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THE BLACKROCK TARGET TERM TRUST INC.
SEMI-ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
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July 31, 1996
Dear Trust Shareholder:
After posting strong returns during 1995, the fixed income markets have
given back much of their gains in 1996 in response to a strengthening U.S.
economy. Accelerating economic growth has raised concerns about an increased
inflationary environment, which could erode the value of fixed income
investments. The stronger economy also has led some market participants to
consider the possibility that the Federal Reserve may increase interest rates to
thwart inflation threats after three interest rate reductions over the past
twelve months.
Despite the pick-up in economic growth, we believe that current inflationary
fears will subside. Commodity prices have risen but manufacturers will have
difficulty passing along the increased costs of raw materials to consumers,
whose debt levels as a percentage of disposable income are at the highest point
since the recessionary highs of 1990. We believe that the overleveraged consumer
will have to retrench, restricting future economic expansion and creating a
positive environment for bonds in the latter half of this year.
The following semi-annual report provides detailed market commentary and a
review of portfolio management activity. We believe that BlackRock's duration
controlled management style and risk management capabilities will allow each of
our Trusts to achieve its long-term investment objective.
We look forward to maintaining your respect and confidence and to serving
your financial needs in the coming years.
Sincerely,
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
July 31, 1996
Dear Shareholder:
We are pleased to present the semi-annual report for The BlackRock Target
Term Trust Inc. ("the Trust") for the six months ended June 30, 1996. We would
like to take this opportunity to review the Trust's stock price and net asset
value (NAV) performance, summarize market developments and discuss recent
portfolio management activity.
The Trust is a diversified, actively managed closed-end bond fund whose
shares are traded on the New York Stock Exchange under the symbol "BTT". The
Trust's investment objective is to return $10 per share (its initial offering
price) to shareholders on or about December 31, 2000 while providing high
current income. The Trust seeks these objectives by investing in investment
grade fixed income securities, including zero coupon bonds, corporate debt
securities, mortgage-backed securities backed by U.S. Government agencies (such
as Fannie Mae, Freddie Mac or Ginnie Mae) and commercial mortgage-backed
securities. All of the Trust's assets must be rated "BBB" by Standard & Poor's
or "Baa" by Moody's at time of purchase or be issued or guaranteed by the U.S.
government or its agencies.
The table below summarizes the performance of the Trust's stock price and
NAV (the market value of its assets per share) over the period:
-----------------------------------------------------
6/30/96 12/31/95 Change High Low
-----------------------------------------------------
Stock Price $8.75 $8.75 - $9.00 $8.375
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Net Asset Value (NAV) $9.71 $10.03 (3.19%) $10.15 $9.56
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The Fixed Income Markets
The domestic fixed income markets witnessed two profoundly different
environments during the past six months, providing an exciting and challenging
environment in which to manage the Trust. The Treasury market rally of 1995
continued through the middle of February 1996, as market demand for fixed income
securities remained strong due to a combination of moderate economic growth, low
absolute levels of inflation and two reductions of the Fed funds target rate.
The rally halted during mid-February, however, as data indicating accelerating
economic growth rekindled inflationary concerns. The strengthening of the
economy continued throughout the second quarter, leading market participants to
become more resolute in their belief that the Federal Reserve will tighten
monetary policy during the second half of 1996, which would result in rising
interest rates. These fears translated into a sharp rise in bond yields across
the Treasury yield curve, resulting in the fixed income markets rescinding much
of their 1995 gains.
Interest rate movements reflected the change in investor sentiment toward
fixed income securities. Interest rates across the Treasury yield curve fell
dramatically through mid-February, as evidenced by the decline in yield levels
on the 10-year Treasury. Continuing the bond market rally of 1995, the yield of
the 10-year Treasury fell to 5.52% on January 19, its lowest yield since October
1993. However, data released during February suggesting renewed economic vigor
placed pressure on bond prices, as the possibility of a stronger economy
dampened investor expectations that interest rates would continue to fall. These
fears translated into a sharp rise in bond yields across the Treasury yield
curve. The yield of the ten-year Treasury ended the semi-annual period at 6.71%,
a net increase of 114 basis points (1.14%) during the first half of 1996.
2
<PAGE>
The mortgage-backed securities (MBS) market outperformed Treasuries for the
period, as rising interest rates coupled with a reduction in prepayment risk
provided investors an opportunity to fundamentally reassess mortgages after
1995's Treasury market rally. Still, many investors remained on the sidelines,
convinced that even historically wide mortgage yield spreads offered inadequate
compensation for the perceived risks of owning mortgages. As a result of this
narrow participation, MBS performance in 1996 has been good but somewhat short
of expectations given the sharp rise in interest rates.
Corporate bond performance relative to Treasuries was hampered by a heavy
new net issue supply, which expanded above 1995 levels despite the rising
interest rate environment of 1996. However, the yield premium, or "spread",
offered by corporate bonds remained narrow throughout the period. Corporate
yield spreads are not expected to widen significantly, as a subsiding of
recessionary fears in response to the strengthening U.S. economy is expected to
support corporate bond prices.
The Trust's Portfolio and Investment Strategy
BlackRock actively manages the Trust's portfolio holdings consistent with
BlackRock's overall market outlook and the Trust's investment objectives. The
following chart compares the Trust's current and December 31, 1995 asset
composition.
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The BlackRock Target Term Trust Inc.
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Composition June 30, 1996 December 31, 1995
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Taxable Zero-Coupon Bonds 53% 52%
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Corporate Bonds 13% 9%
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Mortgage Pass-Throughs 11% 13%
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Asset-Backed Securities 4% 3%
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Agency Multiple Class Pass-Throughs 4% 6%
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Non-Agency Multiple Class Pass-Throughs 4% 4%
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Adjustable Rate Mortgages 3% 6%
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Stripped Mortgage-Backed Securities 3% 3%
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U.S. Government Securities 3% 1%
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CMO Residuals 1% 2%
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Municipal Bonds 1% 1%
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Rating % of Corporates
--------------------------------------------------
June 30, 1996 December 31, 1995
Credit Rating
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AA or equivalent 7% 11%
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A or equivalent 43% 44%
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BBB or equivalent 50% 45%
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The Trust maintained its focus on the primary investment objective of
returning $10 per share to investors on or about its termination date. In
conjunction with this objective, the Trust has been reducing its holdings which
are subject to cash flow risk or which can extend beyond the Trust's scheduled
maturity date. BlackRock has been opportunistically selling bonds with these
characteristics, or "tail risk", and emphasized securities offering attractive
yield spreads over Treasury securities, cash flows prior to the Trust's
termination date and fixed maturities approximating the Trust's termination
date. To that end, the Trust further increased its allocation to
3
<PAGE>
investment grade corporate bonds, which now comprise approximately 13% of
portfolio assets. Corporate bonds allow the Trust to both match the maturity
date of the bond with the Trust's scheduled termination date by providing a
definite maturity value when they mature and a more defined cash flow.
Additionally, the Trust maintained its holdings in zero coupon bonds, the
majority of which mature at par near the Trust's termination date.
The increased corporate bond positions were accompanied by a corresponding
decrease in securities which offer less predictable cash flow streams and
maturity dates. Specifically, the Trust has sold mortgage-backed securities such
as agency pass-throughs and collateralized mortgage-backed obligations, which
have characteristics that are typically more sensitive to interest rate
movements than most fixed maturity securities. For example, the maturity of a
mortgage bond can extend if interest rates rise; conversely, a sharp decline in
interest rates can cause a mortgage bond to prepay, which exposes the Trust to
reinvestment risk in a lower interest rate environment. Over the semi-annual
period, this strategy has worked to the Trust's benefit, as mortgages
outperformed most sectors of the taxable fixed income market. The Trust expects
to continue its tail risk reduction strategy as the Trust's maturity date
approaches.
We look forward to continuing to manage the Trust to benefit from the
opportunities available to investors in the fixed income markets. BlackRock
remains confident in the Trust's ability to return its initial offering price at
its scheduled termination date. We thank you for your investment in The
BlackRock Target Term Trust Inc. Please feel free to contact our marketing
center at (800) 227-7BFM (7236) if you have specific questions which were not
addressed in this report.
Sincerely,
Robert S.Kapito Michael P. Lustig
Vice Chairman and Portfolio Manager Vice President and Portfolio Manager
BlackRock Financial Management, Inc. BlackRock Financial Management, Inc.
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The BlackRock Target Term Trust Inc.
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Symbol on New York Stock Exchange: BTT
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Initial Offering Date: November 17, 1988
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Closing Stock Price as of 6/30/96: $8.75
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Net Asset Value as of 6/30/96: $9.71
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Yield on Closing Stock Price as of 6/30/96 ($8.75)1: 6.57%
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Current Monthly Distribution per Share2: $0.047917
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Current Annualized Distribution per Share2: $0.575
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- ---------
1Yield on Closing Stock Price is calculated by dividing the current annualizing
distribution per share and dividing it by the closing stock price per share.
2Distribution is not constant and is subject to change.
4
<PAGE>
Left Column
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The BlackRock Target Term Trust Inc.
