================================================================================
THE BLACKROCK TARGET TERM TRUST INC.
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
================================================================================
January 31, 1999
Dear Shareholders:
Over the past twelve months, U.S. Treasury securities have experienced a
strong rally, as investors sought a safe haven from global market turmoil and
the Federal Reserve continued to cut interest rates. Other segments of the fixed
income market have lagged behind Treasuries, but still produced generally
positive returns since our last report. We anticipate that the Federal Reserve
will remain prepared to combat any signs of a credit crunch through interest
rate cuts, and given the unstable economic situation in Brazil, the Fed likely
will retain an easing bias.
Despite previous worries of a second half slowdown in 1998, the U.S.
economy continues to expand rapidly, supported by strong consumer spending. This
momentum, however, may not continue as briskly into the new year, based on
weaker corporate profits and a loosening of the labor markets. Already, major
corporations have warned of slower profit growth and announced major layoffs.
This report contains detailed market and portfolio strategy by your Trust's
managers in addition to the Trust's audited financial statements and a detailed
list of the portfolio's holdings. We thank you for your continued investment in
the Trust and look forward to serving your investment needs in the future.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
-------------------- ------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
January 31, 1999
Dear Shareholder:
We are pleased to present the annual report for The BlackRock Target Term
Trust Inc. ("the Trust") for the year ended December 31, 1998. 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. Although there can be no guarantee, BlackRock is confident that
the Trust can achieve its investment objectives. The Trust seeks these
objectives by investing in investment grade fixed income securities, including
corporate debt securities, mortgage-backed securities backed by U.S. Government
agencies (such as Fannie Mae, Freddie Mac or Ginnie Mae), asset-backed
securities and commercial mortgage-backed securities. All of the Trust's assets
must be rated at least "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:
---------------------------------------------
12/31/98 12/31/97 CHANGE HIGH LOW
-------- -------- ------ ---- ---
STOCK PRICE $ 9.75 $9.31 4.73% $ 9.75 $9.25
- --------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $10.13 $9.89 2.43% $10.23 $9.89
- --------------------------------------------------------------------------------
5-YEAR U.S. TREASURY NOTE 4.54 5.71% (20.49%) 5.79% 3.97%
- --------------------------------------------------------------------------------
THE FIXED INCOME MARKETS
The first half of the Trust's fiscal year saw Treasury yields decline
towards historic lows. These lows were the result of budget surplus projections
as well as the Federal Reserve's decision to move from a tightening bias to a
neutral interest rate policy. The positive economic momentum throughout the
first half of the fiscal year was strengthened by unseasonably warm weather that
led to increased consumer spending and job gains, which softened the negative
impact on trade from the Asian financial crisis.
The second half of the Trust's fiscal year witnessed virtually unparalleled
market turbulence. Although consumers continued their spending domestically,
demand for U.S. goods abroad faltered, as the strong dollar and overseas
weakness, especially in Asia, drove prices for U.S. goods higher relative to
foreign goods.
Toward year-end, U.S. GDP growth rebounded; however, the instability in
global financial markets began to rattle investor confidence. The devaluation of
the Russian ruble and the fear of a possible devaluation of the Brazilian
currency caused a flight-to-quality to U.S. Treasuries. Corporate yield spreads
across all credits to Treasuries widened dramatically as a result of the
sell-off. This dramatic shift of investor sentiment culminated in the near
collapse of a prominent hedge fund.
2
<PAGE>
The Treasury market rally pushed Treasury yields to historic levels below
the 5% barrier. In response to the financial fragility in the third quarter of
1998, the Fed eased interest rates on September 29, 1998 by 25bps and again on
October 15, in an unusual between-meetings move. On November 17, the Fed eased
interest rates again by 25bps.
These rate cuts seem to have had their desired effect on the US
economy--which finished the year with a 3.5% growth rate. Growth in 1999,
however, may decrease significantly and further easing of interest rates by the
Federal Reserve is possible as the Western economies will need to provide
support for the global economy. With economic growth and labor markets expected
to soften during the first half of 1999, we expect inflation to remain under
control.
The global instability which resulted in a flight-to-quality to US
Treasuries caused mortgages to severely underperform Treasuries. However, as
these markets have regained some stability, investors have begun to regain
confidence in the international markets. Consequently, we believe that current
spreads in the corporate, and mortgage markets will provide the basis for
outperforming Treasuries.
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, 1997 asset
composition.
================================================================================
THE BLACKROCK TARGET TERM TRUST INC.
- --------------------------------------------------------------------------------
COMPOSITION DECEMBER 31,1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Taxable Zero-Coupon Bonds 53% 57
- --------------------------------------------------------------------------------
Corporate Bonds 11% 13
- --------------------------------------------------------------------------------
Mortgage Pass-Throughs 10% 6
- --------------------------------------------------------------------------------
Stripped Money Market Instruments 6% -
- --------------------------------------------------------------------------------
U.S. Government Securities 4% 6
- --------------------------------------------------------------------------------
Asset-Backed Securities 3% 4
- --------------------------------------------------------------------------------
Taxable Municipal Bonds 3% 3
- --------------------------------------------------------------------------------
Adjustable Rate Mortgages 3% 1
- --------------------------------------------------------------------------------
Principal-Only Mortgage-Backed Securities 3% 4
- --------------------------------------------------------------------------------
Non-Agency Multiple Class Pass-Throughs 2% 3
- --------------------------------------------------------------------------------
Agency MultipleClass Pass-Throughs 2% 1%
- --------------------------------------------------------------------------------
Interest-Only Mortgage-Backed Securities -- 1%
- --------------------------------------------------------------------------------
Inverse-Floating Rate Mortgages -- 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATING % OF CORPORATES
----------------------------------------
CREDIT RATING DECEMBER 31,1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------
AAA or equivalent -- 1%
- --------------------------------------------------------------------------------
AA or equivalent 8% 8%
- --------------------------------------------------------------------------------
A or equivalent 53% 51%
- --------------------------------------------------------------------------------
BBB or equivalent 39% 40%
- --------------------------------------------------------------------------------
3
<PAGE>
In accordance with the Trust's primary investment objective of returning
the initial offer price upon maturity, the Trust's portfolio management activity
focused on adding securities which offered both attractive yield spreads over
Treasury securities and a maturity date matching the Trust's termination date of
December 31, 2000. Additionally, the Trust has been active in reducing positions
in bonds which have maturity dates or potential cash flows after the Trust's
termination date.
