3) the date that the report is submitted by the Access Person.





         D. If no transactions were conducted by an Access Person during a
calendar quarter that are subject to the reporting requirements described above,
such Access Person shall, not later than 10 days after the end of that calendar
quarter, provide a written representation to that effect to the Trusts.

         3. Annual Reporting.

         A. Every Access Person shall report to the Trusts the information
described in paragraph B below with respect to transactions in any Covered
Security in which the Access Person has, or by reason of the transaction
acquires, any direct or indirect beneficial ownership in the security.

         B. Annually, within 30 days of the end of each calendar year, the
following information (which information must be current as of a date no more
than 30 days before the report is submitted):

         (1) The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect beneficial
ownership;

         (2) The name of any broker, dealer or bank with whom the Access Person
maintains an account in which any securities are held for the direct or indirect
benefit of the Access Person; and

         (3) The date that the report is submitted by the Access Person.

         4. Exceptions to Reporting Requirements.

         A. An Access Person is not required to make a report otherwise required
under paragraphs 1, 2 or 3 above with respect to any transaction effected for
any account over which the Access Person does not have any direct or indirect
influence or control; provided, (however, that if the Access Person is relying
upon the provi sions of this paragraph 4(A) to avoid making such a report, the
Access Person shall, not later than 10 days after the end of each calendar
quarter, identify any such account in writing and certify in writing that he or
she had no direct or indirect influence over any such account.

         B. An independent trustee of the Trusts who would be required to make a
report pursuant to paragraphs 1, 2 or 3 above solely by reason of being a
trustee of the Trusts is not required to make an initial holdings report under
paragraph 1 above and an annual report under paragraph 3 above, and is only
required to make a




quarterly report under paragraph 2 above if the independent trustee, at the time
of the transaction, knew or, in the ordinary course of fulfilling the
independent trustee's official duties as a trustee of the Trusts, should have
known that (a) the Trusts has engaged in a transaction in the same security
within the last 15 days or is engaging or going to engage in a transaction in
the same security within the next 15 days, or (b) the Trusts or BlackRock has
within the last 15 days considered a transaction in the same security or is
considering a transaction in the same security or within the next 15 days is
going to consider a transaction in the same security.

         5. Annual Certification.

         A. All Access Persons are required to certify that they have read and
understand this Code of Ethics and recognize that they are subject to the
provisions hereof and will comply with the policy and procedures stated herein.
Further, all Access Persons are required to certify annually that they have
complied with the requirements of this Code of Ethics and that they have
reported all personal securities transactions required to be disclosed or
reported pursuant to the requirements of such policies. A copy of the
certification form to be used in complying with this paragraph A is attached to
this Code of Ethics as Appendix 4.

         B. The Trusts and BlackRock shall prepare an annual report to the Board
of Trustees of the Trusts to be presented at the first regular meeting of the
Board after March 31 of each year and which shall:

         (1) Summarize existing procedures concerning personal investing,
including pre-clearance policies and the monitoring of personal investment
activity after pre-clearance has been granted, and any changes in the procedures
during the past year;

         (2) describe any issues arising under the Code of Ethics or procedures
since the last report to the Board including, but not limited to, information
about any material violations of the Code of Ethics or procedures and the
sanctions imposed during the past year;

         (3) identify any recommended changes in existing restrictions or proce
dures based upon experience under this Code of Ethics, evolving industry
practice or developments in applicable laws and regulations;

         (4) contain such other information, observations and recommendations as
deemed relevant by the Trusts or BlackRock; and






         (5) certify that the Trusts, BlackRock have adopted Codes of Ethics
with procedures reasonably necessary to prevent Access Persons from violating
the provisions of Rule 17j-1(b) or this Code.

         6. Notification of Reporting Obligation and Review of Reports.

         Each Access Person shall receive a copy of this Code of Ethics and be
notified of his or her reporting obligations. All reports shall be promptly
submitted upon completion to the Trust's Secretary who shall review such
reports.

         7. Miscellaneous.

         A. Any report under this Code of Ethics may contain a statement that
the report shall not be construed as an admission by the person making the
report that the person has any direct or indirect beneficial ownership in the
securities to which the report relates.


VI.      Confidentiality.

         No Access Person shall reveal to any other person (except in the normal
course of his or her duties on behalf of the Trusts) any information regarding
securities transactions by the Trusts or consideration by the Trusts or
BlackRock of any such securities transaction.

         All information obtained from any Access Person hereunder shall be kept
in strict confidence, except that reports of securities transactions hereunder
will be made available to the Securities and Exchange Commission or any other
regulatory or self-regulatory organization to the extent required by law or
regulation.


VII.     Sanctions.

         Upon discovering a violation of this Code of Ethics, the Board of
Trustees of the Trusts may impose any sanctions it deems appropriate, including
a letter of censure, the suspension or termination of any trustee, officer or
employee of the Trusts, or the recommendation to the employer of the violator of
the suspension or termination of the employment of the violator.


Dated:   May 22, 2003





                                   Appendix 1

               Rule 17j-l under the Investment Company Act of 1940







                                   Appendix 2


          The following are "Access Persons" for purposes of the foregoing Code
of Ethics:

NAME                                          TITLE
----                                          -----
TRUSTEES

Ralph L. Schlosstein                          Chairman/Trustee
Andrew F. Brimmer                             Trustee
Richard E. Cavanagh                           Trustee
Kent Dixon                                    Trustee
Frank J. Fabozzi                              Trustee
Robert S. Kapito                              Trustee
James Clayburn La Force, Jr.                  Trustee
Walter F. Mondale                             Trustee







OFFICERS

Robert S. Kapito                              President
Kevin Klingert                                Vice President (Municipals Only)
Dennis Schaney                                Vice President (BHY Only)
Anne Ackerley                                 Vice President
Richard M. Shea                               Vice President/Tax
Henry Gabbay                                  Treasurer
James Kong                                    Assistant Treasurer
Vincent Tritto                                Secretary
Brian Kindelan                                Assistant Secretary








                                   Appendix 3

           Rule 16a-l(a)(2) under the Securities Exchange Act of 1934





                                   Appendix 4

                               CERTIFICATION FORM


         This is to certify that I have read and understand the Code of Ethics
of the BlackRock Closed End Trusts dated May 22, 2003, and that I recognize that
I am subject to the provisions thereof and will comply with the policy and
procedures stated therein.

         This is to further certify that I have complied with the requirements
of such Code of Ethics and that I have reported all personal securities
transactions required to be disclosed or reported pursuant to the requirements
of such Code of Ethics.


         Please sign your name here:  _____________________________


         Please print your name here: _____________________________


         Please date here:            _____________________________





         Please sign two copies of this Certification Form, return one copy to
Mr. Bart Battista, Chief Compliance Officer, BlackRock Advisors, Inc., 40 East
52nd Street, New York, NY 10022, and retain the other copy, together with a copy
of the Code of Ethics, for your records.



                                                                   November 2002

                                 BLACKROCK, INC.

                       CODE OF BUSINESS CONDUCT AND ETHICS


INTRODUCTION

         BlackRock, Inc. and its subsidiaries (including BlackRock Financial
Management, Inc., BlackRock Institutional Management Corporation, BlackRock
Advisors, Inc., BlackRock Capital Management, Inc., BlackRock International,
Ltd., BlackRock (Japan), Inc., BlackRock Asia Limited, and BlackRock
Investments, Inc. (collectively, "BlackRock" or the "Company")) have maintained
a reputation for conducting their business activities in the highest ethical and
professional manner. Indeed, BlackRock's reputation for integrity is one of its
most important assets and has been instrumental in its business success. Each
BlackRock employee - whatever his or her position - is responsible for
continuing to uphold these high ethical and professional standards.

         This Code of Business Conduct and Ethics covers a wide range of
business activities, practices and procedures. It does not cover every issue
that may arise in the course of BlackRock's many business activities, but it
sets out basic principles designed to guide employees of BlackRock. All of our
employees must conduct themselves in accordance with this Code, and seek to
avoid even the appearance of improper behavior.

         Any employee who violates the requirements of this Code will be subject
to disciplinary action. If you are in a situation which you believe may violate
or lead to a violation of this Code, you should follow the guidelines described
in Section 13 of this Code.

1.       COMPLIANCE WITH LAWS AND REGULATIONS

         BlackRock's business activities are subject to extensive governmental
regulation and oversight. In particular, as an investment adviser and sponsor of
investment companies and other investment products, BlackRock is subject to
regulation under the Investment Advisers Act of 1940, the Investment Company Act
of 1940, various securities laws, ERISA, and the Commodity Exchange Act, as well
as the laws and regulations of certain jurisdictions within and outside the U.S.
In addition, BlackRock is subject to regulation and oversight, as a public
company, by the Securities and Exchange Commission and the New York Stock
Exchange and, as an affiliated company of The PNC Financial Services Group,
Inc., ("PNC") the Federal Reserve Board and the Office of the Comptroller of the
Currency.

         It is, of course, essential that BlackRock comply with the laws and
regulations applicable to its business activities. Although not all employees
are expected to know the details of these laws and regulations, it is important
for each employee to know enough about them to determine when to seek advice
from supervisors and BlackRock's Legal Department.

         To assist in this effort, BlackRock has provided to all employees its
Compliance Manual and various policies and procedures which provide guidance for
complying with these



laws and regulations. In addition, the Company holds information and training
sessions, including annual compliance meetings conducted by BlackRock's Legal
Department, to assist employees in achieving compliance with the laws and
regulations applicable to BlackRock and its activities.

         In addition, as a public company, BlackRock is required to file
periodic reports with the SEC. It is BlackRock's policy to make full, fair,
accurate, timely and understandable disclosure in compliance with applicable
rules and regulations in all periodic reports required to be filed by the
Company.

2.       STATEMENT OF PRINCIPLES

         Employees of BlackRock are subject to the Statement of Principles
("Statement of Principles") adopted by PNC and these Principles are hereby
incorporated by reference into this Code. The Statement of Principles provides
guidance for handling a wide range of ethical, legal and compliance matters. Any
questions regarding the application of the Statement of Principles to particular
matters should be directed to the General Counsel of BlackRock.

3.       CONFLICTS OF INTEREST

         A potential "conflict of interest" may arise under various
circumstances. A potential conflict of interest may arise when a person's
private interest interferes in some way with the interests of the Company. A
conflict situation can arise when an employee, officer or director takes actions
or has interests that may make it difficult to perform his or her Company work
objectively and effectively. Conflicts of interest may also arise when an
employee, officer or director, or members of his or her family, receives
improper personal benefits as a result of his or her position in the Company.
Loans to, or guarantees of obligations of, employees and their family members
may create conflicts of interest.

         Potential conflicts of interest also arise when a BlackRock employee
works in some manner for a competitor, client or vendor. Thus, you are not
allowed to work for a competitor as a consultant or board member, except as
approved by BlackRock's General Counsel. In addition, potential conflicts of
interests may arise between the interests of BlackRock on the one hand and the
interests of one or more of its clients on the other hand. As an investment
adviser and fiduciary, BlackRock has a duty to act solely in the best interests
of its clients and to make full and fair disclosure to its clients.

         Conflicts of interest may not always be clear-cut, so if you have a
question, you should consult your supervisor, the Company's General Counsel or
another member of the Legal Department. Any employee, officer or director who
becomes aware of a conflict or potential conflict should bring it to the
attention of a supervisor, manager or a member of the BlackRock Legal
Department.

4.       INSIDER TRADING

         Employees who have access to confidential information about BlackRock,
our clients or issuers in which we invest client assets are not permitted to use
or share that information for stock trading purposes or for any other purpose
except the proper conduct of our


                                        2



business. All non-public information about BlackRock or any of our clients or
issuers should be considered confidential information. To use non-public
information for personal financial benefit or to "tip" others who might make an
investment decision on the basis of this information is not only unethical but
also illegal.

         In this regard, BlackRock has adopted the BlackRock Insider Trading
Policy and the BlackRock Employee Investment Transaction Policy. Under the
Employee Investment Transaction Policy, BlackRock employees are required to
pre-clear all transactions in securities (except for certain exempt securities
such as mutual funds and treasury bills). In addition, BlackRock employees are
subject to PNC's policies and procedures regarding transactions in PNC's
securities. These policies provide employees with specific procedures and
guidance regarding trading of BlackRock's and PNC's securities. If you have any
questions regarding the use of confidential information or any of the above
securities trading policies, please consult a member of BlackRock's Legal
Department.

5.       CORPORATE OPPORTUNITIES

         Employees, officers and directors are prohibited from taking for
themselves personal opportunities that are discovered through the use of
corporate property, information or position without the consent of the Board of
Directors or, in some cases, the General Counsel. No employee may use corporate
property, information, or position for improper personal gain, and no employee
may compete with the Company directly or indirectly. Employees, officers and
directors owe a duty to the Company to advance its legitimate interests when the
opportunity to do so arises.

6.       COMPETITION, FAIR DEALING AND GRATUITIES

         We seek to outperform our competition fairly and honestly. We seek
competitive advantages through superior performance, never through unethical or
illegal business practices. Misappropriating proprietary information, possessing
trade secret information that was obtained without the owner's consent, or
inducing such disclosures by past or present employees of other companies is
prohibited. Each employee should endeavor to respect the rights of and deal
fairly with the Company's clients, vendors and competitors. No employee in the
course of conducting BlackRock's business should take unfair advantage of anyone
through manipulation, concealment, abuse of privileged information,
misrepresentation of material facts, or any other intentional unfair-dealing
practice.

         The purpose of business entertainment and gifts in a commercial setting
is to create good will and sound working relationships, not to gain unfair
advantage with clients or vendors. No gift or entertainment should ever be
offered, given, provided or accepted by any BlackRock employee, family member of
an employee or officer unless it: (i) is not a cash gift, (ii) is consistent
with customary business practices, (iii) is not excessive in value (not more
than $150), (iv) cannot be construed as a bribe or payoff and (v) does not
violate any laws or regulations. Additional guidance regarding gifts and
gratuities is contained in the Compliance Manual and BlackRock's Policy
Regarding Entertainment and Gifts. Please discuss with your supervisor any gifts
or proposed gifts which you are not certain are appropriate.




                                        3



7.       DISCRIMINATION AND HARASSMENT

         The diversity of BlackRock's employees is a tremendous asset. BlackRock
is firmly committed to providing equal opportunity in all aspects of employment
and will not tolerate any illegal discrimination or harassment of any kind. In
particular, it is BlackRock's policy to comply with the law by affording equal
opportunity to all qualified applicants and existing employees without regard to
race, religion, color, national origin, sex, age (over 40), disability, status
as a Vietnam-era veteran or any other basis that would be in violation of any
applicable ordinance or law. All personnel actions, including but not limited to
recruitment, selection, hiring, training, transfer, promotion, termination,
compensation, and benefits conform to this policy. In addition, BlackRock will
not tolerate harassment, bias or other inappropriate conduct on the basis of
race, color, religion, national origin, sex, disability, age (over 40), status
as a Vietnam-era veteran or any other basis by a manager, supervisor, employee,
customer, vendor or visitor that would be in violation of any applicable
ordinance or law. BlackRock's Equal Opportunity Policy and other employment
policies are available on the Company's internal website.

8.       RECORD-KEEPING

         The Company requires honest and accurate recording and reporting of
information in order to conduct its business and to make responsible business
decisions. In addition, since BlackRock is engaged in a variety of financial
services activities and is a public company, it is subject to extensive
regulations regarding maintenance and retention of books and records.

         Generally, all of BlackRock's books, records, accounts and financial
statements must be maintained in reasonable detail, must appropriately reflect
the Company's transactions and must conform both to applicable legal
requirements and to BlackRock's system of internal controls.

         Many employees regularly use business expense accounts, which must be
documented and recorded accurately. If you are not sure whether a certain
expense is proper, ask your supervisor or the Finance Department. BlackRock's
Employee Expense Reimbursement Policies and Procedures are available from the
Finance Department and on the Company's internal website.

         Business records and communications often become public, and employees
should avoid exaggeration, derogatory remarks, guesswork, or inappropriate
characterizations of people and companies that can be misunderstood. This
applies equally to e-mail, internal memos, and formal reports. Records should
always be retained or destroyed according to the Company's record retention
policies. Finally, in the event of litigation or governmental investigations,
please consult BlackRock's Legal Department regarding any specific
record-keeping requirements or obligations.

9.       CONFIDENTIALITY

         Generally, BlackRock employees must maintain the confidentiality of
confidential information entrusted to them by the Company or its clients, except
when disclosure


                                        4



is authorized by the Legal Department or required by laws or regulations.
Confidential information includes all non-public information that might be of
use to competitors, or harmful to the Company or its clients, if disclosed. It
also includes information that clients and other parties have entrusted to us.
The obligation to preserve confidential information continues even after
employment ends. All employees of BlackRock have signed a Confidentiality and
Employment Policy which sets forth specific obligations regarding confidential
information. Any questions regarding such Policy or other issues relating to
confidential information, should be directed to a member of the Legal
Department.

10.      PROTECTION AND PROPER USE OF BLACKROCK ASSETS

         All employees should endeavor to protect BlackRock's assets and ensure
their efficient use. Theft, carelessness, and waste have a direct impact on the
Company's profitability. Any suspected incident of fraud or theft should be
immediately reported to your supervisor or a member of the Legal Department for
investigation. Company technology, equipment or other resources should not be
used for non-Company business, though incidental personal use may be permitted.

         The obligation of employees to protect the Company's assets includes
its proprietary information. Proprietary information includes intellectual
property such as trade secrets, patents, trademarks, and copyrights, as well as
business, marketing and service plans, engineering and manufacturing ideas,
designs, databases, records, salary information and any unpublished financial
data and reports. Unauthorized use or distribution of this information would
violate Company policy, and it could also be illegal and result in civil and/or
criminal penalties.

11.      PAYMENTS TO GOVERNMENT PERSONNEL

         The U.S. Foreign Corrupt Practices Act prohibits offering or giving
anything of value, directly or indirectly, to officials of foreign governments,
foreign political candidates or foreign political parties in order to obtain or
retain business. It is strictly prohibited to make illegal payments to
government officials of any country or secure any improper advantage.

         In addition, the U.S. government has a number of laws and regulations
regarding business gratuities which may be accepted by U.S. government
personnel. The promise, offer or delivery to an official or employee of the U.S.
government of a gift, favor or other gratuity in violation of these rules would
not only violate BlackRock's policy but could also be a criminal offense.
Various state and local governments, as well as foreign governments, have
similar rules regarding gratuities and payments.

         Additionally, U.S. federal, state, and local law as well as foreign
laws govern contributions to political candidates and parties, as well as the
employment of former governmental personnel. Guidance regarding political
contributions is contained in the Compliance Manual and BlackRock's Policy
Regarding Political Contributions and Gifts to Public Officials.





                                        5



12.      DRUGS AND ALCOHOL

         The Company prohibits the use, possession or distribution of illegal
drugs by employees while working for BlackRock. Also, the Company prohibits any
use of alcohol by employees that might affect their fitness for duty or job
performance, the operations of the Company, and/or their security or safety or
that of others. All newly hired employees must submit to a drug screening test
on a timely basis and must pass it in order to be employed by BlackRock. A
current employee may also be asked to submit to and pass drug screening and
alcohol detection tests under certain circumstances.

13.      WAIVERS OF THE CODE OF BUSINESS CONDUCT AND ETHICS

         Any waiver of this Code for executive officers or directors may be made
only by BlackRock's Board of Directors or a committee of the Board and will be
promptly disclosed as required by law or stock exchange regulation.

14.      REPORTING ANY ILLEGAL OR UNETHICAL BEHAVIOR

         Employees should talk to supervisors, managers or members of
BlackRock's Legal Department about observed illegal or unethical behavior and
when in doubt about the best course of action in a particular situation. In
addition, employees of BlackRock may utilize (on an anonymous basis if desired)
a hotline (1-866-785-9753) maintained by PNC for reporting ethical or compliance
violations. It is the policy of the Company not to allow retaliation for reports
of misconduct by others made in good faith by employees. Employees are expected
to cooperate in internal investigations of misconduct.

         The General Counsel of BlackRock will report material violations of
this Code or the policies and procedures referenced herein to the Board of
Directors of BlackRock (or a committee thereof), to the Chief Executive Officer
of BlackRock or to the Audit Committee of PNC's Board of Directors.

15.      COMPLIANCE PROCEDURES

         We must all work to ensure prompt and consistent action against
violations of this Code. However, in some situations it is difficult to know
right from wrong. Since we cannot anticipate every situation that will arise, it
is important that we have a way to approach a new question or problem. These are
the steps to keep in mind:

o        Make sure you have all the facts. In order to reach the right
         solutions, we must be as fully informed as possible.

o        Ask yourself: What specifically am I being asked to do? Does it seem
         unethical or improper? This will enable you to focus on the specific
         question you are faced with, and the alternatives you have. Use your
         judgment and common sense; if something seems unethical or improper,
         seek guidance before acting.

o        Clarify your responsibility and role. In most situations, there is
         shared responsibility. Are your colleagues informed? It may help to get
         others involved and discuss the problem.