Portfolio of Investments
June 30, 1996
(Unaudited)
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Principal
Amount Value
Rating* (000) Description (Note 1)
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LONG-TERM INVESTMENTS-147.8%
Mortgage Pass-Throughs-15.5%
$ 5,000 Federal Home Loan Bank,
8.58%, 10/30/97 ..................... $ 5,056,250
Federal Home Loan Mortgage
Corporation,
10,937 5.00%, 11/01/00 - 5/01/01,
7 Year ............................ 9,990,624
701 7.50%, 10/01/23 ..................... 691,904
2,277 7.50%, 2/01/07 - 6/01/09, 15 Year ... 2,287,098
18,226++ 7.77%, 12/01/00, Multifamily ........ 18,681,846
12,536 8.00%, 2/01/20 - 6/01/22 ............ 12,681,424
55,600+ 9.00%, 1/01/09 - 9/01/16,
15 Year ........................... 57,804,562
602 11.00%, 7/01/04, 15 Year ............ 638,638
Federal National Mortgage
Association,
2,674 8.00%, 10/01/09 - 11/01/22 .......... 2,696,818
6,765 8.025%, 7/01/00, Multifamily ........ 7,099,022
16,266 .50%, 9/01/21 ....................... 16,693,098
Government National Mortgage
Association,
5,000 6.00%, 1/20/99 1 Year CMT (ARM) ..... 4,954,688
3,926 7.25%, 5/15/05 - 10/15/05 ........... 3,822,233
715 9.00%, 11/15/22, 27 Year ............ 759,979
------------
143,858,184
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Multiple Class Mortgage
Pass-Throughs-15.7
AAA 795 Countrywide Funding Corp.,
Series 1994-10, Class A-1,
5/25/09 ............................ 789,034
Federal Home Loan Mortgage
Corporation, Multiclass Mortgage
Participation Certificates,
2,690 Series 1425, Class 1425-G,
8/15/06 ........................... 2,654,519
7,557 Series 1516, Class 1516-S,
6/15/00, (ARM) .................... 6,633,451
4,355 Series 1564, Class 1564-I,
5/15/07, (l) ...................... 481,538
4,581 Series 1566, Class 1566-SC,
9/15/00, (ARM) .................... 4,114,789
1,000 Series 1580, Class 1580-S,
9/15/00, (ARM) .................... 784,370
55,907 Series 1616, Class 1616-S,
9/15/06, (ARM) .................... 1,869,388
10,000 Series 1700, Class 1700-B,
7/15/23, (P) ...................... 8,750,000
Right Column
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Principal
Amount Value
Rating* (000) Description (Note 1)
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Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
$ 3,853 Trust 1990-35, Class 35-E,
4/25/20 ........................... $ 4,071,206
5,638 Trust 1992-G56, Class G56-B,
7/25/20 (P)........................ 4,961,125
3,215 Trust 1993-M2, Class M2-H,
11/25/03 .......................... 3,119,117
15,325+ Trust 1993-7, Class 7-S,
2/25/00, (ARM) .................... 14,520,545
21,334 Trust 1993-11, Class 11-M,
2/25/08, (l) ...................... 3,973,444
13,509 Trust 1993-23, Class 23-L,
2/25/21, (l) ...................... 2,279,621
6,000 Trust 1993-G26, Class G26-PT,
12/25/17, (I) ..................... 1,292,934
22,104 Trust 1993-34, Class G34-PV,
2/25/17, (l) ...................... 2,793,272
42,293 Trust 1993-G35, Class G35-S,
1/25/22 ........................... 1,969,233
18,550+ Trust 1993-152, Class 152-C,
6/25/22 ........................... 16,045,750
4,500 Trust 1993-169, Class 169-SA,
9/25/00, (ARM) .................... 3,780,000
1,626 Trust 1993-224, Class 224-SB,
12/25/00 .......................... 1,253,616
5,151 Trust 1993-225A, Class 225A-MB,
12/25/22 .......................... 4,194,748
1,500 Trust 1993-227, Class 227-G,
12/25/00 .......................... 1,423,185
523 Trust 1994-009, Class G,
11/25/23 .......................... 472,108
AAA 4,658 Goldman Sachs Collateralized
Mortgage Obligation,
Trust 8, Class A, 3/25/18 ........... 4,767,057
AAA 5,751 Prudential-Bache Collateralized
Mortgage Obligation Trust,
Series 10, Class 10-H,
4/01/19 (P) ......................... 4,298,536
AA- 10,749 Resolution Trust Corporation,
Series 1992-C6, Class B, 7/25/24 .... 10,786,436
AAA 2,000 Ryland Acceptance Corp.,
Collateralized Mortgage Bonds,
Series 1972, Class D, 12/01/16 ...... 2,074,600
AAA 24,759 Salomon Capital Access Corp.,
Series 1986-1, Class C, 9/01/15 ..... 24,913,260
AAA 6,360 Structured Asset Securities Corp.,
Collateralized Mortgage
Obligation, Series 1989-1,
Class D, 7/01/19 .................... 6,354,037
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145,420,919
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See Notes to Financial Statements.
5
<PAGE>
Left Column
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Principal
Amount Value
Rating* (000) Description (Note 1)
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Corporate Bonds-19.2%
Finance & Banking-12.3%
A+ $ 6,070 American Express,
11.63%, 12/12/00 .................... $ 6,565,312
Aa3 5,000 Associates Corp. North America,
6.35%, 6/29/00 ...................... 4,909,697
Baa3 7,500 Erac USA Finance Co.,
7.00%, 6/15/00 ...................... 7,496,191
A1 10,000 Goldman Sachs Group L. P.,
6.20%, 12/15/00 ..................... 9,708,929
A2 5,000 Household Finance Corp.,
6.89%, 5/11/98 ...................... 5,036,418
International Lease Finance Corp.,
A2 3,000 6.30%, 11/01/99 ..................... 2,957,827
A2 6,000 6.63%, 4/01/99 ...................... 5,976,480
Baa3 3,000 Meditrust,
7.25%, 8/16/99 ...................... 2,973,569
A1 4,000 Meridian Bancorp, Inc.,
6.63%, 6/15/00 ...................... 3,970,019
A1 5,000 Merrill Lynch & Company, Inc.,
6.00%, 1/15/01 ...................... 4,822,900
A1 3,800 Morgan Stanley, Inc.,
5.75%, 2/15/01 ...................... 3,618,952
Baa3 6,000 New American Capital, Inc.,
7.25%, 4/12/00 ...................... 6,030,000
Aa3 5,000 Norwest Corp.,
7.70%, 11/15/97 ..................... 5,093,300
PaineWebber Group, Inc.,
Baa1 7,305 6.31%, 7/22/99 ...................... 7,150,815
Baa1 4,000 7.00%, 3/01/00 ...................... 3,979,710
Provident Bank Cincinnati Ohio,
BBB 162 Zero Coupon, 12/15/97 ............... 148,093
BBB 162 Zero Coupon, 6/15/98 ................ 142,960
BBB 162 Zero Coupon, 12/15/98 ............... 138,015
BBB 162 Zero Coupon, 6/15/99 ................ 133,004
BBB 162 Zero Coupon, 12/15/99 ............... 128,331
BBB 162 Zero Coupon, 6/15/00 ................ 123,677
BBB 5,462 Zero Coupon, 12/15/00 ............... 4,017,144
Salomon, Inc.,
Baa1 6,300 7.59%, 1/28/00 ...................... 6,375,410
Baa1 4,000 7.75%, 5/15/00 ...................... 4,071,904
Smith Barney Holdings, Inc.,
A2 1,950 6.63%, 6/01/00 ...................... 1,934,785
A2 6,000 7.00%, 5/15/00 ...................... 6,019,560
A3 10,000 Transamerica Finance Corp.,
6.75%, 6/01/00 ...................... 9,944,065
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113,467,067
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Right Column
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Principal
Amount Value
Rating* (000) Description (Note 1)
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Corporate Bonds-(cont'd)
Industrials-6.4%
AA- $3,000 BP America, Inc.,
9.75%, 3/01/99 ...................... $ 3,217,014
Baa3 5,000 Columbia Gas Systems, Inc.,
6.39%, 11/28/00 ..................... 4,891,354
Baa2 1,200 Enron Corp.,
8.50%, 2/01/00 ...................... 1,217,328
Ford Motor Credit Co.,
BBB 354 Zero Coupon, 9/15/97 ................ 329,250
BBB 354 Zero Coupon, 3/15/98 ................ 317,939
BBB 354 Zero Coupon, 9/15/98 ................ 307,257
BBB 354 Zero Coupon, 3/15/99 ................ 296,134
BBB 354 Zero Coupon, 9/15/99 ................ 285,576
BBB 354 Zero Coupon, 3/15/00 ................ 275,468
BBB 354 Zero Coupon, 9/15/00 ................ 265,780
BBB 12,311 Zero Coupon, 2/23/01 ................ 8,942,736
A3 10,000 General Motors Acceptance Corp.,
6.125%, 9/18/98 ..................... 9,893,235
A2 5,655 Kern River Funding,
6.42%, 3/31/01 ...................... 5,569,867
Baa2 7,000 Nabisco Brands, Inc.,
8.00%, 1/15/00 ...................... 7,234,150
News America Holdings, Inc.,
BBB 188 Zero Coupon, 9/01/97 ................ 174,497
BBB 194 Zero Coupon, 10/15/97 ............... 178,775
BBB 188 Zero Coupon, 3/01/98 ................ 168,400
BBB 194 Zero Coupon, 4/15/98 ................ 172,638
BBB 188 Zero Coupon, 9/01/98 ................ 162,564
BBB 194 Zero Coupon, 10/15/98 ............... 166,513
BBB 188 Zero Coupon, 3/01/99 ................ 156,643
BBB 194 Zero Coupon, 4/15/99 ................ 160,466
BBB 188 Zero Coupon, 9/01/99 ................ 150,863
BBB 4,444 Zero Coupon, 10/15/99 ............... 3,536,778
BBB 5,188 Zero Coupon, 3/01/00 ................ 4,020,100
Baa3 7,000 Tele Communications, Inc.,
7.375%, 2/15/00 ..................... 6,989,850
------------
59,081,175
------------
Corporate Bonds-(cont'd)
Sovereign & Provincial-0.5%
Baa2 5,000 Corporacion Andina De Fomento,
7.38%, 7/21/00 ...................... 4,998,450
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Asset-Backed Securities-5.5%
AAA 3,532 Banc One Auto Grantor Trust,
6.10%, 10/15/02 ..................... 3,530,219
AAA 700 Chevy Chase Auto Receivables,
6.60%, 12/15/02 ..................... 9,709,021
See Notes to Financial Statements.