We look forward to continuing to manage the Trust to benefit from the
opportunities available to investors in the fixed income markets as well as to
maintain the Trust's ability to meet its investment objectives. 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. You can also reach us via
e-mail at closedend_funds@blackrock. com
Sincerely,
/s/ Robert S. Kapito /s/ Michael P. Lustig
- --------------------- ------------------
Robert S. Kapito Michael P. Lustig
Vice Chairman and Portfolio Manager Director and Portfolio Manager
BlackRock Financial Management, Inc. BlackRock Financial Management,Inc.
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
- --------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BTT
- --------------------------------------------------------------------------------
Initial Offering Date: November 17, 1988
- --------------------------------------------------------------------------------
Closing Stock Price as of 12/31/98: $9.75
- --------------------------------------------------------------------------------
Net Asset Value as of 12/31/98: $10.13
- --------------------------------------------------------------------------------
Yield on Closing Stock Price as of 12/31/98 ($9.75):1 5.51%
- --------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $0.044792
- --------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $0.537504
================================================================================
- ----------
1 Yield on Closing Stock Price is calculated by dividing the current
annualizing distribution per share and dividing it by the closing stock
price per share.
2 Distribution is not constant and is subject to change.
4
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS--140.0%
MORTGAGE PASS-THROUGHS--15.2%
Federal Home Loan Mortgage Corp.,
$ 6,098 5.00%, 11/01/00-5/01/01, 7 Year .......... $ 6,149,937
1,416 7.50%, 2/01/07-6/01/09,15 Year ........... 1,454,130
11,098 7.725%, 12/01/00, Multifamily ............ 11,458,269
11,669 9.00%, 5/01/07, 15 Year .................. 12,024,200
Federal National Mortgage Association,
100,000 6.50% (TBA) .............................. 100,656,250
6,765 8.025%, 7/01/00, Multifamily ............. 6,835,289
7,293 9.50%, 5/01/18-3/01/19 ................... 7,769,929
Government National Mortgage
Association,
215 9.00%, 11/15/12, 20 Year ................. 229,404
218 9.00%, 6/15/09-4/15/13 ................... 232,623
61 10.00%, 10/15/18, 15 Year ................ 66,581
------------
146,876,612
------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS--7.6%
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage Participation
Certificates,
622 Series 1048, Class 1048-Y,
11/15/13 ................................ 617,784
513 Series 1203, Class 1203-G,
7/15/05 ................................. 511,844
1,000 Series 1403, Class 1403-H,
2/15/18 ................................. 979,600
2,690 Series 1425, Class 1425-G,
8/15/06 ................................. 2,720,478
573 Series 1453, Class 1453-S,
1/15/00 (ARM) ........................... 578,097
6,232 Series 1480, Class 1480-VB,
12/15/16 (I) ............................ 205,173
1,193 Series 1564, Class 1564-I,
5/15/07 (l) ............................. 97,972
543 Series 1580, Class 1580-S,
9/15/00 (ARM) ........................... 524,840
408 Series 1608, Class 1608-SK,
11/15/22 (ARM) .......................... 407,787
8,445 Series 1702, Class 1702-PM,
10/15/16 (I) .... 435,589
Federal National Mortgage Association,
REMIC Pass-Through Certificates
272 Trust 1993-13, Class 13-SA,
2/25/00 (ARM) ........................... 275,883
715 Trust 1993-81, Class 81-S,
6/25/00 (ARM) ........................... 682,666
7,623 Trust 1993-81, Class 81-SB,
6/25/00 (I) ............................. 978,534
4,142 Trust 1993-96, Class 96-A,
11/25/16 (I) ............................ 262,581
1,303 Trust 1993-113, Class 113- PL,
4/25/18 (I) ............... ............. 66,400
821 Trust 1993-227, Class 227-SB,
12/25/00 (ARM) .......................... 741,341
7,537 Trust 1993-G34, Class G34-PV,
2/25/17 (l) ............................. 450,555
1,951 Trust 1993-M2, Class M2-H,
11/25/03, Multifamily ................... 1,964,798
1,486 Trust 1994-8, Class 8-C,
11/25/23 (P) ............................ 1,432,042
1,348 Trust 1994-9, Class 9-G,
11/25/23 (P) ............................ 1,297,186
2,841 Trust 1996-54, Class 54-SG,
4/25/23 (I) ............................. 127,836
8,733 Trust 1997- 65, Class 65-A,
9/25/00 (P) ............................. 8,586,110
57,187 Trust 1997-65, Class 65-SA,
9/25/00 (I) ............................. 670,160
3,382 Trust 1997-80, Class 80-SC,
4/18/08 (ARM) ........................... 3,459,164
2,852 Trust 1998-25, Class 25-PE,
9/18/11 (I) ............................. 173,608
1,740 Trust 1998-38, Class 38-SE,
7/18/07 (ARM) ........................... 1,806,852
AAA 2,341 First Boston Mortgage Securities Corp.,
Series 92-4, Class A 4,
10/25/22 ................................ 2,337,872
AAA 27,707 PNC Mortgage Securities Corp.,
Series 1997-6, Class 6-A1,
10/25/26 (ARM) .. ....................... 27,776,688
AAA 4,357 Prudential-Bache CMO Trust,