                                        6



o        Discuss the issue with your supervisor. This is the basic guidance for
         all situations. In many cases, your supervisor will be more
         knowledgeable about the question, and will appreciate being brought
         into the decision-making process. Remember that it is your supervisor's
         responsibility to help solve problems.

o        Seek help from Company resources. In the rare case where it may not be
         appropriate to discuss an issue with your supervisor, or where you do
         not feel comfortable approaching your supervisor with your question,
         discuss it locally with your office manager, your Human Resources
         manager or a member of BlackRock's Legal Department. If you prefer to
         write, address your concerns to your Human Resource manager or the
         General Counsel of BlackRock, as appropriate.

o        You may report ethical violations in confidence and without fear of
         retaliation. If your situation requires that your identity be kept
         secret, your anonymity will be protected. The Company does not permit
         retaliation of any kind against employees for good faith reports of
         ethical violations.

o        Always ask first, act later. If you are unsure of what to do in any
         situation, seek guidance before you act.

16.      ACKNOWLEDGEMENT

            Each employee of BlackRock is required to sign a written
acknowledgement that he or she has received a copy of this Code, has carefully
read the Code and will abide by its terms. A violation of this Code by an
employee of BlackRock may be cause for significant sanctions including
termination of employment.














                                        7




LIVING OUR VALUES


                               PNC CODE OF ETHICS


Performance

Customer Focus

Respect

Integrity

Diversity

Teamwork

Quality of Life


                                                                      [PNC LOGO]


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                               PNC CODE OF ETHICS
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CHAIRMAN'S MESSAGE

[GRAPHIC OMITTED]

As employees of PNC, the decisions we make every day can affect our customers,
colleagues, shareholders and the communities we serve. We recognize how critical
it is for those decisions to meet not only appropriate legal and regulatory
requirements, but our ethical standards as well. The integrity, reputation and
performance of our company depend on it. To emphasize PNC's commitment to
maintain the highest ethical standards and practice strong corporate governance,
the PNC Board of Directors and senior management have adopted a Statement of
Principles that applies to everyone associated with PNC. You will find the
Statement of Principles at the beginning of this Code.

Generally speaking, common sense, good judgment and the PNC values of customer
focus, integrity, respect and diversity provide the guidance needed to conduct
our daily affairs. The Statement of Principles and PNC Code of Ethics give us
direction when the appropriate course of action may not be clear.

Each of us is obligated to report any matters involving questionable ethical
judgments, inadequate compliance or disclosure, or other misconduct or concerns.
The Code outlines the steps we should take when communicating a suspected
problem, concern or ethical violation within the company. The KEY CONTACTS
REFERENCE GUIDE lists several people to whom you may report a possible violation
or concerns, including our new CORPORATE OMBUDSMAN. You may also make an
anonymous report of possible Code violations to the ETHICS HOTLINE at
1-866-785-9753. You will be protected from any employment discrimination,
retaliation, or retribution for good faith reporting. Remember, the earlier we
identify a problem, the easier it will be to address.

After you have reviewed the Statement of Principles and PNC Code of Ethics, you
should discuss questions or concerns with your supervisor or any of the
individuals listed in the KEY CONTACTS REFERENCE GUIDE.


/s/ James E. Rohr

James E. Rohr
Chairman and CEO



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1                              PNC CODE OF ETHICS
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                                TABLE OF CONTENTS




I.       INTRODUCTION .....................................................................page 4

II.      PNC STATEMENT OF PRINCIPLES ......................................................page 4

III.     YOUR RESPONSIBILITIES ............................................................page 6

IV.      THE CODE .........................................................................page 7


         1.00     RULES FOR DEALING WITH CUSTOMERS, PROSPECTIVE CUSTOMERS AND
                  VENDORS



         1.01     Customer Property .......................................................page 7

         1.02     Borrowing from or Lending to Customers or Vendors .......................page 7

         1.03     Awarding of Contracts ...................................................page 7

         1.04     Personal or Financial Interests in Customers and Vendors ................page 7


         2.00     RULES FOR PERSONAL CONDUCT

         2.01     Equal Employment Opportunity Policy .....................................page 8

         2.02     Bias, Harassment and Other Inappropriate Conduct ........................page 8

         2.03     Sexual Harassment .......................................................page 8

         2.04     Conducting Business with/for PNC ........................................page 9

                  2.04.1   Proper Use of Banking Services for Employees ...................page 9

                  2.04.2   Expense Reimbursement Policy ...................................page 9

                  2.04.3   Incentive Sales Programs .......................................page 9

                  2.04.4   Reporting Hours Worked .........................................page 9

         2.05     Bonding Requirements ....................................................page 9

         2.06     Crimes of Dishonesty ....................................................page 9

         2.07     Drug and Alcohol Use ...................................................page 10

         2.08     Safety, Health and Environment .........................................page 11

         2.09     Firearms and Weapons Policy ............................................page 11


         3.00     RULES FOR PROPER USE OF CORPORATE INFORMATION AND PROPERTY

         3.01     Safeguarding Confidential Information ..................................page 11

         3.02     Privacy Principles .....................................................page 12

         3.03     Corporate Property and Inventions ......................................page 13

         3.04     Electronic Media Policy ................................................page 13

         3.05     Business Documentation Requirements ....................................page 14

         3.06     Accounting, Auditing and Recordkeeping Policies ........................page 14

         3.07     Media Inquiries ........................................................page 15

         3.08     PNC's Brand Identity ...................................................page 15








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2                              PNC CODE OF ETHICS
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         4.00     RULES GOVERNING CONFLICTS OF INTEREST

         4.01     Use of Position or Authority ...........................................page 16

         4.02     Self-Dealing ...........................................................page 16

         4.03     Gifts and Entertainment ................................................page 17

         4.04     Outside Activities .....................................................page 18

                  4.04.1   Other Employment ..............................................page 19

                  4.04.2   Outside Director and Officer Positions ........................page 19

                  4.04.3   Holding Political/Public Office Positions .....................page 20

                  4.04.4   Serving as an Expert Witness ..................................page 21

         4.05     Personal Investments and Insider Trading ...............................page 21

                  4.05.1   Rules for All Employees .......................................page 22

                  4.05.2   Insider Trading ...............................................page 23

                  4.05.3   Ownership of Securities in Publicly Held PNC
                           Subsidiaries ..................................................page 26

                  4.05.4   Rules for Employees of BlackRock ..............................page 27

         4.06     Inheritances and Fiduciary Appointments ................................page 27

                  4.06.1   Inheritances ..................................................page 27

                  4.06.2   Fiduciary Appointments ........................................page 27

         4.07     Gifts to Public Officials ..............................................page 28

         4.08     Political Contributions ................................................page 29

         4.09     Sales/Purchases of Property or Services to/from PNC Employees ..........page 30

         4.10     Sales/Purchases of Property or Services to/from Non-PNC
                  Employee Directors .....................................................page 30


         5.00     RULES FOR DEALING WITH COMPETITORS

         5.01     Competition with Former Employers, Business Partners or Others .........page 30

         5.02     Antitrust ..............................................................page 31

         5.03     Ethical Business Practices .............................................page 32


         6.00     RULES GOVERNING COMPLIANCE WITH THE LAW

         6.01     The Code and the Law ...................................................page 32

         6.02     Illegal or Criminal Activities .........................................page 32



V.       ADMINISTERING THE CODE ..........................................................page 33

VI.      EXCEPTIONS ......................................................................page 33

VII.     REQUIRED NOTIFICATIONS AND APPROVALS ............................................page 33

VIII.    REPORTING KNOWN OR SUSPECTED VIOLATIONS OF THE CODE .............................page 34

IX.      QUESTIONS REGARDING THE CODE ....................................................page 34



X.       DEFINITIONS .....................................................................page 34


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3                              PNC CODE OF ETHICS
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XI.      EXHIBITS AND APPENDICES

         Exhibit 1 - Overview of Laws Referenced in Code .................................page 38

         Exhibit 2 - Notification/Approval Form ..........................................page 40

         Exhibit 3 - Form for Approval to Serve at the Request of PNC ....................page 41

         Exhibit 4 - Key Contacts Reference Guide ........................................page 42

         Appendix 1 - Personal Investment Rules for Restricted Employees .................page 43

         Appendix 2 - Personal Investment Rules for Designated Unit Employees ............page 47

         Appendix 3 - Personal Investment Rules for Non-Employee Directors ...............page 49




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4                              PNC CODE OF ETHICS
--------------------------------------------------------------------------------


                                 I. INTRODUCTION

The PNC Financial Services Group, Inc. ("PNC") Statement of Principles and Code
of Ethics (the "Code") set standards for ethical conduct for all employees,
directors and agents when acting on behalf of PNC. The conduct of each of us
reflects on the reputation of PNC. Whether inside or outside of work, your
personal conduct could affect how PNC is perceived. Certain provisions of the
Code also apply to others (such as FAMILY MEMBERS or IMMEDIATE FAMILY
MEMBERS(1)). The Statement of Principles and Code reflect principles PNC intends
to abide by. They are not necessarily a statement of the law and in many
instances may go beyond what the law and industry practice require.(2)

You should discuss questions or concerns with your supervisor or any of the KEY
CONTACTS identified in Exhibit 4 to the Code. THE KEY CONTACTS REFERENCE GUIDE
lists several people to whom you can report a possible violation. You may also
make an anonymous report of possible Code violations to the Ethics Hotline at
1-866-785-9753. The ETHICS HOTLINE is available 24 hours a day, 7 days a week.
When you report a violation, you will be protected from employment
discrimination, retaliation, or retribution for good faith reporting.


                       II. THE PNC STATEMENT OF PRINCIPLES

o        PNC is determined to maintain the highest standards of ethics, business
         conduct, and compliance throughout our entire business organization.

o        This Statement of Principles applies to all PNC personnel, whether they
         are employed by our holding company, PNC Bank, N.A. or any of our
         controlled affiliates.

o        This Statement of Principles has been approved by the Board of
         Directors of PNC Financial Services Group and by our senior management
         team. It represents the standard to which all PNC personnel will be
         held and by which all PNC personnel will be judged.

o        Our most valuable asset at PNC is our reputation and the confidence
         that is placed in all of us by our shareholders, customers, employees,
         regulators, and the many other important constituencies we serve.

o        The PNC Board and PNC management are fully committed to maintaining the
         highest standards of conduct throughout the organization and to
         regaining the complete faith and confidence of all our important
         constituencies. To that end, we adopt this Statement regarding the best
         and only standards that we demand from all of our personnel - starting
         first and foremost in our Board room and senior executive suite:

         1.       All PNC personnel shall maintain the highest standards of
                  loyalty, care and candor in all matters relating to our
                  shareholders, customers, employees and regulators.

         2.       All personal interests, no matter how small, in any matter in
                  which any PNC personnel is involved

--------------------------------------------------------------------------------
(1)Terms in bold are defined in Section X.

(2)The Code is not a contract of employment or a guarantee of employment.
Neither the Code nor the Statement of Principles is intended to result in the
imposition of legal liability on PNC, or on any employee or any person who
becomes subject to provisions of the Code or the Statement of Principles, if
such liability would not exist under law or regulations in the absence of the
Code or the Statement of Principles. The Code and the Statement of Principles
apply to all employees of PNC and its controlled affiliates.





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5                              PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         on behalf of the Company must be fully disclosed, and all PNC personnel
         should recuse themselves from participation in any matter that could
         give rise to any actual or perceived conflict of interest absent a
         determination to the contrary by the CORPORATE ETHICS OFFICE.

3.       All personnel have the obligation to bring any matters involving
         questionable judgments of ethics, inadequate compliance or disclosure,
         or other misconduct to their direct supervisors, or in lieu thereof, to
         another more senior management official at PNC or directly to the PNC
         Board. There is a confidential hot line at 1-866-785-9753 for any PNC
         personnel who wish to bring a matter to the direct attention of the
         CORPORATE ETHICS OFFICE and the PNC Board. There will be no retaliation
         against any PNC personnel who report any matter involving ethical or
         corporate misconduct, except where such report involves an intentional
         fabrication of facts by the personnel.

4.       All actions taken on behalf of PNC must be appropriately documented and
         reviewed to ensure that all requisite internal approvals have been
         obtained. There should be no close-to-the-line opinions and no evasions
         of rules or procedures.

5.       All personnel must respect and obey the laws and regulations as
         enforced by our banking regulators and of the various cities, states
         and countries in which we operate. Although not all employees are
         expected to know the details of all these laws and regulations, they
         must know enough to determine when to seek advice from supervisors,
         managers, or other appropriate personnel.

6.       No PNC personnel may use corporate property, information, or position
         for improper personal gain. All PNC personnel are prohibited from
         taking for themselves personally, opportunities that are discovered
         through the use of corporate property, information, or position without
         the express consent of the PNC Board (or, to the extent so delegated,
         of the Corporate Ethics Policy Committee). And no employee may compete
         with the company directly or indirectly.

7.       All customer and company information must be maintained in the
         strictest of confidence, in compliance with all applicable laws and
         company policies and procedures.

8.       We seek to outperform our competition fairly and honestly. We seek
         competitive advantages through superior performance, never through
         unethical or improper business practices. No employee should take
         unfair advantage of anyone through manipulation, concealment, abuses of
         confidential information, misrepresentation of material facts, or any
         other intentional unfair dealing practice.

9.       All PNC personnel are encouraged and obligated to identify any and all
         risks they see in the business transactions in which they are involved
         on behalf of the company. While prudent risk taking is part of any
         successful business enterprise, those risks must be carefully
         identified, measured, and controlled. PNC has a comprehensive risk
         management and compliance program to ensure that our risks are within
         appropriate bounds and subject to express quantitative and/or
         qualitative limits. Our ability to manage risk successfully depends on
         all PNC personnel bringing all identifiable risks to our appropriate
         attention.

10.      PNC operates in a highly regulated environment, and no single
         relationship is more important to us than our relationships with our
         regulators. PNC is committed to building excellent regulatory
         relationships and to becoming a model by which other financial
         institutions are judged. To accomplish this result, all PNC personnel
         must treat our regulators as full partners in our business enterprise,
         must be fully respectful of them at all times, and must answer all
         requests for information with complete candor and diligence. Any
         material regulatory requests or criticisms must be brought to the
         direct attention of the Company's CHIEF REGULATORY OFFICER, who will
         ensure, in conjunction with management and the PNC Board, that there is
         a prompt and complete response.


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6                              PNC CODE OF ETHICS
--------------------------------------------------------------------------------



                           III. YOUR RESPONSIBILITIES

Your responsibilities are to:

         o        Comply with the Statement of Principles and the Code and all
                  other policies and procedures, including those developed by
                  your business unit or department;

         o        Comply with applicable laws and regulations;

         o        Conduct yourself in an honest and trustworthy manner;

         o        Provide required notifications and obtain necessary approvals;
                  (3)

         o        Report possible violations of the Code or any law or
                  regulation of which you are aware;

         o        Cooperate with investigations, audits, monitoring procedures
                  and other inquiries, and provide any requested documentation;

         o        Certify, when you are hired and at other times during your
                  employment that you have received, read, understand and will
                  comply with the Statement of Principles and the Code; and

         o        Complete any required Code training.

THESE RESPONSIBILITIES ARE IMPORTANT.FAILURE TO FULFILL YOUR RESPONSIBILITIES
UNDER THE STATEMENT OF PRINCIPLES OR THE CODE MAY RESULT IN DISCIPLINARY
ACTION,UP TO AND INCLUDING TERMINATION OF YOUR EMPLOYMENT.

VIOLATIONS OF LAWS OR REGULATIONS MAY ALSO RESULT IN LEGAL PROCEEDINGS AND
PENALTIES INCLUDING,IN SOME CIRCUMSTANCES,CRIMINAL PENALTIES.

--------------------------------------------------------------------------------
(3)For your convenience, anything requiring approval or completion of the Code
of Ethics Notification/Approval (or other) form has been italicized and bolded.


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7                              PNC CODE OF ETHICS
--------------------------------------------------------------------------------




                                  IV. THE CODE

         The Code is organized to emphasize that we are customer focused.
         Section 1.00 provides Rules for Dealing with Customers, Prospective
         Customers, and Vendors. Sections 2.00 and 3.00 discuss Rules for
         Personal Conduct and for Proper Use of Corporate Property and
         Information. Sections 4.00 through 6.00 cover Rules Governing Conflicts
         of Interest, Rules for Dealing with Competitors and Compliance with the
         Law. Throughout the Code, reference is made to various Human Resources
         ("HR") or other business-specific policies. You should consult and read
         the policies that are applicable to you.

--------------------------------------------------------------------------------
1.00     RULES FOR DEALING WITH CUSTOMERS, PROSPECTIVE CUSTOMERS AND VENDORS

         YOU MUST MAINTAIN THE HIGHEST STANDARDS OF HONESTY AND INTEGRITY WHEN
         DEALING WITH OUR CUSTOMERS,PROSPECTIVE CUSTOMERS AND VENDORS.
--------------------------------------------------------------------------------

1.01     CUSTOMER PROPERTY

         You are not permitted to make use of any customer's money or property
         in any way that is not authorized by the customer.

1.02     BORROWING FROM OR LENDING TO CUSTOMERS OR VENDORS

         You may not ask for or accept a loan of any amount from a customer,
         vendor or any other business contact unless the person providing the
         loan is either a FAMILY MEMBER or:

         o        The lender lends money in the usual course of his or her
                  business; and

         o        The loan is made in accordance with the law and on terms
                  offered to others who have similar credit standing, without
                  any special interest rate, security, repayment or other
                  arrangements.

         You must not cosign, endorse, guarantee, or otherwise assume
         responsibility for the borrowing of a customer, vendor or any other
         business contact or lend personal funds to any such person unless the
         borrower is a FAMILY MEMBER.

1.03     AWARDING OF CONTRACTS

         Awards of orders, contracts and commitments for goods and services
         should always be made in the best interests of PNC. You may not request
         or accept any kickbacks or other personal inducements. See also Section
         4.02 Self Dealing and Section 4.03 Gifts and Entertainment.

1.04     PERSONAL OR FINANCIAL INTERESTS IN CUSTOMERS AND VENDORS

         Under some circumstances, you are not permitted to make or dispose of
         Personal Investments in companies that are PNC customers or vendors.
         (See Section 4.05.1 Rules for All Employees.) In addition, if you or an
         IMMEDIATE FAMILY MEMBER has any personal or financial interest in a
         company which is or may become a PNC customer or vendor, YOU MUST USE
         THE NOTIFICATION/APPROVAL FORM TO NOTIFY THE CORPORATE ETHICS OFFICE
         AND REQUEST APPROVAL BEFORE YOU BECOME INVOLVED IN ANY TRANSACTION
         BETWEEN PNC AND THAT COMPANY. (See Section 4.01 Use of Position or
         Authority).



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8                              PNC CODE OF ETHICS
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--------------------------------------------------------------------------------
2.00     RULES FOR PERSONAL CONDUCT

         YOU ARE EXPECTED TO CONDUCT YOURSELF IN A PROFESSIONAL,HONEST AND
         ETHICAL MANNER.
--------------------------------------------------------------------------------

2.01     EQUAL EMPLOYMENT OPPORTUNITY POLICY

         It is the policy of PNC to comply with the law by affording equal
         opportunity to all qualified applicants and existing employees without
         regard to race, religion, color, national origin, sex, age (over 40),
         disability, status as a Vietnam-era veteran or any other basis that
         would be in violation of any applicable ordinance or law. All personnel
         actions, including but not limited to recruitment, selection, hiring,
         training, transfer, promotion, termination, compensation, and benefits
         conform to this policy.

         A copy of PNC's full Equal Employment Opportunity (EEO) policy may be
         obtained from your Human Resources/Employee Relations ("HR/ER")
         Representative, who is also available to answer questions regarding
         PNC's EEO policy. If you believe you have been denied equal employment
         opportunity because of discrimination, bias or harassment, you should
         report it to your supervisor, HR/ER representative, the CORPORATE
         OMBUDSMAN at 412-768-8507, or to the ETHICS HOTLINE at 1-866-785-9753.
         You will be protected from any employment discrimination, retaliation,
         or retribution for good faith reporting.

2.02     BIAS, HARASSMENT AND OTHER INAPPROPRIATE CONDUCT

         You are entitled to a work environment free of bias, harassment and
         other inappropriate conduct on the basis of race, color, religion,
         national origin, sex, disability, age (over 40), status as a
         Vietnam-era veteran or any other basis that would be in violation of
         any applicable ordinance or law.

         PNC will not tolerate harassment, bias or other inappropriate conduct
         by a manager, supervisor, employee, customer, vendor or visitor.
         Intimidation, coercion and threats, or actions leading to bodily harm
         are also prohibited.