6
<PAGE>
Left Column
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Principal
Amount Value
Rating* (000) Description (Note 1)
- --------------------------------------------------------------------------------
Asset-Backed Securities-(cont.)
AAA $10,686 Daimler Benz Auto Grantor Trust,
Series 1995-A, Class A,
5.85%, 5/15/02 ...................... $ 10,646,282
AAA 26,966@ Ford Credit Grantor Trust,
Series 1995-B, Class A,
5.90%, 10/15/00 ..................... 26,806,148
------------
50,691,670
------------
Stripped Mortgage-Backed
Securities-4.7%
AAA 1,326 DBL, Inc., Trust V, Class 1,
9/01/18 (P/O) ....................... 985,755
Federal Home Loan Mortgage
Corporation, Multiclass Mortgage
Participation Certificates,
2,157 Series 1067, Class 1067-J,
4/15/21 (l/O) ..................... 720,534
5,258 Series 1149, Class 1149-IC,
10/15/21 (I/O) .................... 1,879,556
10,797 Series 1440, Class 1440-PK,
8/15/18 (I/O) ..................... 1,315,907
401 Series 1664, Class 1664-A,
12/15/23 (P/O) .................... 382,393
2,442 Series 1790C, Class 1790C-K,
5/15/23 (P/O) ..................... 830,149
Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
4,437 Trust 2, Class 2, 2/01/17 (l/O) ..... 1,523,123
17,756 Trust 4, Class 2, 2/01/17 (l/O) ..... 5,559,503
8,481 Trust 6, Class 2, 1/01/17 (l/O) ..... 2,715,179
200 Trust 18, Class 2, 2/01/17 (l/O) .... 62,862
3,840 Trust 19, Class 1, 6/01/17 (P/O) .... 2,861,775
4,560 Trust 95, Class 2, 10/01/20 (l/O) ... 1,493,411
523 Trust 225, Class 1, 2/01/23 (P/O) ... 376,096
13,934 Trust 226, Class 2, 6/01/23 (l/O) ... 4,158,310
1,363 Trust 1991-29, Class 29-J,
4/25/21 (I/O) ..................... 499,622
168 Trust 1991-79, Class 79-B,
7/25/98 (P/O) ..................... 148,517
1,388 Trust 1991-121, Class 121-B,
9/25/98 (P/O) ..................... 1,249,157
3,517 Trust 1992-23, Class 23-D,
2/25/21 (P/O) ..................... 1,767,204
9,167 Trust 1992-140, Class 140-HD,
11/25/06 (P/O) .................... 6,098,675
4,964 Trust 1993-G12, Class 12-E,
2/25/23 (P/O) ..................... 2,035,082
5,000 Trust 1993-25, Class 25-CA,
1/25/17 (I/O)...................... 835,937
Right Column
- --------------------------------------------------------------------------------
Principal
Amount Value
Rating* (000) Description (Note 1)
- --------------------------------------------------------------------------------
Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
$ 2,876 Trust 1993-G35, Class G35-N,
11/25/23 (P/O) ................... $ 877,331
2,362 Trust 1993-88, Class 88-C,
6/25/00 (P/O) ..................... 1,830,195
AAA 19 Prudential Securities, Collateralized
Mortgage Obligations,
Series 16, Class 16-P,
10/25/21 (I/O) ...................... 3,784,858
------------
43,991,131
------------
CMO Residuals**-1.9%
AAA 5 American Housing Trust V,
Senior-Mortgage Pass-Through
Certificates,
Series A, Class R, 4/25/21
(REMIC) # ........................... 502
Collateralized Mortgage Securities
Corporation, Collateralized
Mortgage Obligations,
AAA 10 Series 1989-2, Class I, 6/25/19 ..... 367,746
AAA 2,254 Series 1990-3, Class R, 5/25/20 ..... 498,305
Federal Home Loan Mortgage
Corporation, Multiclass
Mortgage Participation
Certificates,
450 Series 32, Class 32-R, 3/15/20 ...... 509,243
3 Series 88, Class 88-R, 10/15/20 ..... 342,765
10 Series 98, Class 98-R, 11/15/20 ..... 1,757,040
Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
10,000 Trust 1989-31, Class 31-R,
6/25/19 ........................... 662,232
12 Trust 1989-66, Class 66-R,
9/25/19 ........................... 1,574,181
10 Trust 1989-70, Class 70-R,
10/25/19 .......................... 1,223,992
50 Trust 1989-85, Class 85-R,
11/25/19 .......................... 2,250,000
10 Trust 1989-89, Class 89-R,
11/25/19 117,244
10 Trust 1990-2, Class 2-R, 1/25/20 .... 1,929,278
10 Trust 1990-6, Class 6-R, 1/25/20 .... 60,000
23 Trust 1990-87, Class 87-R,
7/25/20 ........................... 1,260,729
AAA 1 M.D.C. Asset Investors, Trust VI,
Collateralized Mortgage
Obligations,
11/01/17 (REMIC) # .................. 183,155
See Notes to Financial Statements.
7
<PAGE>
Left Column
- --------------------------------------------------------------------------------
Principal
Amount Value
Rating* (000) Description (Note 1)
- --------------------------------------------------------------------------------
CMO Residuals**(cont'd)
AAA $ 57 PaineWebber CMO Trust, Series N7,
Collateralized Mortgage
Obligation,
1/01/19 (REMIC) # ................... $ 483,749
AAA 150 Prudential-Bache CMO Trust II,
Collateralized Mortgage
Obligations,
6/01/18 (REMIC) # ................... 630,825
AAA 16 Ryland Acceptance Corp. Four,
Collateralized Mortgage Bonds,
Series 1986, Class R, 4/01/19
(REMIC) # ........................... 1,284,900
AAA 47 Shearson Lehman Collateralized
Mortgage Obligation Inc.,
Mortgage-Backed Sequential Pay
Bonds, Series V, Sequence V-9,
5/01/19 (REMIC) # ................... 1,929,449
AAA 34 Structured Asset Securities
Corporation, Collateralized
Mortgage Obligations,
Series 1989-1, Class R, 7/01/19
(REMIC) # ........................... 83,858
------------
17,149,193
------------
U.S Government Securities-4.3%
U.S. Treasury Notes,
7,700++ 5.00%, 2/15/99 ....................... 7,470,232
20,000+ 5.13%, 2/28/98 ....................... 19,706,200
120 5.25%, 1/31/01 ....................... 114,544
9,300++ 6.13%, 7/31/00 ....................... 9,196,863
3,600 6.38%, 5/15/99 ....................... 3,607,884
------------
40,095,723
------------
Taxable Zero Coupon Bonds-78.7%
2,185 Agency STRIPS, Series 1, relating to
Federal National Mortgage
Association 8.95% Debentures,
Series SM-2018-A, 8/12/00 ........... 1,665,943
10,407 Federal Home Loan Mortgage
Corporation, Debenture,
5/15/00 ............................. 8,065,576
6,250 Federal Judiciary Office Building,
8/15/00 ............................. 4,752,749
Federal National Mortgage Association,
11,250 2/01/00 ............................. 8,876,050
11,250 8/01/00 ............................. 8,584,568
5,370 8/12/00 ............................. 4,102,505
Financing Corporation (FICO Strips),
5,311 2/08/00 ............................. 4,207,534
21,050++ 3/07/00 ............................. 16,595,820
4,472 3/26/00 ............................. 3,512,487
13,000 4/05/00 ............................. 10,190,440
12,750 4/06/00 ............................. 9,989,115
Right Column
- --------------------------------------------------------------------------------
Principal
Amount Value
Rating* (000) Description (Note 1)
- --------------------------------------------------------------------------------
Financing Corporation (FICO Strips),
$11,445 5/02/00 ............................. $ 8,924,811
19,199 6/06/00 ............................. 14,885,177
850 6/27/00 ............................. 656,532
4,675 8/03/00 ............................. 3,585,444
9,541 8/08/00 ............................. 7,308,120
23,000 9/07/00 ............................. 17,531,750
4,472 9/26/00 ............................. 3,395,858
2,474 10/06/00 ............................ 1,873,733
3,945 11/02/00 ............................ 2,973,780
38,050+ 12/06/00 ............................ 28,516,953
33,600++ 12/27/00 ............................ 25,086,096
333 Government and Agency Term
Obligation Receipt,
11/15/00 ............................ 246,785
Government Trust Certificates,
16,644 Series 1-D, 5/15/00 ................. 12,902,429
33,100 Series 1-D, 11/15/00 ................ 24,791,238
42,627 Series 2-F, 5/15/00 ................. 33,044,450
44,627 Series 2-F, 11/15/00 ................ 33,424,731
13,659 Series J-I, 5/15/00 ................. 10,588,457
13,362 Series J-I, 11/15/00 ................ 10,007,870
46,028 Series T-1, 11/15/00 ................ 34,553,596
20,673 Series T-4, 11/15/00 ................ 15,483,663
356 Physical Treasury Coupons,
8/15/00 ............................. 273,009
17,938 Resolution Funding Corporation,
10/15/00 ............................ 13,588,214
Tennessee Valley Authority,
15,488 5/01/00 ............................. 12,086,216
11,128 11/01/00 ............................ 8,397,411
1,862 U.S. Treasury CUBES,
11/15/00 ............................ 1,402,868
U.S. Treasury Strips,
1,097 2/15/00 ............................. 872,334
161 5/15/00 ............................. 126,053
296,926+ 8/15/00 ............................. 228,312,340
124,685+ 11/15/00 ............................ 94,325,884
------------
729,708,589
------------
Municipal Bonds-2.3%
AAA 2,190 Long Beach, California, Pension
Obligation, Taxable Refunding,
6.33%, 9/01/00 ...................... 2,163,830
AAA 7,795 Massachusetts State Housing
Finance Authority,
Series 1991-A, 6.85%, 4/01/21 ....... 7,556,278
Baa1 10,000 New York City, Gen. Oblig.,
Series I, 6.26%, 3/15/00 ............ 9,720,000
AAA 2,000 Western Minnesota Municipal
Power Agency Supply,
Series A, 6.19%, 1/01/00 ............ 1,966,240
------------
21,406,348
------------
See Notes to Financial Statements.