Series 10, Class 10-H,
4/01/19 (P) ............................. 3,969,318
AAA 9,383 Salomon Capital Access Corp.,
Series 1986-1, Class C, 9/01/15 .......... 9,535,787
----------
73,674,545
----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES--1.1%
A 1,924 Carolina First SBL Series
1996-C1, Class B, 7.43%
3/18/27*** ............................... 1,919,127
3,000 FDIC, Series 1994-C1, Class 2C,
8.45% 9/25/25 ............................ 3,048,750
AA+ 5,200 Nomura Asset Capital Corp.,
Series 1993-M1, Class A1,
7.64%, 11/25/03*** ....................... 5,338,407
----------
10,306,284
----------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--14.8%
FINANCE & BANKING--9.1%
AA 5,527 Associates Corp. of North America,
Zero Coupon, 5/01/99-6/29/00*** ........... $ 5,109,073
A+ 1,240 Goldman Sachs Group LP,
Zero Coupon, 6/15/99-12/15/00 ............. 10,236,981
International Lease Fin. Corp.,
A+ 3,000 6.30%, 11/01/99 3,028,500
A+ 6,000 6.625%, 4/01/99 ........................... 6,020,340
A 8,950 Lehman Brothers, Inc.,
6.90%, 1/29/01 ............................ 9,093,916
Ba1 3,000 Meditrust Inc.,
7.25%, 8/16/99 ............................ 2,976,990
A1 4,398 Meridian Bancorp, Inc.,
Zero Coupon, 6/15/99-6/15/00*** ........... 4,084,177
AA- 2,960 Merrill Lynch & Company, Inc.,
5.75%, 11/02/02 ............ 2,968,199
A+ 4,346 Morgan Stanley Group, Inc.,
Zero Coupon, 2/15/99-2/15/01*** ........... 3,899,217
PaineWebber Group, Inc.,
BBB+ 4,420 Zero Coupon, 3/01/99-3/01/00*** ........... 4,148,874
BBB+ 7,305 6.31%, 7/22/99 ............ 7,309,394
Aa3 0,550 Salomon, Inc.,
6.625%, 6/01/00-11/30/00*** .............. 10,753,103
A 8,774 Smith Barney Holdings, Inc.,
Zero Coupon, 5/15/99-6/01/00*** .......... 8,149,848
A 11,013 Transamerica Finance Corp.,
Zero Coupon, 6/01/99-6/01/00*** .......... 10,208,964
-----------
87,987,576
-----------
INDUSTRIALS--3.4%
AA 3,000 BP America, Inc.,
9.75%, 3/01/99 .......................... 3,018,979
BBB 7,500 Erac USA Finance Co.,
7.00%, 6/15/00*** ....................... 7,533,618
A1 3,727 Ford Motor Credit Co.,
Zero Coupon, 3/15/99-2/23/01*** ......... 12,311,886
A2 3,313 Kern River Funding Corp.,
6.42%, 3/31/01*** ....... ............... 3,350,694
AA- 7,000 TCI Communications, Inc.,
7.375%, 2/15/00 ......................... 7,137,970
-----------
33,353,147
-----------
UTILITIES--1.8%
A3 5,000 Columbia Energy Group, Inc.,
6.39%, 11/28/00 ......................... 5,088,350
BBB+ 7,250 Potomac Capital Investment Corp.,
6.73%, 8/09/99*** ....................... 7,273,806
A3 5,300 Provident Bank Cincinnati Ohio,
6.125%, 12/15/00 ........................ 5,338,358
-----------
17,700,514
-----------
YANKEE--0.5%
A3 5,000 Corporacion Andina De Fomento,
7.375%, 7/21/00 ......................... 5,023,700
-----------
144,064,937
-----------
ASSET-BACKED SECURITIES--3.9%
AAA 700 Banc One Auto Grantor Trust,
Series 1996-A, Class A,
6.10%, 10/15/02 ......................... 703,739
Aaa 8,579 Brazos Student Financial Corp.,
Series 1998-A, Class A1,
5.53%, 6/01/06 ......................... 8,491,887
AAA 2,636 Chevy Chase Auto Receivables,
Series 1996-1, Class A,
6.60%, 12/15/02 ........................ 2,657,305
AAA 2,216 Fifth Third Bank Auto Trust,
Series 1996-B, Class A,
6.45%, 3/15/02 ......................... 2,227,989
AAA 1,868 First Security Auto Grantor Trust,
Series 1998-A, Class A,
5.97%, 4/15/04 ......................... 11,994,922
AAA 4,933 Ford Credit Grantor Trust,
Series 1995-B, Class A,
5.90%, 10/15/00 ........................ 4,935,706
AAA 3,000 Keycorp Student Loan Trust,
Series 1996-A, Class A2,
5.288%, 8/27/25 ........................ 2,950,312
AAA 4,000 Standard Credit Card Master Trust I,
Series 1995-3, Class A,
7.85%, 2/07/02*** ...................... 4,128,753
----------
38,090,613
----------
STRIPPED MORTGAGE-BACKED
SECURITIES--2.8%
AAA 475 American Housing Trust, Trust VIII,
Class L, 6/25/04 (I/O) .................. 39,428
AAA 651 DBL, Inc., Trust V,
Class 1A, 9/01/18 (P/O) ................. 556,489
Federal Home Loan Mortgage Corp.,
4,375 Series G36, Class G36-B,
4/25/24 (P/O) .......................... 4,107,837
3,497 Series 1440, Class 1440-PK,
8/15/18 (I/O) ...... ................... 220,237
6,961 Series 1472, Class 1472-SD,
2/15/05 (I/O) .......................... 173,531
2,044 Series 1790, Class 1790-K,
5/15/23 (P/O) ...... ................... 1,887,506
Federal National Mortgage
Association,
104 Trust 18, Class 2,
2/01/17 (l/O) .......................... 25,162
1,764 Trust 19, Class 1,
6/01/17 (P/O) .......................... 1,489,972
263 Trust 225, Class 1,
2/01/23 (P/O) .......................... 221,258
660 Trust 1991-29, Class 29-J,
4/25/21 (I/O) .......................... 204,991
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
- -----------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- -----------------------------------------------------------------------------
Federal National Mortgage Association,
$ 3,517 Trust 1992-23, Class 23-D,
2/25/21 (P/O) ........................ $ 2,964,331
9,167 Trust 1992-140, Class 140-HD,
11/25/06 (P/O) ....................... 8,612,909
9,707 Trust 1993-11, Class 11-M,