2.03     SEXUAL HARASSMENT

         Sexual harassment is any unwelcome conduct of a sexual nature that is
         sufficiently severe or pervasive so as to unreasonably interfere with
         an individual's work performance or create an intimidating, hostile or
         offensive working environment.

         Sexual harassment can take various forms, including:

         o        Verbal (for example, sexual innuendo, sexual propositions,
                  threats, suggestive or insulting comments or jokes of a sexual
                  nature);

         o        Non-verbal (sexually suggestive pictures or objects, graphic
                  commentaries and obscene gestures); and

         o        Physical (unwelcome physical contact).

         Sexual harassment may also include unwelcome conduct of a sexual nature
         if an individual's submission to or rejection of that conduct results
         in a tangible employment action, such as a failure to hire or promote,
         or a demotion or termination from employment.

         Any one or a combination of three basic criteria determines whether
         conduct is sexual harassment:

         o        If you are required to submit to the conduct as either an
                  express or implied qualification for a job or a requirement of
                  your employment relationship;

         o        If submission to, or rejection of, the conduct is used as a
                  basis for employment decisions affecting you; or

         o        If the conduct has the purpose or effect of unreasonably
                  interfering with your work performance, or creating an
                  intimidating, hostile or offensive working environment.

         Sexual harassment by a manager/supervisor, other employee, customer,
         vendor or visitor will not be tolerated within PNC.


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9                              PNC CODE OF ETHICS
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         If you are confronted with actions that may be sexual harassment, you
         should report them to your supervisor, HR/ER representative, the
         CORPORATE OMBUDSMAN at 412-768-8507 or to the ETHICS HOTLINE at
         1-866-785-9753

2.04     CONDUCTING BUSINESS WITH/FOR PNC

         You are expected to conduct both your personal and professional
         activities with/for PNC in an honest manner.

2.04.1   PROPER USE OF BANKING SERVICES FOR EMPLOYEES

         PNC's principal business is the efficient and effective management of
         money. Abuse of PNC products or services provided to employees (e.g.,
         employee checking accounts, company credit cards) is not in the best
         interest of PNC and may result in revocation of these privileges.

2.04.2   EXPENSE REIMBURSEMENT POLICY

         You must submit requests for reimbursement in accordance with the
         Employee Expense Reimbursement Guide as well as the standards set forth
         in the Code.

2.04.3   INCENTIVE SALES PROGRAMS

         Actions contrary to the spirit and purpose of PNC's incentive sales
         programs are prohibited. For example, you may not:

         o        Manipulate transactions or systems to obtain multiple credit
                  or credit for unsold products;

         o        Take credit for a customer referral without having had a
                  discussion with that customer; or

         o        Falsify or "exaggerate" sales or service results or combine
                  results with another employee when either or both of you
                  failed to qualify on an individual basis.

2.04.4   REPORTING HOURS WORKED

         You are expected to provide an accurate accounting of time worked.
         Falsification of your time card/hours worked is an act of employee
         dishonesty.

2.05     BONDING REQUIREMENTS

         Upon employment, you are bonded by PNC. To continue employment, you
         must remain covered under PNC's fidelity bond. Bond coverage may
         terminate for any employee as soon as PNC learns of any dishonest or
         fraudulent act that was or may have been committed by the employee at
         any time, whether or not the act was committed while in PNC's
         employment. To comply with bonding and other requirements imposed by
         law, PNC reserves the right to investigate the personal, consumer and
         criminal history of its employees. When PNC becomes aware that an
         employee is not covered under the fidelity bond, the employee becomes
         ineligible to perform work for PNC.

2.06     CRIMES OF DISHONESTY

         Under FDIC rules, any person may be terminated or prohibited from being
         employed by PNC if he/she has:

         o        Been convicted of or pled guilty to any criminal offense
                  involving dishonesty, breach of trust, or money laundering; or

         o        Agreed to enter into a PRE-TRIAL DIVERSION PROGRAM or similar
                  program in connection with a prosecution for such an offense.


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10                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


2.07     DRUG AND ALCOHOL USE

         Use of Drugs

         You are prohibited from illegally using, possessing, distributing,
         selling, manufacturing, and/or being under the influence of drugs(4)
         while working and/or while on company premises.


         Use of Alcohol

         You are prohibited from any use of alcohol that might affect your
         fitness for duty or job performance, the operations of the company,
         and/or your security or safety or that of others.


         Testing for Drugs and/or Alcohol

         All newly hired employees must submit to a drug screening test on a
         timely basis and must pass it in order to be employed by PNC.

         A current employee may also be asked to timely submit to and pass drug
         screening and alcohol detection tests if:

         o        There is reason to believe that the employee may have violated
                  this section or the separate PNC Drug Abuse Policy;


         o        The employee works in a sensitive position;

         o        The employee might pose a risk to PNC, or to the security or
                  safety of the employee, any co-worker or the public.

         Refusal or failure of an employee to take a drug screening or alcohol
         detection test when requested will be considered a voluntary
         termination of employment.


         Availability of Assistance

         Employees with a drug and/or alcohol problem are encouraged to seek
         help with that problem, and are reminded that various corporate
         benefits programs may be available to assist them. Employees can
         contact 1-800-PNC-Plan or the Employee Assistance Program (LifeBalance)
         at 1-888-300-0431 to confidentially discuss such assistance.

         Current employees who:

         o        Have not previously violated this section;

         o        Enter a recognized drug or alcohol abuse rehabilitation
                  program to treat a drug or alcohol abuse problem;

         o        Successfully complete the rehabilitation program; and

         o        Agree to be subject to random testing for a period of two
                  years after successful completion of the rehabilitation
                  program will not be subject to disciplinary action for
                  entering such program.

         PNC may always, however, take disciplinary action based on an
         employee's violation of other PNC policies or procedures prior to
         entering the rehabilitation program, his or her inability to meet the
         criteria listed above, the failure to successfully complete such
         program, or conduct subsequent to release from such program.

--------------------------------------------------------------------------------
(4)"Drugs" refers to, but is not limited to, controlled substances and
potentially mind-altering chemicals. This includes, but is not limited to,
barbiturates, amphetamines, cocaine, opiates such as morphine or codeine,
hallucinogens such as PCP or LSD, methadone, cannabinoids such as marijuana,
medications legally obtainable with prescription but used without prescription.




--------------------------------------------------------------------------------
11                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         Notice Required by the Drug-Free Workplace Act

         AN EMPLOYEE WHO IS CONVICTED OF OR WHO PLEADS GUILTY TO THE
         USE,POSSESSION,MANUFACTURE,DISTRIBUTION AND/OR SALE OF DRUGS OCCURRING
         ON COMPANY PREMISES IS REQUIRED TO NOTIFY PNC IN WRITING WITHIN FIVE
         (5) DAYS OF THE CONVICTION OR PLEA.

2.08     SAFETY, HEALTH AND ENVIRONMENT

         You must comply with safety and health requirements governed by
         federal, state, and local laws. You have a responsibility to:

         o        Follow safe operating procedures;

         o        Promote your own and your co-workers' health and safety; and o
                  Comply with applicable environmental laws and regulations.

2.09     FIREARMS AND WEAPONS POLICY

         You are not permitted to possess firearms or other weapons on PNC
         premises, in PNC-owned vehicles or on work time, unless this is
         required as part of your job.

--------------------------------------------------------------------------------
3.00     RULES FOR PROPER USE OF CORPORATE INFORMATION AND PROPERTY

         YOU ARE EXPECTED TO PROTECT PNC CONFIDENTIAL INFORMATION FROM
         UNAUTHORIZED DISCLOSURE AND USE PNC PROPERTY FOR THE BENEFIT OF PNC.
--------------------------------------------------------------------------------

3.01     SAFEGUARDING CONFIDENTIAL INFORMATION

         Confidentiality is a fundamental principle at PNC. In your role here,
         you may learn of or have access to CONFIDENTIAL INFORMATION concerning
         PNC, its customers, clients, shareholders, directors, employees and
         vendors.

         The term "CONFIDENTIAL INFORMATION" includes, but is not limited to:

         o        Customer/client lists, prospect lists and any listing of
                  shareholders, employees and vendors;


         o        Customer account or personal financial information;

         o        Strategic, business, marketing, project and financial
                  information and plans;

         o        Price lists, sales methods, training and staffing models;

         o        Information relating to mergers and acquisitions;

         o        Contracts under negotiation;

         o        Computer programs, system documentation, special hardware,
                  software and technology developments;

         o        Manuals, formulas, processes, methods, machines, compositions,
                  ideas, improvements, inventions, and other proprietary
                  information and trade secrets;

         o        Reports written to or by regulatory agencies;

         o        Information designated as confidential, private or privileged;

         o        Security information, such as passwords, personal
                  identification numbers (PINs) and electronic keys;

         o        Employee payroll, benefit, health, performance and other non
                  public information that is personal to the employee;

         o        INSIDE INFORMATION; and

         o        All other NON PUBLIC INFORMATION that might be of use to
                  competitors, or harmful to PNC or its customers, if disclosed.




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12                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------

         Your responsibilities with regard to CONFIDENTIAL INFORMATION are:

         o        You must not access CONFIDENTIAL INFORMATION unless you have a
                  legitimate business reason for doing so;

         o        You must not disclose CONFIDENTIAL INFORMATION to any person
                  within PNC, unless that person has a need to know such
                  information in connection with his or her employment
                  responsibilities;

         o        You must not disclose CONFIDENTIAL INFORMATION to anyone
                  outside of PNC, unless:

                  -        The information being requested is confidential to
                           the customer requesting the information and you have
                           followed your department's "Know Your Customer"
                           procedures to validate that customer's identity
                           (i.e., the customer requesting account information is
                           listed as the account holder and is able to provide
                           appropriate identification);

                  -        Such person is employed by an outside firm (e.g., a
                           law or accounting firm) retained by PNC and that
                           person needs to know the information in connection
                           with the service to be provided by the firm to PNC;

                  -        Pursuant to proper legal process or regulation or as
                           required by law. (You should follow the GENERAL
                           COUNSEL'S OFFICE guidelines for handling legal
                           process.);

                  -        The individual or organization to which the
                           information relates gives written consent; or

                  -        Disclosure is authorized by the GENERAL COUNSEL'S
                           OFFICE;

         o        You must never use CONFIDENTIAL INFORMATION for personal
                  financial gain or to compete with PNC;

         o        You must secure all files and other records that contain
                  CONFIDENTIAL INFORMATION;

         o        You must not disclose system identification and access codes,
                  security equipment, security programs, and security
                  procedures;

         o        You must avoid discussing CONFIDENTIAL INFORMATION in public
                  places (for example, elevators, hallways, restaurants or at
                  social events). If you are in a public place and overhear a
                  conversation involving CONFIDENTIAL INFORMATION, you should
                  remind the other employees of their responsibilities under the
                  Code;

         o        You must avoid discussing CONFIDENTIAL INFORMATION on cellular
                  or car phones unless you are certain the conversation cannot
                  be intercepted. Please refer to both Section 3.04 of the Code
                  and the PNC Information Security Policies and Standards Manual
                  for guidelines for electronic communications;

         o        You must be sensitive to whether information is confidential
                  when using PNC ELECTRONIC MEDIA;

         o        You are expected to observe the confidentiality required
                  during investigations involving PNC;

         o        You may not disclose CONFIDENTIAL INFORMATION, even after you
                  leave your employment or position with PNC.

         In addition, you must comply with all other PNC policies and procedures
         relating to confidentiality, including those in the PNC Information
         Security Policies and Standards Manual and those that have been adopted
         for your business unit or department.

3.02     PRIVACY PRINCIPLES

         You must handle customer information responsibly. PNC has adopted The
         PNC Financial Services Group, Inc. Consumer Customer Information
         Privacy Principles, a policy statement on customer privacy. You should
         be familiar with this policy statement, which is available online at
         WWW.PNCBANK.COM and WWW.PNCADVISORS.COM, as well as with any privacy
         policy of your business unit. Questions should be directed to your
         supervisor, your business unit's privacy coordinator or PNC'S PRIVACY
         DIRECTOR.



--------------------------------------------------------------------------------
13                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


3.03     CORPORATE PROPERTY AND INVENTIONS

         Corporate property is to be used to further PNC's business and may be
         removed from PNC premises as required to further PNC's business
         purposes with approval by your supervisor, or in accordance with
         policies adopted by the Board of Directors of PNC or a committee of the

         Board. Corporate property includes, but is not limited to:

         o        All CONFIDENTIAL INFORMATION, as defined in Section 3.01;

         o        Files and documents;

         o        Products and services;

         o        Office supplies and furnishings;

         o        Automobiles;

         o        Technologies; and

         o        U.S. Mail delivered to a PNC address.




         Inspections

         PNC reserves the right to search all corporate property and all
         employee personal possessions brought onto or taken from company
         property.


         Inventions

         If you invent, discover, improve or create anything during your
         employment that is related directly or indirectly to PNC's business or
         activities, or developed using time, material or facilities of PNC, you
         are required to:

         o        Disclose your work to your supervisor;

         o        Assign all rights to the work to PNC; and

         o        Assist PNC in every way possible, without additional
                  compensation, both during and after your employment in
                  recording and/or protecting PNC's interests in the work,
                  including assistance to enable PNC to obtain patent,
                  copyright, or other protection for the work.

3.04     ELECTRONIC MEDIA POLICY

         The ELECTRONIC MEDIA Policy applies to the use of all Electronic Media

         when:

         o        Accessing on or from PNC premises;

         o        Using PNC's leased or purchased services (e.g., PNC's
                  corporate network or Internet/Intranet connection);

         o        Using PNC's leased or owned equipment (e.g., laptops,
                  hand-held devices or cell phones); or

         o        Using your own or a third party's ELECTRONIC MEDIA to conduct
                  PNC-related business or in a manner that identifies PNC.


         General Rules for Appropriate Use of Electronic Media

         The company provides ELECTRONIC MEDIA resources to facilitate
         company-related business. Unless otherwise restricted, occasional
         personal use of these resources is permitted. However, non-business use
         must be kept to a minimum, must be governed by good judgment and may
         not disrupt business operations or interfere with the performance of
         your job responsibilities. Your business unit may have additional
         procedures limiting the use of ELECTRONIC MEDIA.


--------------------------------------------------------------------------------
14                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         Prohibitions

         Under no circumstances are you permitted to use ELECTRONIC (or other)
         MEDIA for any of the following purposes:

         1.       You may not initiate, save or send items that are hostile,
                  harassing, offensive or threatening (e.g., inappropriate
                  jokes, sexual comments or images, or comments that could
                  offend someone based on specific characteristics such as
                  gender, race, age, religious belief, sexual orientation,
                  disability, or any other basis prohibited by law);

         2.       You may not initiate, save or send chain letters or other
                  widespread non-business distributions. These items pose
                  security risks in the form of malicious code (e.g., a virus)
                  and can also create unacceptable delays in meeting our
                  customers' needs or our business obligations; and

         3.       You may not initiate or participate in any malicious use of
                  company resources, including, for example, bypassing or
                  attempting to bypass system security; examining, using or
                  changing PNC's or another person's files without explicit
                  authorization; or fraudulent use of another person's system
                  sign-on information.

         ELECTRONIC MEDIA Is Not Private

         Your use of ELECTRONIC MEDIA is not private. By signing the Code of
         Ethics Acknowledgment Form, you acknowledge that authorized PNC
         personnel may intercept, monitor and/or record your communications
         anytime you use PNC's equipment, including but not limited to your use
         of PNC's telephone system, facsimile equipment, computers, E-mail,
         Voicemail and Intranet, as well as your Internet usage for any purpose,
         including, for example, operations, maintenance, system security,
         business, legal, regulatory or Code enforcement reasons. In addition,
         PNC uses software to block and log access to certain web sites.

         Electronic Transmission of Confidential Information

         CONFIDENTIAL INFORMATION may be contained in E-mails or other
         electronic transmissions provided you take appropriate precautions to
         protect such information from accidental disclosure.

         PNC's policies and standards regarding system security are set forth in
         the PNC Information Security Policies and Standards Manual. For
         information concerning, among other things, the use of encryption to
         safeguard electronic transmission of CONFIDENTIAL INFORMATION and other
         system security topics, please refer to this manual or contact the
         Security Services Department. (See KEY CONTACTS REFERENCE GUIDE.)




3.05     BUSINESS DOCUMENTATION REQUIREMENTS

         PNC maintains record retention policies in accordance with business,
         legal, and regulatory requirements. You are prohibited from disposing
         of or destroying any records except in accordance with these policies.

         If there is threatened or pending litigation, an administrative charge,
         a subpoena or other legal process, or if a government audit or review
         is in process, you are prohibited from disposing of or destroying any
         relevant records.


3.06     ACCOUNTING, AUDITING AND RECORDKEEPING POLICIES

         PNC has internal accounting controls, auditing practices, and
         recordkeeping policies designed to meet legal and business requirements
         with which you must comply. For example:

         o        All business transactions and payments will be accurately and
                  promptly recorded;

         o        No unrecorded fund or asset of PNC will be established or
                  maintained for any reason;

         o        The use or transfer of PNC funds for any purpose that would be
                  in violation of any law or regulation or that would be
                  improper is prohibited; and


--------------------------------------------------------------------------------
15                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         o        The accounting records of PNC must be complete and in
                  reasonable detail with no false or misleading entries.

         If you have any questions or concerns about PNC's internal accounting
         controls, audit practices, or recordkeeping policies, you should
         discuss the matter with your supervisor, your ER/HR Representative, or
         the CORPORATE OMBUDSMAN AT 412-768-8507. If you wish to make an
         anonymous report, you should contact the ETHICS HOTLINE AT
         1-866-785-9753.

3.07     MEDIA INQUIRIES

         You may be contacted by the media for information concerning PNC's
         position on various matters. You must always direct these inquiries to
         the Corporate Communications Manager for your market.

         PNC (through Corporate Communications) will speak out on issues of
         importance when appropriate. In addition, you should not comment on any
         of the following areas of inquiry:

         o        The identity of PNC's customers, employees or vendors;

         o        Issues that are in litigation or under governmental review;

         o        Financial projections;

         o        Plans, programs, products, or operations that have not been
                  announced publicly;

         o        The actions of any other company, entity or person;

         o        Testimonials or endorsements for other firms or persons;

         o        The content of regulatory examination reports; or

         o        Contracts under negotiation.

3.08     PNC'S BRAND IDENTITY

         PNC's brand identity has great value in the marketplace. To protect
         this value, the PNC name and logo may be used only in connection with
         approved products and services or with the prior approval of the
         Corporate MarketingDepartment.

--------------------------------------------------------------------------------
4.00     RULES GOVERNING CONFLICTS OF INTEREST

         YOU MUST ALWAYS ACT IN THE BEST INTERESTS OF PNC.
--------------------------------------------------------------------------------

         YOU SHOULD NOT HAVE AN INTEREST THAT CONFLICTS WITH,OR MAY REASONABLY
         APPEAR TO CONFLICT WITH,THE INTERESTS OF PNC UNLESS YOU HAVE SUBMITTED
         THE NOTIFICATION/APPROVAL FORM AND HAVE OBTAINED PRIOR WRITTEN APPROVAL
         FROM THE CORPORATE ETHICS OFFICE.

         YOU MUST DISCLOSE IN WRITING ALL KNOWN OR POTENTIAL CONFLICTS OF
         INTEREST BY SUBMITTING THE NOTIFICATION/APPROVAL FORM.

         A conflict of interest exists if:

         o        You or a FAMILY MEMBER engages in a personal activity or have
                  a personal interest that may influence your decisions when
                  acting on behalf of PNC; or

         o        You engage in a personal activity or have a personal interest
                  that is contrary to PNC's interests; or

         o        You use your position with PNC, or PNC's CONFIDENTIAL
                  INFORMATION, or PNC resources (including facilities, corporate
                  property, or other personnel) to benefit you or another person
                  rather than PNC.

         A conflict may be based on your financial, business, family or other
         personal relationships with customers, vendors, competitors and/or
         others, or on some other factor.

         The appearance of a conflict may be just as damaging to PNC's
         reputation as an actual conflict.


--------------------------------------------------------------------------------
16                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------

         This section gives examples of situations that may result in a conflict
         of interest and provides guidelines for handling them, including:

         4.01 - Use of Position or Authority;
         4.02 - Self-Dealing;
         4.03 - Gifts and Entertainment;
         4.04 - Outside Activities;
         4.05 - Personal Investments and Insider Trading;
         4.06 - Inheritances and Fiduciary Appointments;
         4.07 - Gifts to Public Officials;
         4.08 - Political Contributions;
         4.09 - Sales/Purchases of Property or Services to/from PNC Employees;
                and
         4.10 - Sales/Purchases of Property or Services to/from Non-PNC Employee
                Directors.