8
<PAGE>
Left Column
- --------------------------------------------------------------------------------
Principal
Amount Value
Rating* (000) Description (Note 1)
- --------------------------------------------------------------------------------
Total long-term investments
(cost $1,363,006,555) ............. $1,369,868,449
-------------
SHORT-TERM INVESTMENTS-0.2%
Corporate Bonds
Ford Motor Credit Co.,
BBB $ 354 Zero Coupon, 9/15/96 .............. 350,222
BBB 354 Zero Coupon, 3/15/97 .............. 339,745
News America Holdings, Inc.,
BBB 188 Zero Coupon, 9/1/96 ............... 185,665
BBB 194 Zero Coupon, 10/15/96 ............. 190,704
BBB 188 Zero Coupon, 3/01/97 .............. 180,211
BBB 194 Zero Coupon, 4/15/97 .............. 184,892
Provident Bank Cincinnati, Ohio,
BBB 162 Zero Coupon, 12/15/96 ............. 158,025
BBB 162 Zero Coupon, 6/15/97 .............. 153,019
-------------
Total short-term investments
(cost $1,770,414) ................. 1,742,483
-------------
Total investments before
investment sold short
(cost $1,364,776,969) ............. 1,371,610,932
-------------
INVESTMENT SOLD SHORT-(8.4%)
87,500 U.S. Treasury Bonds,
6.00%, 2/15/26 (proceeds
$75,464,063) ...................... (77,588,000)
-------------
Total investments, net of short
sale-139.6% ....................... 1,294,022,932
Liabilities in excess of other
assets-(39.6%) .................... (366,829,856)
-------------
NET ASSETS-100% ..................... $927,193,076
=============
Right Column
- ------------
* Using the higher of Standard & Poor's or Moody's rating.
** Illiquid securities representing 1.2% of portfolio assets.
# Private placements restricted as to resale.
+ 338,309,912 principal amount pledged as collateral for reverse repurchase
agreements.
++ Entire principal amount pledged as collateral for reverse repurchase
agreements.
@ $7,495,304 principal amount pledged as collateral for futures contracts.
---------------------------------------------------------------
Key to Abbreviations
ARM -Adjustable Rate Mortgage.
CMO -Collateralized Mortgage Obligation.
CMT -Constant Maturity Treasury.
I -Denotes a CMO with Interest only characteristics.
I/O -Interest Only.
P -Denotes a CMO with Principal only characteristics.
P/O -Principal Only.
REMIC -Real Estate Mortgage Investment Conduit.
---------------------------------------------------------------
See Notes to Financial Statements.
9
<PAGE>
Left column
- --------------------------------------------------------------------------------
The BlackRock Target Term Trust Inc.
Statement of Assets and Liabilities
June 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments, at value
(cost $1,364,776,969) (Note 1) ............................. $1,371,610,932
Cash ......................................................... 140,027
Deposits with brokers as collateral for
investments sold short (Note 1) ............................ 77,795,800
Interest receivable .......................................... 6,984,095
Receivable for investments sold .............................. 1,478,768
-------------
1,458,009,622
-------------
Liabilities
Reverse repurchase agreements (Note 4) ....................... 442,693,563
Investments sold short, at value
(proceeds $75,464,063) (Note 1) ............................ 77,588,000
Payable for investments purchased ............................ 5,438,853
Interest payable ............................................. 3,900,499
Dividends payable ............................................ 602,942
Advisory fee payable (Note 2) ................................ 340,599
Administration fee payable (Note 2) .......................... 85,991
Due to broker-variation margin ............................... 8,241
Other accrued expenses ....................................... 157,858
-------------
530,816,546
-------------
Net Assets $ 927,193,076
=============
Net assets were comprised of:
Common stock, at par (Note 5) .............................. $ 954,606
Paid-in capital in excess of par ........................... 893,438,946
-------------
894,393,552
Undistributed net investment income ....................... 25,024,868
Accumulated net realized gains ............................. 3,076,680
Net unrealized appreciation .............................. 4,697,976
-------------
Net assets, June 30, 1996 ................................. $ 927,193,076
=============
Net asset value per share:
($927,193,076 / 95,460,639 shares of
common stock issued and outstanding) ....................... $ 9.71
======
See Notes to Financial Statements.
Right column
- --------------------------------------------------------------------------------
The BlackRock Target Term Trust Inc.
Statement of Operations
Six Months Ended June 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Net Investment Income
Income
Interest (includes net discount accretion of
$16,443,657 and net of interest expense of $15,028,750) .... $35,178,552
-----------
Operating expenses
Investment advisory ........................................ 2,114,242
Administration ............................................. 532,331
Custodian .................................................. 254,000
Reports to shareholders .................................... 249,000
Transfer agent ............................................. 124,000
Directors .................................................. 36,000
Audit ...................................................... 15,000
Legal ...................................................... 7,000
Miscellaneous .............................................. 116,737
-----------
Total operating expenses ................................. 3,448,310
-----------
Net investment income ........................................ 31,730,242
-----------
Realized and Unrealized Gain (Loss)
on Investments (Note 3)
Net realized gain (loss) on:
Investments ................................................ (292,284)
Futures .................................................... (3,145,007)
Short sales ................................................ 8,666,969
-----------
5,229,678
-----------
Net change in unrealized appreciation
(depreciation) on:
Investments .............................................. (41,241,335)
Futures .................................................. (452,644)
Short sales .............................................. (2,123,937)
-----------
(43,817,916)
-----------
Net loss on investments ...................................... (38,588,238)
-----------
Net Decrease In Net Assets
Resulting from Operations .................................... ($ 6,857,996)
===========
See Notes to Financial Statements.
10
<PAGE>
Left column
- --------------------------------------------------------------------------------
The BlackRock Target Term Trust Inc.
Statement of Cash Flows
Six Months Ended June 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash
Cash flows provided by operating activities:
Interest received ............................................. $ 32,633,245
Operating expenses paid ....................................... (3,861,847)
Interest expense paid ......................................... (13,784,686)
Proceeds from disposition of short-term portfolio
investments, net ............................................ 389,241
Purchase of long-term portfolio investments. .................. (653,310,551)
Proceeds from disposition of long-term portfolio investments .. 654,510,028
Variation margin on futures ................................... (3,491,213)
------------
Net cash flows provided by operating activities .............. 13,084,217
------------
Cash flows used for financing activities:
Increase in reverse repurchase agreements ..................... 13,868,563
Cash dividends paid ........................................... (26,841,935)
------------
Net cash flows used for financing activities .................. (12,973,372)
------------
Net increase in cash ............................................ 110,845
Cash at beginning of period ..................................... 29,182
------------
Cash at end of period ........................................... $ 140,027
------------
Reconciliation of Net Increase (Decrease) in Net
Assets Resulting from Operations to
Net Cash Flows Provided By
Operating Activities
Net decrease in net assets resulting from operations ............ (6,857,996)
------------
Decrease in investments ......................................... 4,206,924
Net realized gain ............................................... (5,229,678)
Decrease in unrealized appreciation ............................. 43,817,916
Increase in deposits with brokers as
collateral for investments sold short ......................... (77,795,800)
Increase in receivable for investments sold ..................... (213,148)
Increase in interest receivable ................................. (1,130,400)
Decrease in receivable for variation margin ..................... 98,197
Decrease in payable for investments purchased. .................. (22,238,566)
Increase in payable for variation margin ........................ 8,241
Increase in interest payable .................................... 1,244,064
Increase in payable for securities sold short ................... 77,588,000
Decrease in accrued expenses and other liabilities .............. (413,537)
------------
Total adjustments ............................................. 19,942,213
------------
Net cash flows provided by operating activities ................. $ 13,084,217
============
Right column
- --------------------------------------------------------------------------------
The BlackRock Target Term Trust Inc.
Statements of Changes
in Net Assets
(Unaudited)
- --------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, December 31,
1996 1995
---- ----
Increase (Decrease) in
Net Assets
Operations:
Net investment income .......................... $ 31,730,242 $ 69,498,237
Net realized gain (loss) on
investments, futures
and short sales .............................. 5,229,678 (2,990,472)
Net change in unrealized
appreciation (depreciation)
on investments,
futures, and short sales ..................... (43,817,916) 97,495,898
------------ ------------
Net increase (decrease) in
net assets resulting from operations ......... (6,857,996) 164,003,663
Dividends and distributions:
Dividends from net
investment income .......................... (22,870,515) (66,625,406)
Distributions from net realized capital gains - (282,086)
------------ ------------
Total increase (decrease) ...................... (29,728,511) 97,096,171
Net Assets
Beginning of period ............................ 956,921,587 859,825,416
------------ ------------
End of period .................................. $927,193,076 $956,921,587
============ ============
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
The BlackRock Target Term Trust Inc.