2/25/08 (l/O) ........................ 848,408
2,393 Trust 1993-25, Class 25-CA,
1/25/17 (I/O) ........................ 103,989
7,964 Trust 1993-50, Class 50-SD,
12/25/16 (I/O) ....................... 312,894
2,362 Trust 1993-88, Class 88-C,
6/25/00 (P/O) ........................ 2,249,770
7,942 Trust 1993-172, Class 172-S,
9/25/00 (I/O) ...................... 217,918
119 Trust 1993- 216, Class 216-B,
8/25/23 (P/O) ...................... 115,674
14,606 Trust 1993-225, Class 225-VK,
11/25/17 (I/O) ..................... 350,688
16,646 Trust 1997-7, Class 7-SA,
4/18/15 (I/O) ...................... 107,219
16,646 Trust 1997-7, Class 7-SD,
8/18/15 (I/O) ...................... 181,528
51,091 Trust 1997-7, Class 7-SH,
4/18/15-8/18/15, (I/O) ............. 223,521
AAA 8,364 Prudential Securities, CMO,
Series 16, Class 16-P,
10/25/21 (I/O) ..................... 1,549,190
-----------
26,764,450
-----------
U.S. GOVERNMENT SECURITIES--5.8%
U.S. Treasury Bonds,
10,139 3.625%, 4/15/28 (TIPS) ............... 9,834,733
5,000++ 5.50%, 8/15/28 ....................... 5,233,600
30,500++ 6.125%, 11/15/27 ..................... 34,140,785
U.S. Treasury Notes,
1,000++ 5.25%, 8/15/03 ....................... 1,025,470
5,485 6.00%, 8/15/00 ....................... 5,598,101
-----------
55,832,689
-----------
TAXABLE ZERO COUPON BONDS--74.4%
2,185 Agency STRIPS, Series 1, relating to
Federal National Mortgage Association
8.95% Debentures,
Series SM-2018-A, 8/12/00 ............ 2,019,617
10,407 Federal Home Loan Mortgage Corp.,
5/15/00 .............................. 9,727,111
6,250 Federal Judiciary Office Building,
8/15/00 .............................. 5,770,063
16,620 Federal National Mortgage
Association,
8/01/00-8/12/00 ..................... 15,377,670
139,485 Financing Corp. (FICO Strips),
2/08/00-12/27/00 .................... 128,765,042
333 Government and Agency
Term Obligation
Receipt, 11/15/00 .................... 305,082
356 Physical Treasury Coupons,
8/15/00 ............................ 330,653
40,000 Tennessee Valley Auth.,
11/01/00 ............................ 36,562,400
1,862 U.S. Treasury CUBES,
11/15/00 ............................ 1,708,609
565,012+ U.S. Treasury Strips,
5/15/00-11/15/00 .................... 519,160,083
------------
719,726,330
------------
TAXABLE MUNICIPAL BONDS--4.3%
AAA 2,467 Long Beach California, Pension
obligation, Zero Coupon,
3/01/99-9/01/00*** ................. 2,261,096
AAA 6,755 Massachusetts St. Housing
Fin. Auth.,
Series 1991-A,
6.85%, 4/01/21, F.H.A. ............. 7,183,520
New York City, G.O.,
A- 10,939 Zero Coupon, 3/15/99-3/15/00 ...... 10,201,056
A- 10,000 7.10%, 4/15/00 .................... 10,245,300
Baa1 1,200 New York St. Environ
Facilities Auth.,
6.49%, 9/15/00 .................... 1,222,116
BBB+ 5,000 New York St. Dorm. Auth. Rev.,
Pension Obligation,
6.63%, 10/01/00 ................... 5,101,750
Baa1 3,120 New York St. Housing Fin.,
Series B,
7.03%, 9/15/01 .................... 3,241,524
AAA 2,186 Western Minnesota Municipal Power
Agency, Zero Coupon,
1/01/99-1/01/00 ................... 2,073,570
-----------
41,529,932
-----------
COLLATERALIZED MORTGAGE OBLIGATION
RESIDUALS**--0.1%
AAA 5 American Housing Trust V,
Senior-Mortgage
Pass-Through Certificates,
Series A, Class R, 4/25/21
(REMIC)*** ..................... 451,500
AAA 1 M.D.C. Asset Investors, Trust VI,
11/01/17 (REMIC)*** .............. 164,234
AAA 57 PaineWebber, CMO Trust, Series N7,
1/01/19 (REMIC)*** ............... 165,605
-----------
781,339
-----------
STRIPPED MONEY MARKET
INSTRUMENTS--9.5%
50,000 AIM Prime Portfolio,
Zero Coupon, 12/01/00 ............ 45,873,950
50,000 Goldman Sachs Money Market,
Zero Coupon, 12/01/00*** ......... 45,857,100
-----------
91,731,050
-----------
Notional
Amount
(000)
-----
CALL OPTION PURCHASED--0.5%
$145,000 Interest Rate Swap, 5.60%
over 3-month LIBOR,
expires 8/07/00
(cost $1,993,750) ................. 4,935,814
-----------
Total Long-Term Investments
(cost $1,314,592,057) ............. 1,354,314,595
-------------
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS--4.0%
DISCOUNT NOTES
$ 6,200 Federal Home Loan Bank,
4.68%, 1/4/99 .................. $ 6,197,038
32,730 Federal Home Loan Mortgage Corp.,
4.68%, 1/4/99 .................. 32,712,907
------------
Total short-term Investments
(cost $38,909,945) ............. 38,909,945
------------
Total investments before
outstanding call options
written and investments sold
short (cost $1,353,502,002) .... 1,393,224,540
-------------
Notional
Amount
(000)
---- CALL OPTION WRITTEN--(0.5%)
$232,000 Interest Rate Swap, 3 month
LIBOR over 5.50%, expires,
8/10/99
(premium received $1,421,000) (5,151,328)
Principal
Amount
(000)
-----
INVESTMENT SOLD SHORT--(3.9%)
$34,540 U.S. Treasury Notes,
6.125%, 8/15/07
(proceeds $37,964,317) ............ (37,724,243)
-----------
Total investments, net of
outstanding call options written
and investments sold short
--139.6% (cost $1,314,116,685) .. 1,350,348,969
Liabilities in excess of other
assets--(39.6%) .............. (383,171,471)
-------------
NET ASSETS--100% ........ $ 967,177,498
=============
* Using the higher of Standard & Poor's or Moody's rating.