4.01     USE OF POSITION OR AUTHORITY

         You must not use your position or authority with PNC in a way that
         creates a conflict of interest. For example, you must not:

         o        Represent PNC in a transaction with any company in which you
                  or an IMMEDIATE FAMILY MEMBER have any personal or financial
                  interest unless YOU HAVE USED THE NOTIFICATION/APPROVAL FORM
                  TO NOTIFY THE CORPORATE ETHICS OFFICE AND HAVE RECEIVED
                  APPROVAL TO PARTICIPATE IN THE TRANSACTION. Generally,
                  approval will be granted if: (i) the company's securities are
                  publicly traded, (ii) the decisions about the company or
                  transactions with the company are not significant to the
                  outside company or PNC and (iii) in the case of publicly held
                  PNC subsidiaries you must comply with the securities ownership
                  rules set forth in Section 4.05.3.

                  You do not need to notify the CORPORATE ETHICS OFFICE if your
                  only contact with a company that is a PNC CONTROLLED AFFILIATE
                  consists of routine communications or administrative duties,
                  and if your representation of PNC does not involve a
                  transaction or other matter that is the subject of negotiation
                  between PNC and the CONTROLLED AFFILIATE. If you are not sure
                  whether you are required to provide notice in a particular
                  situation, you should contact the CORPORATE OMBUDSMAN.

         o        Transact business with respect to your own accounts, FAMILY
                  MEMBER accounts or accounts for anyone whose close
                  relationship with you may create a conflict or the appearance
                  of a conflict. You must conduct these transactions following
                  the same procedures that are used by our customers (e.g., go
                  to teller window, use Account Link). This prohibition also
                  includes non-financial transactions such as routine
                  maintenance transactions (e.g., address change);(5)

         o        Direct an employee you directly or indirectly supervise to
                  perform any transactions that you would be prohibited from
                  doing yourself. If your transaction requires approval, that
                  approval must come from your supervisor or manager.

4.02     SELF-DEALING

         Self-dealing means using your employment or position for personal gain.
         Whether you are acting individually, through a business, or in a
         fiduciary capacity (a position of trust for another person), you are
         prohibited from self-dealing.

         This means that you may not:

         o        Accept from someone either doing business or trying to do
                  business with PNC, a business opportunity that is not
                  available to other people on similar terms, or that is made
                  available to you because of your position with PNC; or


--------------------------------------------------------------------------------
(5)This provision does not apply to NASD licensed employees of Hilliard Lyons
(including PNC Investments). If you are a licensed employee, please contact your
Compliance representative or the CORPORATE OMBUDSMAN for additional information.




--------------------------------------------------------------------------------
17                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------

         o        Take for yourself a business opportunity that belongs to PNC.
                  A business opportunity belongs to PNC if (i) PNC has sought
                  the opportunity or the opportunity has been offered to PNC,
                  and (ii) PNC is pursuing or funding the opportunity, or PNC is
                  devoting time, facilities, personnel, or other corporate
                  resources to develop the opportunity.

4.03     GIFTS AND ENTERTAINMENT

         You may not ask for or accept a gift or anything of value(6) from
         anyone if you intend to be influenced or rewarded, or you believe the
         giver intends to exert influence in connection with any business
         decision or transaction involving PNC.(7)

         Where this is not the case, under certain circumstances you may accept
         gifts or something of value from someone doing or seeking to do
         business with PNC.

         EXAMPLES OF SUCH CIRCUMSTANCES ARE:

         o        Accepting a gift that is based on obvious family or personal
                  relationships (such as between you and a FAMILY MEMBER or
                  close friend) and it is clear that the gift is being accepted
                  because of the relationship rather than any PNC business;

         o        Occasionally accepting a gift having a value not in excess of
                  $100, such as flowers, fruit baskets, tickets (where the donor
                  will not be attending the event with you), and advertising or
                  promotional items, including pens, pencils, note pads, key
                  chains, calendars and similar items;

         o        Accepting gifts having a value not in excess of $250 that (i)
                  are related to commonly recognized events or occasions, such
                  as a promotion, new job, wedding, retirement, holiday,
                  birthday, or religious life cycle events(8) or (ii) are
                  contest prizes.

                  Note: In a calendar year, you may not accept, from any one
                  source, gifts whose aggregate value exceeds the amounts set
                  forth in the two paragraphs above.

         o        Letting someone else occasionally pay for meals, refreshments,
                  travel arrangements (including airfare), accommodations, or
                  entertainment to discuss business or foster business
                  relationships if such payment is an accepted practice in the
                  applicable business and the expense is of reasonable value. In
                  general, such items are of "reasonable value" if: (i) they
                  involve a level of expense that customarily would be
                  reimbursed by PNC as a reasonable business expense if not paid
                  for by the other party and (ii) the hospitality being offered
                  is customary and appropriate with regard to your job
                  responsibilities. WHERE TRAVEL ARRANGEMENTS AND/OR
                  ACCOMMODATIONS ARE TO BE PAID FOR BY A CUSTOMER OR
                  VENDOR,PRIOR APPROVAL OF YOUR SUPERVISOR IS REQUIRED. If you
                  are offered entertainment or tickets to events, and the host
                  is not/will not be in attendance, the hospitality is
                  considered a gift and is subject to a $100 annual limit;

         o        Accepting loans from other banks or financial institutions on
                  normal terms to finance usual activities, such as home
                  mortgage loans, except where prohibited by law;

         o        Accepting a discount or rebate on merchandise or services as
                  long as the same discount or rebate is available to either all
                  PNC employees, all employees within a particular business, or
                  all employees in a particular market; and

         o        Accepting civic, charitable, educational or religious
                  organizational awards for recognition of service and
                  accomplishment.


--------------------------------------------------------------------------------
(6)Items of value include money, securities, business opportunities, goods,
services, discounts on goods or services, entertainment, food or drink.

(7)A gift is also considered solicited or accepted by an employee if it is given
with the employee's knowledge and acquiescence to his or her FAMILY MEMBER
because of that person's relationship to the employee.

(8)Employees of PNC Capital Markets or Hilliard Lyons (including PNC
Investments) may not accept gifts under this paragraph in excess of $100. In
addition, all employees of PNC Capital Markets or Hilliard Lyons (including PNC
Investments) should consult their department's policies for restrictions in
addition to those listed above.





--------------------------------------------------------------------------------
18                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         Gifts in Excess of the Above Permissible Amounts

         IF YOU ARE OFFERED A GIFT OR SOMETHING OF VALUE THAT GOES BEYOND THE
         PERMISSIBLE AMOUNTS LISTED ABOVE, YOU MUST COMPLETE THE
         NOTIFICATION/APPROVAL FORM EVEN IF YOU DO NOT ACCEPT IT.

         You must make every effort to refuse or return a gift or something of
         value that exceeds the permissible amounts.

         o        YOU MAY NOT ACCEPT ANY GIFT IN EXCESS OF THE PERMISSIBLE
                  AMOUNTS LISTED ABOVE UNLESS YOU OBTAIN THE APPROVAL OF THE
                  CORPORATE ETHICS OFFICE.

         o        If you are offered a gift of indeterminate value, you must
                  make a reasonable effort to establish the approximate worth.
                  Reasonable effort could include, for example, reviewing and
                  comparing the gift to similar items in a shopping catalog,
                  viewing the manufacturer's web site or other comparative
                  analysis. If you are not able to determine an approximate
                  value, you should consult with your supervisor, HR/ER
                  representative or the CORPORATE OMBUDSMAN.

         Giving Gifts to Customers or Vendors

         You should follow the guidelines in the PNC Expense Reimbursement
         Policy before giving any gift to a customer or vendor.(9)


         Giving Gifts to Employees of Other Banks

         In dealing with employees of other banks or bank holding companies, you
         should be aware that those employees are also subject to restrictions
         on the receipt of gifts and that these restrictions apply to both the
         giver and the recipient.


         Giving Gifts to Other PNC Employees

         You should not give a gift to or accept a gift from another employee in
         any instance if the gift is intended to influence the performance of
         duties or responsibilities on behalf of PNC. This restriction does not
         apply to gifts given or received in connection with an approved
         employee recognition program. If you will be submitting a reimbursement
         form, you must also follow the guidelines in the PNC Expense
         Reimbursement Policy before giving a gift to another employee.

4.04     OUTSIDE ACTIVITIES

         Examples of outside activities are: other employment; outside director
         and officer positions; holding public/political office; and serving as
         an expert witness.

         General Requirements

         In general, you are permitted to participate in outside activities
         provided that:

         o        You make any disclosures and obtain any approvals required
                  under the Code;(10)


         o        Your outside activity is not with or for a PNC competitor;(11)

         o        Your outside activity does not interfere with the performance
                  of your job duties; and

         o        Your outside activity does not involve other PNC employees
                  during working time or the use of PNC equipment, supplies or
                  facilities.

--------------------------------------------------------------------------------
(9)Employees of PNC Capital Markets or Hilliard Lyons (including PNC
Investments) wishing to give to a customer or vendor are subject to a limit of
$100 and must receive prior approval from their supervisor.

(10)Employees of PNC Capital Markets or Hilliard Lyons (including PNC
Investments) must obtain written supervisory and Compliance approval prior to
participating in any outside activity.

(11)"Competitor" means any organization, wherever located, that engages in any
of the same businesses as PNC. Further, if the outside organization is or has a
bank, thrift or other depository entity anywhere within its group of affiliates,
all members of that group are considered competitors.




--------------------------------------------------------------------------------
19                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         If you engage in an outside activity and a conflict of interest (actual
         or perceived) develops, or if PNC determines that the outside activity
         interferes with your job duties, you may be required to leave your
         outside activity or resign your position with PNC.

4.04.1   OTHER EMPLOYMENT

         You may engage in other employment, including self-employment, as long
         as you satisfy the General Requirements on outside activities set out
         in Section 4.04. IF YOU WISH TO HOLD OTHER EMPLOYMENT,YOU MUST FIRST
         DISCUSS THE PROPOSED POSITION WITH YOUR SUPERVISOR. If your supervisor
         is satisfied that the proposed employment complies with the General
         Requirements described in Section 4.04, your request will normally be
         approved. Your supervisor's approval must be in writing. Under these
         circumstances, completion of the Notification/Approval Form is not
         required.

         The following situations require prior written approval from the
         CORPORATE ETHICS OFFICE in addition to the prior approval of your
         supervisor. IF YOU WISH TO ENGAGE IN ANY OF THESE ACTIVITIES,YOU SHOULD
         COMPLETE THE NOTIFICATION/APPROVAL FORM.

         o        Other employment involving use of a professional license
                  (e.g., any NASD license, law license, real estate license,
                  insurance license); and

         o        Other employment that involves a potential conflict of
                  interest (actual or perceived) or that does not comply with
                  the General Requirements described in Section 4.04.


         Prohibition

         Other employment may not involve the preparation, audit or
         certification of documents pertaining to PNC's business. For example,
         you may not prepare financial statements on behalf of your outside
         employer if those financial statements will be submitted to PNC as part
         of a loan request.

4.04.2   OUTSIDE DIRECTOR AND OFFICER POSITIONS

         Employees serving in a director/officer position in an outside
         organization of their own choice are generally not required to provide
         notification or to obtain approval from PNC, provided the employee
         complies with the General Requirements described in Section 4.04.(12)
         However, there may be circumstances when serving as a director or
         officer of an organization on your own behalf may create a conflict of
         interest. COMPLETION OF THE NOTIFICATION/APPROVAL FORM IS REQUIRED FOR
         ANY OUTSIDE DIRECTOR/OFFICER POSITION WHERE:

         o        Your service involves a potential conflict of interest (actual
                  or perceived) or does not comply with the General Requirements
                  described in Section 4.04 above;

         o        PNC holds an equity interest13 in the outside organization. It
                  is your responsibility to ask the outside organization if PNC
                  holds such an interest; and

         o        The outside organization is an unaffiliated (e.g., non-PNC),
                  insured depository institution or depository institution
                  affiliate.


         Certain Responsibilities Of All Outside Director and Officer Positions

         By serving as a director/officer in an outside organization, you will
         also have certain responsibilities to that organization. You should be
         sure that you understand and comply with those responsibilities. There
         may be occasions where contracts or transactions involving PNC are
         discussed or decided by that outside organization (for example, the
         outside organization is interested in obtaining a loan from PNC or in
         engaging PNC as a trustee of a plan, program or fund, such as a pension
         plan or an


--------------------------------------------------------------------------------
(12)Employees of PNC Capital Markets or Hilliard Lyons (including PNC
Investments) must receive written supervisory and Compliance approval prior to
accepting any outside director/officer position.

(13)For purposes of this policy, equity held by PNC includes equity held for
PNC's own account and equity PNC holds as a trustee or other fiduciary. Equity
interests may also include options, convertible debt and other instruments.




--------------------------------------------------------------------------------
20                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         endowment fund). In these instances, after disclosing your relationship
         with PNC, you should not participate in such discussions or in the
         decision-making process. If you are a director of the outside
         organization, you should ask the Board secretary to reflect in the
         meeting minutes that you did not participate in the discussions and did
         not vote on that matter because of your relationship with PNC.

         Serving at the Request of PNC(14)

         You will be deemed to be serving in a director/officer position in an
         organization outside of PNC at the request of PNC only if you obtain
         written approval from the CEO or the CEO's designee (or in the case of
         the CEO, from the Board of Directors or its Corporate Governance
         Committee). TO OBTAIN THIS APPROVAL,YOU MUST SUBMIT THE "FORM FOR
         APPROVAL TO SERVE AT THE REQUEST OF PNC".

         o        Approvals for all such requests will be based on the best
                  interest of PNC. Approvals will be reviewed annually by the
                  CEO or the CEO's designee or, in the case of the CEO, by the
                  Corporate Governance Committee, and may be modified or
                  withdrawn at any time;

         o        You will be considered for possible coverage in your capacity
                  as an outside director/officer under PNC's directors and
                  officers liability insurance policy and for possible
                  indemnification by the applicable PNC entity only with respect
                  to outside director/officer positions approved as being at the
                  request of PNC in accordance with this section, subject in
                  each case to applicable law and governing documents. Any
                  exceptions must be approved by the CEO or the CEO's designee
                  (or, in the case of the CEO, by the Board of Directors or its
                  Corporate Governance Committee).

         Data Collection

         PNC may collect information related to director/officer positions held
         by PNC employees in outside organizations from you for marketing or
         other business purposes. Neither a request for information related to
         outside director/officer positions nor an employee response to such a
         request will mean or imply that the employee is serving in such
         position(s) at the request of PNC.

4.04.3   HOLDING POLITICAL/PUBLIC OFFICE POSITIONS

         This section applies to service in any elective or appointive public
         office, including school boards, commissions, and local governmental
         entities (e.g., mayor's office, city council positions).

         Employees who campaign for or seek appointment to a public office, or
         who serve as members of a candidate's political campaign committee, do
         so as individuals and not at the request of, or as representatives of,
         PNC. If you choose to participate in this type of outside activity, you
         are not required to provide notification to or obtain approval from
         PNC. However, the following rules apply (in addition to the General
         Requirements described in Section 4.04):

         o        Before beginning a campaign for public office or accepting
                  such a position, you must receive written confirmation from
                  the solicitor or other counsel for the governmental entity
                  that your service as a public official would not prevent PNC
                  from doing business with that governmental entity and provide
                  such written confirmation to the CORPORATE ETHICS OFFICE. If
                  you are unable to obtain written confirmation, you are
                  required to consult the CORPORATE OMBUDSMAN before you begin
                  your campaign or accept the public office;

         o        To avoid any appearance of sponsorship or endorsement, you may
                  not use PNC's name in any campaign material or in any
                  fundraising activities, other than to factually state your
                  employment history. All correspondence concerning campaign
                  business must be on campaign letterhead;

         o        You may not take a paid leave of absence to work on your or
                  another candidate's campaign except earned vacation time. If
                  you take an unpaid leave of absence, either you or the
                  campaign must promptly reimburse PNC for any benefits (e.g.,
                  insurance) provided by PNC to you during that leave of
                  absence;


--------------------------------------------------------------------------------
(14)"At the request of PNC" means at the request of the PNC entity by which the
employee is employed.




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21                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         O        YOU MAY NOT SOLICIT CONTRIBUTIONS FROM ANY PNC EMPLOYEE
                  WITHOUT FIRST OBTAINING PRECLEARANCE FROM THE CORPORATE ETHICS
                  OFFICE;

         o        You may not direct or coerce any PNC employee to provide
                  services to a campaign or make the provision of such services
                  a condition of employment; and

         O        YOU MAY NOT ASK PNC EMPLOYEES TO WORK ON YOUR OR ANOTHER
                  CANDIDATE'S CAMPAIGN, EVEN ON A VOLUNTEER BASIS, UNLESS YOU
                  HAVE OBTAINED PRECLEARANCE FROM THE CORPORATE ETHICS OFFICE.

4.04.4   SERVING AS AN EXPERT WITNESS

         You may be asked to serve as an expert witness or advisor or to provide
         technical assistance in litigation or other proceedings not involving
         PNC. Serving in such capacity generally takes a significant amount of
         time and may create a conflict of interest with PNC's policies and
         practices, positions PNC has taken in other lawsuits, or with the
         interests of our customers. Therefore, YOU MUST RECEIVE ADVANCE WRITTEN
         APPROVAL TO SERVE IN PROCEEDINGS ON BEHALF OF A PARTY OTHER THAN
         PNC.YOU MUST SUBMIT THE NOTIFICATION/APPROVAL FORM TO REQUEST SUCH
         APPROVAL.

4.05     PERSONAL INVESTMENTS AND INSIDER TRADING

         It is important that investments for your personal account and for
         those of your FAMILY MEMBERS or IMMEDIATE FAMILY MEMBERS do not, and do
         not appear to, create a conflict of interest.

         It is also important that your investments comply with the federal
         securities laws and regulations. You or an IMMEDIATE FAMILY MEMBER may
         be subject to penalties for buying, selling, or recommending a security
         while aware of MATERIAL,NON-PUBLIC INFORMATION about that security or
         its issuer.

         The purpose of this section is to help you identify conflicts of
         interest and to further compliance by PNC and its subsidiaries,
         employees, and directors with the federal securities laws and
         regulations. These rules are designed not only to protect PNC and its
         subsidiaries from civil or criminal liability, but also to protect our
         reputation for integrity.

         In addition to the rules set out in this section, you may be subject to
         Office of the Comptroller of the Currency requirements for fiduciary
         activities, Securities and Exchange Commission ("SEC") requirements,
         and other requirements of various self-regulatory organizations. You
         will be notified by your supervisor or manager if your business unit
         imposes such additional requirements.

         If you or a FAMILY MEMBER or IMMEDIATE FAMILY MEMBER have any questions
         about a PERSONAL INVESTMENT, you should contact the CORPORATE OMBUDSMAN
         before making, disposing of, or recommending an investment. In
         connection with a PERSONAL INVESTMENT, you may be required to submit a
         Notification/Approval Form and, in some cases, to preclear the
         investment. If the type of investment you are considering is not
         described in this section, contact the CORPORATE OMBUDSMAN before
         making, disposing of, or recommending the investment.





BEFORE MAKING A PERSONAL INVESTMENT,ALL EMPLOYEES AND NON EMPLOYEE DIRECTORS
SHOULD CONSIDER THE FOLLOWING QUESTIONS AND ANSWERS:




WHAT IS MY                          THE CODE CONTAINS DIFFERENT RESTRICTIONS FOR
RELATIONSHIP TO PNC?                EACH OF THE FOLLOWING CATEGORIES:

                                    o All Employees of PNC (Section 4.05.1)

                                    o RESTRICTED EMPLOYEES of PNC (Appendix 1)

                                    o DESIGNATED UNIT Employees of PNC (Appendix 2)

                                    o NON-EMPLOYEE DIRECTORS of PNC (Appendix 3)

                                    o Employees of BLACKROCK (Section 4.05.4)








--------------------------------------------------------------------------------
22                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


WHAT IF A MEMBER                    Certain restrictions on PERSONAL INVESTMENTS apply to your
OF MY FAMILY IS                     FAMILY MEMBERS, while the rules for INSIDER TRADING (Section 4.05.2)
MAKING AN INVESTMENT?               and investments in publicly held PNC subsidiaries (Section 4.05.3)
                                    apply to your IMMEDIATE FAMILY MEMBERS.

COULD MY INVESTMENT CREATE          You may not make or dispose of an investment if a conflict of
A CONFLICT OF INTEREST?             interest exists or will be created as a result of the investment.