Financial Highlights
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Six Months Two Months Year
Ended Year Ended December 31, Ended Ended
June 30, ------------------------------------------ December 31, October 31,
1996 1995 1994 1993 1992 1991* 1991
------- ------ ------ ------ ------ ------ ------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .......... $10.02 $ 9.01 $10.40 $10.28 $10.53 $ 10.14 $ 9.24
------ ------ ------ ------ ------ ------- ------
Net investment income (net of interest
expense of $.16, $.36, $.21, $.10,
$.18, $.04 and $.07, respectively) ........ .33 .72 .63 .81 .74 .17 1.14
Net realized and unrealized gain (loss)
on investments ............................ (.40) .99 (1.30) .04 (.12) .46 .71
------ ------ ------ ------ ------ ------- ------
Net increase (decrease) from investment
operations .................................. (.07) .71 (.67) .85 .62 .63 1.85
------ ------ ------ ------ ------ ------- ------
Dividends from net investment income .......... (.24) (.70) (.72) (.73) (.87) (.24) (.95)
------ ------ ------ ------ ------ ------- ------
Net asset value, end of period** .............. $ 9.71 $10.02 $ 9.01 $10.40 $10.28 $ 10.53 $10.14
====== ====== ====== ====== ====== ======= ======
Market value, end of period** ................. $ 8.75 $ 8.75 $8.125 $10.00 $10.00 $10.875 $10.75
====== ====== ====== ====== ====== ======= ======
TOTAL INVESTMENT RETURN+ ...................... 2.76% 16.34% (11.98%) 7.36% (.20%) 3.42% 17.57%
RATIOS TO AVERAGE NET ASSETS:
Operating expenses# ........................... 0.74%++ 0.75% 0.75% 0.73% 0.88% 0.89%++ 0.90%
Net investment income ......................... 6.79%++ 7.57% 6.62% 7.62% 7.18% 10.36%++ 11.82%
SUPPLEMENTAL DATA:
Average net assets (in thousands) ............. $939,673 $918,344 $909,105 $1,011,691 $981,133 $ 975,843 $921,727
Portfolio turnover 44% 118% 84% 41% 30% 2% 279%
Net assets, end of period (in thousands) ...... $927,193 $956,922 $859,825 $ 992,627 $981,267 $1,005,552 $967,739
Reverse repurchase agreements outstanding,
end of period (in thousands) ................ $442,694 $428,825 $422,578 $ 270,800 $270,636 $ 472,805 $424,765
Asset coverage+++ ............................. $ 3,094 $ 3,231 $ 3,035 $ 4,666 $ 4,625 $ 3,127 $ 3,278
<FN>
- ----------------
* Subsequent to October 31, 1991 (the Trust's prior fiscal year-end) the Trust changed its fiscal year-end to December 31.
** NAV and market value published in The Wall Street Journal each Monday.
# The ratios of operating expenses, including interest expense, to average net assets were 3.95%, 4.53%, 2.89%, 1.63%,
2.61%, 0.58% and 1.63% for the periods indicated above, respectively. The ratios of operating expenses including interest
expense and excise tax, if applicable, to average net assets were 3.95%, 4.54%, 2.89%, 1.63%, 2.62%, 0.73% and 1.65% for
the periods indicated above, respectively.
+ Total investment return is calculated assuming a purchase of common stock at the current market price on the first day and
a sale at the current market price on the last day of each period reported. Dividends are assumed, for purposes of this
calculation, to be reinvested at prices obtained under the Trust's dividend reinvestment plan. Total investment return
does not reflect brokerage commissions. Total investment returns for periods of less than one full year are not annualized.
++ Annualized.
+++ Per $1,000 of reverse repurchase agreement outstanding.
The information above represents the unaudited operating performance data for a share of common stock outstanding, total
investment return, ratios to average net assets and other supplemental data, for each of the periods indicated. This
information has been determined based upon financial information provided in the financial statements and market value data
for the Trust's shares.
</FN>
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Left column
- --------------------------------------------------------------------------------
The BlackRock Target Term Trust Inc.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
Note 1. Accounting Policies
The BlackRock Target Term Trust Inc. (the "Trust"), a Maryland corporation, is a
diversified, closed-end management investment company. The investment objective
of the Trust is to manage a portfolio of investment grade fixed income
securities that will return $10 per share (the initial offering price per share)
to investors on or shortly before December 31, 2000 while providing high monthly
income. The ability of issuers of debt securities held by the Trust to meet
their obligations may be affected by economic developments in a specific
industry or region. No assurance can be given that the Trust's investment
objective will be achieved.
The following is a summary of significant accounting policies followed by the
Trust.
Securities Valuation: The Trust values mortgage-backed, asset-backed and other
debt securities on the basis of current market quotations provided by dealers or
pricing services approved by the Trust's Board of Directors. In determining the
value of a particular security, pricing services may use certain information
with respect to transactions in such securities, quotations from dealers, market
transactions in comparable securities, various relationships observed in the
market between securities, and calculated yield measures based on valuation
technology commonly employed in the market for such securities. Exchange-traded
options are valued at their last sales price as of the close of options trading
on the applicable exchanges. In the absence of a last sale, options are valued
at the average of the quoted bid and asked prices as of the close of business. A
futures contract is valued at the last sale price as of the close of the
commodities exchange on which it trades unless the Trust's Board of Directors
determines that such price does not reflect its fair value, in which case it
will be valued at its fair value as determined by the Trust's Board of
Directors. Any securities or other assets for which such current market
quotations are not readily available are valued at fair value as determined in
good faith under procedures established by and under the general supervision and
responsibility of the Trust's Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost, if their term to maturity from date of purchase was 60
Right column
days or less, or by amortizing their value on the 61st day prior to maturity, if
their original term to maturity from date of purchase exceeded 60 days.
In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Trust may be delayed or limited.
Option Selling/Purchasing: When the Trust sells or purchases an option, an
amount equal to the premium received or paid by the Trust is recorded as a
liability or an asset and is subsequently adjusted to the current market value
of the option written or purchased. Premiums received or paid from writing or
purchasing options which expire unexercised are treated by the Trust on the
expiration date as realized gains or losses. The difference between the premium
and the amount paid or received on effecting a closing purchase or sale
transaction, including brokerage commissions, is also treated as a realized gain
or loss. If an option is exercised, the premium paid or received is added to the
proceeds from the sale or cost of the purchase in determining whether the Trust
has realized a gain or a loss on investment transactions. The Trust, as writer
of an option, may have no control over whether the underlying securities may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written option.
Options, when used by the Trust, help in maintaining a targeted duration.
Duration is a measure of the price sensitivity of a security or a portfolio to
relative changes in interest rates. For instance, a duration of "one" means that
a portfolio's or a security's price would be expected to change by approximately
one percent with a one percent change in interest rates, while a duration of
five would imply that the price would move approximately five percent in
relation to a one percent change in interest rates.
Option selling and purchasing is used by the Trust to effectively hedge more
volatile positions so that changes in
13
<PAGE>
Left column
interest rates do not change the duration of the portfolio unexpectedly. In
general, the Trust uses options to hedge a long or short position or an overall
portfolio that is longer or shorter than the benchmark security. A call option
gives the purchaser of the option the right (but not obligation) to buy, and
obligates the seller to sell (when the option is exercised), the underlying
position at the exercise price at any time or at a specified time during the
option period. A put option gives the holder the right to sell and obligates the
writer to buy the underlying position at the exercise price at any time or at a
specified time during the option period. Put options can be purchased to
effectively hedge a position or a portfolio against price declines if a
portfolio is long. In the same sense, call options can be purchased to hedge a
portfolio that is shorter than its benchmark against price changes. The Trust
can also sell (or write) covered call options and put options to hedge portfolio
positions.
The main risk that is associated with purchasing options is that the option
expires without being exercised. In this case, the option expires worthless and
the premium paid for the option is considered the loss. The risk associated with
writing call options is that the Trust may forego the opportunity for a profit
if the market value of the underlying position increases and the option is
exercised. The risk in writing put options is that the Trust may incur a loss if
the market value of the underlying position decreases and the option is
exercised. In addition, as with futures contracts, the Trust risks not being
able to enter into a closing transaction for the written option as the result of
an illiquid market.
Financial Futures Contracts: A futures contract is an agreement between two
parties to buy or sell a financial instrument for a set price on a future date.
Initial margin deposits are made upon entering into futures contracts and can be
either cash or securities. During the period that the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Trust records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Trust's basis in the contract.
Financial futures contracts, when used by the Trust, help in maintaining a
targeted duration. Duration is a measure of the price sensitivity of a security
or a portfolio to relative changes in interest rates. For instance, a duration
of "one"
Right column
means that a portfolio or a security's price would be expected to change by
approximately one percent with a one percent change in interest rates, while a
duration of "five" would imply that the price would move approximately five
percent in relation to a one percent change in interest rates. Futures contracts
can be sold to effectively shorten an otherwise longer duration portfolio. In
the same sense, futures contracts can be purchased to lengthen a portfolio that
is shorter than its duration target. Thus, by buying or selling futures
contracts, the Trust can effectively hedge more volatile positions so that
changes in interest rates do not change the duration of the portfolio
unexpectedly.
The Trust may invest in financial futures contracts primarily for the purpose
of hedging its existing portfolio securities or securities the Trust intends to
purchase against fluctuations in value caused by changes in prevailing market
interest rates. Should interest rates move unexpectedly, the Trust may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates and
the underlying hedged assets. The Trust is also at risk of not being able to
enter into a closing transaction for the futures contract because of an illiquid
secondary market. In addition, since futures are used to shorten or lengthen a
portfolio's duration, there is a risk that the portfolio may have temporarily
performed better without the hedge or that the Trust may lose the opportunity to
realize appreciation in the market price of the underlying positions.
Short Sales: The Trust may make short sales of securities as a method of hedging
potential price declines in similar securities owned. When the Trust makes a
short sale, it may 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 the particular securities and may be obligated to
pay over any premiums received on such borrowed securities. A gain, limited to
the price at which the Trust sold the security short, or a loss, unlimited as to
dollar amount, will be recognized upon the termination of a short sale if the
market price is greater or less than the proceeds originally received.