** Illiquid securities, representing .05% of portfolio assets.
*** Private placements restricted as to resale.
+ Partial principal amount pledged as collateral for reverse
repurchase agreements. See Note 4.
++ Entire principal amount pledged as collateral for reverse
repurchase agreements. See Note 4.
- --------------------------------------------------------------------------------
KEY TO ABBREVIATIONS
- --------------------------------------------------------------------------------
ARM -- Adjustable Rate Mortgage.
- --------------------------------------------------------------------------------
CMO -- Collateralized Mortgage Obligation.
- --------------------------------------------------------------------------------
G.O. -- General Obligation.
- --------------------------------------------------------------------------------
I -- Denotes a CMO with Interest only characteristics.
- --------------------------------------------------------------------------------
I/O -- Interest Only.
- --------------------------------------------------------------------------------
LIBOR -- London Interbank Offer Rate.
- --------------------------------------------------------------------------------
P -- Denotes a CMO with Principal only characteristics.
- --------------------------------------------------------------------------------
P/O -- Principal Only.
- --------------------------------------------------------------------------------
REMIC -- Real Estate Mortgage Investment Conduit.
- --------------------------------------------------------------------------------
TBA -- To Be Allocated.
- --------------------------------------------------------------------------------
TIPS -- Treasury Inflation Protection Securities.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $1,353,502,002)
(Note 1) ................................................... $1,393,224,540
Cash ....................................................... 5,192
Deposits with brokers as collateral for investments
sold short (Note 1) ........................................ 38,344,414
Interest receivable ........................................ 4,260,365
Unrealized appreciation on interest rate swaps
(Note 1 & 3) ............................................... 1,018,229
--------------
1,436,852,740
--------------
LIABILITIES
Reverse repurchase agreements (Note 4) ..................... 316,217,275
Payable for investments purchased .......................... 100,781,597
Investments sold short, at value
(proceeds $37,964,317) (Note 1) ............................ 37,724,243
Call options written, at value
(premium received $1,421,000) (Note 1) ..................... 5,151,328
Dividend payable ........................................... 4,275,841
Interest payable ........................................... 4,171,365
Investment advisory fee payable (Note 2) ................... 372,927
Administration fee payable (Note 2) ........................ 74,815
Other accrued expenses ..................................... 905,851
--------------
469,675,242
--------------
NET ASSETS ................................................. $ 967,177,498
==============
Net assets were comprised of:
Common stock, at par (Note 5) .............................. $ 954,606
Paid-in capital in excess of par ........................... 891,634,901
--------------
892,589,507
Undistributed net investment income ........................ 32,647,024
Accumulated net realized gain .............................. 4,690,454
Net unrealized appreciation ................................ 37,250,513
--------------
Net assets, December 31, 1998 .............................. $ 967,177,498
==============
Net asset value per share:
($967,177,498 / 95,460,639 shares of
common stock issued and outstanding) ....................... $ 10.13
==============
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest (including net accretion of discount
of $38,207,385 and net of interest expense
of $25,638,139) .......................................... 57,288,405
------------
Operating expenses
Investment advisory ...................................... 4,321,338
Administration ........................................... 868,513
Custodian ................................................ 200,000
Transfer agent ........................................... 170,000
Reports to shareholders .................................. 150,000
Audit .................................................... 92,000
Directors ................................................ 84,000
Legal .................................................... 40,000
Miscellaneous ............................................ 425,814
------------
Total operating expenses ................................. 6,351,665
------------
Net investment income before excise tax .................. 50,936,740
Excise tax ............................................... 814,045
------------
Net investment income .................................... 50,122,695
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3)
Net realized gain (loss) on:
Investments .............................................. 8,310,994
Options written .......................................... 2,440,326
Futures .................................................. (7,501,483)
Short sales .............................................. (2,888,718)
------------
361,119
------------
Net change in unrealized appreciation
(depreciation) on:
Investments .............................................. 22,517,900
Options written .......................................... (3,970,928)
Interest rate swaps ...................................... 1,070,527
Futures .................................................. (143,591)
Short sales .............................................. 4,684,294
------------
24,158,202
------------
Net gain on investments .................................. 24,519,321
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 74,642,016
============
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
Cash flows provided by operating activities:
Interest received ......................................... $ 121,677,228
Operating expenses paid ................................... (7,145,091)
Interest expense paid ..................................... (25,400,416)
Proceeds from disposition of short-term
portfolio investments, net ................................ 2,041,956
Purchase of long-term portfolio investments ............... (1,032,352,648)
Proceeds from disposition of long-term