DO I HAVE INSIDE                    You may not buy, sell, or recommend securities while aware
INFORMATION?                        of MATERIAL,NON-PUBLIC INFORMATION. (Section 4.05.2)

AM I PLANNING TO INVEST             Certain investments in publicly held PNC subsidiaries are
IN A PNC SUBSIDIARY?                prohibited. (Section 4.05.3)

IS THE COMPANY A CUSTOMER           Under certain circumstances, PNC employees may not make
OR VENDOR OF PNC?                   investments in PNC customers or vendors WITHOUT PRIOR
                                    APPROVAL FROM THE CORPORATE ETHICS OFFICE. (Section 4.05.1)





4.05.1   RULES FOR ALL EMPLOYEES

         General Rules Regarding PERSONAL INVESTMENTS




CONFLICTS OF        You must avoid PERSONAL INVESTMENTS that create a conflict
INTEREST            of interest. A conflict of interest may exist if:

                    o You or a FAMILY MEMBER make, hold or dispose of a PERSONAL
                      INVESTMENT that may influence your decisions when acting
                      for PNC; or

                    o You engage in a personal activity or have a personal
                      interest that is contrary to PNC's interests; or

                    o You use your position with PNC, PNC's CONFIDENTIAL
                      INFORMATION, or PNC resources to make or dispose of a
                      PERSONAL INVESTMENT in a manner that may benefit you or a
                      FAMILY MEMBER rather than PNC.

                    You must avoid making a PERSONAL INVESTMENT that has been
                    offered to you because of your position with PNC unless the
                    investment opportunity is widely available on comparable
                    terms to:

                    o All employees;

                    o All employees within a particular business or market; or

                    o The general public.

CUSTOMERS           If you or an IMMEDIATE FAMILY MEMBER wish to make or dispose
OR VENDORS          of a PERSONAL INVESTMENT in a company that is a PNC
OF PNC              customer or vendor with which you expect  to have or in the
                    past 90 days have had any involvement on behalf of PNC, YOU
                    MUST USE THE NOTIFICATION AND APPROVAL FORM TO NOTIFY THE
                    CORPORATE ETHICS OFFICE AND OBTAIN PRIOR APPROVAL OF THE
                    TRANSACTION.


--------------------------------------------------------------------------------
23                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


                    Generally, approval will be granted if:

                    o The company's securities are publicly traded,

                    o You are not aware of significant CONFIDENTIAL INFORMATION
                      about that customer or vendor; and

                    o You do not participate in decisions about the company or
                      other business transactions between PNC and that
                      customer or vendor that may be significant to either the
                      customer or vendor or to PNC.

INSIDER             You must comply with the INSIDER TRADING rules set forth in
TRADING             Section 4.05.2.

PUBLICLY HELD       If you wish to purchase or sell securities of a publicly
SUBSIDIARIES        held subsidiary of PNC, you must comply with the rules set
OF PNC              forth in Section 4.05.3.

OTHER               Your PERSONAL INVESTMENTS must comply with this section as
POLICIES            well as any other applicable policies, including those
                    developed by your business unit. You will be informed if you
                    are in a business unit that has special policies applicable
                    to you.





         Notification of Conflicts

         IF YOU HAVE MADE OR DISPOSED OF A PERSONAL INVESTMENT AND IF YOU
         BELIEVE OR SUSPECT THAT A CONFLICT OF INTEREST HAS DEVELOPED,EVEN IF
         YOU WERE PRE-CLEARED AT THE TIME YOU MADE OR DISPOSED OF THE
         INVESTMENT, YOU MUST DISCLOSE THIS CONFLICT OF INTEREST BY COMPLETING A
         NEW NOTIFICATION/APPROVAL FORM.

         At its discretion, PNC may require you to take appropriate actions to
         resolve the conflict of interest.

4.05.2   INSIDER TRADING

         PNC's INSIDER TRADING rules apply to all PNC employees and NON-EMPLOYEE
         DIRECTORS. You must follow these rules when PERSONAL INVESTMENTS are

         made:

         o        By you;

         o        By your IMMEDIATE FAMILY MEMBERS;

         o        In or by accounts in which you or your IMMEDIATE FAMILY
                  MEMBERS have a beneficial interest; or

         o        In or by accounts over which you or your IMMEDIATE FAMILY
                  MEMBERS exercise investment discretion or control.(15)

         You are responsible for the transactions of IMMEDIATE FAMILY MEMBERS
         complying with these rules, and you must pre-clear and report their
         PERSONAL INVESTMENTS in accordance with this section as if they were for
         your own account.

         Penalties for INSIDER TRADING violations are substantial. Civil
         penalties may be as high as three times the profit gained or loss
         avoided as a result of an unlawful purchase or sale of a security. For
         con- trolling persons (such as PNC) who knowingly or recklessly fail to
         take appropriate measures designed to prevent the occurrence of INSIDER
         TRADING violations, civil penalties of up to the greater of three times
         the profit gained or loss avoided or $1,000,000 may be imposed. In
         addition, criminal fines and jail terms may be imposed.

--------------------------------------------------------------------------------
(15)If you or an Immediate FAMILY MEMBER exercises investment discretion or
control over non-related customer accounts in the normal course of employment
responsibilities (e.g., if you are employed as a broker or trustee), those
accounts are not subject to the Special Rules Regarding PNC and BlackRock
Securities set forth in Section 4.05.2 or the pre clearance and reporting
requirements for Restricted Employees or Non-Employee Directors. However,
transactions in such accounts may be subject to review by audit or compliance
personnel.





--------------------------------------------------------------------------------
24                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         General Prohibition on Insider Trading

         If you are aware of INSIDE INFORMATION concerning an issuer or its
         securities, including but not limited to PNC, you are prohibited from
         buying, selling, or recommending securities of that issuer.

         In addition, you may not disclose INSIDE INFORMATION to any other
         person, unless:

         o        That person is employed by PNC or one of its subsidiaries and
                  has a need to know such information in connection with his or
                  her employment or supervisory responsibilities and that
                  information is permitted to be disclosed under the policies
                  and procedures set forth in the INFORMATION BARRIER at your
                  business unit;

         o        That person is employed by an outside firm (such as a law,
                  accounting, or investment banking firm) retained by PNC or one
                  of its subsidiaries and needs to know the information in
                  connection with the service to be provided by the firm to PNC;
                  or

         o        Disclosure is otherwise authorized by the GENERAL COUNSEL'S
                  OFFICE.

         Once the INSIDE INFORMATION is released to the public and has been
         widely disseminated, you may buy, sell, or recommend securities of an
         issuer unless otherwise restricted by the Code or by a business unit
         policy. Unless you are sure that information is not INSIDE INFORMATION,
         you should presume that it is or consult with the CORPORATE OMBUDSMAN.

         The INSIDER TRADING rules also prohibit recommendations regarding
         securities by you and your Immediate FAMILY MEMBERS in certain
         circumstances ("tipping"). A person who communicates INSIDE INFORMATION
         (a "TIPPER") to another person (a "TIPPEE") may also be liable for the
         TIPPEE'S trading as if it were the TIPPER'S own.

         Special Rules for PNC and BlackRock Securities

         In addition to the general prohibition on INSIDER TRADING described
         above, the following restrictions apply to transactions involving PNC

         or BlackRock, Inc. ("BlackRock") securities:






EMPLOYEE           You are prohibited from purchasing or selling PNC or BlackRock shares or
BENEFIT PLAN       phantom shares through or within a benefit plan (other than purchases or sales
TRANSACTIONS       that occur automatically pursuant to pre-existing plan elections) while you are:

                   o Aware of INSIDE INFORMATION concerning PNC or BlackRock or their securities; or

                   o You are otherwise prohibited from trading in PNC or BlackRock securities.

                   The benefit plans covered by these special rules are:

                   o PNC DRIP;

                   o PNC or BlackRock ESPP;

                   o ISP;

                   o PNC Supplemental Incentive Savings Plan;

                   o PNC and affiliates Deferred Compensation Plan;

                   o PNC Directors Deferred Compensation Plan; or

                   any other PNC or subsidiary plan relating to the investment of PNC or
                   BlackRock shares (or phantom shares).

                   If you are aware of INSIDE INFORMATION concerning PNC or BlackRock or
                   their securities, or you are otherwise prohibited from trading in PNC
                   or BlackRock securities, you are also prohibited from:

                   o Electing to join the PNC or BlackRock ESPP, or changing the percent
                     of your base salary that is deducted and applied to stock purchases
                     under the ESPP;

--------------------------------------------------------------------------------
25                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


                   o Making additional voluntary purchases of PNC shares or selling PNC
                     shares in your PNC DRIP account;

                   o Electing to join the PNC or BLACKROCK ESPP, or changing the percent
                     of your base salary that is deducted and applied to stock purchases
                     under the ESPP;

                   o Electing to join the ISP or Supplemental Incentive Savings Plan, or
                     changing the percent of your base salary that is deducted and invested
                     under the ISP or the Supplemental ISP if that amount would be matched
                     by PNC or would be invested in PNC or BLACKROCK shares or phantom
                     shares;

                   o Making or changing investment decisions with respect to future ISP or
                     Supplemental Incentive Savings Plan contributions or Deferred
                     Compensation Plan deferrals involving PNC or BLACKROCK shares or
                     phantom shares;

                   o Transferring investments into or out of the PNC or BLACKROCK Common
                     Stock Fund under the ISP;

                   o Allocating or reallocating deemed investments into or out of the
                     phantom PNC or BLACKROCK Common Stock Fund in the Supplemental
                     Incentive Savings Plan or the Deferred Compensation Plan; and

                   o Funding participant loans, in-service withdrawals, or hardship
                     withdrawals under one of the plans from the PNC or BLACKROCK Common
                     Stock Fund.

TRANSACTIONS       If you fail to meet a margin call or otherwise default on a loan secured by PNC or
INVOLVING          BLACKROCK securities, and the securities are liquidated while you are aware of INSIDE
PLEDGED            INFORMATION regarding PNC or BLACKROCK or when you are otherwise prohibited
SECURITIES         from trading in PNC or BLACKROCK securities, you may be deemed to be in violation
                   of this section of the Code.

DAY TRADING AND    You are prohibited from DAY TRADING and SHORT SELLING PNC and BlackRock
SHORT SELLING      securities.


TRANSACTIONS       You are prohibited from engaging in transactions in any derivative of PNC and
IN DERIVATIVES     BlackRock securities, including but not limited to puts, calls, and options. A limited
                   exception to this prohibition is described in
                   "Employees Receiving PNC Securities in Connection
                   with an Acquisition" below.

                   The receipt or exercise of an option grant or other derivative
                   security pursuant to a PNC or a PNC subsidiary compensation
                   plan is not a violation of this section, but the sale of any
                   securities obtained through such receipt or exercise is
                   subject to this section.

                   For example, you can exercise a PNC employee stock option at
                   any time if you exercise with cash or already-owned PNC shares
                   and you hold the PNC shares you receive from the option
                   exercise. However, you can simultaneously exercise your
                   options and sell exercised shares to pay the exercise price (a
                   "cashless option exercise") only at a time when you are not
                   aware of INSIDE INFORMATION concerning PNC or its securities
                   and you are not otherwise prohibited from trading in PNC
                   securities.





         Employees Receiving PNC Securities in Connection with an Acquisition

         There is a limited exception to the prohibition on transactions in
         derivative securities for employees who have received PNC securities in
         connection with an acquisition. This exception is not available


--------------------------------------------------------------------------------
26                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         to PNC executive officers who are subject to Section 16 of the
         Securities Exchange Act of 1934. You will be informed if this exception
         applies to you. If this exception applies:

         o        You may sell or "write" covered call options, or purchase
                  protective puts (either alone or in combination, as, for
                  example, in establishing a collar), provided that such
                  derivative securities relate only to the number of PNC shares
                  you originally acquired in connection with the acquisition;

         o        You may not enter into these transactions when you are aware
                  of INSIDE INFORMATION regarding PNC or otherwise prohibited
                  from trading in PNC securities;



         o        You must remain "covered" (that is, you must not sell the
                  underlying PNC shares with respect to which you have entered
                  into the transaction involving derivative securities) at all
                  times during the term of the derivative security instrument;
                  and

         o        You may not exercise any such instrument during a time when
                  you are aware of INSIDE INFORMATION regarding PNC or when you
                  are otherwise prohibited from trading in PNC securities. (The
                  exercise by a counterparty to such a transaction in a
                  derivative security would not be deemed to violate this
                  restriction.)

         PNC Trading Plans

         The SEC's Rule 10b5-1 creates a limited exception to some of the
         special rules for PNC and BlackRock Securities. In general terms, the
         rule allows you to adopt a PNC TRADING PLAN to purchase or sell PNC or
         BLACKROCK securities. The terms of a PNC TRADING PLAN may set forth
         conditions for future purchases or sales of PNC or BLACKROCK securities
         even if such purchases or sales would occur at a time when you are
         aware of INSIDE INFORMATION, or at a time when you would otherwise be
         prohibited from trading in PNC or BLACKROCK securities.

         You may not, however, enter into or modify a PNC TRADING PLAN when you
         are aware of INSIDE INFORMATION or are otherwise prohibited from
         trading in PNC or BLACKROCK securities. You must enter into a PNC
         TRADING PLAN in good faith and not as part of a scheme to evade INSIDER
         TRADING laws and regulations. In addition, the plan must be either a:

         o        SPECIFIC INSTRUCTION PLAN - this plan will automatically
                  effect purchases and sales and must specify the amount and
                  price of the PNC or BlackRock securities to be purchased or
                  sold and the date(s) of purchase or sale (or the plan must
                  provide a formula for determining such information); or

         o        DELEGATED AUTHORITY PLAN - this plan delegates trading
                  authority to another person (such as a broker, trustee or
                  financial advisor) not affiliated with PNC or BLACKROCK,
                  provided that the other person is not aware of INSIDE
                  INFORMATION when he or she exercises that authority.

         The precise requirements of Rule 10b5-1 are complex, and you should
         consider contacting your financial advisor or attorney to discuss
         whether a PNC TRADING PLAN is appropriate for your specific
         circumstances. For more information about PNC TRADING PLANS, please
         contact the CORPORATE ETHICS OFFICE.

4.05.3   OWNERSHIP OF SECURITIES IN PUBLICLY HELD PNC SUBSIDIARIES

         o        If you act and exercise decision-making authority on behalf of
                  PNC with respect to the relationship or transactions between
                  PNC and a publicly held PNC subsidiary; and

         o        Your principal employment is not with that publicly held PNC
                  subsidiary;

         then you may not acquireor hold an equity interest in that subsidiary
         that exceeds in value your equity interest in PNC. For purposes of this
         restriction, a subsidiary is defined as any entity in which PNC
         directly or indirectlyowns at least 25% of the outstanding capital
         stock or other equity interest and that is subject to periodic
         reporting requirements under the federal securities laws.

         The value of your equity interest will be based on the fair market
         value of securities (including phantom stock units) owned directly or
         indirectly through employee benefit or deferred compensation plans,




--------------------------------------------------------------------------------
27                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         owned beneficially through trusts or other vehicles, or that may be
         acquired upon exercise of stock options, whether exercisable or not.
         Your equity interest includes securities owned by your IMMEDIATE FAMILY
         MEMBERS.

         You must monitor your compliance with this restriction. If you discover
         that you are no longer in compliance with this restriction, you have 90
         days from the date of such discovery to re-establish compliance, unless
         (1) an exception is granted by the CORPORATE ETHICS OFFICE or (2) you
         are otherwise prohibited from trading in securities of PNC or its
         subsidiaries, in which case you must re-establish compliance promptly
         after that prohibition lapses.

 4.05.4  RULES FOR EMPLOYEES OF BLACKROCK

         BLACKROCK employees are subject to other policies and procedures
         designed to achieve the same goals as PNC's PERSONAL INVESTMENT and
         INSIDER TRADING rules and you should consult the Employee Investment
         Transaction Policy for BLACKROCK Investment Adviser Companies and the
         BLACKROCK, Inc. Insider Trading Policy to understand the rules and
         restrictions applicable to you. If you are an employee of BlackRock and
         not also a RESTRICTED EMPLOYEE of PNC, you are exempt from the
         restrictions described in Section 4.05, except as set forth below.

         INSIDER TRADING Rules

         You and your IMMEDIATE FAMILY MEMBERS must comply with the INSIDER
         TRADING rules set forth in Section 4.05.2 (as those rules apply to PNC
         securities) when making or disposing of PNC securities.

         RESTRICTED EMPLOYEES of PNC

         If you are an employee of BLACKROCK who is also a RESTRICTED EMPLOYEE
         of PNC, you must comply with the rules set forth in Appendix 1.

4.06     INHERITANCES AND FIDUCIARY(16) APPOINTMENTS

4.06.1   INHERITANCES

         Neither you nor any FAMILY MEMBER may accept an inheritance from a
         customer or the immediate family of a customer.

         Exception

         The above prohibition does not apply if:

         o        The relationship between the customer and you or your FAMILY
                  MEMBER was established outside of your employment or position
                  with PNC; or

         o        The customer giving you or your FAMILY MEMBER the inheritance
                  is your relative.

 4.06.2  FIDUCIARY APPOINTMENTS

         You must obtain prior written approval before you or a FAMILY MEMBER
         may accept a fiduciary appointment for a customer or the immediate
         family of a customer. YOU MUST SUBMIT THE NOTIFICATION/APPROVAL FORM TO
         OBTAIN THIS APPROVAL.

         APPROVAL IS NOT REQUIRED IF:

         o        The relationship between the customer and you or your FAMILY
                  MEMBER was established outside of your employment or position
                  with PNC; or


         o        The customer is your relative.

--------------------------------------------------------------------------------
(16)Fiduciary includes: executor, administrator, personal representative,
Trustee, attorney-in-fact under a power of attorney or agent under a power of
attorney, guardian, custodian under any Uniform Transfer or Gifts to Minors Act.





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28                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         NOTE: IF YOU WILL BE ACTING AS CO-FIDUCIARY WITH PNC BANK N.A.,OR PNC
         BANK,DELAWARE,AND YOU WILL BE COMPENSATED,THE BOARD OF DIRECTORS OF
         THAT BANK MUST APPROVE THE APPOINTMENT.TO INITIATE A REQUEST FOR
         APPROVAL, YOU MUST COMPLETE THE NOTIFICATION/APPROVAL FORM. THIS
         REQUIREMENT APPLIES IN ALL SITUATIONS,WHETHER OR NOT THE FIDUCIARY
         APPOINTMENT IS PROHIBITED BY THIS SECTION.

         Advance Knowledge

         If you have advance knowledge of any appointment that may violate the
         prohibited inheritance guidelines or fiduciary appointments guidelines,
         you must try to discourage the customer from making the appointment.

4.07     GIFTS TO PUBLIC OFFICIALS

         Special rules and restrictions apply when you are contemplating a gift
         to a federal, state, or local public official.(17) Lawful political
         contributions are not considered gifts, but are covered by Section
         4.08. In certain circumstances, which are discussed below, you are
         prohibited from giving a gift to a public official, regardless of its
         value. In other cases, a gift may be permissible if it is worth less
         than a certain dollar amount.

         There are several important points you should bear in mind as you read
         this section.

         o        Gifts to a public official or to the spouse or family member
                  of a public official are subject to the preclearance
                  procedures explained below. In certain situations, you may be
                  unaware that an individual who is a current or prospective PNC
                  customer is a public official. For example, you may learn that
                  the individual is a school board member while entertaining
                  him/her as a PNC customer. In such a case, you should consult
                  the CORPORATE OMBUDSMAN the following business day to discuss
                  the situation.

         o        The term "public official" includes anyone who represents any
                  governmental unit or agency, regardless of whether he or she
                  is an elected or appointed official or a government employee.
                  This Section covers gifts to, among other public officials,
                  United States Senators or Representatives, members of their
                  staffs, city mayors or councilpersons, county officials,
                  school board members, and officials and employees of executive
                  and regulatory agencies.

         o        This Section 4.07 applies whether or not you plan to pay for
                  the gift yourself or to seek reimbursement of the expense from
                  PNC.

         Certain Gifts To Public Officials Are Prohibited

         Gifts to public officials are prohibited if:

         o        The gift is given in exchange for any official act of the
                  public official;

         o        The gift consists of money, unless you are making the gift
                  from your own funds and YOU HAVE PRECLEARED THE GIFT BASED ON
                  YOUR FAMILY OR PERSONAL RELATIONSHIP WITH THE PUBLIC OFFICIAL.
                  (PNC will never reimburse you for a gift of money to a public
                  official); or

         o        The gift would create the appearance of impropriety in the
                  mind of a reasonable and objective third party.

         Preclearance Requirements

         The various statutes, rules and regulations which govern the offer to
         or acceptance by federal, state, or local public officials of gifts are
         complex and subject to change. As a result, UNLESS YOU ARE



--------------------------------------------------------------------------------
(17)For purposes of this section, a "gift" includes honoraria, meals,
recreation, entertainment, flowers, transportation (including the use of
corporate airplanes and cars), lodging, sporting or cultural event tickets, or
anything else that has monetary value.