Security Lending: The Trust may lend its portfolio securities to qualified
institutions. The loans are secured by collateral at least equal, at all times,
to the market value of the securities loaned. The Trust may bear the risk of
delay in recovery of, or even loss of rights in, the securities loaned should
the borrower of the securities fail financially. The Trust receives compensation
for lending its securities in the
14
<PAGE>
Left column
form of interest on the loan. The Trust also continues to receive interest on
the securities loaned, and 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 did not engage in securities lending during the
six months ended June 30, 1996.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Trust accretes discount or amortizes premium on securities
purchased using the interest method.
Taxes: It is the Trust's intention to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute sufficient amounts of its taxable income to shareholders. Therefore,
no federal income tax provision is required. As part of its tax planning
strategy, the Trust may retain a portion of its taxable income and pay an excise
tax on the undistributed amounts.
Dividends and Distributions: The Trust declares and pays dividends and
distributions monthly first from net investment income, then from net realized
short-term capital gains and other sources, if necessary. Net long-term capital
gains, if any, in excess of loss carryforwards may be distributed annually.
Dividends and distributions are recorded on the ex-dividend date.
Note 2. Agreements
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc. (the "Adviser"), a wholly-owned corporate subsidiary of PNC
Asset Management Group, Inc., the holding company for PNC's asset management
business, and an Administration Agreement with Prudential Mutual Fund
Management, Inc. ("PMF"), an indirect, wholly-owned subsidiary of The Prudential
Insurance Co.
of America.
The investment advisory fee paid to the Adviser is computed weekly and
payable monthly at an annual rate of 0.45% of the Trust's average weekly net
assets through December 31, 1996 and 0.30% from January 1, 1997 to the
termination or liquidation of the Trust. The administration fee paid to PMF is
also computed weekly and payable monthly at an annual rate of 0.125% of the
first $500 million and 0.10% of any excess through December 31, 1996, and 0.10%
of the first $500 million of the Trust's average weekly net assets and 0.08% of
any excess from January 1, 1997 to the termination or liquidation of the Trust.
Right column
Pursuant to the agreements, the Adviser provides continuous supervision of the
investment portfolio and pays the compensation of officers of the Trust who are
affiliated persons of the Adviser. PMF pays occupancy and certain clerical and
accounting costs of the Trust. The Trust bears all other costs and expenses.
Note 3. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments
and dollar rolls, for the six months ended June 30, 1996 aggregated
$631,071,985, and $607,900,172, respectively.
The Trust may invest up to 40% of its total assets in securities which are not
readily marketable, including those which are restricted as to disposition under
securities law ("restricted securities"). At June 30, 1996, the Trust held 1.2%
of its portfolio assets in illiquid securities including 0.3% of its portfolio
assets in securities restricted as to resale.
The Trust may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced by PNC Mortgage
Securities Corp. (or Sears Mortgage if PNC Mortgage Securities Corp. succeeded
to rights and duties of Sears) or mortgage related securities containing loans
or mortgages originated by PNC Bank or its affililates. It is possible under
certain circumstances, PNC Mortgage Securities Corp. or its affiliates could
have interests that are in conflict with the holders of these mortgage backed
securities, and such holders could have rights against PNC Mortgage Securities
Corp. or its affililates.
The federal income tax basis of the Trust's investments at June 30, 1996 was
substantially the same as the basis for financial reporting and accordingly, net
unrealized appreciation for federal income tax purposes was $6,833,963 (gross
unrealized appreciation-$36,633,984; gross unrealized depreciation-$29,800,021).
For federal income tax purposes, the Trust had a capital loss carryforward at
December 31, 1995 of approximately $7,421,500 which will expire in 2003.
Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amount.
During the six months ended June 30, 1996, the Trust entered into financial
futures contracts. Details of open futures at June 30, 1996 are as follows:
Value at Value at
Number of Expiration Trade June 30, Unrealized
Contracts Type Date Date 1996 Depreciation
- --------- ---- ---------- ------- -------- ------------
Short
positions:
10 yr. Sept.
8 T-Note 1996 $847,950 $860,000 $(12,050)
15
<PAGE>
Left column
Note 4. Borrowings
Reverse Repurchase Agreements: The Trust may enter into reverse repurchase
agreements with qualified, third party broker-dealers as determined by and under
the direction of the Trust's Board of Directors. Interest on the value of
reverse repurchase agreements issued and outstanding will be based upon
competitive market rates at the time of issuance. At the time the Trust enters
into a reverse repurchase agreement, it will establish and maintain a segregated
account with the lender, the value of which at least equals the principal amount
of the reverse repurchase transactions including accrued interest.
The average daily balance of reverse repurchase agreements outstanding during
the six months ended June 30, 1996 was approximately $460,732,000 at a weighted
average interest rate of approximately 5.49%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the six months ended
June 30, 1996 was $471,812,000 as of March 31, 1996, which was 31.7% of total
assets. The amount of reverse repurchase agreements outstanding at June 30, 1996
was $442,693,563, which was 30.2% of total assets.
Dollar Rolls: The Trust may enter into dollar rolls in which the Trust sells
securities for delivery in the current month and
Right column
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. During the roll period the
Trust forgoes principal and interest paid on the securities. The Trust will be
compensated by the interest earned on the cash proceeds of the initial sale and
by the lower repurchase price at the future date.
The average monthly balance of dollar rolls outstanding during the six months
ended June 30, 1996 was approximately $1,703,100. The maximum amount of dollar
rolls outstanding at any month-end during the six months ended June 30, 1996 was
$10,218,700 as of January 31, 1996, which was .79% of total assets.
Note 5. Capital
There are 200 million shares of $.01 par value common stock authorized. Of the
95,460,639 shares outstanding at June 30, 1996, the Adviser owned 10,639 shares.
Note 6. Dividends
Subsequent to June 30, 1996, the Board of Directors of the Trust declared a
dividend from undistributed earnings of $0.047917 per share payable July 31,
1996 to shareholders of record on July 15, 1996.
Note 7. Quarterly Data
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized Net increase (decrease)
gains (losses) in net assets Dividends Period
Net Investment on resulting from and and
Quarterly Total Income investments operations Distributions Share price net asset
period Income Amount Per share Amount Per share Amount Per share Amount Per share High Low value
- ------- ------ ---------------- ----------------- ------------------ ------------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 1,
1994 to
March 31,
1994 $15,191,464 $13,423,417 $.14 $(63,941,217) $(.67) $(50,517,800) $(.53) $18,302,668 $.19 $10-1/8 $8-7/8 $9.68
April 1,
1994 to
June 30,
1994 11,806,618 10,142,089 .11 (24,083,293) (.25) (13,941,204) (.14) 16,704,657 .18 9-3/8 8-5/8 9.36
July 1,
1994 to
September
30, 1994 15,534,348 13,888,570 .14 (6,871,861) (.07) 7,016,709 .07 16,704,657 .18 9-1/8 8-3/8 9.25
October 1,
1994 to
December
31, 1994 24,453,953 22,734,872 .24 (29,678,001) (.31) (6,943,129) (.07) 16,704,658 .17 8-5/8 7-7/8 9.01
January 1,
1995 to
March 31,
1995 24,821,335 21,969,605 .23 33,502,291 .35 55,471,896 .58 15,512,613 .16 8-7/8 8-1/8 9.43
April 1,
1995 to
June 30,
1995 16,128,039 15,710,472 .16 34,604,887 .37 50,315,359 .53 15,512,614 .16 9-1/4 8-3/8 9.79
July 1,
1995 to
September
30, 1995 17,948,613 16,249,910 .17 (4,458,729) (.05) 11,791,181 .12 15,795,395 .17 9 8-3/8 9.75
October 1,
1995 to
December
31, 1995 17,591,442 15,568,250 .16 30,856,977 .32 46,425,227 .48 20,086,870 .21 9-1/4 8-5/8 10.02
January 1,
1996 to
March 31,
1996 18,354,047 16,056,023 .17 (29,459,484) (.30) (13,403,461) (.13) 9,148,209 .10 9 8-5/8 9.79
April 1,
1996 to
June 30,
1996 16,824,505 15,674,219 .16 (9,128,754) (.10) 6,545,465 .06 13,722,306 .14 8-7/8 8-3/8 9.71
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"), shareholders
may elect to have all distributions of dividends and capital gains automatically
reinvested by State Street Bank & Trust Company (the "Plan Agent") in Trust
shares pursuant to the Plan. Shareholders who do not participate in the Plan
will receive all distributions in cash paid by check in United States dollars
mailed directly to the shareholders of record (or if the shares are held in
street or other nominee name, then to the nominee) by the transfer agent, as
dividend disbursing agent.
The Plan Agent serves as agent for the shareholders in administering the Plan.
After the Trust declares a dividend or determines to make a capital gain
distribution, the Plan Agent will, as agent for the participants, receive the
cash payment and use it to buy Trust shares in the open market on the New York
Stock Exchange for the participants' accounts. The Trust will not issue shares
under the Plan.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent and will receive certificates for whole Trust shares and a cash
payment will be made for any fraction of a Trust share.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income taxes that
may be payable on such dividends or distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change sent to all shareholders of the Trust at least 90 days before the record
date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent upon at least 90 days' written notice to all
shareholders of the Trust. All correspondence concerning the Plan should be
directed to the Plan Agent at (800) 699-1BFM. The addresses are on the front of
this report.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
There have been no material changes in the Trusts investment objectives or
policies that have not been approved by the shareholders, or to its charter or
by-laws, or in the principal risk factors associated with investment in the
Trust. There have been no changes in the persons who are primarily responsible
for the day-to-day management of the Trust's portfolio.
The Annual Meeting of Trust Shareholders was held May 8, 1996 to vote on the
following matters:
(1) To elect three Directors to serve as follows:
Director Class Term Expiring
-------- ----- ---- --------
Andrew F. Brimmer ........... III 3 years 1999
Kent Dixon .................. III 3 years 1999
Laurence D. Fink ............ III 3 years 1999
Directors whose term of office continues beyond this meeting are Richard
E. Cavanagh, Frank J. Fabozzi, James Grosfeld, James Clayburn LaForce,
Jr. and Ralph L. Schlosstein.