portfolio investments ..................................... 1,054,474,133
Variation margin on futures ............................... (7,320,393)
---------------
Net cash flows provided by operating
activities ................................................ 105,974,769
---------------
Cash flows used for financing activities:
Cash Dividends Paid ....................................... (51,308,780)
Decrease in reverse repurchase agreements ................. (54,798,008)
---------------
Net cash flows used for financing activities .............. (106,106,788)
---------------
Net decrease in cash ...................................... (132,019)
Cash at beginning of year ................................. 137,211
---------------
Cash at end of year ....................................... $ 5,192
===============
RECONCILIATION OF NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS TO NET
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net increase in net assets resulting
from operations ........................................... $ 74,642,016
---------------
Increase in investments ................................... (49,191,617)
Net Realized Gain ......................................... (361,119
Increase in unrealized appreciation ....................... (24,158,202)
Decrease in receivable for investments sold ............... 6,072,317
Decrease in Interest Receivable ........................... 543,299
Increase in appreciation of Interest Rate Swap ............ (1,070,527)
Decrease in receivable for Variation Margin ............... 181,090
Increase in Payable for Investments Purchased ............. 93,529,183
Decrease in Payable for Investments
Sold Short ................................................ (56,634,977)
Decrease in deposit with brokers .......................... 58,210,536
Increase Options Written .................................. 3,954,428
Increase in Interest Payable .............................. 237,723
Increase in accrued expenses and other liabilities ........ 20,619
---------------
Total Adjustments ....................................... 31,332,753
---------------
Net cash provided by operating activities ................. $ 105,974,769)
===============
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
STATEMENTS OF CHANGES IN
NET ASSETS
- --------------------------------------------------------------------------------
Year Ended December 31,
1998 1997
------------ ------------
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income ................ $ 50,122,695 $ 60,809,622
Net realized gain (loss) ............. 361,119 (599,507)
Net change in unrealized
appreciation ......................... 24,158,202 885,072
------------- -------------
Net increase in net assets
resulting from operations ............ 74,642,016 61,095,187
Dividends from net
investment income .................... (51,308,780) (54,590,615)
------------- -------------
Total increase ....................... 23,333,236 6,504,572
NET ASSETS
Beginning of year .................... 943,844,262 937,339,690
------------- -------------
End of year .......................... $ 967,177,498 $ 943,844,262
============= =============
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................... $9.89 $9.82 $10.02 $9.01 $10.40
---- ---- ----- ---- -----
Net investment income (net of interest expense of
$0.27, $0.27, $0.28, $0.36 and $0.21, respectively) ...... 0.52 0.64 0.68 0.72 0.63
Net realized and unrealized gain (loss) on investments ..... 0.26 -- (0.31) 0.99 (1.30)
---- ---- ----- ---- -----
Net increase (decrease) from investment operations ........... 0.78 0.64 0.37 1.71 (0.67)
---- ---- ----- ---- -----
Dividends from net investment income ......................... (0.54) (0.57) (0.57) (0.70) (0.72)
---- ---- ----- ---- -----
Net asset value, end of year* ................................ $10.13 $9.89 $9.82 $10.02 $9.01
====== ===== ===== ====== =====
Market value, end of year* ................................... $9.75 $9.31 $8.88 $8.75 $8.13
====== ===== ===== ====== =====
TOTAL INVESTMENT RETURN+ ..................................... 10.79% 11.64% 7.94% 16.34% (11.98%)
RATIOS TO AVERAGE NET ASSETS:
Operating expenses# .......................................... 0.66% 0.68% 0.73% 0.75% 0.75%
Net investment income ........................................ 5.23% 6.49% 6.89% 7.57% 6.62%
SUPPLEMENTAL DATA:
Average net assets (in thousands) ............................ $957,474 $937,236 $936,823 $918,344 $909,105
Portfolio turnover ........................................... 76% 161% 95% 118% 84%
Net assets, end of year (in thousands) ....................... $967,177 $943,844 $937,340 $956,922 $859,825
Reverse repurchase agreements outstanding,
end of year (in thousands) ................................. $316,217 $371,015 $368,550 $428,825 $422,578
Asset coverage++ ............................................. $ 4,059 $ 3,544 $3,543 $ 3,231 $ 3,035
</TABLE>
- ----------
* Net asset value and market value are published in The Wall Street Journal
each Monday.
# The ratios of operating expenses, including interest expense, to average
net assets were 3.34%, 3.43%, 3.57%, 4.53% and 2.89% for the years
indicated above, respectively. The ratios of operating expenses including
interest expense and excise tax, if applicable, to average net assets were
3.43%, 3.47%, 3.64%, 4.54% and 2.89% for the years 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 year 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.
++ Per $1,000 of reverse repurchase agreement outstanding. The information
above represents the audited 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 years indicated.
This information has been determined based upon financial information provided
in the financial statements and market value data for the Trust's shares.
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION & 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 between securities
observed in the market 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 60 days or less are valued at
amortized cost, if their term to maturity from date of purchase is 60 days or
less. Short-term securities with a term to maturity greater than 60 days from
the date of purchase are valued at current market quotations until maturity.
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 commence 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
positions so that changes in 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
12
<PAGE>
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.