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29                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------

         REGISTERED AS A LOBBYIST IN CONNECTION WITH YOUR EMPLOYMENT DUTIES FOR
         PNC,YOU ARE REQUIRED TO PRECLEAR ANY CONTEMPLATED GIFT TO A PUBLIC
         OFFICIAL WITH THE CORPORATE ETHICS OFFICE.TO REQUEST PRECLEARANCE,YOU
         MUST COMPLETE THE NOTIFICATION/APPROVAL FORM.IF YOU GIVE A GIFT WITHOUT
         THE REQUIRED PRECLEARANCE,YOU ARE NEVERTHELESS REQUIRED TO PROMPTLY
         REPORT THE GIFT AND THE RELATED CIRCUMSTANCES BY COMPLETING THE
         NOTIFICATION/APPROVAL FORM.

         The preclearance requirement applies even if:

         o        The public official solicits the gift (such a solicitation may
                  itself be prohibited);

         o        The public official, or a member of his or her staff, assures
                  you that the gift is permissible;


         o        You have received preclearance for similar gifts in the past;

         o        You intend to pay for the gift out of your own funds and not
                  seek reimbursement from PNC;

         o        There is a family or personal relationship between you and the
                  public official which you believe makes the contemplated gift
                  permissible; or

         o        The gift is of nominal or symbolic value.

         Gifts to Federal Officials

         Gifts of over $20 in value may not be offered to officers and employees
         in the executive branch of the federal government, such as regulatory
         or other agency personnel ("executive branch official"). For example,
         the value of an executive branch official's meal paid for by PNC may
         not be greater than $20; if the value of the gift offered on any single
         occasion exceeds $20, the executive branch official is not permitted to
         pay the value in excess of $20 in order to accept the gift. If all of
         the gifts to an executive branch official are added together in any
         calendar year, they may not be greater than $50. ANY GIFT TO AN
         EXECUTIVE BRANCH OFFICIAL OR FAMILY MEMBER MUST RECEIVE ADVANCE WRITTEN
         APPROVAL SO THAT THE $50 LIMIT CAN BE MONITORED AND COMPLIANCE WITH THE
         APPLICABLE REGULATIONS CAN BE PROMOTED. Advance approval of each gift,
         regardless of amount, is important because gifts given by all PNC
         officers to one executive branch official in the same calendar year
         will be aggregated for purposes of the $50 annual limit. TO REQUEST
         THIS APPROVAL,YOU MUST COMPLETE THE NOTIFICATION/APPROVAL FORM.

         Members of Congress and Congressional staff are also subject to
         restrictions on the gifts they may accept. ANY GIFT TO A MEMBER OF
         CONGRESS OR TO CONGRESSIONAL STAFF MEMBERS, OR MEMBERS OF THEIR
         FAMILIES,MUST RECEIVE ADVANCE WRITTEN APPROVAL.TO REQUEST THIS
         APPROVAL,YOU MUST COMPLETE THE NOTIFICATION/APPROVAL FORM.

         Gifts to State and Local Officials

         The rules governing gifts to state and local officials are complex and
         vary from state to state and location to location. IF YOU ARE
         CONTEMPLATING A GIFT TO ONE OF THESE OFFICIALS,YOU MUST CONTACT THE
         CORPORATE OMBUDSMAN FOR GUIDANCE ON WHETHER THE GIFT IS PERMISSIBLE.

 4.08 POLITICAL CONTRIBUTIONS

         Unless you are in the municipal securities or municipal finance
         business and subject to Rule G-37 of the Municipal Securities
         Rulemaking Board ("MSRB"):(18)

         o        You may use your own funds to make lawful contributions to
                  political parties, candidates, or political action committees;

--------------------------------------------------------------------------------
(18)Certain employees associated with municipal securities or municipal finance
business are subject to additional rules as a result of MSRB Rule G-37 and the
related PNC policies. Please contact your Compliance representative for
additional information or a copy of this rules and PNC's related policies





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30                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         o        You may participate in volunteer political activities during
                  non-working time and away from PNC premises, as long as you
                  comply with the applicable campaign finance laws and do not
                  use any PNC resources in connection with your activities.(19)


         Prohibitions

         PNC will never reimburse you for making a contribution to political
         candidates or office holders. Additional prohibitions apply to foreign
         nationals who are not U.S. citizens. IF YOU ARE A FOREIGN NATIONAL, YOU
         SHOULD NOT MAKE ANY POLITICAL CONTRIBUTIONS WITHOUT FIRST CHECKING WITH
         THE GENERAL COUNSEL'S OFFICE. (Note: These additional prohibitions do
         not apply to U.S. citizens living outside the United States.)



4.09     SALES/PURCHASES OF  PROPERTY OR SERVICES TO/FROM PNC EMPLOYEES

         You may purchase from PNC only those properties or services that are
         widely available to the general public, all employees, all employees
         within a particular business or all employees within a particular
         market on comparable terms.

         You may not sell, rent or lease any property or services to PNC unless
         the services or property are widely available to the general public and
         are being offered to PNC on market terms at least as favorable as would
         be offered to an unaffiliated third party.

4.10     SALES/PURCHASES OF PROPERTY OR SERVICES TO/FROM NON-EMPLOYEE DIRECTORS

         Unless permitted by applicable law or precleared by a majority of
         disinterested members of the PNCBoard of Directors after the material
         facts are disclosed or made known to the Board of Directors, a
         NON-EMPLOYEE DIRECTOR and any enterprise of which he or she is an
         officer or director may not:

         o        Purchase property or services from PNC unless such property or
                  services are offered in the regular course of PNC's business,
                  and are purchased from PNC on terms comparable to those
                  available to other similarly situated customers of PNC; or

         o        Sell any property or services to PNC unless such property or
                  services are sold in the regular course of the director's or
                  the enterprise's business, and are sold to PNC on terms
                  comparable to those available to other similarly situated
                  customers of the director or the enterprise.

         This Section does not apply to transactions that are related to
         compensation or benefits arrangements approved for Non-Employee
         Directors.

--------------------------------------------------------------------------------
5.00     RULES FOR DEALING WITH COMPETITORS

         PNC EXPECTS YOU TO ENGAGE IN VIGOROUS,BUT FAIR COMPETITION.
--------------------------------------------------------------------------------

5.01     COMPETITION WITH FORMER EMPLOYERS, BUSINESS PARTNERS OR OTHERS

         You must never direct or encourage any applicant or new employee to
         violate any contractual or legal obligations to a former employer,
         business partner or other person or entity, such as a responsibility to
         protect confidential business information, technical information or
         trade secrets.

         YOU ARE REQUIRED TO SUBMIT A NOTIFICATION/APPROVAL FORM TO THE
         CORPORATE ETHICS OFFICE IF YOU HAVE ANY OBLIGATIONS THAT MAY INTERFERE
         WITH YOUR JOB DUTIES AT PNC. These obligations may include an agreement
         with a former employer, business partner or other person or entity that
         states:


--------------------------------------------------------------------------------
(19)PNC may make its facilities available to an affiliated political action
committee ("PAC") for PAC-related functions, including speeches by political
candidates. In addition, PNC may absorb administrative or other permissible
expenses incurred by an affiliated PAC, to the extent permitted by applicable
law.





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31                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         o        You may not compete with them for a certain time, in a
                  specific location or ask their customers to do business with
                  PNC;

         o        You may not ask their employees if they are interested in
                  working for PNC;

         o        You may not take their work-related items to use at another
                  business or place of employment;

         o        You may be limited in your use of trade secrets, business
                  information, materials, training or techniques that you
                  learned there; or

         o        You may have to notify them of any new employment or business
                  venture.

5.02     ANTITRUST


         The antitrust laws, which contain criminal and civil penalties,
         prohibit unfair methods of competition and agreements that restrain the
         way companies compete. The antitrust laws are most often enforced
         against agreements between separate businesses (for example, agreements
         between PNC and other companies) that limit competition. These
         agreements need not be in writing to raise a concern.

         As a general matter, all PNC strategies and other decisions should be
         made independently, without consultation with PNC's competitors. You
         may not enter into any of the following three types of arrangements or
         agreements:

         o        PRICE-FIXING AGREEMENTS are agreements with competitors about
                  the prices, terms, or conditions to be charged clients. To
                  avoid even an allegation of price fixing, you should not
                  discuss our prices, terms or conditions with a competitor,
                  except as noted below.

                  Note: Where we are openly working jointly with our competitors
                  to provide a loan or other product or service to a client (for
                  example, loan syndications), agreements with such competitors
                  on the price to be charged to the client generally do not
                  constitute price fixing. You should only enter into such
                  agreements if we have legitimate business reasons for working
                  jointly with our competitors rather than providing the product
                  or service on our own (for example, in loan syndications,
                  because of undue credit risk to PNC).

         o        GROUP BOYCOTT AGREEMENTS are agreements among two or more
                  companies to "boycott" or otherwise not do business with
                  another company.

         o        MARKET,CLIENT,TERRITORY OR LOCATION ALLOCATION AGREEMENTS
                  AMONG COMPETITORS are agreements with competitors not to
                  compete in a particular line of business or product, not to
                  "poach" competitors' clients, or not to compete in a
                  particular geographic area.

         BECAUSE THE FOLLOWING ACTIVITIES MAY RAISE ANTITRUST CONCERNS UNDER
         CERTAIN CIRCUMSTANCES,YOU SHOULD CONSULT WITH THE GENERAL COUNSEL'S
         OFFICE BEFORE ENTERING INTO ANY OF THEM:

         o        TYING ARRANGEMENTS arise when a seller has a product or
                  service buyers need, and requires buyers of that product or
                  service to purchase a second product or service from the
                  seller. PNC Bank has adopted a Policy Statement on Product
                  Tying Restrictions that you can obtain from your Compliance
                  Department representative.

                  Note: Most TYING ARRANGEMENTS that are long established in
                  banking (such as compensating balances) that facilitate
                  reasonable arrangements intended to ensure the soundness of
                  credit do not pose a problem under either the banking or
                  antitrust laws.

         o        PREDATORY PRICING is pricing below cost for the purpose of
                  driving all competitors out of the marketplace to reap the
                  benefits of higher prices after the competitors are gone.

         o        EXCLUSIVE DEALING involves agreements to do business with one
                  vendor or customer that preclude PNC from doing business with
                  others, or that preclude PNC's customers from doing business
                  with other vendors. YOU SHOULD CONSULT WITH THE GENERAL
                  COUNSEL'S OFFICE IF PNC'S PURCHASES OR SALES ACCOUNT FOR A
                  SUBSTANTIAL PORTION OF THE MARKET FOR THE PRODUCT OR SERVICE
                  BEING PURCHASED OR SOLD.

         o        RECIPROCITY involves a company conditioning the purchase of
                  products or services from vendors on those vendors' purchases
                  of services from the company.




--------------------------------------------------------------------------------
32                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


         Other Instances in Which You Should Consult With THE GENERAL COUNSEL'S
         OFFICE

         o        BEFORE A PNC UNIT THAT YOU MANAGE MERGES WITH OR ACQUIRES
                  ANOTHER COMPANY (INCLUDING ACQUIRING A DIVISION OF ANOTHER
                  COMPANY OR SUBSTANTIAL ASSETS OF ANOTHER COMPANY OUTSIDE OF
                  THE ORDINARY COURSE OF BUSINESS); OR

         o        IF YOU BELIEVE THAT ANY ACTIVITY THAT MAY BE UNDERTAKEN BY PNC
                  COULD BE VIEWED AS RESTRAINING FAIR OR OPEN COMPETITION,OR IF
                  YOU HAVE ANY QUESTIONS ABOUT WHETHER ANY SUCH ACTIVITIES MAY
                  FALL WITHIN ANY OF THE CATEGORIES OF CONDUCT DESCRIBED ABOVE.

5.03     ETHICAL BUSINESS PRACTICE

         PNC expects its employees to observe high standards of business ethics.
         You must not engage in any intentional unfair dealing practice. If you
         have any questions about a particular transaction, you should consult
         your manager or supervisor, your HR/ER representative or the CORPORATE
         OMBUDSMAN at 412-768-8507.

--------------------------------------------------------------------------------
6.00     RULES GOVERNING COMPLIANCE WITH THE LAW

         YOU ARE EXPECTED TO COMPLY WITH THE LAW.
--------------------------------------------------------------------------------

6.01     THE CODE AND THE LAW

         PNC expects you to comply with the law. For your convenience, a brief
         description of some of the laws that apply to you because of your
         association with PNC is provided in Exhibit #1. PNC operates in a
         highly regulated environment and our relationship with our regulators
         should reflect PNC's values of integrity and respect. You are expected
         to treat our regulators with courtesy and respond promptly to their
         requests, as directed by your supervisor.

6.02     ILLEGAL OR CRIMINAL ACTIVITIES

         PNC must notify law enforcement agencies under certain circumstances
         when criminal acts involving PNC have occurred or are suspected. You
         are required to report a disappearance or loss or an unexplained
         shortage involving other employees. If you know or suspect a criminal,
         dishonest, or fraudulent act that may affect PNC, its employees,
         officers, or customers, you should immediately use any of the reporting
         procedures listed in Section VIII of the Code.


         Note: Please refer to the discussion of the Bank Secrecy Act in Exhibit
         1 for information regarding suspected criminal, dishonest or fraudulent
         acts involving non-employees.






                                                                        09-09-02




--------------------------------------------------------------------------------
33                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------

                            V. ADMINISTERING THE CODE

The CORPORATE OMBUDSMAN in the CORPORATE ETHICS OFFICE is responsible for
administering the Code and reporting periodically to PNC's Board of Directors or
the appropriate Board committee. PNC has established an Ethics Policy Committee,
chaired by the CHIEF REGULATORY OFFICER, to resolve policy issues relating to
the Code, oversee resolution of major ethical issues, and receive and review
reports relating to the Code's administration.


                                 VI. EXCEPTIONS

Exceptions to the Code and certain approvals must be made by either the
CORPORATE OMBUDSMAN or the Ethics Policy Committee. Exceptions to or waivers of
provisions of the Code requested by a member of PNC's senior management are also
subject to ratification and approval by the Audit Committee of PNC's Board of
Directors and will be publicly disclosed as required by law. If you would like
to ask for an exception, or if you have a question about any part of the Code,
you should first discuss the matter with your supervisor, who will process your
request, or you may contact the CORPORATE OMBUDSMAN. The CORPORATE OMBUDSMAN has
the sole discretion to determine if he/she will present requests for exceptions
or approvals to the Ethics Policy Committee.




                    VII. REQUIRED NOTIFICATIONS AND APPROVALS

You should become familiar with the following situations that require you to
provide notification or obtain prior approval.Throughout the Code,all items
requiring notification or approval have been italicized and bolded for your
convenience.




o Personal or Financial Interests in Customers and Vendors ................Section 1.04
o Corporate Property and Inventions........................................Section 3.03
o Conflicts of Interest....................................................Section 4.00
o Use of Position or Authority.............................................Section 4.01
o Gifts and Entertainment     .............................................Section 4.03
o Outside Activities.......................................................Section 4.04
o Other Employment.........................................................Section 4.04.1
o Outside Officer or Directorships.........................................Section 4.04.2
o Holding Political/Public Office Positions ...............................Section 4.04.3
o Serving as an Expert Witness.............................................Section 4.04.4
o Personal Investments and Insider Trading ................................Section 4.05 and 4.05.1
o Inheritances and Fiduciary Appointments..................................Section 4.06
o Gifts to Public Officials................................................Section 4.07
o Political Contributions..................................................Section 4.08
o Competition with Former Employers, Business Partners or Others...........Section 5.01
o Antitrust................................................................Section 5.02


You can provide notification or obtain approval through submission of the
Notification/Approval Form shown in Section XI, Exhibit #2. This form is

available via Lotus Notes, PNC's Intraweb at http://www.intraweb.pnc.com, from
your HR/ER Representative, or the CORPORATE ETHICS OFFICE.

IF YOU RECEIVE REQUESTS FROM REGULATORS FOR INFORMATION YOU SHOULD NOTIFY YOUR
SUPERVISOR IMMEDIATELY. ANY MATERIAL REGULATORY REQUESTS OR CRITICISMS MUST BE
BROUGHT TO THE DIRECT ATTENTION OF PNC'S CHIEF REGULATORY OFFICER. SEE EXHIBIT
4, KEY CONTACTS REFERENCE GUIDE.


--------------------------------------------------------------------------------
34                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


If you have any questions about how to provide notification or obtain
approval, you should talk to your supervisor or your HR/ER representative, or
the CORPORATE OMBUDSMAN. Directors should contact the General Counsel's office
regarding notifications or approvals, questions or any other matters under the
Code. Agents can contact any of the KEY CONTACTS listed in Exhibit 4.


            VIII. REPORTING KNOWN OR SUSPECTED VIOLATIONS OF THE CODE

You are encouraged to, and reminded of your obligation to, report any known or
suspected violations of the Code. A problem cannot be resolved unless it has
first been identified. Reports of any possible violations of the Code, including
dishonest or fraudulent acts should be made immediately to any of the following
people with whom you are most comfortable:

     o Your supervisor; or
     o Your HR/ER representative; or
     o The CORPORATE OMBUDSMAN at 412-768-8507; or
     o ETHICS HOTLINE at 1-866-785-9753.

YOU HAVE BEEN PROVIDED WITH SEVERAL ALTERNATIVES TO WHOM YOU CAN REPORT A
POSSIBLE VIOLATION SO THAT YOU CAN CHOOSE A PERSON WITH WHOM YOU FEEL
COMFORTABLE.YOU MAY ALSO MAKE AN ANONYMOUS REPORT IF YOU WISH BY CALLING THE
ETHICS HOTLINE AT 1-866-785-9753.THE ETHICS HOTLINE IS AVAILABLE 24 HOURS A
DAY,7 DAYS A WEEK.

WHEN YOU REPORT A POSSIBLE VIOLATION,YOU WILL BE PROTECTED FROM ANY EMPLOYMENT
DISCRIMINATION,RETALIATION, OR RETRIBUTION FOR GOOD FAITH REPORTING.


                        IX. QUESTIONS REGARDING THE CODE

If you have any questions or concerns regarding matters covered by the Code you
should contact:

     o Your Supervisor; or
     o Your HR/ER Representative; or
     o CORPORATE OMBUDSMAN at 412-768-8507.


                                 X. DEFINITIONS

BLACKROCK. BlackRock, Inc.

CONFIDENTIAL INFORMATION. See Section 3.01 of the PNC Code of Ethics.

CONTROLLED AFFILIATE. Any entity listed on PNC's organizational chart produced
by the General Counsel's office each quarter.

CORPORATE ETHICS OFFICE. See KEY CONTACTS REFERENCE GUIDE for phone number.

CORPORATE OMBUDSMAN. The Corporate Ombudsman is a person who can answer any
questions you may have regarding the Code. The ombudsman can help you deal with
issues such as violations of our Code of Ethics, Statement of Principles, or
other behavior that is inconsistent with PNC's values and ethical standards. See
KEY CONTACTS REFERENCE GUIDE for phone number.

CORPORATE SECRETARY. See KEY CONTACTS REFERENCE GUIDE for phone number.

DAY TRADING. Buying and selling the same securities during one calendar day.

DESIGNATED UNIT. A designated business unit of PNC, which is generally a lending
unit.



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35                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


DRIP. Dividend Reinvestment Plan.

ELECTRONIC MEDIA. ELECTRONIC MEDIA includes but is not limited to voicemail
messaging ("Voicemail"), electronic mail systems ("E-mail"), the Internet, the
PNC Intranet, and electronic devices such as the telephone system, cellular
phones, pagers and facsimile machines.

ESPP. Employee Stock Purchase Plan.

ETHICS HOTLINE. A toll-free telephone number available to all employees on a 24
x 7 basis Caller ID technology is not used on this line.

EXCLUSIVE DEALING. Involves agreements to do business with one vendor or
customer that preclude PNC from doing business with other vendors or customers.

FAMILY MEMBERS. Includes your spouse or domestic partner, children, parents,
brothers, and sisters plus any other relative (through blood, marriage, or
adoption) living in your household.

FULLY DISCRETIONARY ACCOUNT. An account that has been cleared by the CORPORATE
ETHICS OFFICE and over which neither you nor any of your IMMEDIATE FAMILY
MEMBERS exercises investment discretion, suggests or receives prior notice of
transactions or otherwise has any direct or indirect influence or control.

GENERAL COUNSEL'S OFFICE. See KEY CONTACTS REFERENCE GUIDE for phone number.

GROUP BOYCOTT AGREEMENTS. Agreements among two or more companies to "boycott" or
otherwise not do business with another company.

IMMEDIATE FAMILY MEMBER. IMMEDIATE FAMILY MEMBERS consist of your spouse or
domestic partner, any minor children, any older children living in your
household or who rely primarily on you for financial support, and any other
relatives (by blood, marriage, or otherwise) living in your household.

INFORMATION BARRIERS. One business unit may have INSIDE INFORMATION about an
issuer while another business unit that does not have such information may wish
to buy or sell that issuer's securities or recommend a purchase or sale of such
securities. Information Barriers are policies and procedures designed to
separate business units that are likely to receive INSIDE INFORMATION from
business units that purchase, sell, or recommend the purchase or sale of
securities. Information Barrier policies and procedures will be implemented for
each applicable business unit.