(2) To ratify the selection of Deloitte & Touche LLP as independent public
accountants of the Trust for the fiscal year ending December 31, 1996.
(3) To modify the investment restriction prohibiting investing for the
purpose of exercising control over the management of a company.
Shareholders elected the three Directors, ratified the selection of Deloitte &
Touche LLP and approved the modification of the investment restriction
prohibiting investing for the purpose of exercising control over the management
of a company.The results of the voting was as follows:
Votes for Votes Against Abstentions
---------- ------------- -----------
Andrew F. Brimmer ..................... 51,873,683 - 1,559,244
Kent Dixon ............................ 51,883,863 - 1,549,064
Laurence D. Fink ...................... 51,898,050 - 1,534,877
Ratification of Deloitte & Touche LLP . 51,371,976 521,760 1,539,191
Investment restriction ................ 37,425,552 1,798,079 2,869,033
17
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
The Trust's Investment Objective
The Trust's investment objective is to manage a portfolio of investment grade
fixed income securities that will return $10 per share (the initial public
offering price per share) to investors on or shortly before December 31, 2000
while providing high monthly income.
Who Manages the Trust?
BlackRock Financial Management, Inc. ("BlackRock" or the "Adviser") is the
investment adviser for the Trust. BlackRock is a registered investment adviser
specializing in fixed income securities. Currently, BlackRock manages
approximately $41 billion of assets across the government, mortgage, corporate
and municipal sectors. These assets are managed on behalf of institutional and
individual investors in 21 closed-end funds traded either on the New York Stock
Exchange or American Stock Exchange, several open-end funds and separate
accounts for more than 80 clients in the U.S. and overseas. BlackRock is a
subsidiary of PNC Asset Management Group, Inc. which is a division of PNC Bank,
one of the nation's largest banking organizations.
What Can the Trust Invest In?
The Trust may invest in all fixed income securities rated investment grade or
higher ("AAA", "AA", "A" or "BBB"). Examples of securities in which the Trust
may invest include U.S. government and agency securities, zero coupon
securities, mortgage-backed securities, corporate debt securities, asset-backed
securities, U.S. dollar-denominated foreign debt securities and municipal
securities. Under current market conditions, BlackRock expects that the primary
investments of the Trust will be U.S. government securities, securities backed
by government agencies (such as mortgage-backed securities) and corporate debt
securities.
What is the Adviser's Investment Strategy?
The Adviser will seek to meet the Trust's investment objective by managing the
assets of the Trust so as to return the initial offering price ($10 per share)
at maturity. The Trust will implement a conservative strategy that will seek to
closely match the maturity of the assets of the portfolio with the future return
of the initial investment at the end of 2000. At the Trust's termination,
BlackRock expects that the value of the securities which have matured, combined
with the value of the securities that are sold will be sufficient to return the
initial offering price to investors. On a continuous basis, the Trust will seek
it's objective by actively managing its assets in relation to market conditions,
interest rate changes and, importantly, the remaining term to maturity of the
Trust.
In addition to seeking the return of the initial offering price, the Adviser
also seeks to provide high monthly income to investors. The portfolio managers
will attempt to achieve this objective by investing in securities that provide
competitive income. In addition, leverage will be used (in an amount up to
33-1/3% of total assets) to enhance the income of the portfolio. In order to
maintain competitive yields as the Trust approaches maturity and depending on
market conditions, the Adviser will attempt to purchase securities with call
protection or maturities as close to the Trust's maturity date as possible.
Securities with call protection should provide the portfolio with some degree of
protection against reinvestment risk during times of lower prevailing interest
rates. Since the Trust's primary goal is to return the initial offering price at
maturity, any cash that the Trust receives prior to its maturity date (i.e. cash
from early and regularly scheduled payments of principal on mortgage-backed
securities) will be reinvested in securities with maturities which coincide with
the remaining term of the Trust. Since shorter-term securities typically yield
less than longer-term securities, this strategy will likely result in a decline
in the Trust's income over time. However, the Adviser will attempt to maintain a
yield which is competitive with a comparable maturity Treasury at the same point
on the yield curve (i.e. if the Trust has three years left until its maturity,
the Adviser will attempt to maintain a yield at a spread over a 3-year
Treasury). It is important to note that the Trust will be managed so as to
preserve the integrity of the return of the initial offering price.
18
<PAGE>
How Are the Trust's Shares Purchased and Sold? Does the Trust Pay Dividends
Regularly?
The Trust's shares are traded on the New York Stock Exchange which provides
investors with liquidity on a daily basis. Orders to buy or sell shares of the
Trust must be placed through a registered broker or financial advisor. The Trust
pays monthly dividends which are typically paid on the last business day of the
month. For shares held in the shareholder's name, dividends may be reinvested in
additional shares of the fund through the Trust's transfer agent, State Street
Bank & Trust Company. Investors who wish to hold shares in a brokerage account
should check with their financial advisor to determine whether their brokerage
firm offers dividend reinvestment services.
Leverage Considerations in a Term Trust
Under current market conditions, leverage increases the income earned by the
Trust. The Trust employs leverage primarily through the use of reverse
repurchase agreements and dollar rolls. Leverage permits the Trust to borrow
money at short-term rates and reinvest that money in longer-term assets which
typically offer higher interest rates. The difference between the cost of the
borrowed funds and the income earned on the proceeds that are invested in
longer-term assets is the benefit to the Trust from leverage. In general, the
portfolio is typically leveraged at approximately 33-1/3% of total assets.
Leverage also increases the duration (or price volatility of the net assets) of
the Trust, which can improve the performance of the fund in a declining rate
environment, but can cause net assets to decline faster than the market in a
rising rate environment. BlackRock's portfolio managers continuously monitor and
regularly review the Trust's use of leverage and the Trust may reduce, or
unwind, the amount of leverage employed should BlackRock consider that reduction
to be in the best interests of the shareholders.
Special Considerations and Risk Factors Relevant to Term Trusts
The Trust is intended to be a long-term investment and is not a short-term
trading vehicle.
Return of Initial Investment. Although the objective of the Trust is to return
its initial offering price upon termination, there can be no assurance that this
objective will be achieved.
Dividend Considerations. The income and dividends paid by the Trust are likely
to decline to some extent over the term of the Trust due to the anticipated
shortening of the dollar-weighted average maturity of the Trust's assets.
Leverage. The Trust utilizes leverage through reverse repurchase agreements and
dollar rolls, which involves special risks. The Trust's net asset value and
market value may be more volatile due to its use of leverage.
Market Price of Shares. The shares of closed-end investment companies such as
the Trust trade on the New York Stock Exchange and as such are subject to supply
and demand influences. As a result, shares may trade at a discount or a premium
to their net asset value.
Mortgage-Backed and Asset-Backed Securities. The cash flow and yield
characteristics of these securities differ from traditional debt securities. The
major differences typically include more frequent payments and the possibility
of prepayments which will change the yield to maturity of the security.
Corporate Debt Securities. The value of corporate debt securities generally
varies inversely with changes in prevailing market interest rates. The Trust may
be subject to certain reinvestment risks in environments of declining interest
rates.
Zero Coupon Securities. Such securities receive no cash flows prior to maturity,
therefore, interim price movements on these securities are generally more
sensitive to interest rate movements than securities that make periodic coupon
payments. These securities appreciate in value over time and can play an
important role in helping the Trust achieve its primary objective.
Illiquid Securities. The Trust may invest in securities that are illiquid,
although under current market conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.
Non-U.S Securities. The Trust may invest less than 10% of its assets in non-U.S.
dollar-denominated securities which involve special risks such as currency,
political and economic risks, although under current market conditions does not
do so.
Antitakeover Provisions. Certain antitakeover provisions will make a change in
the Trust's business or management more difficult without the approval of the
Trust's Board of Directors and may have the effect of depriving shareholders of
an opportunity to sell their shares at a premium above the prevailing market
price.
19
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
GLOSSARY
- --------------------------------------------------------------------------------
Adjustable Rate Mortgage-
Backed Securities (ARMs):
Mortgage instruments with interest rates that adjust at periodic intervals at a
fixed amount over the market levels of interest rates as reflected in specified
indexes. ARMS are backed by mortgage loans secured by real property.
Asset-Backed Securities:
Securities backed by various types of receivables such as automobile and credit
card receivables.
Closed-End Fund:
Investment vehicle which initially offers a fixed number of shares and trades on
a stock exchange. The fund invests in a portfolio of securities in accordance
with its stated investment objectives and policies.
Collateralized Mortgage
Obligations (CMOs):
Mortgage-backed securities which separate mortgage pools into short-, medium-,
and long-term securities with different priorities for receipt of principal and
interest. Each class is paid a fixed or floating rate of interest at regular
intervals. Also known as multiple-class mortgage pass-throughs.
Discount:
When a fund's net asset value is greater than its stock price the fund is said
to be trading at a discount.
Dividend:
This is income generated by securities in a portfolio and distributed to
shareholders after the deduction of expenses. This Trust declares and pays
dividends on a monthly basis.
Dividend Reinvestment:
Shareholders may elect to have all dividends and distributions of capital gains
automatically reinvested into additional shares of the Trust.
FHA:
Federal Housing Administration, a government agency that facilitates a secondary
mortgage market by providing an agency that guarantees timely payment of
interest and principal on mortgages.
FHLMC:
Federal Home Loan Mortgage Corporation, a publicly owned, federally chartered
corporation that facilitates a secondary mortgage market by purchasing mortgages
from lenders such as savings institutions and reselling them to investors by
means of mortgage-backed securities. Obligations of FHLMC are not guaranteed by
the U.S. government, however; they are backed by FHLMC's authority to borrow
from the U.S. government. Also known as Freddie Mac.