INTEREST RATE SWAPS: In an interest rate swap, one investor pays a floating rate
of interest on a notional principal amount and receives a fixed rate of interest
on the same notional principal amount for a specified period of time.
Alternatively, an investor may pay a fixed rate and receive a floating rate.
Rate swaps were conceived as asset/liability management tools. In more complex
swaps, the notional principal amount may decline (or amortize) over time.
During the term of the swap, changes in the value of the swap are
recognized as unrealized gains or losses by "marking-to-market" to reflect the
market value of the swap. When the swap is terminated, the Trust will record 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, if any.
The Trust is exposed to credit loss in the event of non-performance by the
other party to the interest rate swap. However, the Trust does not anticipate
non-performance by any counterparty.
SWAP OPTIONS: Swap options are similar to options on securities except that
instead of selling or purchasing the right to buy or sell a security, the writer
or purchaser of the swap option is granting or buying the right to enter into a
previously agreed upon interest rate swap agreement at any time before the
expiration of the option. Premiums received or paid from writing or purchasing
options are recorded as liabilities or assets and are 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 commission, 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 loss on investment transactions.
The main risk that is associated with purchasing swap options is that the
swap option expires without being exercised. In this case, the option expires
worthless and the premium paid for the swap option is considered the loss. The
main risk that is associated with the writing of a swap option is the market
risk of an unfavorable change in the value of the interest rate swap underlying
the written swap option.
Swap options may be used by the Trust to manage the duration of the Trust's
portfolio reflecting the view of the Trust's management in the direction of
interest rates.
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. 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
13
<PAGE>
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 less or greater 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 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.
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 substantially all 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.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATION OF CAPITAL ACCOUNTS: The Trust accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect caused by
applying this statement was to decrease paid-in capital and increase
undistributed net investment income by $814,045 due to certain expenses not
being deductible for tax purposes. Net investment income, net realized gains and
net assets were not affected by this change.
NOTE 2. AGREEMENTS
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc. (the "Adviser"), a wholly-owned corporate subsidiary of
BlackRock Advisors, Inc., which is an indirect majority-owned subsidiary of PNC
Bank, N.A., and an Administration Agreement with Prudential Investments Fund
Management LLC ("PIFM"), 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. The administration fee paid to PIFM is also computed weekly and payable
monthly at an annual rate of 0.10% of the first $500 million of the Trust's
average weekly net assets and 0.08% of any excess.
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. PIFM pays occupancy and certain clerical
and accounting costs of the Trust. The Trust bears all other costs and expenses.
14
<PAGE>
NOTE 3. PORTFOLIO SECURITIES Purchases and sales of investment securities, other
than for short-term investments and dollar rolls, for the year ended December
31, 1998 aggregated $1,123,888,081 and $1,031,796,232, 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 December 31, 1998, the Trust
held 0.05% of its portfolio assets in securities restricted as to resale all of
which are illiquid securities.
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 affiliates, including Midland Loan
Services, Inc. It is possible under certain circumstances, PNC Mortgage
Securities Corp. or its affiliates, including Midland Loan Services, Inc., 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 affiliates, including Midland Loan Services, Inc.
The federal income tax basis of the Trust's investments at December 31,
1998 was $1,353,502,002 and accordingly, net unrealized appreciation for federal
income tax purposes was $39,722,538 (gross unrealized appreciation--$45,229,359;
gross unrealized depreciation--$5,506,821).
For federal income tax purposes, the Trust had a capital loss carryforward
at December 31, 1998 of approximately $1,022,000 which will expire at the
termination of the Trust. Accordingly, no capital gains distribution is expected
to be paid to shareholders until net gains have been realized in excess of such
amount.
Details of open interest rate swaps at December 31, 1998 are as follows:
NOTIONAL FLOATING/ UNREALIZED
AMOUNT FIXED FLOATING TERMINATION APPRECIATION
(000) TYPE RATE RATE DATE (DEPRECIATION)
----- ---- ---- ---- ---- --------------
$ 60,000 Floating Rate 3 mo.T-Bill 3 mo.LIBOR 9/10/03 (229,996)
+81.75 bps
250,000 Interest Rate 6.421% 3 mo.LIBOR 7/27/01 (11,980,235)
363,750 Interest Rate 6.365% 3 mo. LIBOR 7/27/00 13,228,460
------------
$ 1,018,229
============
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 year ended December 31, 1998 was approximately $448,839,629 at a
weighted average interest rate of approximately 4.76%. The maximum amount of
reverse repurchase agreements outstanding at any month-end during the year ended
December 31, 1998 was $509,091,813 as of February 28, 1998 which was 33% 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 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 Trust had no outstanding dollar rolls during the year ended December
31, 1998.
NOTE 5. CAPITAL
There are 200 million shares of $.01 par value common stock authorized. Of the
95,460,639 shares outstanding at December 31, 1998, the Adviser owned 10,639
shares.
15
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The BlackRock Target Term Trust Inc.:
We have audited the accompanying statement of assets and liabilities of The
BlackRock Target Term Trust Inc., including the portfolio of investments, as of
December 31, 1998, and the related statements of operations and of cash flows
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1998, by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock Target
Term Trust Inc. as of December 31, 1998, and the results of its operations, its
cash flows, the changes in its net assets and the financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche, LLP
- --------------------------
Deloitte & Touche, LLP
New York, New York
February 12, 1999
16
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
TAX INFORMATION
- --------------------------------------------------------------------------------
We wish to advise you as to the federal tax status of dividends and
distributions paid by the Trust during the fiscal year ended December 31, 1998.