INSIDE INFORMATION. MATERIAL,NON-PUBLIC INFORMATION concerning an issuer or its
securities. It is impossible to provide a complete list of INSIDE INFORMATION,
but INSIDE INFORMATION may include:

     o Unpublished financial reports or projections;

     o Information about current, proposed, or contemplated transactions,
       business plans, financial restructurings, or acquisition targets;

     o Dividend increases or decreases;

     o Extraordinary borrowings or liquidity problems;

     o Material defaults under agreements or actions by creditors, clients, or
       vendors relating to a company's credit standing;

     o Proposed or contemplated issuance, redemption, or repurchase of
       securities or stock splits;

     o Significant expansions or contractions of operations, including
       acquisitions, mergers, divestitures, and joint ventures, and purchases or
       sales of substantial assets;

     o Major new product developments;

     o Significant increases or decreases in business or information about
       major contracts;

     o Institution of, or developments in, major litigation, investigations,
       or regulatory actions or proceedings; and

     o Developments regarding a company's senior management.


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36                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


INSIDER TRADING. Generally, the purchase or sale of securities while aware of
INSIDE INFORMATION.

ISP. The PNC Incentive Savings Plan.

KEY CONTACTS REFERENCE GUIDE. Individuals with assigned responsibility to assist
you with Code of Ethics matters. See Exhibit 4 for their telephone numbers.

MARKET,CUSTOMER,TERRITORY OR LOCATION ALLOCATION AGREEMENTS AMONG COMPETITORS.
Agreements with competitors not to compete in a particular business or product,
not to "poach" competitors' customers, or not to compete in a particular
geographic area.

MATERIAL INFORMATION. Information relating to an issuer of securities, such as
information about its business operations or securities, the public
dissemination of which would likely affect the market price of any of its
securities, or which would likely be considered important by a reasonable
investor in determining whether to buy, sell, or hold such securities.

NON-EMPLOYEE DIRECTOR. Members of the Boards of Directors of PNC, PNC Bank,
National Association, and PNC Bank, Delaware who are not RESTRICTED EMPLOYEES.
NON-EMPLOYEE DIRECTORS do not include advisory directors.

NON-PUBLIC INFORMATION. Information that has not been disclosed to the public is
generally non-public. To show that information is public, there must be evidence
that it is widely disseminated. Information would generally be considered widely
disseminated if it has been disclosed, for example, on the Dow Jones broad tape,
news wire services such as AP or Reuters, radio or television; or in newspapers
or magazines, or public disclosure documents filed with the Securities and
Exchange Commission, such as prospectuses, proxy statements, and periodic
reports.

OTHER EMPLOYMENT. With the exception of outside director or officer positions
(discussed in Section 4.04.2 of the Code) and outside political positions
(discussed in Section 4.04.3 of the Code), "OTHER EMPLOYMENT" is defined as any
position outside of PNC including self-employment.

PERSONAL INVESTMENT. Any purchase or sale of publicly or non-publicly traded
securities, which include without limitation: common and preferred stock,
partnership interests, limited partnership interests and other debt and equity
interests such as notes, bonds or other evidence of indebtedness, warrants,
options, futures and other derivative instruments. Personal Investments do NOT
include:

     o Transactions involving open-end mutual funds (such as money market
       funds or exchange traded funds), closed-end mutual funds other than those
       managed or advised by BLACKROCK, unit investment trusts, and federal,
       state, or local government agency bonds or other obligations;

     o Reinvestment of dividends pursuant to another issuer's dividend
       reinvestment plan (a.k.a. "DRIP" plans) but the requirements do apply to
       additional voluntary purchases or sales effected through such a plan;

     o Involuntary acquisitions or dispositions of securities as the result of
       a stock dividend, stock split, reverse stock split, merger,
       consolidation, spin-off or other similar corporate distribution or
       reorganization; or

     o Other situations where the CORPORATE ETHICS OFFICE determines that the
       investment should not be included.

PNC TRADING PLAN. A written plan entered into in accordance with the provisions
of Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, that governs
the purchase or sale of PNC or BLACKROCK securities.

PREDATORY PRICING. Arises when a company sells a product at an unfairly low
price for the purpose of driving competitors out of the marketplace in order to
reap the benefits of being able to set higher prices after competition has been
reduced.

PRE-TRIAL DIVERSION PROGRAM. An arrangement with a prosecutor, court,
administrative agency, or similar type of entity, whereby the person accused of
a crime avoids a trial or the need to enter a plea by agreeing, for example, to
perform community service, undergo psychiatric counseling or treatment, attend
educational classes, make restitution, and/or avoid further criminal conduct for
some period of time. The program may involve a promise to suspend or eventually
dismiss the case and/or to expunge the record.


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37                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


PRICE-FIXING AGREEMENTS. PRICE-FIXING AGREEMENTS are agreements with competitors
about the prices, terms, or conditions to be charged customers.

PRIVACY DIRECTOR. See KEY CONTACTS REFERENCE GUIDE for phone number.

RECIPROCITY. Involves a company conditioning the purchase of products or
services from vendors on those vendors' purchases of services from the company.

RESTRICTED EMPLOYEE. Certain designated employees of PNC, including members of
PNC's senior officer committee (the Marketing Committee, as of the effective
date of this Policy), executive officers who are subject to the reporting
requirements of Section 16 of the Securities Exchange Act of 1934, as amended,
designated employees of Mergers and Acquisitions, and other employees designated
by the CORPORATE ETHICS OFFICE.

SHORT SELLING. Selling securities you do not currently own, or selling
securities you currently own, but not closing out your position in those
securities ("selling short against the box").

TIPPEE. A person who receives information from the another person (the
"tipper").

TIPPER. A person who communicates inside information to another person (the
"tippee").

TYING ARRANGEMENTS. Arise when a seller has a product or service buyers need,
and requires buyers of that product or service to purchase a second product or
service from the seller. The Bank Holding Company Act, as well as the antitrust
laws, prohibits certain ties. PNC has an online Anti-Tying training module
available to all employees as well as a manual on Product Tying Restrictions
that you can obtain from your Compliance Department representative.

NOTE: WHILE NOT ALL TIES ARE PROHIBITED,AND WHILE "CROSS-SELLING"DOES NOT
VIOLATE THE TYING PROHIBITIONS,YOU MUST BE VERY CAREFUL THAT A CROSS-SELLING
ARRANGEMENT DOES NOT RESULT IN AN IMPERMISSIBLE TYING ARRANGEMENT.IF YOU HAVE
ANY QUESTION,CONSULT THE GENERAL COUNSEL'S OFFICE. Most Tying Arrangements that
are long established in banking (such as requiring compensating balances in
connection with a loan) that facilitate reasonable arrangements intended to
assure the soundness of credit do not pose a problem under either the banking or
antitrust laws.


--------------------------------------------------------------------------------
38                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------

                           XI. EXHIBITS AND APPENDICES

                 EXHIBIT 1. OVERVIEW OF LAWS REFERENCED IN CODE


Bank Bribery Statute

The Federal Bank Bribery Statue makes it a crime for any director, officer or
employee of an FDIC insured bank to make or grant any loan or gratuity to a
public bank examiner; and for any director, officer, employee agent or attorney
of a financial institution to solicit, demand, accept or agree to accept
anything of value in exchange for being influenced or rewarded in connection
with any business transactions related to that financial institution.

Penalties for violations of the Bank Bribery Act can be severe, including a
maximum fine of $1,000,000 or up to 30 years in prison.

Bank Secrecy/Money Laundering Control Act

It is the policy of PNC to engage in business practices which comply with the
Bank Secrecy Act (BSA) and related anti-money laundering laws. You are
responsible for knowing and following PNC's BSA procedures including:

     1.   "Know Your Customer" account opening procedures employed by your
          business unit;

     2.   Reporting of unexplained, unusual, or suspicious transactions that are
          not consistent with expected activities of a customer;

     3.   Participating in training programs that are provided for your business
          unit in BSA and anti-money laundering compliance;

     4.   Procedures for reporting cash transactions of more than $10,000 on
          Currency Transaction reports (CTRs), and other recordkeeping laws that
          impact your business unit;

     5.   Procedures for reporting activity which is designed to avoid the
          filing of CTRs (such as changing a cash transaction to below the
          reporting amount, or engaging in multiple cash transactions to avoid
          reporting) or other recordkeeping laws; and

     6.   Conducting your personal finances under Section 2.04.1 in a manner
          that complies with all BSA and related anti-money laundering laws.

Your business unit's Compliance Representative, or the Corporate BSA Compliance
Officer identified in EXHIBIT 4, KEY CONTACTS AND REFERENCE GUIDE should be
contacted regarding any BSA or money laundering questions or concerns.

Fair Lending

It is the policy of PNC to conduct its business in accordance with the fair
lending laws. The fair lending laws prohibit discrimination in any aspect of a
consumer, commercial or real estate credit transaction based on any of the
following factors: race, color, religion, gender, national origin, martial
status, age, receipt of public assistance, handicap, familial status, or
exercise in good faith or rights granted by the Consumer Credit Protection Act.
It is your responsibility to treat all clients fairly.




Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (FCPA) strictly regulates the business
dealings of U.S. persons and entities with "foreign officials." Under the FCPA,
"foreign officials" include foreign government officials, foreign political
party or party officials, candidates for foreign political office, and officials
of public international organizations. The statute's principal aim is to prevent
bribes by U.S. persons or entities of any such officials. Under the law:


--------------------------------------------------------------------------------
39                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------

     o    You may neither take nor assist in any action in furtherance of an
          offer, payment, promise of payment or authorization thereof to any
          "foreign official" as a means to either (i) induce that person to take
          any unlawful action or (ii) influence official decisions in order to
          obtain, retain or direct business to any person;

     o    You may not use any intermediary to influence the acts or decisions of
          any foreign official or foreign government in the manner described
          above; thus, you may not make any offer, payment, promise or gift to
          any person while knowing that such offer, payment, promise or gift
          will be used to effectuate such influence;

     o    You must keep complete and accurate records of all business
          transactions, including detailed accountings of all payments to
          foreign agents and the purposes of such payments.


Violations of the FCPA may result in both criminal and civil penalties, which
could apply both to you individually and to PNC.

Insider Lending/Reg O

Federal Reserve Board Regulation O prohibits a PNC Bank from extending credit on
preferential terms to:

     o    Any of PNC's or any PNC Bank's directors or designated Regulation O
          executive officers; or

     o    Any related interest of these individuals.

PNC has adopted a Regulation O Policy to implement the provisions of the
regulation in all PNC markets. You should contact your Compliance Department
representative to obtain a copy of the policy if applicable to your business
unit or department.

Interest on Deposits of Directors, Officers, Attorneys, and Employees

PNC Bank is not permitted to pay any director, officer, attorney, or employee a
greater rate of interest on the deposits of such director, officer, attorney or
employee than that paid to other depositors on similar PNC Bank deposits.


Lobbying

Specific federal and state laws apply to lobbying activities undertaken on
behalf of PNC. You may obtain a summary of selected lobbying laws and a copy of
PNC's Lobbying Policy from the CORPORATE ETHICS OFFICE.



--------------------------------------------------------------------------------
40                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


                                   EXHIBIT 2.



                                [GRAPHIC OMITTED]


--------------------------------------------------------------------------------
41                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


                                   EXHIBIT 3.



                                [GRAPHIC OMITTED]






This form is available via Lotus Notes, PNC's intraweb at
http//www.intraweb.pnc.com or from your HR/ER Representative or the Corporate
Ethics Office.



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


42                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


EXHIBIT 4. KEY CONTACTS REFERENCE GUIDE

--------------------------------------------------------------------------------
   PNC ETHICS HOTLINE to report alleged violations of the code 1-866-785-9753
--------------------------------------------------------------------------------



--------------------------------------------------------------------------------------------------------
                          CORPORATE ETHICS OFFICE: As Referenced in the Code

CONTACT                    NAME                          PHONE            FAX               MAILSTOP

Corporate Ombudsman        Michelle O. Manning           (412) 768-8507   (412) 705-0829    P1-POPP-22-2
Corporate Ethics Office    Mary Linn Fitzpatrick         (412) 768-7622   (412) 705-0829    P1-POPP-22-2
For Preclearance Issues    Mark Joseph                   (412) 762-0147   (412) 705-0829    P1-POPP-22-2
--------------------------------------------------------------------------------------------------------





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


        HUMAN RESOURCES/EMPLOYEE RELATIONS REPRESENTATIVES EMPLOYEES: As Referenced in the Code

CONTACT                    NAME                          PHONE            FAX               MAILSTOP

BlackRock                  Lyn Rosensweig                (212) 409-3157   (212) 409-3123    XX-R040-08-1
Corporate Bank/
Treasury Management        Jim Popp                      (412) 768-2378   (412) 762-3985    P2-PTPP-02-1
Real Estate Finance/
Business Credit            Jim Popp                      (412) 768-2378   (412) 762-3985    P2-PTPP-02-1
Employees in Other Areas   Linda Williamson              (412) 762-5413   (412) 762-2256    P2-PTPP-02-1
Regional Community Bank Theresa Kiwior                   (570) 961-6174   (570) 961-6340    N1-NADM-04-A
PNC Advisors               Jean Olenak                   (412) 762-2113   (412) 762-2256    P2-PTPP-02-1
TPS                        Joanna Robinson               (412) 768-3600   (412) 705-0118    P6-PUSX-41-5
Staff Services             Marilyn Crump                 (412) 762-2193   (412) 768-4275    P1-POPP-28-5
Hilliard Lyons             Marilyn Underwood-Riley       (502) 588-8416   (502) 588-1100    K9-HLYN-01-1
PFPC                       Rachel Emrich                 (302) 791-1251   (302) 791-2855    W3-FBEL-02-1
--------------------------------------------------------------------------------------------------------




--------------------------------------------------------------------------------------------------------
                           SECURITY SERVICES DEPARTMENT: As Referenced in the Code

CONTACT                    NAME                          PHONE            FAX               MAILSTOP

Director of Corporate
Security Services          John P. Eriksen               (412) 762-7761   (412) 762-0726    P2-PTPP-06-1
--------------------------------------------------------------------------------------------------------




--------------------------------------------------------------------------------------------------------
                              GENERAL COUNSEL OFFICE: As Referenced in the Code

CONTACT                    NAME                          PHONE            FAX               MAILSTOP

General Counsel            Helen P. Pudlin               (412) 762-7987   (412) 768-2875    P1-POPP-30-1
                                                         (215) 585-5174   (215) 585-8564    F5-F012-02-7
--------------------------------------------------------------------------------------------------------




--------------------------------------------------------------------------------------------------------
                           CORPORATE SECRETARY OFFICE: As Referenced in the Code

CONTACT                    NAME                          PHONE            FAX               MAILSTOP

Corporate Secretary        Thomas R. Moore               (412) 762-1901   (412) 705-2194    P1-POPP-21-1
--------------------------------------------------------------------------------------------------------




--------------------------------------------------------------------------------------------------------
                                 PRIVACY DIRECTOR: As Referenced in the Code

CONTACT                    NAME                          PHONE            FAX               MAILSTOP

Director of Privacy        Ken Robinson                  (412) 762-3214   (412) 762-0726    P2-PTPP-06-1
--------------------------------------------------------------------------------------------------------




--------------------------------------------------------------------------------------------------------
                             CHIEF REGULATORY OFFICER: As Referenced in the Code

CONTACT                    NAME                          PHONE            FAX               MAILSTOP

Chief Regulatory Officer   John J. Wixted                (412) 762-0196   (412) 762-4507    P1-POPP-30-1
--------------------------------------------------------------------------------------------------------




--------------------------------------------------------------------------------------------------------
                         BANK SECRECY COMPLIANCE OFFICER: As Referenced in the Code

CONTACT                    NAME                          PHONE            FAX               MAILSTOP

Bank Secrecy Act Officer   Michael Kelsey                (302) 429-1775   (302) 429-1536    W1-W300-06-1
--------------------------------------------------------------------------------------------------------




--------------------------------------------------------------------------------
43                             PNC CODE OF ETHICS
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               PERSONAL INVESTMENT RULES FOR RESTRICTED EMPLOYEES

                                   APPENDIX 1

Preclearance of PERSONAL INVESTMENTS

If you are a RESTRICTED EMPLOYEE of PNC, you will be notified in writing.

YOU MUST USE THE PERSONAL INVESTMENTS PRECLEARANCE SYSTEM ("PIPS") TO PRECLEAR
ALL PERSONAL INVESTMENTS, FOR OR BY YOU AND YOUR IMMEDIATE FAMILY MEMBERS EXCEPT
FOR SECURITIES ISSUED BY PNC OR BLACKROCK,OR CLOSED-END MUTUAL FUNDS MANAGED OR
ADVISED BY BLACKROCK. For PNC or BlackRock securities, please see "Blackout
Periods for PNC and BlackRock Securities" and "Preclearance and Reporting
Requirements" below.

You will not be permitted to invest in a non-publicly traded entity in which PNC
also holds an equity interest, unless the CORPORATE ETHICS OFFICE grants an
exception.

Investments made prior to November 1, 2002 are not subject to this restriction.

You may not make or dispose of your PERSONAL INVESTMENT if PIPS does not
preclear the transaction.



General Rules Regarding Personal Investments

Even if PIPS preclears your PERSONAL INVESTMENT, you must still observe the
following general rules when making or disposing of a PERSONAL INVESTMENT:

CONFLICTS OF   You must avoid PERSONAL INVESTMENTS that create a conflict of
INTEREST       interest. A conflict of interest may exist if:

               o    You or a FAMILY MEMBER make, hold, or dispose of a PERSONAL
                    INVESTMENT that may influence your decisions when acting for
                    PNC; or

               o    You engage in a personal activity or have a personal
                    interest that is contrary to PNC's interests; or

               o    You use your position with PNC, PNC's CONFIDENTIAL
                    INFORMATION, or PNC resources to make or dispose of a
                    PERSONAL INVESTMENT in a manner that may benefit you or a
                    FAMILY MEMBER rather than PNC.

               You must avoid making a PERSONAL INVESTMENT that has been offered
               to you because of your position with PNC unless the investment

               opportunity is widely available on comparable terms to:

               o    All employees;

               o    All employees within a particular business or market; or

               o    The general public.



BLACKOUT       You will be restricted from purchasing or selling PNC and
PERIODS;       BlackRock securities (and  closed-end mutual funds managed or
PRECLEARANCE   advised by BlackRock) during certain "blackout" periods, and you
AND REPORTING  may be restricted at other times.

               You are also subject to certain additional preclearance and
               reporting requirements with respect to PNC and BlackRock
               securities (and closed-end mutual funds managed or advised by
               BlackRock).


               See "Blackout Periods for PNC and BlackRock Securities" and
               "Preclearance and Reporting Requirements" below for more
               information.




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44                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


INSIDER        You must comply with the INSIDER TRADING rules set forth in
TRADING        Section 4.05.2 of this Code.

PUBLICLY HELD  If you wish to purchase or sell securities of a publicly held
SUBSIDIARIES   subsidiary of PNC,  you must comply with the rules set forth in
OF PNC         Section 4.05.3 of this Code.


OTHER POLICIES Your PERSONAL INVESTMENTS must comply with Appendix 1 as well as
               any other applicable policies, including those developed by your
               business unit. You will be informed if you are in a business unit
               that has special policies applicable to you.


DESIGNATED     If you are also a DESIGNATED UNIT employee, please review the
UNIT EMPLOYEES additional preclearance requirements set forth in Appendix 2
               below under "Preclearance of PERSONAL INVESTMENTS".

Notification of Conflicts

IF YOU HAVE MADE OR DISPOSED OF A PERSONAL INVESTMENT AND IF YOU BELIEVE OR
SUSPECT THAT A CONFLICT OF INTEREST HAS DEVELOPED,EVEN IF YOU WERE PRECLEARED AT
THE TIME YOU MADE OR DISPOSED OF THE INVESTMENT,YOU MUST DISCLOSE THIS CONFLICT
OF INTEREST BY COMPLETING A NEW NOTIFICATION/APPROVAL FORM.

At its discretion, PNC may require you to take appropriate actions to resolve
the conflict of interest.

Blackout Periods for PNC and BLACKROCK Securities

You are prohibited from purchasing or selling PNC securities beginning 15 days
before the end of a calendar quarter until the second business day after PNC
releases its earnings results for that quarter. This prohibition does not
include exercising with cash or already-owned PNC securities an option on PNC
securities granted by PNC and holding the underlying securities received as a
result of the option exercise.

You may also be restricted from purchasing or selling PNC securities at other
times. If you are subject to such additional restrictions, you will be notified.

You are also prohibited from purchasing or selling securities issued by
BLACKROCK, or Anthracite Capital, Inc., at a time when similarly situated
employees of BLACKROCK are prohibited from purchasing or selling such
securities.