FNMA:
Federal National Mortgage Association, a publicly owned, federally chartered
corporation that facilitates a secondary mortgage market by purchasing mortgages
from lenders such as savings institutions and reselling them to investors by
means of mortgage-backed securities. Obligations of FNMA are not guaranteed by
the U.S. government, however; they are backed by FNMA's authority to borrow from
the U.S. government. Also known as Fannie Mae.
GNMA:
Government National Mortgage Association, a U.S. government agency that
facilitates a secondary mortgage market by providing an agency that guarantees
timely payments of interest and principal on mortgages. GNMA's obligations are
supported by the full faith and credit of the U.S. Treasury. Also known as
Ginnie Mae.
Government Securities:
Securities issued or guaranteed by the U.S. government, or one of its agencies
or instrumentalities, such as GNMA (Government National Mortgage Association),
FNMA (Federal National Mortgage Association) and FHLMC (Federal Home Loan
Mortgage Corporation).
20
<PAGE>
Interest-Only Securities (I/O):
Mortgage securities that receive only the interest cash flows from an underlying
pool of mortgage loans or underlying pass-through securities. Also known as a
strip.
Market Price:
Price per share of a security trading in the secondary market. For a closed-end
fund, this is the price at which one share of the fund trades on the stock
exchange. If you were to buy or sell shares, you would pay or receive the market
price.
Mortgage Dollar Rolls:
A mortgage dollar roll is a transaction in which the Trust sells mortgage-backed
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (although not the same) securities on a
specified future date. During the "roll" period, the Trust does not receive
principal and interest payments on the securities, but is compensated for giving
up these payments by the difference in the current sales price (for which the
security is sold) and lower price that the Trust pays for the similar security
at the end date as well as the interest earned on the cash proceeds of the
initial sale.
Mortgage Pass-Throughs:
Mortgage-backed securities issued by Fannie Mae, Freddie Mac or Ginnie Mae.
Multiple-Class Pass-Throughs:
Collateralized Mortgage Obligations.
Net Asset Value (NAV):
Net asset value is the total market value of all securities and other assets
held by the Trust, plus income accrued on its investments, minus any liabilities
including accrued expenses, divided by the total number of outstanding shares.
It is the underlying value of a single share on a given day. Net asset value for
the Trust is calculated weekly and published in Barron's on Saturday and The New
York Times or The Wall Street Journal each Monday.
Principal-Only Securities (P/O):
Mortgage securities that receive only the principal cash flows from an
underlying pool of mortgage loans or underlying pass-through securities. Also
known as a strip.
Project Loans:
Mortgages for multi-family, low- to middle-income housing.
Premium:
When a fund's stock price is greater than its net asset value, the fund is said
to be trading at a premium.
REMIC:
A real estate mortgage investment conduit is a multiple-class security backed by
mortgage-backed securities or whole mortgage loans and formed as a trust,
corporation, partnership, or segregated pool of assets that elects to be treated
as a REMIC for federal tax purposes. Generally, Fannie Mae REMICs are formed as
trusts and are backed by mortgage-backed securities.
Residuals:
Securities issued in connection with collateralized mortgage obligations that
generally represent the excess cash flow from the mortgage assets underlying the
CMO after payment of principal and interest on the other CMO securities and
related administrative expenses.
Reverse Repurchase
Agreements:
In a reverse repurchase agreement, the Trust sells securities and agrees to
repurchase them at a mutually agreed date and price. During this time, the Trust
continues to receive the principal and interest payments from that security. At
the end of the term, the Trust receives the same securities that were sold for
the same initial dollar amount plus interest on the cash proceeds of the initial
sale.
Stripped Mortgage-Backed
Securities:
Arrangements in which a pool of assets is separated into two classes that
receive different proportions of the interest and principal distributions from
underlying mortgage-backed securities. IO's and PO's are examples of strips.
21
<PAGE>
- --------------------------------------------------------------------------------
BlackRock Financial Management, Inc.
Summary of Closed-End Funds
- --------------------------------------------------------------------------------
Taxable Trusts
- --------------------------------------------------------------------------------
Stock Maturity
Perpetual Trusts Symbol Date
------ --------
The BlackRock Income Trust Inc. ....................... BKT N/A
The BlackRock North American Government Income
Trust Inc. .......................................... BNA N/A
Term Trusts
The BlackRock 1998 Term Trust Inc. .................... BBT 12/98
The BlackRock 1999 Term Trust Inc. .................... BNN 12/99
The BlackRock Target Term Trust Inc. .................. BTT 12/00
The BlackRock 2001 Term Trust Inc. .................... BLK 06/01
The BlackRock Strategic Term Trust Inc. ............... BGT 12/02
The BlackRock Investment Quality Term Trust Inc. ...... BQT 12/04
The BlackRock Advantage Term Trust Inc. ............... BAT 12/05
The BlackRock Broad Investment Grade 2009 Term
Trust Inc. .......................................... BCT 12/09
Tax-Exempt Trusts
- --------------------------------------------------------------------------------
Stock Maturity
Symbol Date
------ --------
Perpetual Trusts
The BlackRock Investment Quality Municipal Trust Inc. . BKN N/A
The BlackRock California Investment Quality
Municipal Trust Inc. ................................ RAA N/A
The BlackRock Florida Investment Quality
Municipal Trust Inc. ................................ RFA N/A
The BlackRock New Jersey Investment Quality
Municipal Trust Inc. ................................ RNJ N/A
The BlackRock New York Investment Quality
Municipal Trust Inc. ................................ RNY N/A
Term Trusts
The BlackRock Municipal Target Term Trust Inc. ........ BMN 12/06
The BlackRock Insured Municipal 2008 Term Trust Inc. .. BRM 12/08
The BlackRock California Insured Municipal 2008
Term Trust Inc. ..................................... BFC 12/08
The BlackRock Florida Insured Municipal 2008
Term Trust Inc. ..................................... BRF 12/08
The BlackRock New York Insured Municipal 2008
Term Trust Inc. ..................................... BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. ....... BMT 12/10
If you would like further information please call BlackRock at
(800) 227-7BFM (7236)
or consult with your financial advisor.
22
<PAGE>
- --------------------------------------------------------------------------------
BlackRock Financial Management, Inc.
An Overview
- --------------------------------------------------------------------------------
BlackRock Financial Management (BlackRock) is a registered investment
adviser which specializes in managing high quality fixed income securities, both
taxable and tax exempt. BlackRock currently manages over $41 billion of assets
across the government, mortgage, corporate and municipal sectors. These assets
are managed on behalf of institutional and individual investors in 21 closed-end
funds which trade on either the New York Stock or American Stock Exchanges,
several open-end funds and over 80 institutional clients in the United States
and overseas. BlackRock's institutional investor base includes Chrysler
Corporation Master Retirement Trust, General Retirement System of the City of
Detroit, State Treasurer of Florida, Ford Motor Company Pension Plan, General
Electric Pension Trust and Unisys Corporation Master Trust.
BlackRock was formed in April 1988 by fixed income professionals who sought
to create an asset management firm specializing in managing fixed income
securities for individuals and institutional investors. The professionals at
BlackRock have extensive experience creating, analyzing and trading a variety of
fixed income instruments, including the most complex structured securities. In
fact, individuals at BlackRock are responsible for many of the major innovations
in the mortgage-backed and asset-backed securities market, including the
creation of the CMO, the floating rate CMO, the senior/subordinated pass-through
and the multi-class asset-backed security.
BlackRock is unique among asset management and advisory firms in the
significant emphasis it places on the development of proprietary analytical
capabilities. A quarter of the professionals at BlackRock work full-time in the
design, maintenance and use of such systems which are otherwise not generally
available to investors. BlackRock's proprietary analytical tools are used for
evaluating, investing in and designing investment strategies and portfolios of
fixed income securities, including mortgage securities, corporate debt
securities or tax-exempt securities and a variety of hedging instruments.
BlackRock has developed investment products which respond to investors'
needs and has been responsible for several major innovations in closed-end
funds. BlackRock introduced the first closed-end mortgage fund, the first
taxable and tax-exempt closed-end funds to offer a finite term, the first
closed-end fund to achieve a AAAf rating by Standard & Poor's, and the first
closed-end fund to invest primarily in North American Government securities.
BlackRock's closed-end funds currently have dividend reinvestment plans which
are designed to provide an ongoing source of demand for the stock in the
secondary market. BlackRock manages a ladder of alternative investment vehicles,
with each fund having specific investment objectives and policies.
In view of our continued desire to provide a high level of service to all
our shareholders, BlackRock maintains a toll-free number for your questions. The
number is (800) 227-7BFM (7236). We encourage you to call us with any questions
you may have about your BlackRock funds and thank you for the continued trust
you place in our abilities.
23
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(Left Column)
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BlackRock
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Directors
Laurence D. Fink, Chairman
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Grosfeld
James Clayburn La Force, Jr.
Ralph L. Schlosstein
Officers
Ralph L. Schlosstein, President
Scott Amero, Vice President
Keith T. Anderson, Vice President
Michael C. Huebsch, Vice President
Robert S. Kapito, Vice President
Richard M. Shea, Vice President/Tax
Henry Gabbay, Treasurer
James Kong, Assistant Treasurer
Karen H. Sabath, Secretary
Investment Adviser
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
(800) 227-7BFM
Administrator
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
(800) 699-1BFM
Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
The accompanying financial statements as of
June 30, 1996 were not audited and, accordingly,
no opinion is expressed on them.
This report is for shareholder information.
This is not a prospectus intended for use in the
purchase or sale of any securities.
The BlackRock Target Term Trust Inc.
c/o Prudential Mutual Fund
Management, Inc.
32nd floor
One Seaport Plaza
New York, NY 10292
(800) 227-7BFM
092476-10-0
(Right Column)
The BlackRock
Target
Term Trust Inc.
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Semi-Annual Report
June 30, 1996