During the fiscal year ended December 31, 1998, the Trust paid a total of
$0.5375 per share to investors taxable as 1998 income to shareholders of record
from January 1 to December 31, 1998. There were no capital gains paid to
shareholders in 1998. In addition, as part of the Trust's annual tax planning
strategy, the monthly distribution payable January 30, 1999 will be taxed as
1998 income. This dividend shift will bring the number of distributions taxable
in 1998 to twelve. For federal income tax purposes, the aggregate of any
dividends and short-term capital gains distributions you received are reportable
in your 1998 federal income tax returns as ordinary income. Further, we wish to
advise you that your income dividends do not qualify for the dividends received
deduction.
For the purpose of preparing your 1998 annual federal income tax return,
however, you should report the amounts as reflected on the appropriate Form 1099
DIV which was mailed to you in January 1999.
- --------------------------------------------------------------------------------
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
reinvested by State Street Bank and 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 or elsewhere, for the participants' accounts. The Trust will not
issue any new shares in connection with 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.
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.
17
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
There have been no material changes in the Trust's 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.
YEAR 2000 READINESS DISCLOSURE. The Trust is currently in the process of
evaluating its information technology infrastructure for Year 2000 compliance.
Substantially all of the Trust's information systems are supplied by the
Adviser. The Adviser has advised the Trust that it is currently evaluating
whether such systems are year 2000 compliant and that it expects to incur costs
of up to approximately five hundred thousand dollars to complete such evaluation
and to make any modifications to its systems as may be necessary to achieve Year
2000 compliance. The Adviser has advised the Trust that it has fully tested its
systems for Year 2000 compliance. The Trust may be required to bear a portion of
such cost incurred by the Adviser in this regard. The Adviser has advised the
Trust that it does not anticipate any material disruption in the operations of
the Trust as a result of any failure by the Adviser to achieve Year 2000
compliance. There can be no assurance that the costs will not exceed the amount
referred to above or that the Trust will not experience a disruption in
operations.
The Adviser has advised the Trust that it is in the process of evaluating
the Year 2000 compliance of various suppliers of the Adviser and the Trust. The
Adviser has advised the Trust that it intends to communicate with such suppliers
to determine their Year 2000 compliance status and the extent to which the
Adviser or the Trust could be affected by any supplier's Year 2000 compliance
issues. To date, however, the Adviser has not received responses from all such
suppliers with respect to their Year 2000 compliance, and there can be no
assurance that the systems of such suppliers, who are beyond the Trust's
control, will be Year 2000 compliant. In the event that any of the Trust's
significant suppliers do not successfully and timely achieve Year 2000
compliance, the Trust's business or operations could be adversely affected. The
Adviser has advised the Trust that it is in the process of preparing a
contingency plan for Year 2000 compliance by its suppliers. There can be no
assurance that such contingency plan will be successful in preventing a
disruption of the Trust's operations.
The Trust is designating this disclosure as its Year 2000 readiness
disclosure for all purposes under the Year 2000 Information and Readiness
Disclosure Act and the foregoing information shall constitute a Year 2000
statement for purposes of that Act.
18
<PAGE>
- --------------------------------------------------------------------------------
THE BLACKROCK TARGET TERM TRUST INC.
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
THE TRUST'S INVESTMENT OBJECTIVE
The BlackRock Target Term Trust Inc.'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") is an SEC-registered
investment adviser. BlackRock and its affiliates currently manage over $132
billion on behalf of taxable and tax-exempt clients worldwide. Strategies
include fixed income, equity and cash and may incorporate both domestic and
international securities. Domestic fixed income strategies utilize the
government, mortgage, corporate and municipal bond sectors. BlackRock manages
twenty-one closed-end funds that are traded on either the New York or American
stock exchanges, and a $24 billion family of open-end equity and bond funds.
Current institutional clients number 425, domiciled in the United States and
overseas.
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 government 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
its 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
331/3% of the 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.
19
<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 adviser. 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 adviser 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 331/3% 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 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.
INTEREST-ONLY SECURITIES (IO). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying Mortgage Assets, and a rapid rate of principal payments may
have a material adverse effect on such security's yield to maturity. If the
underlying Mortgage Assets experience greater than anticipated prepayments of
principal, the Trust may fail to recoup fully its initial investment in these
securities even if the securities are rated AAA by S&P or Aaa by Moody's.
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.
20
<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.
COMMERCIAL
MORTGAGE BACKED SECURITIES (CMBS): Mortgage-backed securities secured or backed
by mortgage loans on commercial properties.
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
distributions of dividends and 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
government agency that facilitates a
secondary mortgage market by providing an
agency that guarantees timely payment 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.
21
<PAGE>
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).
INVERSE-FLOATING RATE MORTGAGES: Mortgage instruments with coupons that
adjust at periodic intervals according to a
formula which sets inversely with a market
level interest rate index.
INTEREST-ONLY SECURITIES (I/O): Mortgage securities including CMBS 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 WALL STREET JOURNAL on
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 STRIPS.
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.
22
<PAGE>
- --------------------------------------------------------------------------------
BLACKROCK FINANCIAL MANAGEMENT, INC.
SUMMARY OF CLOSED-END FUNDS
- --------------------------------------------------------------------------------
TAXABLE TRUSTS
- --------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
------ --------
The BlackRock High Yield Trust Inc. BHY N/A
The BlackRock Income Trust Inc. BKT N/A
The BlackRock North American Government Income Trust Inc. BNA N/A
TERM TRUSTS
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
PERPETUAL TRUSTS SYMBOL DATE
------ --------
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 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 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.
23
<PAGE>
BLACKROCK
DIRECTORS
Laurence D. Fink, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Grosfeld
James Clayburn La Force, Jr.
Walter F. Mondale
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 Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
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 LLP
919 Third Avenue
New York, NY 10022
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 Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 227-7BFM
THE BLACKROCK
TARGET
TERM TRUST INC.
- --------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1998
[logo] Printed on recycled paper 092476-10-0