All pending purchase and sale orders regarding PNC and BLACKROCK securities that
could be executed during a blackout period must be canceled before the beginning
of the blackout period unless they are part of a PNC TRADING PLAN that has been
cleared by the CORPORATE ETHICS OFFICE.

Preclearance and Reporting Requirements

As discussed above, you are subject to preclearance and reporting requirements
in connection with your PERSONAL INVESTMENTS. preclearance of any particular
transaction under this Policy will not necessarily protect you from liability
under the laws prohibiting INSIDER TRADING, and you should not purchase, sell or
recommend any security while you are aware of INSIDE INFORMATION, even if you
have been precleared. PNC may grant or deny preclearance for various reasons,
and you should not infer anything from the preclearance response. The ultimate
responsibility for determining whether you have INSIDE INFORMATION rests with
you, and you must review and understand the INSIDER TRADING rules set forth in
Section 4.05.2.




WHEN IS        PRECLEARANCE IS REQUIRED BEFORE YOU OR YOUR IMMEDIATE FAMILY
PRECLEARANCE   MEMBER:
REQUIRED?

               o    Buy or sell PNC securities and securities issued by PNC
                    affiliates that are publicly traded companies (such as
                    BlackRock);


--------------------------------------------------------------------------------
45                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------



               o    Buy or sell interests in a closed-end mutual fund managed or
                    advised by BlackRock; o Use PNC or BlackRock securities to
                    secure a loan (including through a margin account);

               o    Make a gift of PNC or BlackRock securities;

               o    Make or change elections under the PNC DRIP, if such an
                    action would affect purchases or sales of PNC securities, or
                    make additional voluntary purchases or sales of PNC shares
                    through that plan;

               o    Make or change elections, or make intra-plan transfers or
                    liquidations, under any PNC or subsidiary compensation or
                    benefit plan that involves PNC or BlackRock securities or
                    phan- tom securities (such as the ISP, Supplemental ISP,
                    Deferred Compensation Plan or ESPP) if such an action would
                    cause you to make, or change the level of, purchases or
                    sales of PNC or BlackRock securities of PNC or BlackRock
                    phantom securities;

               o    Make or dispose of any other PERSONAL INVESTMENT.




HOW DO         o    From the CORPORATE ETHICS OFFICE (PNC or BlackRock
I RECEIVE           securities, or closed-end mutual funds advised or managed
PRECLEARANCE?       by BlackRock)

               o    Through PIPS (all other PERSONAL INVESTMENTS )


WHEN IS        o    FULLY DISCRETIONARY ACCOUNTS. If you trade securities (other
PRECLEARANCE        than those issued by PNC or a Controlled Affiliate, such as
NOT REQUIRED?       BlackRock) through a FULLY DISCRETIONARY ACCOUNT, you do not
                    have to preclear those trades (unless there are exceptions
                    in the account that require preclearance);

               o    PNC TRADING PLANS. Purchases or sales of PNC or BlackRock
                    securities (or closed-end mutual funds managed or advised by
                    BlackRock) made in connection with a PNC TRADING PLAN that
                    has been cleared by the CORPORATE ETHICS OFFICE are not
                    subject to preclearance. (See "Additional Rules for PNC
                    TRADING PLANS" below.);

               o    CERTAIN EXCLUDED TRANSACTIONS. The preclearance and
                    reporting requirements do not apply to the following
                    transactions (which are excluded from the definition of
                    PERSONAL INVESTMENTS):

                    -    Security transactions involving open-end mutual funds
                         (such as money market funds or exchange-traded funds),
                         closed-end mutual funds other than those managed or
                         advised by BlackRock, unit investment trusts, and
                         federal, state, or local government or agency bonds or
                         other obligations

                    -    Reinvestment of dividends pursuant to another issuer's
                         DRIP (but the requirements do apply to additional
                         voluntary purchases or sales effected through such a
                         plan)

                    -    Involuntary acquisitions or dispositions of securities
                         as the result of a stock dividend, stock split, reverse
                         stock split, merger, consolidation, spin-off or other
                         similar corporate distribution or reorganization

                    -    Other situations where the CORPORATE ETHICS OFFICE
                         determines that preclearance or reporting is not
                         necessary

HOW LONG DOES       The preclearance will remain effective only for the day it
PRECLEARANCE        is granted. If you decide to postpone your transaction until
LAST?               the next day you must call the CORPORATE ETHICS OFFICE or
                    use PIPS.


--------------------------------------------------------------------------------
46                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


WHAT                o    For PERSONAL INVESTMENTS that are effected through
TRANSACTIONS             brokers or an investment advisory account - provide
MUST BE                  periodic statements (at least quarterly) of all
REPORTED?                purchases and sales to CORPORATE ETHICS OFFICE.

                    o    For PERSONAL INVESTMENTS that are effected through
                         other means - provide periodic statements (at least
                         quarterly) of all purchases and sales to CORPORATE
                         ETHICS OFFICE.


Additional Rules for PNC TRADING PLANS

YOU MUST RECEIVE CLEARANCE FROM THE CORPORATE ETHICS OFFICE BEFORE ENTERING INTO
OR MODIFYING A PNC TRADING PLAN AND YOU MUST NOTIFY THE CORPORATE ETHICS
OFFICE,IN WRITING,WITHIN ONE BUSINESS DAY AFTER TERMINATING SUCH A PNC TRADING
PLAN. If you are an executive officer subject to Section 16 of the Securities
Exchange Act of 1934, as amended, you must also continue to follow the
transaction reporting requirements set forth above.



--------------------------------------------------------------------------------
47                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


            PERSONAL INVESTMENTS RULES FOR DESIGNATED UNIT EMPLOYEES

                                   APPENDIX 2

Preclearance of Personal Investments

You will be informed if you are in a DESIGNATED UNIT of PNC.

YOU MUST USE THE PERSONAL INVESTMENTS PRE-CLEARANCE SYSTEM ("PIPS") TO PRECLEAR
ALL PERSONAL INVESTMENTS,FOR OR BY YOU AND YOUR IMMEDIATE FAMILY MEMBERS EXCEPT
FOR SECURITIES ISSUED BY PNC OR BLACKROCK,OR CLOSED-END MUTUAL FUNDS MANAGED OR
ADVISED BY BLACKROCK OR AS SET FORTH BELOW. Preclearance will be effective only
for the day it is granted. If you decide to postpone your transaction until the
next day, you must re-enter your trade using PIPS.

You may not make or dispose of your PERSONAL INVESTMENT if PIPS does not
preclear the transaction.

You are prohibited from purchasing, selling, or otherwise holding any securities
of any company that is a client of your DESIGNATED UNIT. There are certain
limited exceptions to this prohibition:

     o    Holding client securities that you acquired before you commenced
          employment in your DESIGNATED UNIT, before the company became a
          client, or in a transaction permitted by the PNC Code of Ethics in
          effect before April 1, 2000. (You may not acquire additional
          securities of that client, however, unless you meet one of the
          additional exceptions listed below.);

     o    Acquiring client securities in connection with the reinvestment of
          dividends pursuant to a client's DRIP;

     o    Involuntary acquisitions or dispositions of client securities as the
          result of a stock dividend, stock split, reverse stock split, merger,
          consolidation, spin-off or other similar corporate distribution or
          reorganization; or

     o    Trading client securities in connection with a FULLY DISCRETIONARY
          ACCOUNT.



IF YOU ARE SUBJECT TO THE FIRST EXCEPTION REGARDING PREVIOUSLY HELD CLIENT
SECURITIES,YOU MUST DISCLOSE THIS INVESTMENT TO YOUR BUSINESS UNIT MANAGER AND
THE CORPORATE ETHICS OFFICE,AND YOU MUST OBTAIN CLEARANCE FROM YOUR BUSINESS
UNIT MANAGER AND THE CORPORATE ETHICS OFFICE BEFORE SELLING SUCH CLIENT
SECURITIES.

General Rules Regarding Personal Investments

Even if PIPS preclears your PERSONAL INVESTMENT, you must still observe the
following general rules when making or disposing of a PERSONAL INVESTMENT:


CONFLICTS OF   You must avoid PERSONAL INVESTMENTS that create a conflict of
INTEREST       interest. A conflict of interest may exist if:

               o    You or a FAMILY MEMBER make, hold, or dispose of a PERSONAL
                    INVESTMENT that may influence your decisions when acting for
                    PNC; or

               o    You engage in a personal activity or have a personal
                    interest that is contrary to PNC's interests; or

               o    You use your position with PNC, PNC's CONFIDENTIAL
                    INFORMATION, or PNC resources to make or dispose of a
                    PERSONAL INVESTMENT in a manner that may benefit you or a
                    FAMILY MEMBER rather than PNC.


--------------------------------------------------------------------------------
48                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


               You must avoid making a PERSONAL INVESTMENT that has been offered
               to you because of your position with PNC unless the investment

               opportunity is widely available on comparable terms to:

               o    All employees;

               o    All employees within a particular business or market; or o


                    The general public.

VENDORS OF     If you wish to make, hold or dispose of a PERSONAL INVESTMENT in
PNC            a company that is a vendor of PNC, you must use the
               Notification/Approval Form to notify the Corporate Ethics Office
               and obtain prior approval of the transaction if you expect to
               have or within past 90 days have had any involvement with the
               company on behalf of PNC.


               Generally, you will receive approval for the transaction if:

               o    The company's securities are publicly traded;

               o    You are not aware of significant CONFIDENTIAL INFORMATION
                    about that vendor; and

               o    You do not participate in decisions or other business
                    transactions between PNC and that vendor that may be
                    significant to either the vendor or to PNC.




INSIDER        You must comply with the INSIDER TRADING rules set forth in
TRADING        Section 4.05.2 to this Code.


PUBLICLY HELD  If you wish to purchase or sell securities of a publicly held
SUBSIDIARIES   subsidiary of PNC, you must comply with the rules set forth in
OF PNC         Section 4.05.3 to this Code.

OTHER          Your PERSONAL INVESTMENTs must comply with Appendix 2 as well as
POLICIES       any other applicable BUSINESS UNIT policies.

RESTRICTED     If you are also a RESTRICTED EMPLOYEE, please review the
EMPLOYEES      additional requirements set forth in Appendix 1.


Notification of Conflicts

IF YOU HAVE MADE OR DISPOSED OF A PERSONAL INVESTMENT AND IF YOU BELIEVE OR
SUSPECT THAT A CONFLICT OF INTEREST HAS DEVELOPED,EVEN IF YOU WERE PRE-CLEARED
AT THE TIME YOU MADE OR DISPOSED OF THE INVESTMENT,YOU MUST DISCLOSE THIS
CONFLICT OF INTEREST BY COMPLETING A NEW NOTIFICATION/APPROVAL FORM.

At its discretion, PNC may require you to take appropriate actions to resolve
the conflict of interest.


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


49                             PNC CODE OF ETHICS
--------------------------------------------------------------------------------


              PERSONAL INVESTMENT RULES FOR NON-EMPLOYEE DIRECTORS

                                   APPENDIX 3


General Rules Regarding Personal Investments

When making or disposing of a PERSONAL INVESTMENT, you must observe the
following general rules:


CONFLICTS OF   You must avoid PERSONAL INVESTMENTS that create a conflict of
INTEREST       interest. A conflict of interest may exist if:

               o    You or a FAMILY MEMBER hold, make or dispose of a PERSONAL
                    INVESTMENT that may influence your decisions when acting for
                    PNC; or

               o    You engage in a personal activity or have a personal
                    interest that is contrary to PNC's interests; or

               o    You use your position with PNC, PNC's CONFIDENTIAL
                    INFORMATION, or PNC resources to make or dispose of a
                    PERSONAL INVESTMENT in a manner that may benefit you or a
                    FAMILY MEMBER rather than PNC.

               You must avoid making a PERSONAL INVESTMENT that has been offered
               to you because of your position with PNC unless the investment

               opportunity is widely available on comparable terms to:

               o    All employees;

               o    All employees within a particular business or market; or

               o    The general public.




BLACKOUT       You will be restricted from purchasing or selling PNC and
PERIODS;PRE-   BLACKROCK securities (and closed-end mutual funds managed or
CLEARANCE AND  advised by BLACKROCK) during certain "blackout" periods, and you
REPORTING      may be restricted at other times.

               You are also subject to certain additional pre-clearance and
               reporting requirements with respect to PNC and BLACKROCK
               securities (and closed-end mutual funds managed or advised by
               BLACKROCK).

               See "Blackout Periods for PNC and BLACKROCK Securities" and
               "Preclearance and Reporting Requirements" below for more
               information.

INSIDER        You must comply with the INSIDER TRADING rules set forth in
TRADING        Section 4.05.2 of this Code.

PUBLICLY HELD  If you wish to purchase or sell securities of a publicly held
SUBSIDIARIES   subsidiary of PNC, you  must comply with the rules set forth in
OF PNC         Section 4.05.3 to this Code.


OTHER POLICIES Your PERSONAL INVESTMENTS must comply with Appendix 3 as well as
               any other applicable policies.

Notification of Conflicts

IF YOU HAVE MADE A PERSONAL INVESTMENT AND IF YOU BELIEVE OR SUSPECT THAT A
CONFLICT OF INTEREST HAS DEVELOPED,YOU MUST NOTIFY THE CORPORATE SECRETARY
IMMEDIATELY.

At its discretion, PNC may require you to take appropriate actions to resolve
the conflict of interest.


--------------------------------------------------------------------------------
50                             PNC CODE OF ETHICS
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Blackout Periods for PNC and BLACKROCK Securities

You are prohibited from purchasing or selling PNC securities beginning 15 days
before the end of a calendar quarter until the second business day after PNC
releases its earnings results for that quarter. This prohibition does not
include exercising with cash or already-owned PNC securities an option on PNC
securities granted by PNC and holding the underlying securities received as a
result of the option exercise.

You may also be restricted from purchasing or selling PNC securities at other
times. If you are subject to such additional restrictions, you will be notified

You are also prohibited from purchasing or selling securities issued by
BLACKROCK or AnthraciteCapital, Inc., at a time when non-employee directors of
BLACKROCK are prohibited from purchasing or selling such securities.

All pending purchase and sale orders regarding PNC and BLACKROCK securities that
could be executed during a blackout period must be canceled before the beginning
of the blackout period unless they are part of a PNC TRADING PLAN that is
cleared by the CORPORATE SECRETARY.

Pre-Clearance and Reporting Requirements

YOU ARE SUBJECT TO PRE-CLEARANCE AND REPORTING REQUIREMENTS. Pre-clearance of
any particular transaction under this section will not necessarily protect you
from liability under the laws prohibiting INSIDER TRADING and you may not
purchase, sell or recommend any security while you are aware of INSIDE
INFORMATION, even if you have been pre-cleared. PNC may grant or deny
pre-clearance for various reasons, and you should not infer anything from the
pre-clearance response. The ultimate responsibility for determining whether you
have INSIDE INFORMATION rests with you, and you must review and understand the
INSIDER TRADING rules set forth separately in Section 4.05.2.




WHEN IS        PRECLEARANCE IS REQUIRED BEFORE YOU OR AN IMMEDIATE
PRECLEARANCE   FAMILY MEMBER:
REQUIRED?
               o    Buy or sell PNC securities and securities issued by PNC
                    affiliates that are publicly traded companies (such as
                    BLACKROCK);

               o    Buy or sell interests in a closed-end mutual fund managed or
                    advised by BLACKROCK;

               o    Use PNC or BLACKROCK securities to secure a loan (including
                    through a margin account);

               o    Make a gift of PNC or BlackRock securities;

               o    Allocate or reallocate deemed investments within the
                    Directors Deferred Compensation Plan;

               o    Make or change elections under the PNC DRIP, if such an
                    action would affect purchases or sales of PNC securities, or
                    make additional voluntary purchases or sales of PNC shares
                    through that plan.

HOW DO              From the CORPORATE SECRETARY or designee.
I RECEIVE
PRECLEARANCE?

WHEN IS PRE-   o    PNC TRADING PLANS. Purchases or sales of PNC or BLACKROCK
CLEARANCE NOT       securities (or closed-end mutual funds managed or advised by
REQUIRED?           BLACKROCK) made in connection with a PNC TRADING PLAN that
                    has been cleared by the CORPORATE SECRETARY are not subject
                    to pre-clearance. (See "Additional Rules for PNC TRADING
                    PLANS" below.);

               o    CERTAIN EXCLUDED TRANSACTIONS. The pre-clearance and
                    reporting requirements do not apply to the following
                    transactions (which are excluded from the definition of
                    PERSONAL INVESTMENTS):

                    -    Security transactions involving BLACKROCK open-end
                         mutual funds such as money market funds and exchange
                         traded fund (but the requirements do apply to BLACKROCK
                         managed or advised closed-end mutual funds)



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51                             PNC CODE OF ETHICS
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                    -    Reinvestment of dividends pursuant to the PNC DRIP (but
                         the requirements do apply to additional voluntary
                         purchases or sales effected through the PNC DRIP)

                    -    Involuntary acquisitions or dispositions of securities
                         as the result of a stock dividend, stock split, reverse
                         stock split, merger, consolidation, spin-off or other
                         similar corporate distribution or reorganization

HOW LONG DOES  o   Preclearance will be effective only for the day it is
PRECLEARANCE       granted. If you decide to postpone your transaction until
LAST?              the next day you must preclear your trade again with the
                   CORPORATE SECRETARY.

WHAT           o    For transactions in PNC securities (or securities of PNC's
TRANSACTIONS        publicly traded AFFILIATES) that are effected through
MUST BE             brokers or an investment advisory account - provide
REPORTED?           duplicate copies of transaction confirmations of all
                    purchases and sales to the CORPORATE SECRETARY;

               o    For transactions in PNC securities (or securities of PNC's
                    publicly traded affiliates) that are effected through other
                    means - provide copies of transaction documents to the
                    CORPORATE SECRETARY no later than 7 calendar days after such
                    transaction.


Additional Rules for PNC Trading Plans

YOU MUST RECEIVE CLEARANCE FROM THE CORPORATE SECRETARY BEFORE ENTERING INTO OR
MODIFYING A PNC TRADING PLAN (WHETHER IT IS A SPECIFIC INSTRUCTION PLAN OR A
DELEGATED AUTHORITY PLAN),AND MUST NOTIFY THE CORPORATE SECRETARY, IN
WRITING,WITHIN ONE BUSINESS DAY AFTER TERMINATING SUCH A PNC TRADING PLAN. You
must also continue to follow the transaction reporting requirements set forth in
this above.



                                POWER OF ATTORNEY

         That each of the undersigned officers and trustees of BlackRock Managed
Duration Trust, a statutory trust formed under the laws of the State of Delaware
(the "Trust"), do constitute and appoint Robert S. Kapito, Ralph L. Schlosstein
and Anne F. Ackerley, and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the other)
to execute in the name and on behalf of each of the undersigned as such officer
or trustee, a Registration Statement on Form N-2, including any pre-effective
amend ments and/or any post-effective amendments thereto and any subsequent
Registration Statement of the Trust pursuant to Rule 462(b) of the Securities
Act of 1933, as amended (the "1933 Act") and any other filings in connection
therewith, and to file the same under the 1933 Act or the Investment Company Act
of 1940, as amended, or otherwise, with respect to the registration of the
Trust, the registration or offering of the Trust's common shares of beneficial
interest, par value $.001 per share, or the registration or offering of the
Trust's preferred shares, par value $.001 per share; granting to such attorneys
and agents and each of them, full power of substitution and revocation in the
premises; and ratifying and confirming all that such attorneys and agents, or
any of them, may do or cause to be done by virtue of these presents.

         This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.







         IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney for BlackRock Managed Duration Trust this 22nd day of May, 2003.


                                        /s/ Dr. Andrew F. Brimmer
                                    -------------------------------------
                                            Dr. Andrew F. Brimmer
                                            Trustee


                                        /s/ Richard E. Cavanagh
                                    -------------------------------------
                                            Richard E. Cavanagh
                                            Trustee


                                        /s/ Kent Dixon
                                    -------------------------------------
                                            Kent Dixon
                                            Trustee


                                        /s/ Frank J. Fabozzi
                                    -------------------------------------
                                            Frank J. Fabozzi
                                            Trustee


                                        /s/ Robert S. Kapito
                                    -------------------------------------
                                            Robert S. Kapito
                                            Trustee and President


                                         /s/ James Clayburn La Force, Jr.
                                    -------------------------------------
                                             James Clayburn La Force, Jr.
                                             Trustee


                                         /s/ Walter F. Mondale
                                    -----------------------------
                                             Walter F. Mondale
                                             Trustee





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                                        /s/ Ralph L. Schlosstein
                                    -------------------------------------
                                           Ralph L. Schlosstein
                                           Trustee


                                        /s/ Henry Gabbay
                                    -------------------------------------
                                            Henry Gabbay
                                            Treasurer



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